Japan Stocks Advance on Resources; Shippers Jump on Ratings

By Masaki Kondo

June 10 (Bloomberg) -- Japanese stocks rose, led by resource producers as oil and metal prices jumped, outweighing a bigger-than-expected drop in the nation’s machinery orders.

Mitsubishi Corp., which gets more than half its profit from commodities, increased 4.5 percent as crude rose a second day and copper gained the most in a week. Japan Petroleum Exploration Co., the nation’s No. 2 oil explorer, jumped 5 percent. Nippon Yusen K.K. and Mitsui O.S.K. Lines Ltd. climbed at least 3.7 percent after analysts boosted their ratings.

“Capital spending is still low and the job market is harsh, but investors are focusing more on the possibility that the economy is emerging from its worst period,” said Yoshihiro Ito, senior strategist at Tokyo-based Okasan Asset Management Co., which oversees about $7.7 billion. “The recovery in the commodity market and ample liquidity with low interest rates are spurring investor appetite for risk.”

The Nikkei 225 Stock Average added 141.51, or 1.5 percent, to 9,928.33 as of 12:38 p.m. in Tokyo, rebounding from yesterday’s 0.8 percent decline. The broader Topix index rose 14.93, or 1.6 percent, to 933.17, with more than four stocks advancing for each that slumped.

Companies on the Topix trade at 43.3 times their estimated net income for this fiscal year, the highest level among benchmark indexes in the world’s five biggest stock markets, according to Bloomberg data. The gauge has risen 6.9 percent this year through yesterday as central banks in Japan, the U.S. and Europe cut key interest rates and pumped money into the economy to curb the global credit crisis.

Machinery Orders

Japan’s machinery orders, which indicate capital investment in the next three to six months, fell 5.4 percent in April from the previous month, a government report released this morning showed. Economists had estimated a 0.6 percent drop from March.

Mitsubishi, the nation’s biggest trading company by value, surged 4.5 percent to 1,961 yen. Japan Petroleum leapt 5 percent to 5,640 yen, while metal producer Sumitomo Metal Mining Co. added 6.3 percent.

Dowa Holdings Co., Japan’s No. 2 zinc smelter, soared 7.1 percent, breaking a four-day losing streak. The Nikkei newspaper said its metal business may post a profit in the year to March 2010 as the company cuts costs, though Dowa is projecting a loss.

Crude rose 2.8 percent to $70.01 a barrel yesterday in New York, the highest settlement in seven months, and extended its gain today. A gauge of six metals jumped 3.8 percent in London. Copper surging 5 percent in New York, the most since June 1.

Shippers Advance

A gauge of maritime transport companies rebounded from a four-day retreat after Credit Suisse Group AG raised Japan’s three-biggest shippers to “outperform” from “neutral” on expectations earnings will bottom this year. Deutsche Bank AG also boosted ratings on Nippon Yusen and Mitsui O.S.K.

Nippon Yusen, Japan’s top shipping line by sales, rose 3.7 percent to 453 yen, while closest rival Mitsui O.S.K. added 5 percent to 688 yen. Kawasaki Kisen Kaisha Ltd., the No. 3, jumped 5.9 percent to 447 yen, also benefiting from comments by President Hiroyuki Maekawa that the company may cut more costs.

Nikkei futures expiring in June added 1.6 percent to 9,940 in Osaka and gained 1.5 percent to 9,930 in Singapore.

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

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NYSE Comments May End Six Months of Deutsche Boerse Speculation

By Edgar Ortega

June 10 (Bloomberg) -- NYSE Euronext Chief Executive Officer Duncan Niederauer squashed six months of speculation that he was considering a merger with Deutsche Boerse AG.

The world’s largest owner of stock exchanges isn’t in negotiations with the Frankfurt-based Deutsche Boerse and has no plans to enter them, Reuters reported, citing remarks yesterday by Niederauer at the Japan Society in New York. Richard Adamonis, a spokesman for the exchange, declined to comment.

NYSE Euronext, owner of the New York Stock Exchange and four bourses in Europe, held preliminary talks with Deutsche Boerse last year, people familiar with the matter said at the time. NYSE Euronext shares rallied 14 percent April 23 and jumped 23 percent on Dec. 8 after reports in German magazines raised the prospect of a deal.

Niederauer told investors last week that he is focused on squeezing more profit from NYSE Group Inc.’s $12.4 billion purchase of Paris-based Euronext NV by overhauling trading systems on both sides of the Atlantic to reduce costs. Niederauer said earlier this year that consolidation among exchanges may slow as companies integrate operations from a wave of deals since 2006 valued at about $54 billion, according to data compiled by Bloomberg.

Deutsche Boerse, the second-largest exchange operator, is also seeking to cut costs to sustain growth after the Dow Jones Stoxx 600 Index lost 46 percent in 2008, posting its steepest yearly drop in more than three decades. CEO Reto Francioni told shareholders last month that expanding without an acquisition “remains the highest priority,” and declined to comment on “rumors” about merger talks with NYSE Euronext.

Yesterday, NYSE Euronext shares rose $1.21 to $30.68 in New York trading, while Deutsche Boerse declined 1.80 euros to 59 euros in Frankfurt. NYSE Euronext has a market value of $7.98 billion, less than half Deutsche Boerse’s $16.2 billion, according to Bloomberg data.

To contact the reporter on this story: Edgar Ortega in New York at ebarrales@bloomberg.net.

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Barnes, LaSalle, Oxford, Shuffle Master: U.S. Equity Preview

By Lu Wang

June 10 (Bloomberg) -- Shares of the following companies may have unusual moves in U.S. trading. Stock symbols are in parentheses.

Barnes Group Inc. (B US): The maker of components for automobiles and aircraft withdrew its full-year earnings forecast, citing “increased uncertainty in the transportation sector.”

ITT Corp. (ITT US): The maker of “jammers” that prevent remotely triggered roadside bombs from detonating won a U.S. Army contract valued at $363.1 million for radio systems.

LaSalle Hotel Properties (LHO US): The real estate investment trust focused on luxury and upscale full-service hotels said it plans to sell 6.5 million common shares.

Oxford Industries Inc. (OXM US): The maker of Tommy Bahama clothing reported earnings of 42 cents a share in the first quarter, beating the average analyst estimate by 71 percent.

Shuffle Master Inc. (SHFL US): The maker of casino-chip sorters and card shufflers reported second-quarter profit excluding some items of 10 cents a share, more than double the average analyst estimate.

Stone Energy Corp. (SGY US): The independent oil and gas company said it’s offering 6 million shares, raising money to pay back debt.

To contact the reporter on this story: Lu Wang in New York at lwang8@bloomberg.net

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Asian Stocks Climb on Commodity Prices, Australian Confidence

By Patrick Rial and Masaki Kondo

June 10 (Bloomberg) -- Asian stocks rose for the first time in three days, as higher metal and oil prices boosted commodity companies and the biggest gain in Australian consumer confidence in 22 years added to evidence the global recession is easing.

Fortescue Metals Group Ltd., Australia’s third-largest iron ore producer, jumped 9.7 percent, while Mitsubishi Corp., a trading company that gets more than half its profit from commodities, climbed 5.2 percent in Tokyo. David Jones Ltd., Australia’s No. 2 department store chain, surged 5.4 percent as a consumer sentiment index showed the country’s optimists outnumbered pessimists for the first time since January 2008.

“Investors are focusing more on the possibility that the economy is emerging from its worst period,” said Yoshihiro Ito, senior strategist at Tokyo-based Okasan Asset Management Co., which oversees the equivalent of $7.7 billion. “Improved sentiment is resulting in this resilient market.”

The MSCI Asia Pacific Index gained 2.1 percent to 104.25 as of 1:48 p.m. in Tokyo, following a two-day, 1.2 percent drop. The gauge has surged 48 percent from a five-year low on March 9 as equities from Mumbai to Shanghai rallied on rising confidence the worst of the global recession is over.

Japan’s Nikkei 225 Stock Average rose 1.8 percent as Mitsui O.S.K. Lines Ltd., Japan’s second-biggest bulk shipper, surged 5.3 percent after brokerages recommended buying the shares. Taiwan Semiconductor Manufacturing Co. climbed 2.7 percent after saying the worst is over for the global chip industry.

South Korea’s retailers rallied after Shinsegae Co. reported higher sales. Stocks climbed in all Asian markets except Vietnam. China’s CSI 300 Index rose 0.5 percent to the highest since Aug. 1 as a report showed consumer prices fell for a fourth month, making it easier for the government to keep interest rates low.

Higher Valuations

Futures on the Standard & Poor’s 500 Index rose 0.4 percent. Most U.S. stocks rose yesterday, lifting the S&P 500 up by 0.4 percent as a better-than-estimated forecast at Texas Instruments Inc. spurred gains in technology companies.

The three-month stock rally has driven the average valuations of companies on the MSCI Asia Pacific Index to 1.5 times the book value of assets, the highest since Sept. 26. Analyst profit forecasts have been increasing since the end of March, according to data compiled by Bloomberg. Nomura Holdings Inc. yesterday narrowed its estimate for how much profit at Japan’s non-financial companies will decline in fiscal 2009.

Fortescue soared 9.7 percent to A$3.41 in Sydney. Mitsubishi Corp. added 5.2 percent to 1,974 yen. BHP Billiton Ltd., the world’s largest mining company and Australia’s top oil producer, jumped 3.3 percent to A$37.70.

Best Performers

Crude oil rose 2.8 percent to $70.01 a barrel yesterday in New York, the highest settlement since Nov. 4. A gauge of six metals jumped 3.8 percent in London, the most since June 1. Copper surged 5 percent in New York.

Measures of energy and material stocks have been the top performers among the MSCI Asia Pacific Index’s 10 industry groups in the past month on speculation demand for commodities will increase as global growth picks up.

Signs of a global recovery have increased in recent weeks, fueling the stock rally since March. Australia unexpectedly reported growth in its economy last week, while Japan’s government two weeks ago raised its view of the economy for the first time in three years.

The International Monetary Fund said in April it expects Asia’s developing markets to grow 4.8 percent in 2009, compared with a global contraction of 1.3 percent.

Optimists Increase

An Australian consumer sentiment index compiled by Westpac Banking Corp. and the Melbourne Institute that was released today showed an increase of 12.7 percent in June from the previous month to 100.1 points. It’s the first time since January 2008 that the index was above 100, indicating optimists outnumber pessimists.

David Jones climbed 5.4 percent to A$4.11. Commonwealth Bank of Australia, the nation’s second-biggest lender, added 2 percent to A$37.73. Harvey Norman Holdings Ltd., Australia’s biggest electronics retailer, climbed 2 percent to A$3.09.

Mitsui O.S.K. rallied 5.3 percent to 690 after Osuke Itazaki, an analyst at Credit Suisse Group AG and Deutsche Bank AG’s Seigo Ando recommended investors buy the shares.

“Any short-term reduction in share prices is an investment opportunity,” Itazaki wrote in a report. “If the March 2010 fiscal year marks the bottom for earnings, then there is a strong possibility of an upturn in the basic share price trend.”

Shippers Gain

Kawasaki Kisen Kaisha Ltd., Japan’s third-biggest shipping line, jumped 5.9 percent to 447 yen, while Nippon Yusen K.K., the largest, rose 4.1 percent to 455 yen, after Itazaki gave “outperform” ratings to both.

In Taipei, Taiwan Semiconductor, the world’s largest custom-chip maker, climbed 2.9 percent to NT$57.70 as comments made by Chairman Morris Chang at the company’s annual shareholder meeting fueled optimism industry demand will pick up.

United Microelectronics Corp., the world’s second-biggest maker of custom semiconductors, gained 3.6 percent to NT$12.85. Samsung Electronics Co., the world’s largest computer memory chipmaker, jumped 3.5 percent to 585,000 won.

Shinsegae, which runs South Korea’s biggest discount-store chain, climbed 6.9 percent to 472,500 won after saying sales in May rose 20 percent. Lotte Shopping Co., South Korea’s biggest department-store chain, added 6.4 percent to 251,000 won.

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

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Currency Trading Summary

Daily Forex Fundamentals | Written by Easy Forex | Jun 10 09 01:35 GMT |

U.S. Dollar Trading (USD) resumed weakening after a brief period of strengthening as speculation of future rate hikes in the US were dampened. In a survey of the major US bond traders all 16/16 thought the US would not raise rates this year. USD/JPY was lower even as stocks rallied on banking and mining stocks. Oil broke and closed above $70 a barrel. Crude Oil closed up $1.92 to finish the day at $70.01. In US share markets, the Nasdaq was up 17 points or 0.96% and the Dow Jones was down 1 points or -0.02%. Looking ahead, April Trade Balance forecast at -29BN vs. -28Bn previously. The Euro (EUR) regained above 1.4000 after Goldman Sachs put out a buy recommendation and the USD weakened after traders pared back bets of the US Fed raising rates this year. German Industrial Production was down -1.9% in April vs. 0.0% forecast. Overall the EUR/USD traded with a low of 1.4004 and a high of 1.3804 before closing at 1.3910. Looking ahead, May German CPI is forecast at -0.1%. The Japanese Yen (JPY) strengthened against the USD as Yields dropped on the above news. Support at 98 gave weigh but crosses continued to provide support on dips so the downside may be limited while risk appetite is strong. Core Machinery Orders fell -5.4% vs. 0.1% forecast. Overall the USDJPY traded with a low of 97.24 and a high of 98.57 before closing the day around 97.40 in the New York session. The Sterling (GBP) continued the rally that began yesterday on route back above 1.6300 towards year highs above 1.66. Better than expected RICS house price balance helped propel the pair with gains above 1% for the day. Overall the GBP/USD traded with a low of 1.5985 and a high of 1.6365 before closing the day at 1.6330 in the New York session. Industrial Output is forecast at -0.1% vs. 0.0%. Also released, April Trade balance is forecast at -6.4Bn vs. -6.59Bn. The Australian Dollar (AUD) regained 0.8000 as USD weakened and commodities surged. The major topside target at year highs of 0.8260 could come under threat as June consumer confidence increased the most on record up 12%. Overall the AUD/USD traded with a low of 0.7851 and a high of 0.8046 before closing the US session at 0.8015. Looking ahead, Australian June Unemployment is forecast at -30k vs. +27.2K previously. Gold (XAU) couldn’t rally on the USD weakness with improving risk sentiment and inflation pressures yet to materialize. Overall trading with a low of USD$942 and high of USD$960 before ending the New York session at USD$953 an ounce. Easy Forex http://www.easy-forex.com Easy-Forex makes no recommendations as to the merits of any financial product referred to in this website, emails or its related websites and the information contained does not take into account your personal objectives, financial situation and needs. Therefore you should consider whether these products are appropriate in view of your objectives, financial situation and needs as well as considering the risks associated in dealing with those products

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Forex Exchange Morning Report

Daily Forex Fundamentals | Written by Westpac Institutional Bank | Jun 10 09 01:43 GMT |

News And Views Dollar slips. The S&P500 hovered around its flat open, closing up 0.4%. The US Treasury said 10 big banks will repay about $68 billion to the government, but the market was undecided whether that was positive (banks in good shape) or negative (banks have less to lend) for the economy. The US dollar index lost around 1.3%, which then helped metals - copper gaining 4.6% and nickel 6.2%. Treasury bond supply concerns were absent at a 3yr auction, foreign (e.g. central bank) bidders more noticeable. Of course the real test will be the 10yr and 30yr auctions this week. The 2yr yield rallied by 10bp while 10yrs did 2bp, in a partreversal of the rate-hike-expectations prevailing during the past few days. EUR bounced from 1.3855 to 1.4100, a US investment bank's long-EUR trade recommendation coinciding with a moderately positive tone in risk sentiment last night. GBP rallied from around 1.6000 to 1.6360 in the standout performance of the evening, helped by talk of inflows related to the Barclay Global sale, improving housing data, and receding political volatility. USD was weaker against even the yen, falling from 98.50 to 97.25. AUD went for the ride with the other majors, rallying from 0.7900 (noon London) to 0.8045 (late NY), opening in NZ at 0.8020. NZD copied the action, gaining a cent to the current 0.6270. AUD/NZD marched higher, from 1.2700 to 1.2800. US wholesale inventories down 1.4% in April. Another sharp rundown in stocks at the start of Q2, following a downward revision to March from -1.6% to -1.8%. No evidence at this early stage of a positive contribution to Q2 GDP growth from inventory accumulation. US IBD-TIPP economic optimism up from 48.6 to 50.8 in June. This first read on consumer confidence this month shows a further modest gain, driven by all three of the economic outlook, personal finances and federal policies. Japan April leading composite index rose 1.0, extending the 2.1 March rebound from prolonged sharp drop that saw it decline 9 of the 10 previous month. The coincident composite index rose 1.0 in April, the first increase in 11 month. The April indices reflect recent hints of a bottoming out in the sharp contraction in the manufacturing sector. German industrial production down 1.9% in April. This weak monthly outcome pulled annual growth down from -20.2% yr to -21.6% yr. UK house prices update. The May RICS (surveyor) index rose to an 18 month high, with just 44.1% of respondents reporting lower house prices. The DCLG (government) house price index improved from -13.6% yr to -13.0% yr. Both add to the body of evidence suggesting the UK housing market may be stabilising. UK BRC retail sales monitor very soft. May same store sales growth dropped from 4.6% yr to -0.8% yr, confirming that April's strength was mostly Easter and hot weather driven. Outlook We have a negative NZD bias for a 2-month outlook, having expressed that yesterday via the purchase of a NZD put (USD call) option. The motivation for using an option was to remove the daily noise from a medium-term structural trade. We have a target of around 0.55 in mind, but expect the path will be choppy. Today, the 0.6300 level should cap the action, and a move to 0.6150 is our preferred scenario. Watch the terms of trade report this morning - we think it could be much worse than the -3.8% q/q consensus. Events Today Country Release Last Forecast NZ Q1 Terms of Trade -0.9% -6.6% May Electronic Card Transactions 0.70% - Aus Jun Westpac-MI Consumer Sentiment 88.8 - Apr Housing Finance 4.90% -1.0% US Apr Trade Balance $bn -27.6 -29.0 May Federal Budget Balance $bn -166 -181 Fed Beige Book Apr Current Account €bn Fedspeak: Governor Duke Jpn Apr Machinery Orders -1.3% -0.7% May Corp. Goods Prices %yr -0.4% -0.3% UK Apr Visible Trade Balance £bn -6.6 -6.4 Apr Industrial Production -0.6% 0.20% Can Apr Trade Balance C$bn 1.1 1.1 Apr New House Prices -0.5% -0.5% Westpac Institutional Bank http://www.wib.westpac.co.nz/ Disclaimer All customers please note that this information has been prepared without taking account of your objectives, financial situation or needs. Because of this you should, before acting on this information, consider its appropriateness, having regard to your objectives, financial situation or needs. Australian customers can obtain Westpac's financial services guide by calling +612 9284 8372, visiting www.westpac.com.au or visiting any Westpac Branch. The information may contain material provided directly by third parties, and while such material is published with permission, Westpac accepts no responsibility for the accuracy or completeness of any such material. Except where contrary to law, Westpac intends by this notice to exclude liability for the information. The information is subject to change without notice and Westpac is under no obligation to update the information or correct any inaccuracy which may become apparent at a later date. Westpac Banking Corporation is regulated for the conduct of investment business in the United Kingdom by the Financial Services Authority. © 2004 Westpac Banking Corporation. Past performance is not a reliable indicator of future performance. The forecasts given in this document are predictive in character. Whilst every effort has been taken to ensure that the assumptions on which the forecasts are based are reasonable, the forecasts may be affected by incorrect assumptions or by known or unknown risks and uncertainties. The ultimate outcomes may differ substantially from these forecasts.

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Foreign Exchange Market Commentary

Daily Forex Technicals | Written by HY Markets | Jun 10 09 03:31 GMT |

EUR/USD closed sharply higher on Tuesday due to short covering as it consolidated some of its decline off last week's low. The high-range close sets the stage for a steady to higher opening on Wednesday. Despite today's rebound, stochastics and the RSI remain bearish signalling that sideways to lower prices is possible near-term. Closes below the 20-day moving average crossing are needed to confirm that a short-term top has been posted. If it renews this spring's rally, the 87% retracement level of the December-March decline crossing is the next upside target. USD/JPY closed higher due to short covering on Tuesday as it consolidated some of the decline off May's high. The high-range close sets the stage for a steady to higher opening on Wednesday. Stochastics and the RSI are oversold but remain neutral to bearish signalling that sideways to lower prices are possible near-term. If it extends last week's decline, the reaction low crossing is the next downside target. Closes above the 20-day moving average crossing would confirm that a short-term low has been posted. GBP/USD closed sharply higher due to short covering on Tuesday as it consolidates some of last week's decline. The high-range close sets the stage for a steady to higher opening on Wednesday. Despite today's rebound, stochastics and the RSI remain bearish signalling that sideways to lower prices are possible near-term. Closes below the 20-day moving average crossing are needed to confirm that a short-term top has been posted. If it renews the rally off April's low, the 50% retracement level of the 2008-2009 decline crossing is the next upside target. USD/CHF closed higher due to short covering on Tuesday as it consolidated some of the decline off last week's high. The high-range close sets the stage for a steady to higher opening on Wednesday. Despite today's rebound, stochastics and the RSI remain bearish signalling that sideways to lower prices are possible near-term. If it extends the decline off last week's high, the reaction low crossing is the next downside target. Closes above the 10-day moving average crossing would temper the near-term bearish outlook in the market. HY Markets http://www.hymarkets.com

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Forex and Dow Jones Recommended Levels

Daily Forex Technicals | Written by FXtechtrade | Jun 10 09 03:26 GMT |

EUR/USD Today's support: - 1.4025, 1.3990 and 1.3953(main), where correction is possible. Break would give 1.3922, where correction also may be. Then follows 1.3904. Break of the latter would result in 1.3891. If a strong impulse, we would see 1.3872. Continuation will give 1.3858. Today's resistance: - 1.4123(main). Break would give 1.4176, where a correction is possible. Then goes 1.4220. Break of the latter would result in 1.4247. If a strong impulse, we'd see 1.4266. Continuation will give 1.4290. USD/JPY Today's support: - 96.90(main). Break would bring 96.77, where correction is possible. Then 96.53, where a correction may also happen. Break of the latter will give 96.40. If a strong impulse, we would see 96.17. Continuation would give 95.86. Today's resistance: - 97.88 and 98.21(main), where a correction may happen. Break would bring 98.58, where also a correction may be. Then 98.78. If a strong impulse, we would see 99.26 Continuation will give 99.47. DOW JONES INDEX Today's support: -8724.32, 8673.70, 8634.17 and 8561.40(main), where a delay and correction may happen. Break of the latter will give 8495.80, where correction also can be. Then follows 8463.00. Be there a strong impulse, we would see 8426.22. Continuation will bring 8392.44. Today's resistance: - 8808.80 and 8842.72(main), where a delay and correction may happen. Break would bring 8858.37, where a correction may happen. Then follows 8887.46, where a delay and correction could also be. Be there a strong impulse, we'd see 8910.00. Continuation would bring 8927.28. FXtechtrade http://www.fxtechtrade.com Disclaimer: Any information presented by Nikolajs Serikovs at this very website should be in no way understood as an offer, promise or guarantee for receiving a profit or avoiding the losses. Stated here levels of support and resistance must not be construed as an investment advice or endorsement for any financial instrument. There exists no guarantee that the market would behave in accordance with the information stated here Prepared in Republic of Latvia for the worldwide distribution.

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Various Economic Data Indicate Asia Is On Its Way To Stabilize

Daily Forex Fundamentals | Written by ecPulse.com | Jun 09 09 08:02 GMT |

The economic agenda did not carry with it any important economic data from the Asian region today, however lately we were pleasantly surprised with some evident signs that the worst is behind us therefore stability is about to take control next indicating that recovery from the worst financial crisis since the great depression is close. However some data that have a mild affect on markets was released today starting with Australia in which business confidence for the month of May fell to -2 however better than the previous reading which indicated a wider fall reaching -14, meanwhile the business conditions also for the month of May also fell to -14 but this time it was worst than the previous -10. The improvement in Australia's business confidence could've been based on the government stimulus plan which reached to 22 billion Australian dollars and which was directed to building roads, railways, schools and other infrastructure projects that help to support growth and strengthened the country to be able to face the crisis that ruined exports around the world. The interest rates reductions performed by the Reserve Bank of Australia, driving it to the lowest level in 49 years at 3.0% helped to support domestic spending, direct investments to internal projects and support companies. The Central Bank held rates steady during its last meeting following some signs indicating that the country is stabilizing which were later confirmed by the GDP reading for the first quarter that proved to be positive preventing the economy from falling into recession. More data were today released from Australia as the Job Advertisements for the month of May fell by 0.2% however improving from the previous reading when it fell by 7.5%, its clear that the fiscal policy adopted by the Reserve Bank of Australia had improved the business sector and slowed down the layoffs, however unemployment remains high at 5.4% during the month of May because of the pressures faced by large companies in the past few months after exports fell sharply and domestic consumption declined. Moving to South Korea that witnessed the release if its yearly Producer Price Index for the month of May which dropped by 1.3% and for the first time since 2002 compared to the previous rise of 1.5%, obviously the decline is very much influenced by the fall in energy and row material prices that help decrease manufacturing prices but also by the decline in domestic consumption, however the Korean central bank benefited from the decline in inflation levels by lowering interest rates to 2.0% yet in its last meeting it held rates steady as a reaction to the stability signs that began to emerge from the US and the recovery signs started in China. Moving to the second largest economy in the world Japan which today released the preliminary reading for the leading index which reached in April to 76.5 from the previous revised reading of 75.5 however worst than the expected 77.2, meanwhile the preliminary reading for the coincident index reached to 85.8 in April from the previous revised reading of 84.8 yet worst than the expected 86.0, but the improvement in April from the previous month indicate that stability is finding its way into the economy, still the main focus remain on exports are they are the main supportive factor to growth in Japan. Japan holds today a meeting of the government's Council on Economic and Fiscal Policy where it is expected to announce the outline of monetary and fiscal policy in Japan, the Nikkei newspaper published today said that the government is expected for it to cut the deficit of the country by half until 2014 and start achieving surplus in the upcoming 10 years. 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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Morning Forex Overview

Daily Forex Fundamentals | Written by Dukascopy Swiss FX Group | Jun 09 09 07:35 GMT |

Previous session overview The euro fell further against the dollar and the yen in Asia Tuesday as regional stocks declined, prompting hedge funds to keep taking profit on risky currencies including the European unit. The euro fell about half a cent to USD1.3853 overnight. It also lost more than one yen to JPY135.75 before recouping some losses. U.S. and European hedge funds, some of which are set to close their books at the end of the month, kept offloading their holdings of currencies that many consider to be relatively risky, such as the euro, sterling and the Australian currency, dealers said. The sellers took a cue from weakness in Asian shares, which often knocks those currencies lower by chilling demand for risk, they said. The Euro eased relentlessly to USD1.4000 support after the US jobs data changed the fortune of the dollar. EURJPY was very well supported though with the break higher on the USDJPY countering the major. A pullback after weeks of rallying is healthy for the uptrend with some looking for a break of USD1.3925 support. In European morning session, the British pound remained under pressure against the greenback as Prime Minster Gordon Brown confronted a fresh attempt to force him out, after support for his ruling Labour Party in European elections plunged to its lowest level in a century. The Australian dollar was weaker in late Asian trade Tuesday as the run up in shorter-dated U.S. Treasury yields that have increased speculation about possible U.S. central bank rate hikes prompted fears about the longevity of the so-called green shoots recovery Market expectation The euro faces the risk of falling to USD1.3500 in the near-term, although it may lose a sense of direction once the current rounds of position adjustments run their course, analysts added. Some dealers noted that Standard & Poor's move Monday to downgrade the sovereign credit rating of Ireland continued to weigh on the euro, while others brushed off the event as too old. The euro, Swiss franc and U.K. pound are tipped as buys against the dollar later on Tuesday, as the dollar's current run higher runs out of steam. Markets reported to have been thin overnight, with the downside pressure squeezing out some of the weaker spec longs. EURUSD recovered ahead of the European open, with demand able to lift rate toward USD1.3900. Failure to break above this level currently sees rate trading back around USD1.3875. Bids seen placed toward USD1.3850, more around USD1.3840 with stops below, which if triggered to bring Monday's lows at USD1.3806 back into focus. Bids noted between USD1.3810/00, more between USD1.3795/90 with stops below. Resistance seen placed between USD1.3895/05, more toward USD1.3920 ahead of overnight highs at USD1.3938. EUEGBP traders note that Monday's extended pullback found support at stg0.8646, the level corresponding to a 76.4% retracement of the rally from stg0.8578 to stg0.8866. Bids noted from this level to stg0.8640 with stops below, which iof triggered to open a deeper move toward stg0.8625/20 ahead of stg0.8605/00. Resistance noted at stg0.8670/75. Analysts say much of the political uncertainty in the U.K. has now been priced into the market, and the reasons that had previously sent the pound to 2009-highs still exist. Meanwhile, disturbing euro-zone developments, such as currency and banking fears in Eastern Europe and the Baltics, are mostly under the surface. Dukascopy Swiss FX Group Legal disclaimer and risk disclosure This overview can be used only for informational purposes. Dukascopy SA is not responsible for any losses arising from any investment based on any recommendation, forecast or other information herein contained.

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Forex Technical Analytics

Daily Forex Technicals | Written by FOREX Ltd | Jun 09 09 06:45 GMT |

CHF The pre-planned break-out variant for buyers has been implemented with overlap of minimal anticipated target. OsMA trend indicator, having marked last trading day top by formation of topping bearish signal with further confirmative sales activity rise and gives grounds for the priority of buyers direction of trading operations planning for today. On the assumption of it we can assume probability of rate attainment of close 1,0860/80 supports where it is recommended to evaluate development of the activity of both parties in accordance with the charts of a shorter time interval. As for buying positions on condition of the formation of topping signals the targets will be 1,0920/40, 1,0980/1,1000 and (or) further break-out variant up to 1,1040/60, 1,1100/20, 1,1160/80. The alternative for sales will be below 1, 0790 with the targets of 1,0730/50, 1,0680/1,0700. GBP The pre-planned break-out variant for sales has been implemented but with loss of several points in the achievement of minimal anticipated targets. OsMA trend indicator, having marked confirmation of rate oversold by relative bullish activity rise but with rather minimal grounds for the preservation of bearish planning priorities for today. On the assumption of it as well as descending direction of indicator chart we can assume probability of rate return to close 1,5940/60 supports where it is recommended to evaluate development of the activity of both parties in accordance with the charts of a shorter time interval. As for short-term buying positions on condition of formation of topping signals the targets will be 1,6020/40, 1,6080/1,6100 and (or) further break-out variant above 1,6140 with the targets of 1,6180/1,6200, 1,6240/60, 1,6300/20. The alternative for sales will be below 1,5780 with the targets of 1,5720/40, 1,5660/80, 1,5600/20. JPY The estimated test of key supports for the implementation of pre-planned long positions has not been confirmed and the result of previous working day with preservation of bullish activity priority gives grounds for the preservation of trading plans made before. We can assume probability of rate fall to channel line '1' at 97,60/80 levels where it is recommended to evaluate development of the activity of both parties in accordance with the charts of a shorter time interval. As for short-term buying positions on condition of formation of topping signals the targets will be 98,20/40, 98,80/99,00 and (or) further break-out variant up to 99,40/60, 100,00/20, 100,80/101,20. The alternative for sales will be below 97,00 with the targets of 96,40/60, 95,80/96,00, 95,20/40. EUR The pre-planned break-out variant for sales has been implemented with the overlap of minimal anticipated target. OsMA trend indicator, having marked last trading day low by formation of topping bullish signal with further relative bearish activity rise and gives grounds to suppose further correction period with preservation of sales priority of trading operations planning for today. On the assumption of we can assume rate achievement of channel line '2' at 1,3960/80 levels where it is recommended to evaluate the development of the activity of both parties in accordance with the charts of a shorter time interval. As for short-term sales on condition of the formation of topping signals the targets will be 1,3900/20, 1,3840/60, 1,3780/1,3800 and (or) further break-out variant up to 1,3720/40, 1,3660/80, 1,3600/20. The alternative for sales will be above 1,4060 with the targets of 1,4100/20, 1,4160/80, 1,4220/40. FOREX Ltd www.forexltd.co.uk

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FX Technical Analysis

Daily Forex Technicals | Written by Mizuho Corporate Bank | Jun 09 09 06:32 GMT |

EURUSD Comment: Trying to base against the 26-day moving average and retracement support. Yesterday's bounce was decent but not conclusive so allow for more of the same today. Strategy: Attempt longs at 1.3890; stop below 1.3800. Short term target 1.4020, then 1.4245 Direction of Trade: →↗ Chart Levels: Support Resistance 1.3853 " 1.3938 1.38 1.4023 1.3790/1.3775* 1.4050/1.4065* 1.3725 1.41 1.3600* 1.417 GBPUSD Comment: Bouncing smartly from retracement and trendline support, and the 26-day moving average which all cluster around 1.5800, despite an appalling political situation. Two-way price action should keep the bid tone to implied volatility. Strategy: Attempt small longs at 1.6035, adding to 1.5855; stop below 1.5800. First target 1.6100, then 1.6200 Direction of Trade: →↗ Chart Levels: Support Resistance 1.5985 " 1.6105* 1.5800* 1.6155 1.575 1.62 1.57 1.6245 1.5514* 1.6435 USDJPY Comment: Hovering above the top of the Ichimoku 'cloud', which gets very thin at the end of next week, the summer solstice. Expect more cautious random small swings today and probably all week. Strategy: Possibly attempt small shorts at 98.10, adding to 98.55; stop above 99.25. First target 97.65 then 96.00 Direction of Trade: → Chart Levels: Support Resistance 98.00 " 98.58 97.87 98.85/99.00* 97.57 99.49/99.60 97 99.69/99.80* 96 100 EURJPY Comment: Consolidating between 138.00 and the 9-day moving average at 135.50, and we favour more of the same today with a downside test likely late in the afternoon. Strategy: Attempt small shorts at 136.55, adding to 137.50; stop above 138.20 Short term target 135.50, maybe 134.00 Direction of Trade: → Chart Levels: Support Resistance 135.70 " 137.33 135.45 138.02 135.25 138.2 134.5 138.57 134 139.26* Mizuho Corporate Bank Disclaimer The information contained in this paper is based on or derived from information generally available to the public from sources believed to be reliable. No representation or warranty is made or implied that it is accurate or complete. Any opinions expressed in this paper are subject to change without notice. This paper has been prepared solely for information purposes and if so decided, for private circulation and does not constitute any solicitation to buy or sell any instrument, or to engage in any trading strategy.

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China Investment Growth Likely Quickened on Government Spending

By Bloomberg News

June 9 (Bloomberg) -- China’s spending on roads, power grids and property probably accelerated for a fourth month as the government stepped up spending to revive the world’s third- largest economy.

Urban fixed-asset investment grew 31 percent in the five months through May from a year earlier, according to the median estimate of 16 economists surveyed by Bloomberg News. That compares with 30.5 percent in the first four months. Industrial output may rise 7.7 percent, up from 7.3 percent in April.

Premier Wen Jiabao’s 4 trillion yuan ($585 billion) stimulus package has helped manufacturing expand, sparked record vehicle sales and increase property transactions. Still, the government said on May 27 that the drop in overseas sales is the biggest challenge facing the economy and that outlook for employment remains “grim.”

“China’s economic recovery is well on track as investment and consumption continue to gain momentum,” said Xing Ziqiang, a Beijing-based economist at China International Capital Corp.

Exports probably dropped for a seventh month, falling 23 percent in May compared with 22.6 percent in April. Imports likely slid 22 percent, leaving a trade surplus of $14.9 billion, according to 15 economists. The government will release trade and investment figures on June 11.

Since the stimulus was announced in November China has built 20,000 kilometers (12,430 miles) of rural roads, 445 kilometers of highway and 100,000 square meters (1.08 million square feet) of airport buildings, the National Development and Reform Commission said on May 21.

New Construction

More projects are breaking ground as the nation starts to build 5.2 million low-rent homes and offers housing subsidies to help accommodate 7.5 million poor urban families by 2011.

Chongqing Changan Automobile Co. started building a plant in Chongqing that will produce as many as 300,000 vehicles a year on completion in 2012, the carmaker said on June 2.

China’s State Council is also taking measures to help exporters. The finance ministry yesterday raised export rebates on some electronics, machinery, steel products and toys to boost shipments.

Growth of retail sales probably accelerated to 15 percent from 14.8 percent in April, according to the median estimate of 16 economists. China last month said it will boost trade-in subsidies for vehicle purchases by five times and add TVs, refrigerators and computers into the trade-in program to spur consumer spending and to offset losses overseas.

Stock-Market Gains

“The wealth effect from rising equity prices, rising inflation expectations and further government support could prompt a broad-based pickup in household consumption,” said Wang Qian, a Hong Kong-based economist at JPMorgan Chase & Co. China’s benchmark Shanghai Composite Index has gained more than 50 percent this year.

New loans may have stabilized after cooling from the record of 1.89 trillion yuan in March. Banks probably lent as much as 600 billion yuan last month, compared with 592 billion yuan in April, according to state media reports. M2, the broadest measure of money supply, may have expanded 25.9 percent, from 26 percent in April, according to the median estimate of 15 economists surveyed by Bloomberg News.

Economic growth slipped to 6.1 percent in the first quarter, the weakest pace in almost a decade. The government cautioned on June 3 that a recovery isn’t yet solid, saying the global crisis may still hurt the economy.

Producer prices probably fell a record 6.9 percent after a 6.6 percent drop in April, and the decline in consumer prices may ease to 1.3 percent from 1.5 percent.

The economy will expand 7.5 percent this year, according to the median estimate of 14 economists, up from 7.1 percent forecast in February.

“This is not a nation of 1.3 billion people who are just sitting around waiting for another order of toys to come in from Wal-Mart,” Carl Weinberg, chief economist of High Frequency Economics in New York, wrote in an e-mailed report yesterday. “China’s economy is broad-based, diverse and driven by domestic consumer demand and investment spending.”

--Li Yanping. Editors: David Tweed, Lily Nonomiya

To contact Bloomberg News staff for this story: Li Yanping in Beijing at +86-10-6649-7568 or yli16@bloomberg.net

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German April Exports Decline Due to ‘Lackluster’ Global Economy

By Frances Robinson

June 9 (Bloomberg) -- German exports fell more than economists forecast in April as the global crisis restrained demand, keeping Europe’s largest economy mired in a recession.

Sales abroad, adjusted for working days and seasonal changes, fell 4.8 percent from March, when they rose a revised 0.3 percent, the Federal Statistics Office in Wiesbaden said today. Economists expected a 0.1 percent decline in April, according to the median of 10 estimates in a Bloomberg News survey.

“The world is still adjusting to the burst of the credit boom and this kind of hangover won’t be gone in a couple of months,” said Thorsten Polleit, chief German economist at Barclays Capital in Frankfurt. “The global economy is still lackluster.”

German companies from chemical makers to car manufacturers have seen demand fall as the global economy contracts. While Bundesbank President Axel Weber said June 5 that central bank policy has helped to slow the pace of the economic slump, the outlook “remains uncertain.” Volkswagen AG’s Audi division said yesterday it may need to push back a 2015 sales target as customers withhold purchases of luxury vehicles.

German imports dropped 5.8 percent in April from the previous month, when they increased a revised 0.2 percent, the statistics office said. The trade surplus narrowed to 9.4 billion euros ($13.1 billion) from 11.3 billion euros.

The surplus in the current account, the measure of all trade including services, was 5.8 billion euros, down from a revised 11.0 billion euros.

The European Central Bank has cut its key interest rate to a record low of 1 percent and pledged to buy 60 billion euros of covered bonds starting next month in an effort to revive lending. President Jean-Claude Trichet said on June 4 that he expects the slump in the euro-area economy to ease in the current quarter after a “sharp fall in global demand and trade” affected the region in the first quarter.

To contact the reporter on this story: Frances Robinson in Frankfurt at frobinson6@bloomberg.net

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Fed Said to Retreat From Seeking Power to Sell Its Own Bills

By Scott Lanman

June 9 (Bloomberg) -- The Federal Reserve has backed off from seeking a new tool to forestall inflation, refraining from asking Congress for the power to issue its own debt, according to a person familiar with the matter.

Putting off the issue may avoid a political clash over whether the Fed should begin winding down its emergency lending programs while unemployment remains elevated. The central bank intends to rely instead on paying interest on banks’ reserve deposits to prevent a flood of cash into the economy.

After central bankers repeatedly said Fed bills would be a useful additional tool to mop up liquidity, Chairman Ben S. Bernanke omitted mention of the idea in congressional testimony last week. The person, who spoke on condition of anonymity, said the Fed hasn’t made a formal request to lawmakers.

“It’s important that we have all the tools in place” for the Fed to drain liquidity when it’s ready, House Financial Services Committee Chairman Barney Frank, a Massachusetts Democrat, said in an interview. Still, “it would be a mistake to start dealing with that before you know when, how, how much, et cetera.”

House Budget Committee Chairman John Spratt, a South Carolina Democrat, said in an interview after Bernanke testified to his panel June 3 that “if it was something that the Fed needed, he wasn’t pushing it with this committee.” Wisconsin Representative Paul Ryan, the panel’s ranking Republican, said “I do not like that idea at all.”

‘Other Possibilities’

In testimony before the committee, Bernanke suggested the Fed hasn’t abandoned the idea of issuing its own debt. Beyond the Fed’s current set of tools, Bernanke said “there are still other possibilities that we’re looking at and that perhaps we can discuss with Congress at some point,” without mentioning the authority to issue debt.

“We suspect the omission from Bernanke’s litany was not a slip of the tongue,” Joseph Abate, a money-market strategist at Barclays Capital in New York, said in a research note June 4.

Abate said in an interview that lawmakers may be reluctant to allow the Fed to issue debt that’s not subject to the Treasury limit and competes with other government securities. In addition, were Fed officials to ask Congress for debt-issuing powers, they would be “opening themselves up to political interference,” he said.

Fed Assets Double

The Fed has replenished and added liquidity in credit markets over the past year through lending programs and purchases of securities, more than doubling assets on its balance sheet to $2.1 trillion.

Gaining authority to issue its own debt would allow the Fed to reduce reserves in the banking system and push up interest rates without having to shrink the balance sheet, San Francisco Fed President Janet Yellen said March 25.

In his congressional testimony last week, Bernanke instead highlighted the Fed’s authority to pay interest on banks’ reserve deposits as a tool that bears “very importantly” on the central bank’s ability to tighten credit.

“We can raise interest rates, and then we can tighten policy,” Bernanke said in response to a question from Representative Rick Larsen, a Washington Democrat.

Lacking the power to issue its own debt separates the Fed from central banks in Japan, China, the U.K. and other countries that do have such authority.

‘Nice to Have’

New York Fed President William Dudley said last week that under such a program, Fed debt would probably be restricted to maturities of less than 30 days. “We’d like Congress to consider it,” Dudley said, according to a transcript of an interview with the Economist. “It’s nice to have -- as opposed to critical.”

Yet seeking the power may lead to other legislation. The Senate in April passed a nonbinding resolution asking the Fed to identify borrowers, a move Bernanke has said would be “counterproductive” and result in “severe adverse consequences” for the economy. Another resolution called for an “evaluation of the appropriate number and the associated costs” of the Fed banks.

Bernanke gave Congress a similar opening last year when he sought, and received, immediate authority from Congress to pay banks interest on the reserves they kept at the Fed. The 27-word clause was part of the October law creating the $700 billion Troubled Asset Relief Program.

New Obligations

With that legislation, Congress placed several new obligations on the central bank. The Fed was required to devise a policy to ease terms on mortgages it had acquired, and to file reports with the legislature on emergency-lending programs and bailouts.

At the House Budget hearing, a lawmaker brought up the idea of making Fed district-bank presidents subject to Senate confirmation. Currently the presidents are nominated by the banks’ boards of directors and approved by the U.S.-appointed Fed governors in Washington.

Representative Marcy Kaptur, an Ohio Democrat, asked Bernanke during the hearing whether he supported the idea. “No,” the chairman replied.

“The last thing the Fed wants is for its independence of monetary policy to be challenged,” said David M. Jones, president of DMJ Advisors LLC in Denver and a former Fed economist. “It’s very unlikely this debt thing would be pursued.”

To contact the reporter on this story: Scott Lanman in Washington at slanman@bloomberg.net.

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U.K. Housing Market Shows Signs of ‘Stabilizing,’ RICS Says

By Svenja O’Donnell

June 9 (Bloomberg) -- The U.K. housing market showed signs of “stabilizing” in May as the smallest balance of real-estate agents and surveyors in 18 months reported price declines, the Royal Institution of Chartered Surveyors said.

The number of respondents in the monthly survey saying home values fell exceeded those reporting gains by 44.1 percentage points, the best reading since November 2007, RICS said in a report today in London. Property sales per agent rose to 11.8 in the three months through May, the highest since August 2008.

With Nationwide Building Society and Halifax saying that home values jumped in May, evidence is mounting that the property slump is past its worst. That may help buoy the economy as service industries pick up, pulling Britain out of its worst recession since World War II.

“On the face of it, the housing market does appear to be close to bottoming out with activity picking up in a material way and prices at last stabilizing,” RICS spokesman Ian Perry said in the statement. “However, it is important to remember that the lack of supply has been as important in underpinning prices as the rise in demand.”

The number of properties on agents’ books fell to 58.4 last month, a drop of 35 percent from a year earlier and the lowest since May 2004, RICS said.

The survey showed optimism about future prices is increasing. A net 11 percent of respondents predicted declines, the best result since July 2007, the month before the financial crisis began.

Buyer Confidence

“Buyer confidence is growing daily,” said Luke Pender- Cudlip, an estate agent at Knight Frank in London. “Many think we have hit the bottom of the market.”

Lloyds Banking Group Plc’s Halifax business says that house prices jumped 2.6 percent in May, the most since 2002. Nationwide says they matched the biggest gain since 2006.

Retail sales at stores open least 12 months still fell 0.8 percent in May from a year earlier, the British Retail Consortium said in a separate report today. The economy shrank 1.9 percent in the first quarter, the most since 1979.

The Bank of England kept the benchmark interest rate at 0.5 percent last week and reiterated its plan to spend 125 billion pounds ($200 billion) in newly printed money in U.K. debt markets to aid the economy. The bank said yesterday it may widen the range of assets it’s buying to include secured commercial paper.

To contact the reporter on this story: Svenja O’Donnell in London at sodonnell@bloomberg.net.

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Nigeria Naira Depreciation Bets Cut by Citigroup

By Garth Theunissen

June 9 (Bloomberg) -- Citigroup Inc. has pared its outlook for a slump in Nigeria’s naira, saying that a rebound in oil prices means the currency of Africa’s biggest crude exporter faces a 4.4 percent drop instead of 14 percent.

The naira is likely to depreciate to 155 per dollar, rather than the bank’s previous prediction of 173, by year-end as higher crude prices boost foreign earnings, David Cowan, Citigroup’s Africa economist, said in a phone interview from London.

Declining crude output due to conflict in the oil- producing Niger Delta means the naira is still unlikely to strengthen from the 148.25 per-dollar level it traded at late yesterday, he said.

“The naira is facing pressure to weaken in coming months, just not as much as it did before,” said Cowan. “Oil prices above $60 a barrel give Nigeria some relief and provide the central bank with more ammunition to defend the naira.”

Crude oil has rallied to $69.22 per barrel in New York trading today from as low as $32.40 in December, boosting Nigeria’s supply of foreign exchange and helping policy makers preserve their $44.7 billion in reserves. The Central Bank of Nigeria let the naira drop about 21 percent since November to avoid having to use reserves to defend the currency as oil prices plunged from a record $147.27 a barrel in July.

Current oil prices exceed Nigeria’s budgeted estimate of $45 a barrel, providing Africa’s most populous nation with an estimated “$20 windfall” for each barrel of oil exported, Standard Chartered Plc said June 5.

Niger Production

Rebel attacks have cut oil production in Nigeria, the fifth-biggest source of U.S. imports of the fuel, by more than 20 percent since 2006.

“Oil production is Nigeria’s big problem at the moment, especially because of the ongoing conflict in the Niger Delta,” Cowan said. The interruption of supply means “oil revenue coming in is still insufficient to meet demand in the foreign exchange market, which keeps pressure on the naira to weaken,” he said.

Nigeria is officially required to trim production from its current 1.88 million barrels a day to its OPEC quota of 1.67 million, according to Bloomberg data.

Former Central Bank Governor Chukwuma Soludo defended the naira by limiting the supply of foreign currencies, banning interbank trading of the naira and setting controls on exchange bureaus. He lifted the ban on May 22, a week before he was replaced by Lamido Sanusi.

Breaking Ranks

Commercial banks now trade foreign currencies for five hours per day with a “gentlemen’s agreement” to halt the exchange should the naira’s value deviate from the official central bank’s rate by more than 3 percent, according to Standard Chartered.

Oil companies are permitted to sell foreign-currency earnings to commercial banks, compared with previous rules requiring them to deal directly with the central bank at its targeted naira rate, according to Citigroup and Renaissance Capital, a Moscow-based brokerage with offices in Africa.

“Sooner or later one of the banks is going break ranks and bid for that foreign exchange from the oil companies above the central-bank rate,” said Cowan. “Everyone knows the exchange rate needs to weaken. The only question is which bank will be the first to stick their head above the parapet and when.”

Even with the rebound in oil prices, the government is unlikely to meet domestic demand for foreign currencies without drawing on its reserves.

“At current production levels oil would have to rise to about $80 a barrel to meet all the demand for foreign exchange in Nigeria,” said Cowan. “Unless they can boost their oil production they’re still going to be facing a shortage of foreign currency.”

To contact the reporter on this story: Garth Theunissen in Johannesburg gtheunissen@bloomberg.net

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Yen Gains for a Second Day Versus Euro as Asian Stocks Decline

By Yasuhiko Seki

June 9 (Bloomberg) -- The yen advanced for a second day against the euro and strengthened versus the dollar as declines in Asian stocks increased demand for the relative safety of Japan’s currency.

The yen also rose against 14 of the 16 most-active currencies after the Wall Street Journal reported the Obama administration wants Europeans to put their banks through more rigorous stress tests, raising concern about the strength of the banking system in the 16-nation region. South Korea’s won lead declines in Asian currencies on concern heightened tension with North Korea will deter investors.

“A downturn in stock prices -- the key barometer of risk appetite -- triggered buying back of the yen,” said Takao Yahata, senior manager of foreign exchange and financial- products trading in Tokyo at Mitsubishi UFJ Trust and Banking Corp., a unit of Japan’s largest publicly traded lender by assets. “Given that stock prices are looking top-heavy, we need to reassess the recent optimism about the global economy.”

The yen climbed to 136.54 per euro as of 7:44 a.m. in London from 136.89 in New York yesterday, when it gained 0.7 percent. It has still fallen 8.7 percent in the past three months. Japan’s currency rose to 98.13 per dollar from 98.49. The dollar fell $1.3915 per euro from $1.3900 yesterday when it advanced to $1.3806, the strongest level since May 28.

The MSCI Asia Pacific index of regional shares declined 0.7 percent after earlier rising as much as 0.4 percent. The Nikkei 225 Stock Average fell 0.8 percent.

European Banks

U.S. Treasury Secretary Timothy Geithner is likely to discuss stress tests for European banks at a meeting of finance ministers from the Group of Eight nations in Italy this week, the WSJ said. Standard & Poor’s yesterday cut Ireland’s credit rating for the second time this year, lowering it to AA from AA+, citing the nation’s rising bill for propping up its banks.

“The WSJ report came as an additional bad lead for the euro as it followed up renewed concerns about financial problems in neighboring countries, including the rating downgrade for Ireland,” said Yuichiro Harada, senior vice president of the foreign-exchange division in Tokyo at Mizuho Corporate Bank Ltd., a unit of Japan’s second-largest lender. “The currency may have to undergo some period of correction against the dollar, especially following the recent sharp run-up.”

The dollar earlier approached a one-week high against the euro as traders added to bets the Federal Reserve will increase its target lending rate this year as the world’s largest economy recovers. Nobel Prize-winning economist Paul Krugman said yesterday the U.S. economy will emerge from recession by September.

‘Stabilizing’

“I would not be surprised if the official end of the U.S. recession ends up being, in retrospect, dated sometime this summer,” Krugman said in a lecture at the London School of Economics. “Things seem to be getting worse more slowly. There’s some reason to think that we’re stabilizing.”

Traders see a 62 percent chance the Fed will raise its target rate by its November meeting, based on futures on the Chicago Board of Trade. The odds were 26 percent a week ago before the Labor Department said June 5 that U.S. payrolls fell by 345,000 last month, the smallest decrease in eight months.

“As Krugman signaled, people are becoming more confident about the prospects for the U.S. economy and interest rates there,” said Shoichi Handa, a senior currency dealer in Tokyo at SBI Liquidity Markets Co., a unit of financier SBI Holdings Inc. “These positive perceptions will support capital flow back into dollar-denominated assets.”

Retail Sales

Sales at U.S. retailers increased in May for the first time in three months as demand for cars picked up, according to a Bloomberg News survey before the government report on June 11. Retail sales climbed 0.5 percent, after falling 0.4 percent the prior month, according to the survey

The Dollar Index, used by the ICE to track the greenback against the euro, yen, pound, Swiss franc, Canadian dollar and Swedish krona, fell to 80.669 from 80.909 yesterday when it reached the highest level since May 20. The index has risen 3 percent from this year’s low of 78.334 on June 2.

The Korean won dropped for a second day versus the dollar after the North handed out 12-year prison terms to two U.S. reporters accused of illegal entry. The two female journalists were detained near North Korea’s border with China in March while reporting for San Francisco-based Current TV, co-founded by former U.S. Vice President Al Gore.

‘Some Uneasiness’

There’s “some uneasiness linked to North Korea,” said Park Sang Bae, a currency dealer at Industrial Bank of Korea in Seoul. “The dollar will have a limited gain against the won for the day as exporters are willing to settle their positions on highs.”

The won declined 1 percent to 1,264.85 per dollar, extending its losses in the past month to 1.4 percent.

The dollar may rise to $1.30 per euro in the next three months as the U.S. economy shows signs of a recovery and concerns ease that overseas investors will reduce holdings of Treasuries, according to UBS AG.

Comments from Japanese, Indian and South Korean officials suggest that demand for Treasuries will remain strong, UBS said in the report yesterday. The dollar rose to a three-week high against the yen last week after the U.S. payrolls report.

“The sharp rally in the greenback after last week’s much better-than-expected payrolls numbers shows that dollar bears should be wary of selling the greenback at these historically low valuations,” UBS strategists including Mansoor Mohi-Uddin and Brian Kim said in the report.

To contact the reporter on this story: Yasuhiko Seki in Tokyo at yseki5@bloomberg.net.

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