U.K. Stocks Advance, Led by Tesco; BT Gains on Broker Upgrade

By Adam Haigh

June 16 (Bloomberg) -- U.K. stocks advanced for the first time in three days, led by Tesco Plc after the world’s third- biggest retailer said sales growth accelerated and as analysts recommended Royal Bank of Scotland Group Plc and BT Group Plc.

Tesco climbed 1.9 percent after reporting U.K. same-store sales rose in the first quarter. Royal Bank, Britain’s biggest government controlled-bank, and Lloyds Banking Group Plc rallied after Redburn Partners upgraded the stocks. BT, the U.K.’s largest phone company, added 4.7 percent as Morgan Stanley advised buying the shares.

“Tesco is going well,” said Anthony Grech, a market strategist at IG Index in London. “Banks too are rallying with RBS and Lloyds leading the way.”

The benchmark FTSE 100 Index climbed 32.46, or 0.8 percent, to 4,358.47 as of 12:28 p.m. in London. The FTSE All-Share Index added 0.7 percent and Ireland’s ISEQ Index advanced 0.9 percent.

The FTSE 100 has rebounded 24 percent from this year’s low on March 3 as banks and raw-material producers rallied on speculation the $12.8 trillion pledged by the U.S. government and Federal Reserve will end the deepest economic contraction since the Great Depression.

U.K. inflation slowed less than economists forecast in May after higher taxes and the weakness of the pound sustained price pressures in the economy. Consumer prices rose 2.2 percent from a year earlier, compared with 2.3 percent in April, the Office for National Statistics said today in London.

Tesco Gains

Tesco increased 1.9 percent to 362.9 pence. U.K. same-store sales rose 4.3 percent in the 13 weeks to May 30 excluding fuel and value-added tax. The pace compared with a 2.7 percent increase in the previous quarter. International sales rose 20.1 percent, helped by a weaker pound.

Royal Bank advanced 4.8 percent to 39.7 pence. Lloyds, the government-controlled bank that bought HBOS Plc, increased 5.1 percent to 70.2 pence.

Redburn Partners upgraded the stocks to “buy” and said “even the more dangerous deflationary scenario is priced in.”

BT added 4.7 percent to 99.4 pence. Morgan Stanley upgraded the stock to “overweight” from “equal-weight,” saying “cash flows could rebound strongly.”

“We see a 3-4 year target for the shares of around 190 pence, but the market could get there far sooner if it sees evidence of execution,” analysts including Nick Delfas wrote in the report.

British Land Co. added 2 percent to 400 pence. JPMorgan Chase & Co. raised the largest office developer in London to “overweight,” saying “revaluations of portfolios with long leases will surprise to the upside.”

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

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European Stocks Gain for First Time in Three Days; Tesco Rises

By Adria Cimino

June 16 (Bloomberg) -- European stocks advanced after German investor confidence rose to the highest in three years, adding to evidence that the worst of the recession is over.

Tesco Plc led retailers higher after reporting first- quarter sales growth that matched analyst estimates. BT Group Plc climbed 4.6 percent after Morgan Stanley recommended the U.K.’s largest phone company. National Bank of Greece SA sank the most in seven months after announcing plans for a 1.25 billion-euro ($1.7 billion) rights offer.

Europe’s Dow Jones Stoxx 600 Index added 0.5 percent to 210 at 12:11 p.m. in London. The gauge has surged 33 percent since March 9 on speculation the $12.8 trillion pledged by the U.S. government and Federal Reserve will end the deepest global economic contraction since the Great Depression.

“The confidence indicators have been positive,” said Gregoire Scheiff, a fund manager at DNCA Finance in Paris, which oversees $5.3 billion. “The market can continue to gain. Now we need to see more data on investment.”

The ZEW Center for European Economic Research in Mannheim said its index of German investor and analyst expectations, which aims to predict economic developments six months ahead, increased to 44.8 this month from 31.1 in May, the highest since May 2006. Economists had expected a reading of 35, according to the median of 35 forecasts in a Bloomberg News survey.

Expensive Level

The rally has left the Stoxx 600 trading at 25.4 times earnings, the most expensive level since March 2004, weekly data compiled by Bloomberg show.

“Investors expected some sort of consolidation,” Philipp Baertschi, global chief strategist at Bank Sarasin & Cie. in Zurich, said in Bloomberg Television interview. “The improvement in sentiment has been so dramatic.”

Standard & Poor’s 500 Index futures added 0.3 percent before a Federal Reserve report at 9:15 a.m. Washington time that may show industrial production in the U.S. fell 1 percent in May. Other reports may show builders began work on more houses in May and wholesale prices rose.

The MSCI Asia Pacific Index sank 1.6 percent as lower commodity prices dragged down raw-material and oil producers.

Tesco added 2 percent to 363.2 pence after reporting first- quarter sales growth that matched analyst estimates as its U.K. supermarkets retained shoppers in the recession and international expansion boosted revenue. The world’s third- biggest retailer led a gauge of retail shares 1.3 percent higher, for the biggest gain among 19 industry groups in the Stoxx 600.

Carrefour, Delhaize

Carrefour SA, the second-largest retailer, added 2.2 percent to 29.37 euros. Delhaize Group, the Belgian owner of the Food Lion supermarket chain in the U.S., increased 2.9 percent to 48.57 euros.

BT advanced 4.6 percent to 99.3 pence. Morgan Stanley lifted its recommendation on the shares to “overweight” from “equal weight.”

National Bank of Greece slumped 10 percent to 18.41 euros, the biggest intraday decline since Nov. 11. The country’s biggest bank plans to offer shareholders two new shares for each nine held at 11.30 euros apiece. EFG Eurobank Ergasias SA, Greece’s second-largest lender, dropped 8.1 percent to 8 euros.

TUI AG plummeted 12 percent to 5.38 euros. The German owner of Europe’s largest travel company was rated “sell” in resumed coverage at Deutsche Bank AG, which cited the company’s exposure to container shipping trends.

To contact the reporter on this story: Adria Cimino in Paris at acimino1@bloomberg.net.

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Citigroup to Expand Reach Abroad as U.S. Faces Slower Growth

By Josh Fineman and Michael J. Moore

June 16 (Bloomberg) -- Citigroup Inc. Chief Executive Officer Vikram Pandit said his bank will look abroad for growth as the U.S. economy goes through an “adjustment period” marked by greater savings and less credit.

“There is a clear trade-off between stimulating the economy on a short-term basis and saving more,” Pandit, 52, said in the keynote address yesterday at the Detroit Economic Club’s National Summit. “Businesses are going to have to search for new growth drivers away from the U.S. consumption and credit creation.”

Citigroup is focusing on overseas markets after the bank’s overdependence on U.S. consumers stoked its financial woes, Pandit said. The company racked up more than $100 billion of credit losses and writedowns during a credit contraction that began in 2007. The U.S. government has pumped $45 billion into the bank and will become the largest shareholder when as much as $25 billion of the Treasury’s preferred shares are converted into common stock.

“Citi had a business model that was predicated on ever- rising U.S. consumer spending and credit creation,” Pandit said in prepared remarks. “We too were very credit-dependent and relied too greatly on non-core, or wholesale funding sources, including securitization and other aspects of the shadow banking system.”

The deleveraging of the U.S. financial system means reduced credit creation, and less available financing and working capital, Pandit said. This will also lead to lower gross domestic product growth.

New Technology

Pandit said he was “optimistic” and said the country will benefit from new technology developed during the crisis.

“We’ve all heard the phrase, ‘A crisis is a terrible thing to waste,’” Pandit said. “I’m confident that this crisis will re-ignite the creativity and entrepreneurship that has been the hallmark of the U.S. economy for over 200 years.”

Pandit said companies and consumers have borrowed too heavily and the country is paying the price.

“We have too much leverage as consumers and as a financial system,” he said. “This leverage funded consumption and created the illusion of enhanced financial returns.”

The GDP growth rate may decline 1 percent to 1.5 percent unless the “shadow banking system” of non-bank lenders returns, Pandit said. “It is not hard to envision a significant gap in the availability of credit,” he said.

Regulators should focus on uniform regulation to restore trust in the financial markets that has been “shaken” during the financial crisis, Pandit said.

Changes Coming

President Barack Obama’s regulatory proposal, to be announced June 17, would put the Federal Reserve in charge of monitoring firms for systemic risk and create a resolution mechanism to unwind non-bank financial institutions, Treasury Secretary Timothy Geithner wrote in a Washington Post commentary yesterday with Lawrence Summers, director of the White House National Economic Council.

“For money to come back into the markets, individuals need to believe their capital is safe and they can rely on regulators and entities like rating agencies,” Pandit said. “Policy makers are focused on uniform regulation. The key goals surround regulation of all systemically important institutions.”

Citigroup is making efforts to fix the financial system. It has extended more than $200 billion in credit commitments to U.S. consumers, businesses and communities since October, Pandit said. The company has helped more than 525,000 homeowners stay in their homes and aided 1.4 million credit-card customers with their debt through forbearance programs, he said.

To contact the reporter on this story: Josh Fineman in New York at jfineman@bloomberg.net; Michael J. Moore in New York at mmoore55@bloomberg.net.

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S&P 500 Index Year-End Target Raised to 900 at Morgan Stanley

By Roger Neill

June 16 (Bloomberg) -- Morgan Stanley raised its end-of- year target for the Standard & Poor’s 500 Index to 900 from 825, but said the rally in U.S. stocks “may now be over.”

The firm also lifted its 2009 and 2010 earnings estimates for the S&P 500 to $51 and $62 respectively, and brought forward “the trough in the earnings cycle, ex-financials,” to the third quarter of 2009.

“Having breached the 950 level, the rally may now be over,” strategists including Jason Todd wrote in a report.

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AT&T, Cummins, Research In Motion, Tyco: U.S. Equity Preview

By Matt Townsend

June 16 (Bloomberg) -- Shares of the following companies may have unusual moves in U.S. trading. Stock symbols are in parentheses, and prices are as of 7:45 a.m. in New York.

Amgen Inc. (AMGN US) added 2.3 percent to $50.58. The world’s largest biotechnology company was boosted to “outperform” from “market perform” by Sanford C. Bernstein & Co., which said the stock “should benefit from a significant re-acceleration in revenue and earnings growth” over the next year.

AT&T Inc. (T US) lost 1.3 percent to $24.30. The largest U.S. phone company was cut to “equal weight” from “overweight” at Barclays Plc, as the brokerage also downgraded U.S. telecom services shares to “neutral.”

Bruker Corp. (BRKR US): The maker of scientific instruments and its shareholders plan to sell as many as 70 million shares in total, according to a regulatory filing.

Cummins Inc. (CMI US) added 0.7 percent to $34.27. The largest North American maker of diesel trucks was rated “buy” in new coverage by Goldman Sachs Group Inc., which said the company is “uniquely positioned” to benefit from increasing industrialization in Asia. Goldman’s 12-month share price estimate is $42.

Harman International Industries Inc. (HAR US): The audio- equipment maker plans to sell 9 million shares of common stock and use some of the proceeds to pay down debt, according to a regulatory filing.

La-Z-Boy Inc. (LZB US): The maker of living-room recliners posted earnings excluding some items of 7 cents a share in the fourth quarter. Raymond James Financial Inc. expected the company to report a loss.

Methanex Corp. (MEOH US): The world’s largest methanol supplier was reduced to “neutral” from “buy” at UBS AG, which cited the stock’s surge in past three months.

Research In Motion Ltd. (RIMM US) advanced 1.4 percent to $81.50. The maker of the BlackBerry smart phone unveiled a new model that operates globally, vying with Apple Inc.’s latest iPhone. The Tour 9630, which uses so-called 3G technology, will be sold in the U.S. through Verizon Wireless and Sprint Nextel Corp., the company said.

Tenneco Inc. (TEN US): The world’s largest maker of vehicle-exhaust systems was raised to “overweight” from “neutral” at JPMorgan Chase & Co., which said “global auto production has sequentially bottomed.”

Tyco Electronics Ltd. (TEL US) jumped 7.1 percent to $20.63. The world’s largest maker of electronic connectors boosted its third-quarter earnings forecast, saying it now expects profit excluding some items of at least 10 cents a share. That exceeded the average analyst estimate of 3 cents in a Bloomberg survey.

To contact the reporter on this story: Matt Townsend in New York at mtownsend9@bloomberg.net

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U.S. Stock Futures Gain; Exxon, Newmont, Barrick Gold Advance

By Sarah Jones

June 16 (Bloomberg) -- U.S. stock futures rose, indicating the Standard & Poor’s 500 Index may rebound from its biggest drop in a month, as oil’s climb above $72 a barrel lifted the earnings outlook for energy producers.

Exxon Mobil Corp. gained in German trading. Newmont Mining Corp. and Barrick Gold Corp. advanced as gold rose for first time in five days.

Futures on the Standard & Poor’s 500 Index expiring in September gained 0.3 percent to 921.7 at 12:25 p.m. in London. The gauge slid 2.4 percent yesterday, the biggest slump since May 13. Dow Jones Industrial Average futures and Nasdaq-100 Index futures added 0.3 percent before reports on housing and manufacturing that may show the recession is within months of a bottom.

“We have got some important data points today,” said Felix Wintle, head of U.S. equities at Neptune Asset Management in London, where he helps oversee the equivalent of $4.1 billion. “Investors are still looking for signs that the green shoots we have already seen continue to show the slowdown is decelerating.”

Europe’s Dow Jones Stoxx 600 Index rose 0.6 percent today, as a surge in German investor confidence to the highest in three years overshadowed a slump in banks.

U.S. stocks extended a global slide yesterday as falling oil and metal prices weighed on commodity producers and after a weaker-than-expected report on New York manufacturing. The S&P 500’s 40 percent rebound from a 12-year low on March 9 through last week had left the index valued at 14.9 times its companies’ earnings, near the highest level since October.

Breached 950

Morgan Stanley today said the rally in U.S. stocks “may now be over” after the brokerage raised its end-of-year target for the S&P 500 to 900 from 825, still 2.6 percent below yesterday’s closing price.

“Having breached the 950 level, the rally may now be over,” Morgan Stanley strategists including New York-based Jason Todd wrote in a note to clients.

Data from the Federal Reserve today may show industrial production last month dropped 1 percent, mainly due to auto- industry shutdowns that swamped gains elsewhere, according to a Bloomberg survey of analysts. Other reports may show builders began work on more houses in May and wholesale prices rose.

Exxon, the U.S. oil company, gained 0.3 percent to $73.02 in Germany trading as oil climbed as much as 2.1 percent to $72.12 in New York. The contract last week climbed to a seven- month high as a stronger dollar made commodities less appealing as a currency hedge.

Newmont, the largest U.S. gold producer, added 0.7 percent to $41.89 in Germany as gold climbed in London as the dollar weakened, increasing demand for the precious metal as an alternative investment. Barrick Gold advanced 1.6 percent to $32.90 in German trading.

Amgen Inc. increased 1.3 percent to $50.08 after Sanford C. Bernstein & Co. upgraded the world’s largest biotechnology company to “outperform” from “market perform,” saying the stock “should benefit from a significant re-acceleration in revenue and earnings growth” over the next year.

To contact the reporters on this story: Sarah Jones in London at sjones35@bloomberg.net.

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Europe Payrolls Shrink by Record 1.22 Million Jobs

By Simone Meier

June 15 (Bloomberg) -- Europe’s economy lost a record 1.22 million jobs in the first quarter as companies cut spending to survive the worst global economic slump in more than six decades.

Employment payrolls in the 16-member euro region fell 0.8 percent from the fourth quarter, when they declined 0.4 percent, the European Union statistics office in Luxembourg said today. The first-quarter drop was the biggest decline since the data series started in 1995. From a year earlier, payrolls contracted 1.2 percent, the first annual decline on record.

The euro-area economy may struggle to gather strength after shrinking at the fastest pace in at least 15 years in the first quarter. Even as indications mount that the worst of the recession may be over, unemployment is near a 10-year high and forecast to rise more as industries from auto makers to airlines reduce output and staffing to weather the economic crisis.

“Companies will continue to cut jobs well into 2010, pushing up unemployment across the region,” said Stefan Bielmeier, an economist at Deutsche Bank AG in Frankfurt. “While the economy may start to stabilize, the worst is still ahead in terms of the labor market.”

Continental AG, the second-largest car-parts maker in Europe, said this month that it may fire as many as 2,600 workers in Germany. Air France-KLM Group, Europe’s biggest airline, last month said it will deepen job cuts after reporting its first annual loss since 1996.

Biggest Increases

The European Commission expects unemployment across the euro region to average 9.9 percent this year and 11.5 percent in 2010, with the biggest increases in Ireland and Spain. The jobless rate is currently 9.2 percent, the highest since September 1999.

While European Central Bank President Jean-Claude Trichet said on June 4 that the region’s economy may be past the worst and return to growth by mid-2010, the ECB forecasts that the euro-area economy will shrink around 4.6 percent this year and about 0.3 percent in 2010.

Hanover, Germany-based Continental said on June 5 that it may cut as much as 9.6 percent of the 27,000 jobs at its German auto-component operations by the end of next year. “We have to do something because our customers are ordering less,” spokeswoman Dagmar Weiner said.

3,000 Positions

Paris-based Air France-KLM will reduce its workforce by about 3,000 positions this year following 2,000 job cuts in fiscal 2009, Chief Executive Officer Pierre-Henri Gourgeon said on May 19. Airline losses worldwide may total $9 billion this year, nearly double a previous forecast, the industry’s main trade group said last week.

European shares fell for a second day. The Dow Jones Stoxx 600 Index was down 1.5 percent at 211.16 at 11:05 a.m. in London. The euro was at $1.3872, down 1 percent, as the dollar was boosted by Russian Finance Minister Alexei Kudrin’s comments that his nation has full confidence in the U.S. currency.

The worldwide financial crisis, which started with the collapse of the U.S. property market in 2007, has triggered more than $1.46 trillion of writedowns and credit losses at banks and other financial institutions, according to data compiled by Bloomberg, and sent the global economy into its first recession since World War II.

The statistics office estimates that the total number of people employed in the euro area was 146.2 million in the first quarter. Total employment in the 27-nation EU was 223.8 million.

The fourth-quarter drop in euro-area employment from the prior quarter was revised to 0.4 percent from 0.3 percent estimated earlier.

To contact the reporter on this story: Simone Meier in Frankfurt at smeier@bloomberg.net

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G-8 Plans to Reverse Stimulus as Rebound Signs Grow

By Simon Kennedy and Rainer Buergin

June 15 (Bloomberg) -- Group of Eight finance ministers began drawing up contingency plans for rolling back budget deficits and bank bailouts as the economy shows signs of recovery and investors start worrying about inflation.

Officials meeting in Lecce, Italy, over the weekend said it’s prudent to consider what exit strategies to deploy once global growth is secured and asked the International Monetary Fund to examine how to do so without reigniting the two-year crisis. At the same time, they said it’s premature to rein back more than $2 trillion in stimulus packages.

“Growth should remain the principal focus of policy,” U.S. Treasury Secretary Timothy Geithner said after the meeting ended on June 13. “It is too early to shift toward policy restraint.”

Policy makers trod a fine line in the knowledge that withdrawing stimulus measures too soon could choke the recovery before it starts, and allowing them to last too long might push up borrowing costs. They are also trying to reassure markets after the yield on the 10-year U.S. Treasury note rose last week to the highest since October.

“Markets aren’t looking for specific exit strategies now, but want governments to start thinking about them,” said Bill Witherell, chief global economist at Cumberland Advisors Inc. in Vineland, New Jersey, which oversees $1 billion in assets. “They worry that inflation is going to build up if nothing is done to withdraw the stimulus.”

Dollar Support

The G-8’s statement made no reference to currencies or interest rates given the absence of central bankers from the meeting.

Treasuries rose for a third day and the dollar gained the most in a week against the euro today after Russian Finance Minister Alexei Kudrin told Bloomberg Television he has full confidence in the U.S. currency. Russia’s central bank drove U.S. bonds and the dollar lower on June 10 by saying it may shift some reserves from Treasuries, pushing the yield on the 10-year security above 4 percent.

“It’s too early to speak of an alternative” to the dollar, Kudrin said in Lecce. IMF Managing Director Dominique Strauss- Kahn said he didn’t see a “weak dollar.”

German Finance Minister Peer Steinbrueck also said he wasn’t concerned by the euro’s 10 percent climb against the dollar in the past four months.

Upbeat Reports

The G-8 ministers delivered their most upbeat outlook since the collapse of Lehman Brothers Holdings Inc. in September amid mounting evidence that the deepest global recession in six decades is moderating.

Economists expect reports on U.S. housing and German investor sentiment to back that case in coming days.

Home Depot Inc., the world’s largest home-improvement chain, said June 10 that fiscal 2009 profit may decline less than it had projected. Virgin America Inc., an airline partly owned by billionaire Richard Branson, said June 12 its first-quarter net loss narrowed as it filled more seats on planes.

Still, data last week showed the situation is fragile. European industrial production dropped by a record in April and Volkswagen AG, Europe’s largest automaker, said June 12 that “very weak” global car markets aren’t yet recovering.

There are “signs of stabilization,” though “the situation remains uncertain” as climbing unemployment and volatile commodity prices present obstacles, the ministers said in their statement.

No Exit Talk

Geithner and U.K. Chancellor of the Exchequer Alistair Darling were among the most vocal in warning officials not to move too soon. Steinbrueck sought a “credible exit strategy” to avoid inflation.

“We’re not there yet,” Darling told reporters. “No one is talking about exiting yet.”

The officials argued over whether Europe is endangering the rebound by refusing to follow the U.S. and subject its banks to individual and public stress tests. European governments have preferred to examine their financial system as a whole, arguing banks are too diverse to evaluate by a single standard and that publishing results could rekindle the crisis.

“We want stress tests, but stress tests of the system, not related to individual banks,” Steinbrueck told reporters in Lecce. “The European banking sector, and the German one in particular, is a lot more heterogeneous than the North American one.”

Canadian Critic

Such resistance drew criticism before the talks from Canadian Finance Minister Jim Flaherty, who said it risked impeding a worldwide revival.

The G-8’s statement made no mention of the topic. Flaherty said later that he was “much less frustrated” with Europe’s stance after the talks. Italian Finance Minister Giulio Tremonti said the continent may start discussing its approach.

“The uncomfortable truth for Europe is that, however flawed it might have been, the U.S. stress test exercise has so far proved effective in bolstering confidence and helping banks to raise capital,” said Marco Annunziata, chief economist at UniCredit Group in London.

The G-8 is composed of the U.S., Japan, Germany, France, U.K., Canada, Italy and Russia. Its ministers met to shape an agenda for their leaders’ meeting on July 8-10 in L’Aquila, the Italian town destroyed by an earthquake in April.

To contact the reporters on this story: Rainer Buergin in Lecce at Rbuergin1@bloomberg.net; Simon Kennedy in Paris at skennedy4@bloomberg.net

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IMF Raises Forecast for U.S. Economy, Calls for Exit Strategies

By Timothy R. Homan

June 15 (Bloomberg) -- The International Monetary Fund, which has rescued economies from Pakistan to Iceland in the past year, raised its outlook for the U.S. and called for steps to reduce concern about rising public debt and inflation.

The IMF forecasts the world’s largest economy will contract 2.5 percent this year before expanding 0.75 percent in 2010, according to a statement today after an annual staff analysis of the U.S. In the IMF’s World Economic Outlook report released in April, the U.S. was forecast to contract 2.8 percent this year before stalling in 2010.

The Washington-based lender said a “gradual” recovery is likely with downside risks “tilted to the upside.” The Federal Reserve could ease credit further if conditions worsen and additional fiscal stimulus “could also be considered” in the event the economy doesn’t bounce back, the IMF said.

“The combination of financial strains and ongoing adjustments in the housing and labor markets is expected to restrain growth for some time, with a solid recovery projected to emerge only in mid-2010,” the IMF staff report said.

Today’s statement said a solid recovery is unlikely until the middle of next year as unemployment peaks close to 10 percent.

The report praised the efforts of the Fed, the Obama administration and Congress, calling the economic stimulus package “well targeted” and saying monetary policy is relieving financial strains. It also warns that the extraordinary measures required to stabilize the economy and financial markets must be followed by a plan to unwind them as soon as possible to avoid a rise in inflation.

Inflation Concern

“Monetary and fiscal stimulus may stoke concerns about inflation and rising debt, exerting upward pressure on interest rates,” the statement said. “Unwinding interventions will pose major challenges, and -- given the high level of cross-border competition in the financial sector -- will need to be coordinated internationally to facilitate a smooth exit.”

The U.S. jobless rate climbed to 9.4 percent in May, the highest since 1983, according to Labor Department data. Falling home prices, coupled with near-record low mortgage rates and tax credits for first-time buyers, may help bring an end to the worst residential construction slump in seven decades. Reports this week are forecast to show builders began work on more houses as sales steadied and consumer prices rose.

The IMF projects the U.S. stimulus package will raise gross domestic product growth by 1 percent this year and 0.25 percent in 2010. The fund also said additional spending could also be considered.

Deficits Rising

The IMF staff projects federal deficits will average 9 percent of GDP from 2009 through 2011, and public debt will almost double to 75 percent of GDP.

The increased debt “may put significant pressure on Treasury bond rates,” the fund said.

Along with fiscal measures, the IMF staff mission offered its analysis of the American financial industry, saying that while steps taken by the Federal Reserve and Federal Deposit Insurance Corp. have “done much to stabilize financial conditions,” its unclear whether the administration’s Public- Private Investment Program will be used effectively.

The fund cautioned that the “ramping up” of the Term- Asset Backed Securities Loan Facility, known as TALF, and further purchases of Treasury debt and mortgage-backed securities could “substantially” inflate the Fed’s balance sheet.

To contact the reporter on this story: Timothy R. Homan in Washington at thoman1@bloomberg.net

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New York Region Manufacturing Shrinks at Faster Pace

By Bob Willis

June 15 (Bloomberg) -- Manufacturing in the New York region this month contracted at a faster pace as sales and inventories declined, showing the economy is still months away from a sustained recovery.

The Federal Reserve Bank of New York’s June general economic index fell to minus 9.4, less than forecast, from minus 4.6 the prior month, the bank said today. Readings below zero for the Empire State index signal manufacturing is shrinking.

U.S. companies are likely to keep cutting stockpiles until sales improve, indicating orders and production will be restrained. The New York Fed’s factory gauge of the outlook for the next six months climbed to the highest level in almost two years as the drawdown in goods on hand clears the way for factories to ramp up output in coming months.

“The road to recovery in manufacturing is going to be long and gradual,” said Ryan Sweet, a senior economist at Moody’s Economy.com in West Chester, Pennsylvania. “At some point manufacturers will cut inventories to below final demand and that will set the stage for a recovery in production.”

Stocks extended losses following the report and Treasury securities rose. The Standard & Poor’s 500 index was down 1.4 percent to 932.82 at 9:40 a.m. The yield on the 10-year Treasury note decreased to 3.72 percent from 3.79 percent late on June 12.

Less than Forecast

Economists projected the Empire State index would hold unchanged at minus 4.6, according to the median of 43 estimates in a Bloomberg News survey. Forecasts ranged from 5 to minus 8.1.

The International Monetary Fund today raised its outlook for the U.S. and called for steps to reduce concern about rising public debt and inflation. The lender forecasts the world’s largest economy will contract 2.5 percent this year before expanding 0.75 percent in 2010. In April, the IMF projected the economy would contract 2.8 percent this year.

International holdings of long-term U.S. financial assets, a haven for investors during the global financial crisis, rose at a slower pace in April as China, Japan and Russia trimmed their holdings of Treasuries, the government also reported today. Total net purchases of long-term equities, notes and bonds rose a net $11.2 billion, compared with buying of $55.4 billion in March.

Growing Optimism

Factory executives in the New York Fed’s district, which encompasses New York state, northern New Jersey and one county in Connecticut, turned more optimistic about the future. The gauge measuring the manufacturing outlook climbed to 47.8, the highest level since July 2007, from 43.8.

The New York Fed’s measure of new orders increased to minus 8.2 from minus 9 and a gauge of shipments fell to minus 4.8 from 1.3. The index of inventories decreased to minus 25.3 from minus 21.6.

The index of prices paid increased to minus 5.8 from minus 11.4, and the gauge of prices received rose to minus 12.6 from minus 27.3. A measure of employment improved to minus 21.8 from minus 23.9.

The headline New York Fed survey number conveys the general impression of executives on whether activity is increasing or decreasing, and isn’t a composite of the other readings.

‘Disappointing’ Reading

Although the main reading was “disappointing from the perspective of the stabilization story, the details of the report were not as weak as the headline,” John Ryding, chief economist at RDQ Economics in New York, wrote in a note to clients.

Today’s report is one of the earliest measures of regional manufacturing this month. The Philadelphia Fed report, due June 18, may show manufacturing in that region contracted at a slower pace in June, according to the Bloomberg survey median.

Regional and national purchasing manager surveys have shown a declining rate of contraction in recent months, one sign the worst of the manufacturing slump may have passed. Still, General Motors Corp. and Chrysler LLC’s plant closings as part of their bankruptcy reorganizations portend the auto industry will weaken further before it gets better.

Economists surveyed by Bloomberg News June 1 to June 8 projected the U.S. economy would grow at an average 1.2 percent pace in the second half of the year after falling by 2 percent in the second quarter. They also estimated the jobless rate will climb to 10 percent by the end of the year.

Signs of Improvement

Some companies, particularly technology and industrial- materials firms, are seeing signs the outlook is improving.

Armonk, New York-based International Business Machines Corp. last month said it’s “ahead of pace” to meet its 2010 earnings forecast.

Alcoa Inc., the largest U.S. aluminum producer, said May 29 that distributors of the lightweight metal are showing renewed buying interest and will generate a “giant sucking sound” of demand when the global economy revives.

Distributors “know if the green shoots turn over to become demand, they will not be able to supply,” Alcoa Chief Executive Officer Klaus Kleinfeld said at a presentation in New York. “The distribution chain will generate this giant sucking sound of demand.”

To contact the reporter on this story: Bob Willis in Washington at bwillis@bloomberg.net

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Empire State Survey Signals Tough Period for Manufacturing

Daily Forex Fundamentals | Written by Wachovia Corporation | Jun 15 09 13:25 GMT |

The Empire index of general business conditions deteriorated in June, signaling an increase in the pace of decline for the manufacturing sector. However, the forward-looking component that measures general conditions for the next six months jumped to its highest level since before the credit crisis first gripped markets in the summer of 2007. Tough Work-out Period, but Future is Looking Brighter Manufacturing in the New York area appears to have lost its footing in June as the business conditions index slipped to a -9.41 from -4.55 the pervious month. Any negative number suggests contraction in New York manufacturing activity. The silver lining in this report is the fourth consecutive month of improvement for the forward-looking measure of business conditions six months from now, which jumped to 47.8. Orders Still Negative, Pricing Pressures Building The new orders index remained negative this month, but did show slight improvement from the even-lower reading in May. This is merely a slowing in the rate of decline, not growth. After falling off a cliff over most of the last year, the prices paid index has been steadily increasing in recent months. This mirrors the drop and subsequent recovery in oil and other commodities, and suggests pricing pressures for manufacturers. Wachovia Corporation http://www.wachovia.com Disclaimer: The information and opinions herein are for general information use only. Wachovia Corporation and its affiliates, including Wachovia Bank, N.A., do not guarantee their accuracy or completeness, nor does Wachovia Corporation or any of its affiliates, including Wachovia Bank, N.A., assume any liability for any loss that may result from the reliance by any person upon any such information or opinions. Such information and opinions are subject to change without notice, are for general information only and are not intended as an offer or solicitation with respect to the purchase or sales of any security or any foreign exchange transaction, or as personalized investment advice. Securities and foreign exchange transactions are not FDIC-insured, are not bank-guaranteed, and may lose value.

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Currency Technical Report

Daily Forex Technicals | Written by FX Greece | Jun 15 09 12:34 GMT |

EUR/USD Resistance: 1,3930-40/ 1,3980-85/ 1,4020-30/ 1,4070/ 1,4120-30/ 1,4170 Support : 1,3850-55/ 1,3800-10/ 1,3750-60/ 1,3700/ 1,3650/ 1,3600 Comment: The week starts negative for euro, and support at 1,3900 is being breached at the time of the writing. We do not have much to add to our previous analysis. Our higher targets according to our basic scenario (1,4340) for the midterm were achieved and the reversal candle formation in the weekly chart, leave us negative regarding euro, while the top formation (Head and Shoulders) that is clear in the 4 hour and daily chart confirm our bearish sentiment. The base of 1,3800-10 should be breached downwards, in order to confirm this scenario. Possible targets will be at 1,3430-60 and 1,3270-00 area. If the area of 1,3800 is not breached or a false break and pullback above 1,3900, would cancel our downward scenario. *STRATEGY : We remain bearish trying sell orders at current levels 1,3880-90, adding more at 1,3940-50 and set our stops above 1,4000. Our target will be at 1,3800-20 area. We will follow the first reach of 1,3800 with buy orders and close stops, while a downward break will be used for sell orders.... FX Greece DISCLAIMER The details and information included in the above analysis, are part of research based exclusively on currency charts and are of purely instructional and educational nature. None of the information featuring in the analysis can be considered as an invitation for opening positions in FOREX market or in the market of forward contracts or any securities listed on an organized or unorganized market. We assume no responsibility for any kind of losses ,profits or property loss resulting, in whole or in part, from acts that are based either directly or indirectly on the processing or the use of information, details and strategies, the reader may find in the analysis. The readers hold full responsibility for the use and the results of their actions. The recipients of the analysis must acknowledge and accept that investment choices of any kind, especially concerning the FOREX market, contain risks (high, low and occasionally zero) of reduction or even loss of their investment. Therefore, they should always be cautious prior to any kind of action. We reserve the right to change the terms and the characteristics of the analysis. The contents of the analysis are solely intended for personal use. They may not be retransmitted, reproduced, distributed, published, adapted, modified or assigned to third parties in any way whatsoever. Anyone having access to them is required to comply with the law provisions on the protection of third party intellectual property rights.

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U.S. Stock Futures Drop; Chevron, Freeport Fall With Oil, Metal

By Sarah Jones and Jeff Kearns

June 15 (Bloomberg) -- U.S. stock futures fell, signaling the Standard & Poor’s 500 Index may drop from a seven-month high, as lower oil and metal prices weighed on commodity producers and manufacturing in the New York region contracted at a faster pace.

Chevron Corp. lost 1.3 percent as crude declined for a second day. Freeport-McMoRan Copper & Gold Inc. slid 2.9 percent as copper decreased by the daily limit in Shanghai on speculation supply may outpace demand in China, the largest consumer. Wal-Mart Stores Inc. sank 1.7 percent after Goldman Sachs Group Inc. downgraded the shares.

Futures on the S&P 500 expiring in September decreased 1.2 percent to 929.7 at 9:08 a.m. New York time, after the benchmark index climbed 40 percent from a 12-year low March 9. Dow Jones Industrial Average futures lost 1.2 percent to 8,635 and Nasdaq- 100 Index futures fell 1 percent to 1,470.75. Stocks also retreated in Europe and Asia.

“There’s no clear trajectory for moving us out of a recessionary environment,” said Wayne Wicker, who oversees $33 billion as chief investment officer at Vantagepoint Funds in Washington. “Given the shellshock of the last year and a half, you have a lot of people who don’t think this market is sustainable.”

Futures extended declines after the Federal Reserve Bank of New York said its June general economic index fell to minus 9.4 from minus 4.6 the prior month. Readings below zero for the Empire State index signal manufacturing activity is shrinking.

Valuation Watch

The S&P 500’s rally since March left the index valued at 14.9 times its companies’ earnings, near the highest level since October. Last week, the Dow average became the latest major U.S. stock gauge to give investors a profit for the year amid growing optimism the worst recession since World War II is ending after the government and Federal Reserve pledged $12.8 trillion to revive economic growth.

Group of Eight finance ministers, who met in Italy over the weekend, have began drawing up contingency plans for rolling back budget deficits and bank bailouts as the economy shows signs of recovery and investors start worrying about inflation.

Russian Finance Minister Alexei Kudrin said the dollar is in “good shape,” further affirming that there’s no substitute for the world’s reserve currency. “It’s too early to speak of an alternative,” Kudrin said in an interview two days ago in Italy after meeting officials from the G-8 nations.

Treasuries Gain

Treasuries climbed for a third day, the longest streak in a month. International holdings of long-term U.S. financial assets, a haven for investors during the global financial crisis, rose at a slower pace in April as China, Japan and Russia trimmed their holdings of Treasuries. Purchases of long- term equities, notes and bonds rose a net $11.2 billion, compared with buying of $55.4 billion in March, the Treasury said today in Washington.

Chevron, the second-biggest U.S. oil company, lost 1.3 percent to $71.75, while rival ConocoPhillips retreated 1.6 percent to $43.65.

Crude oil for July delivery dropped as much as 1.9 percent to $70.71 a barrel in electronic trading on the New York Mercantile Exchange as the dollar rose the most in a week against the euro, limiting investors’ need to use commodities as a hedge against inflation.

Freeport-McMoRan, the world’s biggest publicly traded copper producer, slid 2.9 percent to $56.84 as gold declined to a three-week low.

Inventories of copper in Shanghai warehouses grew for a second week to 60,647 metric tons last week, the highest since the week of March 20, 2008, the exchange said after the market closed June 12. China’s imports of the metal and its products increased 6 percent in May from April to 422,666 tons.

Wal-Mart lost 1.4 percent to $49.16 after Goldman cut the largest retailer to “neutral” from “buy,” saying it sees “little near-term positive catalysts to drive shares higher.”

To contact the reporters on this story: Sarah Jones in London at sjones35@bloomberg.net. Jeff Kearns in New York at jkearns3@bloomberg.net.

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FX Thoughts for the Day

Daily Forex Technicals | Written by Kshitij Consultancy Services | Jun 12 09 12:37 GMT |

USD-CHF @ 1.0798/0801...Holding Long R: 1.0811-19 / 1.0852-68 / 1.0990 S: 1.0766-44 / 1.0700 / 1.0633-26 Dollar-Swiss has risen during the day and next faces Resistance near 1.0811-19. A break of 1.0819 might look to move towards 1.10 and possibly make a double bottom on the daily candle chart. Today's close is going to be very important which could possibly chalk out the path over the next few days. We shall have to see. Our Long at 1.0764 got profited during the day. Limit Buy Order: Buy USD 10K at 1.0735, SL 1.0645, TP 1.0780 Holding: USD 10K Long at 1.0695, SL 1.0730 (up from 1.0715), TP Open Cable GBP-USD @ 1.6374/76...Indecisive at the moment R: 1.6507 / 1.6642-80 / 1.6840 S: 1.6273-53 / 1.6014 Cable has fallen sharply during the day. Today's close might indicate the path that the pair might take over the course of the week. There's Support available at 1.6273-53 on a further fall. Referring to the note in the morning, the simple MACD is looking to come down, bringing the pair along with it. So, one has to be cautious at the moment. On the other hand, a rise past 1.6680 is likely to be very bullish for the pair. Aussie AUD-USD @ 0.8101/03...Holding Long R: 0.8151 / 0.8259-88 / 0.8322 S: 0.8069-56 / 0.8023-07 / 0.7928-04 In Aussie, too, today's close might give some indication of the pair going forward. Here again, there's the danger of double bottom forming on the daily candle chart. But if the Support at 0.7980 holds, the next week might see the pair retracing 0.8250 and even higher. Holding: AUD 10K Long at 0.8090, SL 0.8070 (up from 0.8010), TP 0.8140 (down from 0.8250) Kshitij Consultancy Service http://www.fxthoughts.com Legal disclaimer and risk disclosure These views/ forecasts/ suggestions, though proferred with the best of intentions, are based on our reading of the market at the time of writing. They are subject to change without notice.Though the information sources are believed to be reliable, the information is not guaranteed for accuracy. Those acting in the market on the basis of these are themselves responsibly for any profits or losses that might occur, without recourse to us. World financial markets, and especially the Foreign Exchange markets, are inherently risky and it is assumed that those who trade these markets are fully aware of the risk of real loss involved.

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Euro area Industrial Production Plunged to the Worst Since Records Started

Daily Forex Fundamentals | Written by ecPulse.com | Jun 12 09 13:44 GMT |

We have seen at the start of the week easing pace of contractions between investors along with remarkable improvements in confidence levels, despite some weak data seen this year in the industrial sectors where the Industrial Production contracted 1.9% on the month in April. The Europeans confidence improved in the second quarter in particular after fundamentals improved significantly starting from April, with sectors picking up some activity, but markets might not take this reading into consideration because the services sectors in the sixteen nations takes a bigger part than the manufacturing sector in the GDP reading. The contraction seen today in the Industrial Production today came worse than market expectations, falling 1.9% on the month worse than market expectations -0.4%, the year ending April contracted 21.6% coming worse the previous -19.3%, the worst since the data started. The International Monetary Fund projections that world economy will contract 3.0% this year. Where we all know that the economy had been struggling with the prolonged downturn in the world leading economies, triggered by the anchored levels of spending on the world exports and in particulate the sixteen nations; along with terminating the levels of new investments in the euro area. The European Central Bank projections that the growth and expansion will start taking place in the second half of 2010, but the improvement signs started to take place in the second quarter of the current year. However, the worst Credit Crisis since the Great Depression will need a prolonged time to mitigate especially we know the precipitation of this agony was the surging unemployment rates, which need years to ease down to previous levels. Nevertheless, my dear reader I have to note that improvements are taking place even with all the pessimism found in financial markets, what is taking place now is for sure better than the vast decline seen in the prior year. As now, policy markers are just waiting until markets starts to adjust it self alone using the endless interventions taken by Central Banks across the globe. Let seal this week with some optimism and joy because no more deterioration are taking place in the European financial markets are reforms by policy markers are taking place and new regulations are to be approved in the upcoming period. Even with those data, the European Indices decline as off 9:14 EST, Dow Jones euro stoxx lost 0.77% or 19.37 points reaching 2505.92 levels, the French CAC 40 lost 0.53% or 17.51 points reaching 3317.43 levels and finally the German DAX Index lost 1.03% or 52.89 point reaching 5054.28 levels. 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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Stronger Verbal Intervention on the USD and Treasuries by Japan Helps Boost the Greenback. CAD Suffering the Most at the Moment.

Daily Forex Fundamentals | Written by Saxo Bank | Jun 12 09 13:47 GMT |

Yet another bull/bear tug of war in equities yesterday as risk appetite seems to be at a fulcrum. Will USD benefit on swoon in confidence? MAJOR HEADLINES – PREVIOUS SESSION New Zealand Apr. Retail Sales rose +0.5% MoM vs. +0.2% expected, but fell -0.1% ex Autos vs. +0.4% expected China May Retail Sales grew 15.2% YoY vs. 15.0% expected and 14.8% in Apr. China May Industrial Production rose 8.9% YoY in May vs. 7.7% expected Japan May Consumer Confidence rose to 36.3 vs. 34.0 expected and 33.2 in Apr. EuroZone Apr. Industrial Production fell -21.6% YoY vs. -19.8% expected US May Import Price Index rose + 1.3% MoM vs. 1.4% expected and fell - 17.6% YoY vs. -17.5% expected THEMES TO WATCH – UPCOMING SESSION US Jun. preliminary University of Michigan Confidence (1400) US Treasury Secretary Geithner to Speak at G-8 News Conference (Sat 1330) New Zealand Apr. Performance of Services Index (Sun 2230) New Zealand Q1 Manufacturing Activity (Sun 2245) Market Comment: More verbal intervention out of Asia overnight as Japan's FinMin Yosano described Japan's confidence in US debt as "unshakable". But confidence in US debt was already evident yesterday with strong results from the latest treasury auction - this time the longest term 30-year US T-bonds. Strangely, the USD didn't react at all to the auction results, instead seeming to follow the ebb and flow in equity prices and then following through stronger in the European session today. There seem to be growing signs of an exhaustion in the weak USD move here, though we have yet to breach significant technical levels. The last four daily bars have seen strong moves in the opposite direction of the previous day's action. Chinese data overnight seems to confirm the idea that the Chinese consumer is consuming and that industrial production is recovering, though anecdotal evidence suggests troubling trends and questions the strength of the recovery. The NY Times article about Chinese commodity buying yesterday noticed that lower grades of steel were being consumed in very large quantities as these are the types of metal associated with road building, etc., while higher grades associated with consumer products were seeing less demand. The G-8 summit this weekend is unlikely to produce much of note for the FX market. There has been a reasonable noise level of late on the idea of reserve diversification into so-called IMF SDR's, but this kind of thing moves slower than molasses and the level of verbal intervention out of Asia would suggest that China and others won't want to be too loud about any diversification plans as this would be tantamount to a shooting themselves in the foot. Rather, the focus of the G-8 most relevant for currencies is the discussion of "exit strategies", led, of course, by the German ueber-hawks, who, despite panic, worse-than-the-Great-Depression contractions in their export-related industries are worried about how the worlds' central banks are going to withdraw liquidity and extract itself from the programs that were enacted to prevent a complete meltdown of the financial system and economy. It appears the USD strengthening today has a bit more conviction, and this is certainly supported in the comeback by US T-bonds yesterday and the correction in commodities - especially oil - today. Gold is also scratching to local new lows today, certainly confounding the old theme that no currencies are to be trusted. With six virtually unchanged days on the US equity indices having completely taken the momentum out of the shorter term bull move there, are we set up for a nasty correction now? The lack of any sizeable correction all the way up in risk appetite actually makes the risk for an ugly correction higher in our view. Look out for a dramatic volatility expansion if risk aversion develops here. ( See the AUDJPY chart below for the classic technical pattern that develops in these kinds of situations.) Charts: EURUSD and AUDJPY EURUSD - developing head and shoulders? The technicals for the EURUSD chart are more than interesting if this sell-off deepens toward the 1.3800 area, which would complete the neckline for a rather compelling head and shoulders pattern. But already today we also have a key support area in the form of the 21-day moving average close to the day's lows around 1.3955. Further south, the key 1.3720 area support looms. A break there could see follow through all the way to the 200-day moving average down below 1.3400. AUDJPY AUDJPY is in a classic ascending wedge formation. The outlook for such a formation when it breaks is usually for a very high momentum downdraft. It is interesting to note that the latest move to new highs for the week yesterday is not holding well as of this writing. Could we see a big follow through lower if risk aversion is on the rise here again? AUDJPY should be a good proxy for risk appetite in the coming days in any case. Analysis Disclosure & Disclaimer Saxo Bank A/S shall not be responsible for any loss arising from any investment based on any recommendation, forecast or other information herein contained. The contents of this publication should not be construed as an express or implied promise, guarantee or implication by Saxo Bank that clients will profit from the strategies herein or that losses in connection therewith can or will be limited. Trades in accordance with the recommendations in an analysis, especially leveraged investments such as foreign exchange trading and investment in derivatives, can be very speculative and may result in losses as well as profits, in particular if the conditions mentioned in the analysis do not occur as anticipated. Saxo Bank utilizes financial information providers and information from such providers may form the basis for an analysis. Saxo Bank accepts no responsibility for the accuracy or completeness of any information herein contained. Any recommendations and other comments in Saxo Bank's analysis derive from objective fundamental macro economical and company specific calculations, statistical and technical analysis, and subjective general market assessment. If an analysis contains recommendations to buy or sell a specific financial instrument, such recommendation should be seen as Saxo Bank's opinion that the specific instrument will respectively outperform the relevant market or underperform compared to the market. Saxo Bank's recommendations should statistically correspond to an even distribution between buy and sell recommendations. The recommendations may expire promptly due to market volatility and in general, Saxo Bank does not anticipate its recommendations to be valid more than one month. An analysis will be updated if and only if a market development or other issues relevant to the analysis render a new analysis on the same topic relevant. Saxo Bank's analysis does not cover any specific financial product over time but only products which Saxo Bank's strategy team finds it important to cover at any given point in time. In order to prevent conflicts of interest, Saxo Bank has established appropriate business procedures, incl. procedures applicable to research and analysis to ensure objective research reports. Saxo Bank's research reports have not been discussed with the parties, e.g. issuers of securities, mentioned in the analysis. Saxo Bank is under supervision by the Danish Financial Supervisory Authority. Saxo Bank does not engage in corporate finance activities and accordingly, Saxo Bank's employees, incl. the persons responsible for an analysis, do not receive remuneration associated with investment banking transactions.

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Mid-Day Report: Dollar Extends Rebound as Overbought Oil Pullback

Market Overview | Written by ActionForex.com | Jun 12 09 13:10 GMT |

Dollar rebounds further on the back of deeper pull back in commodity prices. In particular, the overbought oil extended yesterday's fall from above 73 and breaches 71 level in early US session. Gold took out 940 level and dips to as low as 936 so far. USD/CAD is leading the way today by breaking 1.1163 minor resistance and should be resuming the rise from 1.0784. Such development serves as an early alert that further dollar strength is underway but focus will remain on minor support levels in EUR/USD, GBP/USD and AUD/USD for confirmation. US Treasuries was helped by Japanese Finance Minister Yosano, who expressed his confidence about outlook of US Treasuries and Japan has "complete trusts" on the strong dollar policy. Treasury yields edge lower in early US session which gives some support to the Japanese yen as seen in the deep retreat in yen crosses. Nevertheless, USD/JPY remains basically in range. Technically, an intraday low should be in place in dollar index at 79.19 with 4 hours MACD crossed above signal line. The three wave structure, and with 79.03 support intact, is consistent with the view that rise from 78.33 is still in progress. Above 80.63 minor resistance resistance will flip intraday bias back to the upside first. Break of 81.47 will then target next key resistance at 82.63 (38.2% retracement of 89.62 to 78.33 at 82.64) to confirm completion of whole decline from 89.62. On the data front, US Import price index rose more than expected by 1.3% mom in May. Eurozone industrial production contracted -1.9% mom, -21.6% yoy in April. New Zealand retail sales rose more than expected by 0.5% mom in Apr, but ex-auto sales unexpectedly dropped -0.1% mom. Japanese industrial production was revised up to 5.9% mom, -30.7% yoy in April. Household confidence improved from 34 to 35.7 in May. Germany WPI rose 0.1% mom, dropped -8.9% yoy in May. In the Quarterly Bulletin, BoE analysts said that there are tentative signs that the asset-purchase program is having positive impacts on financial conditions. However, "The U.K. and global macroeconomic outlook remained highly uncertain with significant upside and downside risks." The timing of exiting from its policy of low interest rates and quantitative easing will depend on medium term inflation outlook. And, to do so, it will be possibly be through a combination of rate hikes, bond sales or by reducing supply of reserves through issuing short term BoE bills. USD/CAD Mid-Day Outlook Daily Pivots: (S1) 1.0962; (P) 1.1062; (R1) 1.1184; More. USD/CAD's break of 1.1163 minor resistance indicates that pull back from 1.1289 has completed and intraday bias is flipped back to the upside. Break of 1.1289 will confirm rally resumption for 1.1475/1.1814 resistance zone next. On the downside, while some retreat might be seen, downside should be contained above 1.0947 minor support and bring rise resumption. In the bigger picture, fall from 1.3063 is treated as correction to impulsive rally from 0.9056 to 1.3063 and has met target support zone of 1.0297/0819 already. We're slightly favoring the case that such correction has completed at 1.0784 already. Break of mentioned 1.1475/1.1814 resistance zone will confirm this case and should at least bring strong rally to key cluster resistance at 1.2191 (61.8% retracement of 1.3063 to 1.7084 at 1.2192). Nevertheless, a break below 1.0784 will indicate that fall from 1.3063 is still in progress, probably to 61.8% retracement of 0.9056 to 1.3063 at 1.0587 before completion. Economic Indicators Update GMT Ccy Events Actual Consensus Previous Revised 22:45 NZD Retail Sales M/M Apr 0.50% 0.20% -0.40% -0.20% 22:45 NZD Retail Sales Ex-Auto M/M Apr -0.10% 0.40% 0.50% 23:01 GBP BoE Quaterly Bulletin 04:30 JPY Industrial Production M/M Apr F 5.90% 5.20% 5.20% 04:30 JPY Industrial Production Y/Y Apr F -30.70% -- -31.20% 05:00 JPY Households Confidence May 35.7 34 32.4 06:00 EUR German WPI M/M May 0.10% 0.10% 0.10% 06:00 EUR German WPI Y/Y May -8.90% -9.00% -8.10% 09:00 EUR Eurozone Industrial Production M/M Apr -1.90% -0.40% -2.00% -1.40% 09:00 EUR Eurozone Industrial Production Y/Y Apr -21.60% -19.80% -20.20% -19.30% 12:30 USD Import Price Index M/M May 1.30% 1.10% 1.60% 14:00 USD U. of Michigan Confidence Jun Prelim 69.2 68.7

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U.K. Stocks Declines as Mining Shares Retreat; Vedanta Drops

By Sarah Jones

June 12 (Bloomberg) -- U.K. stocks fell, led by mining companies as Vedanta Resources Plc announced a $1 billion convertible bond issue and base metals fell.

Vedanta, India’s largest copper producer, sank 7.8 percent. Antofagasta Plc and Xstrata Plc lost more than 3 percent as investors sold commodities after recent gains. Barclays Plc slid after BlackRock Inc. agreed to buy the lender’s investment unit.

The FTSE 100 Index fell 24.37, or 0.6 percent, to 4,437.5 at 2:13 p.m. in London, leaving the measure virtually unchanged for the week, after swinging between gains and losses more than 10 times today. The FTSE All-Share Index slipped 0.6 percent today, while Ireland’s ISEQ Index added 0.7 percent in Dublin.

Vedanta fell 7.8 percent to 1,610 pence after India’s largest copper producer said it is offering $1 billion of convertible bonds to help fund expansion plans. The offer may be increased by $250 million and JPMorgan Cazenove is the sole bookrunner.

Antofagasta, owner of copper mines in Chile, declined 5.4 percent to 665.5 pence as the base metal dropped in New York and London as the dollar advanced and investors sold commodities after recent gains. Xstrata, owner of the fourth-biggest copper producer, lost 3.9 percent to 744.5 pence.

Nickel, tin, lead and zinc also retreated on the London Metal Exchange.

Barclays lost 3.9 percent to 292.75 pence after the bank announced that BlackRock agreed to buy Barclays Global Investors for $13.5 billion to become the world’s largest money manager.

The U.K. lender will hold a 19.9 percent stake in the combined company. Financing will include $2.8 billion from the sale of equity to institutional investors and as much as $2 billion in loans from Barclays and other banks.

The following stocks also gained or fell in the U.K. market. Stock symbols are in parentheses.

AstraZeneca Plc (AZN LN) rallied 81 pence, or 3.2 percent, to 2,598 as UBS AG added the drugmaker to its “European focus list” and raised its price estimate in the shares by 11 percent to 3,100 pence.

Berkeley Group Holdings Plc (BKG LN) dropped 28 pence, or 3.5 percent, to 767 after Nomura Holdings Inc. today placed 4.5 million shares of the British Homebuilder.

Earlier this week, Citigroup Inc. and Credit Suisse Group AG sold 144 million pounds ($237 million) worth of shares that were own by Saudi billionaire Maan al-Sanea’s Saad Group.

BT Group Plc (BT/A LN) rallied 4.4 pence, or 4.7 percent, to 97.4 after Bank of America Corp. upgraded Britain’s largest phone company to “buy” from “neutral,” citing a “new era of cost control and pricing discipline.”

GlaxoSmithKline Plc (GSK LN) increased 41 pence, or 3.9 percent, to 1,099.5 as the World Health Organization declared the first pandemic since 1968. Glaxo today said it said it started developing an adjuvanted vaccine against the pandemic flu strain known as A(H1N1).

To contact the reporter on this story: Sarah Jones in London at sjones35@bloomberg.net.

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