Payrolls Probably Declined at Slower Pace; Unemployment Rose

By Shobhana Chandra

Aug. 7 (Bloomberg) -- A slowing in the pace of U.S. job losses last month wasn’t enough to prevent the unemployment rate from climbing to a 26-year high, economists forecast a report today will show.

Employers probably cut 325,000 workers from payrolls in July after trimming 467,000 the prior month, according to the median of 82 estimates in a Bloomberg News survey. The unemployment rate likely rose to 9.6 percent from 9.5 percent.

Companies from Boeing Co. to Verizon Communications Inc. continue to cut costs, signaling that a rebound in hiring will take time to develop even as Obama administration stimulus efforts take hold. A jobless rate that is projected to exceed 10 percent by early 2010, stagnant wages and falling home values mean a lack of consumer spending will curb an economic recovery.

“The labor market is still bad,” said Nigel Gault, chief U.S. economist at IHS Global Insight in Lexington, Massachusetts. “Projects that create jobs will take a long time to ramp up. People are resigned to the idea of a jobless recovery and expectations for the consumer are really low.”

The Labor Department’s report is due at 8:30 a.m. in Washington. Economists’ forecasts for payrolls ranged from declines of 150,000 to 460,000. Job losses peaked at 741,000 in January, the most since 1949.

The July projection would bring total jobs lost since the recession began in December 2007 to 6.8 million, the biggest decline in any post-World War II economic slump.

Unemployment Forecasts

Estimates for the unemployment rate ranged from 9.2 percent to 9.8 percent, according to the survey. A separate Bloomberg survey last month showed unemployment may exceed 10 percent by early next year and average 9.8 percent for all of 2010.

The Standard & Poor’s 500 Index, which reached a 12-year low on March 9, has since climbed 47 percent as evidence mounted the recession was easing.

Declining pay is one reason economists project consumer spending, which accounts for 70 percent of the economy, will be slow to gain speed. Wages and salaries fell 4.7 percent in the 12 months through June, the biggest drop since records began in 1960, according to Commerce Department data issued this week.

Companies like Verizon and Boeing are still looking to trim expenses through cutbacks in staff. New York-based telephone carrier Verizon last month said it plans to slash more than 8,000 jobs in the second half of the year.

10,000 Jobs

Chicago-based Boeing, which is planning to eliminate about 10,000 workers, or 6 percent of its labor force, has agreed to allow some machinists to volunteer for a “layoff with benefits” to help mitigate job cuts, the International Association of Machinists and Aerospace Workers said on July 28.

Emerson Electric Co., a maker of industrial equipment, will cut an additional 5,000 to 6,000 positions in the next few quarters, after it posted its third straight drop in quarterly earnings, the longest stretch since 2002. The St. Louis-based company has already eliminated 20,000 jobs.

“Emerson is still seeing very difficult and challenging times around the world,” Chief Executive Officer David Farr said on a conference call on Aug. 4.

Administration officials including Lawrence Summers, director of the White House National Economic Council, predict most new jobs under President Barack Obama’s stimulus program will come only in 2010. Less than 10 percent of the $787 billion plan goes to job creation this year, and the government still expects to save or create at least 3 million jobs, Summers said in an NBC television interview on Aug. 2.

The unemployment rate may not peak until the second half of 2010, Treasury Secretary Timothy Geithner said on ABC last week, even as the economy shows signs of improvement. Another extension in unemployment benefits “is something that the administration and Congress are going to look very carefully at as we get closer to the end of this year,” Geithner said.

                        Bloomberg Survey

================================================================
                          Nonfarm Unemploy     Manu   Hourly
                         Payrolls     Rate Payrolls Earnings
                           ,000’s        %   ,000’s     MOM%
================================================================

Date of Release              08/07    08/07    08/07    08/07
Observation Period            July     July     July     July
----------------------------------------------------------------
Median                        -325     9.6%     -100     0.1%
Average                       -324     9.6%     -104     0.1%
High Forecast                 -150     9.8%      -80     0.3%
Low Forecast                  -460     9.2%     -160     0.0%
Number of Participants          82       80       20       60
Previous                      -467     9.5%     -136     0.0%
----------------------------------------------------------------
4CAST Ltd.                    -245     9.7%     ---      0.1%
Action Economics              -320     9.7%     -100     0.1%
AIG Investments               -375     9.6%     ---      0.0%
Aletti Gestielle SGR          -370     9.6%     -110     ---
Ameriprise Financial Inc      -340     9.6%     -100     0.1%
Argus Research Corp.          -275     9.7%     -160     0.3%
Banesto                       -330     ---      ---      ---
Bank of Tokyo- Mitsubishi     -362     9.2%     ---      0.1%
Bantleon Bank AG              -310     9.6%     ---      ---
Barclays Capital              -275     9.6%     ---      0.0%
BBVA                          -395     9.7%     -133     0.2%
BMO Capital Markets           -300     9.7%     ---      0.1%
BNP Paribas                   -350     9.8%     ---      0.1%
Briefing.com                  -370     9.7%     ---      0.1%
C I T I C Securities          -350     9.6%     ---      ---
Calyon                        -340     9.6%     ---      0.1%
Capital Economics             -380     9.6%     ---      0.0%
CIBC World Markets            -300     9.6%     ---      0.1%
Citi                          -300     9.7%     ---      0.1%
ClearView Economics           -300     9.8%      -85     0.1%
Commerzbank AG                -300     9.6%     ---      0.1%
Credit Suisse                 -275     9.6%     ---      0.1%
Daiwa Securities America      -375     9.7%     ---      ---
Danske Bank                   -313     9.5%     ---      ---
DekaBank                      -360     9.6%     ---      0.1%
Desjardins Group              -350     9.7%     ---      0.1%
Deutsche Bank Securities      -150     9.6%     ---      0.0%
Deutsche Postbank AG          -350     9.8%     ---      ---
DZ Bank                       -300     9.6%     ---      ---
First Trust Advisors          -250     9.6%     -100     0.1%
FTN Financial                 -300     9.6%     ---      0.0%
Goldman, Sachs & Co.          -250     9.7%     ---      0.2%
Helaba                        -350     9.6%     ---      0.1%
Herrmann Forecasting          -321     9.6%      -96     0.1%
High Frequency Economics      -350     9.7%     ---      0.1%
HSBC Markets                  -375     9.6%     ---      0.1%
IDEAglobal                    -310     9.6%      -90     0.1%
IHS Global Insight            -330     9.7%     ---      0.1%
Informa Global Markets        -460     9.7%      -85     0.1%
ING Financial Markets         -290     9.6%      -85     0.1%
Insight Economics             -350     9.7%     ---      0.0%
Intesa-SanPaulo               -350     9.6%     ---      0.0%
J.P. Morgan Chase             -275     9.7%     ---      0.1%
Janney Montgomery Scott L     -355     9.6%     ---      ---
Johnson Illington Advisor     -340     9.7%     -130     0.2%
JPMorgan’s Private Wealth     -375     9.6%     ---      0.0%
Landesbank Berlin             -320     9.8%     ---      0.0%
Landesbank BW                 -380     9.6%     ---      ---
Maria Fiorini Ramirez Inc     -375     9.6%     ---      0.1%
Merrill Lynch/BAS             -325     9.7%     ---      0.1%
MFC Global Investment Man     -330     9.6%      -80     0.1%
Mizuho Securities             -375     9.7%     ---      ---
Moody’s Economy.com           -305     9.6%      -90     0.0%
Morgan Keegan & Co.           -296     ---      ---      ---
Morgan Stanley & Co.          -250     9.7%     ---      0.1%
National Bank Financial       -200     9.5%     ---      ---
Natixis                       -310     9.8%     ---      0.1%
Newedge                       -390     9.6%     -125     ---
Nomura Securities Intl.       -250     9.5%      -90     0.1%
Nord/LB                       -370     9.6%     -110     0.1%
PNC Bank                      -325     9.7%      -90     0.0%
Raymond James                 -280     9.6%     ---      0.1%
RBC Capital Markets           -315     9.6%     ---      ---
RBS Securities Inc.           -325     9.7%     ---      ---
Ried, Thunberg & Co.          -350     9.6%     ---      ---
Schneider Foreign Exchang     -310     9.6%     ---      ---
Scotia Capital                -400     9.7%     ---      0.1%
Societe Generale              -285     9.7%     ---      0.1%
Standard Chartered            -320     9.7%     ---      0.0%
Stone & McCarthy Research     -375     9.5%     -110     0.2%
TD Securities                 -375     9.7%     ---      ---
Thomson Reuters/IFR           -320     9.8%     ---      0.1%
Tullett Prebon                -390     9.7%     ---      0.1%
UBS Securities LLC            -250     9.6%     ---      0.1%
UniCredit Research            -300     9.7%     ---      ---
Union Investment              -377     9.7%     ---      0.1%
University of Maryland        -330     9.7%     -110     0.1%
Wells Fargo & Co.             -245     9.5%     ---      ---
WestLB AG                     -350     9.6%     ---      0.0%
Westpac Banking Co.           -270     9.7%     ---      ---
Woodley Park Research         -247     9.4%     ---      0.1%
Wrightson Associates          -350     9.6%     ---      0.1%
================================================================

To contact the reporter on this story: Shobhana Chandra in Washington schandra1@bloomberg.net

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SocGen’s Mustier Leaves Bank Amid French Insider Trading Probe

By Fabio Benedetti-Valentini

Aug. 7 (Bloomberg) -- Societe Generale SA, France’s second- largest bank by market value, said former investment-banking chief Jean-Pierre Mustier quit after the market regulator’s sanctions commission opened an insider trading probe.

Mustier, 48, who ran the investment bank at the time of a 4.9 billion-euro ($7 billion) trading loss in January 2008, had planned to leave by year-end, Paris-based Societe Generale said in an e-mailed statement yesterday. He brought forward his departure “in the interest of the group,” the bank said.

Robert Day, who founded Los Angeles-based TCW Group Inc. in 1971 and serves on Societe Generale’s board, is also under investigation by the watchdog’s sanctions commission for possible insider trading, the bank said. Day, 65, and Mustier reject the allegations, the company said in the statement, which didn’t provide further details of the investigation.

Christine Anglade, a spokeswoman for the Paris-based Autorite des Marches Financiers, confirmed that the regulator sent letters of grievance to Day and Mustier opening proceedings before the sanctions commission. She declined to elaborate. Societe Generale also said an investigation started by the regulator in January 2008 into its financial information and shares has ended.

Kerviel Loss

Societe Generale announced a record trading loss on Jan. 24, 2008, blaming it on unauthorized positions amassed by Jerome Kerviel, at the time a 31-year-old junior trader. Kerviel has said his superiors at the bank knew of his actions.

Day, 65, and his foundation sold 45 million euros of Societe Generale shares less than a week before the trading loss was made public, the regulator said on its Web site last year.

“At no time did Robert Day trade on inside information in SocGen shares,” Josh Pekarsky, a spokesman for Day, said in an e-mailed statement. The probe isn’t related to the “Kerviel matter or disclosures made to the bank’s board in January 2008 regarding SocGen’s potential subprime exposure,” he said.

Day cooperated with the AMF’s inquiry and will remain a member of Societe Generale’s board, Pekarsky said.

The bank had to turn to shareholders for 5.5 billion euros in a stock offering following the trading loss last year. Daniel Bouton, 59, stepped down as chairman this April after complaining of “repeated attacks” in the media during the months following the loss.

No Insider Information

Mustier, in an internal memo to staff published on the Web site NouvelObs.com, said the probe relates to shares he sold on Aug. 21, 2007. In the memo, he says he didn’t have any insider information at that time and sold the stock as he reduced his overall equity portfolio. He retained half of his Societe Generale shares, according to the memo.

Mustier is leaving Societe Generale with no departure payment, he told NouvelObs.com in an interview. Mustier, who declined to give the amount of his holdings as of August 2007, said the AMF estimates the gain he could be blamed for at between 50,000 euros and 200,000 euros, NouvelObs reported.

Societe Generale spokeswoman Astrid Brunini didn’t return calls seeking comment.

An engineer by training, Mustier joined Societe Generale in 1987 in Paris as a stock options trader. He held senior executive positions at the investment bank in Paris, Tokyo and Hong Kong before becoming chief executive officer of the corporate- and investment bank in 2003. He moved to head the investment-management division last year after the trading loss.

To contact the reporter on this story: Fabio Benedetti-Valentini in Paris at fabiobv@bloomberg.net.

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UBS Clients Await Details of U.S.-Swiss Pact on Secret Accounts

By David Voreacos and Carlyn Kolker

Aug. 7 (Bloomberg) -- UBS AG clients are waiting to assess the effect of a settlement that could come today in a U.S. Justice Department lawsuit seeking the names of Americans suspected of evading taxes through 52,000 secret Swiss accounts.

A Justice Department attorney told a judge in Miami on July 31 that the U.S. and Swiss governments agreed in principle and hoped to outline final terms today. Tax lawyers said they expect UBS to disclose thousands of accounts after giving the Internal Revenue Service data on 250 clients on Feb. 18. UBS agreed then to pay $780 million to defer prosecution for aiding tax evasion.

Since then, three UBS clients have pleaded guilty in the U.S. to hiding their bank assets from the IRS. Thousands avoided prosecution by voluntarily disclosing their accounts to the IRS under a program that ends Sept. 23, tax lawyers said. The pace of future disclosures could hinge on the accord, according to lawyers for clients of UBS, the largest Swiss bank by assets.

“There is a substantial likelihood that the agreement will involve the handing over of many, many names of UBS clients,” said lawyer William Sharp of Sharp & Associates in Tampa, Florida. “People have a lot of concern that they could be turned in and be in deeper legal trouble than they already are.”

Lawyers will report by telephone today to U.S. District Judge Alan Gold in Miami. The IRS has said any accord must involve a “significant” number of accounts.

In the past month, Switzerland negotiated on behalf of the bank, arguing that the U.S. demands would force UBS bankers to violate Swiss criminal laws protecting account secrecy. The Swiss also threatened that they would seize the data sought by the IRS if Gold ordered disclosures violating Swiss privacy law.

More Criminal Charges

More criminal charges against UBS clients are coming, according to three tax lawyers who have spoken with Justice Department prosecutors.

“I am informed that there will be several indictments coming” in the Eastern District of New York, said tax attorney Robert Fink of Kostelanetz & Fink. His New York law firm represented about 200 clients who voluntarily disclosed UBS accounts to the IRS. The pending criminal cases involve accounts set up in the names of other entities, he said.

“The bank knew that the ultimate beneficiary was a U.S. citizen,” Fink said. “All these things were done with the bank’s knowledge, almost invariably at the bank’s suggestion.”

On July 31, U.S. Secretary of State Hillary Clinton met with Swiss Foreign Minister Micheline Calmy-Rey in Washington. Clinton said “our government worked very hard” on the accord, and Calmy-Rey said she was “very pleased” with it.

Sham Companies

The U.S. sued UBS for the account data on Feb. 19, a day after the bank admitted its Swiss private bankers helped wealthy Americans evade U.S. taxes from 2000 to 2007. It admitted setting up sham offshore companies in havens like the British Virgin Islands, Hong Kong and Panama.

Aside from UBS’s admissions of wrongdoing, one banker pleaded guilty and cooperated with prosecutors. Another was indicted and declared a fugitive, and a third who ran the now- shuttered cross-border business was held by the U.S. as a material witness for several months last year.

After closing its cross-border business, which operated without U.S. Securities and Exchange Commission approval, UBS urged those clients to leave or move their assets to an SEC- registered bank business in the U.S. or Switzerland.

UBS, based in Zurich, has sent letters to U.S. clients urging them to ask a tax lawyer whether they should sign up for the IRS voluntary disclosure program. It also has asked clients for permission to turn over their account data to the IRS.

Waiver Form

“We herewith instruct and authorize you to disclose to the IRS, on my/our behalf, any and all Account Records in your possession” sought by the IRS, according to a waiver form obtained by Bloomberg News that was sent July 31 to a client. “With this instruction, I/we hereby waive protections provided under bank secrecy laws of Switzerland.”

Under the IRS voluntary disclosure program, taxpayers must pay taxes, interest and a 20 percent penalty on the highest balance of the preceding six years. Clients should not wait to disclose their accounts, even if UBS doesn’t disclose their data, said attorney George Clarke at Miller & Chevalier in Washington.

“Just because the Swiss don’t turn over those names doesn’t mean the government won’t try to get those names from some other source,” Clarke said. “As long as you are violating U.S. law, and there is an incentive for someone to rat you out, you should come forward to the U.S. government.”

Offshore account holders who don’t report to the IRS run a “tremendous risk,” said attorney Charles Falk.

“The IRS and Congress have decided to get tough about this stuff and they are making a very concerted effort to stop it,” said Falk, who practices in Mendham, New Jersey. “Anybody who has an offshore account who sees what’s happening and does not come forward is playing Russian roulette with the tax laws.”

The case is U.S. v. UBS AG, 09-cv-20423, U.S. District Court, Southern District of Florida (Miami).

To contact the reporters on this story: David Voreacos in Newark, New Jersey, at dvoreacos@bloomberg.net; Carlyn Kolker in New York at ckolker@bloomberg.net.

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D.R. Horton Added to ‘Conviction Buy’ List at Goldman Sachs

By Andrew Rummer

Aug. 7 (Bloomberg) -- D.R. Horton Inc., the largest U.S. homebuilder by sales, was added to Goldman Sachs Group Inc.’s “conviction buy” list.

“It appears to be the best-positioned company to benefit from the nearing expiration of the federal housing stimulus, given its industry-low price point and its 2,300 completed, ready-for-sale homes,” the brokerage wrote in a report today.

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Banco Macro, Banorte, Sabesp, VisaNet: Latin Equity Preview

By Emily Schmall

Aug. 7 (Bloomberg) -- The following companies may have unusual price changes in Latin American trading. Stock symbols are in parentheses and share prices reflect the previous close.

The MSCI Latin America Index fell 0.6 percent to 3,366.16. In Brazil, preferred shares usually are the most-traded class of stock. Colombia markets are closed today for a holiday.

Argentina

Banco Macro SA (BMA AF): Argentina’s fourth-largest private lender reported second-quarter net income of 163.2 million pesos ($43 million), up from 161 million pesos a year earlier, according to a statement distributed by PRNewswire. Macro rose 1.7 percent to 7.12 pesos.

Brazil

Cia. Brasileira de Meios de Pagamento (VNET3 BS): The credit-card company known as VisaNet is being investigated for possible anti-competitive practices by the Brazilian Justice Ministry. As a preventive measure, the Ministry will allow other companies to accredit businesses to accept Visa-branded cards. VisaNet fell 3.8 percent to 17.70 reais.

Cia de Saneamento Basico do Estado de Sao Paulo (SBSP3 BS): Brazil’s biggest water utility will likely report today that profit climbed 15 percent in the second-quarter to 415.4 million reais ($225.5 million), from 360 million reais in the year- earlier period, according to the average of 5 estimates compiled by Bloomberg. Sabesp, as the Sao Paulo-based utility is known, rose 1.5 percent to 32.25 reais.

Chile

Sonda SA (SONDA CC): Chile’s biggest independent software company was scheduled to close its offer to buy all shares in rival Quintec SA (QUINTEC CC) for 165 pesos each by midnight. Sonda rose 0.4 percent to 765 pesos, while Quintec was little changed at 168 pesos.

Mexico

Grupo Financiero Banorte SAB (GFNORTEO MM): Moody’s Investors Service may downgrade Banorte’s local currency deposit and debt ratings. Mexico’s largest publicly-traded lender’s credit card portfolio “could weaken its future earnings and risk-absorption capacity,” Moody’s said in a statement yesterday. Banorte rose 1.6 percent to 34.88 pesos.

To contact the reporter on this story: Emily Schmall in New York at eschmall@bloomberg.net.

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Chiquita, Computer Sciences, Leap, Nvidia: U.S. Equity Preview

By Lu Wang

Aug. 7 (Bloomberg) -- Shares of the following companies may have unusual moves in U.S. trading. Stock symbols are in parentheses.

Chiquita Brands International Inc. (CQB US): The seller of bananas and other produce posted second-quarter earnings excluding some items of $2.08 a share, more than two times higher than the average analyst estimate, according to Bloomberg data.

Computer Sciences Corp. (CSC US): The U.S. computer services provider boosted its full-year earnings forecast after first-quarter profit topped the average analyst estimate by 44 percent.

Crocs Inc. (CROX US): The maker of colorful clogs with holes said that, excluding some items, it expects a loss of 14 cents a share at most in the third quarter. That’s narrower than the 20-cent average estimate from analysts in a Bloomberg survey.

Fuel Systems Solutions Inc. (FSYS US): The company whose devices allow internal-combustion engines to run on alternative fuels boosted its 2009 forecast, projecting sales of at least $370 million. Analysts, on average, expected $353.4 million, according to a Bloomberg survey.

Leap Wireless International Inc. (LEAP US): The pay-as-you- go mobile phone company reported second-quarter profit and revenue that trailed analysts’ estimates as rivals step up competition with new products and expansion plans.

Nvidia Corp. (NVDA US): The second-largest maker of graphics chips forecast sales of as much as $830.9 million in the third quarter, compared with an average analyst estimate of $757 million.

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

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U.S. Stock Futures Decline Before Jobless Report; Alcoa Slips

By Adam Haigh

Aug. 7 (Bloomberg) -- U.S. stock-index futures slipped, indicating the Standard & Poor’s 500 Index will trim its weekly gain, before a report that may show the unemployment rate climbed to a 26-year high.

Alcoa Inc. led a retreat among raw-material producers as metals fell and the second-largest bank in China said it will reduce new loans by about 70 percent. Nvidia Corp. jumped 5.2 percent in pre-market New York trading after the second-biggest maker of graphics chips forecast higher-than-estimated sales for the third quarter. American International Group Inc. surged 9.8 percent as second-quarter earnings topped analyst projections.

Futures on the S&P 500 expiring in September retreated 0.3 percent to 992.1 at 12:24 p.m. in London. The benchmark gauge for U.S. equities has added 1 percent so far this week, heading for a fourth straight weekly advance. Dow Jones Industrial Average futures lost 0.3 percent to 9,198 and Nasdaq-100 Index futures declined 0.2 percent to 1,598.5.

“The key thing will be the Labor data today in the U.S.” said Sean Landers, head of U.S. equities at Pali International in London. “We potentially have a fairly good earnings outlook for 2010,” he told Bloomberg Television.

The recent rally has pushed the valuation of the S&P 500 to 18.5 times its companies’ earnings over the past 12 months, the most expensive since March 2005, according to weekly data compiled by Bloomberg.

Earnings

Companies in the S&P 500 are headed for a record eighth consecutive drop in quarterly profits. Per-share earnings have tumbled 32 percent on average in the second quarter. Analysts predict a 22 percent third-quarter decline before a 62 percent rebound in earnings in the final three months of the year.

While profits are falling, results have surpassed projections by an average of 10 percent in the current season. Per-share earnings have beaten estimates at three-quarters of the 443 companies in the S&P 500 that released second-quarter results since June 17, according to data compiled by Bloomberg.

U.S. employers probably cut 325,000 workers from payrolls in July after trimming 467,000 the prior month, according to the median of 82 estimates in a Bloomberg News survey. The unemployment rate likely rose to 9.6 percent from 9.5 percent, the highest in 26 years, economists said before a Labor Department report due at 8:30 a.m. in Washington.

Alcoa dropped 1 percent to $12.67 in pre-market trading in New York. Copper, lead, nickel, tin and zinc prices declined in London today. China Construction Bank Corp. President Zhang Jianguo said he will cut new lending by about 70 percent in the second half to avert a surge in bad debt, spurring concern this may hamper growth.

Nvidia Gains

Nvidia soared 5.2 percent to $13.80 after it forecast sales of as much as $830.9 million in the third quarter, compared with an average analyst estimate of $757 million.

AIG climbed 9.8 percent to $24.74. The insurer bailed out by the U.S. government reported second-quarter earnings per share of $2.57 on an adjusted basis, beating the $1.50 average analyst estimate.

D.R. Horton Inc., the largest U.S. homebuilder by sales, gained 1.6 percent to $12.74 in German trading as Goldman Sachs Group Inc. added the shares to its “conviction buy” list.

Chiquita Brands International Inc. will probably move after the seller of bananas and other produce posted second-quarter earnings excluding some items of $2.08 a share, more than twice the average analyst estimate, according to Bloomberg data.

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

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European, Asian Stocks Drop Before U.S. Jobs Report; RBS Falls

By Daniela Silberstein

Aug. 7 (Bloomberg) -- European and Asian stocks fell as results from Royal Bank of Scotland Group Plc and Konica Minolta Holdings Inc. spurred speculation that a five-month rally has outpaced the prospects for earnings. U.S. futures slipped before a report that may show the unemployment rate climbed.

RBS slid 12 percent after the U.K.’s biggest government- owned bank reported a first-half loss. BHP Billiton Ltd., the world’s largest mining company, led raw-material producers lower as metals retreated. Konica Minolta slumped 10 percent in Tokyo after the maker of printers and office equipment said first- quarter profit tumbled 98 percent.

Europe’s Dow Jones Stoxx 600 Index slid 1 percent to 225.69 as of 12:41 p.m., trimming its fourth straight weekly gain to 0.4 percent. The gauge has climbed 43 percent since March 9 as companies from GlaxoSmithKline Plc to Goldman Sachs Group Inc. reported better-than-estimated earnings. The regional measure is now valued at 39.2 times the profits of its companies, the highest level since September 2003, weekly data compiled by Bloomberg show.

“If you look at earnings, most of them beat but they are quite volatile,” Philippe Gijsels, a senior structured equity strategist at Fortis Global Markets in Brussels, said in a Bloomberg Television interview. “We’re still in for a rough ride in the financial sector. I would be very cautious for the second half. It might be time to take some money off the table.”

U.S. Jobs Report

Futures on the Standard & Poor’s 500 Index slipped 0.2 percent before a report that may show a slowing pace of U.S. job losses last month wasn’t enough to prevent the unemployment rate from climbing to a 26-year high.

Employers probably cut 325,000 workers from payrolls in July after trimming 467,000 the prior month, according to the median of 82 estimates in a Bloomberg News survey. The unemployment rate likely rose to 9.6 percent from 9.5 percent.

“As the session moves on all eyes will fall on the U.S. as the non-farm payroll figures are released,” Jimmy Yates, head of equities at CMC Markets in London, wrote. “The release has the potential to undo all of the hard work of the last few sessions.”

The MSCI Asia Pacific Index sank 0.7 percent today as lower profits at DBS Group Holdings Ltd. helped fuel concern that the rally in stocks has outpaced earnings prospects.

Chinese Stocks

China’s Shanghai Composite Index retreated 2.9 percent as developers and materials producers fell, extending this week’s drop to 4.4 percent, the biggest slide since February. China Construction Bank Corp. President Zhang Jianguo said the nation’s second-largest bank will cut new lending by about 70 percent in the second half after “some loans didn’t go into the real economy.”

Chinese officials said they will scrutinize stock-market gains without capping new lending after a record $1.1 trillion of loans in the first half added to credit risks and threatened to cause asset bubbles.

Tudor Investment Corp., the $10.8 billion hedge-fund firm run by Paul Tudor Jones, said equity markets could decline later this year, creating buying opportunities.

Slowing growth in China and the return of front-page stories on swine flu may be “further catalysts for global equity markets to pause in September,” the Greenwich, Connecticut-based firm said in an Aug. 3 client letter, a copy of which was obtained by Bloomberg News.

German industrial production unexpectedly declined in June after increasing the most in more than 18 years a month earlier, the Economy Ministry in Berlin said today.

RBS Retreats

RBS plummeted 12 percent to 47 pence. The bank said results will be poor for another two years as it reported an unexpected first-half loss of 1.04 billion pounds ($1.74 billon) after setting aside 7.52 billion pounds to cover bad loans and other impairments. Analysts had predicted net income of 1.1 billion- pounds, according to the median of six estimates in a Bloomberg survey.

“We are two years in and thing are improving but only gradually and the wake-up call from RBS this morning underlines that,” Julian Chillingworth, chief investment officer at Rathbone Unit Trust Management in London, told Bloomberg Television. “We are not out of the woods. We’ve got further impairment to come.”

Allianz SE slipped 2.7 percent to 73.49 euros. Europe’s biggest insurer by market value said profit fell 16 percent to 1.87 billion euros ($2.69 billion) in the second quarter as earnings at its property and casualty unit declined.

Earnings in Europe slumped 33 percent in the second quarter, while more than half of profits have topped analysts’ projections, according to data compiled by Bloomberg.

Basic Resources

BHP Billiton retreated 2.6 percent to 1,532.5 pence. Rio Tinto Group, the world’s third-largest mining company, lost 4.6 percent to 2,380.5 pence. Kazakhmys Plc, Kazakhstan’s biggest copper mining company, slid 2.6 percent 897.5 pence.

Copper dropped in London on concern demand from China the world’s biggest user of the metal, may weaken. Nickel, lead, zinc and tin also declined.

Umicore SA tumbled 9.9 percent to 17.35 euros. The world’s largest precious-metals recycler posted an 85 percent slump in first-half profit and forecasting earnings won’t improve in the rest of the year.

Andritz AG retreated 3.4 percent to 31.50 euros. The Austrian maker of machines for the paper and steel industries, said second-quarter net income plummeted 83 percent to 6.9 million euros.

Peugeot Drops

PSA Peugeot Citroen slid 7.9 percent to 20.70 euros. Europe’s second-largest carmaker had its debt rating lowered to junk by Standard & Poor’s, which cited the company’s deteriorating profitability.

Konica retreated 10 percent to 891 yen. The company said yesterday after markets closed net income dropped 98 percent to 299 million yen ($3.1 million) for the three months ended June, from 17.6 billion yen a year earlier.

Singapore’s DBS slid 3.5 percent to S$12.84. The bank said net income fell 15 percent in the second quarter as non- performing loans climbed to 2.8 percent of total lending from 1.4 percent a year ago.

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U.K.’s FTSE 100 Index Retreats; RBS, Rio Tinto Lead Losses

By Alexis Xydias

Aug. 7 (Bloomberg) -- U.K. stocks fell, paring gains for the week. Royal Bank of Scotland Group Plc led declines after posting an unexpected first-half loss and saying impairments will remain “elevated.”

Rio Tinto Group and Kazakhmys Plc dropped as metals prices declined.

Britain’s benchmark FTSE 100 Index lost 53.68, or 1.1 percent, to 4,636.85 as of 12:13 p.m. in London, cutting this week’s advance to 0.6 percent. The FTSE All-Share Index declined 1.2 percent today and Ireland’s ISEQ Index decreased 1.5 percent.

The FTSE 100 has rebounded 32 percent since March 3 amid speculation a global recession is easing and as companies beat analysts’ earnings estimates. Paul Tudor Jones, who runs the $10.8-billion hedge-fund firm Tudor Investment Corp., wrote in a note to investors Aug. 3 that equity markets may pare gains, saying that “impressive counter-trend rallies are a feature, not an oddity, of secular bear markets.”

RBS slid 12 percent to 46.80 pence, headed for the steepest drop since May 13, after gaining in the previous seven sessions. The bank controlled by the U.K. government posted a first-half loss of 1.04 billion pounds ($1.74 billion) as it set aside 7.52 billion pounds to cover bad loans. Analysts had predicted net income of 1.1 billion-pounds, according to the median of six estimates in a Bloomberg survey.

Impairments will remain at “elevated levels,” the Edinburgh-based bank said. Lloyds Banking Group Plc, the U.K. lender that acquired HBOS Plc in January, declined 6.8 percent to 97.58

Rio Tinto

Rio Tinto, the world’s third-largest mining company, retreated 4 percent to 2,395 pence. Kazakhmys, Kazakhstan’s biggest copper producer, lost 2.6 percent to 897 pence.

Copper for delivery in three months slid as much as 1.8 percent to $5,915 a metric ton in London on speculation recent gains have outpaced the recovery in global demand. Nickel, lead, zinc and aluminum prices also declined.

Rolls-Royce Group Plc fell 3 percent to 411.3 pence. The world’s second-biggest maker of aircraft engines was cut to “sell” from “neutral” at Goldman Sachs Group Inc.

To contact the reporter on this story: Alexis Xydias in London at axydias@bloomberg.net.

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Merrill Lynch Reverses Iron Ore Contract Price Call to 10% Gain

By Jesse Riseborough

Aug. 7 (Bloomberg) -- Iron ore contract prices may rise 10 percent next year on demand from China, said Bank of America Merrill Lynch, reversing its estimate of a 5 percent drop.

Steel mills may pay 106.6 cents a dry metric ton unit for Australian iron ore fines in the year starting April 1, Merrill Lynch said yesterday in a report. That compares with this year’s 96.9 cents and the bank’s previous forecast of 92.1 cents.

Cash prices for Australian ore delivered to China, the world’s biggest buyer, have risen 38 percent this year. China’s imports surged almost a third in the first half as the government’s 4 trillion yuan ($585 billion) stimulus program spurs mills to produce more steel for automobiles and buildings.

“Iron ore’s seaborne trade is recovering spectacularly from the steel market’s massive fourth quarter 2008 correction,” Merrill Lynch analysts led by Michael Jalonen and Tom Price said in the report. “2009 is a far better year than seaborne iron ore producers ever expected. We are now modest bulls on iron ore.”

Australia is the world’s largest exporter of the steelmaking ingredient. Rio Tinto Group, BHP Billiton Ltd. and Fortescue Metals Group Ltd. are the nation’s three biggest exporters respectively.

To contact the reporter on this story: Jesse Riseborough in Melbourne at jriseborough@bloomberg.net;

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Corn Heads for Weekly Drop as Brazil Lifts Crop Output Forecast

By Luzi Ann Javier

Aug. 7 (Bloomberg) -- Corn, poised for a weekly decline, slumped after Brazil, the world’s second-largest exporter of the grain, raised its output forecast. Wheat climbed.

Futures dropped as much as 2.4 percent after Brazil raised its estimate for this year’s corn harvest to 50.27 million metric tons this year from a July forecast of 49.45 million tons, as continued rains aided crops in Center-West states of Mato Grosso and Goias, the country’s Agriculture Ministry said yesterday.

“Any upward revision in production in Latin America will be negative for prices,” Toby Hassall, a research analyst at CWA Global Markets Pty. Ltd. said by phone from Sydney.

Corn for December delivery slumped as low as $3.3225 a bushel in after-hours electronic trading on the Chicago Board of Trade, and was at $3.36 a bushel at 1:10 p.m. Singapore time. The most-active contract is headed for a 3.9 percent weekly loss, the eighth in the past nine weeks.

Argentina, the world’s third-largest shipper of corn, may lift the restrictions on corn and wheat exports after meeting with exporters next week, as it seeks to encourage farmers to boost production of both crops.

The government will meet with Cargill Inc. and producers next week to discuss a new deal on farm exports, Cabinet Chief Anibal Fernandez said in Buenos Aires yesterday.

Wheat gained after a Japanese agriculture official said the government was considering boosting imports this fiscal year as wet weather threatens to cut output on the northern island of Hokkaido, the nation’s largest producing area.

Japanese Imports

Japan, Asia’s largest wheat importer, will probably import more than the 4.91 million tons planned in the year to March 31, Shirara Shiokawa,director at the grain trade division of the Ministry of Agriculture, Forestry and Fisheries, said yesterday in an interview.

Wheat for December delivery gained 0.4 percent to $5.305 a bushel at 1:05 p.m. Singapore time. The December contract, which closed 5.1 percent lower yesterday, is headed for a 4.5 percent loss this week.

Soybeans for November delivery, after the U.S. harvest, lost as much as 1 percent, to $10.20 a bushel, before trading at $10.28 at 1:02 p.m. Singapore time. The most-active contract is poised for a 4.7 percent gain this week, the second weekly rise.

In the U.S., the world’s biggest soybean grower and exporter, “we’re expecting very strong yields, but it is still uncertain as to how the crop will ultimately go,” CWA’s Hassall said. “Risks remain until you’ve got the product harvested,” he said.

To contact the reporter on this story: Luzi Ann Javier in Singapore at ljavier@bloomberg.net

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Oil Falls Before Jobs Data as Equities Reinforce Demand Concern

By Grant Smith

Aug. 7 (Bloomberg) -- Crude oil fell for a second day as falling equity markets reinforced concerns that a pickup in economic activity and demand for fuels will be slow in coming.

Oil declined before a U.S. Labor Department report forecast to show the unemployment rate climbed to a 26-year high. Crude oil inventories in the U.S. rose 1.67 million barrels to 349.5 million last week, 10 percent above the five-year average, an Energy Department report showed Aug. 5.

“We’ve hit a little bit of a ceiling,” said Tobias Merath, head of commodities research at Credit Suisse Group AG in Zurich. “The speed of the price surge has done some damage to the physical market. The likely path is consolidation in a broad band, with a drop to the mid-$60s before rebounding.”

Crude oil for September delivery on the New York Mercantile Exchange fell as much as $1.03, or 1.4 percent, to $70.91 a barrel in electronic trading. It was at $71.23 a barrel at 11:29 a.m. in London.

Oil has advanced 2.7 percent this week as U.S. equities increased and the dollar weakened, and is heading for its fourth weekly increase. Futures have gained 61 percent this year.

European and Asian stocks fell as results from Royal Bank of Scotland Group Plc and Konica Minolta Holdings Inc. spurred speculation that a five-month rally has outpaced the prospects for earnings.

U.S. employers probably cut 325,000 workers from payrolls in July after trimming 467,000 the prior month, according to the median of 82 estimates in a Bloomberg News survey. The unemployment rate is likely to have risen to 9.6 percent from 9.5 percent. The report is due at 8:30 a.m. in Washington.

‘Bullish Channel’

“Either the bulls are running out of steam in the Nymex crude oil pit or they are consolidating for a run back at $75,” Stephen Schork, president of consultant Schork Group Inc. in Villanova, Pennsylvania, said in a note to clients. The market is “entrenched in a well-defined bullish channel, rising supplies of the physical notwithstanding,” he said.

Brent crude oil for September settlement fell as much as 95 cents, or 1.3 percent, to $73.88 a barrel on London’s ICE Futures Europe exchange. It was at $74.31 at 11:28 a.m. in London, $3.08 higher than its New York equivalent.

U.S. stockpiles of distillate fuel, which includes heating oil and diesel, are 25 percent above the five-year average and gasoline inventories are 3 percent higher, according to the Energy Department. Fuel demand in the nation averaged 18.9 million barrels a day in the past four weeks, down 3.1 percent from a year earlier.

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

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Sugar Rises to Highest Since 1983 in London on Supply Shortfall

By M. Shankar

Aug. 7 (Bloomberg) -- White sugar rose to a record in London on concern that adverse weather in producing nations such as India will mean a shortfall in supply.

With the Indian monsoon 64 percent below normal for the week ended Aug. 5, prices at Vashi, the country’s biggest wholesale-sugar market, rose to a record. China, the third- largest sugar producer after Brazil and India, said it may see a deficit of 1.5 million metric tons next year, according to an official from the National Development and Reform Commission.

“I remain cautiously positive as the market already discounted most of the bad news,” said Mehdi Chaouky, a research analyst in London at Diapason Commodities Management LLP, which has $6.5 billion invested in commodities. “The weather pattern is amplifying the price move.”

White, or refined, sugar for October delivery rose $11.60, or 2.2 percent, to $530.50 a ton on the Liffe exchange by 12:06 p.m. in London. It earlier reached $530.80, the highest since the contract started trading in July 1983, according to the exchange. Sugar has advanced in 11 of the past 13 sessions.

Raw sugar for October delivery gained 2.2 percent to 20.23 cents a pound on ICE Futures U.S. in New York, the highest for a most-active contract since April 1981. While refined sugar is up 66 percent this year, raw sugar has surged 71 percent.

Global Deficit

India, the world’s biggest sugar consumer and second- largest producer, is expected to import 5 million tons in 2009- 10, compared with an estimate of about 2.7 million tons this year, researcher Sucres & Denrees Group said last week. The country has contracted to import 2.9 million tons of raw sugar so far this year, Farm Minister Sharad Pawar said yesterday.

The global shortfall is projected to be 4 million tons next year, compared with a deficit of 8 million tons this year, according to Sucres & Denrees.

Mexico set a sugar import quota of 393,000 tons until December, according to the Federal Diary, which published the quota yesterday. The country needs to buy sugar from overseas to cover a decline in domestic production.

Inadequate rains in July last year cut Indian cane yields, causing sugar output to halve and turning the country into a net buyer for the first time since the 2005-06 season. Production is expected to drop 44 percent to 14.7 million tons in the year ending Sept. 30, the Indian Sugar Mills Association has said.

“A large portion of the investing community has been playing the theme of decreased sugar cane output in India and the extension of duty free imports by the Indian government,” said Chaouky of Diapason.

Among other agricultural commodities trading on Liffe, robusta coffee for September delivery fell $26, or 1.7 percent, to $1,468 a ton. Cocoa for the same month rose 2 pounds to 1,747 pounds ($2,924) a ton.

To contact the reporter on this story: M. Shankar in London at mshankar@bloomberg.net

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El Nino to Lift Palm Oil, Sugar Prices, Deutsche Says

By Claire Leow

Aug. 7 (Bloomberg) -- Palm oil could average 2,300 ringgit ($657) a metric ton this year, 10 percent higher than a previous forecast, amid concerns that an El Nino may curb output as the weather pattern parches parts of Asia, Deutsche Bank AG said.

El Nino, which creates unusual weather in various parts of the world, may delay rains in Asia, the U.S. National Oceanic and Atmospheric Administration said on July 9. About 90 percent of global palm oil output comes from Indonesia and Malaysia.

Palm oil has advanced risen 37 percent this year after a drought in Argentina ravaged one-quarter of the soybean crop, boosting demand for rival palm oil. The tropical commodity has also gained on higher crude oil prices and on speculation that demand will increase as the global economy recovers.

“Less precipitation significantly affects production about nine months into the future,” Teoh Su-Yin, plantation analyst at Deutsche Bank in Kuala Lumpur, said by e-mail today. “In the near-term, it would negatively affect the bunch weight, leaving a lower oil extraction ratio but the main impact on the fresh fruit bunch yield will be in 2010.”

Indonesia may miss next year’s production target by as much as 20 percent if a severe El Nino develops, Achmad Manggabarani, director general of plantations at the Ministry of Agriculture, said July 21. The ministry had forecast output to gain 8 percent to 23.3 million tons next year before the El Nino warning.

Malaysia may see production shrink by as much as 16 percent next year if the weather event occurs, Plantation Industries and Commodities Minister Bernard Dompok, said July 16. Output may total a record 18.3 million tons this year.

Beating Forecast

Palm oil may reach 2,500 ringgit in 2010, 32 percent higher than a previous forecast, said Deutsche Bank’s Teoh. Futures had the biggest weekly jump in 18 weeks, gaining 6.9 percent. Sugar prices may also benefit from the weather event, the bank said.

El Nino’s impact for South America may be “pronounced,” worsening a shortfall of soybeans, Deutsche said today in a report led by Niklas Olausson and Xun-Ming Ip.

Soybeans are sown in October in Brazil and in November in Argentina, a time when El Nino “reaches maximum intensity,” resulting in heavy rains that damage crops, said the analysts. “Any shortfall in the harvest would be very bullish for soybean and palm oil prices,” it said.

The U.S., the largest grower of soybeans ahead of Brazil and Argentina, will release data on its crop next week.

“As exports and future export capacity has plummeted in South America, the U.S. crop needs to be good just to offset this in the global marketplace,” the report said.

Soybeans traded in Chicago have advanced 5.2 percent this year on concern a record crop in the U.S. would not be enough to compensate for losses in South America’s crop.

Asian Crops

The drought and flood-causing pattern would affect many other crops in Asia, including grains and soybeans in China, sugar in India, coconuts in the Philippines, coffee in Indonesia and Vietnam, rice in Thailand and its neighbors, the report said.

“El Nino would cause natural rubber yields to come under pressure in Southeast Asia, mitigating expectations of rising inventories,” the report said. “Sugar prices have already shot up on the back of last year’s poor crop in India, but the weak monsoon is raising new supply concerns for the world’s second largest producer.”

Sugar jumped to a 28-year high yesterday in New York as low monsoon rains in India threatens to damage cane crops and excess showers in Brazil curbed output. Rains in India were 25 percent below the 50-year average in the June 1-Aug. 5 period, the state weather bureau said yesterday.

To contact the reporter on this story: Claire Leow in Singapore at cleow@bloomberg.net

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Japanese Stocks Decline as Earnings Damp Rally Enthusiasm

By Patrick Rial and Toshiro Hasegawa

Aug. 7 (Bloomberg) -- Japanese stocks declined after slumping earnings at Konica Minolta Holdings Inc. and Kubota Corp. fueled concern a three-week rally made stocks too expensive relative to the outlook for profits.

Konica plunged 9.8 percent after the maker of printers and office equipment said earnings were almost wiped out, prompting Nomura Holdings Inc. to reduce its investment rating. Kubota, Japan’s largest maker of farm machinery, slumped 6.9 percent. Toyota Motor Corp., which gets more than a fourth of sales in North America, lost 2.9 percent. A report today is forecast to show U.S. joblessness climbed to the highest since 1983.

“We need to see more earnings revisions come through in order for the market to push much higher,” said Fujio Ando, a fund manager at Tokyo-based Chibagin Asset Management Co. “One could say stocks are fully priced already for the positive results we’ve had.”

The Nikkei 225 Stock Average declined 104.54, or 1 percent, to 10,283.55 at the 11 a.m. break in Tokyo. The broader Topix index retreated 1.2 percent to 946.09, with four times as many stocks falling as rising.

The Topix gained 12 percent from July 13 to yesterday as higher-than-estimated earnings outnumbered negative surprises by 2-to-1, according to data compiled by Bloomberg. Prices on the main board of the Tokyo Stock Exchange rose to 37 times estimated earnings, compared with an average of 27 times since 2003.

For the week, the Nikkei has lost 0.7 percent, while the Topix has declined 0.4 percent, breaking a three-week streak. In New York, the Standard & Poor’s 500 Index slipped 0.6 percent to 997.07 yesterday as JPMorgan Chase & Co. downgraded health-care stocks.

Konica, Ricoh, Kubota

Konica tumbled 9.8 percent to 894 yen, the steepest decline in the Nikkei 225. The company reported a 98 percent slide in net income yesterday. Nomura cut the stock to “neutral” from “buy,” saying falling prices for film used on panels and shrinking market share for color copiers have clouded the outlook for an earnings recovery.

Ricoh Co., Japan’s second-largest office-equipment maker, dropped 3.7 percent to 1,222 yen.

Kubota dropped 6.9 percent to 759 yen. The company, whose shares soared as much as 153 percent since Oct. 27, reported a 72 percent slide in first quarter net income.

“Many investors have been bullish on the stock, particularly due to growth prospects in Asia,” Shinji Kuroda, an analyst at Credit Suisse Group AG, wrote in a report. Given the weaker-than-estimated sales growth in China and Thailand, “we expect profit-taking opportunities ahead.”

Yamada Denki

Yamada Denki Co., Japan’s largest electronics retailer, sank 6.3 percent to 5,790 yen after JPMorgan Chase & Co. lowered the stock to “neutral” on the view that the shares now look expensive and the benefits of government subsidies are already reflected in the price. The company reported a 30 percent increase in first-quarter earnings yesterday.

Toyota, the world’s biggest automaker, dropped 2.9 percent to 4,010 yen, and smaller rival Honda Motor Co. lost 2.6 percent 3,030, the two heaviest drags on the Topix. Automakers declined even as the U.S. Congress gave final approval to an emergency measure adding $2 billion to the “cash-for-clunkers” auto- purchase program after the initial $1 billion was drained in less than a week.

The Labor Department’s report on unemployment, due today at 8:30 a.m. New York time, is forecast to show an increase to 9.6 percent, the highest level since 1983. The number of Americans filing claims for joblessness benefits last week fell to 550,000, less than economists predicted, according to data released yesterday, a sign some employers have stopped paring staff.

Daicel Chemical Industries Ltd., a Japanese maker of air- bag inflators, rose 3.2 percent to 578 yen after cost cuts helped the company boost its profit forecast.

To contact the reporter for this story: Patrick Rial in Tokyo at prial@bloomberg.net; Toshiro Hasegawa in Tokyo at thasegawa6@bloomberg.net.

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Asian Stocks Drop on Earnings Concern; Konica Minolta, DBS Fall

By Shani Raja

Aug. 7 (Bloomberg) -- Asian stocks fell for the third time in four days as lower earnings from Konica Minolta Holdings Inc. and DBS Group Holdings Ltd. fueled concern an equity rally in the past month had outpaced prospects for corporate profits.

Konica Minolta Holdings Inc., a maker of printers and office equipment, tumbled 9.8 percent as its first-quarter profit tumbled 98 percent. DBS, Southeast Asia’s biggest bank, dropped 3.3 percent in Singapore after saying non-performing loans increased. Orient Overseas (International) Ltd., Hong Kong’s biggest container line, slumped 6.1 percent after reporting its first loss in 10 years.

The MSCI Asia Pacific Index lost 0.8 percent to 111.62 as of 11:49 a.m. in Tokyo, taking its drop this week to 0.2 percent. The gauge has climbed 58 percent from a five-year low on March 9 on speculation the global economy is recovering.

“The market has run a bit ahead of the fundamentals,” said Rob Patterson, who helps manage $2.7 billion at Argo Investments Ltd. in Adelaide, Australia. “Things are getting less worse rather than better. Having said that, we’re hopeful we’ve passed the low point and that the world is becoming a better place.”

Japan’s Nikkei 225 Stock Average dropped 1 percent. Kubota Corp., Asia’s largest tractor maker, sank 6.9 percent on lower earnings. Hong Kong’s Hang Seng Index lost 0.7 percent, as China Construction Bank Corp. fell 2.5 percent after saying it will reduce lending. Australia’s S&P/ASX 200 Index declined 0.7 percent, led by BHP Billiton Ltd., the world’s largest mining company, which sank 2.5 percent on lower metal prices.

Jobless Rate

Futures on the Standard & Poor’s 500 Index lost 0.1 percent. The gauge slipped 0.6 percent yesterday as JPMorgan Chase & Co. downgraded health-care stocks.

Economists in a Bloomberg survey estimate that a Labor Department report today will show unemployment rose to 9.6 percent, the highest level since 1983. The number of Americans filing claims for jobless benefits last week fell more than economists predicted, according to data released yesterday, a sign some employers have stopped paring staff.

“The rate of deterioration in unemployment is likely to ease, but there are doubts we’ll see as much improvement as the market would like,” said Kazuhiro Takahashi, a general manager at Daiwa Securities SMBC in Tokyo.

Toyota Motor Corp., which gets 31 percent of its revenue in North America, lost 2.9 percent to 4,010 yen. Honda Motor Co., Japan’s No. 2 automaker, dropped 2.6 percent to 3,030 yen.

Slumping Earnings

Konica retreated 9.8 percent to 894 yen. The company said yesterday after markets closed net income dropped 98 percent to 299 million yen ($3.1 million) for the three months ended June, from 17.6 billion yen a year earlier. Nomura Holdings Inc. cut its rating on the stock to “neutral” from “buy.”

Kubota sank 6.9 percent to 759 yen after first-quarter operating profit tumbled 70 percent.

The MSCI Asia Pacific Index has rallied 25 percent this year, following a record 43 percent slide in 2008. The gauge extended gains in the past two weeks as companies reporting better-than-estimated earnings outnumbered those that disappointed by a ratio of two to one, according to data compiled by Bloomberg.

Singapore’s DBS fell 3.3 percent to S$12.86. The bank said net income fell 15 percent in the second quarter as non- performing loans climbed to 2.8 percent of total lending from 1.4 percent a year ago.

The rising bad debts was a “negative surprise,” Harsh Wardhan Modi, an analyst at JPMorgan Chase & Co., told Bloomberg Television. “That is something we need to understand more.”

Reduced Lending

In Hong Kong, Orient Overseas sank 6.1 percent to HK$42.40 after reporting a $231.8 million first-half net loss as world trade slumped and rising overcapacity pummeled cargo rates.

China Construction Bank fell 2.5 percent to HK$5.79. The company will reduce new lending by about 70 percent in the second half after a surge in loans in the first six months increased credit risk, President Zhang Jianguo said.

BHP declined 2.5 percent to A$37.84. Rio Tinto Group, the world’s third-largest mining company, fell 2.1 percent to A$60.63. Fortescue Metals Group Ltd. sank 1.5 percent to A$4.48.

A measure of six metals, including copper and aluminum, traded on the London Metal Exchange plunged 3.5 percent yesterday, the steepest drop since July 8. The Baltic Dry Index, a measure of shipping costs for commodities, tumbled 4.7 percent, a sixth consecutive decline.

Daicel Chemical Industries Ltd., a Japanese maker of air- bag inflators, climbed 3.2 percent to 578 yen after boosting its profit forecast as it slashed costs.

“Earnings outlooks are being lifted and there are still quite a few companies that investors have yet to properly price for the recovery,” said Daiwa’s Takahashi.

To contact the reporter for this story: Shani Raja in Sydney at sraja4@bloomberg.net.

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Australian Employers Unexpectedly Add 32,200 Workers

By Jacob Greber

Aug. 6 (Bloomberg) -- Australian employers unexpectedly added workers in July, driving up the nation’s currency on speculation the central bank will raise borrowing costs by the end of the year.

The number of people employed rose 32,200 from June, the statistics bureau said in Sydney today. The median estimate of 18 economists surveyed by Bloomberg was for a decline of 18,000. The jobless rate held at 5.8 percent.

Central bank Governor Glenn Stevens kept the benchmark interest rate at a half-century low of 3 percent this week for a fourth month and signaled his next move may be an increase, saying the economy is “stronger than expected a few months ago.” Woolworths Ltd., the nation’s largest retailer, is among companies hiring to meet demand amid rising consumer confidence.

“It’s another sign of resilience and employers holding on to labor, so it provides some confidence in the future,” said David de Garis, a senior economist at National Australia Bank Ltd. in Sydney. The next move for interest rates “will be up.”

The Australian dollar rose to 84.43 U.S. cents at 12:17 p.m. in Sydney, close to its highest in more than 10 months, from 84.26 cents just before the report was released. The two-year government bond yield jumped 5 basis points to 4.45 percent. A basis point is 0.01 percentage point.

Interest-rate contracts on the Sydney Futures Exchange show about an 80 percent chance the Reserve Bank of Australia will increase borrowing costs in November by a quarter percentage point.

Part-time Jobs

Part-time employment increased 48,200 and the number of full-time jobs dropped 16,000 in July, today’s report showed.

The bureau of statistics also released figures today for the first time measuring aggregate monthly hours worked, which fell 0.43 percent in July to 1.52 billion hours. Hours worked peaked in June 2008 at 1.55 billion hours, the report said.

“It’s clear that Australia’s economists need to spend more time on the road listening to businesses than crunching numbers in their ivory towers,” said Craig James, a senior economist at Commonwealth Bank of Australia. “Businesses have been consistently saying that they are not shedding staff, but rather cutting hours” and moving people to part-time jobs.

While steady in Australia, unemployment is rising around the world amid the deepest global recession since the Great Depression. Japan’s jobless rate reached a six-year high of 5.4 percent in June and the U.S. rate climbed to 9.5 percent, the worst since 1983. A report today showed New Zealand’s rate jumped in the second quarter to a nine-year high of 6 percent.

Economic Growth

Australia’s economy has so far outperformed most other developed nations, expanding 0.4 percent in the first quarter, as A$12 billion ($10.1 billion) in government handouts to households boosted consumer spending, which accounts for about 60 percent of gross domestic product. The central bank also cut its benchmark interest rate by a record 4.25 percentage points between September and April.

Rising consumer and business confidence “suggests the risk of a severe contraction in the Australian economy has abated,” Governor Stevens said on Aug. 4.

A Westpac Banking Corp. index of consumer confidence jumped in July to the highest level in 19 months.

Woolworths said last month that sales in the three months ended June 28 rose 5.4 percent on demand at supermarkets.

Still, there are signs that interest-rate cuts and government spending are having less impact. Retail sales unexpectedly tumbled 1.4 percent in June, the first drop since February, when Prime Minister Kevin Rudd announced a plan to distribute individual cash payments of as much as A$900 to low and medium income earners.

Services Industry

A separate report published yesterday showed Australia’s services industry contracted in July, after expanding in June for the first time in 15 months, as households cut spending at hotels, cafes and restaurants.

Today’s figures show the “economic stimulus is working to support jobs,” Deputy Prime Minister Julia Gillard told reporters in Melbourne. Still, it’s “far too soon to contemplate pulling the rug out from the Australian economy” by cutting government spending.

Mark McInnes, chief executive officer of David Jones Ltd., the nation’s second-biggest department-store chain, said yesterday while there was a positive turnaround in trading during the June quarter, “there is still some uncertainty in relation to the future outlook.”

Retailers such as David Jones employ more than one in ten Australian workers, according to government figures.

The participation rate, which measures the labor force as a percentage of the population aged over 15, held at 65.3 percent, today’s report showed.

Labor-market resilience “may reflect greater flexibility compared with the last downturn in 2001 and the recession of the early 1990s,” said Su-Lin Ong, senior economist at RBC Capital Markets Ltd. in Sydney.

To contact the reporter for this story: Jacob Greber in Sydney at jgreber@bloomberg.net

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