Crude Oil Falls From One-Year to High as Dollar Pares Decline

By Rachel Graham and Christian Schmollinger

Oct. 20 (Bloomberg) -- Crude oil fell from a one-year high as the dollar pared losses against the euro and OPEC said it wouldn’t be comfortable with oil at $100.

Oil traded above $80 as the dollar index, which measures the U.S. currency against six major currencies, fell to its lowest since August 2008, boosting the appeal of commodities as a currency hedge. OPEC Secretary-General Abdalla El-Badri said the market is well-supplied with oil.

“We’re seeing weakness in the dollar,” Hannes Loacker, an analyst at Raiffeisen Zentralbank Oesterreich, said by phone from Vienna. “I would be skeptical of a $100 price based on the fundamental picture.”

Crude oil for November delivery fell as much as 55 cents, or 0.7 percent, to $79.06 a barrel in electronic trading on the New York Mercantile Exchange. It traded at $79.17 a barrel at 10:05 a.m. London time.

Earlier, prices rose as much as 44 cents, or 0.6 percent, to $80.05 a barrel in electronic trading on the New York Mercantile Exchange, the first time the front-month contract has traded above $80 since Oct. 14, 2008.

The November contract expires today. The more actively traded December future was at $79.63 a barrel, down 33 cents.

Prices have gained 78 percent this year, accelerating its climb as a recovery in stock markets emboldened investors and the sliding dollar prompted buying of commodities.

The U.S. currency traded as low as $1.4994 per euro, the weakest since August 2008. It then recovered to $1.4959.

‘No Shortage’

El-Badri said he doesn’t expect prices to reach three figures in the near future as there is “no shortage of oil supply.” The rally to more than $80 a barrel was driven by higher equities, the sliding dollar and speculation, he told reporters in London today.

The 125 million barrels of crude oil and oil products including diesel currently in floating storage is a concern for OPEC, he said.

“When we see that floating storage eliminated it means demand is coming,” El-Badri said. “We are seeing an $80 oil price that is a little bit high.”

U.S. gasoline and distillate fuel inventories probably declined for a second week, according to the median of seven estimates from analysts surveyed by Bloomberg News before an Energy Department report tomorrow.

Gasoline stockpiles are expected to have fallen 1.5 million barrels in the week ended Oct. 16. Oil advanced last week after the department posted an unexpected decline in supplies as refineries idled units. The 5.23 million-barrel drawdown was the steepest since Hurricanes Gustav and Ike shut refineries representing about a fifth of U.S. capacity in September 2008.

Heating Oil

Stockpiles of distillate fuels, a category that includes heating oil and diesel, declined 1.5 million barrels from 170.7 million, the survey showed. Crude oil inventories probably increased 1.5 million barrels last week from 337.8 million barrels.

The Energy Department is scheduled to release its weekly report tomorrow at 10:30 a.m. in Washington. The industry-funded American Petroleum Institute will put out its data today.

Brent crude oil for December settlement rose as much as 41 cents, or 0.5 percent, to $78.18 a barrel on the London-based ICE Futures Europe exchange. It was at $77.43 a barrel at 10:06 a.m. London time.

To contact the reporters on this story: Rachel Graham in London rgraham13@bloomberg.net; Christian Schmollinger in Singapore at christian.s@bloomberg.net.

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Europe Finance Chiefs Back U.S. Strong-Dollar Stance

By Brian Swint and Rainer Buergin

Oct. 20 (Bloomberg) -- European finance chiefs expressed “worries” about foreign-exchange movements and backed the U.S. administration’s stated preference for a strong dollar after the euro climbed to a 14-month high against the American currency.

“Excessive volatility” in currency rates is “bad for economic development,” European Central Bank President Jean- Claude Trichet said in an unscheduled appearance at a press conference late yesterday after a meeting of euro-area finance ministers in Luxembourg. “It’s a problem which worries us,” said Luxembourg’s Jean-Claude Juncker, who led the talks.

The euro has gained almost 20 percent against the dollar since February, making the region’s exports more expensive to overseas buyers and threatening the recovery from the worst recession since World War II. U.S. Treasury Secretary Timothy Geithner said on Oct. 3 that it is “very important” for the U.S. to have a strong dollar.

“We all note with considerable attention the statements made by American authorities as regards their support in favor of a strong dollar,” Trichet told journalists in Luxembourg.

“We want a strong dollar; we need a strong dollar,” French Finance Minister Christine Lagarde said after the talks. “We must remain disciplined” on the message, she said.

‘Strong Level’

“The euro is at a strong level and they don’t want to see it rise any further,” said Grant Lewis, an economist at Daiwa Securities SMBC Europe Ltd. and a former U.K. Treasury official. “This is a shot across the bow, but I’m not sure it will be effective. It’s very difficult to turn the tide.”

The dollar traded at $1.4973 per euro as of 8:41 a.m. in London, compared with $1.4965 in New York yesterday, after earlier declining to $1.4981, the weakest since August 2008.

“We reaffirm a shared interest with our partners of the major floating currencies that we have a solid and stable currency system,” Trichet said. “The eurogroup and the ECB will echo this position, which has been recently repeated by the American authorities.”

Trichet and Juncker will travel to China with European Union Monetary Affairs Commissioner Joaquin Almunia before the end of the year to discuss currencies, Juncker said. The trio went to Beijing two years ago to push Chinese leaders for a faster “pace of appreciation” of the yuan, a plea that was rebuffed at the time by Premier Wen Jiabao.

Chinese Counterparts

Juncker, who serves as Luxembourg’s Treasury minister and premier, yesterday said it was too early to talk about what they would say to their Chinese counterparts this time. “We’re not pre-announcing a message,” said Juncker, who serves as Luxembourg’s Treasury minister and prime minister.

Juncker reiterated that the European economy is still too weak to remove record-low interest rates and government spending programs. Governments have committed billions of euros to boost the economy, while the ECB is lending banks as much money as they want for up to a year and purchasing covered bonds in an effort to get credit flowing again.

“There are clear signs of recovery, but there’s still a balance between the positive and negative signs,” Juncker said. If new European Commission forecasts due next month show a “genuine recovery,” then stimulus measures should “be gradually withdrawn” starting in 2011, he said.

The euro-area economy barely contracted in the second quarter as Germany and France returned to growth. The region’s gross domestic product will expand 0.3 percent in 2010, the International Monetary Fund forecast on Oct. 1, as it trimmed its estimate for this year’s contraction to 4.2 percent from the 4.8 percent it projected in July.

Climate Change

The euro-area finance ministers will be joined today by their colleagues from the rest of the 27 EU nations. Swedish Finance Minister Anders Borg, who is leading today’s discussions, said he hopes to make progress on financial- supervision plans and proposals for financing measures to combat climate change.

“We need a broad political agreement on the macro supervisory structure,” Borg told reporters as he arrived for the talks. “We’ve been in a period of very difficult financial turmoil and obviously we need to strengthen the traffic-police role in this situation.”

Borg also said he sees “some of the contours” of an accord on climate-change funding. The U.S., China, the EU and 14 other countries have moved closer to an agreement on the need for more climate aid for developing nations, on how that money will be managed and on how commitments by developed and developing countries will be reflected in an international agreement, U.K. Energy Secretary Ed Miliband said after meetings yesterday in London.

400 Tractors

The euro-area ministers’ meeting yesterday was delayed and then displaced by farmers demonstrating against agricultural policies. The meeting was moved to a nearby chateau after at least 1,500 farmers and about 400 tractors marched through Luxembourg’s streets to the conference center where the officials normally meet.

The protests were aimed at a meeting of agriculture ministers that took place at the same venue before the finance chiefs were scheduled to meet. The agriculture officials, whose meeting wasn’t disrupted, agreed to extend intervention buying of butter and skimmed-milk powder until the end of February to bolster milk prices.

To contact the reporters on this story: Brian Swint in London at bswint@bloomberg.net; Rainer Buergin in Luxembourg at rbuergin1@bloomberg.net

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OPEC Isn’t Comfortable With Oil Going Back to $100

By Grant Smith

Oct. 20 (Bloomberg) -- The Organization of Petroleum Exporting Countries isn’t comfortable with oil prices returning to $100 a barrel, said the group’s secretary-general, Abdalla El-Badri.

El-Badri said he doesn’t expect prices to reach three figures in the near future as there is “no shortage of oil supply.” The rally to a one-year high above $80 a barrel today is driven by higher equities, the sliding dollar and speculation, he told reporters today.

OPEC, responsible for about 40 percent of the world’s crude supply, next meets on Dec. 22 in Luanda, Angola. The group is concerned about the 125 million barrels of crude oil and fuel that remains in floating storage, El-Badri said, adding that it’s too early to say what should happen at the next summit.

“When we see that floating storage eliminated it means demand is coming,” El-Badri said in London, where he’s attending the Oil & Money conference. “We are seeing an $80 oil price that is a little bit high.”

Crude oil for November delivery rose as much as 44 cents, or 0.6 percent, to $80.05 a barrel in electronic trading on the New York Mercantile Exchange, the first time the front-month contract has traded above $80 since Oct. 14, 2008.

OPEC has 6 million to 7 million barrel of spare oil production capacity “that can be put into the market straight away,” El Badri said in a speech at the conference.

‘Upward Drift’

Crude demand is recovering slightly as the economy picks up, and oil prices are likely to remain in their current range “with a slight upward drift,” BP Plc Chief Economist Christof Ruehl said in an interview on Bloomberg Television today.

El-Badri said OPEC members should stick more closely to quotas. Compliance slipped to 62 percent in September, according to data given in OPEC’s last monthly report.

The group supports moves in the U.S. to place limits in the positions so-called speculators can take in oil markets, El- Badri said. “We hope this will be under control very soon.”

Seven of the 35 oil projects delayed in member countries after oil slumped last year have now been revived because of the rally in prices, he said, adding the group is working on 150 projects to boost spare capacity

The world needs more investment in oil production to meet future demand for energy, International Energy Agency Executive Director Nobuo Tanaka said at the conference. “We need oil,” he said.

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

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U.K. Pound Extends Decline Against Euro to Trade at 91.38 Pence

By Morwenna Coniam

Oct. 20 (Bloomberg) -- The pound extended its decline against the euro to trade 0.3 percent lower at 91.38 pence as of 8:16 a.m. in London.

The British currency fell 0.2 percent versus the dollar to $1.6388.

To contact the reporter on this story: Morwenna Coniam in London at mconiam@bloomberg.net

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Aussie, Loonie to Rise to U.S. Dollar Parity, Citigroup Says

By Garfield Reynolds

Oct. 20 (Bloomberg) -- The Australian and Canadian dollars are likely to rise to parity against the U.S. currency, Citigroup said in a note to clients.

The greenback is weakening because foreign central banks are diversifying their reserves and U.S. investors are buying high-yielding emerging market assets, the bank said.

The euro will extend gains against the U.S. dollar and the British pound, and may reach parity against the U.K. currency in six to 12 months, Citigroup said.

To contact the reporter on this story: Garfield Reynolds in Sydney at greynolds1@bloomberg.net

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Brazil’s ‘Desperate’ Tax Won’t Stem Currency’s Rise, Cunha Says

By Andre Soliani and Camila Fontana

Oct. 20 (Bloomberg) -- Brazil’s “desperate” measure to tax foreigners’ investments in the nation’s equities and bonds is unlikely to succeed in stemming the currency’s world-beating rally, a former central banker said.

The government announced yesterday it will impose a 2 percent tax on foreign purchases of fixed-income securities and stocks starting today. The levy is higher than a previous 1.5 percent tax scrapped a year ago amid the worldwide credit crunch and one that didn’t cover equities.

Finance Minister Guido Mantega said yesterday the measure seeks to curb gains in the real, which has strengthened the most of any major currency this year on the back of higher commodity prices, a credit rating upgrade from Moody’s Investors Service and forecasts for faster economic growth. A stronger currency makes the country’s exports more expensive in dollar terms, hurting companies that rely on making sales abroad.

“It’s a desperate move,” said Paulo Vieira da Cunha, the director for international affairs at Brazil’s central bank from April 2006 to January 2008 and now a partner at asset management firm Tandem Global Partners LLC in New York. “This kind of measure does not alter the exchange rate trend” because investors will figure out ways to bypass the tax, he said.

Mantega said the move will slow the real’s appreciation by curbing dollar inflows from speculative investment and prevent the creation of bubbles in Brazilian markets. Mantega said that while the levy will dissuade investors seeking short-term gains, it won’t deter investors seeking long-term returns.

“These are to prevent excesses,” he told reporters.

Currency Outlook

While the tax may help keep the real at about 1.7 per U.S. dollar in the next few months, it won’t be able to deter the currency’s appreciation in the long term as investors create new strategies to buy Brazilian assets from abroad to bypass the levy, said Antonio Madeira, an economist at MCM Consultores Associados Ltd.

“These kinds of taxes provide some room for maneuver, but it’s not very much,” Nicolas Eyzaguirre, the International Monetary Fund’s Director for the Western Hemisphere, said by e- mail. “With today’s financial engineering, it’s not very difficult to disguise pure financial flows as trade flows or even foreign direct investment. In fact, the experience in a number of countries is that, over time, the system becomes rather porous.”

Still Bullish

Nick Chamie, head of emerging markets research at RBC Capital Markets, said he remains “bullish” on the real in the “medium term” even after cutting the currency to “underweight” from “overweight.”

“There are very good prospects for growth in Brazil, it is going to be a major destination for foreign direct investment,” Chamie said. “We downgraded it tactically. On a short-term basis, it will underperform emerging-market currencies.”

He expects the real to strengthen to 1.65 per U.S. dollar by December 2010. The currency weakened 0.5 percent to 1.7177 yesterday, and has gained 35 percent this year.

The new tax will make it more expensive for Brazilian companies to raise financing because investors will demand a steeper yield to compensate for the additional cost, said Pablo Cisilino, who manages $10 billion in emerging-market debt at Stone Harbor Investment Partners in New York.

“It makes life more expensive for everyone,” he said.

Debt Costs

Latin America’s biggest economy has rebounded from its first recession since 2003, powered by local demand. Industrial production expanded in the past eight months, companies resumed hiring and retail sales have returned to pre-crisis levels.

Gross domestic product, after contracting in the last quarter of 2008 and first quarter this year, expanded 1.9 percent in the April-to-June period from the previous quarter, beating analysts’ forecasts for a 1.7 percent rise. Mantega has said the economy can grow 5 percent next year.

The tax on bonds will also force the government to pay higher yields on its debt emissions, said Zeina Latif, chief economist at ING Bank NV in Sao Paulo.

“It seems the upper end of the rate-futures curve reacted a bit to rumors on the tax,” Latif said.

The yield gap between Brazil’s real-denominated bonds maturing in January 2010 and July 2011 has widened to 2.66 percentage points from 1.87 points in July, according to data compiled by Bloomberg.

A yield curve is a chart that plots the yields of bonds of the same quality, but different maturities. It steepens when yields on shorter-maturity notes fall, those on longer-dated bonds rise, or both happen simultaneously.

‘Alert Investors’

The currency is gaining even as the central bank buys dollars daily in a bid to stem the advance, a program that began May 8. Brazilian central bank President Henrique Meirelles said in an interview last week that emerging-market currencies that have been appreciating as economies recover from a global recession may become volatile as markets overprice assets.

Central banks need to “alert investors and markets of the risks of exaggeration in the formation of prices, which can lead to future corrections and create unnecessary volatility,” Meirelles said in the interview in New York.

The Brazilian stock market had more than 17 billion reais of net inflows from international investors this year through September, according to the Web site of BM&FBovespa SA, owner of the nation’s stock exchange. The benchmark Bovespa index has surged 79 percent in 2009 and closed yesterday at the highest level in 16 months.

“This tax has come and gone and been raised and lowered in the past without any real measurable effect,” Kenneth Fisher, who manages about $28 billion as chief executive officer of Fisher Investments Inc. in Woodside, California, wrote in an e- mail. “It is a negative but not a huge one.”

To contact the reporters on this story: Andre Soliani in Brasilia at asoliani@bloomberg.net; Camila Fontana Correa in Sao Paulo at cfontana@bloomberg.net.

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Dollar May Test One-Month High Versus Yen: Technical Analysis

By Yasuhiko Seki and Hiroko Komiya

Oct. 20 (Bloomberg) -- The dollar may extend its advance against Japan’s currency to reach the strongest level in a month, Bank of Tokyo-Mitsubishi UFJ Ltd. said, citing trading patterns.

The greenback rose above its four-week moving average last week, signaling the U.S. currency will make further headway, said Masashi Hashimoto, a senior analyst in Tokyo at the unit of Japan’s biggest publicly traded bank. Momentum indicators, such as the stochastic oscillator, also show buy signals, he said.

“It may be interesting to follow the short-term change in the technical trend and test the upside of the dollar,” Hashimoto said. “In that case, the target is mid-92 yen, or the highest level since September.”

The dollar traded at 90.71 yen as of 7:28 a.m. in Tokyo, from 90.55 yen yesterday in New York. The dollar reached 92.53 yen on Sept. 21. The currency’s four-week moving average stood at 90.03 yen at the end of last week.

“While near-term prospects for the dollar have improved, the mid- and long-term outlooks are still negative,” Hashimoto said. “The currency’s gains will slow as it moves toward the 52-week moving average of 94.54 yen, which holds the key to ascertaining the long-term outlook.”

In technical analysis, investors and analysts study charts of trading patterns and prices to forecast changes in a security, commodity, currency or index. A stochastic oscillator chart measures the closing price of a security relative to its highs and lows during a particular period to try to predict whether it will rise or fall.

To contact the reporters on this story: Yasuhiko Seki in Tokyo at yseki5@bloomberg.net; Hiroko Komiya in Tokyo at Hkomiya1@bloomberg.net

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Yen Rises as Fujii Repeats Reluctance to Stem Currency’s Gains

By Lukanyo Mnyanda and Yasuhiko Seki

Oct. 20 (Bloomberg) -- The yen rose against the dollar and the euro after Japanese Finance Minister Hirohisa Fujii repeated his reluctance to intervene in the foreign-exchange markets to halt the currency’s gains.

Japan’s currency traded at its strongest level in three days against its U.S. counterpart. The U.K. pound snapped five days of gains versus the dollar after Qatar Holding LLC said it plans to sell more than 379 million shares of Barclays Plc. The Australian and New Zealand dollars dropped from the strongest levels in at least 14 months as technical indicators indicated their gains may have been exaggerated.

Japanese officials are not “entirely clear on how they should reign in the market and that’s really played out in terms of the direction of the yen,” said Elizabeth Gregory, a markets strategist in Geneva at ACM Advanced Currency Markets, which handles about $150 billion of foreign-exchange trades a month. “The commentary has been a bit muddled. They started off by saying it wouldn’t be a bad thing to have a strong yen and that caused the market to fly off in one direction.”

The yen strengthened to 90.31 per dollar as of 9:43 a.m. in London, from 90.55 in New York yesterday, and to 135.07 per euro, from 135.51. The euro was at $1.4956, from $1.4965. It touched $1.4994 earlier, the strongest level since August 2008.

The yen’s strength is due to a weakening dollar, stemming from the Federal Reserve’s “easy” monetary policy, Fujii said today at the Japan National Press Club in Tokyo. The devaluation of currencies can hurt the global economy, he said.

Pound’s Decline

The pound fell as U.K. banking shares slid after Qatar Holding, the Doha-based arm of the Qatar Investment Authority, said it is halving its stake in Barclays, Britain’s second- largest lender. The U.K. currency lost 0.2 percent to $1.6392 and declined for the first time since Oct. 14 against the euro to trade at 91.28 pence, from 91.10 pence yesterday.

The euro stayed within a half a cent of trading at $1.50 for the first time in 14 months before reports this week that economists said will show the U.S. housing market and German business confidence improved.

Australia’s dollar lost 0.5 percent to 92.50 U.S. cents, after earlier rising to 93.11 cents, the highest level since August 2008. New Zealand’s dollar also declined by 0.5 percent and was at 75.31 cents, retreating from as high as 75.76 cents, the strongest level since July 2008.

Aussie, Kiwi

The so-called Aussie’s 14-day relative strength index, or RSI, has been above 70 for the past seven days, a level that typically signals a price reversal may occur. The kiwi’s RSI climbed above 70 yesterday.

The currencies rose earlier after Reserve Bank of Australia officials said in minutes of their Oct. 6 meeting released today in Sydney that a “very expansionary setting of policy was no longer necessary, and possibly imprudent.” The risks in waiting to raise borrowing costs “had increased,” policy makers said.

Central bank Governor Glenn Stevens and his board raised the key interest rated by a quarter percentage point to 3.25 percent at the meeting and signaled they may raise rates again as soon as next month.

Benchmark interest rates of 0.1 percent in Japan and as low as zero in the U.S. make the yen and dollar favorite funding currencies for so-called carry trades, in which investors borrow where interest rates are relatively low and buy assets in nations where returns are higher. The risk in such trades is that currency-market moves can erase profits.

Dollar’s Drop

The Dollar Index, which IntercontinentalExchange Inc. uses to track the currency against the yen, euro, Swiss franc, pound, Swedish krona and Canadian dollar, dropped for a second day, sliding 0.3 percent to 75.266, the lowest level in 14 months.

U.S. housing starts rose to an annual rate of 610,000 in September from 598,000 in August, according to a Bloomberg News survey of economists before the Commerce Department report today. The Ifo institute’s business climate index, based on a survey of 7,000 executives, climbed to 92 in October from 91.3 the previous month, according to a separate survey. The Munich- based institute will release the report Oct. 23.

Demand for the dollar also weakened after the Fed signaled in a statement yesterday that it will keep borrowing costs down while assessing ways to drain money from the banking system.

The Fed said it’s working with market participants to assess the use of reverse repurchase agreements to withdraw some of the record amounts of cash it added to the financial system.

“This work is a matter of prudent advance planning by the Federal Reserve, and no inference should be drawn about the timing of monetary-policy tightening,” the statement said.

Trichet on Dollar

Gains in the euro were limited on speculation the 16-nation region’s finance ministers will reiterate concern about the currency’s recent strength at a two-day meeting ending today.

“Excessive volatility” in currency rates is “bad for economic development,” European Central Bank President Jean- Claude Trichet said in an unscheduled appearance at a press conference late yesterday. “It’s a problem which worries us,” said Luxembourg’s Jean-Claude Juncker, who led the talks.

“Policy makers may express worries that the euro is too strong, especially against China’s renminbi,” said Tsutomu Soma, a bond and currency dealer at Okasan Securities Co. Ltd. in Tokyo. “Further euro appreciation will likely hurt the euro- zone’s exports more.”

The euro has gained 16 percent against the dollar and the renminbi, or yuan, in the past six months, making the region’s exports more expensive to overseas buyers and threatening the recovery from the worst recession since World War II.

To contact the reporters on this story: Lukanyo Mnyanda in London at lmnyanda@bloomberg.net; Yasuhiko Seki in Tokyo at yseki5@bloomberg.net

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Vietnam Expects to Sign Philippine Rice Contracts After Storms

By Nguyen Dieu Tu Uyen

Oct. 20 (Bloomberg) -- Vietnam expects to start signing rice-export contracts with the Philippines earlier than usual this year after storms damaged harvests in the world’s largest buyer, boosting prices for the staple.

Agreements for 250,000 metric tons will be signed from the end of this month, about two months earlier than usual, according a statement posted late yesterday on the Vietnamese government’s Web site. Vietnam is the world’s second-largest shipper after Thailand.

The Philippines has advanced tenders for next-year supplies after the storms cut output, bolstering futures in Chicago. The National Food Authority will hold a tender for 250,000 tons on Nov. 4 after initially planning the purchase for Oct. 30.

The Philippine purchases will boost the price of Vietnam’s 25 percent broken-grain variety, the most common type bought by the nation, the government statement said, without giving a precise forecast. Philippine imports in 2010 from all states may gain 13 percent from about 1.8 million tons this year, it said.

Vietnamese exporters have contracted to ship 6 million tons of rice so far this year, the statement said, citing the Vietnam Food Association. Exporters have shipped 5 million tons in the first nine months, according to government figures.

Shipments to African countries reached 1.4 million tons between January and September, 98 percent more than a year earlier, the statement said. Exports to the Middle East rose 65 percent to 250,000 tons in the same period, it said.

To contact the reporter on this story: Nguyen Dieu Tu Uyen in Hanoi at uyen1@bloomberg.net

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Wall Street 40% Bonus Rise Feeds Spending on $43 Steak, Co-ops

By Martin Z. Braun

Oct. 20 (Bloomberg) -- A 40 percent jump in Wall Street bonuses this year may bring relief to New York City and Albany as the state and its biggest metropolis struggle with a combined $14 billion in budget deficits this fiscal year and next.

New York investment houses will dole out $26 billion in bonus checks by the end of March, said Alan Johnson, president of compensation consultant Johnson Associates Inc. The money will probably boost sales of multimillion-dollar co-op apartments and generate extra income-tax revenue for state and city governments.

“I don’t think this is going to make everybody think, ‘Oh, good times are here again,’ but it may ease things a bit,” said Lawrence White, professor of economics at New York University’s Leonard N. Stern School of Business.

Before the financial meltdown slammed bank earnings and the Standard & Poor’s 500 Index of U.S. stocks dropped 38 percent last year, Wall Street’s compensation and corporate profits provided 20 percent of New York state tax revenue and 9 percent of the city’s taxes. New York banks lost $42.6 billion in 2008 and shed 30,000 jobs, according to the city’s Office of Management and Budget.

The city’s unemployment rate is 10.3 percent, the most since 1993, after the private sector cut 96,600 jobs since employment peaked in August 2008.

Bonuses in 2008 fell 44 percent from the prior year, to $18.4 billion, said New York state Comptroller Thomas DiNapoli. The reduction cost the state $1 billion in personal income tax revenue and New York City $275 million, he said. State personal income tax collections in the current fiscal year’s first six months declined $4.4 billion, or 21.6 percent, from the same period a year earlier, DiNapoli’s September cash report said.

Too Soon

It’s too soon to estimate the impact of bigger bonuses, said DiNapoli spokesman Olayinka Fadahunsi and Mark LaVorgna, a spokesman for New York Mayor Michael Bloomberg. New York City will update its financial plan next month.

“New York was ground zero of this crisis,” Governor David Paterson said last week, announcing $5 billion in spending cuts and one-time revenue measures, including a tax-amnesty program, to preserve the state’s credit rating of Aa3 from Moody’s Investors Service and AA from Standard & Poor’s, three and two levels from the top, respectively.

This year, Wall Street’s banks are set to pay near-record bonuses after the U.S. injected $700 billion into financial- services companies, guaranteed their debt and lowered the Federal Reserve’s benchmark interest rate to almost zero. The number of Wall Street competitors declined after Lehman Brothers Holdings Inc. collapsed, Bear Stearns Cos. was bought by JPMorgan Chase & Co. and Merrill Lynch & Co. was taken over by Bank of America Corp.

Up 46 Percent

Goldman Sachs Group Inc. said Oct. 15 it had set aside $16.7 billion for compensation in 2009’s first three quarters, or $527,192 per worker, up 46 percent from the same period a year earlier and just under the record $16.9 billion set in 2007’s first nine months. JPMorgan set aside $353,834 per investment-bank employee, up from $210,854 last year.

Americans have a “limited tolerance” for Wall Street bonuses, said David Axelrod, a senior adviser to President Barack Obama, on ABC’s “This Week” on Oct. 18. “On the same day that you saw stories about these bonuses, you saw a story about how wages are at a 19-year low,” Axelrod said.

After Obama’s administration proposed capping executive pay at companies that accept government rescue funds, Mayor Bloomberg described bonuses as important to New York’s economy.

‘Enormous Amount’

“They may be an enormous amount of money for one person, but they are how our people in the city in all industries get paid, whether you drive a cab, work in a restaurant, work in a store, whether you are a municipal employee,” Bloomberg said Feb. 5 at City Hall.

“All of this gets filtered down through our economy,” he said. “No matter what you think about the propriety of any individual person’s bonus, we want companies in the city, and we are dependent on Wall Street finance, to do well.” The mayor is the founder and majority owner of Bloomberg LP, parent of Bloomberg News.

“Certainly, it’s good news for the city if Wall Street salaries and bonuses continue to be high,” said Doug Turetsky, a spokesman for New York City’s Independent Budget Office.

Limited Impact

Bonus increases will have a limited impact on revenue, said Matt Anderson, a spokesman for New York state’s Division of Budget. Many payments come in stock that isn’t taxed immediately, and companies that disappeared in the crisis won’t be paying any bonuses at all, he said.

“While Wall Street bonuses are an important component of state revenue, they are not the only component,” Anderson said in an e-mail. “We continue to see substantial declines in tax collections across the entire budget. There is little prospect, if any, for a rebound in receipts by the end of the fiscal year that would remove the need for difficult deficit reduction actions.”

The number of Manhattan apartment sales increased 46 percent in the third quarter from the previous period, the biggest such gain since 1996, according to an Oct. 2 report from Miller Samuel Inc., a New York appraiser. The median price of a luxury apartment in Manhattan in the third quarter was $3.9 million, up from $3.66 million.

Some homes are selling for more than their listing price.

Madoff’s Home

The former Montauk, New York, home of Bernard Madoff, who is serving a 150-year prison sentence for running the biggest Ponzi scheme in history out of his investment firm, sold for $9.41 million, the U.S. Marshals Service said last week. It had been listed for $8.75 million. Home prices in the Hamptons rose 4.7 percent in the third quarter amid a surge in sales of properties from $2 million to $5 million.

Public anger over Wall Street bonuses, and the need to rebuild savings and pay down debt, may limit how much bankers and traders spend once they get their bonuses, said Charlie Attias, a senior vice president at Corcoran Group, a New York real estate brokerage.

“In 2007, we really saw people who were very confident, who knew that they will make a certain amount of money and it will not stop,” Attias said. “I think they are very cautious right now.” Delmonico’s, the landmark steakhouse a few blocks from the New York Stock Exchange, has seen traffic pick up and its catering business improve as firms start to take clients out in bigger groups, said managing partner Dennis Turcinovic, 31, after overseeing a lunch for 150 people last week.

The restaurant, which sells prime New York strip for $43, lost about 20 percent of its business after Lehman Brothers’ bankruptcy last year.

“If anybody does well on Wall Street, they come here and they spend their money,” Turcinovic said. “Some people come in and spend an astronomical amount of money.”

For Related News and Information:

To contact the reporters on this story: Martin Z. Braun in New York at mbraun6@bloomberg.net.

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Corn Climbs to Three-Month High as Rain Delays Harvest in U.S.

By Jae Hur

Oct. 20 (Bloomberg) -- Corn advanced to a three-month high as rains delayed the U.S. harvests and cold weather slowed crop growth. Wheat also climbed for a second day, while soybeans pared yesterday’s gain.

About 17 percent of the corn crop was collected by Oct. 18, compared with 28 percent a year earlier, the U.S. Department of Agriculture said yesterday. The average harvest for this time in the season was about 46 percent the past five years, USDA data indicates. Grains also gained as a weaker dollar increased the investment appeal of commodities priced in the currency.

“You’ve got the delay in the U.S. harvests and you’ve got on the other side, of course, the weaker U.S. dollar,” Peter McGuire, managing director of CWA Global Markets Pty in Sydney, said by phone today. “Everything is on fire because of the sliding U.S. dollar.”

Corn for December delivery gained as much as 0.8 percent to $3.895 a bushel, the highest level since June 30, in electronic trading on the Chicago Board of Trade. The grain was at $3.865 as of 2:07 p.m. Tokyo time. The contract gained 3.8 percent yesterday, the biggest advance since Oct. 12.

November-delivery soybeans fell to 0.3 percent at $9.93 a bushel after trading as high as $10.0474. The oilseed, which gained 1.9 percent yesterday, reached a six-week high of $10.1225 on Oct. 13.

The soybean harvest was 30 percent complete as of Oct. 18, compared with 23 percent a week earlier and 64 percent a year earlier, the USDA said. The department released its report yesterday after futures had settled.

Dollar Slides

The Dollar Index, which IntercontinentalExchange Inc. uses to track the currency against those of six major U.S. trading partners, fell 0.4 percent to 75.187 after touching 75.117, the lowest intraday level since Aug. 8 last year.

“For corn and soybeans, the market appeared to be slightly overbought in this harvest period,” said Hiroyuki Kikukawa, general manager of research at IDO Securities Co. “Even the harvests have been delayed, no one doubts bumper crops in the U.S.,” he said.

Wheat for December delivery added as much as 1.4 percent to $5.25 a bushel and last traded at $5.20. The contract rose 3.8 percent yesterday on speculation that frost and drought will reduce crops in Australia, the world’s fourth-biggest exporter.

About 69 percent of the U.S. winter wheat crop was planted as of Oct. 18, compared with 64 percent a week earlier and 78 percent, on average, in the previous five years, the USDA said. About 48 percent of the crop had emerged from the ground, up from 39 percent a week earlier and trailing the 54 percent five- year average, the department said.

To contact the reporter on this story: Jae Hur in Tokyo at jhur1@bloomberg.net

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Gold Advances as Investors Seek Alternative to Declining Dollar

By Kim Kyoungwha

Oct. 20 (Bloomberg) -- Gold gained, reversing an earlier loss, as the dollar dropped to a 14-month low against the euro, fueling demand for the metal as an alternative investment.

Hedge funds and other large speculators hold their most- bullish position ever in futures, helping to propel gold’s gains for the year to 21 percent as a weaker dollar and rising government debt spur concern that inflation may accelerate. Spot gold touched an all-time high of $1,070.80 on Oct. 14.

“There are long positions building up,” said Darren Heathcote, head of trading at Investec Bank Ltd. in Sydney. “There’s a pretty good reason for it as we continue to see the U.S. dollar weaken daily. The market is becoming more comfortable with diversification and more people are looking to get gold.”

Gold for immediate delivery was up 0.2 percent at $1,065.92 an ounce at 2:04 p.m. in Singapore, after showing a loss of 0.2 percent. Oil topped $80 a barrel in New York. The euro touched $1.4994, the highest level since August 2008.

So-called net-long positions, or bets prices will rise, increased 6 percent to 253,955 contracts in the week ended Oct. 13, according to data from the Commodity Futures Trading Commission.

The Dollar Index extended its decline for a second day, taking this year’s loss to 7.5 percent, after Australia’s central bank said in minutes of its Oct. 6 meeting that a “very expansionary setting of policy was no longer necessary, and possibly imprudent.” The index fell 0.4 percent to 75.177.

“Seasonal factors in the final quarter for both gold prices and the dollar are in favor of further gains,” said Stefan Graber, an analyst with Credit Suisse Group in Singapore. “Accordingly, we think the market is likely to test and eventually break the $1,100 mark.”

Physical Demand

Gold will average $1,200 an ounce in the third quarter of next year, Standard Chartered Bank forecast yesterday. UBS AG lifted its one-month estimate to $1,000 an ounce from $950, and its three-month forecast to $1,050 from $1,000.

“Physical demand for gold from jewelry clients, although generally light over the past six weeks, has been seen in good strength on corrections in the price,” John Reade, an analyst with UBS AG, said in a report.

The recent rally to a record may prompt some investors to sell their positions, according to Commerzbank AG.

“While many speculators had rushed to jump onto the bandwagon, an expanding minority of short-term oriented investors is betting on falling gold prices,” Eugen Weinberg, a senior analyst with Commerzbank, wrote in a note.

Among other precious metals, platinum gained as much as 0.8 percent to $1,369.25 an ounce, the highest since September 2008, before trading at $1,365.75 an ounce. Silver was little changed at $17.84 an ounce, and palladium rose to a 14-month high of $336.25 an ounce before trading at $336.

To contact the reporter on this story: Kyoungwha Kim in Singapore at Kkim19@bloomberg.net

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Palm Oil Trades Near Six-Week High as Crude Oil Surpasses $80

By Pratik Parija

Oct. 20 (Bloomberg) -- Palm oil gained for a third day and traded near its highest level in almost six weeks as crude oil exceeded $80 a barrel for the first time in more than a year, increasing palm’s attraction as an alternative fuel.

“The entire oilseed complex is upbeat about rising crude oil prices,” said Harish Galipelli, head of research at Kochi- based JRG Wealth Management, which advises traders. “Crude oil is getting costlier, which will push up demand for biofuels.”

Palm oil may climb to 2,300 to 2,350 ringgit ($685 to $700) a metric ton in the next two weeks, Galipelli said in a phone interview today. The cooking oil has gained 30 percent this year, less than half the 79 percent advance in crude.

Palm oil for January delivery rose as much as 0.9 percent to 2,216 ringgit a ton today and traded at 2,204 ringgit by the midday close at 12:30 p.m. on the Malaysia Derivatives Exchange. Crude oil was up as much as 0.6 percent to $80.05 a barrel in New York and traded at $79.75.

Soybean oil was 26 percent more expensive than palm oil, up from 9.7 percent on May 13, according to Bloomberg data, increasing the appeal of palm for cooking.

Exports of palm oil by Malaysia, the second-biggest producer, grew 1.8 percent in the first 20 days of October, independent market surveyor Intertek said today. A total of 812,095 metric tons were tracked from Oct. 1 to Oct. 20, versus 797,929 tons in the same period in September.

The 2,216 ringgit high for palm oil futures today was 4 ringgit below the 50-day moving average of 2,220 ringgit, according to data compiled by Bloomberg.

Exports from Indonesia, the largest producer, dropped 16 percent to 1.36 million tons in September from the previous month as local markets were closed for several days because of religious holidays, according to Susanto, marketing head of the Indonesian Palm Oil Association.

Shipments in the first nine months gained 16 percent to 11.4 million tons, the trade group said yesterday.

To contact the reporter on this story: Pratik Parija in New Delhi at pparija@bloomberg.net

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Rubber Rises to One-Year High as Stock Rally, Oil Boosts Demand

By Aya Takada

Oct. 20 (Bloomberg) -- Rubber rose to the highest level in a year as a rally in equities boosted investor confidence that the global economic recovery will raise demand for raw materials.

Prices in Tokyo climbed as much as 3.5 percent to 226.5 yen a kilogram ($2,512 a metric ton), the highest level since Oct. 7, 2008. Futures also gained as oil’s advance to a one-year high boosted the appeal of natural rubber as an alternative to synthetic products made from petroleum.

“The bull run in global stocks increased investor appetite for risk assets, leading to their purchases of commodities,” Hisaaki Tasaka, analyst at broker ACE Koeki Co., said by phone. “Stronger oil is also positive for the price of rubber.”

March-delivery rubber rose 3.4 percent to settle at 226.2 yen on the Tokyo Commodity Exchange. It was the biggest daily increase since Oct. 7.

Prices gained 66 percent this year amid speculation that economic recovery will help boost car sales, leading to an increase in demand for the commodity used in tires.

Asian stocks rose, driving the MSCI Asia Pacific Index to the highest level in more than a year, as earnings reports boosted confidence in the global recovery.

The index added 1.1 percent to 121.73 and is set for the highest close since Sept. 8, 2008. It has surged 72 percent from a five-year low on March 9 on signs the global economy is rebounding from the worst slowdown since World War II.

Crude Oil

Crude oil traded near a one-year high in New York after rising the past eight days on optimism that demand will increase. Rubber futures often move in the same direction as oil as competing synthetic products are made from naphtha, distilled from petroleum.

Crude oil for November delivery gained 0.3 percent to $79.85 a barrel as of 3:45 p.m. Tokyo time in electronic trading on the New York Mercantile Exchange.

January-delivery rubber on the Shanghai Futures Exchange gained 1 percent to 19,210 yuan ($2,814) a ton at 2:46 p.m. local time.

Still, gains in the futures were curbed by concern that an increase in stockpiles in China to a five-year high may reflect slowing demand in the world’s largest consumer, Tasaka said.

Rubber inventories increased 4,404 tons in the week ended Oct. 15 to 105,157 tons, the most since November, 2004, the Shanghai exchange said last week.

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

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German Stocks Erase Earlier Gains as Daimler, Beiersdorf Decline

By Christiane Lenzner

Oct. 20 (Bloomberg) -- German stocks erased earlier gains, leaving the DAX Index little changed at 5,849.08 as of 9:44 a.m. in Frankfurt. Daimler AG and Beiersdorf AG declined, while Infineon Technologies AG led rising shares.

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U.K. Stocks Decline; Barclays Leads Banks Lower on Stake Sale

By Roger Neill

Oct. 20 (Bloomberg) -- U.K. stocks declined, reversing earlier gains, as Barclays Plc led financials lower after Qatar said it would sell a stake in the region’s second-biggest bank.

The benchmark FTSE 100 index slipped 0.3 percent to 5,266.87 at 8.48 a.m. in London, having gained as much as 0.3 perent earlier.

Barclays lost 5 percent after Qatar Holding LLC said it intends to sell 379.2 million shares in the company by way of an accelerated bookbuild. Royal Bank of Scotland Group Plc retreated 2.4 percent.

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European Stocks Fall; Barclays, Autonomy, Ahold Shares Decline

By Adam Haigh

Oct. 20 (Bloomberg) -- European stocks retreated from a 12- month high after Qatar said it would sell a stake in Barclays Plc and Autonomy Corp. reported earnings at the lower end of its forecasts.

Barclays sank 5 percent after Qatar Holding LLC said it would sell more than 379 million shares in the U.K.’s second- biggest bank. Autonomy, the U.K.’s second-largest software maker, dropped 8.8 percent, the steepest decline on the Dow Jones Stoxx 600 Index. Royal Ahold NV slid 2.9 percent after sales at its Albert Heijn stores fell for the first time in almost six years.

Europe’s Stoxx 600 dropped 0.4 percent to 248.39 at 9:31 a.m. in London, erasing an earlier advance of 0.4 percent. The gauge has jumped 57 percent since March 9 as Royal Philips Electronics NV reported an unexpected third-quarter profit and results from JPMorgan Chase & Co. and Google Inc. beat estimates. The rally has pushed valuations on the index to 49.5 times reported earnings, near the most expensive level since 2003, Bloomberg data show.

“There are certain companies in certain sectors that are showing improvements in demand but the overall situation is still very anemic indeed,” for the economy, said Roger Nightingale, London-based global strategist at Pointon York Ltd. “We’ve had a gigantic fall in activity followed by a very mild bounce,” he told Bloomberg Television.

U.S., Asian Shares

Futures on the Standard & Poor’s 500 Index expiring in December were little changed and Nasdaq-100 Index futures gained 0.6 percent after profit at Apple Inc. and Texas Instruments Inc. topped analysts’ estimates. The MSCI Asia Pacific Index rose 1 percent.

Barclays slipped 5 percent to 363 pence. Qatar Holding intends to sell 379.2 million shares in Barclays by way of an accelerated bookbuild, and will exercise an equivalent amount of warrants at 197.775 pence.

Autonomy dropped 8.8 percent to 1,455 pence, the biggest intraday slump since July. The U.K.’s second-largest software maker posted earnings excluding one-time items of 20 cents a share after forecasting on Oct. 8 it would be able to report earnings-per share of 20 cents to 23 cents.

The results were “at the lower end” of expectations, George O’Connor, a London-based analyst at Panmure Gordon & Co., wrote in a note to clients today as he cut his price estimate on Autonomy shares by 4.2 percent to 1,790 pence. He retained his “buy” recommendation on the stock.

Ahold

Ahold, the Dutch owner of the U.S. Stop & Shop grocery chain, declined 2.9 percent to 8.53 euros. Revenue for the third quarter was in line with the average estimate in a Bloomberg survey of nine analysts and same-store sales at its Dutch Albert Heijn unit fell for the first time in almost six years on increased discounting and a drop in food prices.

Apple rose 5.1 percent to $199.55 in Germany after fourth- quarter profit and revenue topped estimates, fueled by back-to- school orders for the iPhone, iPod and Macintosh computer.

Texas Instruments gained 2 percent to $23.98. The second- largest U.S. chipmaker said earnings will be 42 cents to 50 cents a share this quarter, more than the 40 cents projected by analysts.

Thirty-six of the 45 companies in the S&P 500 that reported since Oct. 7 surpassed analysts’ projections, data compiled by Bloomberg show. The benchmark index for American equities has rallied 62 percent from a 12-year low in March on signs the economy is emerging from the worst recession in seven decades.

Builders probably broke ground in September on the most houses in 10 months, showing further stabilization in the industry at the heart of the U.S. recession, economists said before a Commerce Department report at 8:30 a.m. in Washington.

Royal KPN NV, the largest Dutch phone company, gained 2.1 percent to 12.46 euros after Goldman Sachs Group Inc. raised its recommendation to “buy” from “neutral.”

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

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Asian Stocks Advance on Growth, Profit Hopes; Challenger Climbs

By Masaki Kondo

Oct. 20 (Bloomberg) -- Asian stocks rose, driving the MSCI Asia Pacific Index to a 13-month high, after Australia’s central bank signaled more interest-rate increases as economic growth accelerates and Apple Inc. reported better-than-estimated profit.

Challenger Financial Services Group Ltd. climbed 6.3 percent in Sydney as assets under management jumped on improving investor confidence. Industrial & Commercial Bank of China Ltd. rose 2.4 percent in Hong Kong after holders of about $3.1 billion of the lender’s stock said they had no plans to sell their shares. Foxconn International Holdings Ltd., the No. 1 contract maker of mobile-phones globally, surged 6.3 percent after Apple’s quarterly profit surged 47 percent.

“The global economy is continuing to recover,” said Masaru Hamasaki, a strategist at Tokyo-based Toyota Asset Management Co., which oversees about $14 billion. “Demand is improving, especially in high-tech industries, and we can expect a series of better-than-expected results from companies.”

The MSCI Asia Pacific Index added 0.9 percent to 121.47 as of 5:59 p.m. Tokyo time, the highest level since Sept. 1, 2008. The gauge has surged 72 percent from a five-year low on March 9 amid signs the global economy is rebounding from the worst slowdown since World War II.

Japan’s Nikkei 225 Stock Average added 1 percent. Komatsu Ltd., the world’s No. 2 maker of construction machinery, added 1.4 percent as the Nikkei newspaper said the company will report a quarterly profit. Australia’s S&P/ASX 200 Index rose 1.1 percent as Rio Tinto Group jumped 3.3 percent on higher metal prices. China’s Shanghai Composite Index gained 1.5 percent.

Disrupted Production

South Korea’s Kospi Index added 0.6 percent, with LG Display Co. gaining 3.3 percent after a production disruption at a Corning Inc. liquid-crystal display factory in Taiwan raised speculation panel prices will rise.

Futures on the Standard & Poor’s 500 Index were little changed. The gauge rose 0.9 percent yesterday to the highest in more than a year. Caterpillar Inc., Komatsu’s largest rival, surged 6 percent after RBC Capital Markets recommended the stock.

The dollar traded near a 14-month low against the euro amid rising demand for higher-yielding assets. The dollar was at $1.4957 per euro, little changed from $1.4965 in New York yesterday after earlier declining to $1.4994, the weakest since August 2008.

Australia’s dollar rose to the highest since August 2008 after central bank policy makers said in minutes of their Oct. 6 meeting that a “very expansionary setting of policy was no longer necessary, and possibly imprudent.” They raised the benchmark interest rate by a quarter percentage point at that meeting and signaled another increase as soon as next month.

ICBC Shareholders

Challenger Financial Services Group climbed 6.3 percent to A$3.90, the third-biggest increase on the S&P/ASX 200 Index today. Sales of annuities and related products more than doubled in the third quarter, and assets under administration and advice rose 50 percent, the company said.

In Hong Kong, Industrial & Commercial Bank, the world’s biggest lender, gained 2.4 percent to HK$6.34. Allianz SE and American Express Co. said they had no immediate plans to sell their stakes past a lockup on the holdings that expires today.

Allianz has 3.22 billion Hong Kong-traded ICBC shares, worth HK$19.9 billion ($2.57 billion), while American Express owns 638 million shares with a value of HK$3.95 billion.

Technology companies accounted for 10 percent of the MSCI Asia Pacific Index’s advance. After the close of U.S. trading, Apple reported a 47 percent surge in fourth-quarter net income on demand for iPhones, iPods and Macintosh computers. Texas Instruments Inc., the second-biggest U.S. chipmaker, forecast fourth-quarter profit and sales that beat analysts’ estimates.

Apple shares surged 6.6 percent in after-hours trading, while Texas gained 2.8 percent.

Beating Forecasts

Foxconn surged 6.3 percent to HK$7.06. In Japan, Murata Manufacturing Co., which makes capacitors used in mobile-phone handsets, jumped 1.8 percent to 4,480 yen and Foster Electric Co., which makes headphones, advanced 4.4 percent to 2,360 yen.

“We’re likely to see companies beat forecasts as they report in coming weeks,” said Naoki Fujiwara, chief fund manager at Shinkin Asset Management Co. in Tokyo, which oversees the equivalent of $4 billion. “The question remains though whether they will lift full-year projections.”

Komatsu, which trades at 52.3 times estimated earnings this year, advanced 1.4 percent to 1,822 yen, while rival Hitachi Construction Machinery Co. gained 2 percent to 2,270 yen.

Komatsu likely had an operating profit of 10 billion yen ($111 million) in the three months through September, compared with 8.2 billion yen in the previous quarter, the Nikkei newspaper reported.

Rising Valuations

The MSCI Asia Pacific Index has rallied 36 percent this year, set for its biggest annual increase since 2003, amid better-than-estimated earnings and economic reports. Shares in the gauge are priced at an average 23.4 times estimated earnings, higher than 18.1 times for the S&P 500 in the U.S. and 16 times for Europe’s Dow Jones Stoxx 600 Index.

Rio Tinto, the world’s No. 3 mining company, rose 3.3 percent to A$66.80, while market leader BHP Billiton Ltd. gained 2.1 percent to A$39.91 in Sydney. Mitsubishi Corp., a Japanese trading company that gets 39 percent of its sales from commodities, advanced 2.8 percent to 2,040 yen.

Crude oil rose 1.4 percent to $79.61 a barrel in New York yesterday, the highest level since Oct. 13, 2008. The London Metals Index, a measure of six metals including copper and zinc, jumped 3.2 percent yesterday to the highest close since Aug. 13.

LG Display, the world’s second-largest maker of liquid- crystal displays, jumped 3.3 percent to 32,900 won. Asahi Glass Co. added 1.9 percent to 809 yen in Tokyo.

New York-based Corning, the biggest LCD maker globally, said yesterday its manufacturing facility in Taiwan experienced power disruption over the weekend, which is expected to have a material impact on glass volume in the fourth quarter.

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

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Japanese Stocks Advance as Earnings Recover, Commodities Climb

By Patrick Rial and Masaki Kondo

Oct. 20 (Bloomberg) -- Japanese stocks climbed to the highest this month, led by commodities companies and electronics makers, as earnings reports boosted confidence the economic recovery is continuing.

Mitsubishi Corp., Japan’s largest trading company, gained 2.8 percent after oil climbed to a one-year high. Shin-Etsu Chemical Co., the world’s largest maker of silicon wafers, added 1.1 percent as U.S. technology companies had better-than- estimated earnings. Asahi Glass Co. rose 1.9 percent after a competitor’s production was disrupted. Komatsu Ltd., the world’s second-largest maker of earth movers, climbed 1.4 percent after the Nikkei newspaper said quarterly profit exceeded forecasts.

The Nikkei 225 Stock Average added 1 percent to 10,336.84 at the close of trading in Tokyo. The broader Topix index gained 0.8 percent to 913.45, with more than twice as many shares advancing as retreating. Both gauges settled at the highest close since Sept. 25.

“The global economy is continuing to recover,” said Masaru Hamasaki, a strategist at Tokyo-based Toyota Asset Management Co., which oversees about $14 billion. “Demand is improving, especially in high-tech industries, and we can expect a series of better-than-expected results.”

The Topix has climbed 6.3 percent this year, set for its biggest annual increase since 2005. Shares in the benchmark are valued at 39 times estimated earnings, compared with 18 times for the Standard & Poor’s 500 Index in the U.S.

Commodities Advance

Mitsubishi, which generates more than half its profit from raw materials, climbed 2.8 percent to 2,040 yen, the highest since Oct. 2 last year. Mitsui & Co., Japan’s second-largest trading house, advanced 1.2 percent to 1,278 yen. Inpex Corp., the country’s biggest oil explorer, rose 3.4 percent to 827,000 yen. The group that includes Inpex had the second-steepest increase among 33 industries in the Topix.

Crude oil rose 1.4 percent to $79.61 a barrel in New York yesterday, the highest level since Oct. 13, 2008. The London Metals Index, a measure of six metals including copper and zinc, jumped 3.2 percent yesterday.

“It seems every day we are seeing new highs for the year being reached by a number of commodities, pushing investors to take a second look at raw materials companies, including trading houses,” said Tsutomu Yamada, a market analyst at kabu.com Securities Co. in Tokyo. “Every once in a while Japan gets to go along for the ride on the global market rally.”

Chips, Apple

After the close of U.S. trading, Texas Instruments Inc., the second-largest U.S. chipmaker, forecast fourth-quarter profit and sales that exceeded analysts’ estimates, and Apple Inc.’s July-September profit also beat estimates.

Shin-Etsu Chemical Co., the world’s largest maker of silicon wafers, gained 1.1 percent to 5,420 yen. Murata Manufacturing Co., which makes components for Apple products, climbed 1.8 percent to 4,480 yen in Osaka. Murata was also boosted to “neutral” from “sell” by Daiki Takayama at Goldman Sachs Group Inc. on the outlook for orders.

“Japan’s stock market is unable to move based on purely domestic factors,” said Kenichi Hirano, general manager at Tokyo-based Tachibana Securities Co. “Stocks are rising just because of gains in overseas markets.”

Asahi Glass, the world’s largest maker of glass substrates for plasma-display panels, gained 1.9 percent to 809 yen. Nippon Electric Glass Co. the world’s third-biggest supplier of glass for liquid-crystal displays, climbed 1 percent to 970 yen.

‘Glass Shortage’

Corning Inc., the world’s biggest maker of glass for flat- panel televisions, said yesterday that a factory in Taiwan that makes LCD glass had a power disruption last weekend that will probably reduce output this quarter.

“It will take at least two to three months to recover full use of the impacted furnaces,” James Kim, a Hong Kong-based analyst at Nomura Holdings Inc., said in a report. “Deeper glass shortage should lead to further panel shortage in the LCD industry, further buffering prices.”

Komatsu added 1.4 percent to 1,822 yen. Rival Hitachi Construction Machinery Co., the world’s largest maker of giant excavators, climbed 2 percent to 2,270 yen.

Komatsu, scheduled to report results next week, likely had a 10 billion yen ($110 million) operating profit in the latest quarter, buoyed by demand in China, the Nikkei reported. Caterpillar Inc., the company’s larger rival, is “among the best-positioned companies to benefit from improving global growth,” RBC Capital Markets wrote in a report yesterday.

“We’re likely to see companies beat forecasts as they report in coming weeks, the question remains though whether they will lift full-year projections,” said Naoki Fujiwara, chief fund manager at Tokyo-based Shinkin Asset Management Co., which oversees the equivalent of $4 billion. “I think the global economy is without a doubt improving, but I’m skeptical that shares can gain much more from here.”

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

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