European, Asian Shares Climb; U.S. Stock-Index Futures Advance

By Daniela Silberstein

Dec. 1 (Bloomberg) -- European and Asian shares gained as manufacturing grew in China and Europe and concern eased that losses from a possible default by Dubai World will spread. U.S. stock-index futures advanced.

HSBC Holdings Plc and Deutsche Bank AG rose more than 2 percent. BHP Billiton Ltd. led basic-resources companies higher on signs the Chinese economy is boosting global growth. Alstom SA and Schneider Electric SA climbed more than 4 percent as the two companies entered exclusive talks to buy Areva SA’s power- grid unit. Nissan Motor Co. and Komatsu Ltd. increased after the Bank of Japan announced an emergency policy meeting, sending the yen lower against the dollar.

Europe’s Dow Jones Stoxx 600 Index added 1.9 percent 243.72 as of 9:47 a.m. in London. The measure has surged 23 percent this year amid signs the global economy is recovering. Stocks in the European benchmark index are valued at about 55 times reported earnings, near the highest level since June 2003, according to data compiled by Bloomberg.

“The sense has grown that the influence from the Dubai situation will not be as big and we had positive surprises from the economic data in Europe,” said Daniel Knuchel, who oversees about $3 billion as chief investment officer at AAM Privatbank AG in Zurich. “The market is vulnerable to shocks and we need positive economic number to keep the gains going.”

Asian, U.S. Shares

The MSCI Asia-Pacific Index rallied 1.4 percent today, and futures on the Standard & Poor’s 500 Index added 0.8 percent. The benchmark measure for U.S. equities gained 0.4 percent yesterday as Dubai World, the investment company seeking to delay repayment on some of its $59 billion of liabilities, said it began “constructive” talks with banks to restructure about $26 billion in debt.

Debt from subsidiaries such as Infinity World Holding, Istithmar World and Ports & Free Zone World will be excluded from the restructuring negotiations because those companies “are on a stable financial footing,” Dubai World, one of the emirate’s three main state-related holding companies, said.

HSBC climbed 2.9 percent to 727.3 pence, the steepest intraday gain in two weeks. Europe’s largest bank expects concerns about Dubai World’s debt will have a limited impact on financial markets, Apple Daily reported, citing Vincent Cheng, chairman of the bank’s Asian operations.

Deutsche Bank, Germany’s biggest lender, increased 2.1 percent to 49.09 euros. Management board member Juergen Fitschen said concerns over Dubai World’s request for a standstill on debt repayment are “manageable.”

KBC Climbs

KBC Groep NV soared 4.3 percent to 30.90 euros. Belgium’s biggest bank by market value was rated “overweight” in new coverage at Morgan Stanley, which cited its “credible restructuring plan and compelling value.”

BHP Billiton, the world’s largest mining company, rose 2.5 percent to 1,904.5 pence and Rio Tinto Group, the third-biggest, added 3.3 percent to 3,189 pence as copper gained on the London Metal Exchange.

Eurasian Natural Resources Corp. climbed 5.3 percent to 907.5 pence. BofA Merrill Lynch Global Research added the Kazakh ferroalloy producer to its “Europe 1” list.

Alstom advanced 6.4 percent to 49.59 euros. The maker of high-speed trains and energy-generation equipment and Schneider Electric, a maker of electrical circuits, are in exclusive negotiations with Areva of France for its power-grid subsidiary, knocking out overseas bids from General Electric Co. and Toshiba Corp. Schneider added 4.5 percent to 76.13 euros.

Vivendi, Nissan

Vivendi SA climbed 2.7 percent to 19.71 euros. GE and the owner of the world’s largest music company agreed on a $5.8 billion valuation for the French company’s 20 percent stake in NBC Universal, according to two people with knowledge of the discussions.

Greene King Plc surged 8.1 percent to 433.9 pence, the biggest gain in the Stoxx 600. The U.K. pub owner and brewer of Old Speckled Hen ale said first-half net income rose 85 percent as the company increased its focus on food sales.

Nissan, which gets 35 percent of its revenue from North America, gained 3 percent to 645 yen and Komatsu, which generates 22 percent of sales from the Americas, jumped 4.3 percent to 1,771 yen on speculation possible steps by the central bank aimed at weakening the yen will help boost the value of Japanese exports.

The BOJ said it will provide short-term loans to commercial banks amid pressure from Prime Minister Yukio Hatoyama’s administration to address falling prices and the yen’s surge to a 14-year high. The cental kept the key overnight lending rate at 0.1 percent.

Australian Interest Rates

Australia’s central bank raised its benchmark interest rate by a quarter percentage point for an unprecedented third straight month as evidence mounts that the nation’s economy is strengthening.

China’s purchasing managers’ index released today by HSBC rose to a seasonally adjusted 55.7 in November from 55.4 the previous month. The government’s PMI, also released today, held at an 18-month high.

Europe’s manufacturing industry grew for a second month in November after the euro-region economy emerged from its worst recession in more than six decades. An index of manufacturing in the 16-nation euro area rose to 51.2 from 50.7 in October, London-based Markit Economics said. That was higher than an estimate of 51 released on Nov. 23.

German unemployment fell in November as government measures discouraged firings and the economy recovered from recession. The number of people out of work fell a seasonally adjusted 7,000 to 3.42 million, according to the Nuremberg-based Federal Labor Agency.

Manufacturing in the U.S. probably expanded for a fourth consecutive month, putting factories at the forefront of the recovery, economists said before reports today. The Institute for Supply Management’s manufacturing index fell to 55 from October’s three-year high of 55.7, according to the median forecast of 72 economists surveyed by Bloomberg News.

Other U.S. reports may show pending sales of existing homes and construction spending declined in October.

To contact the reporter on this story: Daniela Silberstein in Zurich at dsilberstei2@bloomberg.net

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U.K. Stocks Rise; Eurasian Natural Resources, Xstrata Advance

By Adam Haigh

Dec. 1 (Bloomberg) -- U.K. stocks rose after China’s manufacturing grew last month at the fastest pace in five years and concern abated that losses from a possible default by Dubai World will spread.

Rio Tinto Group, Royal Dutch Shell Plc and BHP Billiton Ltd. led gains among raw-material producers on signs the Chinese economy is boosting global growth. Eurasian Natural Resources Corp. climbed 5.4 percent after BofA Merrill Lynch Global Research added the shares to its “Europe 1” list.

The benchmark FTSE 100 Index gained 85.54, or 1.7 percent, to 5,276.22 as of 9:57 a.m. in London. The FTSE All-Share Index climbed 1.6 percent and Ireland’s ISEQ Index added 0.7 percent.

The FTSE 100 has rebounded 50 percent from its low on March 3 amid government stimulus programs and record low-interest rates. The gauge fell 3.3 percent from Nov. 25 through yesterday as Dubai World’s move to delay debt payments risked triggering the biggest sovereign default since 2001.

“Investors were in danger of exaggerating the standstill of Dubai World debt,” said Andrew Garthwaite, the London-based head of global equity strategy at Credit Suisse Group AG. “The numbers are actually a lot smaller” for exposure from foreign banks. He spoke in a Bloomberg television interview.

Dubai World, the investment company seeking to delay repayment on some of its $59 billion of liabilities, yesterday said it is in “constructive” initial talks with banks to restructure about $26 billion in debt.

China’s purchasing managers’ index released today by HSBC Holdings Plc rose to a seasonally adjusted 55.7 in November from 55.4 the previous month. The government’s PMI, also released today, held at an 18-month high.

Copper Advances

Copper advanced in London after China, the biggest user of the metal, expanded at the fastest pace in five years and the dollar fell for a second day. Lead, nickel and zinc also increased.

Rio Tinto, the third-largest mining company, gained 3.2 percent to 3,187 pence. BHP Billiton, the biggest, added 2.5 percent to 1,903 pence. Eurasian Natural Resources, which produces steelmaking raw materials in Kazakhstan, increased 5.4 percent to 908 pence.

Xstrata Plc climbed 3.3 percent to 1,104 pence. Zijin Mining Group Co., China’s third-largest copper producer, agreed to pay A$545 million ($500 million) for Indophil Resources NL to gain a stake in Southeast Asia’s largest untapped copper and gold deposit. Xstrata is the largest shareholder of Indophil and is the majority owner of the deposit which it shares with the Melbourne-based company.

Royal Dutch Shell Plc, Europe’s biggest oil company, advanced 1.4 percent to 1,826 pence. Crude rose for a second day after the Chinese manufacturing report, spurring hopes that the world’s second-biggest oil user will buoy consumption of the fuel.

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

Greene King Plc (GNK LN): The U.K. pub owner and brewer of Old Speckled Hen ale soared 32.6 pence, or 8.1 percent, to 433.9. First-half profit advanced 85 percent as the company focused more on food sales.

Shaftesbury Plc (SHB LN) gained 13.3 pence, or 3.6 percent, to 381.9. The largest landlord in central London’s Carnaby Street neighborhood said its annual loss narrowed as the value of its properties declined more slowly.

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

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Altera, Cutera, Guess?, NetList, SandRidge: U.S. Equity Preview

By Lu Wang

Dec. 1 (Bloomberg) -- Shares of the following companies may have unusual moves in U.S. trading. Stock symbols are in parentheses.

Altera Corp. (ALTR US): The maker of programmable semiconductors said it expects sales for the fourth quarter to be 15 percent to 18 percent higher from the previous three months. Previously, it projected sales growth of 10 percent at most.

Cutera Inc. (CUTR US): The maker of lasers to remove hair said it postponed “indefinitely” the release of its TruSculpt body contouring product because clinical data failed to meet expectations.

Guess? Inc. (GES US): The clothing maker forecast 2010 profit of at least $2.45 a share, topping the average analyst estimate of $2.19, according to Bloomberg data.

NetList Inc. (NLST US): Inphi Corp. said it filed a patent infringement lawsuit against the computer-memory systems maker.

OmniVision Technologies Inc. (OVTI US): The maker of image sensors for camera phones forecast third-quarter revenue of $160 million at most, trailing the average analyst estimate of $171.7 million.

SandRidge Energy Inc. (SD US): The producer of natural gas and crude oil agreed to buy Forest Oil Corp.’s (FST US) stake in Permian Basin properties in West Texas and New Mexico for approximately $800 million.

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

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Will Trichet Signal the Beginning of the End for the ECB's Extraordinary Policy Measures?

Weekly Forex Fundamentals | Written by Lloyds TSB | Nov 30 09 09:05 GMT |

Weekly Economic Data Preview The ECB press conference will attract more attention than usual this week, with financial markets waiting to see whether President Trichet confirms that the central bank is to cease its 12m Long-term Refinancing Operations after December. If so, the move will be interpreted as being the first step by the ECB in unwinding its unconventional policy measures. Meanwhile, in the UK, there has been a divergence of views on the MPC on the appropriateness of the most recent QE extension. MPC member Posen (who voted with the majority to extend the BoE's Asset Purchase Facility by £25bn) speaks on Tuesday, while Chief Economist Dale (who voted against a further extension to the APF) speaks the following day. On the data front, there are a flurry of purchasing managers' surveys released this week across the globe. Moves in the employment balances within the US reports and Wednesday's ADP reading are precursors to Friday's US labour market data. Here, we expect non-farm payrolls to decline by 160k in November and the unemployment rate to stay unchanged at its 26-year high of 10.2%. Until the unemployment rate shows a sustained downward trend, the Fed is not likely to raise interest rates. On Wednesday, the Fed's Beige book is likely to characterise the gradual recovery in the US. In the UK, we expect both the manufacturing and services PMIs to post small declines to 53.3 and to 56.5, though clearly the readings are well above the fifty level, signifying expansion. As a consequence, we expect the level of the composite PMI recorded to date during Q4 to corroborate our expectation that the economy will exit recession in the current quarter - chart a. There are a number of housing releases to watch out for too. Lending to individuals data for October are released on Monday, as is the November Nationwide house price index. The Halifax also releases its house price index during the week. As for policy maker rhetoric, the MPC's Posen (who voted for the MPC's £25bn extension to the APF) speaks on Tuesday, while Chief Economist Dale (who voted against the extension) speaks the following day. In the US, we forecast a small decline in the manufacturing ISM (Tuesday) to 54.8 in November from its three-and-a-half year high of 55.7, and a small rise in the non-manufacturing PMI (Thursday) to 51.5. With both ISM reports, moves in the employment balances will be closely watched, as the outturns will allow financial markets to firm up expectations for the non-farm payroll (NFP) report – chart b. The ADP employment estimate (Wednesday) will also provide further guidance. Our current expectation for Friday's report is that NFPs will decline 160k in November, leaving the unemployment rate static at its 26-year high of 10.2%. The Fed releases its latest conditions of the nation report, the Beige book (Wednesday), which will be used as the basis of discussion for the FOMC meeting on 16 December. Four FOMC members are scheduled to speak this week (Chairman Bernanke, Plosser, Lacker and Bullard). Thursday sees the ECB rate decision, where it is expected to maintain the refinancing rate 1%. Of more significance will be whether President Trichet provides confirmation that the one-year Long-term Refinancing Operation (scheduled for mid-December) will be the last. If so, it will be interpreted as being the first step by the ECB in unwinding its unconventional policy measures. The press conference will also report the latest quarterly ECB staff projections. On the data front, small increases in both the manufacturing and services PMIs for the region are forecast (to 51.0 and 53.2 respectively), which will flag that the GDP in the region will probably expand in Q4 at the same (0.4%) rate recorded in Q3. Ahead of the ECB decision, Tumpel-Gugerell speaks (Tuesday), while Weber and Bini Smaghi are scheduled to speak (on Thursday and Friday respectively). Full Report in PDF Lloyds TSB Bank http://www.lloydstsbfinancialmarkets.com Disclaimer: Any documentation, reports, correspondence or other material or information in whatever form be it electronic, textual or otherwise is based on sources believed to be reliable, however neither the Bank nor its directors, officers or employees warrant accuracy, completeness or otherwise, or accept responsibility for any error, omission or other inaccuracy, or for any consequences arising from any reliance upon such information. The facts and data contained are not, and should under no circumstances be treated as an offer or solicitation to offer, to buy or sell any product, nor are they intended to be a substitute for commercial judgement or professional or legal advice, and you should not act in reliance upon any of the facts and data contained, without first obtaining professional advice relevant to your circumstances. Expressions of opinion may be subject to change without notice. Although warrants and/or derivative instruments can be utilised for the management of investment risk, some of these products are unsuitable for many investors. The facts and data contained are therefore not intended for the use of private customers (as defined by the FSA Handbook) of Lloyds TSB Bank plc. Lloyds TSB Bank plc is authorised and regulated by the Financial Services Authority and is a signatory to the Banking Codes, and represents only the Scottish Widows and Lloyds TSB Marketing Group for life assurance, pension and investment business.

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Currencies: Dubai Driven Dollar Rebound Short-Lived

Daily Forex Fundamentals | Written by KBC Bank | Nov 30 09 08:40 GMT |

Sunrise Market Commentary Global bonds stabilize, as Dubai World induced risk aversion wanes Bonds opened sharply lower, but lost these gains later on as investors re-assessed the risks surrounded Dubai World and potential contagion. In the weekend, more support surfaced for Dubai leading to stronger trading Asian equities. However, we don't expect equities to rally fast higher, keeping the environment bond-friendly. FX Dubai driven dollar rebound short-lived At the end of last week, the dollar and the yen were the major beneficiaries of the Dubai jitters. However, as this theme islosing impact on markets, underlying dollar weakness might soon come to the forefront again. Sterling fails to recoup the post-Dubai losses against the euro The Sunrise Headlines On Friday, US Equities opened sharply lower, but regained some of its losses later in the session. Dow/S&P ended 1.72% / 1.48% lower led by financials. Asian stocks start the week with encouraging gains as the United Arab Emirates' pledge of support for banks eased concerns. US consumer spent significantly less per person at the start of the holiday season this weekend, dimming hopes for a retail comeback that would help propel the economy early in 2010. India's economy expanded at the fastest pace in six quarters as GDP grew 7.9% Y/Y in the third quarter, giving the central bank room to withdraw more stimulus measures. The head of the Bank of Japan Masaaki Shirakawa said the bank will act decisively in the event of renewed financial market turmoil. China fended off renewed pressure to let its currency rise as Premier Wen Jiabao said the demands being made of Beijing to push up the yuan's exchange rate were not fair. In the UK, GfK consumer confidence dropped for the first time in more than a year, indicating that consumer confidence remains fragile. On Friday, crude oil ($76.23) gained back most of its early losses ending the session slightly lower. Today, the calendar contains the first estimate of euro zone CPI, the UK mortgage approvals and Chicago PMI EUR/USD On Friday, the Dubai story was still the key factor for trading on almost all markets. In Asia and at the start of trading in European, the sell-off in riskier assets continued, triggering a further unwinding of carry trades, too. The yen and the dollar continued to gain ground. EUR/USD spiked to the 1.4830 area. However, during the morning session in Europe, some calm returned to the markets and EUR/USD soon regained the 1.49 mark. European stocks recouped the earlier losses and the panic gradually faded. The EC commission confidence indicators confirmed the gradual improvement in sentiment, but were no big issue for trading. Investors in the first place were watching out how US markets would react to the Dubai story even as US trading still developed in a thin market. US Stocks opened sharply lower. However, the losses were much more contained compared to what was on the screens in Europe on Thursday and in Asia. So, the safe haven flows dried up and EUR/USD managed to realize a new upleg early in US trading. The pair closed the session at 1.4988, not that much different from the 1.5019 close in Friday evening Today, the US calendar contains the Chicago PMI and two smaller regional business indicators. In Europe the Flash CPI for the month of November will be published. However, repositionings in the wake of the Dubai headlines will continue to be the major factor on almost all markets. This morning, markets apparently took some additional comfort from the Central Bank of the UAE providing some emergency support to Dubai Banks. It is a bit too early to say that this story has already run its course, but we have the impression that it is moving to the backstage. EUR/USD quite easily regained the 1.50 mark. This morning, there were also quite some headlines on the screens on the meeting between Europe and China. With respect to yuan, China didn't give any hint that it is preparing even a moderate change to its currency policy. Stability (against the dollar) is still the name of the game. However, considering the 'results' after the meeting between China and the US earlier this month, this Chinese standstill should come as a surprise. Also interesting, European Commissioner Almunia over the weekend expressed a strong commitment that Greece will never default on its sovereign debt because the country has the backing of the European Union. It's not really a big issue for the currency market yet, but if pressure on Greek spreads would ease, it might also be a slightly euro supportive factor. To conclude, we have the impression that the Dubai storm is calming. This will reduce safe haven flows and the euro might be short-term beneficiary of this process, too Global context. Already for quite some time, the swings in risk appetite/risk aversion are the main driver for price action on the currency markets. Improving investor sentiment towards risk is still considered a good reason to sell the US dollar. On top of that, the dollar has become (or is at least perceived to have become) the preferred currency to fund carry-trade deals. Lingering uncertainty on the huge US financing needs, some international debate on the status of the dollar and the Fed's intention to run an expansionary monetary policy for a prolonged period of time offer additional ammunition for carry traders to use the dollar rather than other currencies. This has put the dollar in a vulnerable position. We stay dollar skeptical as long as we don't get a clear signal that the Fed is coming closer to reversing its very stimulating monetary policy. Recently, several key Fed members, including Bernanke, obviously refrained from giving such a signal. The opposite was the case. The swings in risk appetite/risk aversion might accelerate/slow the decline of the dollar against the euro. However, the theme of risk appetite/aversion at some point will stop playing its role as a guide for currency trading in general and EUR/USD in particular. Recently, we indicated that this point was coming closer and that the decline of the dollar could become a factor of global uncertainty. Last week's 'Dubai-driven' price action didn't confirm this thesis but we continue to monitor the situation. Nevertheless, this morning swift EUR/USD rebound suggests that it won't be easy for the dollar to make any sustained gains against the euro on this issue. A swift return (or even break beyond) the 1.5144 year high might bring the theme of global dollar weakness again to the forefront. Looking at the (technical) charts, the break of EUR/USD above the range top at 1.4438/48 and above the 1.4719 (Dec high) improved the picture, but the move continued to develop in a gradual way. Nevertheless, the corrections, if any, were very limited, too. The pair tested several times the longstanding uptrend line since March, but a break didn't occur. So, the ST picture remains euro constructive, even as the momentum of the uptrend was waning. Tuesday's break above the previous was a new USD warning signal but after last week's correction, the pair is again within the 1.4626/1.5064 trading range. The long-standing uptrend was challenged on Friday, but once again, not a clear break occurred. So, the positive bias in this pair remains in place EUR/USD: Dubai-triggered correction short-lived? Support comes in at 1.5020 (Break-up hourly), at 1.4965 (Uptrend line/Reaction low/MTMA), at 1.4938/20 (Boll Bottom/ Midline/LTMA), at 1.4828 (Reaction low) and at 1.4761 (Boll Bottom). Resistance stands at 1.5084 (reaction high hourly/), at 1.5099 (Bollinger top), at 1.5145/65 (year high/76% retracement). The pair is slightly overbought USD/JPY On Friday, the Dubai jitters were also the key driver for USD/JPY trading. A spike in risk aversion early in the session pushed USD/JPY to test the 85.00 mark. However, Japanese authorities raising the option of contacting the G7 partners to address a disorderly move might have helped to ease the pressure. Later in the session, pressure on global markets eased too, USD/JPY came close to the 87.00 mark early in US trading. However, this previous support area apparently has become a first important resistance now. The USD/JPY rebound stalled and the pair closed the session at 86.53, compared to 86.59 on Tuesday evening. This morning, Japanese/Asian stocks are showing quite a forceful rebound. However, this is no big support for USD/JPY. The pair continues to drift further south. Fin Min Fuji denied press headlines mentioning him saying that intervention in the currency market was impossible. Nevertheless, markets apparently came to the conclusion that chances for (coordinated) interventions are not that big at the current juncture. Global context: USD/JPY reached a reaction high in the 97.80 area early August. Despite positive global investor sentiment, the dollar could not hold on to its gains against the yen. The link between USD/JPY and global investor risk aversion/risk appetite became less tight and sometimes it even reversed. The dollar (and not the yen) was said to have become the preferred funding currency for carry trades. So, price action in USD/JPY to some extent joined the global dollar trend (decline). The long-term trend obviously remains USD/JPY negative. We have a long-standing sellon upticks approach, but we took profit ahead as the pair reached the range bottom in the 88/87 area. Last week's drop, below this key support level made the picture even more negative for USD/JPY. The risks are clearly to the downside. However, from a tactical point of view we don't feel the need to challenge the possibility of USD/JPY interventions from the BOJ. We still look to reinstall USD/JPY shorts in case of a more pronounced uptick (which might occur in case of interventions USD/JPY: Sell-off blocked in the 0.85 area, but downward pressure persists Support is seen at 86.00 (Reaction low), 84.82 (Reaction low), at 84.51 (Monthly Bollinger bottom), at 83.71 (Irreg. B), at 81.61 (2e Irreg.b) and at 80 (psycho). Resistance comes in at 87.02/17 (STMA/Reaction high), at 88.23/43 (Breakdown hourly/MTMA). The pair is in oversold conditions. EURGBP On Friday, EUR/GBP developed in a rather thin sideways trading range. Ongoing market nervousness on Dubai at the start of trading in Europe caused EUR/GBP to retest Thursday's highs. The involvement of the UK Financial sector in the Middle East continued to weight on the UK currency. However, as the Dubai induced pressure eased later in the session, sterling regained some ground, too. EUR/GBP closed the session 0.9083, little changed from Thursday's 0.9090 close. This morning, the UK GfK consumer confidence came out materially weaker than expected. The Hometrack Housing survey showed a further gradual improvement. EUR/GBP is slightly higher this morning. Later today, the money supply, lending data and mortgage approvals will be published. Global context: Since early August, sterling sentiment deteriorated again as the BoE raised the asset purchase program to £175B. On top of that, BoE's King kept a dovish tone, indicating that the Bank intended to maintain a loose policy for a prolonged period of time. This triggered a new sterling selling wave. At the September and October meetings, the BoE took no additional policy steps. However, the debate on additional QE steps was still ongoing. Nevertheless, a sterling short-squeeze kicked in since mid October, even as speculation on additional QE continued. The November BoE decision to raise the amount of asset purchases (surprisingly) didn't bring any harm for sterling and reinforced the feeling that the sterling correction might have further to go. From a fundamental long term point of view, we don't see any reason to turn sterling positive in a context where the BoE is lagging the ECB in scaling down (a much more aggressive) monetary stimulation. However, in a shortterm perspective, we couldn't ignore the sterling constructive mood/technical picture. This pair dropping below the 0.8900 area was an additional warning signal. However, sentiment changed again after the publication of the Minutes of the November policy meeting as the BoE discussed the possibility of cutting the discount EUR/GBP regained the 0.8900 area and is holding well above the MTMA (today at 0.8992). So, the downside alert in EUR/GBP has been called off. A first test of the 0.9060/78 resistance area was rejected, but the pair finally cleared this barrier at the end of last week. If sustained, this would make the ST picture again positive for EUR/GBP. We maintain a buy-on-dips approach for EUR/GBP. However, we hope to get an opportunity to step in, in case of a correction lower in the 0.8900/0.9240 trading range. A cooling down in the Dubai tensions might provide such an opportunity. To be honest, this morning's price action questions whether such an opportunity will occur. EUR/GBP: holding above the 0.9065/78 area Support comes in at 0.9060 (reaction low) at 0.9012 (break up hourly) and at 0.8992/78(MTMA/reaction low). Resistance is at 0.9134 (reacting high) and at 0.9191 (62% retracement), at 0.92.40 (Reaction high). The pair is in overbought conditions News EMU: EC confidence extends rebound in November In November, the European Commission confidence indicators showed a further improvement in economic confidence. The headline index rose from a revised 86.1 to 88.8, while the consensus was looking for a figure of 88.0. The details show that the improvement was supported by all sub indices, with the biggest increases in retail (-11 from -15), construction (-26 from -29), and services (-4 from -7) confidence, but also business (-19 from -21) and consumer (-17 from -18) confidence improved. The outcome confirms the recent improvement in the PMI's and IFO and indicates that sentiment is improving further in the euro area. After German, also Spanish CPI inflation returned to positive territory in November. On a yearly basis, Spanish CPI rose from -0.6% Y/Y to 0.4% Y/Y, while an outcome of 0.1% Y/Y was expected. In Belgium, CPI inflation stayed negative for the seventh consecutive month. In November, inflation rose from -0.97% Y/Y to -0.12% Y/Y. Today, also euro zone inflation is forecasted to return to positive territory. Download entire Sunrise Market Commentary Disclaimer: This non-exhaustive information is based on short-term forecasts for expected developments on the financial markets. KBC Bank cannot guarantee that these forecasts will materialize and cannot be held liable in any way for direct or consequential loss arising from any use of this document or its content. The document is not intended as personalized investment advice and does not constitute a recommendation to buy, sell or hold investments described herein. Although information has been obtained from and is based upon sources KBC believes to be reliable, KBC does not guarantee the accuracy of this information, which may be incomplete or condensed. All opinions and estimates constitute a KBC judgment as of the data of the report and are subject to change without notice.

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Forex Technical Update

Daily Forex Technicals | Written by India Forex | Nov 30 09 07:57 GMT |

Rupee : Rupee touched the levels of 47 plus and corrected significantly down (unexpectedly) due to fresh bout of dollar selling happening overseas. The trend maintains bullish in rupee but we may look at 47 plus levels again till year end.(USDINR - 46.39) Bullish Euro : EURO is making a rising wedge pattern with clear divergence in the daily and weekly charts. Usually this kind of pattern leads to a strong correction downwards. The patterns are quite unexpectedly changing due to global events. Break of 1.4800 would make the pair bearish until then rangebound.(EURUSD - 1.5070) Neutral Sterling: GBP witnessed a very strong rebound from 1.6270 levels to 1.6570 currently (300 pips) . Sell positions can be built around 1.6634 levels for a target of 200-300 pips move in medium term.(GBPUSD - 1.6569) Bearish Yen : JPY reached its target of 85 on Friday due to heavy bout of risk aversion seen in the markets.The range seems to be between 85 to 87 with a strong bias still.(USDJPY - 86.34) Bullish Aud : AUDUSD moved down but was unable to stay below 0.9050 and bounced back unexpectedly again. Breaking below 0.9050 would push the pair till 0.8800 levels.Please note that AUD is unable to rise despite higher GOLD prices seen across. (AUDUSD - 0.9176) Neutral Gold : Gold climbed further to another record high of $1195 last week but failed to meet $1200 pscyhological level and pull back sharply. Nevertheless, the fall from $1195 was contained by 38.2% retracement of $1026.9 to $1195.0 at $1130.8 and gold recovered strongly to close at $1174.2. With a short term top in place, initial bias is neutral this week and some sideway trading should be seen. A break below $1130.8 fibonacci level cannot be ruled out. But after all, downside of the pull back should be contained by cluster support at $1091/94 level (38.2% retracement of $931.3 to $1195 and 61.8% retracement of $1026.9 to $1195) and bring up trend resumption. Break of $1195 will target next medium term projection level at $1258.(Gold -$1179) Bullish Dollar Index: Dollar index is taking support close to 74 levels . we are moving towards 75.88 levels soon.(DI - 74.545) Neutral India Forex http://www.indiaforex.in DISCLAIMER These views/ forecasts/ suggestions, though proferred with the best of intentions, are based on our reading of the market at the time of writing. They are subject to change without notice.Though the information sources are believed to be reliable, the information is not guaranteed for accuracy. Those acting in the market on the basis of these are themselves responsible for any profits or losses that might occur, without recourse to us. World financial markets, and especially the Foreign Exchange markets, are inherently risky and it is assumed that those who trade these markets are fully aware of the risk of real loss involved.

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Daily Technical Outlook

Daily Forex Technicals | Written by Innerfx | Nov 30 09 07:47 GMT |

EURUSD The euro opened higher today and climbed higher during the Asian session, recovering most of Thursday's and Friday's losses which were quite high (to as low as 1.4828) due to lower liquidity. Now that the upside is back in focus, a re-test of 1.5150 is likely. On an intra-day basis, uptrend will remain intact as long as support into the 1.4990/00 region holds. Current exchange rate is 1.5062 @07:35 GMT Support: 1.4990/00, 1.4900, 1.4820/50 Resistance: 1.5100, 1.5145/50 and 1.5200 NZDUSD The NZD has has found support at .7080 which has been a stable bottom in October. However, the break down below the rising trend line coming around .7270 today is a notable bearish sign. Look for a potential test from the downside within the coming trading sessions and as long as it provides resistance, renewed selling may favor further downside action. On a short-term basis, I remain bullish on this pair. Current exchange rate is .7195 @07:35 GMT Support: .7100, .7080, .7000/30 Resistance: .7200, .7250/70 and .7300 GBPUSD Cable recovered and the 1.6600 handle is under pressure at the time of writing this. However, a sustained break above 1.6700 is needed to fully confirm uptrend resumption. Short term sentiment is neutral while the intra-day studies are bullish and will remain positive while 1.6450/60 will provide support. Current exchange rate is 1.6567 @07:35 GMT Support: 1.6450/60, 1.6350 and 1.6275 Resistance: 1.6600, 1.6700 and 1.6840/50 Innerfx Legal disclaimer and risk disclosure InnerFX and/or its author(s) shall not be responsible for any loss arising from any investment or trading decision based on any recommendation, forecast, strategy or other information herein contained. The contents of this article should not be construed as an express or implied promise, guarantee or implication by InnerFX and/or its author(s) that readers and subscribers will profit from the strategies herein or that losses in connection therewith can or will be limited. Trades in accordance with the recommendations / strategy in an analysis, especially leveraged investments such as Foreign Exchange trading and investment in derivatives, can be very speculative and may result in losses as well as profits, in particular if the conditions mentioned in the analysis do not occur as anticipated. Trading in the Currency Exchange market is a challenging opportunity where above average returns are available to educated and experienced investors who are willing to take above average risk. Past performance does not guarantee similar performance in the future. Check http://www.innerfx.com/disclaimer for full disclaimer. You may not post this (or part of this) article to forums, newsgroups, mailing lists, electronic bulletin boards, websites, or other services, without the prior written consent of InnerFX.

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Wen Says Yuan Pressure Unfair; Europe’s Lobbying Fails

By Bloomberg News

Nov. 30 (Bloomberg) -- Chinese Premier Wen Jiabao rejected “unfair” calls for the yuan to appreciate and European leaders acknowledged that they had failed to shift the nation’s stance on its currency.

“Some countries are now calling for yuan appreciation while imposing trade protectionism on China, which is unfair and actually limits China’s development,” Wen said at a briefing in the Chinese city of Nanjing today. In the financial crisis, “a stable yuan is helpful to the development of the Chinese economy and the world’s economic recovery,” he added.

European officials indicated yesterday that they failed to convince China to loosen controls on the yuan that shelter Chinese exporters from the U.S. currency’s slide and make euro- region goods relatively less competitive. The euro has surged about 20 percent versus the dollar since Feb. 18, undermining the region’s recovery from the worst slump since World II. The yuan is effectively pegged to the dollar.

“China’s not yet convinced about a global recovery next year,” said Ben Simpfendorfer, an economist with Royal Bank of Scotland in Hong Kong. “If the global recovery doesn’t come, then a stable currency will be key to providing some support for exporters.”

Twelve-month non-deliverable yuan forwards rose 0.2 percent to 6.6275 per dollar as of 12:15 p.m. in Shanghai as the dollar declined against Asian currencies. China has kept the yuan at about 6.83 against the U.S. currency since July 2008. In the past year, the yuan fell more than 14 percent against the euro.

Lacking in Optimism

Wen reiterated that China will keep the yuan basically stable and carry out currency reform at its own, gradual pace.

“I can’t say that I’m more optimistic than I was before I came here” on gains by the yuan, or renminbi, Jean-Claude Juncker, who chairs a group of euro-area finance ministers, said in Nanjing yesterday. Chinese officials had explained that it was difficult to make the case for “immediate renminbi appreciation” with 40 million people living on less than $1 a day, Juncker said.

“An orderly and gradual appreciation of the renminbi would be in the best interests of China and the European economy,” he added.

European officials met Wen, Chinese National Development and Reform Commission Chairman Zhang Ping, People’s Bank of China Governor Zhou Xiaochuan and Finance Minister Xie Xuren.

International Pressure

Chinese officials said they will continue currency reforms begun in 2005, when a fixed exchange rate ended, European Central Bank President Jean-Claude Trichet said yesterday. Trichet told Bloomberg Television: “I don’t over-interpret our discussions. It is their decision and we will see.”

The Europeans’ visit comes after U.S. President Barack Obama left Beijing this month without a commitment to let the exchange rate strengthen. International pressure is growing on China after the Group of 20 nations, of which it is a member, agreed in September to make the world economy less reliant on Chinese savings and U.S. demand.

“You shouldn’t expect the Europeans to have significant influence” on China’s currency, said Joerg Kraemer, chief economist at Commerzbank AG, Frankfurt. “Even the U.S. hasn’t managed it.”

Obama told President Hu Jintao and Wen that the U.S. expects progress on making the yuan “more flexible” by mid- 2010, according to Jon Huntsman, the American ambassador. That’s when talks between the U.S. State and Treasury secretaries and their Chinese counterparts will take place.

‘Gentle Appreciation’

“China will only adjust on its own terms and in its own time,” said Glenn Maguire, chief Asia-Pacific economist at Societe Generale SA in Hong Kong. “It’s decided that now is not the time to do that.”

While China is focused on its domestic agenda and “unlikely to do anything” in response to international pressure, authorities may allow a “gentle appreciation” of the yuan next year before the U.S. Federal Reserve starts increasing interest rates, Maguire said.

While the 16-member euro-region economy returned to growth in the third quarter, the euro’s ascent is making exports less competitive abroad and eroding companies’ earnings. European Aeronautic, Defence & Space & Co., the owner of Airbus SAS, said on Nov. 16 that third-quarter earnings slumped 77 percent, partly because of a weaker dollar.

Deutsche Telekom AG Chief Executive Officer Rene Obermann said on Nov. 5 the company is looking “very carefully” at developments in currency markets. The dollar’s depreciation and other exchange-rate movements cut third-quarter revenue at Europe’s biggest phone company by about 100 million euros compared to the second, spokesman Andreas Leigers said.

For Related News and Information: Top economy news: TOP ECO Top currency news: TOP FRX News on China’s currency: TNI CHINA FRX BN Stories on China economy: TNI CHINA ECO BN Top Europe stories: TOP EUR Euro-area economy: TNI EUROP ECO Credit crunch page: WWCC Global currencies: WCRS

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Natural Gas Glut Overwhelms Speculators, Defies Rally

By Ayesha Daya

Nov. 30 (Bloomberg) -- When Qatar’s biggest natural gas shipment to the U.S. arrived this month, it signaled to Barclays Capital Inc. and PFC Energy that this year’s worst performing commodity investment won’t recover in 2010.

Murwab, a Qatari liquefied natural gas tanker, carried the first shipment to the U.S. from the Persian Gulf nation since June 2008. Its cargo, enough to heat about 9 million homes for a day, added to the largest gas inventories for this time of year since at least 1994, Energy Department data show.

Rising supplies threaten to hurt the record-large $4.2 billion bet in the U.S. Natural Gas Fund LP, while traders hold 51 percent more options contracts to buy gas than they do to sell. The International Energy Agency warned of a glut that Qatar’s energy minister said may last until 2012. Wall Street’s consensus forecast for a 51 percent rise in U.S. gas futures to an average $6.09 per million British thermal units next year is too high, according to industry consultant Schork Group Inc.

“We have more gas than we know what to do with in the U.S., we have more waterborne gas floating around the world’s oceans that doesn’t have a home,” Stephen Schork said in an interview from Villanova, Pennsylvania. Prices this winter will “gravitate toward, and remain closer to $4, rather than $7” for each million Btu, he said.

U.S. imports of liquefied natural gas will rise 34 percent this year to about 470 billion cubic feet and another 40 percent in 2010, the Energy Department forecast on Nov. 10. Global LNG supply will exceed demand for a second year in 2010 as new projects from Qatar to Peru boost output, Sanford C. Bernstein & Co. said in a Nov. 23 report.

Worst Performance

Natural gas for January delivery dropped 0.7 percent to $5.155 per million Btu in electronic trading on the New York Mercantile Exchange at 3.27 p.m. in Singapore. Gas has slumped 8.3 percent this year, the worst performance among the world’s biggest exchange-traded commodities. Gas peaked at $13.69 in July 2008 and declined to a low of $2.409 in September 2009.

Nikos Tsafos, a senior gas analyst at PFC Energy in Washington, predicts U.S. gas will average $5 next year because of rising domestic production and international supplies of LNG, gas cooled to liquid form for transport by ship. His projection is below the average $5.605 for 2010 monthly futures trading on the Nymex.

“It is hard to see how prices can be much better than the current strip,” Tsafos said, referring to the average of each futures contract for delivery next year.

Low prices will save money for the 57 million American households using gas for heat, who face bills of about $792 each this winter. Governments and energy companies such as London- based BP Plc are promoting gas, which emits about half as much carbon dioxide as coal, to temper global warming.

Price Collapse

New production in Qatar, which has the world’s third- largest gas reserves, is a legacy of decisions made years ago. As gas tripled between 2002 and 2008 and Qatar increased investments, the nation avoided locking in prices for about half of its new LNG in anticipation of further gains, according to consultant Wood Mackenzie Ltd. Instead, the global recession caused prices to collapse 25 percent last year.

“Qatar has had to supply the U.S., even though the returns are absolutely awful, because it is the sink for cargoes that can’t go anywhere else,” said Tony Regan, a consultant with Singapore-based Tri-Zen International Ltd. and a former executive in Royal Dutch Shell Plc’s LNG business. “It’s the worst possible moment to increase production, because the world is in recession and prices are so low.”

U.S. gas production rose last year to its highest since 1974 as the industry exploited extracted gas from new areas.

‘Acute Glut’

Reserves in the U.S. may be 39 percent higher than estimated just two years ago, reflecting improved yields of gas stored in rocks such as shale, the Potential Gas Committee, a non-profit group linked to the Colorado School of Mines, said in a June 18 report.

An “acute glut” is looming during the next five years because of rising shale gas production in the U.S. and Canada, the Paris-based International Energy Agency said in its World Energy Outlook on Nov. 10.

“There is downward pressure on prices next year,” said Biliana Pehlivanova, a commodities analyst at Barclays Capital in New York, who forecasts gas at $5.05 for 2010. “We see a slow drift lower.”

A decline would be bad news for Oklahoma-based explorer Devon Energy Corp., which is betting on U.S. onshore gas production, as well as BP and Anadarko Petroleum Corp., the two biggest producers in the U.S., and countries that benefit from gas sales, such as Norway and Algeria.

Exporters Meet

Qatar will host a meeting of the Gas Exporting Countries Forum of 11 nations on Dec. 9 to discuss sagging world markets. Russia and Iran, which have the largest reserves, are competing to name the first secretary-general, a step in establishing a group that may one day match the price-setting clout that the Organization of Petroleum Exporting Countries has in oil markets.

As the world’s most efficient producer, Qatar can profit at lower prices. The nation can pump 1 million Btu for as little as 15 cents, compared with about $4 for Russia and Norway, according to the IEA. Most costs are covered by so-called condensate, an oil-like petroleum that’s pumped along with natural gas and refined as if it were crude. Qatar then spends another $2.83 to liquefy that gas ready for shipping.

Buyers Turned Away

The country plans to increase annual LNG production capacity 43 percent to 77 million tons by the end of 2010. As prices rose from $2 in 2002, Qatar resisted signing long-term contracts with Kuwait, the United Arab Emirates and India, officials in the countries said at the time. Now, Qatar finds the spot market for excess supplies shrinking.

“By 2013, 2012, the world will see more demand” than supply, Qatar Energy Minister Abdullah al-Attiyah said at a conference in Doha Nov. 7, calling the drop in demand “short- term.” Qatar has the right to divert cargoes away from the U.S. if it finds better prices elsewhere, he said in an interview.

China may become the biggest market for Qatari gas, Fu Chengyu, president of China National Offshore Oil Corp., said in a Nov. 13 interview. Domestic gas companies were told to increase production and imports this month to ease shortages, China’s National Development and Reform Commission said in a Nov. 25 statement.

Asia ‘Key Market’

Shell, which sells more LNG than any other company, sees Asia as its “key market” for growth, Chief Executive Officer Peter Voser said in a Nov. 26 interview in Zurich.

“Any gas prices in Europe will actually have to compete with those prices in the Far East in order to get the gas to Europe,” Voser said.

JPMorgan Chase expects a colder-than-normal winter will revive U.S. prices even as market is now “drowning in bearish psychology,” Lawrence Eagles, head of commodities strategy, said in a Nov. 24 note. The bank kept its 2010 price forecast unchanged at $5.94 a million Btu.

Qatar is leasing import capacity at the Sabine Pass and Cameron terminals in Louisiana and Cove Point, Maryland, to sell excess cargoes to the U.S. Its $1 billion terminal under construction in Texas with ConocoPhillips and Exxon Mobil Corp., called Golden Pass, is unlikely to open before the middle of next year, after a one-year delay, Exxon Mobil spokeswoman Margaret Ross in Houston said by e-mail on Oct. 7.

The Murwab, carrying 216,000 cubic meters of LNG, arrived Nov. 4 at Sabine Pass, according to Qatar Gas Transport Co. and vessel tracking data compiled by Bloomberg. The last time Qatar sent a cargo there was in June 2008 when U.S. prices were more than double today’s level.

Countries that bet on the U.S. market “lost their shirt” this year, Chakib Khelil, energy minister of Algeria, Europe’s largest LNG supplier, said Oct. 7 in Buenos Aires.

To contact the reporter on this story: Ayesha Daya in Dubai on adaya1@bloomberg.net;

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Oil Rises Above $76 on U.A.E. Backing for Dubai, Weaker Dollar

By Christian Schmollinger and Ben Sharples

Nov. 30 (Bloomberg) -- Crude oil rose above $76 a barrel in New York after the United Arab Emirates’ central bank said it would back the country’s lenders from a possible default by Dubai World, easing concerns of an economic slowdown.

Oil gained as much as 1.1 percent today after the Abu Dhabi-based U.A.E. central bank said yesterday financial institutions will be able to borrow using a facility. The dollar declined against the euro, bolstering the attraction of commodities as an alternative investment.

“There is the expectation that Abu Dhabi will step in and do what needs to be done,” said Jonathan Kornafel, a director for Asia at options traders Hudson Capital Energy in Singapore. “Even so, the amount of capital isn’t really enough to upset the economic resurgence we’ve seen, so it’s really just a chance to buy on the dip.”

Crude oil for January delivery climbed as much as 80 cents to $76.85 a barrel on the New York Mercantile Exchange. Prices were at $76.63 a barrel, up 58 cents, at 3:26 p.m. in Singapore.

The contract declined 2.5 percent to settle at $76.05 a barrel on Nov. 27. Prices have gained 72 percent this year. Oil is set for a monthly decline of 0.4 percent, its first drop in four months.

“The market has run out of steam after spending most the year in an upward trajectory,” said Toby Hassall, a research analyst with CWA Global Markets Pty in Sydney. “The market is still coming to terms with the implications of the Dubai debt scare for oil.” The move by the U.A.E central bank could be a positive sign, he said.

Dubai World

Markets from Asia to the U.S. fell last week after Dubai World announced Nov. 25 it was seeking to delay loan repayments. Dubai’s stock markets will trade today for the first time since the news.

Dubai World, a state-owned holding company struggling with $59 billion of debt and other liabilities, said it would seek a standstill agreement with creditors and an extension of loan maturities until at least May 30, 2010. That raised the prospects of rising loan losses for U.A.E. and foreign banks.

The dollar traded at $1.5062 per euro at 6:33 a.m. in London, from $1.4988 on Nov. 27. The European currency last week gained 0.9 percent against the greenback, its biggest climb in three weeks.

“Barring any jarring announcements out of Dubai, we’ve already seen any support for the dollar,” said Hudson Capital’s Kornafel. “Unless new news comes out, we’ll see the dollar tick lower and crude tick higher.”

Iran Defiance

Iran announced expansion of its nuclear program in defiance of United Nations demands, a move the Obama administration said will further isolate the Islamic Republic from the international community.

President Mahmoud Ahmadinejad’s Cabinet ordered the Atomic Energy Organization of Iran to begin building 10 uranium enrichment sites within two months, the Islamic Republic News Agency reported. All would be at the same scale as Iran’s Natanz site, producing fuel for power plants to generate 20,000 megawatts of electricity, the state news agency said.

Iran is a member of the Organization of Petroleum Exporting Countries, which pumps 40 percent of the world’s oil.

Brent crude oil for January settlement on the London-based ICE Futures Europe exchange traded at $77.76 a barrel, up 58 cents, at 3:27 p.m. in Singapore. The contract earlier rose as much as 62 cents, or 0.8 percent, to $77.80 a barrel.

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

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Yen, Dollar Weaken as Risk Aversion Eases, U.A.E. Backs Dubai

By Yasuhiko Seki and Yoshiaki Nohara

Nov. 30 (Bloomberg) -- The yen and dollar fell against higher-yielding currencies after the United Arab Emirates’ central bank said it “stands behind” the country’s banks, easing concern about a default by state-owned Dubai World.

The euro advanced for the first time in five days against the yen after the Abu Dhabi-based central bank of the U.A.E. said lenders will be able to borrow using a special facility tied to their current accounts. The Australian and New Zealand dollars rallied as demand for riskier assets increased due to allayed concern over credit losses in the Middle East.

“The decision by U.A.E. helped calm down credit woes,” said Akane Vallery Uchida, foreign-currency strategist in Tokyo at Royal Bank of Scotland Group Plc. “The yen, which was bought over jitters in Dubai, is being sold.”

The yen fell to 129.87 per euro as of 7:40 a.m. in London, from 129.67 on Nov. 27 in New York. The euro strengthened to $1.5068, from $1.4988. The yen gained to 86.21 per dollar, from 86.53. It rose to a 14-year high of 84.83 on Nov. 27.

Australia’s dollar jumped to 91.91 U.S. cents, from 90.63 cents and strengthened to 79.25 yen, from 78.43. New Zealand’s dollar advanced to 72.08 U.S. cents, from 71.11 cents, and gained to 62.16 yen, from 61.52 yen.

The MSCI Asia Pacific Index of regional shares rose 3.5 percent and the Nikkei 225 Stock Average jumped 2.9 percent.

The yen’s decline against the euro was tempered by renewed concerns about state-owned Dubai World. Dubai’s property developer Nakheel PJSC asked Nasdaq Dubai to suspend the trading on all its Islamic sukuk bonds until it is in a position to provide further information, according to a statement to the Dubai bourse.

‘Impact Spreading’

“Dubai’s impact is spreading with the report on Nakheel,” said Takeshi Tokita, vice president of foreign-exchange sales at Mizuho Corporate Bank Ltd. in Tokyo. “That stoked concerns about the global market, causing yen-crosses to be sold.”

The dollar earlier climbed against the yen for the first time in five days as a report showed retail sales on Black Friday and the weekend after Thanksgiving advanced 0.5 percent from a year earlier.

The U.S. currency dropped 2.7 percent last week against the yen, the biggest weekly decline since the period to Aug. 14, as stock markets slumped after state-owned Dubai World sought to delay payments on debt.

Work Closely

Japanese Finance Minister Hirohisa Fujii was quoted by the Mainichi newspaper as saying the government won’t intervene to weaken the yen.

The government should work closely with the Bank of Japan to deal with the strengthening yen, Mainichi reported Fujii as saying. He made the remarks last night to reporters after discussing the yen-dollar exchange rate with Prime Minister Yukio Hatoyama, the newspaper said.

Fujii denied today saying he has ruled out intervening in foreign-exchange markets.

“I never said that,” Fujii told reporters in Tokyo today when asked about remarks he made yesterday.

“The market is already convinced that the Japanese government won’t intervene at the current level,” said Kazutoshi Yasuda, general manager of the markets department in Tokyo at FX Prime Corp., a foreign-exchange unit of Japanese trading house Itochu Corp.

Bank of Japan Governor Masaaki Shirakawa said today it’s up to the government to decide whether to intervene in the foreign- exchange market.

Rapid Appreciation

“The bank pays due attention to the effects of the recent rapid appreciation of the yen on business sentiment of the firms that are on the road to recovery, as well as to the effects of international financial developments,” Shirakawa said at a business meeting in Nagoya, central Japan. “It would be important, above all, for a central bank to examine the economy without prejudgment.”

Japan hasn’t sold its currency since March 16, 2004, when it was at about 109 per dollar. The BOJ sold 14.8 trillion yen ($172 billion) in the first three months of 2004, after record sales of 20.4 trillion yen in 2003. Japan last bought the currency in 1998 as the rate fell as low as 147.66.

Contracts granting the right to buy the yen versus the dollar rose last week to a 2.1 percentage-point premium relative to options for selling Japan’s currency, according to Bloomberg data. The odds of the yen strengthening past 84.83 per dollar to 84.5 by the end of March rose to 80 percent, options data compiled by Bloomberg show.

‘Spread Fears’

Dubai World, a state-owned holding company struggling with $59 billion of debt and other liabilities, said Nov. 25 it would seek a standstill agreement with creditors and an extension of loan maturities until at least May 30, 2010. The news led to a slump in global financial markets and raised prospects of new loan losses for U.A.E. and foreign banks.

“Dubai World’s news spread fears over potential risks in emerging markets,” said Akio Yoshino, chief economist in Tokyo at Societe Generale Asset Management (Japan) Co., a unit of France’s third-largest bank. “Underlying concerns here may encourage investors to repatriate funds from emerging and commodity markets.”

To contact the reporters on this story: Yasuhiko Seki in Tokyo at yseki5@bloomberg.net; Yoshiaki Nohara in Tokyo at ynohara1@bloomberg.net

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Wheat, Soybeans Gain as Dubai Debt Concerns Ease, Dollar Drops

By Luzi Ann Javier

Nov. 30 (Bloomberg) -- Wheat jumped as much as 1.9 percent and soybeans gained as the dollar declined after the United Arab Emirates’ central bank eased credit, boosting optimism the impact of Dubai World’s possible default may be limited.

The U.A.E. central bank yesterday said it “stands behind” the nation’s local and foreign banks and offered them access to more money under a new facility as they face losses from Dubai World’s debt.

“The stance that they have stated they will take should further calm markets’ nerves,” Luke Mathews, a commodity strategist at Commonwealth Bank of Australia, said by phone from Sydney today. “The developments in Dubai have certainly added to the volatility in agricultural commodity markets.”

Wheat for March delivery gained 12 cents to $5.8175 a bushel on the Chicago Board of Trade at 3:59 p.m. Singapore time. The contract fell 1.9 percent last week as Dubai’s bid to reschedule debt eroded investor confidence in commodities and boosted the dollar.

Dubai World, a state-owned holding company struggling with $59 billion of debt and other liabilities, said Nov. 25 it would seek a standstill agreement with creditors and an extension of loan maturities until at least May 30, 2010. That raised the prospect of rising loan losses for U.A.E. and foreign banks.

Soybeans for January delivery added as much as 1.2 percent to $10.66 a bushel and last traded at $10.645.

The Dollar Index, which tracks the value of the greenback against six major currencies including the euro and the yen, fell 0.6 percent to 74.564 at 3:01 p.m. Singapore time.

U.S. ‘Struggling’

A weaker dollar makes U.S. supplies more attractive to importers and investors as it makes commodities cheaper for holders of other currencies.

Rising global wheat stockpiles may curb gains in prices of the grain because “the U.S. is still struggling to compete” with other exporters, Commonwealth Bank’s Mathews said.

Wheat exports from Ukraine expanded to 5.4 million metric tons so far in the marketing year that began July 1, from 5.2 million tons in the same period last year, UkrAgroConsult, a Kiev-based Researcher, said Nov. 24. Ukraine is the world’s fifth-largest exporter, according to the U.S. Department of Agriculture.

Soybeans for September delivery jumped as much as 3.3 percent to 4,066 yuan ($596) a ton on the Dalian Commodity Exchange. That’s the highest price for the most-active contract since Sept. 2008. The contract closed 2.4 percent higher at 4,030 yuan.

China Subsidy

China, the world’s largest soybean importer, said Nov. 27 it will buy soybeans and corn from northeastern areas of the country from Dec. 1 through April 30 and will offer crushers a one-off subsidy of 160 yuan per ton to purchase local beans.

Fourteen of 27 traders and analysts surveyed on Nov. 27 from Tokyo to Chicago said corn and soybean prices will rise this week, on speculation commodity investments will increase at the start of December as rain and snow reduce yields in the U.S., the world’s biggest grower and exporter of both crops.

Major U.S. growing states including Iowa, Illinois, Nebraska, Minnesota and Indiana were forecast to have below- normal temperatures between Dec. 5 and Dec. 13, the U.S. Climate Prediction Center said Nov. 29.

“What the U.S. farmers need at the moment is dry and warmish weather for the completion of their harvest,” Mathews said. Cold weather “may weigh on prices there.”

Corn Demand

About 68 percent of the corn crop in the 18 largest U.S. producing states had been harvested as of Nov. 22, compared with 87 percent a year earlier and an average of 94 percent in the past five years, the U.S. Department of Agriculture said Nov. 23. About 94 percent of soybeans had been collected in the same period, compared with 97 percent a year earlier, it said.

Corn for March delivery was little changed at $4.14 a bushel at 3:02 p.m. Singapore time.

Corn may lead an advance in grains and oilseed markets in Chicago this week on optimism demand may be stronger than expected, Mathews said.

The USDA said last week exporters sold 1.22 million tons of corn in the week ended Nov. 19, more than triple the volume a week earlier. An additional 402,900 tons were sold for delivery in the next marketing year beginning Sept. 1, it said.

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

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Dubai May Forfeit Status as Financial Hub to Get Abu Dhabi Help

By Henry Meyer

Nov. 30 (Bloomberg) -- Dubai, the debt-laden Gulf city- state, may lose its status as the region’s financial hub in return for a rescue package from its oil-rich neighbor Abu Dhabi, economists and analysts said.

The bailout will mean eliminating financially unviable parts of the competing, state-run companies which lie at the root of the city’s at least $80 billion debt, according to Dubai-based UBS AG analyst Saud Masud. Dubai may also have to revert to specializing in trade and services, and drop its drive to become a regional banking center, said Ian Hay Davison, former chairman of the Dubai Financial Services Authority.

“Abu Dhabi has financial ambitions of its own,” said Eckart Woertz, an economist at the Gulf Research Center in Dubai. “Dubai will have to focus on its core competencies. There is terrible damage to its ambitions in the financial field from how it handled this.”

The immediate future of Dubai, whose ruler Sheikh Mohammed Bin Rashid Al Maktoum guarded the emirate’s independence, rests on how creditors respond to the demands to delay payments on $59 billion in debt and liabilities of flagship holding company Dubai World. The news sparked a sell-off in world stock markets due to concern that emerging-market risks may set back recovery from the worst global decline since the 1930s.

Moody’s Investors Service says Dubai’s debt may be as high as $100 billion, of which up to $25 billion is bad debt. Dubai World property unit Nakheel PJSC has $3.52 billion of Islamic bonds due Dec. 14.

Central Bank Money

The United Arab Emirates’ Abu Dhabi-based central bank said yesterday it “stands behind” the local and foreign banks. Abu Dhabi has yet to say whether it will step in to avoid default on the Nakheel bond. The sheikhdom has one of the largest sovereign wealth funds in the world, worth $627 billion according to the Roseville, California-based Sovereign Wealth Fund Institute.

The emirate, in control of 8 percent of the world’s oil reserves, is plowing the cash into its own diversification effort, buying shares of international banks, carmakers and chemical companies. Aabar Investments PJSC, which is 70 percent owned by Abu Dhabi, is in talks to raise its stake in Daimler AG to 15 percent from 9.1 percent, Khadem Abdulla Al-Qubaisi, the fund’s chairman, said on Nov. 16.

Abu Dhabi ruler Sheikh Khalifa Bin Zayed Al Nahyan’s priority will be to limit the fallout from Dubai while containing the free-spending neighboring emirate, said Tristan Cooper, a Dubai-based Middle East sovereign analyst at Moody’s.

Intervention

Dubai’s diversification away from dwindling oil reserves may yet help it bounce back from the current slump.

“I’m confident we’ll see some kind of Abu Dhabi intervention so this is more of a short-term thing,” said Haissam Arabi, chief executive officer of the Gulfmena Alternative Investments hedge fund in Dubai.

Dubai opened a stock exchange in 2000 and the Dubai International Financial Centre in 2004 to attract global financial institutions such as Goldman Sachs Group Inc. and HSBC Holdings Plc. Financial services accounted for 8.3 percent of Dubai’s economy in 2008.

Still, the city state, which sparked a property boom by allowing foreigners to invest in 2002, has suffered the steepest real-estate decline in the world since the credit crisis hit last year. It built islands in the shape of palms, the world’s tallest tower and a ski slope inside a shopping mall.

Property Slump

Home prices fell 50 percent from their peak in the third quarter of 2008, Deutsche Bank AG said on Nov. 5. Prices may drop as much as 30 percent more, UBS AG said Nov. 18.

Just days before the Dubai World announcement, Sheikh Mohammed demoted three business aides who were pivotal in the emirate’s debt-fueled expansion. He also removed the governor of the DIFC, Omar Bin Sulaiman, who had led efforts to transform Dubai into a finance hub.

This “very public concession” to Abu Dhabi will now be followed by the dominant U.A.E. emirate taking “a more active role in Dubai’s affairs,” Eurasia Group, a New York-based political risk consulting group, said in an e-mailed commentary.

Dubai sold $10 billion in bonds to the national central bank based in Abu Dhabi in February. Two Abu Dhabi banks provided a further $5 billion injection on Nov. 25. More money will be required, said Eurasia.

Abu Dhabi may seek to take over some of the financial activities of Dubai, according to Woertz.

Abu Dhabi is building a new financial center just off the city’s coast on Sowwah Island, which is scheduled to be completed as early as 2014 and will house the headquarters of the Abu Dhabi Securities Exchange. Al-Hilal Bank and National Bank of Abu Dhabi, which together provided the $5 billion for Dubai on Nov. 25, have bought plots on Sowwah Island, Abu Dhabi investment company Mubadala announced Oct. 1.

Dubai will focus on its strongest businesses including Jebel Ali Free Zone and DP World, which owns the Middle East’s largest port and has activities in 31 countries, says Woertz. Both are owned by Dubai World, Nakheel’s parent company.

“As a service center to the region it has a role,” Davison said of Dubai. “As a counterpart to New York it’s seriously set back.”

To contact the reporter on this story: Henry Meyer in Dubai at hmeyer4@bloomberg.net;

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