Dollar Index May Advance to 3-Month High: Technical Analysis

By Candice Zachariahs and Ron Harui

Dec. 9 (Bloomberg) -- The Dollar Index may extend gains to a three-month high of 77.69 after rising above resistance at the lower end of an ichimoku cloud, said Barclays Capital, citing trading patterns.

The index, which is used to track the dollar against the currencies of six major U.S. trading partners, posted yesterday its first close since April above 76.05, the base of the cloud according to Bloomberg data. The cloud is the area between the first and second leading span lines on the chart and is used to show an area where buy orders may be clustered.

“A potential change in trend is developing,” MacNeil Curry, chief North American technical strategist in New York at Barclays Capital, said in a telephone interview. Yesterday’s close “indicates that the trend is likely to extend and that we’re likely to see continued strength in the Dollar Index.”

The Dollar Index traded at 76.279 as of 7:15 a.m. in London from 76.198 in New York yesterday. It advanced 1.2 percent in the five days ended Dec. 4, the biggest weekly gain since June 5.

The index may rise to as high as 77.69, the low point set on Dec. 18, 2008, Barclays Capital analysts including Curry wrote in a note to clients yesterday. Support typically becomes resistance when it is broken. The 77.69 level would be the highest since Sept. 8.

An ichimoku chart analyzes the midpoints of historic highs and lows. Resistance is a level at which sell orders may be clustered and support is where there may be buy orders.

In technical analysis, investors and analysts study charts of trading patterns and prices to forecast changes in a security, commodity, currency or index.

To contact the reporters on this story: Candice Zachariahs in Sydney at czachariahs2@bloomberg.net; Ron Harui in Singapore at rharui@bloomberg.net.

Read more...

Yen Advances as Stocks Decline on Speculation Recovery Stalling

By Lukanyo Mnyanda

Dec. 9 (Bloomberg) -- The yen rose as stock markets fell and a report showed Japan’s economy expanded more slowly than initially reported, deepening concern that the pace of the global recovery is flagging.

The yen strengthened for a third day against the euro as the MSCI World Index of stocks slid 0.2 percent, boosting demand for the Japanese currency as a refuge. The British pound weakened to its lowest level in almost two months against the dollar before Chancellor of the Exchequer Alistair Darling presents his pre-budget report today in parliament.

“Risk aversion has been the main driver,” said Lutz Karpowitz, a currency strategist in Frankfurt at Commerzbank AG, Germany’s second-biggest lender. “I wouldn’t exclude the possibility of more bad news, which would be bad for the high- yielding currencies.”

The yen appreciated to 129.24 per euro as of 8:23 a.m. in London, from 130.03 yesterday in New York, after earlier trading at 129.18, the strongest since Nov. 30. Japan’s currency was at 87.71 per dollar, from 88.43. The euro bought $1.4734, from $1.4704, after earlier declining to $1.4668, the weakest level since Nov. 3.

The Japanese currency climbed against all of its 16 major counterparts, rising the most against the South Korean won and the pound.

Sterling dropped 0.3 percent to $1.6236 and weakened 0.5 percent to 90.71 pence per euro.

Japan’s Cabinet Office said today in Tokyo that gross domestic product rose at an annual 1.3 percent pace last quarter, slower than the 4.8 percent rate reported in preliminary figures last month. The median estimate of economists surveyed was for 2.8 percent growth.

Japanese Prime Minister Yukio Hatoyama unveiled a 7.2 trillion yen ($81 billion) stimulus package yesterday and the Bank of Japan last week announced a 10 trillion yen credit program to revive the economy.

To contact the reporter on this story: Lukanyo Mnyanda in London at lmnyanda@bloomberg.net.

Read more...

Oil Snaps Five-Day Decline After Report Shows Drop in Supplies

By Christian Schmollinger

Dec. 9 (Bloomberg) -- Crude oil climbed above $73 a barrel in New York after an industry report showed U.S. supplies dropped, bolstering optimism that fuel demand in the biggest energy-consuming nation will increase.

Oil rose for the first time in six days after the American Petroleum Institute said crude inventories fell by 5.82 million barrels. Futures dropped to an eight-week low yesterday as the dollar gained against the euro. The U.S. Energy Department will release its weekly report today in Washington. Inventories are forecast to rise, according to a Bloomberg News survey.

“After the API numbers came out, the market shot up right away,” said Clarence Chu, a trader with options dealer Hudson Capital Energy in Singapore. “But people are holding back a bit for the EIA numbers. If we see a similar number there, oil could spike up $2 or $3.”

Crude oil for January delivery gained as much as 72 cents, or 1 percent, to $73.34 a barrel in electronic trading on the New York Mercantile Exchange. It was at $73.01 at 3:12 p.m. in Singapore. Yesterday, the contract fell $1.31 to $72.62 a barrel, the lowest settlement since Oct. 9. Futures are up 64 percent this year.

The Energy Department report is forecast to show that crude inventories increased 250,000 barrels, according to the survey. Oil-supply totals from the API and Energy Department moved in the same direction 75 percent of the time in the past four years, according to data compiled by Bloomberg News.

Dollar Strength

The euro traded near a one-month low against the dollar on speculation credit ratings of more European nations will be cut after Greece’s debt ranking was lowered by Fitch Ratings Ltd. The dollar was little changed after rising a third day yesterday to $1.4704 per euro in New York.

“The dollar has been a very supportive element for oil in recent months,” said Toby Hassall, an analyst at CWA Global Markets Pty in Sydney. “If you pull that support away, it exposes a bit of downside.”

Gasoline supplies fell 753,000 barrels last week, according to the API report. Inventories of distillate fuel, a category that includes heating oil and diesel, rose 1.01 million barrels to 168.9 million, the report showed.

The API collects stockpile information on a voluntary basis from operators of refineries, bulk terminals and pipelines. The government requires reports to be filed with the Energy Department for its weekly survey.

The Energy Department report will likely show gasoline inventories rose 1.6 million barrels in the week ended Dec. 4 from 214.1 million the prior week, according to a survey of analysts. Supplies of distillate fuel, a category that includes heating oil and diesel, probably fell 750,000 barrels from 165.7 million the prior week.

Brent Premium

Brent crude oil for January settlement rose as much as 53 cents, or 0.7 percent, to $75.72 a barrel on the London-based ICE Futures Europe exchange. It was at $75.52 a barrel at 3:12 p.m. Singapore time. The contract fell $1.24, or 1.6 percent, to $75.19 a barrel yesterday.

Brent traded at a premium of $2.44 a barrel to West Texas Intermediate contracts traded on New York today after widening to $2.57 yesterday, the highest since August. The Nymex contract has declined relative to the U.K. grade as U.S. stockpiles rose.

Oil inventories at Cushing, Oklahoma, the delivery point for Nymex futures, rose to 30.89 million barrels in the week ending Nov. 27, the highest since early September.

“The refinery runs are in the low 80’s or lower now, so we’ll have to see those runs get back up to 85 percent and then you can start taking those stocks out of Cushing,” said Hudson Capital’s Chu. “The runs are really the key.”

To contact the reporter on this story: Christian Schmollinger in Singapore at christian.s@bloomberg.net

Read more...

Copper Falls in London on Slower Growth in Japan: LME Preview

By Anna Stablum

Dec. 9 (Bloomberg) -- Copper fell for a fifth day in London, posting the longest losing streak since July, as Japan’s economy grew less than expected in the third quarter and concern mounted about Greece’s ability to meet debt commitments.

Market News:

Metals News:

Metals Prices:

-- Copper declined 0.8 percent to $6,920 a metric ton on the
LME at 8:21 a.m. Relative Strength Index 55.
-- Aluminum dropped 0.9 to $2,143 a ton. RSI 64.
-- Zinc shed 1.2 percent to $2,300 a ton. RSI 53.
-- Lead fell 0.2 percent to $2,282 a ton. RSI 46.
-- Nickel little changed at $16,150 a ton. RSI 40.
-- Tin eased 0.7 percent to $15,050 a ton. RSI 51.

Other markets:      Last           % Change  % YTD
Dollar Index        76.079          -0.2     -6.4
Crude oil           $73.38           1.1       65
Gold                $1,134.30        0.5       29
MSCI World Index    1,148.98        -0.2       25

Economic Events:
                                Forecast       Prior     Time
                                                      (London)
U.S.  MBA Mortgage Applications                  2.1%     12:00
UK Pre-Budget Report Published                            12:30
U.S. Wholesale Inventories        -0.5%          -0.9%    15:00
JN   Machine Orders (MoM)         -4.4% 0.7%     10.5%    23:50

To contact the reporter on this story: Anna Stablum in London at astablum@bloomberg.net

Read more...

Gold Rallies After Slide to Three-Week Low Lures Investors

By Kim Kyoungwha

Dec. 9 (Bloomberg) -- Gold advanced for the first time in five days on speculation that the metal’s slide to the lowest price in three weeks is attracting some investors.

Bullion slumped 2.6 percent yesterday as the dollar strengthened and after Lee Eung Baek, head of reserve management at the Bank of Korea, described gold as an “illusion” and said the bank is unlikely to raise holdings.

“There’s some buying on weakness in gold and oil so far,” said Ben Westmore, a commodities analyst with National Australia Bank in Sydney. “We’ve seen quite thin trading in commodities markets as it moves into the turn of the year. Some investors are still optimistic about the global recovery and willing to buy on weakness.”

Gold for immediate delivery strengthened as much as 0.8 percent to $1,136.90 an ounce before trading at $1,134 at 1:53 p.m. in Singapore. The price dropped to $1,124.60 an ounce yesterday, the lowest price since Nov. 16.

February-delivery futures on the New York Mercantile Exchange’s Comex unit slid 0.7 percent to $1,135.20.

The Dollar Index, a six-currency gauge of the dollar’s value, fell 0.1 percent today.

The dollar traded near a five-week high against the euro on speculation that credit ratings of more European nations will be cut after Fitch Ratings lowered Greece’s debt ranking. The euro bought $1.4724 from $1.4704.

“A rebounding dollar is giving an excuse to those who were trying to book profits ahead of year-end,” said Kim Kang Nam, a trader with Tongyang Futures Co. in Seoul. “Gold may find some support around $1,100.”

Silver for immediate delivery increased 0.6 percent to $17.695 an ounce. Palladium slipped 0.6 percent to $367.50 an ounce and platinum climbed 0.3 percent to $1,416 an ounce.

To contact the reporters on this story: Kyoungwha Kim in Singapore at kkim19@bloomberg.net;

Read more...

China to Close Steel Mills Failing Environment Limits

By Bloomberg News

Dec. 9 (Bloomberg) -- China, the world’s largest emitter of greenhouse gases, set new environmental and power standards for steelmakers and threatened closures to curb pollution and overcapacity.

Plants should cap effluent discharge at 2 cubic meters and sulfur dioxide emission at 1.8 kilograms for every ton of steel made, according to draft regulations the industry ministry made available for public comment on its Web site.

China, the world’s largest steelmaking nation, has rejected almost $29 billion of industrial projects this year and is planning measures to close plants to curb pollution, it said last month. A steel oversupply is overwhelming demand created by the government’s stimulus, and depressing profits for larger mills including Baoshan Iron & Steel Co.

“These environmental and power standards are all necessary for the long-term development of China’s steel industry,” said Hu Yanping, analyst at industry publication Umetal. “But the key is how to implement the policies. After all there are various parties involved with different profit interests.”

Baoshan Iron & Steel, the largest Chinese steelmaker, rose 0.7 percent to close at 9.24 yuan in Shanghai trading. The benchmark Shanghai index dropped 1.7 percent.

“Steel mills must exit the industry if they can’t meet the requirements,” the Ministry of Industry and Information Technology said in the proposal. Government departments shouldn’t approve construction and upgrading if the mills can’t meet the requirements and shouldn’t issue effluent discharge and land permits, the draft also said.

Copenhagen Summit

China is proposing the standards as Copenhagen this week hosts the United Nations climate summit, where delegates from almost 200 countries are discussing how to extend or replace the 1997 Kyoto Protocol. The Asian nation last month pledged to cut output of carbon dioxide gas per unit of gross domestic product by 40 percent to 45 percent by 2020 from 2005 levels.

Banks shouldn’t give credit support and government departments must not issue iron ore import permits and supply the steelmaking ingredient to mills failing to meet the new requirements, the Chinese ministry said today in the proposal.

Steel plants should cap energy consumption of blast furnaces at 411 kilograms coal equivalent and fresh water use at 6 tons for each ton they produce, the statement said.

The ministry also proposed that carbon steel mills should have a minimum production capacity of 1 million tons, and specialized makers of at least 500,000 tons. It didn’t suggest penalties for those failing to meet output limits.

Small Plants

“The draft has more details on power and environmental standards compared with the industry policy announced in 2005,” said Xu Xiangchun, chief analyst at researcher Mysteel Research Institute. China has between 300 to 400 carbon steel mills with individual capacity of less than 1 million tons, he said.

The government last month also issued environmental standards for lead smelting, capping sulfur dioxide emissions at a maximum of 8 kilograms for each ton of lead produced.

Crude steel production in China may rise 14 percent to 570 million tons this year, Xu Lejiang, chairman of Baosteel Group Corp., the parent of Baoshan Steel, said Dec. 3. The nation’s output capacity may have reached 700 millions or higher, the National Development and Reform Commission, the country’s top economic planner, said last week.

China is planning measures to close plants in steel, aluminum, cement, coke, paper, glass and utility industries, the Ministry of Environmental Production said Nov. 13. The NDRC is seeking to address the slow pace of consolidation in industries with overcapacity, it said Nov. 27.

--Xiao Yu. Editors: Tan Hwee Ann, Ravil Shirodkar.

To contact the Bloomberg News Staff of this story: Xiao Yu in Beijing at yxiao@bloomberg.net

Read more...

Asian Stocks Decline as Greece Rating Cut Dents Recovery Hopes

By Shani Raja and Jonathan Burgos

Dec. 9 (Bloomberg) -- Asian stocks fell, led by finance and mining companies, after Japan’s economy grew more slowly than estimated and Fitch cut Greece’s credit rating, denting confidence in the global economic recovery.

Mitsubishi UFJ Financial Group Inc., Japan’s biggest publicly traded bank, sank 5.2 percent in Tokyo. Nissan Motor Co., a Japanese automaker that gets 35 percent of its revenue from North America, slumped 3.4 percent as the dollar weakened against the yen. Newcrest Mining Ltd., Australia’s largest gold producer, slipped 1.6 percent after the price of the metal dropped for a fourth day.

“Investor sentiment is worsening because of the reignited uncertainty about credit,” said Naoteru Teraoka, who helps oversee about $16 billion in Tokyo at Chuo Mitsui Asset Management Co. “There’s uncertainty about the future and companies are cautious.”

The MSCI Asia Pacific Index declined 0.6 percent to 120.19 as of 6:07 p.m. in Tokyo. The gauge has rallied 70 percent from a five-year low on March 9 on signs stimulus measures were reviving global growth. Japan’s Nikkei 225 Stock Average dropped 1.3 percent as the Cabinet Office said the economy expanded less than initially estimated in the third quarter.

Hong Kong’s Hang Seng Index fell 1.4 percent. Standard Chartered Plc dropped 4.2 percent after CLSA Asia-Pacific Markets recommended investors sell the stock.

China Lending Curbs

The Shanghai Composite Index fell 1.7 percent, extending yesterday’s 1.1 percent drop, on concern the government will curb new lending to avert asset bubbles. Industrial Commercial Bank of China Ltd., the nation’s biggest lender, fell 1.5 percent.

Australia’s S&P/ASX 200 Index lost 0.7 percent as reports showed consumer confidence fell in December and home-loan approvals dropped in October. Woolworths Ltd., the nation’s largest retailer, dropped 1.7 percent, while Australia & New Zealand Banking Group Ltd. dipped 1.9 percent.

New Zealand’s NZX 50 Index slipped 0.3 percent in Wellington, even as Finance Minister Bill English said the nation’s economic outlook was improving.

Futures on the Standard & Poor’s 500 Index added 0.2 percent. The gauge declined 1 percent yesterday, led by commodity producers. Fitch cut Greece’s credit rating one step to BBB+, the third-lowest on the investment-grade scale, and said the outlook for the rating is negative. Standard & Poor’s yesterday put the country’s rating on watch for a downgrade.

‘Sense of Indecision’

“There’s a sense of indecision,” said Nader Naeimi, a Sydney-based strategist at AMP Capital Investors, which oversees about $75 billion. “The fact that Greece has been downgraded is going to upset the market in the short term.”

Separately, Nakheel PJSC, the Dubai World property developer, posted a first-half loss of 13.4 billion dirhams ($3.65 billion) as it wrote down the value of land and property, according to a document obtained by Bloomberg News.

Dubai World roiled global markets two weeks ago after seeking to delay debt repayments. It last week began talks with banks to restructure $26 billion of debt, including a $3.52 billion Islamic bond of Nakheel’s maturing on Dec. 14.

Mitsubishi UFJ was the biggest drag on MSCI Asia Pacific Index, dropping 5.2 percent to 477 yen. Sumitomo Mitsui Financial Group Inc., Japan’s second-biggest bank by value, slipped 2.7 percent to 2,740 yen. Mizuho Financial Group Inc., the nation’s No. 3 lender by market value, sank 3 percent to 161 yen.

Japan GDP Revision

Japan’s gross domestic product rose at an annual pace of 1.3 percent, slower than the 4.8 percent reported in preliminary figures last month, the Cabinet Office said today. The revised figure was also lower than the predictions of all but one of the 17 economists surveyed by Bloomberg News.

The Japanese government yesterday unveiled a 7.2 trillion yen ($81 billion) economic stimulus package, bringing to more than 29 trillion yen the amount of spending to boost the economy since September 2008.

In Shanghai, ICBC, as the world’s most profitable bank is known, dropped 1.5 percent to 5.22 yuan. China Construction Bank Corp., the nation’s second-biggest lender, slipped 1.3 percent to 6 yuan.

The China Banking Regulatory Commission will “strictly control lending to industries that are energy-intensive, polluting and have overcapacity, and raise the quality of lending,” Chairman Liu Mingkang said late yesterday. Overall, it will “increase regulatory supervision,” the official said.

Japanese exporters declined as the stronger yen threatened to reduce the value of overseas revenue at the companies when converted into their home currency.

Japan Exporters Decline

Nissan slumped 3.4 percent to 711 yen. Sony Corp., an electronics maker that gets 24 percent of revenue in the U.S., lost 2.9 percent to 2,510 yen. Canon Inc., the world’s biggest maker of office equipment, declined 1.6 percent to 3,650 yen.

The yen appreciated to as high as 87.79 against the dollar in early trading today in Tokyo, compared with 88.90 at the 3 p.m. close of stock trading yesterday. Against the euro, Japan’s currency strengthened to as much as 129.18 from 131.96.

“Concerns remain about currencies as well as overseas credit risks,” said Hiroichi Nishi, an equities manager at Nikko Cordial Securities Inc. in Tokyo.

The MSCI Asia Pacific Index’s rally from the March low has outpaced gains of 61 percent by the S&P 500 and 54 percent for Europe’s Dow Jones Stoxx 600 Index. Stocks in the benchmark are valued at 22 times estimated earnings, compared with 17 times for the S&P 500 and 15 times for the Stoxx.

Australian Consumer Confidence

In Sydney, Woolworths slipped 1.7 percent to A$26.96. Harvey Norman Holdings Ltd., Australia’s biggest electronics retailer, dropped 2.6 percent to A$4.12.

The country’s consumer confidence fell in December after central bank Governor Glenn Stevens increased borrowing costs for an unprecedented third straight month, according to a survey by Westpac Banking Corp. and the Melbourne Institute.

The number of loans granted to build or buy houses and apartments in Australia dropped 1.4 percent in October from the previous month, when they gained a revised 3.3 percent, the country’s statistics bureau said today.

ANZ Bank, the nation’s fourth-largest lender, dropped 1.9 percent to A$21.51. Westpac lost 1.1 percent to A$23.59.

In Hong Kong, Standard Chartered declined 4.2 percent to HK$182.20. CLSA Asia-Pacific Markets cut its recommendation on the stock to “sell” from “underperform.” It was CLSA’s second downgrade of Standard Chartered in two weeks after Dubai World attempted to reschedule its debt.

Miners Slide

Newcrest lost 1.6 percent to A$35.17. Sumitomo Metal Mining Co., Japan’s biggest gold producer, dropped 2.6 percent to 1,403 yen. Zijin Mining Group Co., China’s biggest producer of the metal, slipped 1.7 percent to HK$8.12 in Hong Kong. Gold futures in New York fell 1 percent to $1,132.20 an ounce in New York, the fourth day of declines.

“There was a whole host of negative issues that gave people an excuse to cut back on risky positions,” said Chris Weston an institutional dealer at IG Markets in Melbourne. “People seem quite happy to sit on the sidelines until the new year.”

BHP Billiton Ltd., the nation’s biggest oil producer, fell 1.2 percent to A$40.55. Crude oil dropped 1.8 percent to $72.62 a barrel yesterday, the lowest settlement since Oct. 9. Oil rose 1 percent today.

Woodside Petroleum Ltd., Australia’s second-largest oil producer, slipped 2.1 percent to A$47.17. Mitsui & Co., which gets half of its sales from energy and metals, declined 3.3 percent to 1,234 yen.

New Zealand Oil & Gas Ltd., the country’s biggest publicly traded explorer, lost 1.1 percent to NZ$1.77. New Zealand could do better than expected in the May budget, Finance Minister Bill English told parliament’s finance & expenditure select committee in Wellington today.

To contact the reporters on this story: Shani Raja in Sydney at sraja4@bloomberg.net; Jonathan Burgos in Singapore at jburgos4@bloomberg.net.

Read more...

U.K. Stocks Fluctuate; Kazakhmys, Man Group Retreats, RBS Gains

By Roger Neill

Dec. 9 (Bloomberg) -- U.K. stocks fluctuated as Kazakhmys Plc followed copper prices lower and Man Group Plc said the net asset value of its flagship fund dropped, countering a rebound in Royal Bank of Scotland Group Plc.

The benchmark FTSE 100 Index lost 6.35, or 0.1 percent, to 5,216.78 as of 8:45 a.m. in London.

Read more...

European, Asian Stocks Decline; Man Group, Mitsubishi Retreat

By Adam Haigh

Dec. 9 (Bloomberg) -- European stocks declined for a third day and Asian shares fell after Japan’s economy grew more slowly than estimated and Fitch Ratings downgraded five Greek banks.

Man Group Plc, the biggest publicly traded hedge-fund manager, slid 3.6 percent after the value of its flagship fund dropped. Mitsubishi UFJ Financial Group Inc., Japan’s largest publicly traded bank, sank 5.2 percent in Tokyo. Debenhams Plc advanced 3.1 percent after BofA Merrill Lynch Global Research recommended the retailer.

Europe’s Dow Jones Stoxx 600 Index slipped 0.5 percent to 242.76 at 8:45 a.m. in London. The regional gauge has climbed 54 percent since March 9, lifted by record-low interest rates and about $12 trillion in spending by governments worldwide. The measure is valued at about 54 times its companies’ reported earnings, near the highest level since 2003, data compiled by Bloomberg show.

The MSCI Asia Pacific Index declined 0.6 percent today, led by finance and mining companies, after Japan’s economy expanded an annualized 1.3 percent in the third quarter, slower than the 4.8 percent reported last month.

Mitsubishi UFJ led the declines in Asia, dropping 5.2 percent to 477 yen. Sumitomo Mitsui Financial Group Inc., Japan’s second-biggest bank by value, slipped 2.7 percent to 2,740 yen. Mizuho Financial Group Inc., the nation’s third- largest lender by market value, sank 3 percent to 161 yen.

U.S. Futures

Futures on the Standard & Poor’s 500 Index added 0.2 percent. Treasury Secretary Timothy Geithner plans to tell Congress that the Obama administration will extend the $700 billion Troubled Asset Relief Program until next October, according to people familiar with the matter. A letter notifying Congress of the extension could come as soon as today said the people, who declined to be identified. Andrew Williams a Treasury Department spokesman, declined to comment.

Man Group dropped 3.6 percent to 305.2 pence after the net asset value of its flagship Man AHL Diversified Futures Ltd. fund fell 4.3 percent in the week ended Dec. 7.

Debenhams surged 3.1 percent to 82.5 pence. The U.K.’s second-largest department-store chain was raised to “buy” at BofA Merrill Lynch, which said “management will drive up profitability through better buying, mix and cost control.”

National Bank of Greece SA slid 4.7 percent to 17.35 euros and Alpha Bank SA dropped 3.7 percent to 7.72 euros. Fitch Ratings downgraded National Bank, Alpha Bank and three other Greek lenders following its downgrade of the nation’s sovereign rating to BBB+ from A- yesterday.

VW Gains

Volkswagen AG advanced 2.5 percent to 80.82 euros after Europe’s largest carmaker agreed to buy 20 percent of Suzuki Motor Corp. for 222.5 billion yen ($2.5 billion) to boost its presence in India. The Japanese automaker is the parent of Maruti Suzuki India Ltd., the maker of half of the cars sold in the country, which rose 1.7 percent to 1,595.8 rupees.

Reed Elsevier Plc, the publisher of Variety magazine, climbed 1.2 percent to 473.7 pence after Deutsche Bank AG raised its recommendation on the shares to “buy” from “hold.”

Chancellor of the Exchequer Alistair Darling today may boost the U.K. Treasury’s borrowing and raise taxes on bankers, part of the Labour government’s effort to revive voter support before next year’s election. Darling, who speaks at 12:30 p.m. London time in Parliament, may add 30 billion pounds ($48 billion) to the government’s borrowing forecasts for the next four years, according to the median estimate of 37 economists surveyed by the Treasury last month.

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

Read more...

Renewed Woes Over Sovereign Debt Ratings with UK and US are at Risk!

Daily Forex Fundamentals | Written by ecPulse.com | Dec 08 09 11:18 GMT |

Moody's managed to add to the ongoing volatility in the market, as their latest edition of their Aaa Sovereign Monitor, that assesses their top eight Aaa rated countries, of which the most important are the US, the UK, Germany and France. Where the financial crisis has hit those economies badly and managed to strike their financial sector and force the governments to extend their helping hand and increase their lending swelling their public deficits. The worrisome part was revolving as usual around the United States and the United Kingdom ratings. Moody's sees that those two nations are not at all immune to testing the Aaa boundary which is known as the point of “no return”. Despite the four named nations being indeed stricken by the crisis, and though four of the nations still have “stable” Aaa top rating by Moody's Germany and France still have their “resistant” category unlike the case for the United Kingdom and the United States which have shifted lower to “resilient” and at risk of sinking further to “vulnerable” as the deficit continues to expand further beyond proportionate representation of the GDP which is already weak affecting by that the governments' capabilities of extending their borrowing. To understand the depth of the ratings, both nations are still among the Aaa top ratings by Moody's yet that class has also categorize by itself, which are “resistant”, “resilient”, and “vulnerable” and as we said with France and Germany with still a “resistant” classification the other two are lower at a “resilient” categorization and risk sinking further to the “point of no return”! The troubles for the weak UK economy continue to expand, especially as the incoming fundamentals remain very weak and the economy lags behind others well. Adding to the agony already floating in the market over Dubai World debt default, which UK's biggest four banks are deeply involved with, with an already fragile financial sector, comes the warning from Moody's and though they are still stable within the Aaa ratings they are surely not immune of testing the lower limit! Moody's scare comes just a day ahead of Darling's Pre-budget testimony tomorrow, and after he yesterday reiterated his resilient stance of preferring to do too much than too little to help the economy rest ashore. His stance implies that further measures might be extended to the economy at the point the deficit swelled high signaling that he will delay his attention to acting upon the highest deficit since WWII, saying “I do think we need to make a determined effort to get our debt down”! Gross debt to GDP ratio has swollen since the start of the crisis estimated to end the year at 69% of the GDP compared to 44% at the end of 2007. The budget deficit also exceeded the EU 3.0% golden rule and according to the European Commission it now stands above 10% of the GDP. Ecpulse disclaimer: The content of ecPulse.com and any page in the website contain information for investors/traders and is not a recommendation to buy or sell currencies, stocks, gold, silver & energies, nor an offer to buy or sell currencies, stocks, gold, silver & energies. The information provided reflects the writers' opinions that deemed reliable but is not guaranteed as to accuracy or completeness. ecPulse is not liable for any losses or damages, monetary or otherwise that result. I recommend that anyone trades currencies, stocks, gold, silver & energies should do so with caution and consult with a broker before doing so. Prior performance may not be indicative of future performance. Currencies, stocks gold, silver &energies presented should be considered speculative with a high degree of volatility and risk

Read more...

London Session Recap

Daily Forex Fundamentals | Written by Forex.com | Dec 08 09 11:16 GMT |

Dollar buying early in the European session failed to find any follow through. EUR/USD pushed down to around USD1.4783 before EUR buyers stepped in and took the EUR back towards its overnight highs around 1.4860. Concerns that Dubai World is struggling to restructure its debt had weighed heavily on Dubai stocks this morning. Asian stocks were also bias lower overnight. In contrast, risk appetite clawed back a little ground in Europe allowing most equities to push a touch higher. Bernanke’s reminder that there are significant headwinds facing the economy is a strong indication that US interest rates will be low for some time yet. This appears to suggest that there may still be life in the USD carry trade and that the USD’s inverse correlation with the carry trade may not be over yet. That said, last week’s payrolls data is a strong reminder that this trade does have a limited shelf life indicating that significant upside in EUR/USD is still likely to be limited near-term. Forthcoming data releases will be crucial for the USD from this point. A wave of better US data will likely to needed to reassert the threat of Fed tightening and to stop EUR/USD creeping back above the 1.4900 handle. Sterling was shaken early in the London session following a comment from Moody’s that the US and the UK may test the boundaries of the Aaa rating in view of the deteriorating position of their budget deficits. More bad news for the UK came with the publication of worst than expected production data. Manufacturing remained flat on the month which will further fears that the sector could be stalling. This news followed a report from the BRC that annual growth in retail sales slowed in Nov. Some relief was granted by another good set of house price data but EUR/GBP trended higher through the morning, presently stalling in the 0.9090 area. USD/JPY has continued to trend lower, finding support at JPY88.60. The Japanese government’s announcement of a USD 81 bln fiscal stimulus package was met with criticism of it being too little too late. That said, the appallingly large debt burden in Japan remains a considerable constraint to further spending. Japan’s Tankan report is due next week. Key focus today will be the BoC policy meeting. The market will be looking to see if the BoC stray from its reassurance to keep policy on hold until the middle of next year. Canadian housing starts are also due. Forex.com http://www.forex.com DISCLAIMER: The information and opinions in this report are for general information use only and are not intended as an offer or solicitation with respect to the purchase of sale of any currency. All opinions and information contained in this report are subject to change without notice. This report has been prepared without regard to the specific investment objectives, financial situation and needs of any particular recipient. While the information contained herein was obtained from sources believed to be reliable, author does not guarantee its accuracy or completeness, nor does author assume any liability for any direct, indirect or consequential loss that may result from the reliance by any person upon any such information or opinions.

Read more...

Forex Technical Analysis

Daily Forex Technicals | Written by DeltaStock Inc. | Dec 08 09 11:05 GMT |

EUR/USD Current level-1.4817 EUR/USD is in a broad consolidation, after bottoming at 1.2331 (Oct.28,2008). Technical indicators are neutral, and trading is situated above the 50- and 200-Day SMA, currently projected at 1.4793 and 1.3523. Yesterday's break below 1.4801 signals a continuation of the negative bias towards 1.4623, en route to 1.4450 major support area. Although the bottom at 1.4757 has been confirmed to be the final of the slide from 1.5146, current rebound is corrective in nature and precedes next drowning towards 1.4623. Intraday bias is positive for a break above 1.4856 and will target 1.4910 resistance area. Crucial on the upside is 1.4970. Resistance Support intraday intraweek intraday intraweek 1.4910 1.5146 1.4796 1.4450 1.4970 1.5290 1.4757 1.3740 USD/JPY Current level - 89.00 The overall downtrend has been renewed with the recent break below 87.12. Trading is situated below the 50- and 200-day SMA, currently projected at 94.86 and 94.84. The pair is still in the downtrend from 90.77 and is currently heading for a precise test of the 88.50 support zone. A reversal around 88.19-50 is to be expected and it should provoke a rise towards 90.77, en route to 92.40 major resistance Resistance Support intraday intraweek intraday intraweek 90.77 92.40 88.50 84.79 91.58 95.60 87.50 79.60 GBP/USD Current level- 1.6369 The pair is in a downtrend after peaking at 1.7042. Trading is situated above the 50- and 200-day SMA, currently projected at 1.6454 and 1.5258. Current rebound from yesterday's minor bottom at 1.6312 is corrective in nature and precedes next slide towards 1.6250, en route to 1.6130. Important resistance on the upside remains 1.6519 area. Resistance Support intraday intraweek intraday intraweek 1.6519 1.6850 1.6313 1.6130 1.6723 1.7042 1.6250 1.5706 DeltaStock Inc. - Online Forex & Securities Broker www.deltastock.com RISK DISCLAIMER: These analyses are for information purposes only. They DO NOT post a BUY or SELL recommendation for any of the financial instruments herein analyzed. The information is obtained from generally accessible data sources. The forecasts made are based on technical analysis. However, Delta Stock’s Analyst Dept. also takes into consideration a number of fundamental and macroeconomic factors, which we believe impact the price moves of the observed instruments. Delta Stock Inc. assumes no responsibility for errors, inaccuracies or omissions in these materials, nor shall it be liable for damages arising out of any person's reliance upon the information on this page. Delta Stock Inc. shall not be liable for any special, indirect, incidental, or consequential damages, including without limitation, losses or unrealized gains that may result. Any information is subject to change without notice.

Read more...

U.K. Manufacturing Production Unexpectedly Stalled

By Scott Hamilton

Dec. 8 (Bloomberg) -- U.K. manufacturing unexpectedly stalled in October, a sign the economy is struggling to shake off the longest recession on record.

Factory output was unchanged after gaining 1.5 percent in September, the Office for National Statistics said today in London. Economists predicted a 0.4 percent increase, according to the median of 21 forecasts in a Bloomberg News survey.

Bank of England policy makers will probably maintain their bond-purchase plan at 200 billion pounds ($328 billion) this week as they assess whether the economy has shaken off the slump. Chancellor of the Exchequer Alistair Darling said yesterday that he would rather suffer criticism for removing support for the economy too late than too early.

“At first glance it is below expectations, but it was coming off a strong month in September,” said Peter Dixon, an economist at Commerzbank AG in London. “All in all, I’m not too worried about it. Most of the data is pointing towards a stabilization and it’s still consistent with a recovery.”

The pound was little changed after the data and traded at $1.6358 at 9:47 a.m. in London, down 0.7 percent from yesterday.

Of the 13 categories in manufacturing, four rose, led by machinery and equipment, the statistics office said. Nine fell, and the biggest decline was in electrical and optical gear.

Smiths Group Plc, the world’s biggest maker of mechanical seals for the energy and marine industries, said Nov. 17 demand from manufacturers for its seals and aftermarket services had declined since the end of July.

Forecast

U.K. factory production will begin growing again next year as exports rebound, the Engineering Employers Federation said yesterday. Production will grow 0.9 percent in 2010 after contracting 10.4 percent this year, according to the London- based lobby group.

Overall industrial production, which includes mining, quarrying, utilities, oil and gas and accounts for 17 percent of the economy, was unchanged on the month and dropped 8.4 percent from a year earlier, the statistics office said.

Production fell 0.9 percent in the third quarter, revised down from a 0.8 percent drop. The revision will have a “negative” effect on the gross domestic product estimate for the quarter, officials said.

The U.K. economy contracted 0.3 percent in the three months through September, the sixth quarter of contraction, making this the longest slump since records began in 1955.

The Bank of England will this week decide to keep unchanged its bond program, according to all 38 economists in a Bloomberg News survey. All 53 economists in a separate survey said policy makers will also hold their key interest rate at 0.5 percent. The bank announces its decision at noon in London on Dec. 10.

To contact the reporter on this story: Scott Hamilton in London at shamilton8@bloomberg.net.

Read more...

U.K. Retail Sales Annual Growth Slowed in November, BRC Says

By Jennifer Ryan

Dec. 8 (Bloomberg) -- U.K. retail sales increased at a slower annual pace in November as Britons curbed spending on food, the British Retail Consortium said.

Sales at stores open at least 12 months rose 1.8 percent from a year earlier, compared with a 3.8 percent gain in October, the London-based BRC said in an e-mailed statement today. Food sales rose 2.1 percent in the three months through November, the smallest gain this year.

“We would have expected much stronger growth,” Stephen Robertson, director general of the BRC, said in the statement. “Uncertainty over jobs and future tax increases and government spending cuts is making customers more cautious.”

Chancellor of the Exchequer Alistair Darling will present tax and spending plans to Parliament tomorrow as he tries to curb Britain’s deficit while supporting the economy. The Bank of England may hold its bond-purchase plan at 200 billion pounds ($328 billion) this week as policy makers assess if the recession has ended.

Sales of non-food items rose 3.3 percent in the three months through November, the biggest gain this year, the BRC said. The report measures changes in the actual value of retail sales and doesn’t adjust for price changes.

“Once the fact that food sales growth slowed further is factored in, largely reflecting lower food price inflation, it represents a solid start to Christmas trading,” Helen Dickinson, head of retail at KPMG, which conducts the retail survey with the BRC, said in the statement.

John Lewis Partnership Plc, owner of the namesake department stores and Waitrose supermarkets, said this week that sales rose 13.8 percent in the week ending Dec. 5, fueled by demand for electronic games and other toys.

“This is the earliest time in the Christmas season that a figure in excess of 100 million pounds has been reached,” the company said in a statement.

Retailers make the bulk of their annual profits in the holiday season. The number of shoppers entering stores dropped 4.8 percent from a year earlier at the Dec. 5-6 weekend, FootFall data from Experian Plc showed yesterday.

To contact the reporter on this story: Jennifer Ryan in London at Jryan13@bloomberg.net

Read more...

German Industrial Production Unexpectedly Declines

By Frances Robinson

Dec. 8 (Bloomberg) -- German industrial output unexpectedly fell for the first time in three months in October, led by a drop in production of energy and of investment goods such as machinery.

Output decreased 1.8 percent from September, when it advanced 3.1 percent, the Economy Ministry in Berlin said today. Economists forecast a 1 percent gain, according to the median of 38 estimates in a Bloomberg survey. From a year earlier, production declined 12.4 percent when adjusted for the number of work days.

Germany’s recovery from its worst recession since World War II may slow as the impact of government stimulus measures, such as the now-expired cash-for-clunkers program, wane and a stronger euro damps exports. Factory orders unexpectedly fell for the first time in eight months in October, the ministry said yesterday, led by a decline in sales abroad.

“The orders disappointed and these numbers move in sync,” said Aline Schuiling, an economist at Fortis Bank Nederland in Amsterdam. “The German industrial sector is in a strong recovery phase. One month doesn’t change that. The underlying trend remains healthy.”

Manufacturing output fell 1.6 percent in October, driven by a 3.5 percent drop in production of investment goods, today’s report showed. Energy production declined 3.4 percent and construction output dropped 2.4 percent.

‘Less Dynamism’

“The overall trend for industrial production still points upward,” the ministry said in a statement. “The recovery of industrial production should continue in the fourth quarter, albeit with less dynamism.”

German stocks erased gains after the report and yields on German two-year bonds extended their decline to 1.25 percent at 12:05 p.m. in Frankfurt from 1.32 percent this morning. The euro was little changed at $1.4829. The currency’s 20 percent gain since mid-February may hurt exports by making them more expensive.

Daimler AG, the world’s second-largest maker of luxury cars, has said that it will shift production of its best-selling Mercedes-Benz C-Class model to Alabama to reduce its reliance on German factories and take advantage of the cheaper dollar.

Chancellor Angela Merkel’s government is spending about 85 billion euros ($126 billion) on measures to stimulate growth, including a 2,500-euro payment for people who junk an old car to buy a new one. That subsidy expired in September.

The Bundesbank nevertheless on Dec. 4 raised its growth forecasts, saying that exports, business investment and private consumption will grow in importance as fiscal stimulus measures expire. It expects gross domestic product to increase 1.6 percent next year after dropping 4.9 percent this year.

German economic growth accelerated to 0.7 percent in the third quarter from 0.4 percent in the second, when it pulled out of recession. Business confidence increased to a 15-month high in November, suggesting the economic recovery may gather pace next year.

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

Read more...

U.K. Pound Declines Against Dollar, Euro After Moody’s Report

By Keith Jenkins

Dec. 8 (Bloomberg) -- The pound fell against the dollar and the euro after Moody’s Investors Service described the U.K. as weaker than top-rated peers including Germany and France.

Britain and the U.S. had “resilient” Aaa ratings, as opposed to the “resistant” top ratings on Canada, Germany and France, Moody’s said in a report today. None of the top-rated countries was “vulnerable,” or had public finances that were “stretched beyond the point of ‘no return’ to the Aaa category,” according to the report. U.K Chancellor of the Exchequer Alistair Darling said yesterday the economy remains too fragile to take more steps to repair the deficit this year.

“The Moody’s story was clearly one significant factor affecting sterling,” said Simon Derrick, chief currency strategist at Bank of New York Mellon Corp. in London, “Also the comments from Darling weighed on the currency.”

The pound dropped 0.6 percent to $1.6354 as of 10 a.m. in London, and weakened 0.8 percent to 90.86 pence per euro.

Darling said yesterday he would rather suffer criticism for removing support for the economy too late than too early, suggesting he will put off extra measures to reduce Britain’s biggest budget deficit since World War II.

“While assumed capacity for fiscal adjustment currently supports the maintenance of the Aaa rating of the U.K. government, this assumption will have to be validated by actions in the not too distant future,” said Moody’s.

Manufacturing Stalls

The pound was little changed after a report showed U.K. manufacturing unexpectedly stalled in October, a sign the economy is struggling to shake off the longest recession on record. Factory output was unchanged after gaining 1.5 percent in September, the Office for National Statistics said today in London. Economists predicted a 0.4 percent increase, according to the median of 21 forecasts in a Bloomberg News survey.

The data is unlikely to change the “bearish pound sentiment,” wrote Valentin Marinov, a senior foreign-exchange strategist at Commerzbank in London, in a research report.

“Even if both releases point to a continuing recovery, we doubt that they will dispel investor concerns about further underperformance of the U.K. economy in the near term,” he wrote before the release of manufacturing data.

To contact the reporter on this story: Keith Jenkins in London at Kjenkins3@bloomberg.net

Last Updated: December 8, 2009 05:07 EST



Read more...

Euro Set for ‘Long-Term’ Drop to 2008 Low: Technical Analysis

By Candice Zachariahs

Dec. 8 (Bloomberg) -- The euro may have a “long-term, multi-month” drop toward its 2008 low, falling below support at $1.4625, BNP Paribas SA said, citing trading patterns.

The single currency declined 1.3 percent on Dec. 4, the most since June 15, triggering a break of the currency’s uptrend in March, Andrew Chaveriat, a technical analyst at BNP Paribas in New York, wrote in a research note yesterday.

“Euro-dollar is in position to have completed its March rally,” he wrote. A drop below $1.4625 “would confirm a major top is in place and that euro-dollar is at the early stages of a long-term, multi-month decline potentially re- testing or breaking the $1.2330 October 2008 cycle low.”

A decline through $1.4625, near the November low, would confirm a top at $1.5144, which the euro touched Nov. 25, the bank said. That level is also near the 76.4 percent Fibonacci retracement of the euro’s fall from its all-time high of $1.6038 in July 2008 to $1.2330 in October of last year.

The euro, which has gained 6.2 percent against the dollar this year and 17 percent since March, traded at $1.4840 as of 9:34 a.m. in Tokyo from $1.4827 in New York.

Support levels are areas on a chart where orders to buy a currency versus a counterpart may be clustered, and a break through those levels typically signals further declines.

Fibonacci charts are based on the theory that securities tend to rise or fall by specific percentages after reaching a new high or low.

In technical analysis, investors and analysts study charts of trading patterns and prices to forecast changes in a security, commodity, currency or index.

To contact the reporter on this story: Candice Zachariahs in Sydney at czachariahs2@bloomberg.net

Last Updated: December 7, 2009 19:44 EST



Read more...

Citigroup Said to Push for Bailout-Payback Agreement This Week

By Bradley Keoun

Dec. 8 (Bloomberg) -- Citigroup Inc. Chief Executive Officer Vikram Pandit is pressing the U.S. Treasury Department and regulators to agree as soon as this week on a plan to pay back $20 billion remaining from a government bailout, people familiar with the matter said.

Pandit, 52, wants an agreement in place this week or next, the people said, speaking on condition of anonymity because the discussions are private. He accelerated efforts after last week’s announcement by Bank of America Corp. that it had won approval to pay back $45 billion of taxpayer funds and exit the Troubled Asset Relief Program, they said.

Citigroup is trying to avoid being the only large U.S. bank left on “exceptional assistance,” a Treasury designation reserved for companies including American International Group Inc. and General Motors Co. that are surviving on taxpayer aid. Such companies are subject to government-imposed pay limits that may make Citigroup vulnerable to employee-poaching by unfettered Wall Street rivals.

“We do not comment on individual institutions but it’s fair to say that since Bank of America announced its intention to repay the government, others are pursuing discussions to understand what needs to be done to move ahead with repayment,” Treasury spokesman Andrew Williams said. “We continue to believe that banks and our financial system are better off with private capital instead of government capital.” Jon Diat, a spokesman for New York-based Citigroup, declined to comment.

‘As Soon as Possible’

In October, Pandit said he was “focused on repaying TARP as soon as possible.” He said, “We’re going to do so in consultation with the government and our regulators.”

Citigroup, which took $45 billion of TARP funds last year, in September converted about $25 billion of that into common stock, equivalent to a 34 percent stake. The Treasury Department, which is free to sell the stock at any time, is holding off on a sale until a plan can be reached with regulators for a payback of all remaining obligations from the bailout, a person close to the Treasury said last week.

Citigroup still has $20 billion in bailout funds along with guarantees from the Treasury, FDIC and Federal Reserve on $301 billion of devalued securities, mortgages, auto loans, commercial real estate and other assets. Citigroup paid $7 billion in advance for the guarantees, which last five to 10 years, depending on the type of underlying assets.

The lender’s exit plan may be more complicated than Bank of America’s because the government must decide how to handle the Treasury’s common stake and what to do about the asset guarantees, the person close to the department said.

Regulators

The bank’s regulators, which include the Federal Reserve, Office of the Comptroller of the Currency and the Federal Deposit Insurance Corp., haven’t commented on when the bank might be allowed to exit.

The government is trying to wind down bailout programs extended as financial markets convulsed late last year. Treasury Secretary Timothy Geithner said in a Dec. 4 interview that most taxpayer money injected into banks through the Troubled Asset Relief Program will eventually be recovered.

JPMorgan Chase & Co., Goldman Sachs Group Inc. and Morgan Stanley, all based in New York, repaid bailout funds in June. San Francisco-based Wells Fargo & Co., with $25 billion of TARP money, isn’t subject to pay limits because it never needed a second helping of bailout funds.

Citigroup’s talks with regulators likely will center on the amount of capital the bank must raise to assure it can weather expected loan losses, the people familiar with the matter said.

To contact the reporter on this story: Bradley Keoun in New York at bkeoun@bloomberg.net.

Last Updated: December 7, 2009 22:17 EST



Read more...

Bernanke Signals Fed Will Maintain Its Outlook for Low Rates

By Craig Torres

Dec. 8 (Bloomberg) -- The Federal Open Market Committee will probably maintain its outlook for a long period of low interest rates next week as tight credit and high unemployment weigh on the economy, Fed Chairman Ben S. Bernanke signaled.

Fed officials meet for the last time this year Dec. 15-16 after a report last week showing employers cut the fewest jobs in November since the recession began in December 2007. The report prompted some investors to raise bets the Fed would increase rates by the third quarter of 2010.

Treasuries climbed yesterday after Bernanke set back those perceptions, saying the economy faces “formidable headwinds.” He repeated the language of the last Fed statement in November foreseeing an “extended period” of low rates and said inflation might subside while joblessness may fall at a pace that’s “slower than we would like.”

“Despite the positive surprise from last week’s employment report, it is way too early for the Fed to begin exiting,” said Mark Gertler, a professor of economics at New York University who worked with Bernanke on research on the Great Depression before he became Fed chairman. “When the time does come, however, the Fed will be prepared.”

Yields on two-year notes fell 7 basis points to 0.76 percent. The Standard & Poor’s 500 Index fell 0.3 percent to 1,103.25 after rising as much as 0.4 percent.

The FOMC said last month that its benchmark interest rate, which has been close to zero for a year, would remain low as long as inflation is subdued and the unemployment rate fails to decline. Bernanke said yesterday those conditions haven’t changed.

Inflation Expectations

“Right now we are still looking at the extended period given that conditions remain -- low rates of utilization, subdued inflation trends and stable long-term inflation expectations,” the Fed chief said in response to a question after a speech at the Economic Club of Washington. “That remains where we are.”

The consumer price index, minus food and energy, rose at a 1.7 percent annual pace in October, up from 1.5 percent the previous month. The core inflation rate rose at a 1.4 percent pace in August, the lowest rate since February 2004.

“We are going to have to continue to look at the economy,” Bernanke told moderator David Rubenstein, president of the economic club and co-founder of the Carlyle Group, the private equity firm. “Obviously there has been some signs of strength recently, we will want to factor that in as we talk about this next week.”

Dudley Comments

In separate remarks yesterday, New York Fed president William Dudley said the unemployment rate is “much too high.” If labor markets remain weak and inflation low, “it will be appropriate to keep the federal funds target exceptionally low for an extended period,” he told the Columbia University World Leaders Forum in New York.

Bernanke explained why the economy is unlikely to bounce back quickly. The job market “remains weak” while “bank- dependent borrowers” such as households and small business are having difficulty obtaining loans, he said. Consumer spending is “unlikely to grow rapidly” as unemployment weighs on confidence, he said.

Consumer credit in the U.S. fell by $3.51 billion, or 1.7 percent at an annual rate, to $2.48 trillion in October, according to a Fed report released yesterday. Borrowing dropped by $8.77 billion in September, less than previously estimated. Consumer credit has fallen for ninth straight months.

Growth Forecast

U.S. central bankers said last month the economy will expand in a range of 2.5 to 3.5 percent in 2010, according to the central tendency of their outlook, which excludes the three highest and three lowest projections.

That rate of growth will only drive unemployment down to a 9.3 to 9.7 percent range next year, Fed officials forecast. More than 7.2 million jobs have been lost since the start of the recession.

“We still have some way to go before we can be assured that the recovery will be self-sustaining,” the Fed Chairman said. “My best guess at this point is that we will continue to see modest economic growth next year -- sufficient to bring down the unemployment rate, but at a pace slower than we would like.”

Bernanke “certainly hasn’t done a 180 degree turn because of one payroll number,” said Michael Feroli, economist at JPMorgan Chase & Co. in New York. Risks to the economy “don’t seem balanced at all” in Bernanke’s view.

JPMorgan Chase predicts the Fed to leave interest rates unchanged until the second quarter of 2011. Feroli said that an expansion one percentage point faster than the economy’s potential growth rate, which JPMorgan estimates at around 2.25 percent, would lower then unemployment rate by around four tenths of 1 percent in a year.

To contact the reporter on this story: Craig Torres in Washington at ctorres3@bloomberg.net: Shobhana Chandra in Washington at +1- schandra1@bloomberg.net.

Last Updated: December 8, 2009 00:00 EST


Read more...

Yen Climbs as Signs of Slowing Recovery Spur Demand for Safety

By Lukanyo Mnyanda and Yasuhiko Seki

Dec. 8 (Bloomberg) -- The yen rose against the euro and higher-yielding peers as signs the global economic recovery is losing momentum spurred demand for the currency as a refuge.

The yen gained versus its 16 most-traded counterparts monitored by Bloomberg before reports this week that may show German industrial production slowed and the U.S. trade deficit widened. Federal Reserve Chairman Ben S. Bernanke said yesterday the U.S. faces “formidable headwinds.” The pound fell after Moody’s Investors Service said the U.S. and the U.K. have “resilient” Aaa ratings, as opposed to the “resistant” top ratings of Canada, Germany and France.

“It’s the broad retrenchment in markets more than anything else” driving the yen, said Simon Derrick, London-based chief currency strategist at BNY Mellon Corp., the world’s biggest custody bank. “Calling it a retreat from risk sounds too simplistic, but there is a natural desire as we get into the holiday season for people to lock in their profit.”

The yen strengthened to 131.86 per euro as of 9:45 a.m. in London, from 132.71 yesterday in New York, and appreciated to 88.82 per dollar, from 89.51. The dollar was at $1.4846 per euro, from $1.4827 yesterday, when it appreciated to $1.4756, the strongest level since Nov. 4.

Industrial production in Germany expanded 1 percent in October from a month earlier, the Economy Ministry in Berlin will say at noon local time, according to the median estimate of 38 economists in a Bloomberg survey. The U.S. trade deficit widened to $36.9 billion in October, from $36.5 billion in September, according to a separate Bloomberg survey before the Commerce Department report in two days.

Yen Strength

The yen strengthened to 11.9400 against the South African rand, from 11.9933 yesterday. It also gained a second day versus the Australian dollar, trading at 81.19 yen, from 81.69.

“We still have some way to go before we can be assured that the recovery will be self-sustaining,” Bernanke said in a speech to the Economic Club of Washington. “My best guess at this point is that we will continue to see modest economic growth next year -- sufficient to bring down the unemployment rate, but at a pace slower than we would like.”

Futures on the Chicago Board of Trade showed a 46 percent chance yesterday the Fed will raise the target lending rate by at least a quarter-percentage point by its June meeting, down from 54 percent a day earlier. The central bank next meets to review borrowing costs on Dec. 16.

The dollar has declined 5.9 percent this year against the euro as the Fed kept the target rate between zero and 0.25 percent and bought assets in a bid to lower borrowing costs. The European Central Bank’s main refinancing rate is at 1 percent, also a record low.

Japan Package

The yen tends to strengthen amid economic and financial turmoil because Japan’s trade surplus makes it less reliant on foreign capital. The nation’s current-account surplus increased 42.7 percent to 1.4 trillion yen ($15.7 billion) in October from a year earlier, the Ministry of Finance said today.

Japan’s government also today unveiled a 7.2 trillion yen economic spending package. The plan includes 3.5 trillion yen to help regions, 600 billion yen for employment and 800 billion yen on environmental initiatives, the Cabinet said in a statement.

The currency also rose amid speculation Japanese officials won’t act to weaken it even as they say they are concerned about the effect of yen strength on the economy.

‘Still in Doubt’

“People are still in doubt about whether the Bank of Japan will intervene and put action behind their words,” said Niels Christensen, a currency strategist in Copenhagen at Nordea Bank AB. “Bernanke definitely ruled out a rate hike for a very long time and that’s also putting downward pressure on dollar-yen.”

The pound weakened after Moody’s said the U.K.’s and U.S.’s finances are deteriorating and may “therefore test the Aaa boundaries.” None of the top-rated countries is “vulnerable,” or have public finances that are “stretched beyond the point of ‘no return’ to the Aaa category,” the ratings company said.

The pound dropped to $1.6351, from $1.6446 yesterday, and weakened to 90.88 pence per euro, from 90.16 pence.

Demand for the yen also strengthened on speculation companies including Hitachi Ltd. and Mitsubishi UFJ Financial Group Inc. will bring home funds from share and asset sales.

“Japanese firms, such as those raising capital from selling shares and assets abroad, are likely to repatriate money,” said Tsutomu Soma, a bond and currency dealer at Okasan Securities Co. Ltd. in Tokyo. “This is a yen-positive factor.”

Hitachi said in a statement last month it may sell 400 million shares to Japanese investors and 600 million shares to overseas buyers at a price to be set between Dec. 7 and Dec. 10. Mitsubishi UFJ plans to offer about 1 trillion yen of stock, according to documents sent to investors. The price for the sale will be set as early as Dec. 14, said Daiwa Securities Group Inc., one of the underwriters.

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

Last Updated: December 8, 2009 05:28 EST


Read more...