British Pound Strengthens Against Euro Before BOE Rate Decision

By Keith Jenkins

Dec. 10 (Bloomberg) -- The pound rose against the euro for the first day in three before the Bank of England decides on interest rates and its asset-purchase plan.

Sterling also snapped a five-day decline versus the U.S. currency. Policy makers, led by Governor Mervyn King, will keep the benchmark rate at a record low of 0.5 percent and their bond-buying program unchanged at 200 billion pounds ($326 billion), according to separate analyst surveys by Bloomberg.

We don’t expect any policy change from the Bank of England, said Lee Hardman, a foreign-exchange strategist at Bank of Tokyo-Mitsubishi UFJ Ltd. in London.

The pound appreciated to 90.43 pence per euro as of 9:16 a.m. in London, from 90.56 pence yesterday. The U.K. currency was little changed at $1.6267, from $1.6261.

Sterling may depreciate toward $1.50 and 92.40 pence against the euro over the next six months, Hardman said.

Gilts dropped, sending the yield on the 10-year bond up 13 basis points to 3.79 percent. The two-year note yield advanced 4 basis points to 1.15 percent.

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

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Americans Want Government to Spend for Jobs, Send Bill to Rich

By Mike Dorning and Catherine Dodge

Dec. 10 (Bloomberg) -- Americans want their government to create jobs through spending on public works, investments in alternative energy or skills training for the jobless.

They also want the deficit to come down. And most are ready to hand the bill to the wealthy.

A Bloomberg National Poll conducted Dec. 3-7 shows two- thirds of Americans favor taxing the rich to reduce the deficit.

Even though almost 9 of 10 respondents also say they believe the middle class will have to make financial sacrifices to achieve that goal, only a little more than one-fourth support an increase in taxes on the middle class. Fewer still back cuts in entitlement programs such as Social Security and Medicare or a new national consumption tax.

These long-standing contradictions in voters’ attitudes toward taxes, spending and the deficit are intensified as the U.S. grapples with the most severe economic crisis in decades, says J. Ann Selzer, president of Selzer & Co., a Des Moines, Iowa-based firm that conducted the nationwide survey. The rich have become an especially inviting target as the combination of a bank bailout and big bonuses stoke resentments, she says.

“People are hurting,” Selzer says. “They want anything that can help and not hurt them more.”

“It’s hard enough just to get by,” says poll respondent Trevor Wofsey, 32, a postal carrier in Big Pine Key, Florida. “We’re being cut at every level: There are less hours at work and they want us to pay more into medical. Food is up, gas is up.”

Obama Jobs Initiative

The findings are in tune with the job-promotion initiatives President Barack Obama announced Dec. 8, as well as the administration’s assurances it will address the deficit, and proposals from some Democratic lawmakers to raise taxes on the wealthy.

The difficulty of reconciling public demands for government action on jobs while at the same time reducing the deficit is shaping up as a major political theme ahead of the 2010 midterm elections. Obama and Democrats in Congress confront an unemployment rate that was 10 percent for November and a deficit that is forecast to be more than $1 trillion over each of the next two years.

While the public sees both unemployment and the deficit as a threat, anxiety over unemployment is higher. Eight out of 10 poll respondents rate unemployment a high risk to the economy in the next two years and 7 of 10 say the same about the deficit.

Infrastructure Spending

The poll contains some of the features Obama announced in his jobs plan. Two-thirds of Americans back boosting spending on infrastructure. Six of 10 also support more spending on alternative energy to stimulate job growth, another measure Obama announced.

“The best thing we could do is take some public money to rebuild our infrastructure and improve it,” says poll respondent Richard Kellaway, 75, a Unitarian Universalist minister who lives in Dorchester, Massachusetts. Unemployed people “could be put to work in a matter of days.”

Americans support a range of other potential new government initiatives presented as employment programs, with ideas from both parties backed by wide majorities. An across-the-board tax cut, a favorite of some Republicans, also is supported by 6 of 10 Americans.

A tax credit for businesses that hire new workers, which Obama favored as a presidential candidate and this week proposed in a limited form available only to small firms, gains backing from 7 of 10 Americans.

Skeptical About Results

Americans support the proposals even as they express doubts the federal government will help cut joblessness. A 51 percent majority say they are pessimistic about the prospects.

When it comes to the deficit, they are more distrustful: 61 percent say they are pessimistic the government will bring down the budget shortfall.

Nearly 9 out of 10 Americans say the middle class will have to make sacrifices to cut the deficit. That doesn’t mean that they are ready to embrace the idea.

“With the middle class making more sacrifices than they are already making because of what the government ran up, it’s going to eventually leave the middle class at the bottom,” says poll respondent Laisha Wright, 25, an unemployed resident of Columbus, Ohio.

The wealthy would be better able to bear the burden of more taxes, she says. “I don’t think it would be a big issue for them.”

Across Party Lines

The appeal of taxes on the wealthy crosses party lines. About half of Republicans back the idea and it is more popular among Democrats and independents.

House Democrats have proposed surtaxes on the wealthy to pay for the health-care overhaul and the decision to send an additional 30,000 troops to Afghanistan Obama announced last week.

Obama made tax increases on the wealthy a theme of his presidential campaign, promising to roll back the Bush administration’s tax cuts for families that earn more than $250,000.

White House Budget Director Peter Orszag has promised to produce a budget that will cut the long-term federal deficit, and Senate Budget Committee Chairman Kent Conrad, a Democrat from North Dakota, is pressing for a bipartisan commission on deficit reduction.

The poll shows that an across-the-board 5 percent cut of all discretionary government spending also attracts support as a deficit-reduction measure, with 57 percent saying they would back it.

Majorities of poll respondents also say some big government programs either are not justified or could be cut. They included the $700 billion rescue of the nation’s banking system, the auto industry bailout, Iraq War funding, the $787 billion economic stimulus package and funding for the Afghanistan War.

Cuts in funding for the Medicare prescription drug program would be resisted by 71 percent.

To see methodology and exact question wording, click on the attachment tab at the top of the story.

To contact the reporters on this story: Mike Dorning in Washington at mdorning@bloomberg.net; Catherine Dodge in Washington at cdodge1@bloomberg.net

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Yen Weakens as Australian Jobs Report Boosts Recovery Optimism

By Lukanyo Mnyanda

Dec. 10 (Bloomberg) -- The yen declined against higher- yielding currencies after a report showed companies in Australia added six times more jobs than economists estimated.

Japan’s currency snapped three days of gains against the so-called Aussie and fell for a second day against the kiwi after the statistics bureau in Sydney said the jobless rate fell to 5.7 percent and Reserve Bank of New Zealand Governor Alan Bollard said he expects to begin raising interest rates in the middle of next year. The dollar fell as investors cut bets that the Federal Reserve will increase interest rates next year. The Swiss franc was little changed after the central bank said it will halt bond purchases and left its main rate at a record low.

The Australian and New Zealand dollars “should strengthen across the board, particularly the Aussie, which is ahead in terms of the recovery cycle,” said Steve Barrow, head of Group of 10 foreign-exchange strategy in London at Standard Bank Plc. “The Aussie will keep getting stronger and the dollar is the carry currency to use there.”

The yen declined 1.3 percent to 80.88 per Australian dollar as of 9:43 a.m. in London and 1.8 percent to 64.30 per New Zealand dollar. Japan’s currency also weakened 0.4 percent to 88.26 per dollar. The euro bought 129.85 yen, from 129.39 yesterday.

Australia added 30,800 full-time jobs last month, today’s report showed. That pushed the number of new jobs created in the past three months to 99,500. The median estimate of 22 economists surveyed by Bloomberg was for 5,000 new jobs.

New Zealand Growth

New Zealand’s central bank increased its growth forecast for the first quarter of 2010 to 1.9 percent from 1.3 percent, according to a report published today. Benchmark interest rates are 3.75 percent in Australia and 2.5 percent in New Zealand, compared with 0.1 percent in Japan and as low as zero in the U.S., attracting investors to the nations’ assets.

The Aussie has gained 30 percent against the U.S. dollar this year, the best performer after the Brazilian real. The Reserve Bank of Australia increased interest rates three times since October. The kiwi is the fourth-best performer versus the U.S. currency.

Australia’s currency gained 0.9 percent to 91.64 U.S. cents, while the kiwi was 1.4 percent stronger at 72.86 cents.

“Australia’s data revived confidence in the bright story for the global economy,” said Tomohiro Nishida, a foreign- currency dealer in Tokyo at Chuo Mitsui Trust & Banking Co., a unit of Japan’s seventh-largest banking group. “Renewed risk sentiment will support higher-yielding assets and pressure funding currencies such as the yen and the dollar.”

Japanese Orders

The yen also declined as a report showed orders for Japanese machinery fell in October. A separate report showed producer prices dropped for an 11th month in November, fueling speculation deflation may undermine the economic recovery.

Futures on the Chicago Board of Trade showed a 41 percent chance yesterday that the Fed will raise its target rate for overnight bank loans by at least a quarter-percentage point by its June meeting. The odds were 51 percent a month ago. The central bank next meets to review borrowing costs on Dec. 16. The U.S. currency has fallen against all its most-actively traded peers since this year.

The franc traded at 1.5112 against the euro, from 1.5120 yesterday. It was at 1.0271 per dollar, from 1.0267.

The Swiss National Bank, led by Jean-Pierre Roth, held the three-month Libor target at 0.25 percent, as expected by all 16 economists in a Bloomberg News survey. It was last monetary policy decision before Roth is replaced by Vice-Chairman Philipp Hildebrand next month.

The euro gained against the yen as a report showed German wholesale prices increased last month, adding to evidence the recovery in Europe’s largest economy is taking hold. Prices rose 0.7 percent, compared with a 0.4 percent decline in October, the Federal Statistics Office in Wiesbaden said.

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

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Wheat Gains on Speculation Investors Closing Bets on Price Drop

By Luzi Ann Javier

Dec. 10 (Bloomberg) -- Wheat futures rose, ending a seven- day decline that was the longest losing streak in more than a year, on speculation that some investors were closing bets that prices will drop by quitting so-called short positions.

“People are just profit-taking,” Toshiro Horiguchi, assistant general manager at Agrex Asia Pte, said by phone from Singapore today. Still, wheat prices may extend falls on concern that there is a global oversupply, Horiguchi said.

Speculative shorts had outnumbered bets that prices will rise by 1,693 contracts on the Chicago Board of Trade in the week ended Dec. 1, the Commodity Futures Trading Commission said in a report. Futures fell 9.1 percent this month to yesterday.

Wheat for March delivery added as much as 0.6 percent to $5.385 a bushel, before trading at $5.3675 at 1:49 p.m. in Singapore. The seven-day drop to yesterday was the longest series of declines since September 2008.

Global wheat stockpiles are forecast to rise for a second year to 188.3 million metric tons in the 2009-2010 marketing year as output exceeds demand, according to a U.S. Department of Agriculture report on Nov. 10. The agency is scheduled to release its latest supply-and-demand estimates later today.

Wheat planting in France, the European Union’s largest grower, will expand 3 percent to 4.89 million hectares (12.08 million acres) next year as farmers shift from less profitable barley, FranceAgriMer, the national crops office said yesterday.

Corn Declines

Corn for March delivery fell for a second day, losing as much as 0.4 percent to $3.82 a bushel, reversing a 0.4 percent gain earlier. The contract traded at $3.825 at 2:12 p.m.

Korea’s Major Feedmill Group bought 110,000 tons of corn from Cargill Inc. late yesterday, two executives who participated in the biddings said today, declining to be identified as the tender results are confidential. The group paid $227.49 a ton for 55,000 tons from either the U.S. or South America, and $228.49 a ton for the rest from the U.S., they said.

Separately, the Korea Feed Association, South Korea’s biggest grain-buying group, purchased 55,000 tons of U.S. corn from Archer-Daniels-Midland Co. at $229.99 a ton in a private tender earlier this week, the executives said.

January-delivery soybeans fell as much as 0.9 percent to $10.19 a bushel, and last traded at $10.2025.

Rice for March delivery rose 0.9 percent to $15.95 per 100 pounds in Chicago at 1:23 p.m. Singapore time, after jumping 2.6 percent yesterday to the highest since Jan. 7.

Traders on Dec. 8 offered to sell rice to the Philippines for at least $618.95 a ton, 30 percent more than the average price paid by the government in November. Hedge funds and speculators are making the most bets in 19 months that prices will rise, echoing conditions in 2008, when grain shortages forced India, the Philippines and Egypt to boost subsidies.

“The bulls are out there,” said Peter McGuire, managing director at CWA Global Markets Pty. “There’s wonderful money to be made. You’ve just got to have nerves of steel.”

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

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Palm Oil Pares Losses as Malaysian Stockpile, Production Drop

By Thomas Kutty Abraham

Dec. 10 (Bloomberg) -- Palm oil futures pared losses after stockpiles in Malaysia, the second-largest producer, dropped in November as output declined the most in almost three years.

Inventories of the cooking oil fell 2 percent to 1.93 million metric tons from a 10-month high in October, the Malaysian Palm Oil Board said in a statement today. Production dropped 20 percent to 1.6 million tons, while exports gained 1.5 percent to 1.5 million tons, it said. The decrease in output was the most since December 2006, according to Bloomberg data.

February-delivery palm oil reversed losses to increase as much as 0.4 percent to 2,535 ringgit a ton ($746) in the afternoon session on the Malaysia Derivatives Exchange after the data was released. The contract later traded down 0.6 percent at 2,510 ringgit a ton at 4:23 p.m. in Singapore.

“Lower stockpiles will be supportive for prices and demand from India may stay particularly strong in the coming months,” Ben Santoso, an analyst at DBS Vickers Securities (Singapore) Pte., said by phone from Singapore. “Inventory levels will continue to decline as the low production cycle kicks in.”

Palm oil, used as an alternative fuel, advanced 48 percent this year as investors bought commodities as a haven from a declining dollar. The commodity may climb to 3,000 ringgit by March as drought disrupts supplies and demand grows in China and India, the biggest users, according to Dorab Mistry, director of Godrej International Ltd., one of India’s biggest edible oil buyers, last week.

Lower Production

Output in Malaysia may drop to 17.5 million tons this year from last year’s record 17.7 million tons, Mistry said. Tree stress and dry weather from the developing El Nino has created a “pessimistic outlook” for output in the second half of 2010, he said on Dec. 4.

The commodity will be supported early next year by lower- than-expected global soybean supply before coming under pressure as the South American harvest gets under way in the second quarter, DBS Vickers’ Santoso said.

Crude palm oil prices may average 2,380 ringgit in 2010, compared with a forecast of 2,300 ringgit this year, he said.

Palm oil exports from Malaysia fell 5.2 percent to 399,575 tons in the first 10 days of December from the same period in November, independent market surveyor Societe Generale de Surveillance said in an e-mailed report in Kuala Lumpur. That compares with 2.2 percent increase in exports at 412,166 tons estimated by another surveyor Intertek said.

January-delivery soybean oil dropped 3 percent yesterday, the most in more than three months, and traded 0.8 percent higher at 39.60 cents a pound at 4:26 p.m. Singapore time. The premium of soybean oil in Chicago over palm oil in Malaysia, which slumped 10.8 percent yesterday, jumped 6.2 percent to $131.21 a ton today, according to Bloomberg data.

To contact the reporters on this story: Manirajan Ramasamy in Kuala Lumpur at rmanirajan@bloomberg.net Thomas Kutty Abraham at tabraham4@bloomberg.net

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Asian Stocks Fall Amid Yen Strength, China Property Concerns

By Masaki Kondo and Jonathan Burgos

Dec. 10 (Bloomberg) -- Asian stocks fell, dragging the MSCI Asia Pacific Index to the lowest this month, amid concern gains in the yen will hurt Japan’s export earnings and as China moved to curb property speculation.

Mazda Motor Corp., which gets 25 percent of its revenue in North America, lost 3 percent in Tokyo as the yen traded near its highest level against the dollar in a week. China Vanke Co., the nation’s biggest listed developer, dropped 1 percent after the government extended the period of a sales tax on homes. Motech Industries Inc., Taiwan’s largest solar-cell maker, fell 6.9 percent after agreeing to sell a stake to Taiwan Semiconductor Manufacturing Co. at a discount.

The MSCI Asia Pacific Index lost 0.8 percent to 119.10 as of 6:18 p.m. in Tokyo, the lowest level since Nov. 30. The gauge is headed for its third weekly decline in four as downgrades of Spain’s debt outlook and Greece’s credit rating exacerbated credit-market concerns sparked by Dubai World’s plan to reschedule its debt payments.

“It is good for investors to take some money off the table given prevailing uncertainties,” said Daphne Roth, Singapore- based head of Asian equity research at ABN Amro Private Banking, which oversees about $14 billion. “Asian exports are still fragile and there are risks of credit defaults in Dubai and Greece.”

China’s Shanghai Composite Index added 0.5 percent, erasing an earlier 0.4 percent drop, as investors weighed the impact of policies announced by the State Council yesterday. Hisense Electric Co., which makes flat-panel televisions, climbed 5.7 percent in Shanghai after the government said it will continue appliance trade-in subsidies beyond May 2010, when it had been set to expire.

Credit Defaults?

Japan’s Nikkei 225 Stock Average dropped 1.4 percent. Hong Kong’s Hang Seng Index lost 0.2 percent. The S&P/ASX 200 Index sank 0.7 percent in Australia, even after a government report showed the country’s jobless rate dropped.

Futures on the Standard & Poor’s 500 Index added 0.3 percent. The gauge added 0.4 percent yesterday, as analyst upgrades of 3M Co. and Sprint Nextel Corp. helped offset concern that credit defaults will spread through the global economy. The index had declined earlier as Spain’s credit outlook was reduced to “negative” from “stable” at S&P.

The downgrade came after Fitch Ratings cut Greece’s credit rating on Dec. 8. The reliability of sovereign credit has come under scrutiny since Nov. 25, when Dubai World, a state-owned holding company, said it would seek a standstill agreement on its debt. The company has since said it’s in talks to renegotiate $26 billion of loans.

‘More Sensitive’

“Global uneasiness about credit is increasing,” said Mitsushige Akino, who oversees the equivalent of $450 million at Tokyo-based Ichiyoshi Investment Management Co. “People are becoming more sensitive to risks and they are reconsidering investments.”

Japanese automakers fell after the yen appreciated to as much as 87.37 per dollar yesterday, a level not seen since Dec. 3. A stronger yen reduces the value of overseas sales at Japanese companies when converted into their home currency. The yen was at 87.78 per dollar at the 3 p.m. close of stock trading in Tokyo.

Mazda, Japan’s fourth-largest automaker, slid 3 percent to 195 yen. Toyota Motor Corp., which gets 31 percent of its revenue in North America, lost 1.6 percent to 3,650 yen and was the heaviest drag on the MSCI Asia Pacific Index.

Suzuki Motor Corp. dropped 6.5 percent to 2,215 yen even after Volkswagen AG said it will buy a 19.9 percent stake in the Japanese automaker.

“Investors largely shrug off good news but respond quickly to bad news because they have little appetite for Japanese equities with the yen staying high,” said Toshio Sumitani, chief strategist at Tokai Tokyo Securities Co.

Chinese Automakers

Geely Automobile Holdings Ltd. tumbled 8.2 percent to HK$4.23 in Hong Kong. BYD Co., the maker of batteries and cars in which Warren Buffett has a stake, lost 1.5 percent to HK$68.75. They are among Chinese automakers that will suffer from a higher sales tax on smaller vehicles, CLSA Asia-Pacific Markets said today.

China will charge a 7.5 percent sales tax on vehicles with engines of 1.6 liters or less through the end of 2010, according to a statement posted on the State Council’s Web site yesterday. The government had halved the tax to 5 percent this year. The lower 5 percent tax is due to expire at the end of 2009.

While extending favorable policies for consumption, China’s government will impose a sales tax on homes sold within five years of their purchase, increasing the time period covered by the charge from two years, according to the State Council.

Extending Subsidies

China Vanke retreated 1 percent to 11.91 yuan, and Shanghai Industrial Development Co. lost 1.3 percent to 16.40 yuan. Gemdale Corp. fell 1 percent to 15.65 yuan.

Hisense jumped 5.7 percent to 24.34 yuan. Hefei Rongshida Sanyo Electric Co., which makes washing machines, added 5.5 percent to 24.87 yuan. The government will extend subsidies for purchases of appliances, automobiles and farming equipment in rural areas, the State Council said.

In Taipei, Motech tumbled 6.9 percent to NT$135.50. The company agreed to sell a 20 percent stake to Taiwan Semiconductor at a 16.9 percent discount. Taiwan Semiconductor dropped 1.8 percent to NT$61.30.

The MSCI Asia Pacific Index has risen 33 percent this year, set for the biggest annual increase since 2003, as government spending and lower interest rates revived economies globally. The index’s 2009 rally has outpaced gains of 21 percent by the S&P 500 and 22 percent by Europe’s Dow Jones Stoxx 600 Index on optimism growing demand in China will drive growth in Asia.

Companies in the MSCI gauge trade at an average 22 times estimated net income for this year, compared with 17 times for the S&P and 15 times for the Stoxx 600.

“Shares are no longer cheap and people are wondering how long the momentum in the stock market will last,” said Yoji Takeda, who manages the equivalent of $1.1 billion at RBC Investment (Asia) Ltd. in Hong Kong. “I’m currently seeking companies whose valuations aren’t very high but fundamentals are solid.”

To contact the reporter for this story: Masaki Kondo in Tokyo at mkondo3@bloomberg.net; Jonathan Burgos in Singapore at jburgos4@bloomberg.net.

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German IPOs Suffer 2nd Setback in Week as Scan Energy Postpones

By Michael Tsang

Dec. 10 (Bloomberg) -- Scan Energy A/S postponed its $232 million initial public offering, becoming the second company to shelve a German IPO in less than a week.

The Dybvad, Denmark-based wind- and solar-power producer couldn’t find enough buyers for its 19.7 million share offer at 8 euros ($11.80) each yesterday. Investors rejected the IPO even after Scan Energy reduced the price of its initial sale from as much as 13 euros three days earlier and extended the offer period to attract more buyers.

Scan Energy is the latest setback for the European IPO market and casts doubt on whether initial sales in the region will recover in 2010. The number of IPOs in Germany, Europe’s biggest economy, may triple next year as investor confidence rebounds and private-equity firms sell their companies on the stock exchange, Paris-based Societe Generale SA said this week.

“Due to the recent events in the financial markets and investor hesitation on the German IPO market the company does not at this point in time wish to pursue an IPO and a subsequent listing,” Scan Energy said in a statement.

Hochtief AG, Germany’s largest builder, shelved a 1 billion-euro offering of its unit that runs toll roads and airports on Dec. 3 that would have been the country’s largest initial share sale in two years. The Essen, Germany-based company cited the debt crisis in Dubai and “resulting disturbances in the international capital markets.”

The day after Hochtief postponed the offering, Scan Energy said it was proceeding with its sale after receiving “positive” feedback from investors.

Lehman Brothers

The European IPO market has been slower to recover than in the U.S. after New York-based Lehman Brothers Holdings Inc.’s collapse in September 2008 spurred a credit-market freeze. American offerings have outpaced sales in western Europe by more than four times this year, data compiled by Bloomberg show.

Other IPOs on tap in Germany include Brenntag Holding GmbH, a chemicals distributor owned by private-equity firm BC Partners Ltd., and Flint Group, the world’s second-biggest maker of printing ink, people familiar with the plans have said.

There may be eight to 10 IPOs in Germany with a value of 3 billion euros to 6 billion euros next year after no “sizable” share sales in 2009, Armin Heuberger, head of equity capital markets at UBS AG in Germany, said yesterday in Frankfurt, as private-equity firms begin selling and buying companies.

To contact the reporter on this story: Michael Tsang in New York at mtsang1@bloomberg.net.

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U.K. Stocks Gain, Led by Shares of Lloyds Banking Group, RBS

By Adria Cimino

Dec. 10 (Bloomberg) -- U.K. stocks gained, led by Lloyds Banking Group Plc and Royal Bank of Scotland Group Plc, offsetting losses by mining stocks as copper prices fell.

RBS, the largest state-controlled U.K. lender, Lloyds and Barclays Plc gained more than 2 percent. Rio Tinto Group, the world’s third largest mining company, slid 1.1 percent.

The benchmark FTSE 100 advanced 28.96, or 0.6 percent, to 5,232.85 as of 10:28 a.m. in London. The FTSE All-Share Index rose 0.5 percent and Ireland’s ISEQ Index added 0.6 percent. After rallying as much as 53 percent since its low on March 3, the FTSE 100 has been little changed since mid- October amid concern the global economic recovery won’t be sustained.

European stocks rose today, snapping three days of declines, as the European Union’s Jean-Claude Juncker said he rules out a Greek state bankruptcy. Stocks declined for the first three days of the week as concern mounted about the finances of indebted countries. Spain’s credit outlook was reduced to negative from stable by Standard & Poor’s Ratings Services and Fitch Ratings downgraded Greece.

Barclays added 2.5 percent to 285 pence. Lloyds added 3.5 percent to 56.59 pence.

RBS gained 3.3 percent to 31.31 pence. The bank is close to selling assets in China, Malaysia and India to HSBC Holdings Plc, pending regulatory approval, the Wall Street Journal reported, citing people familiar with the matter.

Rio Tinto slipped 1.2 percent to 3,104 pence. Lonmin Plc, the third-largest platinum maker, lost 1.1 percent to 1,714 pence. Copper, nickel and tin declined in London.

The following shares rose or fell in London and Dublin. Stock symbols are in parentheses.

DS Smith Plc (SMDS LN) surged 9.3 percent to 124 pence, rising the most in two months. The owner of the Spicers office products brand said it will likely exceed its fiscal full-year expectations.

Irish Life & Permanent Plc (IPM ID) added 2.1 percent to 3.32 euros, rebounding after three days of losses. Ireland’s biggest mortgage lender was raised to “buy” from “hold” at Citigroup Inc., which said “the market will increasingly focus on fundamental valuation.”

Premier Farnell Plc (PFL LN) jumped 5.3 percent to 167 pence, rebounding after two days of declines. The U.K. electronic and industrial components supplier said it’s well placed to lead recovery in the industry.

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

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European Stocks Gain, Led by Retailers; Asian Shares Decline

By Daniela Silberstein

Dec. 10 (Bloomberg) -- European stocks advanced, snapping three days of declines for the Dow Jones Stoxx 600 Index, as retailers gained after Inditex SA reported earnings that beat analysts’ estimates. Asian shares fell.

Inditex, the world’s biggest clothing retailer, rose 2.3 percent. ING Groep NV rallied 4.2 percent after BofA Merrill Lynch Global Research recommended the shares. Mazda Motor Corp. lost 3 percent in Tokyo amid concern gains in the yen will hurt Japan’s export earnings.

Europe’s Stoxx 600 added 0.8 percent to 243.45 as of 10:25 a.m. in London. The gauge climbed 59 percent from March 9 to Nov. 11 as central banks cut interest rates to record lows and governments worldwide committed about $12 trillion to revive the economy. The measure is valued at about 55 times its companies’ reported earnings, near the highest level since 2003, data compiled by Bloomberg show.

The MSCI Asia Pacific Index fell 0.8 percent today, extending yesterday’s 0.7 percent drop, as China scrapped a tax break on property sales. Futures on the Standard & Poor’s 500 Index rose 0.3 percent.

Inditex gained 2.3 percent to 42.21 euros. The owner of the Zara chain said net income declined to 831 million euros ($1.2 billion) in the nine months through October from 843 million euros in the year-earlier period. The average estimate of seven analysts compiled by Bloomberg was 807 million euros.

Retailers Rise

A gauge of retailers in the Stoxx 600 advanced 1.2 percent, snapping a three-day drop. Kesa Electricals Plc added 2.6 percent to 158.8 pence as Deutsche Bank AG upgraded Europe’s third-largest electronics retailer to “buy” from “hold,” saying “a healthy recovery looks likely.”

ING climbed 4.2 percent to 5.85 euros. The Netherlands’ biggest financial-services company was added to BofA Merrill Lynch’s “Europe 1” list.

Irish Life & Permanent Plc increased 1.2 percent to 3.29 euros. Ireland’s biggest mortgage lender was raised to “buy” from “hold” at Citigroup Inc., which said “the market will increasingly focus on fundamental valuation.”

Japanese automakers fell after the yen appreciated to as much as 87.37 per dollar yesterday, a level not seen since Dec. 3. A stronger yen reduces the value of overseas sales at Japanese companies when converted into their home currency. Mazda, Japan’s fourth-largest automaker, lost 3 percent to 195 yen in Tokyo, while Honda Motor Co., which gets 42 percent of its sales in North America, slipped 1.5 percent to 2,930 yen.

China Vanke Co., the nation’s biggest listed developer, dropped 1 percent to 11.91 yuan after the government extended the period of a sales tax on homes.

Spain, Greece

The Stoxx 600 fell for the first three days of this week as Spain’s credit outlook was reduced to negative from stable by Standard & Poor’s Ratings Services and Fitch Ratings downgraded Greece. The reliability of sovereign credit has come under increased scrutiny since Nov. 25, when Dubai World, a state- owned holding company, said it would seek a standstill agreement on its debt. The company has since said it’s in talks to renegotiate $26 billion of loans.

National Bank of Greece SA, the country’s biggest bank, rose 2.9 percent to 17.49 euros as the European Union’s Jean- Claude Juncker said he rules out a Greek state bankruptcy.

“I completely rule out a bankruptcy of the Greek state,” Juncker, who chairs a group of euro-area finance ministers, told reporters in Bonn. Asked if the EU would need to assist Greece, he said “this won’t be necessary.”

BOE Bond Purchases

The Bank of England will probably today stick to its plan to spend 200 billion pounds ($324 billion) on bonds as officials seek to cement Britain’s recovery from recession.

The Monetary Policy Committee, led by Governor Mervyn King, will keep the purchase program unchanged, according to all 38 economists in a Bloomberg News survey. The bank will also keep its benchmark interest rate at a record low of 0.5 percent, according to all 53 economists in a separate survey. The BOE will announce today’s decision at 12 p.m. in London.

Switzerland’s central bank left its benchmark rate unchanged today and said officials will end some emergency measures as they try to nurture the economy’s recovery from the deepest recession in three decades.

A report from the U.S. Labor Department at 8:30 a.m. New York time may show the number of Americans filing first-time claims for unemployment insurance fell to 455,000 last week, the fewest since September 2008, according to the median estimate of economists in a Bloomberg survey.

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

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Wakeup Call: USD Higher

Daily Forex Fundamentals | Written by Saxo Bank | Dec 09 09 08:40 GMT |

This development is confirming the negative correlation break-down from Friday and suggests that USD bulls have more to hope for in the short term. Calendar Economic Data Releases Country Time (GMT) Name Saxo Consensus Prior US 15:00 Wholesale Inventories MoM (OCT) -0.5% -0.9% What's going on? The USD goes higher and now firmly trades above its 55 DMA in most crosses (but not USDJPY). This development is confirming the negative correlation break-down from Friday and suggests that USD bulls have more to hope for in the short term. That also means that stocks are likely to be under pressure. The S&P500 edged lower and now flirts with the trendline support since March (1085 today). The technical picture has produced a risk-reward favoring 'dip-buying', but only above the trendline support. Geithner seeks to extend the $700B TARP until next October. FX FX Daily stance Comment EURUSD - Sell upticks toward 1.4750. Next downside objective at 1.4635, then <1.4500. USDJPY 0/+ Beware large range. Interested in strategic long, but only at good price (low 87.00’s perhaps). EURJPY 0/- Might be overdone short term. Sell ahead of 131.00, for a try lower again. GBPUSD - Sell as the big 1.6250 support area is giving way – could try 1.6000 soon. USDCAD + Interesting upside down head and shoulders in play around 1.07. Buy with stops below 1.0550. Equities Equities Daily stance Comment DAX 0/- Sell at the break of 5665 targeting 5635. S/L above 5682. FTSE 0/- Sell at the break of 5217 targeting 5191. S/L above 5233. S&P500 0/- Sell at the break of 1087 targeting 1079. S/L above 1090. NASDAQ100 0/- DJIA 0/- Futures Commodities Daily Stance Comment Gold 0/- Sell at the break of 1124 and target 1110. Stop above 1130. Silver 0/- Sell at the break of 17.42 and target 17.15. Stop above 17.50. Oil (CLF0) 0/- Sell at the break of 72.35 and target 70.50. Stop above 72.80. FX Options FX-Options Comment EURUSD Vols follows higher as dollar bullishness continues. Back end risk reversals still point towards a higher dollar so expect this theme to continue. USDJPY Mid to back end continues to see good bids as spot fails to rally. Upside JPY puts are also being aggressively bid so the market is well positioned for a move higher in spot. AUDUSD Few downside strikes starting to see good bids. The rest of the curve remains steady. Gamma is expected to ease after tomorrow’s employment report. Saxo Bank Analysis Disclosure & Disclaimer Saxo Bank A/S shall not be responsible for any loss arising from any investment based on any recommendation, forecast or other information herein contained. The contents of this publication should not be construed as an express or implied promise, guarantee or implication by Saxo Bank that clients will profit from the strategies herein or that losses in connection therewith can or will be limited. Trades in accordance with the recommendations in an analysis, especially leveraged investments such as foreign exchange trading and investment in derivatives, can be very speculative and may result in losses as well as profits, in particular if the conditions mentioned in the analysis do not occur as anticipated. Saxo Bank utilizes financial information providers and information from such providers may form the basis for an analysis. Saxo Bank accepts no responsibility for the accuracy or completeness of any information herein contained. Any recommendations and other comments in Saxo Bank's analysis derive from objective fundamental macro economical and company specific calculations, statistical and technical analysis, and subjective general market assessment. If an analysis contains recommendations to buy or sell a specific financial instrument, such recommendation should be seen as Saxo Bank's opinion that the specific instrument will respectively outperform the relevant market or underperform compared to the market. Saxo Bank's recommendations should statistically correspond to an even distribution between buy and sell recommendations. The recommendations may expire promptly due to market volatility and in general, Saxo Bank does not anticipate its recommendations to be valid more than one month. An analysis will be updated if and only if a market development or other issues relevant to the analysis render a new analysis on the same topic relevant. Saxo Bank's analysis does not cover any specific financial product over time but only products which Saxo Bank's strategy team finds it important to cover at any given point in time. In order to prevent conflicts of interest, Saxo Bank has established appropriate business procedures, incl. procedures applicable to research and analysis to ensure objective research reports. Saxo Bank's research reports have not been discussed with the parties, e.g. issuers of securities, mentioned in the analysis. Saxo Bank is under supervision by the Danish Financial Supervisory Authority. Saxo Bank does not engage in corporate finance activities and accordingly, Saxo Bank's employees, incl. the persons responsible for an analysis, do not receive remuneration associated with investment banking transactions.

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Currencies: Risk Aversion Contiues To Set The Tone For Currency Trading

Daily Forex Fundamentals | Written by KBC Bank | Dec 09 09 08:26 GMT |

Sunrise Market Commentary Global bonds advance on fears for some after-shocks of the great financial crisis The German yield curve bull steepened after Fitch cut Greece's credit rating to BBB+. It raised fears about the solvency of the country. Intra-EMU government yield spreads all saw some widening, but in a measured way. Post-payrolls losses have now been completely erased, underlining the still bullish underlying bond sentiment FX: risk aversion contiues to set the tone for currency trading A series of negative headlines on Dubai and market worries on the budgetary situation in Greece caused investors to look for safe haven shelter. This triggered to ‘usual' reaction on the currency markets. The yen was the winner; the dollar a good second. The headlines on Greece reinforced the correction in EUR/USD The Sunrise Headlines On Tuesday, US Equities opened with significant losses as downgrades sparked renewed concerns over deteriorating public finances. Dow/S&P ended the session 1% lower led by energy shares. This morning, Asian stocks show limited losses. According to people familiar with the matter, US Treasury Secretary Geithner plans to tell Congress that the Obama administration will extend the $700 billion TARP that expires on December 31. Yesterday, Greece saw its credit rating downgraded by Fitch to the lowest level in the euro zone as fears mounted over its deteriorating public finances. Moody's downgraded Illinois' general obligation bond rating to A2 from A1 citing the state's financial woes stemming from the US recession. Japan's economy grew at a far slower pace in the third quarter than first estimated as capital spending fell. GDP rose an annualized 1.3%, significantly slower than the 4.8% reported last month. The Bank of Canada held its key interest rates near zero as expected, but repeated its pledge to hold overnight rates at 0.25% until the end of June 2010, even though it said economic recovery is gathering momentum. Crude oil ($73.12) dropped for a fifth consecutive session on Tuesday, ignoring a report which showed that inventories fell last week. Gold prices ($1 131/ounce) fell to its lowest level in three weeks. Today, the eco calendar contains only the UK trade balance. Also in the UK, the Chancellor reveals the pre-budget report, while in the US and Germany auctions will take place. EUR/USD On Tuesday, some kind of crisis feeling returned to global markets. Moody's cutting the ratings of six Dubai-linked companies was one factor reducing the appetite for riskier assets. In a separate call, the rating agency also indicated that the AAA credit ratings of the US and the UK may test the boundaries of the top credit rating. Last but not least, there was a lot of market talk on the fiscal situation of Greece and around noon, Fitch cut the credit rating of the country to BBB+ from A-. On top of that, the industrial production data came out much weaker than expected. All this provided a euro-negative cocktail. During the morning session EUR/USD held op rather well. Initially, the damage on the European stock markets was rather limited, too. However, the indices came under pressure around noon and the Greece downgrade reinforced the sell-off. This global correction and decline in appetite for risk dragged also EUR/USD lower. Selling pressure mounted as soon as US traders got involved. EUR/USD fell back to Monday's lows at the start of US trading and the break below this 1.4755 support area triggered additional stop-loss selling. The EUR/USD cross rate stayed under pressure further out in the session, even as there was market talk of ongoing central bank buying interest to diversify away from the dollar. EUR/USD closed the session at 1.4704, again a loss of more than one big figure compared to the 1.4827 close on Monday evening. Today, eco calendar contains again only some second tier releases, both in the US and in the euro zone. So global market tensions/developments will continue set the tone for price action on global markets and in EUR/USD. The question is whether the budgetary problems of Greece (and potential similar problems for other sovereign issuers) will become a factor of lasting importance for trading on global markets or whether it will fade as easy as the Dubai story did two weeks ago? The least one can say is that, even after Friday's payrolls, risk (and for example not the improving growth outlook in the US or expectations on monetary policy) remains the key driver for EUR/USD trading. This morning, we have the impression that the heat is cooling. This might slow the correction of EUR/USD. However, sentiment remains fragile and it shouldn't come as a surprise if investors would stay cautious going into the end of the year. If so, this would also cap the short-term rebound potential of the single currency. Global context. For quite some time, the swings in risk appetite/risk aversion are the main drivers for price action on the currency markets. Improving investor sentiment towards risk was seen a good reason to sell the US dollar to set up carry trades in higher yielding/riskier assets. 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. Already, for quite some time, we indicated that we would 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, refrained from giving such a signal. Last week's better than expected US payrolls made investors contemplating whether the tipping point in the Fed's policy approach is finally coming closer. We still expected the Fed to keep a wait-and-see approach for some time to come. Bernanke's semiannual testimony before Congress in February might be a good time for the Fed to change its assessment, in case the economic developments would allow it to do so at that time. Of course, markets can anticipate on such a development. Recently, we already indicated that the theme of risk appetite/aversion at some point might stop playing its role as a guide for currency trading in general and EUR/USD in particular. Will considerations on the relative growth performance or on monetary policy take over as new trading theme? Over the previous two days, this was not yet the case. Risk aversion and some euro negative headlines (Greece) hammered the euro, but this is no dollar positive choice yet. So, EUR/USD trading is developing in some kind of no-mans land, still looking for a new trading theme. This could trigger some erratic trading going into the end of the year. As indicated above, in this context, we keep a very close eye on the technical picture. Looking at the (technical) charts, the break of EUR/USD above the range top at 1.4438/48 and above the 1.4719 (Dec 2008 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 until Friday a break didn't occur. Thursday's rejected test of the highs and Friday's subsequent correction obviously broke the short-term positive momentum in the pair. We amended our short-term bias from positive to neutral. For now, our working hypotheses is for the EUR/USD to settle in a sideways trading pattern between 1.4626 (Nov low) and 1.5145. A break of the range bottom would indicate that a more pronounced rebound of the dollar might be on the cards. For now, we don't not front run on such a move. Nevertheless, given the longstanding build-up of USD short positions, we wouldn't be surprised to see some further unwinding of USD shorts. So, in a day-to-day perspective, a sell on upticks approach looking for return action to the 1.4626 range bottom, remains preferred. The 1.4450/85 area (previous high/previous low) is the key level to watch out for medium term. A sustained break below this level would suggest a MT trend reversal EUR/USD: euro weakness or dollar strength Support comes in at 1.4665 (Reaction low), at 1.4641/26 (Uptrend line since June/Reaction low), at 1.4611 (38% retracement), at 1.4585 (Daily envelope), at 1.4554 (1st target ST double top off 1.4800) and at 1.4880 (Oct low) and at 1.4455 (2nd target off 1.4800). Resistance stands at 1.4743/75 (Daily envelope/Breakdown hourly), at 1.4835 (STMA), at 1.4864/67 (Reaction highs), at 1.4934/50 (Boll midline/ MTMA), at 1.5012 (Weekly envelope). The pair is in oversold territory. USD/JPY On Tuesday, risk averse investors' behaviour was again the name of the game for USD/JPY trading. Both the dollar and the yen are supposed to take up the function of safe haven in case of market tensions. However, when the storm is strong enough, the yen is still a bit more preferred over the dollar. Yesterday, there were enough negative headlines (Dubai and Greece in particular) for the yen to outperform the dollar. USD/JPY drifted gradually lower for most of the session and closed at 88.43, compared to 89.51 on Monday evening. This morning, Japanese Q3 growth was revised sharply lower from the preliminary release (0.3% Q/Q VS 1.2% Q/Q). This was not really good news for the Japanese stock markets. However, impact on yen trading was very limited and short-lived. USD/JPY briefly popped up to the 88.70 area after the release. However, global uncertainty kept the yen well bid and USD/JPY is again setting new reaction lows in the 88.10 area at the moment of writing. 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. 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 sell-on upticks approach. However, from a tactical point of view we were reluctant to challenge the possibility of USD/JPY interventions from the BOJ at sub 87 levels in USD/JPY. Friday's, US payrolls sparked a nice USD/JPY rebound. However, Monday's and Tuesday's price action suggests that this move has no strong legs. We hoped to get an opportunity to reinstall USD/JPY shorts closer to the 92.32/53 previous highs. However, this looks quite far for now. In a day-to-day perspective, a cautious sell-onupticks approach is still preferred. However, from here, the yen rebound might slow with markets contemplating the risk of BOJ action. USD/JPY: yen supported by safe haven flows Support is seen 88.17/02 (Reaction low/daily envelope), at 87.80/50 (50% retracement/Break-up daily), at 87.099 (62% Retracement), at 86.46/32 (MT break-up/ starc bottom). Resistance comes in at 88.70 (Reaction high/daily downtrend line), at 8956/76 (Reaction high + daily envelope/ breakdown hourly), at 90.41 Daily channel top of 101.45) and at 90.78(Reaction high). The pair is in neutral territory. EURGBP Over the last 24 hours, the EUR/GBP cross rate had a rollercoaster ride. Early in the session the poor UK BRC retails sales and some negative headlines from Moody's on the UK AAA rating hammered the UK currency. The industrial/manufacturing production data brought no relieve either. On top of that, the lingering doubts/negative headlines on Dubai credit risks weighed on the US banking sector and on sterling. So; EUR/GBP rebounded from the 0.9020 area at the start of trading in Europe to test offers in the 0.9095 area just before noon. However, later in the session, the euro negative headlines (Greece) came to the forefront and the EUR/GBP reversed all the earlier gains. Later in the session, a positive NIESR UK GDP estimate helped the UK currency to recoup its losses. EUR/GBP closed the session at 0.9027, little changed from the 0.9016 close on Monday evening. Today, the UK eco calendar is again interesting. The trade balance figures deserve some attention, but the market focus will be on UK Chancellor Darling announcing the Pre-budget report. The UK government will have to strike a very difficult balance between giving the economy enough oxygen and convincing markets on a credible deficit reduction plan. Looking at the price action this morning, investors are a bit skeptic as to whether this balancing act will succeed. EUR/GBP spiked higher at the open of the European markets. 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 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. The sterling constructive sentiment changed again after the publication of the Minutes of the November policy meeting as the BoE discussed the possibility of cutting the discount rate. EUR/GBP regained the 0.8900 area. So, the downside alert in EUR/GBP has been called off. The pair regained the 0.9060/78 resistance, but failed to hold above this level after Friday's correction. This makes the ST picture neutral for EUR/GBP. Range trading in the 0.8900/0.9240 trading range is the preferred scenario going into the end of the year. Within this range, we continue to slightly prefer a buy-on-dips approach in line with our long-term fundamental bias. EUR/GBP: 0.9000 offering decent support Support comes in at 0.9019 (Reaction low hourly), at 0.9013/08 (Boll Midline/Reaction low), 0.8991 (Reaction low), at 0.8979/66 (25 Nov low + weekly envelop + daily envelope/Breakup daily) and at 0.8945 (Reaction low). Resistance is at 0.9063/78 (Daily envelope + reaction high/broken weekly MTMA), at 0.9017 (Reaction high), at 0.9145/54 (Weekly envelope/ 30 Nov high + Boll top). The pair is in neutral conditions. News EMU: German IP shows unexpected decline German industrial production showed an unexpected decline in October. On a monthly basis, industrial production fell by 1.8% M/M, while the consensus was looking for an increase by 1.0% M/M. However, the previous figure was upwardly revised from 2.7% M/M to 3.1% M/M. The details show that the decline was broadly based as manufacturing & mining (-1.6% M/M), construction (-2.4% M/M) and energy (- 3.4% M/M) all dropped. The decline in manufacturing and mining was led by a 3.5% M/M fall in capital goods, but also consumer goods (-1.9% M/M) fell, while intermediate goods rose by 0.6% M/M. The first decline in three months might be due to the end of the car-scrapping scheme, which dampened demand for cars, but also the stronger euro might have reduced exports. Other: UK industrial production flat in October In the UK, industrial production came out flat in October, while the consensus was looking for an increase by 0.5% M/M. Also the previous figure was downwardly revised from 1.6% M/M to 1.3% M/M. Looking at the details, manufacturing came out flat, while mining & quarrying (0.6% M/M) and oil & gas (1.0% M/M) increased. Electricity, gas & water supply fell by 1.5% M/M in October. This outcome indicates that last month's rebound due to the reopening following the summer closures was only short-lived. In December, the CBI industrial trends survey showed increase in total orders (-42 from -45). The breakdown showed a worsening in export orders (-41 from -37), finished stocks (15 from 20) and expected volume of output (-7 from 4), while average prices rose marginally (-6 from -7). Although the headline index is now at the highest level in one year, the order book remains at very weak levels 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 Analytics

Daily Forex Technicals | Written by FOREX Ltd | Dec 09 09 08:12 GMT |

CHF The pre-planned break-out variant for buyers has been implemented, but with loss in several points in attainment of minimal anticipated target. OsMA trend indicator, having marked close parity of party activity gives grounds for supposition of probable rate range movement, however, with priority of bullish direction in planning trading operations for today. Hence and considering bearish direction of indicator chart, we can assume probability of rate return to close 1,0220/40 support levels, where it is recommended to evaluate the development of the activity of both parties in accordance with the charts of a shorter time interval. As for short-term buying positions on condition of the formation of topping signals the targets will be 1,0280/1,0300, 1,0340/60 and (or) further break-out variant up to 1,0400/20, 1,0460/1,0500. The alternative for sales will be below 1,0160 with the targets of 1,0100/20, 1,0040/60. GBP The pre-planned break-out variant for sales has been implemented with attainment of minimal anticipated target. OsMA trend indicator, having marked parity of both party activity as a result of the previous trading day, gives grounds for supposition of probable rate range movement, but with priority of sales in planning trading operations for today. Therefore, at this point, considering bullish direction of indicator chart, we can assume probability of rate return to close 1,6300/40 levels, where it is recommended to evaluate the development of the activity of both parties in accordance with the charts of a shorter time interval. As for short-term sales on condition of the formation of topping signals the targets will be 1,6200/40 and (or) further break-out variant up to 1,6140/60, 1,6060/80, 1,5980/1,6020. The alternative for buyers will be above 1,6440 with the targets of 1,6480/1,6500, 1,6540/60, 1,6620/60. JPY Earlier opened and preserved long positions have not had any positive result in attainment of anticipated targets. OsMA trend indicator, having marked fall in both party activity does not clarify the choice of planning priorities for today. Hence, we can assume probability of reaching channel line 2 at 87,80/88,00 levels, where it is recommended to evaluate the development of the activity of both parties in accordance with the charts of a shorter time interval. As for short-term buying positions on condition of the formation of topping signals the targets will be 88,40/60, 89,00/20 and (or) further break-out variant up to 89,60/80, 90,20/40, 90,80/91,00. The alternative for sales will be below 87,60 with the targets of 87,00/20, 86,40/60, 85,80/86,00. EUR The pre-planned break-out variant for sales has been implemented with overlap of minimal anticipated target. OsMA trend indicator, having marked parity of both party activity in the bigger picture, gives grounds for supposition of probable rate range movement, however, with priority of planning sales for today. Hence and considering current indicator chart direction, we can assume reaching 1,4760/80 levels, where it is recommended to evaluate the development of the activity of both parties in accordance with the charts of a shorter time interval. As for short-term sales on condition of the formation of topping signals the targets will be 1,4700/20, 1,4640/60 1,4580/1,4600 and (or) further break-out variant up to 1,4520/40, 1,4460/80. The alternative for buyers will be above 1,4860 with the targets of 1,4900/20, 1,4960/80. FOREX Ltd www.forexltd.co.uk

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FX Technical Analysis

Daily Forex Technicals | Written by Mizuho Corporate Bank | Dec 09 09 07:57 GMT |

EURUSD Comment: Below 'channel' support, trading in the middle of the Ichimoku 'cloud', though above retracement support and thereby confusing many. Knee-jerk reactions in thin year-end markets will probably rattle nerves. The idea that the US dollar is the 'risk averse' trade is risible. Strategy: Possibly attempt small longs at 1.4710; stop below 1.4600. Short term target 1.4800, then 1.5000 Direction of Trade: → Chart Levels: Support Resistance 1.4665 " 1.4736 1.4626 1.48 1.4600* 1.4867 1.4565 1.4906 1.4515 1.495 GBPUSD Comment: Dropping below the bottom of the 'flag' and the Ichimoku 'cloud' balances as we retrace 61% of the previous rally, the US dollar gaining against all currencies this week, hardest hit the Swedish krona. The move is corrective so watch once again for signs of forming an interim base today and maybe through to year-end. Beware thin year-end markets. Strategy: Attempt small longs at 1.6200; stop below 1.6100. First target 1.6450 then 1.6700 Direction of Trade: → Chart Levels: Support Resistance 1.6167 " 1.6288 1.6134 1.6335 1.6000* 1.64 1.59 1.6477 1.58 1.6516 USDJPY Comment: Reversing all of Friday's rally and hovering back at the 26-day moving average. Expect hesitation here today, around the 50% retracement and the 9-day moving average at 87.80. A sustained break below here targets key support around 85.00. Strategy: Attempt small shorts at 88.05, adding to 89.00; stop above 89.60. Short term target 88.00, then 86.00. Direction of Trade: → Chart Levels: Support Resistance 88.00* " 88.7 87.80* 89.18 87.38 89.56 87.00* 90.11 86.5 90.78 EURJPY Comment: Sooner than we had hoped Yen crosses have reversed most or all of last week's gains, underlying the fact that the trend is more likely to be for a stronger Yen. Now hovering just under the lower edge of a very messy band that has held for most of this year. A weekly close below 127.75 might tip the balance and push this one down sharply at year-end. Strategy: Attempt small shorts at 129.35, adding to 130.50; stop above 131.15. Cover ahead of 127.00 Direction of Trade: → Chart Levels: Support Resistance 129.17 " 130 129 130.27 128.55 131.00* 128 132 126.95** 132.5 Mizuho Corporate Bank Disclaimer The information contained in this paper is based on or derived from information generally available to the public from sources believed to be reliable. No representation or warranty is made or implied that it is accurate or complete. Any opinions expressed in this paper are subject to change without notice. This paper has been prepared solely for information purposes and if so decided, for private circulation and does not constitute any solicitation to buy or sell any instrument, or to engage in any trading strategy.

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South Korean Producer Prices Fall, Household Lending Climbs

By Sungwoo Park and Bomi Lim

Dec. 9 (Bloomberg) -- South Korea’s producer prices dropped for a seventh straight month in November and bank lending to households rose, highlighting the difficulty policy makers face on when to raise interest rates.

Prices paid to producers fell 0.4 percent from a year earlier, after a 3.1 percent decline in October, as a stronger currency reduced the cost of imported materials used to manufacture goods, the Bank of Korea said today. Bank lending to households rose for a second consecutive month in November on increased mortgage loans, the bank said in a separate statement.

Central bank Governor Lee Seong Tae kept the benchmark rate at a record-low 2 percent for a ninth month in November, and the board meets tomorrow for its monthly review of borrowing costs. The economy expanded 3.2 percent in the third quarter, boosted by exports plus local spending, and Goldman Sachs Group Inc. expects the Bank of Korea will increase the key rate by 75 basis points in 2010, and another 50 basis points in 2011.

“The global economic recovery will be led by developing nations,” Goohoon Kwon, an economist at Goldman Sachs, told a briefing in Seoul today where he announced the rates forecast. “Korean exporters are really well positioned because of their large exposure to emerging markets.”

South Korea’s exports rose for the first time in 13 months in November as demand for the nation’s semiconductors, display panels and auto components increased.

Stocks, Currency

The benchmark Kospi stock index has climbed 45 percent this year and sales at the nation’s main department stores gained the most in 14 months in October. The Korean won has risen 24 percent in the past year against the U.S. dollar, making it the best-performing currency in the region.

Loans to households climbed 2.6 trillion won ($2.2 billion) last month to 408.2 trillion won, the Bank of Korea said today. Mortgage lending increased by 1.6 trillion won.

“Household credit is a potential risk factor that the central bank should remain concerned about in general terms,” said Lee Sung Kwon, an economist at Good Morning Shinhan Securities Co. in Seoul. “But the growth rate in November does not appear to be a critical factor in triggering adjustments to the benchmark rate in the near term.”

Loans to companies climbed 2.2 trillion won to 517.8 trillion won, today’s report showed. The broadest measure of money supply, M2, grew 10.5 percent in October from a year earlier, the central bank said today in a separate statement.

South Korea’s economy will expand next year at 4.5 percent, the International Monetary Fund said yesterday. Even so, the nation will maintain accommodative policies to generate jobs and investment as the economy faces uncertainties, the Finance Ministry said last week. Governor Lee said Nov. 12 the central bank will maintain an accommodative policy stance for the time being with an emphasis on sustaining economic activity.

Prices for industrial goods, which include products ranging from textiles to oil, plastics and computers fell 1.2 percent from a year earlier, today’s report showed.

Electricity, water and gas prices advanced 6.7 percent, while services costs rose 0.6 percent, according to the report. The cost of agricultural, forestry and fisheries products declined 2.3 percent.

To contact the reporter on this story: Sungwoo Park in Seoul at spark47@bloomberg.net; Bomi Lim in Seoul at blim30@bloomberg.net

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