Asian Stocks Fall the Most in Two Months on Goldman Sachs Probe

By Kana Nishizawa and Shani Raja

April 19 (Bloomberg) -- Asian stocks fell, dragging the MSCI Asia Pacific Index down by the most in two months, on concern a U.S. suit against Goldman Sachs Group Inc. signals increasing regulatory scrutiny on financial companies.

Mitsubishi UFJ Financial Group Inc., Japan’s largest bank by market value, fell 3.5 percent in Tokyo after U.K. Prime Minister Gordon Brown called yesterday for the Financial Services Authority to start an inquiry into Goldman Sachs. BHP Billiton Ltd., the world’s biggest mining company, declined 1.5 percent in Sydney on lower commodity prices. Canon Inc., the world’s No. 1 camera maker, sank 2.3 percent after the yen strengthened against the dollar.

“The Goldman news, in isolation, undermines credibility in the financial system,” said Tim Schroeders, who helps manage about $1.1 billion at Pengana Capital Ltd. in Melbourne. “It also creates uncertainty as to whether this is a one-off action, or the first of many that results in greater scrutiny regarding the integrity of U.S. financial institutions.”

The MSCI Asia Pacific Index slumped 1.8 percent to 126.01 as of 10:42 a.m. in Tokyo, with 15 stocks declining for each one that advanced. The measure dropped the most since Feb. 19. The gauge posted its third straight weekly advance last week as better-than-estimated economic and U.S. earnings reports fueled confidence in the global economic recovery.

Japan’s Nikkei 225 Stock Average sank 1.8 percent and South Korea’s Kospi index dropped 1.5 percent. China’s Shanghai Composite Index slumped 2.4 percent and Hong Kong’s Hang Seng Index lost 1.7 percent after the government stepped up measures to curb gains in real-estate prices. China Vanke Co., the nation’s biggest publicly traded developer, tumbled 3.7 percent in Shenzhen.

Banks, Mining Companies

Futures on the Standard & Poor’s 500 Index lost 0.4 percent. The gauge slumped 1.6 percent on April 16 after the Securities and Exchange Commission sued Goldman Sachs for misstating and omitting facts about collateralized debt obligations. Germany’s financial regulator has asked the SEC for details on the suit.

The MSCI Asia Pacific Index tumbled 39 percent from Sept. 15, 2008 to March 9, 2009 as the credit crisis caused the collapse of Lehman Brothers Holdings Inc. and dragged the global economy into its worst slowdown since World War II. The MSCI gauge has since surged 78 percent.

HSBC Holdings Plc, which made 20 percent of its 2009 revenue in North America, fell 2.1 percent to HK$82.75 in Hong Kong. Mitsubishi UFJ dropped 3.5 percent to 496 yen in Tokyo. Sumitomo Mitsui Financial Group Inc., Japan’s second-biggest bank by market value, sank 4.6 percent to 3,140 yen. In Sydney, Westpac Banking Corp. fell 1.8 percent to A$27.67.

Oil, Metals

Banks and material companies posted the biggest declines among the MSCI Asia Pacific Index’s 10 industry groups. Companies in the gauge trade at an average 16 times estimated earnings, compared with 15.2 times for the S&P 500.

BHP Billiton retreated 1.5 percent to A$42.90. Newcrest Mining Ltd., Australia’s biggest gold producer, slid 1.3 percent to A$34.16. Woodside Petroleum Ltd., Australia’s second-biggest oil and gas producer, declined 1.2 percent to A$46.14. In Wellington, New Zealand Oil & Gas Ltd. fell 1.9 percent to NZ$1.53.

Gold futures for June delivery fell 2 percent in New York on April 16, the most since February, as the SEC’s lawsuit against Goldman Sachs, one of Wall Street’s biggest traders and brokers of raw materials, spurred investors to seek a haven in the dollar and eroded the metal’s appeal as an alternative asset.

Crude oil futures slumped 2.7 percent in New York on April 16, while the London Metals Index, a measure of six metals including copper and zinc, declined 2.1 percent.

Risk Aversion

“The Goldman shock is discouraging investors from taking on risk in stocks, currencies and commodities,” said Tomochika Kitaoka, a senior strategist at Mizuho Securities Co. in Tokyo.

Japanese exporters declined as the yen strengthened to as much as 91.82 to the dollar after trading at 92.74 at the close of the Tokyo stock market on April 16. A stronger yen reduces companies’ revenue from overseas sales when converted into the local currency.

Canon slid 2.3 percent to 4,250 yen. Panasonic Corp., the world’s biggest maker of plasma televisions, retreated 1.7 percent to 1,368 yen. Mazda Motor Corp., Japan’s second-largest car exporter, fell 1.5 percent to 255 yen.

China’s property-related equities fell after the nation said banks should stop loans for third-home purchases in cities with excessive property price gains and suspend lending to buyers who cannot provide tax returns or proof of social security contributions in that city, the State Council said.

China Developers

China Vanke tumbled 3.7 percent to 8.71 yuan in Shenzhen. Poly Real Estate Group Co. sank 4.2 percent to 17.87 yuan in Shanghai. In Hong Kong, China Overseas Land & Investment Ltd., controlled by the country’s construction ministry, slumped 4.1 percent to HK$14.86. Guangzhou R&F Properties Co., the biggest real-estate company in the southern Chinese city, slumped 6.5 percent to HK$11.16.

Airline stocks slumped after a volcanic eruption in Iceland prompted airlines to cancel flights. Airlines worldwide are losing at least $200 million a day in revenue as an ash cloud over Europe grounded planes, the International Air Transport Association said on April 16.

All Nippon Airways Co., Asia’s No. 2 carrier, declined 3.1 percent to 281 yen. Australia’s Virgin Blue Holdings Ltd. tumbled 6.1 percent to 61.5 cents in Sydney. Singapore Airlines Ltd., the world’s second-largest carrier by market value, lost 2.7 percent to S$15.10.

Hong Kong’s Cathay Pacific Airways Ltd. lost 2.4 percent to HK$15.48. Separately, the company said its Deputy Chairman Philip Chen resigned to pursue personal interests.

To contact the reporters for this story: Kana Nishizawa in Tokyo at knishizawa5@bloomberg.net; Shani Raja in Sydney at sraja4@bloomberg.net.

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U.S. Stock Futures Fall as Goldman Sachs Faces Probes in Europe

By Lynn Thomasson and Chris Nagi

April 19 (Bloomberg) -- U.S. stock futures fell, extending the biggest one-day decline in more than two months, after the U.K. and Germany signaled inquiries into Goldman Sachs Group Inc.

Contracts on the Standard & Poor’s 500 Index expiring in June slipped 0.3 percent to 1,186.9 as of 10:27 a.m. in Tokyo. The benchmark index for American equities retreated 0.2 percent last week, halting the longest streak of gains in a year. Nasdaq 100 Index futures dropped 0.2 percent to 2,005 today.

Goldman Sachs faces a regulatory probe in Britain and scrutiny from the German government after the U.S. Securities and Exchange Commission sued the firm for fraud tied to collateralized debt obligations. U.S. equities decreased the most since February after the suit spurred concern fallout from the financial crisis isn’t over.

“You get a punch in the gut with these Goldman Sachs issues,” said Don Wordell, who oversees the RidgeWorth Mid-Cap Value Equity Fund, which has beaten 97 percent of its peers during the past five years. “It brings investors back to reality. There’s a tremendous amount of skepticism.”

The Nikkei 225 Stock Average fell 1.6 percent to 10,924.78 in Tokyo. The broader Topix index dropped 1.6 percent to 972.7, with more than 10 times as many stocks declining as advancing.

Weekly Decline

Goldman Sachs sank 10 percent last week, the most since March 2009, after the SEC sued the bank and one of its vice presidents. The 1.6 percent retreat in the S&P 500 on April 16 erased gains earlier in the week spurred by better-than- estimated earnings results from S&P 500 companies.

The most profitable firm in Wall Street history wiped out its 2010 advance and ended the week at $160.70, the lowest price since March 3. The SEC said the bank created and sold CDOs tied to subprime mortgages in early 2007, as the U.S. housing market faltered, without disclosing that hedge fund Paulson & Co. helped pick the underlying securities and bet against them. Goldman Sachs said the claims are “completely unfounded.” Paulson wasn’t accused of wrongdoing.

Bank of America Corp., Morgan Stanley and JPMorgan Chase & Co. lost more than 4.7 percent on April 16. The lawsuit comes as President Barack Obama is trying to pass the most sweeping overhaul of financial regulations since the 1930s. The proposal would mean more oversight of derivatives trading and hedge funds, a consumer financial-protection authority and a system for unwinding large systemically important firms when they fail.

European Losses

Deutsche Bank AG, Germany’s largest lender, fell 7.3 percent to 55.99 euros on the day of the suit for the biggest retreat in more than eight months. UBS AG, Switzerland’s biggest bank by assets, slipped 2.8 percent to 17.93 Swiss francs. BNP Paribas SA, France’s biggest bank, slumped 3.8 percent to 55.35 euros.

U.K. Prime Minister Gordon Brown yesterday called for the Financial Services Authority to start an investigation, saying he was “shocked” at the “moral bankruptcy” indicated in the suit. Germany’s financial regulator, Bafin, asked the SEC for details on the suit, a spokesman for Chancellor Angela Merkel said.

To contact the reporter on this story: Lynn Thomasson in New York at lthomasson@bloomberg.net.

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Gold May Weaken as Goldman Fraud Case Spurs Demand for Dollar

By Kim Kyoungwha

April 19 (Bloomberg) -- Gold may weaken, after slumping Friday by the most since Feb. 4, on speculation that a fraud suit by U.S. regulators against Goldman Sachs Group Inc. will increase demand for the dollar as a safe investment.

Gold for immediate delivery fell as much as 0.3 percent to $1,134 an ounce before trading little changed at $1,137.10 at 8:55 a.m. in Singapore. The metal tumbled 1.9 percent on April 16. The dollar strengthened 0.2 percent against a basket of six currencies as Goldman faces a probe in Britain and scrutiny from Germany after being sued for fraud.

Investors “saw Goldman’s case as a sell signal and we did see the U.S. dollar firmer,” said Toby Hassall, a commodity analyst with CWA Global Markets Pty Ltd. in Sydney. “It seems to have shaken confidence. If we see flight-to-safety buying of the dollar, that might put gold prices on the defensive.”

The Securities and Exchange Commission alleged that Goldman created and sold securities linked to subprime mortgage-backed securities. The firm failed to disclose to investors that hedge fund Paulson & Co. was betting against the instruments and influenced the selections in the portfolio, the SEC said. Paulson wasn’t accused of wrongdoing.

As of Dec. 31, Paulson was the largest holder of the SPDR Gold Trust, the biggest exchange-traded fund back by the metal, and Goldman was the 11th biggest. Paulson is also the top investor in AngloGold Ashanti Ltd., Africa’s largest producer.

Silver was little changed at $17.72 an ounce, platinum fell 0.3 percent to $1,687.50 an ounce and palladium lost 0.5 percent at $527.25 an ounce.

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

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Oil Falls a Third Day on Speculation Gains Have Outpaced Demand

By Gavin Evans and Yee Kai Pin

April 19 (Bloomberg) -- Crude oil fell for a third day on speculation the commodity’s climb to an 18-month high has outpaced a recovery in global demand.

Oil extended losses after tumbling 2.7 percent on April 16, the most in 10 weeks. Prices are being driven by speculation and currency movements and there’s no need for OPEC to review output before its October meeting, Qatar’s oil minister Abdullah bin Hamad al-Attiyah said yesterday. The dollar strengthened against the euro, reducing the appeal of commodities.

“We’ve still got higher-than-average stockpiles in various markets, including the U.S.,” said Toby Hassall, a commodity analyst at CWA Global Markets Pty in Sydney. OPEC “will want to see those stockpiles drawn down further before they consider increasing supply.”

Crude oil for May delivery fell as much as $1.58, or 1.9 percent, to $81.66 a barrel in electronic trading on the New York Mercantile Exchange. It was at $81.94 at 12:09 p.m. Singapore time. Prices have declined in eight of the nine trading days after touching $87.09 on April 6, the highest since October 2008.

The May contract, which expires tomorrow, lost $2.27 on April 16 to $83.24 a barrel, the biggest drop since Feb. 5. Prices slumped after the U.S. Securities and Exchange Commission accused Goldman Sachs Group Inc. of fraud, triggering a selloff in commodity and equity markets. The more-widely held June future was down $1.10, or 1.3 percent, at $83.57 today.

Greece Bailout

The euro fell to a one-week low against the dollar after European Union finance ministers told Greece to brace itself for the International Monetary Fund’s conditions on a bailout package. The U.S. currency was at $1.3462 per euro at 12 p.m. in Singapore from $1.3503 in New York.

“There will be fits and starts to do with the recovery story and I think this Goldman news is another event that seems to have exposed the fragility of market confidence,” said CWA’s Hassall. “Longer term, the global recovery story is going to continue to drive the oil market.”

Oil at $90 a barrel would be harmful and may “jeopardize the market,” according to Angola’s oil minister, Jose Maria Botelho de Vasconcelos. A “good level” is between $70 and $80, he said yesterday at a gas conference in Oran, Algeria.

Angola and Qatar are members of the Organization of Petroleum Exporting Countries, which pumps 40 percent of the world’s oil. The group slashed output by a record 4.2 million barrels a day beginning January 2009 to prevent a supply glut as the global economy sank into recession. Ministers voted to maintain official output targets at a March 17 meeting in Vienna.

Speculators

Hedge-fund managers and other large speculators trimmed bets on rising oil prices for the first time in three weeks, U.S. Commodity Futures Trading Commission data showed.

Speculative net-long positions, or the difference between orders to buy and sell the commodity on the New York Mercantile Exchange, decreased 12 percent to 113,364 contracts on April 13, the commission said last week.

Brent crude oil for June settlement fell as much as $1.36, or 1.6 percent, to $84.63 a barrel on the London-based ICE Futures Europe exchange. The contract was at $84.97 at 12:09 p.m. Singapore time.

To contact the reporters on this story: Gavin Evans in Wellington at gavinevans@bloomberg.net; Yee Kai Pin in Singapore at kyee13@bloomberg.net.

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Forex Exchange Morning Report

Daily Forex Fundamentals | Written by Westpac Institutional Bank | Apr 14 10 01:51 GMT |

US equities opened lower, digesting yesterday's after-hours Alcoa earnings report for Q1, the fi rst of the reporting season, but have recovered to be up 0.2% at present. Alcoa shares fell 3.4% on weaker sales revenue. A closely watched Greek tbill auction was successful. Greece sold €780m 6mth tbills at a yield of 4.55% with bids for 7.7 times that amount, and €780m 12mth tbills at 4.85% with bid coverage 6.5 times (vs 3.1 times at January's auction). The total amount of €1.6bn exceeded the €1.2bn originally earmarked. The CRB commodities index co-moved with US equities, and is currently up 0.4%, oil (-0.3%) hurt by supply concerns, gold down 0.3% on reduced safe-haven appeal, but copper up 0.8% with equities. US treasuries are 3bp lower in yield, fl attening the curve similarly. The US dollar is little changed, although it did slip with the lower US trade balance release, and then bounced on a rumour of a think-tank report of Fed language changes (which the think tank reportedly denied writing). EUR roughly fl at-lined along 1.3590 +/-40 pips. USD/JPY's gyrations between 92.60 and 93.40 refl ected the dollar's reactions to the news above. AUD ranged +/-30pips around the Sydney closing level of 0.9260, and is currently a tad higher at 0.9275. NZD dipped to just below 0.7100. AUD/NZD fi rmed in a straight line to 1.3060. US small business confi dence falls further in March. The NFIB index fell from 88.0 to 86.8 in March, its lowest since July last year. This survey is a timely reminder that all is not well in the US economy. The lower reading was driven by a lower intention to hire, lower sales expectations, tighter credit and a further fall in businesses saying now is a good time to expand. Note that we have found that the intention to hire/fi re number is a good guide to the tone of the subsequent monthly payrolls so ex Census workers, we are inclined to forecast something like 0k private payrolls growth in April down from 123k in March. US trade defi cit widens from $37.0bn to -$39.7bn in Feb. This refl ected about fl at exports for the second month running, but a 1.7% rebound in imports which had fallen a similar amount in Jan. Exports were constrained by a further decline in civilian aircraft deliveries to foreign customers, while imports showed broad-based gains outside of apparel, autos and food. In other news, import prices rose 0.7% but fell excluding oil, a sign recent dollar gains against some currencies might be impacting on the trade story. US IBD/TIPP economic optimism rose from 45.4 to 48.4 in April. General economic confi dence was the highest since last September, but personal fi nances did nothing more than reverse the steep drop in March. UK trade balance defi cit narrows from £8.1bn to £6.2bn in Feb, its lowest since June 2006, thanks to a sharp jump in exports, especially of chemicals. This follows January's export slump which pushed the defi cit out to its widest since late 2008, and mirrors the recent fall/rebound in manufacturing output in the fi rst two months of 2010. Other UK data mixed. The BRC reported stronger retail sales in March, but the RICS reported fewer surveyors assessing house prices as rising in March. But back in Feb, the government reported house price gains accelerating from 6.2% yr to 7.4% yr. Canadian trade surplus widens from C$0.8bn to C$1.4bn in Feb. Exports rose 2.8% lifted by the industrial and auto sectors, while imports were constrained to a 0.9% rise by a sharp fall in the energy component. Meanwhile, new house prices rose 0.1% in Feb. Outlook AUD/USD and NZD/USD outlook next 24 hours: AUD looks rangebound today between 0.9220 and 0.9300. NZD is in a range of 0.7100 and 0.7150, but the lower bound is more likely to be tested today, particularly if our economist's -0.3% (mom) forecast for Feb retail sales proves correct this morning. Events Today Date Country Release Last Forecast 14-Apr NZ Feb Retail Sales 0.80% –0.3% Aus Apr Westpac-MI Cons Sentiment 117.3 – US Mar Consumer Price Index 0.00% 0.10% Mar CPI Core 0.10% 0.00% Mar Retail Sales 0.30% 1.20% Mar Retail Sales Ex Autos 0.80% 0.70% Feb Business Inventories 0.00% 0.40% Fed Beige Book Fedspeak Eur Feb Industrial Production 1.60% 0.00% 15-Apr Aus Apr WBC-MI Unemploy Expect’s –0.2% – Apr MI Inflation Expectations 3.20% – Q1 NAB Business Survey US Initial Jobless Claims w/e 10/4 460k 440k Apr NY Fed Empire State Index 22.9 25 Feb Net Long Term TIC Flows $bn 19.1 48 Mar Industrial Production 0.10% 0.80% Apr Philadelphia Fed Index 18.9 22 Westpac Institutional Bank http://www.wib.westpac.co.nz/ Disclaimer All customers please note that this information has been prepared without taking account of your objectives, financial situation or needs. Because of this you should, before acting on this information, consider its appropriateness, having regard to your objectives, financial situation or needs. Australian customers can obtain Westpac's financial services guide by calling +612 9284 8372, visiting www.westpac.com.au or visiting any Westpac Branch. The information may contain material provided directly by third parties, and while such material is published with permission, Westpac accepts no responsibility for the accuracy or completeness of any such material. Except where contrary to law, Westpac intends by this notice to exclude liability for the information. The information is subject to change without notice and Westpac is under no obligation to update the information or correct any inaccuracy which may become apparent at a later date. Westpac Banking Corporation is regulated for the conduct of investment business in the United Kingdom by the Financial Services Authority. © 2004 Westpac Banking Corporation. Past performance is not a reliable indicator of future performance. The forecasts given in this document are predictive in character. Whilst every effort has been taken to ensure that the assumptions on which the forecasts are based are reasonable, the forecasts may be affected by incorrect assumptions or by known or unknown risks and uncertainties. The ultimate outcomes may differ substantially from these forecasts.

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USDCAD: Stalled And Directionless Ahead Of The 1.0000 Level

Daily Forex Technicals | Written by FXTechstrategy | Apr 13 10 14:50 GMT |

USDCAD- The pair continues to hesitate above its parity level. As highlighted in our past analysis, while USDCAD continues to trade above the mentioned level risk of a base forming price activities exist for an eventual corrective recovery with the 1.0219 level, its Jan 14’10 low and the 1.0301 level, its Mar 26’10 high coming in as upside targets. Beyond there will open the door for more strength towards the 1.0320 level, its Mar 11’10 high and next its Feb 22’10 low at 1.0368. That level should cap recovery if tested and turn the pair back down in line with its broader medium term weakness. Alternatively, a break and hold below the 1.0000 level, its psycho/parity level will set the stage for a decline towards its 2010 low at 0.9975 with a cut through there putting further downside pressure on the 0.9818 level, its July’08 low and then the 0.9707 level, its Feb’08 low or even lower. Mohammed Isah Market Analyst www.fxtechstrategy.com This report is prepared solely for information and data purposes. Opinions, estimates and projections contained herein are the author's own as of the date hereof and are subject to change without notice. The information and opinions contained herein have been compiled or arrived at from sources believed to be reliable but no representation or warranty, express or implied, is made as to their accuracy or completeness and neither the information nor the forecast shall be taken as a representation for which the author incur any responsibility. The does not accept any liability whatsoever for any loss arising from any use of this report or its contents. This report is not construed as an offer to sell or solicitation of any offer to buy any of the currencies referred to in this report

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FX Thoughts for the Day

Daily Forex Technicals | Written by Kshitij Consultancy Services | Feb 25 10 12:24 GMT |

USD-CHF @ 1.0841/45...21-Month-MA Resistance holding R: 1.0886 / 1.0925-40 / 1.0980 S: 1.0800 / 1.0750-30 / 1.0700 Swiss is continuing to trade lower below the 21-Month-MA Resistance (currently at 1.0886). Immediate Support is seen at 1.08 which we expect to hold in the US session today. We continue to remain bullish for a rise towards 1.0950 on a break above the 21-Month-MA Resistance in the coming days. On the other hand, a strong break below the immediate Support at 1.08 might see 1.0730-00 once again in the US session today. Limit Buy Order: Buy USD 10K at 1.0725, SL 1.0635, TP 1.0920 Cable GBP-USD @ 1.5305/09...Bearish for 1.5050, if below 1.5260 R: 1.5409 / 1.5444 / 1.5510 S: 1.5270-60 / 1.5234 / 1.5050 The Cable has spiked below the Support at 1.5283 to record a low of 1.5271 so far and doesn not seem to be in a great mood to go for consolidation. The bears have pounced once again and this time the next prominent closest target is near 1.50. The pair is likely to find some Support near 1.50 and bounce towards 1.53 once again. If however, it leaves it for the next week and the pair takes Support near 1.5270 itself, it may rise a little towards 1.54-1.55 over the rest of the week. One may want to sell on rallies above 1.54 or sell on stop loss basis below 1.5250. Aussie AUD-USD @ 0.8896/99...Resistance in 0.8950-70 region R: 0.8925 / 0.8950-70 / 0.9020 S: 0.8860 / 0.8820-00 / 0.8730 Aussie has bounced back slightly from the day's low of 0.8860 and is now trading just below 0.89. The 21-DMA (currently at 0.8868) is providing Support for the pair over the last once week. However, the 8-DMA (0.8957) is Resisting the upmove for the last couple of days which is retaining the downside pressure. As mentioned earlier, there are good chances of revisiting the significant Support at 200-DMA (0.8668) in the coming days. Note that this 200-DMA is a very significant Support level to watch for on the downside. On the upside, Resistance is seen in 0.8950-70 region which is expected to hold in the US session today. The projected Max-High and Max-Low for the day is 0.8962 and 0.8850 respectively. Limit Sell Order: Sell AUD 10K at 0.8960, SL 0.9050, TP Open Kshitij Consultancy Service http://www.fxthoughts.com Legal disclaimer and risk disclosure These views/ forecasts/ suggestions, though proferred with the best of intentions, are based on our reading of the market at the time of writing. They are subject to change without notice.Though the information sources are believed to be reliable, the information is not guaranteed for accuracy. Those acting in the market on the basis of these are themselves responsibly for any profits or losses that might occur, without recourse to us. World financial markets, and especially the Foreign Exchange markets, are inherently risky and it is assumed that those who trade these markets are fully aware of the risk of real loss involved.

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FX Thoughts for the Day

Daily Forex Technicals | Written by Kshitij Consultancy Services | Feb 25 10 12:24 GMT |

USD-CHF @ 1.0841/45...21-Month-MA Resistance holding R: 1.0886 / 1.0925-40 / 1.0980 S: 1.0800 / 1.0750-30 / 1.0700 Swiss is continuing to trade lower below the 21-Month-MA Resistance (currently at 1.0886). Immediate Support is seen at 1.08 which we expect to hold in the US session today. We continue to remain bullish for a rise towards 1.0950 on a break above the 21-Month-MA Resistance in the coming days. On the other hand, a strong break below the immediate Support at 1.08 might see 1.0730-00 once again in the US session today. Limit Buy Order: Buy USD 10K at 1.0725, SL 1.0635, TP 1.0920 Cable GBP-USD @ 1.5305/09...Bearish for 1.5050, if below 1.5260 R: 1.5409 / 1.5444 / 1.5510 S: 1.5270-60 / 1.5234 / 1.5050 The Cable has spiked below the Support at 1.5283 to record a low of 1.5271 so far and doesn not seem to be in a great mood to go for consolidation. The bears have pounced once again and this time the next prominent closest target is near 1.50. The pair is likely to find some Support near 1.50 and bounce towards 1.53 once again. If however, it leaves it for the next week and the pair takes Support near 1.5270 itself, it may rise a little towards 1.54-1.55 over the rest of the week. One may want to sell on rallies above 1.54 or sell on stop loss basis below 1.5250. Aussie AUD-USD @ 0.8896/99...Resistance in 0.8950-70 region R: 0.8925 / 0.8950-70 / 0.9020 S: 0.8860 / 0.8820-00 / 0.8730 Aussie has bounced back slightly from the day's low of 0.8860 and is now trading just below 0.89. The 21-DMA (currently at 0.8868) is providing Support for the pair over the last once week. However, the 8-DMA (0.8957) is Resisting the upmove for the last couple of days which is retaining the downside pressure. As mentioned earlier, there are good chances of revisiting the significant Support at 200-DMA (0.8668) in the coming days. Note that this 200-DMA is a very significant Support level to watch for on the downside. On the upside, Resistance is seen in 0.8950-70 region which is expected to hold in the US session today. The projected Max-High and Max-Low for the day is 0.8962 and 0.8850 respectively. Limit Sell Order: Sell AUD 10K at 0.8960, SL 0.9050, TP Open Kshitij Consultancy Service http://www.fxthoughts.com Legal disclaimer and risk disclosure These views/ forecasts/ suggestions, though proferred with the best of intentions, are based on our reading of the market at the time of writing. They are subject to change without notice.Though the information sources are believed to be reliable, the information is not guaranteed for accuracy. Those acting in the market on the basis of these are themselves responsibly for any profits or losses that might occur, without recourse to us. World financial markets, and especially the Foreign Exchange markets, are inherently risky and it is assumed that those who trade these markets are fully aware of the risk of real loss involved.

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Out with Flux, in with Risk Aversion

Daily Forex Fundamentals | Written by Interactive Brokers | Feb 25 10 13:52 GMT |

Unsurprising though it may be, risk aversion kicked in a notch overnight as news of a potential downgrade within a month by Standard & Poors for Greece. Such a move would leave its long-term debt rating on the border of junk status increasing pressure on the government already finding the headwinds pretty tough. The euro slipped on this news along with confirmation from Moody’s that it too might further downgrade the sovereign nation in the event that it deviates from its fiscal plan. Selling the euro in response to such mind-boggling simplicities has created a nasty odor in the markets today with equity prices falling and perceived riskier currencies falling back. Euro - Weakness in the euro was most pronounced against the yen, where the unit fell to ¥120.24. The euro has not traded below ¥120 in exactly a year and today’s threatened break down in the pair known for its ability to dictate risk appetite is reminiscent of a meltdown in January last year as markets braced for the (equity market) lows that were put into place during early March. Against the dollar today the euro has rebounded off a double-bottom at $1.3450 but continues to demand dealers’ attention at $1.3476. The euro’s weakness follows a successful national civil servants strike on Wednesday in Greece with public workers staging antireform demonstrations. According to people familiar with the matter, the demonstration delayed the government’s announcement of a further package of fiscal austerity measures said to be as large as €2.5 billion. On this basis the government will issue a €5 billion 10-year bond to help it raise €22 billion before €22 billion worth of bond maturities before the end of April. The government has already raised €13 billion and has a full year funding total of €54 billion. While the currency markets are getting hot under the collar today it appears that the government of Greece is working hard in coming up with a solution. However, investor attention is also being diverted towards the possibly more problematic escalation of economic crisis in Spain where a generous social safety net is part of the problem crippling Spanish finances. Today’s WSJ carries an in-depth analysis of the situation and tosses out the implication of a withdrawal from the monetary union by Spain. Increasingly dire projections for the euro are surfacing from global analysts over coming months. U.S. Dollar - The renaissance of European fiscal headwinds creates an exit from the flux I described earlier in the week and adds impetus to the rising dollar on risk aversion. In his testimony to Congress Fed Chairman Ben Bernanke described a nascent U.S. recovery and one that remained in need of ultra-low interest rates for an extended period. The wording he chose had the ability to unwind some demand for the dollar, which had earlier risen on the prospect for higher interest rates sooner rather than later. Overall his testimony was tepid and taught us relatively little with stock traders reversing a negative stance and warming to the prospect of ongoing easy money conditions that may aid corporate profits. Japanese yen - Today’s boost to risk aversion caused by rising Greek yields and credit insurance has taken a global toll. The Japanese yen continues to steal back losses incurred when investors assured themselves that short-term U.S. rates were likely hitched to the discount rate. The yen rose per dollar to ¥89.47 and strengthened to ¥137.00 against the British pound. Aussie dollar - The inability of the Australian dollar to make headway when conditions look optimal is frustrating investors wanting to see higher peaks against the dollar. While bulls can cite a variety of factors to support the Aussie unit, the mere resurgence of risk aversion with an epicenter in Athens is enough to turn investors into sellers as though a fault line would show up in Sydney. The Aussie is weaker at 88.79 U.S. cents today and is weaker 1.5% against the Japanese yen at ¥79.36. It was only earlier this week that lower prospects for rising global interest rates saw investors flock to the Aussie dollar on the grounds that it would maintain its yield advantage for longer against the U.S. dollar. Aussie weakness continues to leave investors scratching their heads today with a further highly likely quarter point interest rate increase to be announced when the RBA concludes its meeting on Tuesday. Canadian dollar - With the stronger greenback comes weakness in gold prices and a negative tone in the energy patch, where crude oil prices are $1.11 lower at $78.90. Gold prices are hovering above a two-week low, which appears to be weighing pretty heavily on the Canadian dollar, which felt the weight of a stronger greenback this morning as it slipped a half penny to 94.21 U.S. cents. British pound - The pound still appears to be in need of some first aid as it stumbles against the dollar to $1.5281 this morning. At this point sterling is at its weakest since May of last year. Dealers continue to trade the pound from the short side given the central bank’s recent comments that growth remains weak and susceptible to downside risks. Andrew Wilkinson Senior Market Analyst Interactive Brokers Note: The material presented in this commentary is provided for informational purposes only and is based upon information that is considered to be reliable. However, neither Interactive Brokers LLC nor its affiliates warrant its completeness, accuracy or adequacy and it should not be relied upon as such. Neither IB nor its affiliates are responsible for any errors or omissions or for results obtained from the use of this information. Past performance is not necessarily indicative of future results. This material is not intended as an offer or solicitation for the purchase or sale of any security or other financial instrument. Securities or other financial instruments mentioned in this material are not suitable for all investors. Any opinions expressed herein are given in good faith, are subject to change without notice, and are only correct as of the stated date of their issue. The information contained herein does not constitute advice on the tax consequences of making any particular investment decision. This material does not take into account your particular investment objectives, financial situations or needs and is not intended as a recommendation to you of any particular securities, financial instruments or strategies. Before investing, you should consider whether it is suitable for your particular circumstances and, as necessary, seek professional advice.

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Risk Appetite Takes a Hit - Greek Crisis Continues

Daily Forex Fundamentals | Written by MG Financial Group | Feb 25 10 14:02 GMT |

Asian markets were generally down today on risk aversion as the Greek sovereign debt crisis once again takes center stage. Risk appetite was subdued after both Moody's and S&P's stated that they may downgrade Greece's credit rating, rekindling fears of a default from the distressed nation. Strikes rippled through Athens yesterday as unions protested the government's austerity measures. The yen advanced against all the majors as investors sought safe haven currencies, pushing EUR/JPY to a one year low testing 120.21 early in London trade. The yen surged 1% vs. the dollar before bouncing off the S3 daily pivot at 89.23. USD/JPY continues to consolidate into a wedge formation with the lower bound trend line, dating back to Dec 9th, currently sitting at the 89 handle. Additional support levels appear at the S1 monthly pivot at 88.60 and lower at 87.90. The dollar has a chance to gain its footing with a break of the 89.90. Higher resistance rest at 90.70 followed by 91.20 and the 92 figure. Euro Slides The euro was softer today having tested 1.3450 before settling just below the 1.35 handle. Markets had rallied early on Fed Chairman Ben Bernanke's testimony before Congress yesterday, launching the euro to 1.3624. However, the single currency quickly relinquished all its gains, falling more than 1.25% by mid-day in the Asian session. Bernanke assured market participants that rates would remain "exceptionally low for an extended period," a statement investors were expecting. Although US markets closed to the upside, talks of the Greek credit downgrade weighed heavily on markets, with both Asian and European markets in the red half way through the trading day in London. The euro's troubles are far from over as debates escalate as to whether a bailout would even be able to save the regions debt crisis, revealing deeper, more fundamental problems with the eurozone experiment. The single currency remains under heavy pressure as it maintains the downward channel dating back to Dec 3rd. Short-term support rests at 1.3430 with targets at 1.3385 and 13305. The euro has a chance of redemption with a clean break of the 1.35 handle. Resistance levels peek at 1.3550 and higher at 1.3665. Cable on the Defensive The pound had its 3rd straight day of declines today, sliding to the S2 weekly pivot at 1.5267 at 9:00am in London today. The pound has been hard hit since Bank of England Governor Mervyn King 's, comments on Tuesday, hinting that additional quantitative easing measures may be needed to prevent the economy from falling back into recession. Having broken through the lower bound of the downward channel dating back to Oct 26th, cable's downside momentum picks up steam with a break of the 61.8% Fibonacci extension taken from the Jan 19th and Feb 17th highs, using the Feb 5th trough, at 1.5240. Additional support appears at 1.5070 followed by 1.4884 and 1.4718. Supply sits at 1.5460 with further resistance at 1.5540 and 1.5720. Today, the economic calendar includes reports from the US on Jan durable goods, weekly jobless claims, and Kentucky Fed manufacturing with jobless claims expected to fall some 13k claims, and durable goods expected to rise to 1.5% from 0.3% in Dec. Tomorrow's schedule is packed with data with Japan reporting on CPI, industrial production, housing starts, and construction orders. Consumer confidence from the UK is expected to hold steady at -17 while GDP is seen to strengthen marginally. Also tomorrow is data on UK exports/imports, as well as CPI from the Eurozone. AC Markets http://www.ac-markets.com Disclaimer: This report has been prepared by AC Markets (thereof ACM) and is solely been published for informational purposes and is not to be construed as a solicitation or an offer to buy or sell any currency or any other financial instrument. Views expressed in this report may be subject to change without prior notice and may differ or be contrary to opinions expressed by Salesperson or Traders of ACM at any given time. ACM is under no obligation to update or keep current the information herein, the report should not be regarded by recipients as a substitute for the exercise of their own judgment.

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Copper Drops in N.Y. on Concern Growth May Cool, Sapping Demand

By Ted Bunker

Feb. 25 (Bloomberg) -- Copper prices fell in New York on concern that Greece’s widening budget deficit may signal a threat to economic growth, reducing demand for the metal used in pipes and wires.

Copper futures for May delivery slid 5.4 cents, or 1.7 percent, to $3.1995 a pound at 8:13 a.m. on the New York Mercantile Exchange’s Comex unit. Greek debt may be downgraded by Moody’s Investors Service and Standard & Poor’s within a few months, the rating companies said today, driving borrowing costs higher and weakening the euro.

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Gold Drops to Two-Week Low in New York as Dollar Saps Demand

By Nicholas Larkin and Kim Kyoungwha

Feb. 25 (Bloomberg) -- Gold fell to the lowest price in almost two weeks in New York as a stronger dollar eroded demand for the metal as an alternative investment.

The dollar neared a nine-month high against the euro as concern that Greece’s credit rating may be lowered cut demand for assets denominated in the single European currency. Gold, down for a fourth day, usually moves inversely to the dollar.

The “lower gold price is dictated by the weakness in the euro,” said Bayram Dincer, a commodity analyst at LGT Capital Management in Pfaeffikon, Switzerland. “Short term, higher risk aversion will not benefit gold, as this risk premium is already incorporated in the gold price.”

Gold futures for April delivery fell as much as $8.70, or 0.8 percent, to $1,088.50 an ounce on the New York Mercantile Exchange’s Comex unit, the lowest intraday price since Feb. 12. The metal was at $1,092.90 at 8:33 a.m. local time. Gold for immediate delivery in London was 0.5 percent lower at $1,092.07.

The metal slipped to $1,092.75 an ounce in the morning “fixing” in London, used by some mining companies to sell production, from $1,103 at yesterday’s afternoon fixing. Spot prices are 11 percent below a record $1,226.56 set on Dec. 3.

The euro has slumped as European finance ministers this month put more pressure on Greece to rein in its deficit while refusing to specify potential aid measures. That disappointed investors who were looking for details on assistance.

‘Flood Gates’

“Investor money looking for safe assets should be the factor” driving gold lower, said Tetsuya Yoshii, vice president for derivative products with Mizuho Corporate Bank Ltd. in Tokyo. Bullion “might have a $20 to $40 correction on the downside,” he said.

Germany has denied that concrete plans exist to aid Greece. Granting assistance would “open the flood gates” for other euro-area nations with soaring deficits, former European Central Bank Chief Economist Otmar Issing said yesterday.

The euro slipped against the dollar today after Standard & Poor’s and Moody’s Investors Service said Greece faces further downgrades as early as next month as it copes with the European Union’s biggest budget deficit. Unions took to the streets of Athens and police fired tear gas and clashed with demonstrators.

Gold is little changed this year after rising 24 percent in 2009 as governments boosted spending and central banks kept interest rates low to pull economies out of the longest recession since World War II. The U.S. economy needs low borrowing costs to feed demand in its “nascent” recovery, Federal Reserve Chairman Ben S. Bernanke said yesterday.

SPDR Holdings

Gold holdings in the SPDR Gold Trust, the biggest exchange- traded fund backed by bullion, were unchanged at 1,106.99 metric tons yesterday, according to the company’s Web site.

Investment demand for commodities, especially metals, may wane in the next three months on concern that the global economic recovery might be slower than expected, according to Allianz Investment Management.

“There could be a lot of unwinding” of bets that raw materials will advance, Nikhil Srinivasan, who oversees about $30 billion of assets as Allianz’s chief investment officer for Asia and the Middle East, said in an interview yesterday. “That will keep them from having a strong year.”

Silver for May delivery in New York fell 1.2 percent to $15.78 an ounce. Platinum for April delivery added 0.6 percent to $1,516 an ounce. Palladium for June delivery was 1 percent lower at $420.05 an ounce.

To contact the reporters on this story: Kyoungwha Kim in Singapore at kkim19@bloomberg.net; Nicholas Larkin in London at nlarkin1@bloomberg.net.

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Yen Rises as Greek Downgrade Concern Boosts Demand for Safety

By Inyoung Hwang and Anchalee Worrachate

Feb. 25 (Bloomberg) -- The yen climbed to a one-year high against the euro as investors sought the safest currencies amid concern Greece’s credit rating will be lowered and its woes will spread to other nations in the currency group.

The yen advanced against all 16 major counterparts after Standard & Poor’s and Moody’s Investors Service said Greece faces further downgrades as early as next month amid Prime Minister George Papandreou’s struggle to cut the European Union’s largest budget deficit. The pound slid to a nine-month low against the dollar as investors bet the Bank of England will need to keep interest rates near record-low levels this year.

“The market is concerned Greece is still not behind us and could have an impact on global growth,” said Jens Nordvig, a managing director of currency research in New York at Nomura International Plc. “Unless we see more positive economic data points, there’ll be doubt that underlining growth momentum is picking up.”

The yen appreciated 1.8 percent to 119.90 per euro at 8:33 in New York from 122.03 yen yesterday. That’s the first time the currency has fallen below the 120 yen level since Feb. 24, 2009. The dollar climbed to $1.5271 per British pound, the strongest level since May 18, from $1.5408.

The euro declined to $1.3478 from $1.3538. It touched $1.3444 on Feb. 19, the lowest since May 18. The European currency has fallen 2.8 percent versus the dollar in February, heading for a third monthly loss, its longest stretch since November 2008.

Euro Carry Trades

The dollar weakened against the yen as a government report showed U.S. initial jobless claims unexpectedly increased last week.

Initial jobless claims rose by 22,000 to 496,000 in the week ended Feb. 20, the Labor Department said. The median estimate of 43 economists in a Bloomberg survey was for news claims to fall to 460,000. The dollar declined 1.2 percent to 89.07 yen, from 90.15.

The euro will become a favorite funding currency for carry trades as Greece’s crisis weighs on regional interest rates, Deutsche Bank AG said. The three-month London interbank offered rate, or Libor, for euro loans sank below 0.6 percent for the first time last week, down from more than 5 percent after the collapse of Lehman Brothers Holdings Inc. in September 2008.

“Greece’s crisis has highlighted political and structural weakness in the euro zone,” said Koji Fukaya, a senior currency strategist for Deutsche Bank in Tokyo. “First, it remains unclear whether any aid will be available. And even if any rescue plan comes out, it will take time to see if it’d work.”

The currency may slump further to $1.25, Fukaya said, a level last seen in March 2009.

Pound’s Slide

In carry trades, investors get funds in a country with relatively low borrowing costs and invest in another with higher interest rates, increasing sales of the borrowed currency.

Sterling also fell against 13 of its 16 most-traded peers as concern about the potential downgrades of Greek debt stirred concern Britain may struggle to tackle its own record deficit.

Bruce Stout, who runs Aberdeen Asset Management Plc’s Murray International Trust, said he’s concerned Britain’s widening debt gap will hamper economic growth.

“Sterling is being seen in the risk bucket and risk is off the agenda right now,” said Jeremy Stretch, a currency strategist at Rabobank International in London. Investors are taking bets on rate hikes “off the table,” he said.

The pound may fall to $1.50, should it drop below $1.5275, which would be a 50 percent retracement of its advance from last year’s low to its high, Stretch said, citing Fibonacci numbers.

The U.K. currency weakened 0.4 percent to 88.19 pence per euro and 1.7 percent versus the yen, to 136.49.

Rating Downgrade

The cost of protecting against default on Greek government bonds increased 10 basis points to 392, the highest in more than two weeks, according to CMA DataVision prices.

“We believe that a further downgrade of Greece of one to two notches is possible within a month,” S&P analysts led by Marko Mrsnik in London said in a statement late yesterday. Pierre Cailleteau, managing director of sovereign risk at Moody’s, said in Tokyo today Greece faces a downgrade of “a couple of notches” within a few months.

S&P, Moody’s and Fitch Ratings downgraded Greece’s credit rating in December as its deficit approached 13 percent of gross domestic product. Germany has denied that there are concrete plans to aid Greece, and former European Central Bank Chief Economist Otmar Issing said yesterday granting assistance would “open the flood gates” for other euro-area nations with soaring deficits.

Moody’s rating of Greece is the sixth highest, two notches above the BBB+ held by Standard & Poor’s and Fitch Ratings.

If Moody’s cuts its credit rating to the same level as the other major ratings companies it could exacerbate Greece’s financial distress at the end of this year, when the European Central Bank is due to revert to old collateral rules that were loosened during the global recession. Greek government bonds would then no longer be eligible as collateral at the ECB, making it more difficult for the nation to borrow.

To contact the reporters on this story:
Inyoung Hwang in New York at
ihwang7@bloomberg.net;
Anchalee Worrachate in London at
aworrachate@bloomberg.net

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U.K. Pound Falls to 9-Month Low Versus Dollar on Debt Concerns

By Paul Dobson

Feb. 25 (Bloomberg) -- The pound slid to a nine-month low against the dollar as ratings companies said they may downgrade Greece’s debt, stirring concern Britain may struggle to tackle its own record deficit.

Sterling fell against 14 of its 16 most-traded peers as investors added to bets the Bank of England will need to keep interest rates near record-low levels this year. Standard & Poor’s and Moody’s Investors Service said Greece, which has the European Union’s largest budget deficit, faces downgrades as early as next month. At more than 12 percent of gross domestic product, the U.K. deficit is on a par with that of Greece.

“Sterling is being seen in the risk bucket and risk is off the agenda right now,” said Jeremy Stretch, a currency strategist at Rabobank International in London. Investors are taking bets on rate hikes “off the table,” he said.

The pound fell as much as 0.9 percent to $1.5273, the lowest level since May 18, and was at $1.5283 as of 12:25 p.m. in London. The U.K. currency weakened 0.4 percent to 88.25 pence per euro.

Prime Minister Gordon Brown is selling a record amount of debt to finance stimulus measures that were introduced to help the economy recover from the longest recession on record. The government in December increased its planned gilt sales for the fiscal year that will end in March to a record 225.1 billion pounds from the 220 billion pounds announced in April.

Bruce Stout, who runs Aberdeen Asset Management Plc’s Murray International Trust, said he’s concerned Britain’s widening debt gap will hamper economic growth.

‘Horrible Thing’

“We’re very, very aware of the risk the U.K. is carrying,” Stout said. “Debt is a horrible thing. Sterling is a very vulnerable currency.”

The pounds may fall below parity with the euro and drop to $1.05 if the government tackles the country’s debt burden too early, UBS AG said yesterday.

“If the next government was to prematurely curb the fiscal deficit after the elections, without the economy reaching a surer footing, the consequences for sterling, financial markets and public confidence would be grave,” Mansoor Mohi-Uddin, chief currency strategist at UBS in Singapore, said in a research note.

While the opposition Conservatives, who have called for government spending cuts to start this year, are still ahead of the ruling Labour Party in opinion polls, the gap has narrowed. A poll by YouGov Plc in the Sunday Times newspaper showed the Conservative lead over Labour at its narrowest since December 2008.

‘Big Psychological Mark’

The pound may fall to $1.50, should it drop below $1.5275, which would be a 50 percent retracement of its advance from last year’s low to its high, Stretch said, citing so-called Fibonacci numbers.

“That’s the path of least resistance,” he said. “The big psychological mark of $1.50 is close at hand.”

U.K. government bonds rose after a government report showed business investment fell 5.8 percent in the fourth quarter, compared with analyst estimates for a 0.1 percent gain.

The yield on the benchmark 10-year gilt dropped 3 basis points to 4.04 percent. The yield on the short-sterling futures contract expiring in December fell 4 basis points to 1.12 percent as investors added to bets interest rates will stay lower for longer.

The U.K. sold 7.5 billion pounds of gilts this week.

The rally in gilts “is down to the Greek story, which has lifted risk aversion,” said Jason Simpson, an interest-rate strategist at Royal Bank of Scotland Plc in London. “We’ve got past this week’s supply and gilts have bounced quite nicely.’

To contact the reporters on this story: Paul Dobson in London at pdobson2@bloomberg.net; Keith Jenkins in London at Kjenkins3@bloomberg.net

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Swiss Stocks Fluctuate; Swisscom Declines, Roche Advances

By Daniela Silberstein

Feb. 25 (Bloomberg) -- Swiss stocks swung between gains and losses as Moody’s Investors Service followed Standard & Poor’s in warning Greece’s debt rating may be cut, overshadowing gains by drugmakers.

Swisscom AG, the country’s biggest telephone company, fell for a fourth day. Roche Holding AG advanced 0.5 percent after the drugmaker’s Avastin met its main goal in a study for ovarian cancer.

The benchmark Swiss Market Index, a gauge of the biggest and most actively traded companies, gained 3.1, or less than 0.1 percent, to 6,691.05 at 9:49 a.m. in Zurich. The broader Swiss Performance Index was little changed at 5,742.81.

Greece’s sovereign debt rating may be cut within months unless the country meets the objectives of its fiscal deficit reduction plan, Moody’s said today. If Moody’s cuts its credit rating to the same level as the other major ratings companies, Greek government bonds would no longer be eligible as collateral at the European Central Bank, making it more difficult for the nation to borrow.

Standard & Poor’s said yesterday it may lower Greece’s credit rating by the end of March.

Swisscom dropped 1 percent to 367.9 Swiss francs. Switzerland’s largest telephone company’s Italian unit, Fastweb SpA, was downgraded to “underweight” from “buy” at Banca Leonardo. Swisscom shares have dropped 3.2 percent this week so far after an announcement that Fastweb’s founder and chief executive are under tax fraud investigation.

Roche

Roche advanced 0.5 percent to 180.3 francs. The world’s biggest maker of cancer medicines said its Avastin tumor drug kept ovarian cancer at bay in a clinical trial.

“This is a positive catalyst for Roche and further supports the Avastin franchise,” Silvia Schanz, an analyst at Bank Vontobel AG in Zurich, wrote in a note.

Allreal Holding AG dropped 0.6 percent to 124.9 francs. The Swiss property company said full-year profit before revaluation effects dropped to 88.6 million francs ($81.5 million) from 90.7 million francs a year earlier.

Micronas Semiconductor Holding AG slid 7.3 percent to 4.05 francs. The company in a restructuring to concentrate on the automotive sector said full-year sales fell to 241.2 million francs.

BKW FMB Energie

BKW FMB Energie AG increased 0.8 percent to 79 francs. The utility owned by the canton of Bern said full-year profit rose to 298 million francs from 139 million francs a year earlier.

Rieter Holding AG climbed 3.8 percent to 264.5 francs. The world’s biggest maker of staple-fiber spinning machines was rated “outperform” in new coverage at Credit Suisse Group AG.

Sulzer AG advanced 1 percent to 95.75 francs. The world’s second-biggest maker of pumps said full-year net income fell 16.3 percent to 270.4 million francs.

Vontobel Holding AG gained 1.1 percent to 32.6 francs. The bank that specializes in derivatives said full-year profit increased 23 percent to 138.9 million francs on higher trading income.

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

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U.K. Stocks Extend Decline After U.S. Economic Reports

By David Merritt

Feb. 25 (Bloomberg) -- U.K. stocks extended declines after a report showed the number of Americans filing first-time claims for unemployment insurance unexpectedly increased last week.

The benchmark FTSE 100 Index fell 0.7 percent to 5,304.68 ar 1:35 p.m. in London.

A separate report showed orders for U.S. durable goods rose more than forecast in January, boosted by a surge in bookings for commercial aircraft that masked a decline in demand for some business equipment.

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European Stocks Decline; Asian Shares, U.S. Futures Retreat

By Adria Cimino

Feb. 25 (Bloomberg) -- European stocks slipped as concern that Moody’s Investors Service may cut Greece’s debt rating overshadowed better-than-expected earnings from Royal Bank of Scotland Group Plc and France Telecom SA. Asian stocks and U.S. index futures fell.

Xstrata Plc, the largest exporter of coal used for power, led basic-resources shares lower as metals prices fell. RWE AG slid 1.7 percent after Germany’s second-biggest utility cut its earnings growth forecast. RBS, Britain’s largest government- controlled lender, and France Telecom, the country’s biggest phone company, climbed more than 2.5 percent.

Europe’s Dow Jones Stoxx 600 Index fell 0.3 percent to 246.41 at 1:02 p.m. in London. The benchmark gauge has retreated 5.3 percent from this year’s high on Jan. 19 amid concern over budget deficits in Greece, Spain and Portugal and as China moved to restrict lending and stop its economy from overheating. The measure has still rallied 56 percent since March last year.

“Any new element linked to Greece can have an impact on market sentiment and the outlook for growth,” said Guillaume Duchesne, a Luxembourg-based equity strategist at Fortis Private Banking, which oversees about $117 billion. “It’s a problem, especially in light of the mixed economic data that we’ve seen. Earnings are an element of support for the market. We’re very satisfied with the results.”

Greek Rating

Greece’s ASE Index slid 1.8 percent, the most among 18 western European markets, after Moody’s said the nation’s sovereign debt rating may be cut within months unless it meets the objectives of its deficit reduction plan. If Moody’s reduces its credit rating to the same level as the other major ratings companies, Greek government bonds would no longer be eligible as collateral at the European Central Bank, making it more difficult for the country to borrow.

Yesterday, after the close of Greek trading though while other European markets were still open, Standard & Poor’s said it may lower Greece’s credit rating again by the end of March as a weak economy and political opposition threaten the country’s ability to cut the European Union’s largest budget deficit.

Futures on the S&P 500 Index slid 0.6 percent before reports on durable-goods orders and jobless claims. The MSCI Asia Pacific Index fell 0.8 percent, a second day of losses.

European Confidence

European confidence in the economic outlook unexpectedly worsened in February after the euro region’s recovery almost stalled in the fourth quarter, according to the European Commission’s index of executive and consumer sentiment. The region’s economic recovery may fail to gather strength for most of 2010 as governments phase out stimulus measures and domestic demand remains “subdued,” the Commission said today in its semi- annual economic forecasts.

Xstrata sank 3.4 percent to 1,014.5 pence. Rio Tinto Group, the world’s third-biggest mining company, lost 2.6 percent to 3,274 pence. Copper, lead and nickel were among metals falling in London.

RWE slid 1.7 percent to 62.25 euros. The company said recurrent net income, which is used to calculate its dividend, will grow by an average of about 5 percent a year in the four years through 2012, down from an earlier target of about 10 percent.

RBS surged 6.6 percent to 38.53 pence, the largest gain in more than three weeks. The bank reported a narrower-than- expected full-year net loss and said impairments for bad loans are likely to have peaked.

France Telecom

France Telecom climbed 2.6 percent to 17.28 euros, the biggest intraday gain in more than three months. The company said full-year adjusted net income declined to 4.85 billion euros ($6.5 billion), beating the average analyst estimate of 4.6 billion euros.

Piraeus Bank SA lost 7.5 percent to 5.64 euros, leading Greek banks lower. The country’s fourth-biggest lender reported its lowest annual profit in five years after impairment losses increased amid mounting concern about Greece’s economic slump and the size of its budget deficit.

National Bank of Greece SA, the nation’s largest lender, fell 4 percent to 13.35 euros and EFG Eurobank Ergasias SA, the second-largest, slid 5 percent to 5.55 euros.

Hays Plc sank 9 percent to 103.1 pence, the largest intraday slide in more than two months, after the U.K.’s biggest recruitment company reported first-half profit that missed analysts’ estimates.

BAT, Tenaris

British American Tobacco Plc, Europe’s second-largest largest cigarette maker, dropped 1.9 percent to 2,1898 pence. The company posted full-year net income of 2.71 billion pounds ($4.16 billion), trailing the 2.95 billion-pound average estimate of six analysts surveyed by Bloomberg.

Tenaris SA sank 7 percent to 15.84 euros. The world’s biggest maker of seamless pipes used to extract oil and gas said four-quarter net income increased to $222.4 million. BofA- Merrill Lynch Global Research said the results were “weak” and the “outlook for 2010 stays cautious.”

BASF SE, the world’s largest chemical company, rallied 4.4 percent to 42.43 euros after cutting its dividend less than estimated. Shareholders will get a dividend of 1.70 euros a share, down from 1.95 euros in the prior year, the company said. Analysts had forecast a cut to 1.55 euros, according to a Bloomberg survey.

Safran SA, Europe’s second-largest maker of aircraft engines, jumped 9.4 percent to 16.47 euros. Adjusted net income for 2009 rose to 376 million euros, up from a restated 297 million euros, as the manufacturer benefited from higher defense and security sales.

Valeo, GKN

Valeo SA surged 5.9 percent to 21.87 euros. France’s second-largest car-parts maker reported a fourth-quarter profit as government-backed incentives spurred auto-industry sales. The company vowed to double its operating margin.

GKN Plc soared 7.4 percent to 111.3 pence. The U.K. maker of car parts for Volkswagen AG said it will make “significant progress” in 2010 and plans to restore dividend payments.

In the U.S., orders for durable goods probably rose in January by the most in four months, economists said before a Commerce Department report due at 8:30 a.m. in Washington. Bookings for goods meant to last several years increased 1.5 percent last month, according to the median estimate of 72 economists surveyed by Bloomberg News.

Labor Department figures at the same time may show that U.S. initial jobless claims fell to 460,000 last week from 473,000 the prior week.

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

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U.S. Stock-Index Futures Extend Declines After Economic Reports

By Nick Baker

Feb. 25 (Bloomberg) -- U.S. stock-index futures extended their declines after reports showed unemployment claims increased more than forecast and orders for durable goods excluding transportation equipment trailed estimates.

Standard & Poor’s 500 Index futures expiring in March lost 0.9 percent to 1,093.80 at 8:31 a.m. in New York.

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Asian Stocks Fall on Greece Concern; Commonwealth, Hynix Drop

By Shani Raja

Feb. 25 (Bloomberg) -- Asian stocks fell for a second day, led by finance and technology companies, amid speculation Greece’s credit rating will be downgraded, putting the global economic recovery at risk.

Commonwealth Bank of Australia, the nation’s biggest lender, lost 1.5 percent. Toll Holdings Ltd. slumped 18 percent in Sydney after the air-freight and logistics company posted lower profit. Hynix Semiconductor Inc. fell 2.3 percent in Seoul on speculation creditors will sell a stake in the company. Contact Energy Ltd., New Zealand’s biggest publicly traded electricity company, climbed 4.2 percent as investors sought haven from risk.

The MSCI Asia Pacific Index fell 0.7 percent to 116.94 at 7:19 p.m. in Tokyo. Concern that Greece, Spain and Portugal will struggle to curb deficits contributed to the gauge’s 7.8 percent drop from a 17-month high on Jan. 15. Standard & Poor’s said late yesterday it may lower Greece’s credit rating by the end of March. The country may see its sovereign debt rating cut within months, Moody’s Investors Service said in Tokyo today.

“The Greece issue just seems to drag on,” said Shane Oliver, Sydney-based head of investment strategy at AMP Capital Investors, which oversees about $90 billion. “When issues like potential defaults come up, you see an escalation of nervousness. Investors are worried things might fall back again.”

Japan’s Nikkei 225 Stock Average dropped 1 percent, while Hong Kong’s Hang Seng Index sank 0.3 percent. South Korea’s Kospi Index and Taiwan’s Taiex declined more than 1.3 percent. Australia’s S&P/ASX 200 Index fell 1.2 percent.

Low Rates

The Shanghai Composite Index rose 1.3 percent after China’s government said it will extend support for the country’s industries amid weak global demand. Qingdao Haier Co., the air- conditioner and refrigerator unit of China’s biggest appliance maker, climbed 2.4 percent.

Futures on the Standard & Poor’s 500 Index lost 0.3 percent. The gauge rose 1 percent yesterday after U.S. Federal Reserve Chairman Ben S. Bernanke said the economy still needs low interest rates.

The MSCI Asia Pacific Index erased an earlier 0.2 percent advance as Greece concerns mounted. S&P cut Greece’s credit rating in December and yesterday flagged another possible downgrade. Greece may see its debt rating lowered within months should it fail to meet the objectives in its fiscal deficit reduction plan, Pierre Cailleteau, managing director of sovereign risk at Moody’s, said in Tokyo today.

Commonwealth Bank sank 1.5 percent to A$53.18. KB Financial Group Inc., owner of South Korea’s largest lender, slumped 4 percent to 48,950 won as the financial regulator said it found some accounting discrepancies at the company’s Kookmin Bank unit. Woori Finance Holdings Co., South Korea’s second-biggest financial company by assets, lost 3.7 percent to 13,000 won.

Safe Haven

“The concern is that the size of the bailout for Greece will be limited,” said Tahnoon Pasha, regional head of equities at MFC Global Investment Management in Hong Kong, which oversees $30 billion. “It’s reinforcing the ongoing process of taking risk off the table.”

Contact Energy Ltd. gained 4.2 percent to NZ$6.14 in Wellington as investors sought stocks less tied to economic growth. Tohoku Electric Power Co. climbed 1.4 percent to 1,933 yen in Tokyo. Manila Electric Co., the Philippines’ largest power retailer, jumped 4.1 percent to 177 pesos.

In Sydney, Toll Holdings plunged 18 percent to A$7.10 after the company reported that first-half net income fell 32 percent. Also in Sydney, Iluka Resources Ltd. dropped 3.5 percent to A$3.62. The world’s biggest zircon producer swung to a full-year loss after a decline in demand cut sales and forced the company to write down the value of deposits and close mines.

Analyst Estimates

Goodman Fielder Ltd., Australia’s largest baker, slumped 4.2 percent to A$1.48. The company said first-half profit rose 25 percent to A$90.3 million ($81 million). Earnings were expected to rise to A$92.4 million, the median estimate of analysts surveyed by Bloomberg.

Hynix lost 2.3 percent to 21,700 won in Seoul. The world’s second-largest computer-memory chipmaker slumped after Yonhap News reported that creditors will sell as much as 13 percent of the company this year.

In Tokyo, Denso Corp. declined 2.8 percent to 2,418 yen after one of the autoparts maker’s units was inspected by the U.S. Federal Bureau of Investigation. The unit in America is cooperating with the investigation, said Bridgette Gollinger, a spokeswoman for the subsidiary.

Low Interest Rates?

The MSCI Asia Pacific Index had risen earlier on Bernanke’s comments that a slack labor market and low inflation will allow the Federal Open Market Committee to keep the benchmark lending rate low “for an extended period.”

The gauge dropped the most in two weeks on Feb. 19 after the Fed raised the discount rate from 0.5 percent to 0.75 percent on Feb. 18, triggering concern stimulus programs are winding down. Companies in the MSCI measure trade at 18 times estimated earnings, compared with 14.2 times for the S&P 500 and 12.4 times for the Dow Jones Stoxx 600 in Europe.

“Bernanke stuck to the script and emphasized the Fed’s commitment to maintaining interest rates at low levels until the economic recovery becomes self-sustaining,” said Tim Schroeders, who helps manage about $1.1 billion of equity investments at Pengana Capital Ltd. in Melbourne.

In Shanghai, Qingdao Haier rose 2.4 percent to 21.91 yuan, leading consumer-related companies higher after China’s State Council, or Cabinet, said it will maintain measures to boost car and home-appliance sales in rural areas.

GD Midea Holding Co., China’s second-biggest publicly traded appliance maker, climbed 3 percent to 21.11 yuan.

“Boosting consumption is the government’s key task this year and that investment theme will persist throughout the year,” said Yan Ji, who helps oversee about $1.2 billion at HSBC Jintrust Fund Management Co. in Shanghai. “Some big-cap stocks are bargains given they will see continuing earnings growth and economic fundamentals are still sound.”

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

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