EUR/USD Daily Technical Reports

Daily Forex Technicals | Written by Finotec Group | Oct 17 08 09:51 GMT |

EUR/USD-market strategy can be a sell from the level 1.3450$ Technical oscillators supporting the bearish trend for the currency pair To strengthen our analysis; we use many other indicators, starting with MACD (Moving Averages convergence divergence); we notice the MACD lines after a bearish crossover below the zero line. In order to find the power of the market, we use RSI (Relative Strength Index).With RSI; we can determine that the market is in a bearish direction. Also, MA oscillators indicate a bearish cross on the short MA line. USD/JPY Daily Technical Reports USD/JPY-market strategy can be a buy from the level 101.10 Technical oscillators supporting the bullish trend for the currency pair To strengthen our analysis; we use many other indicators, starting with MACD (Moving Averages convergence divergence); we notice the MACD lines after a bullish crossover below the zero line. In order to find the power of the market, we use RSI (Relative Strength Index).With RSI; we can determine that the market is in a bullish direction. Also, MA oscillators indicate a bullish cross on the short MA line. As seen on the chart there are two bottoms leading upwards to a buying trend. GBP/USD Daily Technical Reports GBP/USD-market strategy can be a sell from the level 1.7320$ Technical oscillators supporting the bearish trend for the currency pair To strengthen our analysis; we use many other indicators, starting with MACD (Moving Averages convergence divergence); we notice the MACD lines after a bearish crossover below the zero line. In order to find the power of the market, we use RSI (Relative Strength Index).With RSI; we can determine that the market is in a bearish direction. Also, MA oscillators indicate a bearish cross on the short MA line. USD/CHF Daily Technical Reports USD/CHF-market strategy can be a buy from the level 1.1330 Technical oscillators supporting the bullish trend for the currency pair To strengthen our analysis; we use many other indicators, starting with MACD (Moving Averages convergence divergence); we notice the MACD lines after a bullish crossover above the zero line. In order to find the power of the market, we use RSI (Relative Strength Index).With RSI; we can determine that the market is in a bullish direction. Also, MA oscillators indicate a bullish cross on the short MA line Finotec Group Inc. http://www.finotec.com/ Disclaimer: FINOTEC Tradings Market Commentaries are provided for informational purposes only. The information contained within these reports is gathered from reputable news sources and not intended as investment advice. FINOTEC Trading assumes no responsibility or liability from gains or losses incurred by the information herein.

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Economic Growth Expectations Being Decreased as Recession Looms

Daily Forex Technicals | Written by FOREXYARD | Oct 17 08 09:12 GMT |

Many of yesterday's economic data releases hinted at a slowing economy, both in the U.S. and the Euro-Zone. Consumer prices are stagnating, Germany has forecast a contracting economy, and the U.S. Philly Fed Manufacturing Index had its worst release in 18 years. Investors will have to adapt themselves to the upcoming economic hardship as these changes will not rectify themselves within a short period of time Market Trend EUR/USD GBP/USD USD/JPY USD/CHF AUD/USD EUR/GBP Daily Trend Weekly Trend Resistance 1.3552 1.7436 1.1423 1.1423 1.6718 0.7859 1.3528 1.7412 1.1399 1.1398 0.6891 0.7834 1.3505 1.7387 1.1378 1.1375 0.6869 0.7811 Support 1.3438 1.7304 100.81 1.1302 0.6797 0.7742 1.3412 1.7279 100.57 1.1279 0.6773 0.7716 1.3389 1.7251 100.32 1.1251 0.6746 0.7788 Economic News USD - Dollar Rises but Fails to Hold Gains In a light volatile trading session yesterday, the USD made early gains against the EUR, only to retreat and end the day relatively unchanged as further data released from the U.S. pointed towards a recession. U.S. stock markets rallied late in the day after their worst decline since the 1987 stock market crash, fueling a greater risk appetite as investors moved out of the safety of the dollar, erasing most of its early gains. Yesterday's data hints at a slowing economy as U.S. consumer prices remained steady. However, these figures tend to be misleading because businesses are unable to pass on higher costs to consumers in a fledging economy in order to maintain consistent growth rates. To give an example of the type of negative data emanating from the American economy, the Philly Fed Manufacturing Index had its worst showing in 18 years! This is also a signal that economic difficulties are starting to spread from the financial sector into the mainstream economy. Investors will have to adapt themselves to the upcoming economic hardships as these changes will not rectify themselves within a short period of time. Traders are advised to keep a close eye on any rise in the U.S. equity markets, or a lowering of the price of Crude Oil, as these have proven to have a strong correlation with an appreciating USD. Due today are the Preliminary University of Michigan Consumer Sentiment Report and U.S. Building Permits figures. Given the recent drop in equity markets, look for the Sentiment Report to post worse-than-expected results. However, the USD has proven resilient despite recent negative economic news from the States. Possibilities persist for the greenback to continue its two month bullish trend and send the USD to as low as 1.3200 against the EUR. EUR - EUR Still Taking Hits as German Growth Forecast is Diminished The EUR ended yesterday's trading sessions down 22 points against the USD, regaining some ground in late trading to close at 1.3473, while losing 19 points against the GBP. The difficulties the EUR has faced do not seem to be over just yet. Germany, the Euro-Zone's largest economy, cut its growth forecast from 1.2% to a meager 0.2% yesterday. The reduction comes after estimates of demand for German exports were reduced. In a speech given by the German Finance Minister, stagnation is a possible scenario for the nation's economy amid slowing global growth and weak consumer spending. The government also reaffirmed its confidence in the German banking system after receiving guaranteed loans of 500 billion EUR to German Banks. EU leaders also met yesterday to discuss the global financial crisis and pledged to protect their national industries while unveiling plans for a global summit to discuss the world's economic position. Despite the European Central Bank's efforts to improve the economic situation in the Euro-Zone, the EUR continues to slump against its pairs. A greater sense of economic weakness versus its counterparts has helped to push the EUR lower the past two weeks and very well may continue this trend until the market receives positive economic indicators for the 15-nation currency. JPY - Japanese Yen Continues to Find Strength The JPY weakened against its major crosses yesterday, gaining 142 points to close at 101.57 by day's end. An increased risk appetite fueled by U.S. equity gains moved investors from the safety of the low-yielding JPY to positions of higher risk and returns. The Japanese government announced its second economic stimulus package in a 3-month time period. The aim of this program is to provide assistance to Japanese citizens who have suffered recent investment losses. The JPY functions as a counter cyclical currency; as the global recession deepens, the JPY's gains continue further. Today, the JPY may continue to gain momentum against the majors, with a particular emphasis on the USD/JPY potentially reaching a level of 100.00. Oil - OPEC Schedules Emergency Meeting to Discuss Production Cuts The price of Crude Oil dropped 6% over recession concerns and fears that demand will continue to decrease. The U.S. economic indicators released yesterday helped to put pressure on the price of Oil, sending it under $70 for a new 14-month low. Poor indicators from the U.S. economy have reduced the demand for Oil lately. Reduced fuel costs may be the only bright spot to appear from this economic crisis. Due to the continuing price declines, OPEC has initiated an emergency meeting, scheduled to convene on October 24. Reducing Crude Oil output will be heavily debated as a possible way to increase Crude Oil's price. However, for the time being, traders may look for another drop in value, potentially reaching into the $60-$65 range before day's end. Technical News EUR/USD For the past 10 days, the pair has fluctuated without making a significant breach, and is now traded around the 1.3480 level. Currently, a double doji formation on the hourlies implies that a sharp movement is impending, and as both the RSI and the Slow Stochastic on the 4-hour chart are floating near the 50 line, it appears that the momentum is still somewhat bullish. GBP/USD It seems that the cable has limited its bullish correction after peaking at the 1.7350 level. And now, a bearish cross on the daily chart's Slow Stochastic indicates that the general downtrend might extend. Going short seems to be the preferable choice today. USD/JPY There is a very distinct bullish channel forming on the 4-hour chart, as the pair is now floating in its lower section. In addition, all oscillators on the 4-hour chart are pointing up, suggesting that the bullish move might extend. Going long might be the right strategy today. USD/CHF The daily chart shows that the pair is currently range-trading within a restricted price range. However, as the RSI on the daily chart has dropped beneath the 70 line, it appears that a bearish momentum might be arising. Going short with tight stops could be the right choice today. The Wild Card Gold Gold prices are in the midst of a very strong downtrend, and an ounce of gold is currently traded for about $809.80. The daily chart shows that the current price has dropped beneath the Bollinger Bands' lower border, suggesting that another bearish session might take place. This might be a good opportunity for forex traders to join a very popular trend. Indicators Date Time (GMT) Country Event Period Previous Forecast 10/17 09:00 EUR Trade Balance -6.4B -5.4B 12:30 USD Building Permits 0.86M 0.84M 12:30 USD Housing Starts 0.90M 0.88M 13:55 USD Prelim UoM Consumer Sentiment 70.3 66.0 13:55 USD Prelim UoM Inflation Expectations 4.3% - FOREXYARD

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Forex Depth Analysis: EUR/GBP

Daily Forex Technicals | Written by Finotec Group | Oct 17 08 09:20 GMT |

Investors should buy the British pound against the euro as the Bank of England will cut interest rates faster than the European Central Bank to battle slowing growth, RBC Capital Markets analysts said.

'Policy making in the U.K. is likely to look like a speedboat compared to the European supertanker going forward,' wrote a team of analysts including Toronto-based David Watt, a senior currency strategist at RBC, in a research note yesterday. 'Difficulty in reaching a consensus will stop the ECB delivering the rapid and aggressive cuts the economy needs.'

The following technical analysis gives us a detailed lookout on what is expected to happen to EUR/GBP.

The buying point is at 0.7840; based on a break of a strong resistance.

* Fibonacci 61.8% is the take profit at 0.7943
* Previous support is the stop loss at 0.7736

The selling point is at 0.7759; based on a clear downtrend.

* Pivot point is the take profit at 0.7691
* Fibonacci 23.6% is the stop loss at 0.7815

To strengthen our analysis; we use many other indicators, starting with MACD (Moving Averages convergence divergence); we notice the crossing of MACD line to the signal line and breaking of equilibrium level. In order to find the power of the market, we use RSI (Relative Strength Index).With RSI; we can determine that the market is in a downtrend.

The ROC oscillator is very important to understand the demand in the market and as we see on the graph it breaks the zero level. The stochastic oscillator crosses %D line and gives us a bearish signal.

* The following analysis is for information only; Finotec is not responsible for any decisions or misinterpretations based on the given text.

Finotec Group Inc.
http://www.finotec.com/

Disclaimer: FINOTEC Tradings Market Commentaries are provided for informational purposes only. The information contained within these reports is gathered from reputable news sources and not intended as investment advice. FINOTEC Trading assumes no responsibility or liability from gains or losses incurred by the information herein.



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Dollar Down Before Consumer And Housing Reports

Daily Forex Fundamentals | Written by Finotec Group | Oct 17 08 09:39 GMT |

The dollar was down against the euro on Friday as fears regarding the global financial crisis diminished slightly. It was down also against the pound on the back of speculation of a further Federal Reserve interest rate cut. However, investors will be keeping an eye on today's U.S. consumer and housing reports that could well reinforce that the economy in the states is pushing towards a recession.

'The reports may reinforce worries that the U.S. is in a recession and concerns linger over its financial markets,' said the general manager of foreign exchange at Tokyo Forex & Ueda Harlow Ltd. 'the dollar is still a sell.'

The pound was up against the dollar and the euro approaching weekly gains against both currency pairs, on sentiment that the proposed UK bank bailout and interest rate cuts will help revive the economy. Sterling was up against 14 of 16 most actively traded currencies. Analysts at RBC Capital Markets recommend to buy the British currency against the euro on sentiment that the BoE will slash interest rates at a faster rate than the European Central Bank.

Today we have key data releases in the U.S. At 12:30pm GMT building permits for the month of September will be released. Expectations are that there was a drop from 860k to 840k. At 1.55pm GMT the University of Michigan will be releasing its monthly Consumer Sentiment statement. This survey of 500 consumers is expected to show continued pessimism about the US economy.
Economic Calendar

Time (GMT)	E Event	Currency	Period	Previous	Previous	Significance
12:30	Building Permits	USD	Sep	0.85M		***
12:30	Housing Starts	USD	Sep	0.90M		**
09:00	Trade Balance	EUR	Aug	-6.4B		**

Finotec Group Inc.
http://www.finotec.com/

Disclaimer: FINOTEC Tradings Market Commentaries are provided for informational purposes only. The information contained within these reports is gathered from reputable news sources and not intended as investment advice. FINOTEC Trading assumes no responsibility or liability from gains or losses incurred by the information herein.



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Euro-Zone Trade Deficit Narrows, But Fails to Meet Expectations

Daily Forex Fundamentals | Written by DailyFX | Oct 17 08 09:15 GMT |

The eurozone August sa trade deficit narrowed to EUR 6.1 bln from EUR 6.7 bln in the previous month. The result was not quite as positive as expected in the light of lower oil prices that month, but the 2.2% m/m decline in nominal imports was fully compensated by the 2.3% m/m drop in nominal exports that month. Unadjusted data show a trade deficit of EUR 9.3 bln, versus a surplus of EUR 1.5 bln in August last year and after a EUR 2.0 bln deficit in July. Accumulated data for the first eight months of the year show a deficit of EUR 24.0 bln, versus a surplus of EUR 16.5 bln in the corresponding period last year.

DailyFX


Disclaimer

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Former customers sue Qwest over cancellation fees

Oct 17 (Reuters) - Two former Qwest Communications International Inc customers filed a suit against the U.S. telecommunications provider, looking to end early-termination fees for Internet subscribers, court documents showed.

The suit, filed on Tuesday in the U.S. District Court for the Western District of Washington, seeks class action status and challenges the practice of early-termination fees for broadband services.

The plaintiffs, Rob Vernon and Rory Durkin, said they were each charged $200 when they cancelled their high-speed Internet service.

Qwest markets its price-for-life plans as requiring a two-year agreement, but charges the early-termination fee regardless of when the customer cancels, the plaintiffs said.

"Qwest imposes this $200 fee on its internet customers regardless of the customer's reason for cancelling service, the time remaining on the subscriber's alleged oral term commitment and the lack of an agreement signed by the customer agreeing to such terms," the plaintiffs said in the lawsuit.

Denver-based Qwest could not be immediately reached for comment. (Reporting by Ajay Kamalakaran in Bangalore; Editing by Andrew Callus)



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World equities rise, helped by earnings

By Jeremy Gaunt, European Investment Correspondent

LONDON (Reuters) - Equities rose across the world on Friday after encouraging earnings signals from technology firms such as IBM and a slowly improving tone in beleaguered short-term money markets helped ease recession fears.

European shares were up more than 3 percent following gains in Asia. Overnight, Wall Street ended a volatile Thursday with gains of more than 4 percent.

The dollar was flat to weaker against major currencies and euro zone government bonds sold off mildly. Oil prices rose nearly $2 a barrel to near $72, helped by the equity gains and growing expectations for an OPEC production cut.

Investors have been shifting their attention over the past week from the still volatile financial crisis to the prospect of a global recession.

"There's still nervousness in the market about the real economy, but in terms of valuations the price is good right now," said Nagayuki Yamagishi, a strategist at Mitsubishi UFJ Securities in Japan.

"The economic problems are the main theme of the market right now and everybody knows this, so rises will be limited."

Among the factors helping investors look past the immediate problems were some better-than-expected corporate news.

International Business Machines Corp (IBM.N) said on Thursday it expects to meet long-term profit forecasts, partly due to continued growth in emerging markets.

Meanwhile, U.S. firms such as internet search leader Google Inc and chip maker Advanced Micro Devices Inc posted results after U.S. market hours that beat expectations.

On the credit front, recent unprecedented measures by central banks to inject liquidity into the financial system appeared to be bearing some fruit.

Three-month dollar lending rates were around 4.5 percent compared with more than 6 percent at the beginning of the week.

Until bank-to-bank lending -- frozen for much of the last year by uncertainty over which faced financial disaster -- is flowing freely again, corporate activity and consumer spending cannot hope to recover from the crisis.

RECOVERY?

MSCI's main world stock index, which has lost more than 40 percent of its value this year, was up 1.5 percent on the day.

The pan-European FTSEurofirst 300 gained 3.6 percent and Japan's benchmark Nikkei closed up 2.8 percent after losing more than 11 percent on Thursday.

On currency markets, the yen gained. The dollar was down a quarter of a percent at 101.30 yen and the euro fell the same to 136.57 yen

Dollar/euro was flat at $1.3474

Ten-year euro zone government bonds yielded 4.084 percent, up 2 basis points and two-year debt yielded 2.929 percent up 1 basis paint.



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Singapore Exports Decline for 5th Month; Worst Slump in 6 Years

By Shamim Adam
Enlarge Image/Details

Oct. 17 (Bloomberg) -- Singapore's exports declined for the fifth straight month, the longest contraction in six years, as companies shipped fewer electronics and pharmaceuticals to customers in the U.S. and Europe.

Non-oil domestic exports slid 5.7 percent last month from a year earlier, after declining a revised 13.9 percent in August, the government's trade promotion agency said in a statement today. Economists had expected a 9.7 percent drop.

The island's economy entered a recession last quarter amid slowing export demand and a slump in manufacturing, prompting the central bank to end a policy favoring gains in its currency. The government expects overseas shipments to decline as much as 4 percent this year, the worst performance since 2001.

``Labor markets and consumption in the U.S. are getting worse, and Europe is not much better,'' said Alvin Liew, an economist at Standard Chartered Plc in Singapore. ``As long as the U.S. and European economies remain weak, there is little chance of a recovery in Singapore's export demand.''


Exports dropped a seasonally adjusted 0.8 percent last month from August, when they advanced a revised 1.9 percent, today's report showed. Economists had expected a 2 percent gain.

Electronics shipments slipped 10.7 percent in September from a year earlier, the 20th consecutive drop, following a revised 19.6 percent decline in August. Sales of electronics products were worth S$5.6 billion ($3.8 billion) last month, compared with S$5.2 billion in August.

Semiconductors

Singapore's semiconductor shipments rose 0.1 percent from a year earlier after falling 16.4 percent in August. Disk-drive exports declined 8.1 percent in September.

Non-electronics shipments, which include petrochemicals and pharmaceuticals, fell 1.9 percent in September from a year earlier. Petrochemical exports gained 13.5 percent.

Pharmaceutical shipments dropped 28.7 percent last month, after sliding 45.2 percent in August. Drug shipments were valued at S$1.3 billion in September, compared with S$1.14 billion the month before.

Non-oil sales to the European Union, Singapore's largest overseas market, fell 23.6 percent in September. Shipments to the U.S., its second-biggest market, dropped 24.5 percent, while exports to China climbed 11.3 percent from a year earlier.

To contact the reporter on this story: Shamim Adam in Singapore at sadam2@bloomberg.net


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Overnight interbank dollar rates continue to inch lower

LONDON, Oct 17 (Reuters) - The interbank cost of borrowing overnight dollars fell again in Europe on Friday although longer rates, including those for euros and sterling, were slower to ease with banks still cautious of lending for longer periods.

Money market stresses are showing some signs of easing but longer "term" rates remain elevated, with banks still inclined to hoard the billions of dollars of liquidity central banks have pumped into money markets rather than lend it out.

In early London trading on Friday interbank rates for overnight dollar deposits were indicated in a range of between 1 and 1.5 percent , compared with 1-2.5 pct on Thursday.

Three-month dollar deposit rates early on Friday were indicated in a slightly narrower range of 4.25-4.8 percent compared with 4.2-5.1 percent early in London on Thursday. They were briefly indicated as low as 2.7 percent overnight in Asia.

All dollar, euro and sterling Libor rates, with the exception of overnights euros, were fixed lower on Thursday for the third consecutive day as aggressive steps taken recently by authorities to unclog money markets began to slowly take effect.

But strains remain. Libor/OIS spreads, a closely-watched measure of financial dislocation, widened slightly. That spread is the difference between Libor rates and anticipated central banks rates ahead.

Three-month sterling interbank rates were last indicated around 5.2-6.2 percent versus 5.4-6.2 percent early Thursday, and euro three-month rates in a narrower range of 4.9-5.04 percent compared with 4.75-5.25 percent .

There is typically a premium on deposit rates over Libor fixings because Libor is taken from a smaller sample of large banks in the market.

Deposit and Libor rates are only indicative prices of where banks are lending to each other, not necessarily the levels at which lending is actually being carried out.



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Oil jumps more than $3 on late Wall St rally

SINGAPORE (Reuters) - Oil rose more than $3 on Friday, rebounding from a 15-month low below $70 on a late rally on Wall Street and growing expectations of an OPEC production cut.

U.S. equities, the oil market's leading barometer of global economic health, staged a late surge on Thursday as investors snapped up battered shares a day before stock options expired.

The Dow Jones industrial average jumped 4.68 percent while the broader Standard & Poor's 500 Index climbed 4.24 percent.

U.S. crude for November delivery rose $3.12 to $72.97 a barrel by 1:19 EDT, after settling $4.69 lower at $69.85, before the close of trade on Wall Street.

London Brent crude gained $2.46 to $70.30.

"This is all the oil market has been doing," said Tim Evans, energy analyst with Citi Futures Perspective. "Our short-term swings are all 'equities are up' and 'equities are down'."

Analysts said oil traders were also betting the Organization of the Petroleum Exporting Countries (OPEC) would reduce supply to support prices when it meets next week.

The 13-member cartel said on Thursday it had brought forward to Friday next week an emergency meeting to discuss the impact of global recession on oil markets.

Oil prices have fallen more than 50 percent from their peak above $147 a barrel hit in July, on demand worries amid the global economic downturn.

Qatar's Oil Minister Abdullah al-Attiyah said he expected OPEC to cut oil production by one million barrels per day (bpd) or more at the meeting.

Nigerian Oil Minister Odein Ajumogobia said the meeting was an opportunity to consider options regarding the world oil price but that no course of action had yet been proposed.

"The only real news out there is the OPEC meeting, so short-term, people will try to concentrate on that," said Gerard Rigby, an independent energy consultant based in Sydney. "If they actually cut production, that will put a floor to prices."

Longer term, analysts said softening demand and the economy were still the focus, with many of them have scaled back their global oil demand growth estimates after a recent slew of grim economic data.

Crude oil inventories in the United States rose 5.6 million barrels last week, far exceeding analysts' expectation of a 1.9-million-barrel increase, as demand in the world's top consumer continued to fall, the U.S. Energy Information Administration reported.

Gasoline inventories rose 7.0 million barrels, more than double analysts' forecast of a 2.9-million-barrel increase, as overall product demand over the past four weeks dropped 8.9 percent from year ago levels.

Hurricane Omar weakened to a tropical storm in the Atlantic on Thursday after threading its way through the small islands of the northeastern Caribbean, causing relatively little damage and posing no threat to the United States or any other land area, the U.S. National Hurricane Center said.

(Reporting by Chua Baizhen and Bernie Woodall in SAN DIEGO; Editing by Michael Urquhart)



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HK shares hover in thin volumes; Sinopec soars

* HK stocks vacillate in thin trade

* Sinopec gains as oil prices fall

* China Unicom slides amid fears over earnings

(Updates to midday)

By Jun Ebias

HONG KONG, Oct 17 (Reuters) - Hong Kong shares were little changed on Friday, as lower oil prices lifted Chinese oil refiner Sinopec Corp , offsetting losses for mobile phone operator China Unicom and Chinese financials.

Sinopec gained 6.3 percent after crude oil prices fell more than $6 a barrel to below $70 overnight on rising U.S. inventories and slowing demand amid a global economic crisis.

Mainland mobile phone operator China Unicom shed 5.8 percent on concerns its merger with fixed-line network China Netcom may hurt earnings. The two companies merged on Oct. 15 and on the same day, China Netcom reported a fall in revenue during the first nine months.

Asia's largest oil & gas producer, PetroChina, slid 1.8 percent on fears that lower oil prices may dent profits.

Offshore oil producer CNOOC fell 2.8 percent, adding to its two-day 14.6 percent slide.

The benchmark Hang Seng Index .HSI ended the morning session 4.97 points lower at 15,225.55.

"People are cautious ahead of the weekend in view of the extreme volatility on Wall Street, so the selling pressure remains," said Howard Gorges, vice chairman at South China Securities.

"Earnings estimates are being revised down and these are being priced in by the market. People are reckoning that earnings will be adversely affected by the crisis."

China Merchants Holdings , the nation's largest port operator, climbed 3.7 percent after Merrill Lynch named the stock its top pick among Chinese conglomerates.


Mainboard turnover fell to HK$27.9 billion ($3.6 billion) from HK$30.6 billion at midday on Thursday.

"Trading is directionless and volume is thin," said Castor Pang, strategist at Sun Hung Kai Financial. "Gains in the Chinese stock market this morning encouraged some buying in Hong Kong."

The Shanghai Composite Index .SSEC was up more than 1 percent on Friday on hopes the Chinese government may announce measures to stimulate the economy and prop up shares.

Chinese bank shares fell on worries China's slowing economy may cut demand for loans, trim profits and raise bad loans, said Y.K. Lee, an analyst at Core-Pacific Yamaichi.

China Construction Bank dropped 1.9 percent, while Bank of Communications was down 3.3 percent.

The China Enterprises Index .HSCE of top locally listed mainland Chinese companies rose 0.2 percent to 7,376.48.

Shares in gold miner Zijin Mining dropped 3.9 percent after the price of the precious metal eased further on Friday, following a 6 percent decline overnight as investors fled commodities, including bullion, and opted for the safety of cash.

Tencent , which runs China's largest online messaging community, jumped 2.9 percent after analysts said its earnings would stay resilient even in the face of an economic downturn, owing to its young target audience and low-priced products and services.

(Additional reporting by Parvathy Ullatil; Editing by Anne Marie Roantree)


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Nikkei up, defensive shares gain as gloom deepens

*Nikkei ends up 2.8 pct, but economy fears weigh *Nikkei up on week despite worst one-day loss since 1987 *Exporters up on weaker yen, defensive shares gain

*Trading houses hit by oil woes (Adds stocks, details) By Elaine Lies

TOKYO, Oct 17 (Reuters) - Japan's Nikkei average gained 2.8 percent on Friday and ended the week up 5 percent a day after its biggest one-day loss since the 1987 crash, with worries about the global economy limiting gains by Canon Inc and other exporters.

Investors turned sharply defensive in the face of growing global economic gloom, with that sentiment and a ratings upgrade propelling telecoms shares such as NTT DoCoMo Inc higher. Pharmaceuticals also gained as a result.

The Nikkei began a tumultuous week by surging 14 percent on Tuesday, its biggest gain ever, after markets were closed for a holiday. But Thursday saw its biggest one-day loss since 1987 as fears grew that bank rescue measures would not stave off a global recession.

The benchmark still finished the week with gains of 5 percent, its first positive week since early September. But it has lost 23 percent this month and 43 percent this year.

"A safety net may have been put in place for the financial system, but the worsening of the global economy has just begun," said Koichi Ogawa, chief portfolio manager at Daiwa SB Investments.

"There's a lot of nervousness about this here in Japan, which is so export-dependent. The biggest worry right now is emerging markets, especially China, which appears to be slowing too."

The benchmark Nikkei .N225 gained 235.37 points to 8,693.82 after earlier rising more than 3 percent, capping a week of roller-coaster trade. On Tuesday it rose more than 1,000 points for the biggest one-day percentage gain in its history, but on Thursday it fell more than 1,000 points.

The broader Topix rose 3.4 percent to 894.29.

Investors were lightening their positions ahead of the weekend, nervous about what New York trade could bring. Caution about the week ahead limited gains, and market players said rises next week were likely to be capped near 8,800.

"Trade next week will remain volatile," said Takahiko Murai, general manager of equities at Nozomi Securities.

"After all, we have no idea what will happen."

HOPING FOR ECONOMIC STEPS

A Reuters poll of 10 market players on Thursday found that most believe the only way to halt the slide in the Nikkei is government spending and new economic policies, preferably as part of a coordinated effort between major economic powers.

Japan's economy is teetering on the brink of recession and a Reuters survey on Thursday showed manufacturers at their gloomiest since six years ago, when the country was in the aftermath of a banking crisis.

The growing gloom sent investors flocking to defensive shares such as communications, drugmakers and power companies.

NTT DoCoMo Inc and other telecoms shares rose after Nikko Citigroup upgraded ratings on the stocks to "Buy" from "Hold", citing their attractiveness as a defensive play amid deteriorating business sentiment. DoCoMo jumped 7.4 percent to 156,500 yen, Nippon Telegraph and Telephone rose 9.8 percent to 425,000 yen, and KDDI Corp gained 7.1 percent to 545,000 yen.

Astellas Pharma rose 9 percent to 3,860 yen, becoming the second-biggest contributor to the Nikkei 225 by volume weight after KDDI.

Fellow drugmakers Eisai Co Ltd rose 4.9 percent to 3,430 yen, while Chugai Pharmaceutical Co Ltd climbed 4.6 percent to 1,301 yen.

The dollar held its own against the yen a day after having its best day against the yen in seven months, fetching around 101.42 yen in afternoon trade . Its gains helped prompt a wave of short-covering that boosted exporters broadly, with Canon rising 5.7 percent to 3,180 yen and Honda Motor Corp gaining 5.2 percent to 2,225 yen. Trading houses, though, suffered because long-term demand for oil is expected to be weak, with U.S. crude up $2.57 in Asia CLc1 a day after falling below $70 a barrel, a 15-month low.

Mitsui & Co lost 3.5 percent to 944 yen and Sojitz was down 1.8 percent at 166 yen. Sumitomo Corp lost 4.9 percent to 713 yen.

Trade fell off, with 2.3 billion shares changing hands on the Tokyo exchange's first section compared with last week's daily average of 2.9 billion.

Advancers outpaced decliners by more than 5 to 1. (Reporting by Elaine Lies; editing by Sophie Hardach)



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European shares jump 4 pct, led by oils, banks

LONDON, Oct 17 (Reuters) - European shares jumped in early trade on Friday, tracking gains in the United States and Asia, as investors picked up battered banks, while energy shares were lifted by a rise in crude.

At 0716 GMT, the FTSEurofirst 300 index of top European shares was up 4 percent at 892.49 points.

Oil groups BP, Total and Shell climbed 5.1-6.3 percent as crude rose nearly $3 to just shy of $73 a barrel amid growing expectations of an OPEC production cut.

Italian bank UniCredit jumped 10 percent after Libyan interests said they held 4.2 percent of the group.

Intesa SanPaolo and HSBC gained 3.2 and 2.7 percent respectively.

The FTSEurofirst 300 index rose 10 percent on Monday and 3 percent on Tuesday, helped by efforts by governments to thaw interbank lending, but suffered falls of 6.5 percent and 5 percent on the next two days as fears of a recession took grip.

"This is the most volatile week we've seen," said Thierry Lacraz, strategist at Swiss bank Pictet in Geneva. "The sole intelligent thing is to remain on the sidelines and not make any huge bets."

"The global economic environment is still very negative, especially in the United States, where we've seen a dramatic drop in industrial production," he said.

But he added that falling oil prices would boost sectors like retail, and the reduction in interbank rates would be positive for October.

Across Europe, Britain's FTSE .FTSE, Germany's DAX .GDAXI and France's CAC .FCHI posted gains of around 4 percent.

(Reporting by Sitaraman Shankar)



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National Grid Studies Land Sale, Focuses on Networks

By Paul Dobson

Oct. 17 (Bloomberg) -- National Grid Plc, the owner of gas and power networks in Britain and the U.S., is in talks to sell land next to its U.K. terminal for liquefied natural gas in order to invest in its energy networks.

``National Grid is investigating the potential sale of its land on the Isle of Grain, Kent,'' spokeswoman Gemma Stokes said in an e-mail yesterday. The area for development covers about 425 acres (172 hectares), she said. Stokes declined to comment on the site's value.

Chief Executive Officer Steve Holliday decided in January against selling National Grid's property unit because of a slowdown in the U.K. real-estate market. The company said at the time it would continue to sell former industrial and commercial properties that have been abandoned on a site-by-site basis.

Holliday told investors in London on Oct. 7 he's planning to raise investment in the company's energy networks to 3 billion pounds ($5.2 billion) a year through 2012, to boost regulated returns. He said in an interview the same day he isn't planning acquisitions and is confident in National Grid's ability to fund the spending through the debt markets.

The company has ``one very large piece of land by the Isle of Grain that people are looking at buying,'' Holliday said in the interview. ``There's certainly talk about replacing the power station there with a new power station and there are conversations around an expansion of a container port, so land is very valuable.''

Double Operations


National Grid won approval for the $7.3 billion takeover of KeySpan Corp. in August 2007, doubling operations in the U.S. to become the country's second-biggest energy distributor by customer numbers. It sold wireless networks and an Australian power cable to fund the expansion and completed a 2.3 billion- pound repurchase of shares. Now the company wants to raise its ownership by U.S. investors from the current 16 percent.

Investing 3 billion pounds a year is equivalent to buying a utility the size of KeySpan every two years, Holliday said. That means any purchase by the company would need to be ``an opportunity that you just cannot pass by,'' he said. ``I don't see any opportunities in the short term. It's not where my focus or the rest of the team's focus is.''

Holliday said that if Germany's transmission networks are made available for sale as part of a European program to separate network operations from production and supply, he ``will take a look at it, but it's going to have to pass some pretty high hurdles.''

`Safe Haven'

The company is confident that it can finance growth. ``We can last out until March 2010 without reducing our capital program and just drawing on our bank lines,'' Holliday said. ``We have no intention of drawing those bank lines,'' he added.

``Increasing confidence over regulatory returns, financing and dividend growth should demonstrate that the shares could be a relative safe haven'' in the current market environment, Dresdner Kleinwort Group analyst Martin Brough said in an Oct. 14 note. He recommends buying the company's shares.

National Grid added 27 pence, or 4.2 percent, to 663.50 pence as of 8:23 a.m. in London trading today. The stock has lost 20 percent so far this year.

Investors shouldn't just buy the shares because of the market turmoil, Holliday said. ``They should invest in National Grid in any market because it is a low-risk investment that is growing through huge organic investment and that is locking in an increase in dividend.''

To contact the reporter on this story: Paul Dobson in London at pdobson2@bloomberg.net


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South Korea Holds Emergency Summit to Stem Stock Rout

By William Sim and Bomi Lim

Oct. 17 (Bloomberg) -- South Korea's policy makers held an emergency summit today, seeking steps to restore confidence after shares plunged to a three-year low and the won declined by the most since the 1997 Asian crisis.

The Bank of Korea and the financial regulator will announce relief measures on Oct. 19 at 2 p.m. in Seoul, Finance Minister Kang Man Soo told reporters in Gwacheon today, declining to provide further details.

Standard & Poor's said the government should consider guaranteeing banks' debts, following similar moves in Australia, Europe and Hong Kong, to help lenders overcome difficulties obtaining offshore funding. Stocks plunged and money market rates soared to a seven-year high on concern banks will struggle to refinance maturing overseas debt, which could roil the financial system and wreck the economy's 10-year expansion.

``The government must take these steps to secure trust that our markets currently lack,'' said Shim Kyu Sun, a banking analyst at HI Investment & Securities Co. in Seoul. ``If we don't follow the global trend, we may see an outflow of capital to other markets.''

The government may provide tax benefits to long-term share investors to help stem the Kospi index's decline, Vice Finance Minister Kim Dong Soo said yesterday. Kang said today the government should cut taxes and increase its spending to stoke local demand as export growth slows.

Korean Banks

Concern about the banking system, initially triggered by the global credit squeeze, deepened as a slump in the domestic property market raised fears that debts made to builders could turn bad. S&P put Kookmin Bank, the nation's largest, and six other financial firms on CreditWatch with negative implications on Oct. 15.

``As has been done in many other countries, a bank guarantee would definitely help restore confidence in Korea's liquidity situation,'' Kwon Jae Min, a credit analyst at S&P in Hong Kong, said today in an interview.

The credit crisis has raised the cost of borrowing and reduced access to funds as global lending dried up. South Korean banks secure as much as 12 percent of their funding from international markets, according to Moody's Investors Service.

Banks' external debt stood at $210.5 billion as of the end of June, according to government figures. Of that total, $145.5 billion is short-term, meaning it matures within a year.

Currency, Shares

The won fell 9.7 percent yesterday, the most since the International Monetary Fund bailed out South Korea in December 1997. The currency gained 2.8 percent to 1,333.93 per dollar today after the central bank changed rules in the foreign- exchange swap market to increase banks' access to funds.

The Kospi index declined 2.7 percent to 1,180.67, the lowest level since October 2005. KB Financial Group Inc., the holding company of Kookmin Bank, slumped 12 percent, adding to yesterday's 15 percent tumble.

The global credit crunch is placing ``severe pressure'' on the ability of South Korean banks ``to roll-over their external funding requirements,'' Moody's said. ``Our assessment is that the government of Korea still has the resources to provide dollar liquidity to domestic banks.''

South Korea has been amassing foreign currency since the Asian financial crisis and is now the world's sixth-largest holder of reserves. Its holdings fell for a sixth month in September to $239.7 billion as policy makers intervened to stem the won's slide and provide liquidity to the financial system.

``The government should try to restore confidence in the market because there is panic,'' said Ma Tieying, an economist at DBS Group Holdings Ltd. in Singapore. ``They should also consider using fiscal measures to boost the real economy.''

South Korea has been reliant on increased exports to China, Europe and the Middle East to drive economic growth as rising living costs and record debt levels crimped consumer spending. The economy grew 4.8 percent in the second quarter, the weakest pace in more than a year.

To contact the reporters on this story: Bomi Lim in Seoul at blim30@bloomberg.net; William Sim in Seoul at wsim2@bloomberg.net.



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Small Banks, Counted on to Fuel Economy, Await Treasury Funds

By Rebecca Christie and Robert Schmidt
Enlarge Image/Details

Oct. 17 (Bloomberg) -- Community banks that Federal Reserve Chairman Ben S. Bernanke calls a key link between financial markets and the U.S. economy face a longer wait for government aid than their bigger competitors.

The Treasury is urging small and regional banks to contact their primary regulator for details on how to access $125 billion in funds -- half of a $250 billion sum set aside to recapitalize the nation's lenders. Five federal regulators plus the states, meanwhile, are waiting for more guidance from the Treasury.

``I don't think that when they rolled this out they understood there would be all these problems,'' said former Treasury official Wayne Abernathy, now an executive vice president at the American Bankers Association in Washington. ``The sooner they can get the details out, the better.''

Treasury Secretary Henry Paulson's aides are working to standardize procedures for putting capital into thousands of banks of varying size, charter and health. The voluntary program will serve as triage for the banking system -- giving some institutions a lifeline of money, while rebuffing weaker ones.

Smaller banks must decide by Nov. 14 whether they want to participate in the Treasury program, said Camden Fine, chief executive of the Independent Community Bankers of America, a Washington-based group that represents lenders such as CountryBank USA in Cando, North Dakota, and Easton Bank and Trust Co. in Easton, Maryland.

`Corporate Hoops'

``Many banks can't step through the corporate hoops,'' Fine said. The ``Treasury is willing to make some accommodation along that line, but we haven't heard definitively.''

Fine said he anticipates the department will release more details next week, which may help with the decision.

Some information about the plan is starting to emerge. The Treasury is making accommodations to allow privately held banks to participate and trying to find a way to help lenders that don't issue the kind of preferred shares that the U.S. wants to buy, Abernathy said.

The next step is out of banks' control, as the Treasury has to decide which applicants deserve the money.

``There's going to be a sorting process as to the financial health of banks and thrifts,'' said University of Connecticut law professor Patricia McCoy, a former member of the Fed's consumer advisory council. ``The ones that are either on the ropes or look like they might be on the ropes will not get capital infusions.''

Few Details Yet

Some community bankers said they don't have enough information yet to decide whether to participate.

Central Virginia Bank, a state bank that's part of the Fed system with about $500 million in assets, is in search of new capital to replace an $18 million investment in Fannie Mae and Freddie Mac preferred shares, said Larry Lyons, the bank's president and chief executive officer.

``We're very interested,'' said Lyons, whose bank is based in Powhatan, Virginia. ``We just have not had an opportunity to look at this thing in detail and look at what our other options are.''

For banks that intend to sign up, board approval will likely be required. For banks that are undecided, or those that don't normally issue the type of preferred stock the Treasury is buying, the administrative challenges are even greater.

``It is complicated,'' Fine said.

Paulson earlier this week set aside $125 billion for ``healthy'' banks of all sizes, after persuading nine major U.S. lenders to accept another $125 billion in fresh capital. The Treasury says the big banks will get their cash in ``days'' to start lending again.

The Other Half

Half of U.S. bank deposits are in those nine large banks, with the remainder spread across the country in smaller firms. Any delays by the Treasury in getting money to the local level threaten to slow economic growth in areas where job losses are mounting and consumer spending weakening.

Investors have responded optimistically to Paulson's bank rescue. Standard and Poor's Small-Cap Regional Banks Index of 37 small lenders rose 6.7 percent yesterday to 86.75 and is up 55 percent from a low this year reached on July 15.

Shares of KeyCorp, the third-largest bank in Ohio, are up 36 percent since Paulson announced plans to buy equity stakes in banks big and small. Regions Financial Corp., Alabama's biggest bank, is up 30 percent. Zions Bancorporation, a Salt Lake City- based lender operating in 10 western states, is up 27 percent.

Raising Capital

When Congress was considering the rescue program, the Treasury secretary said he opposed capital infusions into troubled banks because it amounted to a sign of failure.

With the credit crisis worsening and bank lending frozen, Paulson changed his approach.

``It's an absolutely horrendous time to go out to the market and raise capital,'' Lyons said. ``If things aren't too bad and too onerous in this Treasury proposal, we might consider doing that and then two or three years from now, we could go out and just raise capital in a normal fashion and pay that off.''

To contact the reporters on this story: Rebecca Christie in Washington at Rchristie4@bloomberg.net. Robert Schmidt in Washington at rschmidt5@bloomberg.net.



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Edison May Buy Assets of Rivals Hurt by Crisis, Quadrino Says

By Anthony DiPaola and Michele Seghizzi

Oct. 17 (Bloomberg) -- Edison SpA, Italy's second-largest utility, may gain from the worldwide financial crisis if indebted rivals have difficulty getting credit and are forced to sell assets, Chief Executive Officer Umberto Quadrino said.

``We have the possibility to benefit from this situation if the opportunity presents itself,'' Quadrino said in an interview in London yesterday. The company's liquidity is ``enviable'' and debt is low at less than 3 billion euros ($4 billion), he said.

Edison is set to meet its profit targets this year after a ``good'' third quarter, Quadrino said. The Milan-based company will have earnings before interest, taxes, depreciation and amortization of about 1.55 billion euros this year, he said.

The utility is seeking to expand abroad to gain more power customers and is looking for natural-gas assets to create its own supply base for its generation plants and clients. The company is participating in two pipeline projects to Italy and completed a liquefied natural gas receiving terminal.

The facility, which turns the fuel back into gas for shipment to power plants and homes, will take its first cargoes next year and be operating at full capacity by the start of the 2009 winter, Quadrino said. The LNG terminal is moored about 15 kilometers (9.3 miles) from Rovigo, off Italy's Adriatic coast, and has a capacity of 8 billion cubic meters of gas.

Investment Plan

Exxon Mobil Corp. and Qatar Petroleum both own 45 percent of the facility, with Edison owning the remainder and having rights to 80 percent of fuel imported.

Quadrino confirmed Edison's 6.2 billion-euro investment plan for the five years through 2013. The company has 1.5 billion euros in committed credit lines and can finance all the exploration and production projects it has under way, he said.

Edison expects to announce soon it was the winner of a bid to develop gas fields in Egypt, Quadrino said. The company is also exploring for gas in Iran.

To contact the reporter on this story: Anthony DiPaola in Rome at adipaola@bloomberg.net; Michele Seghizzi in London at mseghizzi@bloomberg.net.



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ONGC Says Credit Crisis Not to Hurt Purchase of Imperial Energy

By Kartik Goyal

Oct. 17 (Bloomberg) -- Oil & Natural Gas Corp., India's biggest exploration company, said the current global financial crisis won't hurt its plans to buy the U.K.'s Imperial Energy Plc.

``We have enough liquidity to do two more such transactions,'' Chairman R.S. Sharma said in New Delhi today when asked about the Imperial purchase. The company is ``not dependant'' on a $1 billion bridge loan, he said.

To contact the reporter on this story: Kartik Goyal in New Delhi at kgoyal@bloomberg.net.



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Crude Oil May Fall as Fuel Consumption Declines, Survey Shows

By Mark Shenk

Oct. 17 (Bloomberg) -- Crude oil may fall next week on concern that fuel consumption will weaken as the economic decline deepens.

Eleven of 28 analysts surveyed by Bloomberg News, or 39 percent, said prices will decrease through Oct. 24. Ten respondents, or 36 percent, said oil will rise and seven forecast little change. Last week 43 percent expected futures to decline.

U.S. fuel demand averaged about 18.6 million barrels a day during the past four weeks, the lowest since June 1999, according to a weekly supply report from the Energy Department, released yesterday. The U.S. consumes 24 percent of the world's oil.

``Fear about the economy, credit markets and demand is driving the oil market,'' said Christopher Edmonds, the managing principal of FIG Partners Energy Research & Capital Group in Atlanta. ``Oil will remain under pressure until we get more certainty about the economy.''

Output at U.S. factories, mines and utilities last month dropped 2.8 percent, the most since 1974, Federal Reserve figures showed yesterday. The Federal Reserve Bank of Philadelphia's general economic index fell to minus 37.5 this month, the lowest since October 1990, the bank said yesterday.

Crude oil for November delivery fell $7.85, or 10 percent, to $69.85 a barrel so far this week on the New York Mercantile Exchange. Futures touched $68.57 a barrel yesterday, the lowest intraday price since June 27, 2007. Prices have dropped 53 percent from the record $147.27 a barrel reached on July 11.

The oil survey has correctly predicted the direction of futures 49 percent of the time since its start in April 2004.

Bloomberg's survey of oil analysts and traders, conducted
each Thursday, asks for an assessment of whether crude oil
futures are likely to rise, fall or remain neutral in the coming
week. The results were:

                    RISE      NEUTRAL    FALL
                     10          7        11

To contact the reporter on this story: Mark Shenk in New York at mshenk1@bloomberg.net.



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Pertamina Buys Crude Oil Cargoes for December From Four Sellers

By Christian Schmollinger and Nesa Subrahmaniyan

Oct. 17 (Bloomberg) -- PT Pertamina, Indonesia's state- owned oil company, bought low-sulfur crude oil for delivery in November from Pertamina Energy Trading Ltd., Petroliam Nasional Bhd., Korea Indonesia Petroleum Co., or Kipco, and Pacific Petroleum & Trading Ltd., said two traders who submitted offers.

Details of Pertamina's purchases including shipping costs are as follows:

---------------------------------------------------------------
Crude:        Bebatik, Brunei
Quantity:     600,000 barrels
Seller:       Kipco
Price:        **OSP +$2.20 a barrel
Delivery:     December
----------------------------------------------------------------
Crude:        Seria, Brunei
Quantity:     600,000 barrels
Seller:       Pacific Petroleum
Price:        APPI Tapis +$1.70 a barrel
Delivery:     December
----------------------------------------------------------------
Crude:        Bach Ho, Vietnam
Quantity:     600,000 barrels
Seller:       Pertamina Energy Trading
Price:        **OSP -$2.45 a barrel
Delivery:     December
----------------------------------------------------------------
Crude:        Lauban, Malaysia
Quantity:     600,000 barrels
Seller:       Petronas
Price:        **OSP +$1.60 a barrel
Delivery:     December
----------------------------------------------------------------

**OSP = Official Selling Price


Pertamina usually seeks low-sulfur, or sweet crude oil, which has less than 0.5 percent sulfur by weight. The oil is more expensive than so-called sour crude oil, which has more than 0.5 percent sulfur.

To contact the reporters on this story: Christian Schmollinger in Singapore at christian.s@bloomberg.net; Nesa Subrahmaniyan in Singapore at nesas@bloomberg.net.


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Dollar Falls, Heads for Weekly Loss, on U.S. Recession Concerns

By Ron Harui
Enlarge Image/Details

Oct. 17 (Bloomberg) -- The dollar fell, heading for its first weekly decline against the euro this month, before U.S. consumer and housing reports that may add to evidence the global credit squeeze is pushing the economy toward a recession.

The U.S. currency also dropped against the British pound and the Swiss franc as traders added to bets on a Federal Reserve interest-rate cut. The yen was poised for a weekly loss versus the euro as Asian stocks rose, restoring investors' confidence to buy higher-yielding assets

``The reports may reinforce worries that the U.S. is in a recession and concerns linger over its financial markets,'' said Masanobu Ishikawa, general manager of foreign exchange at Tokyo Forex & Ueda Harlow Ltd., Japan's largest currency broker. ``The dollar is still a sell.''

The dollar dropped to $1.3490 per euro at 7:30 a.m. in London from $1.3456 late in New York yesterday and was 0.6 percent lower for the week. It traded at 101.45 yen from 101.57 yen yesterday and 100.67 on Oct. 10, set for its first five-day gain since Sept. 12.

The U.S. currency declined to 1.1363 versus the Swiss franc from 1.1379 yesterday and from 1.1390 a week ago. It weakened to $1.7346 against the British pound from $1.7304 yesterday and from $1.7043 last week. The greenback slipped to 1,334.50 against South Korea's won from 1,373.45.

The yen fell to 136.83 per euro from 136.73 yesterday and 134.96 on Oct. 10, and was poised for its first weekly loss in four weeks. It dropped to 70.01 versus Australia's dollar from 67.72 late in Asia yesterday and fell to 62.45 against New Zealand's dollar from 61.28.

Economic Reports

The dollar headed for weekly losses against nine of the 16 most-active currencies as U.S. housing starts declined to an annual rate of 870,000 in September, the fewest since January 1991, according to a Bloomberg News survey of economists. The Commerce Department will issue the report at 8:30 a.m. in Washington.

The Reuters/University of Michigan preliminary index of consumer sentiment, due at 10 a.m., likely decreased to 65.0 in October from 70.3 in September, a separate survey showed.

Futures traded on the Chicago Board of Trade show a 46 percent chance the Fed will lower its 1.5 percent target rate for overnight bank loans by a half-percentage point to 1 percent at its Oct. 29 meeting. Traders saw no chance of a cut of that magnitude a week ago. The odds of a quarter-point reduction are 54 percent.


Losses in the dollar may be curbed on speculation financial institutions will seek more dollars in the foreign-exchange market amid the credit crisis, according to BNP Paribas SA.

`Requirement for Dollars'

``The U.S. dollar's strength against most Asian currencies has to be put into context that this recent credit crunch in the U.S. economy has led to a lot of requirement for dollars from banks as well as companies,'' said Thio Chin Loo, a senior currency strategist at BNP Paribas in Singapore, in an Bloomberg Television interview. ``It's really the flow of funds that's driving the U.S. dollar stronger.''

The dollar rose to the highest versus the euro since March 2007 on Oct. 10, partly as banks' reluctance to lend to each other prompted a surge in demand for U.S. currency funding in global money markets.

The London interbank offered rate, or Libor, that banks charge each other for one-month dollar loans, fell yesterday to 4.278 percent from 4.588 percent a week ago, the highest level this year, according to the British Bankers' Association.

The yen declined as the Nikkei 225 Stock Average climbed 2.8 percent and the MSCI Asia-Pacific Index of regional shares rose 1.4 percent. The Standard & Poor's 500 Index advanced 4.3 percent yesterday.

`Less Risk Averse'

Volatility implied by one-month dollar-yen options fell to 20.35 percent from 23.22 percent yesterday and from 29.64 percent on Oct. 10, indicating a smaller risk of exchange-rate fluctuations that may erode profits on so-called carry trades.

``Shares are higher and investors appear to be less risk averse,'' said Yuji Saito, head of the foreign-exchange group at Societe Generale SA in Tokyo. ``There's a bit of yen selling.''

The benchmark interest rate is 0.5 percent in Japan, compared with 6 percent in Australia and 7.5 percent in New Zealand.

In a carry trade, investors get funds in a country with low borrowing costs and invest in one with higher interest rates, earning the spread between the two.

The euro may extend losses to its lowest level against the yen in 4 1/2 years after the currency completed a so-called ``double-top'' formation on the weekly chart, according to a report from Citigroup Global Markets Inc.

``The formation in euro-yen remains intact and continues to suggest a move to at least 130,'' wrote New-York based strategist Tom Fitzpatrick and London-based Shyam Devani in a research note yesterday. That level was last seen in April 2004.

To contact the reporter on this story: Ron Harui in Singapore at rharui@bloomberg.net


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Asian Currencies: Won Rebounds After Biggest Drop in a Decade

By Lilian Karunungan

Oct. 17 (Bloomberg) -- South Korea's won rebounded, following yesterday's biggest drop in a decade, on speculation the government will prop up confidence in financial markets. The Indonesian rupiah and the Philippine peso gained.

The won snapped a two-day slide, paring this year's loss to 30 percent after the Bank of Korea said it will trade directly with banks in the swap market to help boost foreign currency liquidity. South Korean policy makers are meeting today to compile measures to restore confidence in the economy. Standard & Poor's said today the government should consider guaranteeing banks' debts to help them obtain offshore funding.

``The move by the central bank this morning provided a psychological boost to the currency market,'' said Kim Sung Soon, a currency dealer with state-run Industrial Bank of Korea in Seoul. ``The unrest remains though, as we all are not sure of how this global turmoil will pan out in the months ahead.''

The won rose 2 percent to 1,345 per dollar at 1:13 p.m. in Seoul, according to Seoul Money Brokerage Services Ltd. The rupiah rose 0.8 percent to 9,800 in Jakarta, from 9,875 yesterday, according to data compiled by Bloomberg.

The won has lost 10.4 percent this month as banks and companies scramble for dollars to service debt, while global turmoil in financial markets makes overseas borrowings even more expensive.

Gains Limited

The change in the trading system will ``help ease the recent market jitters in the foreign-currency money market,'' the Seoul-based Bank of Korea said in a statement. Currently, the central bank trades first with intermediary banks, which then trade with local banks.

South Korea's foreign reserves fell for a sixth month in September to $239.7 billion, from $243.2 billion in August, after authorities provided dollars in the swap market to boost liquidity and help stem the won's drop.

``Further gains in the won may be limited as heavy foreign stock sales in the past few days will spur some demand for the dollar,'' said Ko Yun Jin, a currency dealer with Kookmin Bank in Seoul. Still, ``exporters are willing to sell dollars on dips in the won, which will provide some buffer.''

Indonesia's rupiah was poised for its first weekly gain in a month on speculation the central bank will sell dollars to limit losses.

Indonesia yesterday passed a rule to give the central bank and deposit guarantee agency more powers to decide on bailing out lenders.

Intervention Caution

The rupiah ``will trade around 9,800 today,'' said Tetsuo Yoshikoshi, a market analyst at Sumitomo Mitsui Banking Corp. in Singapore.``Market players are also cautious about central bank's intervention,''

The currency, which declined past 10,000 last week for the first time in three years, advanced 1.5 percent this week. Central banks arrange sales or purchases of currencies to influence exchange rates.

The Philippine peso snapped two days of losses against the U.S. dollar on speculation gains in Asian stocks will lure investors to the nation's assets.

The peso rose from an 18-month low as the MSCI Asia-Pacific Index of shares rose 1.1 percent today, set for a weekly gain of more than 2 percent, on signs governments are succeeding at attempts to unlock credit markets.

``Some funds are taking advantage of some bounces to get in the equities market, which helps support the peso,'' said Jonathan Ravelas, a strategist at Banco de Oro Unibank Inc. in Manila. ``Still, this is a temporary pause and the peso may further weaken.''

More Declines

The local currency gained 0.1 percent to 48.035 in Manila, according to Tullett Prebon Plc. The peso is headed for its biggest annual loss in eight years.

The Philippine peso, which declined 14 percent this year, will drop another 4 percent as financial turmoil saps demand for emerging-market assets, according to Rafael Consing, treasurer at International Container Terminal Services Inc., the nation's largest port operator. He said that was his personal forecast.

Slowing economic growth, consumer spending and capital outflows will send the currency to 50, the weakest since November 2006, Consing said in an interview from Manila ``Our trading partners in the U.S. and Europe are close to a recession. One doesn't really expect strong export numbers to those countries.''

Elsewhere, the Thai baht was little changed at 34.28 and Taiwan's dollar weakened 0.1 percent to NT$32.566. The Malaysian ringgit was at 3.5250 versus 3.5265 yesterday. Vietnam's dong fell 0.1 percent to 16,610.

To contact the reporter on this story: Lilian Karunungan in Singapore at lkarunungan@blooomberg.net;



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Copper May Fall on Reduced U.S., European Demand, Survey Shows

By Claudia Carpenter

Oct. 17 (Bloomberg) -- Copper may drop next week as speculation about a recession curbs demand for metals.

Fourteen of 22 analysts and traders surveyed by Bloomberg yesterday and Oct. 15 said copper will drop. Six expected a gain and two were neutral. Copper for delivery in three months on the London Metal Exchange has declined 0.4 percent this week.

Copper demand is ``weakening particularly from the U.S. and Europe,'' Jose Pablo Arellano, chief executive officer of Codelco, the world's largest copper producer, said this week. U.S. industrial production in September fell 2.8 percent, the most since December 1974, according to the Federal Reserve.

This week's survey results: Bullish: 6 Bearish: 14 Neutral: 2

To contact the reporter on this story: Claudia Carpenter in London at ccarpenter2@bloomberg.net



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U.K. Builders Retain $1.7 Billion in Payments in Recession Sign

By Tim Barwell

Oct. 17 (Bloomberg) -- British construction companies may be withholding almost 1 billion pounds ($1.7 billion) in payments to suppliers, a sign the credit crisis and a looming recession are spurring a grab for cash.

The handing over of final payments, withheld until a project is completed, has slowed ``dramatically'' over the last four weeks and the amount of money owed could be about 50 percent more than two years ago, National Specialist Contractors Council head, Suzannah Nichol, said in an interview yesterday. The 7,000 NSCC members are preparing to cut jobs, she said.

The U.K.'s 82 billion-pound building industry, accounting for about 5 percent of the economy, has ground to a halt, with little work being booked because of faltering demand and a credit freeze, said Nichol. The collapse of Lehman Brothers Holdings Inc. and banking turmoil, at a time when homebuilding is suffering its worst slump for 25 years, confirmed industry fears a recession is inevitable, she said from her London office.

``I was asked to do a job in June, when they knew they never intended to pay me,'' said Barbara Beeson, a blinds fitter in Eastbourne, southern England, who had to file legal proceedings against Oakdene Homes Plc to get 12,000 pounds owed on a job. ``My business wouldn't have survived if I hadn't got them to pay up.''

Just 15 percent of the NSCC's members are paid within 30 days of completing a job, Nichol said. The average is about 60 days while Carillion Plc, Britain's No. 2 builder, averages 86 days, she said. Carillion Chief Executive Officer John McDonough said his Wolverhampton-based company always pays on time.

``We can't afford to bugger around,'' said McDonough in an Oct. 14 phone interview. ``In the big boys' league, we all know the rules of the game and we stick to them. Smaller, less savvy companies might muck around.''

Building Slump

Oakdene Homes, based in Reigate, is in rescue talks with banks after a freeze in mortgage markets and tumbling sales. Taylor Wimpey Plc, the No. 1 homebuilder, has until February to persuade debt holders to ease covenants.

``There's a bit of a supply chain paying later but nothing out of the ordinary,'' Oakdene CEO Carl Turpin said in an Oct. 15 call from his cell phone. ``Our people are always looked after.''

Britain's economy may already be in a recession and inflation may slow below the central bank's 2 percent target, Bank of England policy maker Andrew Sentance said on Oct. 13. U.K. unemployment rose to the highest level in almost two years in September.


Homebuilders have been at the mercy of banks after the mortgage market failed to benefit from interest rate cuts. Building may not grow again until 2011, the Construction Products Association, which represents 85 percent of the industry's suppliers, said in an Oct. 2 report. That's reversing a 10-year building boom, when more than 100 billion pounds of new orders for retail-related projects or offices were initiated.

Cash Ploy

``Private new orders are looking down, and we're expecting a big fall off,'' said Howard Seymour, an analyst at Numis Securities Ltd. Construction firms ``have got to be really careful'' on the issue of holding payments back.

``Cash conservation is where it's at right now, but killing the subcontractors doesn't make sense,'' he said.

For subcontractors, the slump may deepen. As an office block may take two years to build, with the finishes such as electrics and carpeting added at the end, construction is a ``late cycle'' industry. An economic slump will have a bigger impact on building-services once retail, manufacturing and other areas have already been hit, Seymour said.

`Different Environment'

``It's a completely different environment that even four weeks ago,'' Nichol said. ``Immediately we're seeing payment length stretching. The main contractor sits and holds onto that money, earning interest. The housebuilders certainly use it.''

Outstanding final payments totaled about 812 million pounds at the end of June, up from 650 million pounds two years ago, according to NSCC calculations extrapolating data from quarterly surveys. Findings from the latest survey will be published at the end of this month and Nichol said a figure of 950 million pounds ``would not surprise.'' ``Across the industry it's billions,'' she said.

Homebuilders imposed price reductions of as much as 10 percent on previously agreed work, delaying payments and withholding so-called retentions between January and April, Nichol said. That ``stopped dead'' around June, when homebuilders halted work-in-progress and began laying workers off.

Some companies ``bat away'' contractors who ask for payment, whereas others pay only when a legal writ is issued, Nichol said.

``I tried phoning, e-mails and letters, but there was never the courtesy of a reply,'' said Beeson, who fitted blinds at three of Oakdene Homes's developments, in an Oct. 13 phone interview. ``If they hadn't settled, I believe that some assets may have been seized.''

To contact the reporter on this story: Tim Barwell in London on tbarwell@bloomberg.net


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Fed to Meet With Credit-Default Industry on Clearinghouse Today

By Shannon D. Harrington and Matthew Leising

Oct. 17 (Bloomberg) -- The Federal Reserve Bank of New York plans a third meeting today with the credit-default swap industry, as it presses for a central clearinghouse for the $55 trillion market, people with knowledge of the talks said.

Fed officials summoned dealers and exchanges to the gathering after meeting twice last week, according to the people, who declined to be named because the discussions are confidential.

The Fed stepped up pressure on the industry to create a central counterparty that would absorb losses should a market maker fail after last month's bankruptcy of Lehman Brothers Holdings Inc. Because the contracts are traded bilaterally between banks, hedge funds, insurance companies and other institutional investors, each party faces the risk of losses should their trading partners default.

Four groups have been vying to operate clearing operations, including a partnership between Chicago-based CME Group Inc. and Citadel Investment Group LLC and a group that includes Intercontinental Exchange Inc., dealer-owned Clearing Corp. and credit swap index owner Markit Group Ltd. Eurex and NYSE Euronext also have submitted proposals.

While the Fed has said it isn't looking to endorse any one plan, it's keeping pressure on the group to drive discussions until the industry finds a workable solution, one of the people said.

New York Fed spokesman Andrew Williams declined to comment in an e-mail. CME spokesman Allan Schoenberg and ICE spokeswoman Kelly Loeffler didn't immediately return telephone calls.

To contact the reporters on this story: Shannon D. Harrington in New York at sharrington6@bloomberg.net; Matthew Leising in New York at mleising@bloomberg.net.



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