BNP, Deutsche Boerse, Endesa, Total: European Equity Preview

By Nadja Brandt

Nov. 5 (Bloomberg) -- The following companies may have unusual price changes in European trading. Stock symbols are in parentheses, and share prices are from the previous close.

The Dow Jones Stoxx 600 climbed 4.5 percent to 233.50. The Dow Jones Stoxx 50 Index added 4.1 percent to 2,436.01. The Euro Stoxx 50 Index, a benchmark for nations using the euro, increased 5.6 percent to 2,755.12.

BNP Paribas SA (BNP FP): France's largest bank by market value reports third-quarter earnings before the market opens in Paris. Profit probably declined to 1.38 billion euros ($1.8 billion), according to the median of 13 analyst estimates, on subprime-related writedowns and charges linked to the failure of Lehman Brothers Holdings Inc. The shares gained 5.6 percent to 58.50 euros.

Deutsche Boerse AG (DB1 GY): Europe's largest exchange by stock value said third-quarter profit rose more than analysts estimated after financial-market turmoil boosted derivatives trading. The shares added 13 percent to 68.70 euros.

Endesa SA (ELE SM): Spain's largest operator of hydro and nuclear plants will publish its third-quarter earnings before the stock market opens in Madrid. The shares rose 4.5 percent to 26.69 euros.

Hannover Re (HNR1 GY): Germany's second-biggest reinsurer plans to release third-quarter results. The company last month abandoned its 2008 profit target after losing money in the first nine months of the year on declining stock investments and above- average catastrophe claims. The shares climbed 1.9 percent to 20.70 euros.

HeidelbergCement AG (HEI GY): Germany's biggest cement maker owned by German billionaire Adolf Merckle plans to release third- quarter results. The company in August said second-quarter profit dropped 66 percent, hurt by higher raw-material costs and declining demand for building materials in the U.S. The shares dropped 3 percent to 57.50 euros.

JCDecaux SA (DEC FP): The world's second-largest seller of outdoor advertising cut its forecast for sales growth and profitability this year as the slowing economy weighs on ad spending in the U.K. The shares added 2.2 percent to 14.16 euros.

Pernod Ricard SA (RI FP): The world's second-largest liquor company has seen no ``major impact'' on revenue from the credit crunch, Le Figaro reported, citing an interview with Managing Director Pierre Pringuet. The shares rose 2.9 percent to 55.20 euros.

Royal Vopak NV (VPK NA): The world's biggest oil and chemical storage provider gives a third-quarter trading update before the market opens. Vopak increased 7.5 percent to 28.72 euros.

Total SA (FP FP): Europe's third-largest oil company reports quarterly earnings before the market opens in Paris. Profit, excluding changes in the value of the company's stake in drugmaker Sanofi-Aventis SA, likely rose 28 percent to 3.85 billion euros, according to the median of nine analyst estimates, as higher crude and natural-gas prices offset lower production. The shares added 3.5 percent to 44.50 euros.

Wincor-Nixdorf AG (WIN GY): The world's second-largest maker of automated teller machines plans to release preliminary full- year results. The company may say profit climbed 18 percent, as banks made increasing use of ATMs to cut costs, according to analysts surveyed by Bloomberg News. The shares climbed 9.9 percent to 37.42 euros.

To contact the reporter on this story: Nadja Brandt in Los Angeles at nbrandt@bloomberg.net.



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Obama to Get Running Start With Market Crisis, Wars

By Indira A.R. Lakshmanan and Kim Chipman

Nov. 5 (Bloomberg) -- Barack Obama won't have time to catch his breath.

Having won the longest election in U.S. history, toppling two formidable rivals and succeeding in his improbable quest to become the first African-American president, he will immediately begin the arduous work of turning campaign promises into a viable agenda, aides said.

Illinois Senator Obama inherits neither peace nor prosperity, but rather the toughest environment for a new president since Franklin D. Roosevelt. He takes office with the nation in the grip of the worst economic crisis in three- quarters of a century and embroiled in two foreign wars.

``It's been decades since we've seen something like this, where a president has to deal with major crises in national security and economic policy at the same time,'' said presidential historian Michael Beschloss.

Obama, 47, acknowledged as much in his acceptance speech before at least 125,000 people in Chicago's Grant Park shortly after midnight.

`Planet in Peril'

``Even as we celebrate tonight, we know the challenges that tomorrow will bring are the greatest of our lifetime -- two wars, a planet in peril, the worst financial crisis in a century,'' he said. ``There is new energy to harness and new jobs to be created; new schools to build and threats to meet and alliances to repair.''

On the campaign trail, Obama vowed to pursue an ``Apollo- style'' program to transform the country's energy economy, a massive overhaul of the health-care system, and a slew of other proposals to bolster the middle class and restore economic confidence.

When President George W. Bush took office in 2001, he inherited a record budget surplus and a nation at peace. Bush's initial to-do list -- spending that surplus, pursuing a ``humble foreign policy,'' and raising school test scores -- now sounds trivial. By contrast, the Obama administration will begin as economic indicators suggest the U.S. may be headed for the deepest recession in a quarter century and the most complicated financial crisis since the Great Depression. Wages are stagnant, credit is squeezed and costs are escalating.

Deficits

Obama has two months to form a government and prioritize a long list of costly demands at a time of unprecedented deficits. Though FDR had to tackle an unemployment rate four times the current 6 percent jobless figure, he didn't inherit two wars, a global terrorist threat or a world with unstable nuclear-armed states.

The new president is likely to confront stiff resistance from Republicans accustomed to decades of partisan fights in Washington. The task of governing will be both monumental and delicate.

So far, Obama has shown no signs of curbing his ambitious proposals. The turmoil, he has said, makes his agenda for taxes, energy, health care, education and the financial industry more pressing.

``The crisis crystallized in so many ways what was really at stake,'' said Anita Dunn, a senior Obama adviser. ``We had been saying it's a big election about big things.'' For many people, the Wall Street crisis and the $700 billion bailout brought ``into focus how big the challenges are.''

About three weeks ago, as the crises deepened and financial markets reeled, Obama increased the proposed cost of his ``middle-class rescue plan'' to $175 billion from $115 billion.

Advisers said pushing through that stimulus, which would direct funds to financially strapped states, rebuild infrastructure and give a $1,000 tax rebate to eligible families, will be Obama's top priority in January if Congress doesn't pass a comparable plan this month.

Public Confidence

Taking the helm during the Great Depression, Roosevelt's first step was to shore up the confidence of the public. The 32nd president staved off a run on banks and put in place dozens of programs to stimulate the economy, create jobs, regulate the financial system, rebuild infrastructure and create a social safety net.

With Obama's skill at oratory and the unflappable air he projected during the bailout vote, he could likewise send a reassuring message.

``The model should be FDR,'' tamping down panic and letting America know that ``action is essential,'' said political scientist Fred I. Greenstein, author of ``The Presidential Difference: Leadership Style from FDR to George W. Bush.''

The public's unease goes deeper than the immediate crisis. The nation has ``been through some terrible shocks in last 10 years -- a contested election, the 9/11 attacks, two wars, Hurricane Katrina. The president is going to have to heal the country,'' Beschloss said.

Agenda Needed

That will take more than a calm demeanor and rhetorical skill; Obama needs an agenda that achieves promises he has made, and that will require buy-in from financial and military leaders and Congress.

``It's going to be a challenge of leadership. Can government fix anything, can it overcome gridlock?'' said Julian Zelizer, a historian at Princeton University in New Jersey.

Roosevelt invented a measure by which he could be judged: the First 100 Days. It's been the yardstick ever since. Republican Ronald Reagan focused his agenda early; Democrats Jimmy Carter and Bill Clinton didn't.

``FDR had 15 major bills in his famous 100 days, and the Reagan Revolution was all within a year,'' said Alan Lichtman, professor of history at American University in Washington. ``The next president has to try a lot of things and see what works.''

Manageable Goals

Obama must set priorities and select a few manageable goals he can accomplish quickly, historians said. A president's mandate is usually strongest at the beginning, giving him the best chance to pass his agenda and administer bitter medicine.

``You sort which things you can do quickly and which you have to explain to your country will take time,'' said Stephen Hess, an analyst at the Brookings Institution in Washington who has been involved in every presidential transition since Dwight D. Eisenhower's handoff to John F. Kennedy.

``Ronald Reagan could list on the fingers of one hand exactly the things he wanted to do on Jan. 20, 1981,'' Hess said.

David Eisenhower, director of the Institute for Public Service at the University of Pennsylvania's Annenberg School in Philadelphia, said Obama would have to divide programs into three phases: ``Relief, Reform, and Recovery.''

``Relief must begin with banking, the insurance industry. Recovery includes energy, education, foreign policy, relations with NATO, new overtures in the Mideast,'' said Eisenhower, grandson of President Eisenhower. ``Reform would be taxes, health, re-industrialization.''

Foreign Policy

While economic and domestic concerns are front and center, Obama can't leave foreign policy on the back burner. He inherits two wars, a defiant Iran and an ever-present al-Qaeda. Middle East peace talks are flagging, Europe faces an assertive Russia and hurdles remain over an agreement to end North Korea's nuclear program.

In Iraq, Obama has vowed to withdraw most combat troops within 16 months, while sending more forces to Afghanistan, where a resurgent Taliban is staging attacks from tribal areas along the border with Pakistan, an unstable nuclear-armed U.S. ally.

Obama has pledged to work more closely with allies and engage adversaries such as Iran in talks.

Speaking in Ohio on Oct. 13, Obama said his agenda wouldn't ``be easy or come without cost.''

That, he said, means investing in ``energy, education and health care that bear directly on our economic future, while deferring other things we can afford to do without.''

To contact the reporters on this story: Indira Lakshmanan in Washington at ilakshmanan@bloomberg.netKim Chipman in Chicago at kchipman@bloomberg.net

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AT&T, Comcast Face New Web, Antitrust Enforcement Under Obama

By Molly Peterson and Ian King

Nov. 5 (Bloomberg) -- AT&T Inc. and Comcast Corp. will probably face new Internet rules backed by Google Inc. under Barack Obama's administration, and find it more difficult to persuade the government to approve acquisitions.

The Democratic president-elect's top technology priorities include ``network neutrality'' policies that would bar Internet- service providers from accepting payments to make some Web sites work faster than others.

``He wants the small mom-and-pop provider that has a new application, for example, to have equal treatment with the big content providers,'' said Paul Glenchur, an analyst at Stanford Group Co. in Washington.

Obama also pledged to double federal spending on science research over 10 years and establish a permanent tax credit for research and development, policies advocated by Intel Corp. and Microsoft Corp.

Phone companies have fought the net neutrality rules. ``Probably the thing that scares the industry the most about a Democratic administration is regulating the one real shining star that's really working really well -- and that's the Internet,'' Sprint Nextel Corp. Chief Executive Officer Dan Hesse said after a speech in Washington Oct. 24.

Sprint, based in Overland Park, Kansas, is the third- biggest U.S. wireless carrier. Network neutrality rules would have ``horrendous implications'' for the industry, he said.

`Play Favorites'

Consumer groups and Internet companies such as Google, Amazon.com Inc. and EBay Inc. say new regulations would preserve the open nature of the Internet and prevent service providers from charging companies for priority access to their networks.

``It means the operators who run the Net can't play favorites,'' Google CEO Eric Schmidt, who personally campaigned for Obama, said last month in a Bloomberg Television interview.

Google, based in Mountain View, California, makes almost all of its $16.6 billion in annual revenue from Internet advertising.


Telecommunications industry consolidation will likely slow under an Obama administration, Glenchur said. Obama pledges to ``reinvigorate'' antitrust enforcement, according to his technology policy statement.

Since 2000, AT&T and Verizon Communications Inc., the two biggest phone companies in the U.S., have spent more than $100 billion on acquisitions.

`Footing the Bill'

Companies such as Intel, the world's largest chipmaker, and Microsoft, the biggest software company, may push Obama for more spending on science research, lower corporate taxes and immigration reform so foreign graduate students at U.S. universities aren't forced to return home.

``The U.S. government hasn't been footing the bill to the degree that it should for basic science research,'' Craig Mundie, chief strategy officer at Redmond, Washington-based Microsoft, said last week in an interview.

The federal government needs to invest more in long-term research on semiconductor technology and software development, he said.

About two-thirds of PhD students at U.S. universities are foreign-born, said George Scalise, president of the Semiconductor Industry Association in San Jose, California, whose members include Intel and Advanced Micro Devices Inc.

Patent Reform

Obama plans to appoint a cabinet-level chief technology officer to upgrade government computers and oversee the deployment of a nationwide wireless network for public safety agencies.

He also wants to overhaul the Patent and Trademark Office to make patents less vulnerable to legal challenges.

``Many of our small, medium and even large companies are facing lawsuits by companies that really don't have a vested interest in commercializing the patents,'' said Mark Bohannon, general counsel for the Software and Information Industry Association in Washington, whose members include Oracle Corp. and International Business Machines Corp. ``That that will be something that we'll be looking at very closely.''

To contact the reporters on this story: Molly Peterson in Washington at mpeterson9@bloomberg.net; Ian King in San Francisco at ianking@bloomberg.net


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Cemig, Cemex, Light, Galicia, Macro: Latin Equity Preview

By James Attwood and Fabio Alves

Nov. 5 (Bloomberg) -- The following companies may have unusual price changes today in Latin America trading. Stock symbols are in parentheses, and share prices are from the previous close. Preferred shares are usually the most-traded class of stock in Brazil.

The MSCI Latin America Index rose 8.8 percent yesterday to 2,373.97.

Argentina

Banco Macro SA (BMA AF), BBVA Banco Frances SA (FRAN AF) and Grupo Financiero Galicia SA (GGAL AF): Argentine authorities are inspecting banks and brokerages to see if they are violating foreign exchange requirements or evading taxes. Argentina's securities regulator, tax agency, and central bank said in a joint statement that they have been carrying out inspections, without elaborating on the reason for the searches. Macro rose 7.3 percent to 3.25 pesos. Frances climbed 6.7 percent to 3.52 pesos. Galicia added 3.6 percent to 80 centavos.

Brazil

Braskem SA (BRKM5 BS): Latin America's largest chemical company will invest $30 million in a plant in Venezuela, according to a filing with Brazil's securities regulator. The investment was approved Nov. 4 by Braskem's board. The stock sank 4.6 percent to 9.06 reais.

Cia. Energetica de Minas Gerais (CMIG4 BS): Brazil's largest combined electricity generator and distributor said it acquired 80 percent of power distributors Companhia Transmissora de Energia Eletrica, known as Lumitrans, and Sistema de Transmissao Catarinense SA, know as STC. A unit of the company paid 32.5 million reais ($15.4 million) for Lumitrans shares and 56.8 million reais for the STC stake. Cemig fell 4.3 percent to 33.50 reais.

Light SA (LIGT3 BS): Brazil's second-biggest electricity distributor will raise prices in Rio de Janeiro and surrounding areas by an average 4.7 percent starting Nov. 7. The increase, the first in two years, was granted by Brazil's electricity regulator, known as Aneel. The stock slid 0.4 percent to 22.37 reais.

Mexico

Cemex SAB (CEMEXCP MM): The world's third-largest cement producer said its offices in the U.K. and Germany were searched by authorities seeking information related to an antitrust investigation. Cemex said it is cooperating with regulators by providing all requested information and testimonies. Cemex rose 1.9 percent to 10.23 pesos.

To contact the reporters on this story: James Attwood in Santiago at jattwood3@bloomberg.net; Fabio Alves in New York at falves3@bloomberg.net;



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Nannies Worse Off Than Hedge-Fund Guys in Rout: William Pesek

Commentary by William Pesek

Nov. 5 (Bloomberg) -- As Japan and the U.S. grapple with the ``R'' word, or recession, the Philippines is dealing with one of its own.

For Asia's 13th-biggest economy, the ``R'' word is remittances.

Roughly 10 percent of the Philippine population works overseas for lack of well-paid jobs at home. Their earnings support one of Asia's most vulnerable economies. In 2007, for example, overseas Filipinos sent home $14.4 billion, or 10 percent of gross domestic product.

There is good and bad news here. First the bad: The recession-bound U.S. is the Philippines' largest source of remittances from overseas nationals. The good news? Slumping U.S. growth, believe it or not.

The search for silver linings in Asia as U.S. growth drops is a challenging business. Yet there's reason to think that when this global crisis ends, people will no longer be the key export of the Philippines.

Gloria Arroyo hinted as much on Oct. 22 when the Philippine president said the nation may need a ``massive'' retraining program if events in the U.S., also its biggest overseas market, cause Filipinos to lose jobs at home and abroad.

``We will need, should there be a recession in the U.S., a massive skills upgrading and retooling service,'' Arroyo said at a conference in Manila.

Global Crisis

Too bad it has taken the worst global crisis since the 1930s to shake Arroyo's government out of complacency. Throughout the 2000s, the Philippines implicitly encouraged ever-growing numbers of its citizens to leave and support families back home. If not for immigration challenges, more Filipinos would be working in New York, Hong Kong or Riyadh.

The Philippines isn't the only government failing its people. For every doctor leaving Manila to become a nurse in Boston because the pay is far better, a young woman is leaving rural Indonesia or Sri Lanka to become a nanny or maid in London or Singapore.

Yet the Philippines gets the most remittances after India, China and Mexico. Its ``OFWs,'' or overseas Filipino workers, are often referred to as a secret economic weapon. In reality, the arrangement is a key weakness for the nation's 96 million people that's becoming apparent as global growth wanes.

Recession-Proof?

``The stark reality is that developing countries must prepare for a drop in trade, capital flows, remittances, and domestic investment, as well as a slowdown in growth,'' World Bank President Robert Zoellick said in Washington on Oct. 15.

Policy makers in Manila downplay the risks. ``Remittances are recession-proof'' because many overseas Filipinos are in medical care and ``professional jobs,'' says central bank Deputy Governor Diwa Guinigundo.

Arroyo also says Filipinos working abroad ``are in areas less sensitive to recession,'' including teaching, nursing, care- giving and information technology. Higher oil prices have fueled a Middle East construction boom that has resulted in a ``surge'' of remittances from there, she says.

If this global crisis worsens, it's not clear how many recession-proof industries there will be a year from now, if any. While the focus today is on hedge funds blowing up, it will soon be on Filipino nannies, engineers and domestic helpers losing jobs. That's why it is good to hear Arroyo talking about a so- called human-capital fund.

Future Prosperity

Far more investment is needed both to train Filipinos and keep skilled workers at home. The planned fund will amount to just 100 billion pesos ($2 billion). With unemployment at 7.4 percent, the second-highest level in the Asia-Pacific region, the Philippines must work much harder.

The $144 billion Philippine economy is a fraction of the almost $14 trillion U.S. one. Yet $2 billion is too small a percentage of GDP to expect the results the Philippines needs here. While money is understandably scarce, this is about the nation's future prosperity.

This isn't a moral judgment. The Philippines can no longer compete with China and India on a cost basis. The skills of its large English-speaking population are better suited to industries that rely on information and technology -- like the nation's big push into call centers and back-office-processing services.

Labor Force

Given high poverty rates, remittances make sense in the short run. The trouble is that the Philippines has never articulated a long-term term plan to attract back many of its best and brightest. The result is a brain drain that lowers the quality of the nation's labor force. The Philippines needs more of its human capital at home to raise living standards.

Money flowing in has an exponential effect on growth. It helps the government make debt payments, supports banks and boosts the retail, transportation, real-estate and telecommunications sectors. It's a vital stabilizer.

``Their overall impact on the economy is arguably much larger given the multiplier effect on consumption spending,'' says Ed Bancod, head of research at ATR-Kim Eng Securities Inc. in Manila.

The pain may already be beginning. Remittances were growing at a 25 percent year-over-year rate in July. In August, the pace slowed to 10 percent. As fallout from the global crisis heads Asia's way, inflows will continue slowing.

It's as clear a sign as any that exporting people like a commodity has its risks. If Arroyo works to reverse the tide, the Philippines could actually benefit from today's turmoil.

(William Pesek is a Bloomberg News columnist. The opinions expressed are his own.)

To contact the writer of this column: William Pesek in Manila at wpesek@bloomberg.net

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Asian Interest-Rate Swaps Signal More Rate Cuts Are Coming

By Patricia Lui

Nov. 5 (Bloomberg) -- Asian central banks will lower borrowing costs further to cushion the region's economies from the global slump, trading in interest-rate swaps shows.

South Korea, Indonesia and Thailand reported slower inflation this week, and economists predict the Philippines and Taiwan to follow suit today. Central banks in Australia, China, Hong Kong, India, Japan, South Korea, Taiwan and Vietnam all announced rate cuts since the start of last week. Bank of Korea and Bank Indonesia will announce monetary policy reviews in the next two days.

``Governments will continue to prioritize growth over inflation,'' said Sebastien Barbe, a Hong Kong-based strategist at Calyon, the investment banking unit of France's Credit Agricole SA. ``Swaps are already starting to price in some of the rate cuts with more to come.''

Asian stocks and currencies plunged in October on concern a global lending squeeze was tipping the world into recession, prompting investors to seek safer bets than assets in export- reliant developing economies. The MSCI Emerging Markets Index of stocks and the Bloomberg-JPMorgan Asia Dollar Index, which tracks the region's 10 most-active currencies excluding the yen, both posted their biggest monthly drops in a decade.

South Korea's one-year interest-rate swap will decline to 3.4 percent by the end of March when the central bank's benchmark rate is likely to have fallen to 3 percent, according to James Lee, an economist with JPMorgan Chase & Co. in Seoul.

Swaps Decline

The swap rate fell to 4.66 percent yesterday, the lowest since December 2006, and the Bank of Korea last week lowered its seven-day repo rate by a record 75 basis points to 4.25 percent at an emergency board meeting. A basis point is 0.01 percentage point.

In an interest-rate swap, two parties agree to exchange fixed payments for variable-rate payments over a set period. Typically, one agrees to pay a fixed rate, while the other pays a rate that fluctuates with a benchmark index or formula defined in the contract.

``The swap market is pricing in expectations about rate cuts and government measures to funnel funds into financial systems,'' JPMorgan's Lee said. ``A thawing in money markets is causing a rally in short-end rates, leaving the door open to further declines in the swap rates.''

The Bank of Korea's monetary board next meets in two days time to review rates and economists surveyed by Bloomberg predict a further 25 basis point reduction in the benchmark rate.

Rate Cuts

``Certainly, the bias is for Asian central banks to cut policy rates to boost their economies,'' said Ho Woei Chen, an economist at United Overseas Bank Ltd. in Singapore.

Six months ago, Asian central bankers were jacking up benchmark borrowing costs as inflation accelerated on surging costs for oil, food and commodities. That changed as the U.S. credit crunch snowballed into a global financial crisis, curbing lending and causing raw-materials prices to tumble.

South Korea's October inflation of 4.8 percent was the slowest in six months. Indonesia's consumer prices increased 11.8 percent from a year earlier, the smallest gain in four months.

``The data will provide room for Bank Indonesia to cut rates this Thursday,'' said Joanna Tan, an economist at Forecast Singapore Pte Ltd. ``We are looking for a 25 basis point cut, if not this Thursday, then definitely at the next meeting. It's hard for Bank Indonesia to ignore the plethora of global interest-rate cuts.''

Indonesia, Thailand

The central bank raised its key interest rate by 150 basis points since May to 9.5 percent to curb inflation, most recently adding a quarter of a percentage point on Oct. 7. Policy makers, who will again review policy tomorrow, may lower the benchmark rate to 8.5 percent over the next six months, Tan forecast.

Indonesia's one-year interest-rate swap was 11.63 percent late yesterday, having reached a two-year high of 12 percent on Oct. 29. The rate stood at just 6.5 percent at the start of the year when the benchmark policy rate was 8 percent.

Thailand's one-year swap rate was 3.39 percent late yesterday, down from 4.75 percent at the end of June, the highest close of the year. The government reported an inflation rate of 3.9 percent for October, the lowest this year.

``Thailand's inflation particularly signals interest-rate cuts ahead,'' Calyon's Barbe said.

The Bank of Thailand ``has room'' to ease monetary policy, Governor Tarisa Watanagase said on Oct. 24. The Thai central bank left its one-day bond repurchase rate at a 16-month high of 3.75 percent at its last policy meeting on Oct. 8, after announcing quarter-point increases at the two previous reviews in July and August.

Philippines, Taiwan

The Philippines and Taiwan may today also report that consumer prices increases are moderating.

Philippine inflation slowed to a four-month low of 11.4 percent in October, according to economists surveyed by Bloomberg ahead of a government announcement at 9 a.m. in Manila. The consumer price index in Taiwan rose 1.3 percent from a year earlier, the smallest gain in more than a year, a separate survey showed. The report is due at 4 p.m. in Taipei.

To contact the reporter on this story: Patricia Lui at plui4@bloomberg.net

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Korea Won Gains as Stock Rally Spurs Global Funds to Buy Assets

By Kim Kyoungwha

Nov. 5 (Bloomberg) -- South Korea's won rose as a surge in global stocks helped to fuel optimism that overseas investors will return to emerging markets.

The currency advanced 13 percent in the past week as policy makers signed a $30 billion swap deal with the U.S., guaranteed bank debt and unveiled a stimulus plan to quash concerns that the nation may be headed for a repeat of the 1997 financial crisis. The Kospi index soared 3.2 percent, tracking a rally in U.S. stocks on presidential election day.

``Sentiment is getting a boost from rising stocks,'' said Kim Yule, a currency dealer with BNP Paribas in Seoul. ``Demand and supply of dollars is key to movements and the market is watching how importers and foreign investors are behaving.''

Korea's currency strengthened 1.8 percent to 1,266 against the dollar as of 9:19 a.m. local time, according to Seoul Money Brokerage Services Ltd. It fell 26 percent this year, the worst among the 10 most-traded Asian currencies outside of Japan.

Global investors bought more local shares than they sold, ending two days of net sales, according to Korea Exchange.

Vice Finance Minister Kim Dong Soo said today foreign- exchange liquidity will improve as the country increases efforts to boost currency swaps and improve its trade balance.

``When taking into account all those factors, liquidity problems in the currency market will improve as time goes by,'' Kim said on SBS radio today. ``We have already agreed with China to boost currency swaps.''

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

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Australia, N.Z. Dollars Reach 2-Week Highs on Stocks, Materials

By Candice Zachariahs

Nov. 5 (Bloomberg) -- The Australian and New Zealand dollars advanced to the highest in two weeks as U.S. equities posted their biggest Election Day rally in 24 years, prompting investors to buy higher-yielding assets.

The currencies also rose as prices increased for commodities the two nations export, which account for more than half of their revenue from overseas. The Australian dollar dropped yesterday after the central bank cut interest rates to 5.25 percent, reducing appetite for so-called carry trades where low-cost funds are invested in assets generating higher returns.

``Quite clearly the key determinant is stocks,'' said Craig Ferguson, a currency hedge fund manager at Antipodean Capital Management in Melbourne. ``The odds are that stocks may extend their gains and then pause over the next couple of days and that would limit the Aussie and the kiwi upside,'' he said, referring to the currencies by their nicknames.

Australia's currency rose 1.4 percent to 69.15 U.S. cents as of 12:33 p.m. in Sydney from 68.17 cents late in Asia yesterday. It earlier touched 70.14 cents, the highest since Oct. 21. The currency advanced as much as 4.2 percent to 70.52 yen, also the most since Oct. 21, before trading at 68.73 yen.

New Zealand's dollar gained 1.2 percent to 60.49 U.S. cents from 59.75 in Asia yesterday. It rose as high as 61.29 cents, the strongest since Oct. 22. It bought 60.14 yen from 59.32.

Stocks Gain

The South Pacific nations' currencies gained as stocks advanced on the Standard & Poor's 500 Index and the Dow Jones Industrial Average, led by energy and banking shares ahead of the U.S. presidential election results expected later today.

They strengthened as the UBS Bloomberg Constant Maturity Commodity index of 26 raw materials rose by the most since Oct. 29 led by gold and crude oil, Australia's third- and fourth-most valuable commodity exports. Raw materials account for 60 percent of Australia's exports, and 70 percent of New Zealand's.

The Aussie ``has long forgotten the surprise 0.75 percentage point cut yesterday and the focus remained on increased risk appetite,'' wrote Toronto-based Matthew Strauss, a senior currency strategist at RBC Capital Markets Inc., a unit of Canada's biggest bank by assets. ``Increased risk appetite benefited equities, commodities and carry trades.''

Benchmark interest rates are 0.3 percent in Japan and 1 percent in the U.S., attracting investors to the South Pacific nations' assets. The interest rate in New Zealand is 6.5 percent.

Economy Slowing

Australian Treasurer Wayne Swan said today the economy will grow at a slower 2 percent pace in the 12 months to June 30, 2009 from a May forecast for 2.75 percent, amid the global financial crisis. Separately, a government report showed that the nation's trade surplus unexpectedly widened in September as exports of coal and iron ore surged.

In New Zealand, Fonterra Cooperative Group Ltd., the world's biggest dairy exporter, said whole milk powder prices fell at auction and have now declined 44 percent over the past four months.

Australian government bonds fell. The yield on the benchmark 10-year note rose 6 basis points to 5.33 percent, according to data compiled by Bloomberg. The price of the 5.25 percent security due March 2019 declined 0.503, or A$5.03 per A$1,000 face amount, to 99.363. A basis point equals 0.01 percentage point.

New Zealand's two-year swap rate, a fixed payment made to receive floating rates, fell to 6.05 percent today from 6.31 yesterday.

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

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Euro Falls on Speculation ECB Will Cut Rates to Boost Economy

By Stanley White

Nov. 5 (Bloomberg) -- The euro fell against the dollar after European Central Bank member Juergen Stark said policy makers are ready to use interest-rate policy to bolster the region's shrinking economy.

The 15-nation currency also declined against the yen as Stark's comments, cited by the Financial Times Deutschland in an interview, bolstered expectations the ECB will lower its 3.75 percent benchmark rate at a meeting tomorrow. The South Korean won led gains in Asian currencies as a surge in global stocks encouraged investors to return to emerging markets.

``Our basic view is euro depreciation,'' said Osamu Takashima, chief analyst for global market sales and trading in Tokyo at Bank of Tokyo-Mitsubishi UFJ Ltd., a unit of Japan's largest publicly listed lender. ``Economic momentum in the euro- zone has decreased dramatically. I expect the ECB to continue monetary easing into the first half of next year.''

The euro fell to $1.2922 at 10:46 a.m. in Tokyo from $1.2981 late yesterday in New York. It weakened to 128.60 yen from 129.47 yen. The dollar bought 99.54 yen from 99.70 yen. The euro may fall to $1.18 in the third quarter of next year, Takashima said.

``We're ready to use all instruments at our disposal and the main instrument is interest-rate policy as long as our mandate'' to contain inflation ``allows it,'' Stark was quoted as saying. The inflation environment ``dramatically changed,'' he added.

The ECB will lower its main refinancing rate by a half- percentage point to 3.25 percent tomorrow, according to all 54 economists in a Bloomberg News survey.

Election Day

The won rose to 1,272.00 per dollar from 1,288.25 in late Asian trading as Asian stocks tracked a rally on Wall Street. The MSCI Asia Pacific Index gained 3 percent after U.S. shares posted their biggest presidential Election Day rally in 24 years. The Philippine peso rose 0.4 percent to 48.22 per dollar.

Republican presidential nominee John McCain claimed 32 electoral votes, while Democratic rival Barack Obama took 99 electoral votes, television networks projected. A candidate needs 270 electoral votes to win the election.

``The election so far is playing out as supportive of risk, supportive of some of the other variables that are giving out positive risk appetite signals,'' said Alan Ruskin, head of international currency strategy at RBS Greenwich Capital Markets in Greenwich, Connecticut. ``The dollar has had a very consistent relationship of late where equity strength is associated with dollar weakness.''

The pound fell 0.5 percent to $1.5874 after a report showed Britain's construction industry contracted in October at the fastest pace in more than a decade. The Bank of England will cut its main interest rate by a half-percentage point to 4 percent tomorrow, according to the median forecast of 60 economists surveyed by Bloomberg News.

To contact the reporter on this story: Stanley White in Tokyo at swhite28@bloomberg.net

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Currency Derivatives May Face Curbs in Korea, China, Hong Kong

By Bob Chen

Nov. 5 (Bloomberg) -- Asian regulators may limit currency derivatives after losses helped push the South Korean won to a decade low, led to lawsuits in India and caused shares of China's Citic Pacific Ltd. to collapse.

South Korea will announce measures by December to restrict company purchases of the contracts to a percentage of overseas earnings, Hyeon Jung Gun, head of Korea's Financial Supervisory Services' derivatives market team, said in a Nov. 3 interview. China plans to improve monitoring of performance and compliance. Hong Kong is investigating improper sales of financial products by banks.

``There were companies that went over-hedging and banks that failed to remind options buyers of the embedded risk,'' Hyeon said. ``Under new regulations, companies will have access to derivative products based only on real demand.''

Governments face demands for tougher rules after the collapse of Lehman Brothers Holdings Inc. in September caused credit markets to freeze and emerging-market currencies to plunge. Korean companies may lose as much as $2.3 billion on derivatives after the won dropped 28 percent this year, Standard & Poor's estimates. Citic Pacific, a unit of China's biggest state-owned investment company, predicted a $2 billion loss because of unauthorized bets on the Australian dollar, which plunged 24 percent in 2008.

Derivatives Market

Restrictions may slow growth in the market for foreign- exchange over-the-counter derivatives, which swelled 78 percent in the two years ended 2007 to $56 trillion, according to the Bank for International Settlements in Basel, Switzerland. Derivatives are financial instruments derived from stocks, bonds, loans, currencies and commodities, or linked to specific events such as changes in the weather or interest rates. OTC products aren't exchange-traded and can be customized.

``Users of currency derivatives should face regulations regarding their qualifications and exposure,'' said Dariusz Kowalczyk, chief investment strategist at CFC Seymour Ltd., a Hong Kong-based brokerage focused on emerging markets. ``Automakers are allowed to produce fast cars, but drivers must be license holders and required to observe speed limits.''

Some 100 South Korean exporters filed a group lawsuit against 13 banks, seeking to nullify contracts bought from lenders including Citigroup Inc., Standard Chartered Plc, Shinhan Bank and Korea Exchange Bank. Spokespeople at the banks had no immediate comment.

`Unlimited Losses'

``We hope to prevent the recurrence of these incidents and urge regulators to address this issue and more thoroughly supervise on derivatives,'' said Kim Tae Hwan, a general manager at the Korea Federation of Small and Medium Business, which helped organize the action. ``They are extremely speculative products that exposed exporters to unlimited losses.''

The so-called knock-in knock-out options pay companies a fixed exchange rate as long as the dollar trades within a set range against the won. The firms are required to pay twice the amount of the contract if the U.S. currency appreciates beyond the range.

The won slumped to 1,495 per dollar on Oct. 28, the lowest in 10 years, from 902 last November. JPMorgan Chase & Co.'s Emerging Market Volatility Index soared to a record 32.96 on Oct. 23 before declining to 25.48 yesterday.

Citic Pacific dropped 73 percent in Hong Kong when its trading blunder was announced last month. The company has contracts that require it to buy as much as A$9.44 billion ($6.4 billion) of Australian dollars, according to an Oct. 20 statement. The trades were supposed to hedge an iron ore project in Australia that required A$1.6 billion.

Aussie Versus Dollar

The Australian dollar fell to 60.09 U.S. cents on Oct. 27, the weakest since April 2003, from a 25-year high of 98.49 on July 16.

``We want banks to sell appropriate products to clients,'' Li Fuan, head of the banking innovation department at the China Banking Regulatory Commission, said in an Oct. 30 interview. ``Monitoring measures may include reviewing products' legal documents and tracking their performance in real time.''

Citic Pacific identified HSBC Holdings Plc, BNP Paribas SA and Citigroup as among the sellers of the derivatives. Spokespeople at the banks declined to comment yesterday.

The Hong Kong Monetary Authority is reviewing ``whether the current `buyer beware' policy for the protection of investors remains appropriate,'' Chief Executive Joseph Yam wrote in an Oct. 9 note. An HKMA spokesman referred to that statement when asked about currency derivatives this week and said the review of rules will be completed this year.

``The mantra of `buyer beware' has been taken to extremes, and it's likely regulators will seek to redress the balance,'' said Simon Grose-Hodge, a strategist in Singapore at LGT Group, the bank owned by Liechtenstein's royal family. ``Any product that exposes a client to unlimited downside risk should never be described or sold as a hedge.''

To contact the reporter on this story: Bob Chen in Hong Kong at bchen45@bloomberg.net

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Crude Oil Falls as Much as 1.2% to $69.66 a Barrel in New York

By Christian Schmollinger

Nov. 5 (Bloomberg) -- Crude oil fell in New York, giving back some of yesterday's 10 percent gain, on concern demand for fuels will decline because of an economic slowdown.

Crude oil for December delivery declined as much as 87 cents, or 1.2 percent, $69.66 a barrel on the New York Mercantile Exchange. It was at $69.72 a barrel at 9:16 a.m. Singapore time.

Prices, which have tumbled 53 percent since reaching a record $147.27 on July 11, are down 26 percent from a year ago.

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

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PLDT, Sun Hung Kai, Sembcorp: Asia Ex-Japan Equity Preview

By Anuchit Nguyen

Nov. 5 (Bloomberg) -- The following companies may have unusual price changes in Asia trading, excluding Japan, today. Stock symbols are in parentheses, and share prices are from the previous close.

Developers: Hong Kong's home sales fell for a fourth straight month in October as local lenders tightened mortgage lending amid a slowdown in the economy. Sales of residential units dropped 63 percent by value from a year earlier to HK$16.3 billion ($2.1 billion), the Land Registry said yesterday.

Sun Hung Kai Properties Ltd. (16 HK), Hong Kong's No. 1 property developer by market value, climbed 50 cents, or 0.7 percent, to HK$71. Cheung Kong (Holdings) Ltd. (1 HK), the second biggest, added HK$1.20, or 1.6 percent, to HK$77.85.

Asia Commercial Bank (ACB VN): The Vietnamese lender partly owned by Standard Chartered Plc said its 10-month pretax profit rose 31 percent from the same period last year to 1.7 trillion dong ($101 million), boosted by loans and trading income. The stock advanced 1,700 dong, or 3.9 percent, to 45,000.

Brem Holding Bhd. (BREM MK): The Malaysian builder said it has no knowledge or information on a report in the Edge newspaper that said it may win a 600 million ringgit contract to build a 12 kilometer (7.5 mile) road. Brem rose 2 sen, or 2 percent, to 1.02 ringgit.

Indo Mines Ltd. (IDO AU): An Australian minerals explorer signed a mining contract with the Indonesian government for a $600 million pig-iron plant in the province of Yogyakarta. PT Jogja Magasa Iron, in which Indo Mines has a 70 percent stake, signed a 30-year so-called contract of work with the government, Indonesian Energy and Mining Minister Purnomo Yusgiantoro told reporters. The stock fell 3 cents, or 7.5 percent, to 37 cents.

Jollibee Foods Corp. (JFC PM): The biggest local fast-food company said its treasurer acquired 78,333 shares on Oct. 29 when the stock rose 6.2 percent. Jollibee gained 50 centavos, or 1.1 percent, to 46.50 pesos.

Philippine Long Distance Telephone Co. (TEL PM): The owner of the nation's No. 1 and third-largest mobile phone service providers said 2009 will be a tougher period and that it expects next year's profit net of one-off items to exceed 37 billion pesos ($763 million). PLDT, as the stock is called, lost 10 pesos, or 0.5 percent, to 2,015 pesos.

Rizal Commercial Banking Corp. (RCB PM): The fifth-biggest Philippine bank by asset said Chairwoman Helen Dee bought 283,000 shares on Oct. 29 and Oct. 30, when the stock rose 5.3 percent. Rizal fell 25 centavos, or 2.3 percent, to 10.75 pesos.

Sembcorp Marine Ltd. (SMM SP): The world's second-biggest oil-rig maker said third-quarter profit rose 73 percent to a record S$140.9 million ($95 million), or 6.8 cents a share, on demand for offshore rigs and ship repairs. Sales dropped 2.3 percent to S$1.14 billion, Singapore-based Sembcorp Marine said.

Singapore Airlines Ltd. (SIA SP): Asia's most profitable carrier will lower surcharges by as much as $15 after jet fuel prices declined. The airline, which last cut its levies on Sept. 8, will reduce the charge on tickets issued from Nov. 7 for economy class flights by between $8 and $15, the company said in a statement to the stock exchange. Surcharges on business class trips will fall by between $4 and $10, the airline said. The airline gained 20 cents, or 1.7 percent, to S$12.12.

Singapore Technologies Engineering Ltd. (STE SP): Asia's biggest aircraft maintenance company expects full-year net income to decline due to a global economic slowdown. The slowdown ``could lead to weakened demand in some parts of our business,'' the company, also known as ST Engineering, said in a statement to the Singapore stock exchange. The stock lost 6 cents, or 2.4 percent, to S$2.44.

Titan Chemicals Corp. (TTNP MK): Malaysia's biggest petrochemical maker said third-quarter profit fell 87 percent to 9.7 million ringgit because of a ``margin squeeze'' and it wrote down the value of inventories following the slide in crude oil. Sales climbed 28 percent to 2.04 billion ringgit, it said in a statement. Titan climbed 4.5 sen, or 6 percent, to 79.5 sen.

VADS Bhd. (VADS MK): The Malaysian phone services provider controlled by Telekom Malaysia Bhd. said it received a 104 million ringgit contract to provide contact centre services for PT Excelcomindo Pratama, Indonesia's third-largest mobile-phone operator. VADS was unchanged at 7.20 ringgit.

To contact the reporter on this story: Anuchit Nguyen in Bangkok at anguyen@bloomberg.net.

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Australia Stocks: Babcock, Bendigo, BHP, James Hardie, Woodside

By Ian C. Sayson and Malcolm Scott

Nov. 5 (Bloomberg) -- The S&P/ASX 200 Index advanced 85.70 points, or 2 percent, to 4,300.80 as of 10:31 a.m. in Sydney, rebounding from a 0.2 percent loss yesterday. The S&P/ASX 200 Index futures contract expiring in December added 2.4 percent to 4,310, while the All Ordinaries Index added 87.40, or 2.1 percent, to 4,257.20.

The following are among the most active companies in Australian trading. Stocks symbols are in parentheses after company names.

Mining stocks: BHP Billiton Ltd. (BHP AU), the world's largest mining company, rose A$1.63, or 5.6 percent, to A$30.75, heading for its highest close since Oct. 14 on higher metal prices. Rio Tinto Group (RIO AU), the third-largest, climbed A$4.52, or 5.7 percent, to A$84.23.

A measure of six metals traded on the London Metal Exchange rose 4.5 percent, its second day of gain. Copper added 5.2 percent, nickel 8 percent, and zinc 5.9 percent.

Separately, BHP, seeking regulatory clearance for its takeover offer for Rio Tinto Group, said it got a Statement of Objections from the European Commission. BHP is ``continuing to work cooperatively'' with the commission and will respond ``in due course to address the issues raised,'' the Melbourne-based company said today in a statement posted on its Web site.

Oil companies: Woodside Petroleum Ltd. (WPL AU), Australia's second-biggest oil producer, rose A$1.41, or 3.2 percent, to A$45.38 after the fuel climbed more than 10 percent, the most in six weeks. Santos Ltd. (STO AU), the third-biggest oil producer, advanced 85 cents, or 6 percent, to A$14.98, heading for its highest close since Oct. 8.

Crude oil rose more than $6 a barrel as global stock indexes advanced and the dollar dropped against the euro, increasing the appeal of commodities. Oil rose to $70.53 a barrel yesterday, its sharpest gain since Sept. 22.

U.S.-Related Stocks: Westfield Group (WDC AU), the world's biggest shopping mall owner by market value, gained 43 cents, or 2.7 percent, to A$16.21 after U.S. stocks advanced in the biggest presidential Election Day rally in 24 years. James Hardie Industries NV (JHX AU), the biggest seller of home siding in the U.S., added 12 cents, or 2.4 percent, to A$5.11.

U.S. stocks rallied led by energy and banking shares, on rebounding commodity prices and speculation the Treasury will bail out more financial companies. The S&P 500 added 4.1 percent to 1,005.72.

Babcock & Brown Infrastructure Group (BBI AU), an owner of ports and energy transmission lines in Australia, Europe and the U.S., slumped 3 cents, or 12 percent, to 22.5 Australian cents after it suspended payments of dividends to preserve cash flows and reduce debt. The stock is heading for its worst loss since Oct. 10.

Bendigo & Adelaide Bank Ltd. (BEN AU), an Australian regional lender, declined 18 cents, or 1.3 percent, to A$13.32, its first loss in five sessions after the bank said it's withdrawing the sale of convertible preferred shares.

To contact the reporter on this story: Ian C. Sayson in Manila at isayson@bloomberg.net; Malcolm Scott in Sydney at Mscott23@bloomberg.net

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Japan Stocks Climb a 2nd Day on Commodity Gains, U.S. Election

By Patrick Rial and Kotaro Tsunetomi

Nov. 5 (Bloomberg) -- Japanese stocks advanced for a second day as a rise in commodities prices sparked gains by resource companies and investors speculated the next U.S. president will take additional steps to spur economic growth.

Mitsui & Co., Japan's second-largest trading company, jumped 7.9 percent after oil surged the most in six weeks. Honda Motor Co., which gets half its sales in North America, climbed 7.9 percent on speculation U.S. lawmakers may push for more policies to boost growth. Mizuho Financial Group Inc., Japan's second- biggest listed bank, gained 13 percent as money market rates continued to tumble, indicating credit markets are easing.

The Nikkei 225 Stock Average rose 202.03, or 2.2 percent, to 9,316.63 as of 10:32 a.m. in Tokyo, the highest since Oct. 15. The gauge is up 30 percent since falling to a 26-year low on Oct 27. The broader Topix index added 36.48, or 4 percent, to 947.18.

``Once the election is finished, the hopes are that the incoming president will start formulating some new economic relief measures,'' said Hiroshi Chano, who helps manage $7.3 billion at Yasuda Asset Management Co. in Tokyo. ``This market is oversold, and people are jumping back in as dividends remain high and there are some stocks with solid earnings outlooks. The Nikkei should be heading back to 10,000 soon.''

In the U.S., the Standard & Poor's 500 Index surged 4.1 percent, the biggest presidential Election Day rally in 24 years, as oil rose and people briefed on the matter said the government may broaden the focus of its rescue program.

Commodity Rally

Mitsui, which generates more than half its profit from commodities, rose 7.9 percent to 998 yen. Inpex Holdings Inc., Japan's biggest oil explorer, rallied 13 percent to 657,000 yen after saying it won approval to buy a 20 percent stake in a Brazilian oil field. Sumitomo Metal Mining Co., Japan's biggest nickel producer, rose 4.2 percent to 786 yen.

Crude oil for December delivery rose 10 percent to $70.53 a barrel in the New York yesterday, the biggest one-day gain since Sept. 22. Copper added 6.4 percent, while nickel surged 8.1 percent as the dollar weakened against global currencies.

Honda, Japan's second-biggest carmaker, climbed 7.9 percent to 2,610 yen. Komatsu Ltd., the world's second-largest maker of construction machinery, gained 6.1 percent to 1,220 yen. Nintendo Co., which depends on overseas sales for 80 percent of its revenue, rose 9.8 percent to 35,850 yen in Osaka trading.

Voting concludes today for the U.S. presidential election between Democrat Barack Obama, the favorite in polls, and Republican John McCain.

Stimulus Plans

The Treasury may take stakes in non-bank financial firms amid signs the $163 billion it has given to banks in exchange for equity is restoring investor confidence, people familiar with the matter said. Economists including Harvard University's Martin Feldstein, New York University's Nouriel Roubini and Larry Hatheway of UBS AG are calling for the next U.S. president to enact stimulus packages worth $300 billion or more.

Mizuho soared 13 percent to 281,200 yen. Mitsubishi UFJ Financial Group Inc., the country's biggest lender by value, rose 7.8 percent to 676 yen.

The cost of borrowing dollars for one month in London fell to the lowest level in almost four years, while the three-month rate slumped to the lowest since June, spurred on by central-bank cash injections and interest-rate cuts worldwide. The London interbank offered rate, or Libor, for one-month loans slid 18 basis points to 2.18 percent yesterday, the lowest level since November 2004, and the 17th-straight decline.

Fast Retailing Co., the operator of Japan's Uniqlo casual clothing store chain, slumped 6.3 percent to 10,300 yen after reporting a drop in same-stores-sales.

To contact the reporters for this story: Patrick Rial in Tokyo at prial@bloomberg.net; Kotaro Tsunetomi in Tokyo at ktsunetomi@bloomberg.net.



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Asian Stocks Rise as U.S. Election Results Unfold; BHP Gains

By Kyung Bok Cho and Chua Kong Ho

Nov. 5 (Bloomberg) -- Asian stocks gained as commodities prices rose and investors speculated the next U.S. president will take steps to bolster the world's largest economy.

BHP Billiton Ltd. advanced 4.4 percent after oil soared 10 percent and metals prices climbed. Honda Motor Co. gained 3.9 percent on speculation a revival in the U.S. will bolster automobile demand. KB Financial Group Inc., owner of South Korea's biggest bank, added 4.5 percent as money market rates fell, indicating credit markets are thawing out.

``The U.S. presidential election can change investment sentiment,'' said Roger Groebli, Singapore-based head of financial market analysis at LGT Capital Management, which oversees about $20 billion. ``We all know that the new president can't work miracles, but maybe he'll open the gateway to change.''

The MSCI Asia Pacific Index gained 1.3 percent to 91.40 as of 9:10 a.m. in Tokyo. Japan's Nikkei 225 Stock Average climbed 2.6 percent to 9,350.63. All markets open for trading advanced.

Futures on the Standard & Poor's 500 Index were little changed. The S&P 500 climbed 4.1 percent yesterday, the biggest presidential Election Day rally in 24 years. Voting concludes during Asian trading hours today for the U.S. presidential election between Democrat Barack Obama, the favorite in polls, and Republican John McCain.

Whoever wins will face a U.S. economy battered by declining corporate profits and the highest unemployment in five years. Concern that $680 billion in bank writedowns will halt growth pushed the S&P 500 down 17 percent last month, the most since 1987. The MSCI Asia Pacific slumped 20 percent in October.

Support Measures

``Stock markets globally are rising, a trend that's set to continue today,'' Hiroichi Nishi, an equities manager at Tokyo- based Nikko Cordial Securities Inc., said on Bloomberg Television. ``With the election ending, expectations are now shifting to new support measures for the economy.''

U.S. Treasury Secretary Henry Paulson is considering taking stakes in nonbank financial companies after allocating $250 billion for government investments in banks, people briefed on the matter said. Initially, the Troubled Asset Relief Program was intended to buy mortgage-backed securities and other assets for which investor demand had dried up.

Crude oil jumped 10 percent to $70.53 a barrel yesterday in New York, the biggest gain since Sept. 22. A measure of six metals traded on the London Metal Exchange rose 4.5 percent.

The cost of borrowing dollars in London fell to the lowest level in almost four years as central banks worldwide injected cash and cut interest rates. The London interbank offered rate, or Libor, for one-month loans slid 18 basis points to 2.18 percent yesterday, the lowest level since November 2004, and the 17th straight decline.

To contact the reporter for this story: Kyung Bok Cho in Seoul at kcho7@bloomberg.net; Chua Kong Ho in Shanghai at kchua6@bloomberg.net.

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Election Day Boosts Markets After Steepest Declines Since 1970s

By Michael Patterson and Daniel Kruger

Nov. 5 (Bloomberg) -- Election Day in the U.S. is proving a haven for investors around the world contending with the worst stock, bond and commodity markets in more than three decades.

Japan’s Nikkei 225 Index added 2.1 percent at 9:42 a.m. in Tokyo, while the MSCI Asia Pacific Index climbed 2.3 percent. The Standard & Poor’s 500 Index yesterday gained 4.1 percent to a three-week high of 1,005.75 after plunging faster over the past year than any time since 1974. Oil, copper and gold surged, the dollar dropped, and the cost of protecting corporate bonds from default through 2013 fell to the lowest in two weeks.

The election of Democrat Barack Obama, who leads in the polls, or Republican John McCain may help cement the government’s strategy for overcoming a recession, investors said. Whoever wins will face a U.S. economy battered by declining corporate profits and the highest unemployment in five years. Concern that $680 billion in bank writedowns will halt growth pushed the S&P 500 down 17 percent last month, the most since 1987, and sent corporate bonds to their worst return in 32 years.

“We’re finally getting all this uncertainty surrounding the election behind us,” said Jeffrey Kleintop, chief market strategist at LPL Financial, which has $274 billion under management. “The market is feeling like there’s finally an outcome. We’re finally putting behind us a lot of the worries that have plagued the market.”

The S&P 500’s rally, its biggest during a presidential vote since the New York Exchange first opened for Election Day in 1984, brought its gain since reaching a five-year low on Oct. 27 to 18 percent. Money-market rates fell for a 17th day, helping push Europe’s Dow Jones Stoxx 600 Index up 4.5 percent.

Early Returns

Obama received Vermont’s three votes, CNN, ABC, CBS and Fox said after polls closed. McCain won Kentucky, based network projections. Two of the biggest battleground states in the election, Virginia and Indiana, were too close to call based on initial returns after the polls closed, the networks said.

The energy-weighted Standard & Poor’s GSCI Index of 24 commodities jumped 7.5 percent to 467.26, the biggest one-day gain since it was created in 1970. The Reuters/Jefferies CRB Index gained 5.3 percent. Crude oil jumped as much as 12 percent, gold rose the most in six weeks and corn hit a three-week high.

Stocks and commodities plunged globally since last year as a nationwide decline in U.S. home prices spurred record foreclosures and saddled banks with bad mortgage loans. Money markets seized up, sending the so-called TED spread, a gauge of credit-market stress, to 4.64 percentage points Oct. 10, the highest level on record.

Steepest Drop

The S&P 500’s drop since its peak is the steepest for a comparable period since it declined 43 percent in the 13 months ended in October 1974, according to data compiled by Bloomberg. The MSCI World Index’s 37 percent retreat is its worst since the measure began in 1970.

Investment grade corporate bonds lost 7.4 percent in October, their worst month as measured by Merrill Lynch & Co.‘s bond indexes since the firm began compiling monthly data on the debt in 1976. The spread between investment grade company bonds and Treasury debt of similar maturity is the widest since 1932, according to Moody’s Investors Service.

S&P 500 companies are on pace for their fifth straight quarter of declining profits, with companies from Texas Instruments Inc. to Freeport-McMoRan Copper & Gold Inc. reporting earnings and revenue that failed to meet analysts’ estimates.

Earnings are down 10.4 percent for the 392 companies that have reported third-quarter results so far. The U.S. economy contracted 0.3 percent in the July-September period, and growth is expected to slow to 1.15 percent in 2009 from 1.6 percent this year, economists’ estimates compiled by Bloomberg show.

‘Slow-Motion Crash’

“October was a slow-motion crash,” said Joseph Keating, chief investment officer at RBC Private Asset Management in Birmingham, Alabama, who oversees $3 billion.

Credit markets started to loosen up as Treasury Secretary Henry Paulson began deploying $700 billion to recapitalize banks and purchase mortgage-related securities.

The London interbank offered rate, or Libor, that banks charge each other for three-month loans in dollars slid 15 basis points to 2.71 percent today, the lowest level in almost five months, data from the British Bankers’ Association showed.

“You’re starting to work off a lot of the risk parameters,” said Andrew Brenner, co-head of structured products in New York at MF Global Inc. “Having this election behind us, I think the country will be much more optimistic.”

After pulling ahead of Obama in some polls following the Republican National Convention in the first week of September, McCain’s support slid as the financial crisis deepened, with voters considering Obama better able to manage the economy.

Democratic Edge?

Should either party have an edge in reviving the stock market, history suggests it is the Democrats.

Since 1928, the S&P 500 climbed 9.3 percent in the 12 months after the Democratic Party captured the White House, based on the median change following the election of six Democrats from Franklin D. Roosevelt to Bill Clinton.

Only once did the benchmark for American equities decline, after Jimmy Carter‘s victory in 1976.

Among the six newly elected Republicans, five -- including Herbert Hoover, Richard Nixon and George W. Bush -- preceded stock-market declines, with a median retreat of 4.3 percent for the group, data compiled by Bloomberg show. The data excludes incumbents that won re-election.

Overall, the S&P 500 generated a median 62 percent advance from the time a Democrat is elected in November or elevated from the vice presidency until the next president is chosen. For Republicans, the gain is 28 percent.

History may not be an accurate indicator this time.

“In a normal year, you would expect some kind of relief rally after the election is over with, just because we won’t be talking about this anymore,” said Brian Barish, the Denver-based president of Cambiar Investors LLC, which oversees about $6 billion. “But I would throw in that there’s been nothing normal about 2008.”

To contact the reporters on this story: Michael Patterson in London at mpatterson10@bloomberg.net; Daniel Kruger in New York at dkruger1@bloomberg.net

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