Asian Market Update

Daily Forex Fundamentals | Written by Trade The News | Nov 19 08 06:48 GMT |

Rescue plea by car makers put to test on the Hill, Asia markets pare early gains In the most dire display of desperation, CEO's of the US 'Big-Three' automaker companies pleaded reluctant Congress to bail out their industry, contending that staying afloat without a lifeline from the government in the immediate future will be difficult. Speaker of the House Nancy Pelosi appeared favorable to the cause, urging Congress to move on a decision as early as this week as time becomes of the essence ahead of December Washington break, however Congressional members across both parties appeared to be skeptical. Automaker executives used a variety of arguments - from the inherent interconnectedness of domestic auto industry with the rest of the economy, to the progress that has already been made in reforming the viability of their business models. Entrenched difficult economy, reined in consumer spending, and tight credit conditions have made this a difficult choice for the legislators however, who were still visibly seething from (in the words of one Senator) being told that 'fundamentals are sound, to being asked for bazooka-size bailout for banks, to discovering that the funds they appropriated would not be used as intended.' Additionally, UAW labor union chief contending that concessions have already been made, as well as an academic from University of Maryland arguing that federal aid would create another AIG while recommending bankruptcy to restructure companies costs contributed to lawmakers skepticism. And while President-elect Obama has stated his support in helping the auto industry, the current administration is still not willing to spend taxpayer money on 'company that can't prove that it has a long-term path for success.' Equity markets in Asia initially rallied, tracking the gains made by US indices in the final hour of trading, thanks in part to a solid Q4 outlook from tech bellwether Hewlett-Packard. However, with little else to get excited about from other sectors, the early gains were pared by mid-session across the board. Nikkei225 traded over 1% to the downside on the other side of the lunch break amid reported weakness from housing and financial names. Mitsubishi Estate cites a sharp slowdown in commercial tenant market while its financial relative - Mitsubishi UFJ - posted a 60% drop in profit. Likewise, Sumitomo Mitsui bank was under financial duress, disclosing the need to raise 400B yen ($4B) by selling preferred securities. In South Korea, Vice Finance Minister Kim reiterated most recent dim assessment from officials, stating that domestic economy is weakening further while expressing administration plans to focus on creating jobs and help smaller businesses. Testament to deteriorating regional fundamentals, investors in Korea's electronics powerhouse Samsung reportedly asked company management to focus on cheaper laptops and mobile phones as well as to slow pace of production of large screen TVs, while also requesting less spending on semiconductors and LCD displays next year. Meanwhile, Central Bank chief Lee pledged to supply timely short-term liquidity to money markets. S Korea's Kospi traded off by over 1% in mid-Asian hours. Australia received another round of sobering economic data with release of Westpac leading index figure below -0.1% estimates at -1.0%, sparking a selloff in equities to fresh 4-year lows in S&P/ASX, however those losses were subsequently retraced, with the index falling by just over 0.5% toward session close. RBA member Edey spoke at Economic Outlook Conference, commenting on persisting uncertainty and forecasting significant further slowing in the economy while allowing for the central bank's monetary action and the government's fiscal measures to 'cushion' the decline. Aussie oil names like Woodside Petroleum were particularly heavily sold as slumping energy demand pushed crude prices below $55 - a 22-month low. Equity indices in India meanwhile cheered additional remarks from the country's Finance Minister, who pledged government focus to stimulate domestic demand via a stimulus package while also commenting on central bank bias toward more accommodative monetary policy. Sensex thwarted selloff elsewhere in Asia with a 1.8% rally. Shanghai Composite was also notably higher on announcement of possible rise of oil prices in China stemming from OPEC production cuts. This may not sit well among increasingly dissatisfied with financial hardships populace - a development underscored by riots reported from Northwestern Gansu province in response to local governments forced resettlement scheme. Protests by workers laid off from local factories impacted by global economic decline escalated into violence against police force and commercial property in what could still evolve into another historic manifestation of mass opposition to central planning system, as its systemic weaknesses become exaggerated by a global economic downturn. In currencies, volatility among the majors remains subdued for second consecutive session. EUR/USD oscillated in a tight 1.26-2640 range for the duration of the Asian session, GBP/USD rebound was contained by former support turned resistance at 1.4980 despite the late rally in US markets, while USD/CHF took out 1.2050 en route to fresh 2008 low for Swiss franc. Japanese Yen rallied in conjunction with Asian equity market weakness, however the USD/JPY downside was thwarted by US session low just above 96.30. EUR/JPY slid from 122.50 to 121.50 with subsequent support found at US session low of 121.00. GBP/JPY has also traded with little directional momentum, finding consistent buying interest below 144.00 figure. Among commodity related pairs, AUD traded with a heavy tone for second consecutive session, paring earlier gains with a selloff toward 0.6420 while aiming for week low of 0.6370. USD/CAD traded marginally to the upside, testing session highs of 1.2330 on continued selling in crude. Among emerging Asian FX, Hong Kong dollar rally was reported to be interrupted by injection from HKMA at 7.75. USD/SGD briefly tested fresh multi-month highs just below 1.53, while USD/KRW maintained its clearly defined November uptrend with a new high above 1,460. In commodity trading, crude oil is higher by more than (%) and trading below $55.00/bbl. Overall crude has swung between gains and losses on the session and trading has been confined to a roughly $0.55 range. In terms of the speculation related to a Nov OPEC output cut, the cartel's Secretary General noted that it is too early to talk about cutting oil supplies. In China, the CEO of one of the country's largest oil companies, CNOOC, said that national oil companies in the country are expecting oil prices to fall to $40/bbl. This comments follow a WSJ report which disclosed that China's Oct fuel demand fell sharply. Despite the declining demand for oil in China, a government researcher noted that the government plans to introduce a retail fuel tax “soon” in a move to support local oil companies. In India, there are reports that the government may seek to lower retail fuel taxes as a way to provide aid to the country's airlines and stimulate travel demand. Looking ahead, today's US Department of Energy weekly inventories report is expected to show that crude stocks rose by 1M barrels during the prior week, according to 1 survey. Spot Gold is higher by more than 0.50% and the metal has traded in a $3 range for most of the session. Spot gold continues to lack direction as it deals with being a safe haven asset and demand for the USD. Earlier on the session an unconfirmed report noted that China's central bank is examining raising its gold reserves to as much as 4K tons from the current level of approximately 600 tons in a move to diversify its foreign exchange reserves. This report was in line with a prior report in the HK Standard and comes on the day that it was announced that China surpassed Japan to become the largest foreign holder of US Treasuries. According to an analyst at Investec, if China raised its gold holdings to 4,000 tons it would be like going back to the gold standard. Amid the speculation about China diversifying its fx reserves, which are mostly dollar denominated, Japan's Ministry of Finance Official Shinohara noted that the USD needs to remain as the reserve currency, echoing recent comments out of Japan's PM and Finance Minster. Trade The News Staff Trade The News, Inc. Legal disclaimer and risk disclosure All information provided by Trade The News (a product of Trade The News, Inc. "referred to as TTN hereafter") is for informational purposes only. Information provided is not meant as investment advice nor is it a recommendation to Buy or Sell securities. Although information is taken from sources deemed reliable, no guarantees or assurances can be made to the accuracy of any information provided. 1. Information can be inaccurate and/or incomplete 2. Information can be mistakenly re-released or be delayed, 3. Information may be incorrect, misread, misinterpreted or misunderstood 4. Human error is a business risk you are willing to assume 5. Technology can crash or be interrupted without notice 6. Trading decisions are the responsibility of traders, not those providing additional information. Trade The News is not liable (financial and/or non-financial) for any losses that may arise from any information provided by TTN. Trading securities involves a high degree of risk, and financial losses can and do occur on a regular basis and are part of the risk of trading and investing.

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Australian Economic Index Falls as Recession Looms

By Gemma Daley

Nov. 19 (Bloomberg) -- Australia's leading economic index fell in September, signaling the nation may slip into a recession, ending 17 straight years of economic expansion.

The leading index, a gauge of future economic growth, fell 1 percent to 258.4 points, Westpac Banking Corp. and the Melbourne Institute said in Sydney today. The annualized growth rate of the index slowed to 1.1 percent from 2.5 percent in August.

``This is a disturbing fall in the growth rate,'' said Bill Evans, Sydney-based chief economist at Westpac. ``Growth in the first half of 2009 will be barely positive, with a decent risk the first two quarters of growth in 2009 could be negative.''

The central bank has reduced the benchmark interest rate by two percentage points to 5.25 percent since early September in the most aggressive round of reductions since a recession in 1991. It cut its 2008 economic growth forecast last week to 1.5 percent from 2 percent as Australia becomes embroiled in the global financial turmoil.

Policy makers will cut the rate by another half point on Dec. 2 to 4.75 percent, according to 13 of 22 economists surveyed by Bloomberg News last week. The rest expect reductions of between 75 and 100 basis points.

Government Handouts

Falling share markets, including a 43 percent plunge in the benchmark S&P/ASX 200 Index this year, and declining house prices have slashed household net worth by 8 percent since the start of 2008, the bank said yesterday in minutes of its November meeting.

Australia's economy expanded at the slowest pace in more than three years in the second quarter as consumers cut spending for the first time since 1993.

The government has announced A$10.4 billion ($6.8 billion) in grants to pensioners, families and first home buyers to boost the economy as the global financial crisis freezes credit and damps growth.

Australian business confidence plunged in October to a record low, consumers were pessimistic in November for a 10th straight month and house prices dropped in the third quarter by the most since 1978.

Job Losses

Sydney-based Babcock & Brown Ltd., the worst performing stock on the MSCI Asia-Pacific Index this year, today said it will accelerate job cuts and separate its businesses to avoid defaulting on A$3.1 billion of debt.

Westpac's leading index tracks eight gauges of economic activity, such as company profits and productivity, to give an indication of how the economy will perform over the next three to nine months.

Westpac's coincident index, a measure of the current state of the economy, was largely unchanged in September at 236 points. The annual growth rate of the coincident index was 2 percent, lower than its long-term trend of 3.7 percent.

To contact the reporter on this story: Gemma Daley in Canberra at gdaley@bloomberg.net

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India's New Rural Roads May Buffer Economy From World Recession

By Cherian Thomas

Nov. 19 (Bloomberg) -- The 100 kilometers (62 miles) of roads India is adding each day may save Asia's third-largest economy from the worst of a global recession.

New roads built so far under the $27 billion program have brought urban markets within reach of 60 million village dwellers over the past five years, letting them earn money selling fruits, vegetables and milk that would have spoiled otherwise. They are now spending their cash just as the world economy falters.

``Rural demand is keeping the economy kicking along,'' said Shashanka Bhide, chief economist at the privately funded National Council of Applied Economic Research in New Delhi. ``Growth will slow in India, but not as dramatically as the rest of the world.''

Some of India's biggest companies are already benefiting: shares of Hindustan Unilever Ltd., the biggest maker of household products, and Hero Honda Motors Ltd., India's largest motorcycle maker, are up this year while the benchmark stock index has plunged 56 percent. Domestic spending will help cushion India from the worst global meltdown since the Great Depression, according to the Reserve Bank of India.

When the roads program is completed in two years, every village with 1,000 or more inhabitants will have access to all- weather roads, up from 40 percent when construction started in 2003. Spending on the project, run by the National Rural Roads Development Agency, was worth about 5 percent of gross domestic product when it was announced.

More to Come

Even at its current pace of investment, India still needs to spend more to buoy growth. The South Asian nation requires $100 billion annual investments in its highways, railways, power systems, ports and other infrastructure for the next five years, according to the government. Inadequate capacity shaves two percentage points off the nation's growth each year, the finance ministry estimates.

Rural connectivity is increasing people's income and adding to domestic consumption, which makes up 55 percent of India's economy, compared with 37 percent of gross domestic product in China.

Hazari Lal Negi, 55, a farmer in the northern Indian state of Himachal Pradesh, says this year's crop of cabbages, potatoes, beans and cauliflower was his first not to perish on the way to market because of lack of transport.

``Earlier, we would have to haul our produce and walk all night to the nearest town to catch the early morning trucks,'' Negi said. ``We could sell only about a quarter of our produce and the rest got wasted. Now, we sell everything.'' Negi plans to expand into organic farming to boost his income.

`Consumer Boom'

``New markets are opening up for our products,'' said Pranay Dhabhai, chief operating officer at Haier Appliances (India) Ltd., the local unit of China's biggest home appliances maker. ``People's aspirations levels are rising with higher incomes. There's a huge consumer boom waiting to happen because penetration levels are so low in India.''

Haier, which opened its first factory in India last year, estimates that only 19.6 percent of Indian households have refrigerators, 27 percent own television sets and just 3 percent of homes have air-conditioners installed.

Sanjeev Chadha, chief executive officer of PepsiCo Inc.'s India unit, said the September-October period ``has been one of the best ever'' for sales.

``Buying power is coming,'' said Joerg Mueller, head of India operations for Volkswagen AG, which is building a 580 million euro ($730 million) car factory in the western Indian city of Pune. ``We are optimistic and happy to be here. We see a very positive future.''

Cushioning the Slowdown

The International Monetary Fund expects India's economic growth to slow to 6.3 percent in 2009 from an estimated 7.8 percent this year. That's still faster than the South Asian nation's average 4.5 percent expansion since 1947.

China may grow 8.5 percent in 2009, compared with 9.7 percent this year, according to the IMF. The U.S. and the Euro area may shrink by 0.7 percent and 0.5 percent in 2009, the Washington-based lender said.

``Overall, India is still poised to rank as the second- fastest growing major economy after China,'' said Rajeev Malik, regional economist at Macquarie Group Ltd. in Singapore. ``Consumption expenditure is poised to be resilient, but investment spending will be hit owing to scarce availability and higher cost of funding.''

Even though India has a domestic consumption-led economy, its growth may be hampered by slower investments by companies as borrowing options dry up in a global recession.

Lending Slips

Investor appetite in the stock market has waned, with overseas funds selling a record $12.7 billion of equities this year. Foreign lenders are shying away from emerging markets like India, as Europe and Japan last quarter slipped into recession.

The rural roads program is financed by the federal government using revenue from an additional tax imposed on the sale of diesel.

``India can't be fully insulated from what's happening in the rest of the world,'' said Rajat Nag, managing director at the Manila-based Asian Development Bank. ``Infrastructure financing will be tight for a while.''

Nag said India's banks are well capitalized and can afford to step up lending. They have just $1 billion of toxic Western assets out of a total loan portfolio of $510 billion, according to the central bank. The global credit crunch has seen financial institutions around the world write off or lose $965.8 billion.

To stimulate investments, India's central bank has slashed lenders' reserve requirement in cash and bonds by 3.5 percentage points and one percentage point respectively and cut interest rates by 1.5 percentage points in the past month.

``India is connected with the global crisis, but not as severely as other Asian countries,'' said K.V. Kamath, chief executive officer of ICICI Bank Ltd., the nation's second- biggest. ``We will have to get back to the consumers to get India back on a higher growth path.''

To contact the reporter on this story: Cherian Thomas in New Delhi at cthomas1@bloomberg.net

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India May Reduce Key Rate as Inflation Slows, Chidambaram Says

By Paul Gordon and Cherian Thomas

Nov. 19 (Bloomberg) -- India's central bank has scope to cut borrowing costs further as growth slows and inflation approaches a level ``we can live with,'' Finance Minister Palaniappan Chidambaram said.

The inflation rate dropped the most in close to two decades to 8.98 percent this month as commodity prices tumbled. Chidambaram expects price increases to slow to between 6.5 percent and 7 percent by December, almost half the 16-year high reached in August.

``How rapidly inflation declines will decide how the central bank moves,'' India's longest-serving finance minister since 1980 said in an interview with Bloomberg Television in New Delhi yesterday. ``We have not yet licked inflation, though our expectation is it will come down.''

Chidambaram yesterday met with Governor Duvvuri Subbarao as Indian policy makers work to limit the impact of a global recession on Asia's third-largest economy. The finance minister said companies benefiting from lower borrowing costs should cut prices to help revive domestic demand.

``The writing is on the wall for interest rates to drop in India,'' said Ravi Chaudhry, chairman of Cemex Investment & Services Ltd., a New Delhi-based company that provides investment advice to governments including Norway and Brazil. ``The crisis in the U.S. is endemic.''

The U.S., Europe and Japan slipped into recession last quarter, and China's economy, the biggest contributor to global growth in 2007, is slowing.

`Rapid Rate'

``We need to ensure that our domestic economy, at least the insulated parts of the domestic economy, continues to grow at a rapid rate,'' said Chidambaram, who holds an MBA from Harvard. ``It's the external sector that's causing us problems, so we will have to compensate that. If exports decline, we will have to compensate that by stimulating domestic consumption.''

India, whose 1.1 billion population is second only to China's, is relying on spending by local consumers and companies to make up for a slump in overseas sales. Exports, which make up about a fifth of the $1.2 trillion economy, grew in September at the slowest pace in 18 months.

Subbarao cut the central bank's benchmark repurchase rate by 1.5 percentage points to 7.5 percent in the past month, in addition to slashing lenders' reserve requirements in cash and bonds by 3.5 percentage points and 1 percentage point respectively.

``We expect inflation to decline with falling commodity prices,'' Chidambaram said.

Bond investors are speculating on further reductions in interest rates. The yield on benchmark 10-year Indian government bonds declined 26 basis points since the start of last week, closing at 7.42 percent yesterday.

State-Run Banks

State-run banks, which control half the assets in India's banking sector, slashed their prime lending rates by 75 basis points following the reductions in the central bank's policy rates.

Non-state lenders are waiting to see ``if there is enough liquidity in the system'' before they cut their rates, said K. V. Kamath, chief executive officer at ICICI Bank Ltd., India's second-largest lender.

``Now I think the ball is in the court of suppliers and manufacturers -- they have to cut prices,'' Chidambaram said. ``If they cut prices I am a 100 percent sure that demand for homes, cars and two-wheelers will sharply pick up.''

The lawyer-turned-politician said the government will consider a stimulus package if required, aimed at supporting specific industries.

Chidambaram said the global credit crunch posed different risks for India than for China, which earlier this month unveiled a $564 billion spending plan.

China's Package

``I don't think we need to compare China and India,'' the minister said. ``Each country has to address the problems it faces. In our case the problems are providing liquidity, getting the price right and ensuring banks get over their innate caution and deliver credit at that price.''

India's efforts at propping up the economy may see the government miss its budget deficit target of 2.5 percent of gross domestic product in the year to March 2009.

Chidambaram on Oct. 22 obtained parliament approval to spend an extra 2.4 trillion rupees ($49 billion) in the year to pay for food subsidies and a rural jobs program, and to refund commercial banks that waived farm debt.

``This is not the year to worry about the fiscal deficit,'' he said. ``We will overshoot the target a bit. We will reach the target later. It doesn't matter.''

To contact the reporter on this story: Cherian Thomas in New Delhi at cthomas1@bloomberg.net.

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Cnooc's Fu Chengyu Says Oil Expected at $40 a Barrel, FT Says

By Howard Mustoe

Nov. 19 (Bloomberg) -- Cnooc Ltd. Chief Executive Officer Fu Chengyu said participants at a meeting of national oil companies expect oil to reach $40 per barrel, the Financial Times reported.

The consensus of the conference, held in Beijing, was that prices will fall and most investment projects would be canceled, the newspaper said, citing comments Fu made at a conference in Barcelona.

To contact the reporter on this story: Howard Mustoe in London at hmustoe@bloomberg.net.

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Australian, New Zealand Dollars Gain as U.S. Equities Recover

By Candice Zachariahs

Nov. 19 (Bloomberg) -- The Australian and New Zealand dollars advanced for the first day in three as U.S. equities rebounded after the Standard & Poor's 500 index fell below its lowest closing levels since 2003.

The Australian dollar gained before speeches today from policy makers at the Reserve Bank of Australia, which is expected to cut interest rates next month. The RBA said yesterday in the minutes of its Nov. 4 meeting that it had seen benefits in moving monetary policy ``quickly to a neutral position''.

Currency markets are ``still following the gyrations intra- day in equities but we're seeing a little less of that strength in the U.S. dollar and the yen,'' said Greg Gibbs, a currency strategist at ABN Amro Australia Ltd. in Sydney. ``It's an indication that some of the very rapid deleveraging that was driving up the U.S. dollar has slowed.'' The Australian dollar, he said, was benefiting from that.

Australia's currency rose 0.7 percent to 65.07 U.S. cents as of 8:05 a.m. in Sydney from 64.61 cents late in Asia yesterday. It advanced 1.3 percent to 63.03 yen. The Aussie, as the currency is called, will trade between 63.5 cents and 67 cents today, Gibbs said.

New Zealand's dollar gained 0.5 percent to 55.23 U.S. cents from 54.98. It bought 53.53 yen from 52.94.

The Australian dollar plunged 25 percent versus the greenback over the past three months and 34 percent against the yen after the Sept. 15 collapse of Lehman Brothers Holdings Inc. caused money markets to seize up and equities to tumble. The New Zealand dollar dropped 23 percent and 32 percent against the dollar and yen, respectively, in the same period.

Benchmark rates are 5.25 percent in Australia and 6.5 percent in New Zealand, compared with 0.3 percent in Japan and 1 percent in the U.S., attracting investors to borrow in Japan and the U.S. to buy the South Pacific nations' assets. The risk in such trades is that currency market moves will erase profits.

Traders yesterday were betting the RBA will lower rates by at least 0.75 percentage point at its next meeting on Dec. 2, according to a Credit Suisse index based on overnight swaps trading yesterday. There was a 69 percent change of a one percentage point reduction.

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

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Korean Won Advances for First Day in Seven on Exporter Demand

By Kim Kyoungwha

Nov. 19 (Bloomberg) -- South Korea's won rose, snapping a six-day losing streak, on speculation exporters are taking advantage of dollar gains to repatriate overseas income.

The Korean currency fell 8 percent versus the dollar since Nov. 10, extending this year's slide to 35 percent, as the onset of a global recession prompted overseas investors to cut their holdings of emerging-market assets. The Kospi index fell for a seventh day as global funds dumped more Korean shares than they bought, according to Korea Exchange.

``Exporters are offloading some dollars on a perception that the greenback may have hit a short-term peak,'' said Jo Hyun Suk, a currency dealer with Korea Exchange Bank in Seoul. ``There's steady demand for fund remittances from foreign investors which may reverse the won's course.''

The won rose 0.5 percent to 1,440.50 per dollar at 9:52 a.m. in Seoul, according to Seoul Money Brokerage Services Ltd.

The U.S., Europe and Japan are already in recession and the International Monetary Fund this month forecast global economic growth will slow to 2.2 percent next year from an estimated 3.7 percent in 2008. The fund has said that expansion of 3 percent or less is ``equivalent to a global recession.''

South Korea's government revised its forecast for the nation's 2009 trade balance to a $5.6 billion deficit from a $1.2 billion surplus, Yonhap News reported today, citing a document submitted to parliament. Its projection for consumer spending growth was cut to 2.5 percent from 4.5 percent.

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

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Babcock Infrastructure Studies Sale of Up to 49% of Coal Port

By Angela Macdonald-Smith

Nov. 19 (Bloomberg) -- Babcock & Brown Infrastructure Group, owner of Australia's second-biggest coal-export harbor, said it's examining the potential sale of as much as 49 percent of the port after drawing interest from potential bidders.

The company will ``only look to sell down if the price is right,'' Helen Liossis, its Sydney-based investor relations manager, said today. She declined to name interested parties.

Babcock Infrastructure is understood to have issued confidential agreements to potential bidders after a group of mining companies, including Xstrata Plc, made an approach to buy the A$2.3 billion ($1.5 billion) Dalrymple Bay port, the Australian Financial Review said today. A sale would help pay debt and secure funds for expansion, the newspaper reported.

``There are many users out there that would love to get their hands on the asset,'' Liossis said by telephone. ``Where we know there is strong interest it is appropriate that we test out that appetite and the pricing for co-investing.''

Babcock Infrastructure, which has slumped 95 percent in Sydney trading in the past six months, gained as much as 7.6 percent today to 5.7 cents on the Australian stock exchange and was at 5.4 cents at 10:45 a.m. local time.

To contact the reporter on this story: Angela Macdonald-Smith in Sydney at amacdonaldsm@bloomberg.net

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Yen Rises on Speculation U.S. Will Fail to Agree on Car Bailout

By Ron Harui and Stanley White

Nov. 19 (Bloomberg) -- The yen rose against the dollar on speculation U.S. lawmakers will fail to agree on a bailout for the country's automakers, prompting investors to pare higher- yielding assets funded with Japan's currency.

The yen also gained against the Australian dollar and the British pound on concern the credit crisis may spread. A $700 billion financial stability package isn't intended to prevent General Motors Corp., Ford Motor Co. and Chrysler LLC from collapsing, Treasury Secretary Henry Paulson said in a House hearing yesterday.

``It seems unlikely that the U.S. will pass legislation this year to help its carmakers,'' said Hiroshi Yoshida, foreign-exchange trader in Tokyo at Shinkin Central Bank, Japan's fifth-largest publicly traded lender by assets. ``Once this filters through the markets, this will push up the yen.''

The yen climbed to 96.65 against the dollar at 9:35 a.m. in Tokyo from 97.03 late yesterday in New York. It rose to 122.15 per euro from 122.43. The euro bought $1.2633 from $1.2618. The pound was little changed at $1.4962. The yen may rise to 96.20 versus the dollar today, Yoshida said.

The Australian dollar fell 0.9 percent to 62.72 yen from late yesterday in New York, while the New Zealand dollar declined 0.5 percent to 53.33 yen. The South African rand also slid 0.4 percent to 9.4410 yen.

The yen is popular in carry trades, where purchases of higher-yielding assets are funded in nations with lower rates. Japan's benchmark rate of 0.3 percent compares with 1 percent in the U.S., 3.25 percent in Europe, 5.25 percent in Australia, 6.5 percent in New Zealand and 12 percent in South Africa.

U.S., Japanese Automakers

Japan's currency has advanced 13 percent versus the dollar, 33 percent against the euro and 52 percent against the Australian dollar in the past three months on slumping global economies. Nissan Motor Co., Japan's third-largest automaker, said profit in the second-half will go to ``zero'' because of lower sales in the U.S. and a stronger yen.

Chief Executive Officer Carlos Ghosn made the comments in an interview with the Wall Street Journal, which were confirmed by Nissan spokesman Simon Sproule.

The U.S. economy would suffer a ``catastrophic collapse'' if domestic carmakers fail, GM Chief Executive Rick Wagoner said yesterday, as the nation's auto industry renewed appeals to Congress for federal aid.

Three million jobs would be lost within the first year, personal income would drop by $150 billion and government tax losses would total $156 billion over three years, Wagoner told a Senate panel.

The dollar may fall before government reports today that economists estimate will show the housing recession at the heart of the U.S. economic downturn is deepening, bolstering the case for the Federal Reserve to cut interest rates.

`Deteriorating Further'

The ICE's Dollar Index, a gauge of the greenback against the currencies of six major trading partners, may snap two days of gains as futures traders raised bets that the Fed will lower borrowing costs in coming months. A U.S. report yesterday showed confidence among homebuilders dropped in November to the lowest level since record-keeping began in 1985.

``The reports are likely to indicate the U.S. economy is deteriorating further,'' said Yuji Saito, head of the foreign- exchange group in Tokyo at Societe Generale SA, France's second- largest bank by market value. ``The Fed may cut rates more. It's negative for the dollar.''

The dollar may weaken to 96.50 yen today, Saito said. The ICE's Dollar Index hasn't yet traded. It closed at 87.372 late in New York yesterday, from 86.807 on Nov. 17.

Housing starts in the U.S. fell to a 780,000 annual pace in October, the lowest since records began in 1959, according to a Bloomberg News survey of economists. Building permits dropped to a 774,000 pace in October, the lowest since November 1981, a separate Bloomberg survey shows. The Commerce Department releases both reports at 8:30 a.m. in Washington.

Futures on the Chicago Board of Trade show a 9 percent chance the Fed will reduce its 1 percent target rate for overnight bank loans to 0.25 percent by its Jan. 28 meeting, up from zero percent odds a day earlier.

To contact the reporters on this story: Ron Harui in Singapore at rharui@bloomberg.net; Stanley White in Tokyo at swhite28@bloomberg.net

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Crude Oil Is Steady Amid Forecasts of Increased U.S. Supplies

By Mark Shenk

Nov. 19 (Bloomberg) -- Crude oil was little changed in New York amid forecasts that a report will show U.S. oil supplies increased for an eighth week as a recession erodes global demand.

Stockpiles probably climbed 1 million barrels in the week ended Nov. 14, according to the median of 12 analyst estimates before an Energy Department report today. The Organization of Petroleum Exporting Countries, the International Energy Agency and U.S. Energy Department slashed demand projections this month.

``The bottom line is that you don't have anything solid out there to support a sustained rally,'' said Peter Beutel, president of energy consultant Cameron Hanover Inc. in New Canaan, Connecticut. ``The financial crisis has led to economic weakness and falling demand in the U.S. The problems in the U.S. are now spreading to China and other developing countries.''

Crude oil for December delivery rose 3 cents, or 0.1 percent, to $54.42 a barrel at 10:09 a.m. Sydney time on the New York Mercantile Exchange. Oil has dropped 63 percent since reaching a record $147.27 in July. Futures fell 56 cents, or 1 percent, to $54.39 a barrel yesterday, the lowest settlement since Jan. 29, 2007.

Gasoline for December delivery fell 3.78 cents, or 3.2 percent, yesterday to $1.1368 a gallon in New York, the lowest settlement since the contract was introduced in October 2005.

Prices rose earlier yesterday as a hijacked Saudi Arabian supertanker was anchored close to the Somali coast. Pirates directed the Sirius Star, the largest merchant ship ever seized, to the Eyl coastal area to the north of Somalia, the U.S. Navy said. The vessel is carrying 2 million barrels of crude oil.

``This exemplifies that even the Saudis are vulnerable,'' said Gianna Bern, president of Brookshire Advisory & Research Inc., an energy research consulting company based in Flossmoor, Illinois. ``It's important to remember that piracy and pipeline bombings are nothing new and have been dealt with.''

Brent crude oil for January settlement declined 47 cents, or 0.9 percent, to $51.84 a barrel on London's ICE Futures Europe exchange, the lowest settlement since Jan. 18, 2007.

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

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Yen, Philippine Peso, Taiwan's Dollar: Asia Currency Preview

By Bob Chen

Nov. 19 (Bloomberg) -- The following events and economic reports may influence trading in Asian currencies today. Exchange rates are from the previous session.

Japanese yen: Chief Cabinet Secretary Takeo Kawamura will hold press briefings at 11 a.m. and 4 p.m. in Tokyo.

The Ministry of Economy, Trade and Industry will release Japan's all-industry index for September at 8:50 a.m. in Tokyo. The index probably fell 0.1 percent in September, after a 1.8 percent decline in August, economists said in a Bloomberg survey.

The yen was at 96.98 per dollar at 8:32 a.m. in Sydney.

Philippine peso: The central bank may keep the benchmark interest rate unchanged at 6 percent at its meeting tomorrow, seven of the 13 economists surveyed by Bloomberg said, with the remaining six predicting a cut.

The peso was at 49.95.

Taiwan dollar: Gross domestic product expanded 0.8 percent in the third quarter from a year earlier, the smallest increase since a contraction in the three months ended June 2003, according to the median estimate in a Bloomberg survey before the statistics bureau reports the data tomorrow.

The Taiwan dollar was at NT$33.234.

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

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Most Japanese Stocks Rise on Valuations; Mitsubishi UFJ Drops

By Masaki Kondo

Nov. 19 (Bloomberg) -- Most Japanese stocks rose as investors seized on companies trading near the lowest valuations on record. Mitsubishi UFJ Financial Group Inc. led banks lower after saying a surge in bad loans dragged down profits.

Softbank Corp., a mobile carrier that's lost half its value this year, jumped 2.4 percent. Isuzu Motors Ltd., whose dividend yield is more than twice as high as that on government bonds, climbed 2 percent. Mitsubishi UFJ, Japan's biggest listed bank, sank 3.7 percent after posting a 61 percent drop in quarterly profit and announcing a share sale to boost capital.

The Topix index rose 1.67, or 0.2 percent, to 837.11 as of 9:12 a.m. in Tokyo, with two stocks gaining for each that fell. The Nikkei 225 Stock Average declined 11.06, or 0.1 percent, to 8,317.35. In New York, the Standard & Poor's 500 Index erased losses in the last hour of trading, closing 1 percent higher.

``The recent decline has made stocks cheap,'' Hiroichi Nishi, an equities manager at Tokyo-based Nikko Cordial Securities Inc., said in an interview with Bloomberg Television. ``Shares with a low price-book ratio will likely attract investors.''

Dividends paid by companies included in the Nikkei were 2.5 percent of the benchmark's price as of Nov. 17, compared with a 1.48 percent yield on 10-year government notes, data compiled by Bloomberg show. The Nikkei's dividend yield climbed to 2.97 percent on Oct. 27, the highest since at least July 1989.

Mitsubishi UFJ yesterday reported a 61 percent drop in net income for the three months to Sept. 30, on mounting losses on stockholdings and rising costs to get rid of bad loans. The bank said it will raise as much as 546 billion yen ($5.64 billion) through a share sale, joining competitors in bolstering capital.

Nikkei futures expiring in December dipped 0.1 percent to 8,310 in Osaka and gained 0.2 percent to 8,310 in Singapore.

To contact the reporter for this story: Masaki Kondo in Tokyo at mkondo3@bloomberg.net.

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Australia Stocks: AWB, Babcock, CSR, Macquarie, OZ, Woodside

By Shani Raja

Nov. 19 (Bloomberg) -- The S&P/ASX 200 Index slipped for the third day. It lost 54.20 points, or 1.5 percent, to 3,469.00 at 11:46 a.m. in Sydney, the lowest since Aug. 20, 2004. The broader All Ordinaries Index declined 55.90 points, or 1.6 percent, to 3,457.20, while the futures index expiring in December dropped 0.9 percent to 3,518.

Oil companies: Woodside Petroleum Ltd. (WPL AU), the nation's No. 2 oil producer, dropped A$2.05, or 5.9 percent, to A$32.94, the lowest in three years. Santos Ltd. (STO AU), the third-biggest oil producer, slumped 48 cents, or 3.8 percent, to A$12.27.

Crude oil fell to the lowest in almost 22 months in New York on forecasts that U.S. oil supplies increased for an eighth week as a recession erodes demand.

AWB Ltd. (AWB AU), Australia's largest wheat exporter, surged 18 cents, or 6.9 percent, to A$2.79, the most since Nov. 3 and the benchmark's third-biggest gainer. The company said second-half profit more than doubled, driven by increased sales at its Landmark farm merchandise unit.

Babcock & Brown Infrastructure Group (BBI AU) declined 0.2 cents, or 3.8 percent, to 5.1 cents, a record low. The owner of Australia's second-biggest coal-export harbor said it's examining the sale of as much as 49 percent of the port after drawing interest from potential bidders.

Babcock & Brown Ltd. (BNB AU), the worst performing stock on the MSCI Asia-Pacific Index this year, plunged 3 cents, or 11 percent, to 28 cents, a record low. Babcock said it will accelerate job cuts and separate its businesses as it tries to avoid defaulting on A$3.1 billion ($2 billion) of debt.

CSR Ltd. (CSR AU), Australia's third-largest maker of building products, tumbled 33 cents, or 19 percent, to A$1.39, the most since 1987. The company announced a 1-for-4 entitlement offer priced at A$1.40 a share, along with an institutional placement, aimed at raising A$482 million.

Macquarie Group Ltd. (MQG AU), Australia's biggest securities company, surged A$1.38, or 5.8 percent, to A$25.38, the index's fourth-best performer. Citigroup Inc. raised its rating to ``buy'' from ``hold.'' Macquarie soared 17 percent yesterday after results that beat analyst estimates.

OZ Minerals Ltd. (OZL AU), the world's second-largest zinc mining company, tumbled 11 cents, or 15 percent, to 62 cents, the lowest since July 2003. The company said it expects full- year earnings to decline because of falling metal prices and higher production costs.

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

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Most Asian Stocks Fall, Led by Commodity Producers; BHP Drops

By Kyung Bok Cho

Nov. 19 (Bloomberg) -- Most Asian stocks fell, led by commodity producers and financial companies, as oil, gold and aluminum prices dropped and Mitsubishi UFJ Financial Group Inc. posted its lowest quarterly profit in at least four years.

Woodside Petroleum Ltd., Australia's second-largest oil company, lost 6.3 percent after crude fell to the lowest since January 2007. Mitsubishi UFJ, Japan's biggest bank, declined 3.1 percent. Babcock & Brown Ltd., the worst performing stock on the MSCI Pacific Index this year, plunged 19 percent in Sydney after saying it will accelerate jobs cuts to avoid defaulting on debt.

The MSCI Asia Pacific Index fell 0.3 percent to 76.69 at 9:59 a.m. in Tokyo. About two stocks dropped for each the rose.

Shares on the MSCI gauge are valued at 9.9 times trailing earnings and fell to 8.2 times last month, the lowest level since at least 1995, Bloomberg data shows. The index has lost 49 percent this year as financial institutions' losses and writedowns from the collapse of the U.S. mortgage market approach $1 trillion and companies cut more than 166,000 jobs.

Japan's Nikkei 225 Stock Average lost 0.7 percent to 8,270.69. All other Asian benchmark indexes declined.

According to Bloomberg data, 51 percent of shares on the gauge traded at below their book value, with a quarter of Asian shares priced at less than half of their net worth.

Futures on the U.S. Standard & Poor's 500 Index slipped 1.1 percent. The S&P 500 advanced 1 percent yesterday, gaining in the last hour of trading as energy and technology shares rallied.

Woodside declined 6.3 percent to A$32.79. BHP Billiton Ltd., the world's biggest mining company and Australia's largest oil producer, slipped 2.4 percent to A$23.62.

Crude oil fell 1 percent to $54.39 a barrel yesterday in New York. Gold fell for the second day, losing 1.3 percent to $732.70 an ounce, while aluminum fell to a three-year low in London.

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

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Bank of America's Lewis Says Merrill Deal `On Track'

By Alex Ortolani and David Mildenberg

Nov. 18 (Bloomberg) -- Bank of America Corp. Chief Executive Officer Kenneth Lewis said he will complete the takeover of Merrill Lynch & Co. by the end the year, quashing speculation the $19 billion purchase may come undone.

The acquisition is ``on track,'' Lewis, 61, told reporters after a speech at the Detroit Economic Club today. Shares of Merrill jumped more than 5 percent from their low of the day after his comment.

Lewis, already the nation's biggest home lender and credit- card issuer, is adding Merrill's brokerage business while deploying $25 billion in federal funds designed to thaw frozen credit markets. As his bank's shares hover at a 13-year low, he said the economy won't rebound anytime soon, saying the gross domestic product isn't likely to expand until late next year and that credit-card losses will probably reach a record.

``We won't see a real turnaround until the core problem -- housing -- reaches a bottom, stabilizes and turns the corner,'' Lewis said in Detroit. Charlotte, North Carolina-based Bank of America became a leader in home lending and credit cards after buying Countrywide Financial Corp. and MBNA Corp. Lewis said the Federal Reserve will probably cut interest rates by a half percentage point at its December meeting to spur growth.

China Construction

Lewis' expansion isn't limited to the U.S.: Yesterday, Bank of America announced plans to almost double its stake in China Construction Bank, a step that will cost $7 billion. That decision drew criticism from analysts, who said the bank should retain capital to shoulder mounting loan losses.

Bank of America began investing in China Construction three years ago and ``didn't think we should stop it'' because of the federal government funding, Lewis said. Bank of America received $15 billion, and Merrill got $10 billion, as part of the Troubled Asset Relief Program, known as TARP. The bank said yesterday it didn't use TARP funds for the China investment.

Some homeowners who can pay mortgages are trying to take advantage of Bank of America's efforts to modify as many as 400,000 mortgage loans to keep borrowers in their homes, Lewis said. ``These are emergency assistance programs, not an attempt to rewrite every mortgage on the books.''

Lewis also called for more conservative mortgage lending, including requiring larger downpayments and fewer short-term ``teaser'' interest rates. Lenders should hold more loans rather than selling them to the secondary market, which Lewis said ensures greater responsibility for relations between the bank and borrower.

The banker also urged a limited role for Fannie Mae and Freddie Mac, urging more reliance on private industry. The government needs ``some limited role'' to ensure liquidity, he said.

Shares of Bank of America rose 1 percent to $15.19 at 4:10 p.m. in New York Stock Exchange composite trading. Merrill Lynch declined 3.2 percent to $11.40.

To contact the reporter on this story: David Mildenberg in Charlotte at dmildenberg@bloomberg.netAlex Ortolani in Southfield, Michigan, at Aortolani1@bloomberg.net

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Brazil Stocks Fall to the Lowest This Month; Bolsa Declines

By Alexander Ragir and William Freebairn

Nov. 18 (Bloomberg) -- Brazilian stocks dropped to the lowest this month, led by banks and steelmakers, on concern the slowing economy will reduce demand for everything from car loans to commodities.

Uniao de Bancos Brasileiros SA fell, sending financial stocks down to a three-week low, on speculation that bank default rates will rise amid higher unemployment. Cia. Siderurgica Nacional SA fell 6.8 percent after the steelmaker said it will revise its investment plans because of eroding demand for metals. Lojas Americanas SA dropped 4.1 percent as Itau Corretora said October retail sales may be the start of a ``marked slowdown.''

``Nobody knows how intense the slowdown will be, especially in Brazil,'' said Alexandre Vianna, who helps manage the equivalent of $7.2 billion in Sao Paulo at Suladis DTVM, a unit of SulAmerica Investimentos. ``That's the big question.''

The Bovespa fell 4.5 percent to 34,094.66, the lowest level since Oct. 28. The BM&FBovespa Small Cap index retreated 2.4 percent. The BM&FBovespa MidLarge Cap index declined 4.9 percent. Mexico's Bolsa declined 2.7 percent and Chile's Ipsa slid 1.4 percent.

Bradesco, the nation's second-biggest non-government bank, dropped 7.4 percent to 22 reais. Itau slid 7.6 percent to 23.80 reais. The MSCI Brazil/Financials Index dropped 5.7 percent to the lowest since Oct. 28.

``The crisis is arriving here and causing less consumption,'' SLW Corretora's Kelly Trentin said from Sao Paulo. ``There's an increase in defaults and that will certainly affect new loans which is negative for banks.''

Default Rates

The default rate in Brazil will rise next year as a direct result of an expected increase in the unemployment rate to 10 percent in 2010 from less than 8 percent this year, Adalberto Savioli, president of the Brazilian association of financing institutions, told Agencia Estado yesterday. Savioli expects lending to expand 10 percent next year, Agencia Estado reported. That would mean a slowdown from the 34 percent growth in lending in the 12 months ending in September.

Merrill Lynch & Co. yesterday cut its 2009 economic growth forecast for Brazil to 2.9 percent, from a previous estimate of 3.1 percent, as scarcer credit and the lagging effect of monetary tightening weigh on consumer demand.

Lojas Americanas, Brazil's biggest discount retailer, dropped 26 centavos to 6.04 reais on the prospect that the slowing economy and credit crisis will lead to lower sales the rest of this year and next.

``From October on, we'll be able to see more clearly the consumer spending blow from the credit crunch,'' wrote Itau analysts. `` The sudden interruption in the credit flow, a widespread confidence decline at both corporate and household levels, all seems to have set its toll especially in the credit- sensitive segments of the economy'' like durable goods.

Renner Bank

Rival Lojas Renner SA gained 1.2 percent to 13.87 reais after Valor Economico reported Renner plans to open its own bank in Brazil and issue credit cards.

CSN, as Brazil's third biggest steelmaker is known, fell 1.61 reais to 21.99 reais. Some investment ``will be revised,'' Chief Financial Officer Otavio Lazcano said yesterday on a conference call with investors and analysts.

Gerdau SA slid 5.8 percent to 13 reais. The Bloomberg World Iron/Steel Index dropped 4.3 percent to 151.58.

Mexico's Bolsa index fell for the fourth time in five sessions, as Telefonos de Mexico SAB and its holding company Carso Global Telecom SAB dropped after JPMorgan Chase & Co. reduced profit and share-price estimates.

Telmex Drops

Telmex, as Mexico's biggest fixed-line phone company is known, will earn less that previously expected as competition increases and the peso weakens, JPMorgan said. The analysts kept their ``neutral'' rating on Telmex and ``underweight'' rating on Carso Global.

Telmex fell the most in almost two weeks, slipping 4.1 percent to 11.60 pesos. Carso Global dropped 5.4 percent to 41.55 pesos.

Mining and materials companies dropped as prices paid to U.S. producers fell in October by the most on record as demand faltered. Grupo Mexico SAB, Mexico's biggest mining company, slipped 5.3 percent to 8.22 pesos.

Cemex SAB, the biggest cement producer in the Americas, slid as U.S. home prices fell 9 percent from a year earlier. Cemex, which gets a quarter of sales from the U.S., declined 9.6 percent to 6.15 pesos.

Argentina's Merval dropped 4.5 percent, Colombia's IGBC slipped 2.1 percent and Peru's Lima General index fell 1.2 percent.

To contact the reporters on this story: Alexander Ragir in Rio de Janeiro at aragir@bloomberg.net; William Freebairn in Mexico City at wfreebairn@bloomberg.net.

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Canadian Stocks Rally, Led by RIM, Manulife; TransCanada Drops

By John Kipphoff

Nov. 18 (Bloomberg) -- Canadian stocks rose for the first time in three days, led by Research In Motion Ltd., as better- than-estimated results from Hewlett-Packard Co. signaled that some technology company earnings may withstand a recession.

Research In Motion had the steepest gain in almost two months, helped by anticipation of a new BlackBerry phone being introduced this week. Manulife Financial Corp. rallied from near a four-year low, leading finance shares higher. Pipeline company TransCanada Corp. fell on plans to sell additional stock and a decline in oil prices.

The Standard & Poor's/TSX Composite Index gained 0.5 percent to 8,835.76 in Toronto, rallying from a three-week low. Canada's main stock benchmark alternated between gains and losses as oil rallied before erasing gains. Almost two stocks fell for every one that rose.

``The big news today is RIM's move,'' said Duncan Stewart of Duncan Stewart Asset Management in Toronto. ``RIM's gotten pounded lately. It may be a snap-back rally. RIM looks like it may have hit a bottom.''

The broader market may not be at a bottom yet, he said, because oil prices may fall further. The S&P/TSX, which gets almost three-quarters of its value from energy, mining and finance shares, fell 42 percent before today from a June peak as commodities slid and global credit losses mounted.

Hewlett-Packard posted a fourth-quarter profit before one- time items of $1.03 a share, beating the $1 average of analyst estimates compiled by Bloomberg. Sales rose 19 percent to $33.6 billion, also exceeding projections. The shares gained 14 percent in New York.

`Unrealistically Dour'

Research In Motion jumped 12 percent to C$58, the steepest gain since Sept. 19. The stock has the most compelling valuation in six years and sentiment on it is ``unrealistically dour,'' Scotia Capital's Toronto-based analyst Gus Papageorgiou said in a note to clients.

A successful launch of its Storm handset in the U.S. on Nov. 21 will remove the largest risk hanging over the stock, Papageorgiou said, reiterating his ``sector outperform'' rating and a share target of C$160. The stock is trading almost two- thirds below its June 19 peak on concern the company's profit growth will be hurt by a recession and competition from Apple Inc.'s iPhone, and increased marketing spending on new handsets.

Manulife, Canada's biggest insurance company, climbed 6.2 percent to C$22.36, the most in two weeks. The stock fell 13 percent this month before today after sliding 37 percent in October, on concern that the company may have to raise fresh capital to cover losses from the global equity market slump.

Banks Gain

Bank of Nova Scotia, the nation's third-largest lender, added 3 percent to C$37.17. Toronto-Dominion Bank, the second- biggest, added 0.8 percent to C$52.18.

BCE Inc., Canada's biggest phone company, rose 2.8 percent to C$38.35, a nine-week high, on optimism its C$51.7 billion ($42 billion) buyout led by Ontario Teachers' Pension Plan will proceed. The transaction is scheduled to close by Dec. 11 and banks financing the deal may have begun marketing the loans, according to a report last month from RBC Capital Markets.

A measure of finance companies, the biggest by value among the S&P/TSX's 10 industries, rose 0.7 percent. Phone shares added 2.2 percent and energy stocks fell 0.2 percent as a group.

TransCanada fell 4.9 percent to C$32.85, the lowest since Oct. 16. The owner of Canada's largest pipeline system said it will issue about 30.5 million shares at C$33 apiece to raise funds to pay off debt and finance capital projects. Additional share may dilute existing shareholders.

Enbridge Inc. dropped 4.2 percent to C$37.50, the most since Oct. 15. Canada's largest pipeline company said yesterday that it'll invest an additional $500 million in Enbridge Energy Partner LP, its U.S. unit, to raise its stake to about 27 percent from 15 percent.

Fortis Inc. dropped 5.9 percent to C$25.96. The investor in electric distribution utilities was downgraded to ``sector perform'' from ``sector outperform'' by Scotia Capital analyst Sam Kanes in Toronto, who cited the stock's recent appreciation. An index of utility stocks fell 4 percent.

EnCana Corp., the nation's largest energy company by market value, climbed 2.1 percent to C$52.59.

To contact the reporter on this story: John Kipphoff in Toronto at jkipphoff@bloomberg.net.

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Eagle Materials, La-Z-Boy, Phoenix, Tivo: U.S. Equity Preview

By Lu Wang

Nov. 18 (Bloomberg) -- The following companies may have unusual price changes in U.S. trading tomorrow. Stock symbols are in parentheses.

Standard & Poor's 500 Index futures expiring in December added 11.50, or 1.3 percent, to 866.50. Dow Jones Industrial Average futures gained 235, or 2.8 percent, to 8,494. Nasdaq-100 Index futures lost 6, or 0.5 percent, to 1,168.

Eagle Materials Inc. (EXP US): The maker of gypsum wallboard reduced its quarterly dividend by 50 percent to 10 cents a share, citing the need ``to increase financial flexibility during these times of economic uncertainty.'' The stock rose 1.4 percent to $18.53 in regular trading.

KLA-Tencor Corp. (KLAC US): The second-largest U.S. maker of semiconductor equipment said it plans to cut about 15 percent of its workforce as customers curb orders. The stock lost 3.2 percent to $16.81 in regular trading.

La-Z-Boy Inc. (LZB US): The maker of living-room recliners withdrew the latest full-year earnings forecast, cut the quarterly dividend in half and announced plans to reduce 10 percent of the workforce. The stock jumped 11 percent to $4.95 in regular trading.

Phoenix Cos. (PNX US): The insurer and money manager catering to wealthy clients said it applied for U.S. aid under the Treasury's Troubled Asset Relief Program and is considering acquiring a lender as part of the process. The stock fell 2.3 percent to $3.04 in regular trading.

TiVo Inc. (TIVO US): The pioneer of digital video recorders said it will cut jobs to reduce expenses. The stock rose 1 percent to $6.07 in regular trading.

To contact the reporter on this story: Lu Wang in New York at lwang8@bloomberg.net

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U.S. Stocks Rally, Led by Energy, Computer Shares; Exxon Gains

By Eric Martin

Nov. 18 (Bloomberg) -- U.S. stocks gained in the last hour of trading as a rally in energy and technology shares overpowered earlier declines spurred by a drop in homebuilder confidence to the lowest level on record.

Hewlett-Packard Co. jumped 14 percent as earnings topped analysts' estimates, while Exxon Mobil Corp. climbed more than 4 percent. The advance in equities accelerated near the close as investors tracking the Standard & Poor's 500 Index bought shares to replace Anheuser-Busch Cos., which was removed from the gauge following its takeover by InBev NV.

The S&P 500 added 1 percent to 859.12, the first advance in three days. The Dow Jones Industrial Average increased 151.17 points, or 1.8 percent, to 8,424.75. The Nasdaq Composite Index rose less than 0.1 percent to 1,483.27. About six stocks retreated for every five that advanced on the New York Stock Exchange.

``A number of industries' and sectors' stocks have fallen by huge percentages over the past year and appear to be at pretty attractive valuations based on historical measures,'' said Dean Gulis, part of a group that manages about $2.5 billion for Loomis Sayles & Co. in Bloomfield Hills, Michigan. ``There can be some small-scale buying done in this market environment.''

The S&P 500 earlier slid below its lowest closing level since 2003 after the National Association of Home Builders/Wells Fargo index of builder confidence decreased to a worse-than- forecast reading of 9, the lowest level since record-keeping began in 1985.

Worst Year Since '31

The benchmark index for U.S. equities is down more than 41 percent in 2008, poised for its worst year since 1931, as credit losses and asset writedowns at global financial firms approach $1 trillion. Profits slumped 17 percent on average at companies in the index that have reported third-quarter results, according to Bloomberg data. Analysts expect an 8.5 percent drop in full-year earnings, based on estimates compiled by Bloomberg.

The S&P 500 erased a drop of as much as 2.8 percent in the final hour of the trading session as managers of funds that mimic the index prepared for the replacement of Anheuser-Busch by Stericycle Inc. Anheuser-Busch, with a market value of about $50 billion, was set to be removed following the close of its acquisition by InBev NV of Belgium.

Index funds, which represent about 10 percent of the stock market, ``got $5 billion from owning BUD,'' said Michael Buek, a principal at Vanguard Group Inc. in Valley Forge, Pennsylvania, manager of the biggest S&P 500 index fund. BUD is the ticker symbol for Anheuser-Busch, brewer of Budweiser beer.

`Put to Work'

``The stock that was added was a $500 million weight, so about $4.5 billion has to be put to work,'' said Buek. ``That money was spent across the other 499 names. To perfectly track the close, you'd want to put the $4.5 billion to work on the close.''

The earlier retreat in the S&P 500 pushed its dividend yield above the yield on 10-year Treasury notes for the first time since 1958 today, according to data compiled by Bloomberg and Peter Bernstein, the financial author and president of Peter L. Bernstein Inc. Dividends paid by S&P 500 companies were 3.57 percent of the index's price as of 1:13 p.m., compared with the 10-year note's yield of 3.54 percent.

``It's something I've been watching for quite some time,'' said Fritz Meyer, the Denver-based senior market strategist at Invesco Aim, which manages about $358 billion. ``It speaks to the opportunity in stocks. By comparison to Treasuries, every asset class is on sale.''

Tech Rally

Hewlett-Packard added $4.25, or 14 percent, to $33.59. The computer maker reported fourth-quarter earnings of $1.03 a share, excluding reorganizing expenses and other costs, exceeding the $1 average analyst estimate. The results signal Hewlett-Packard is withstanding an economic crisis that has sapped sales at other technology companies, including Cisco Systems Inc. and Intel Corp.

Hewlett-Packard led the S&P 500 Information Technology Index to a 1.9 percent advance. The gains came after the group's valuation slid to less than 12 times earnings, the cheapest since Bloomberg began tracking the data in 1995.

Yahoo! Inc. jumped 8.7 percent to $11.55 after Chief Executive Officer Jerry Yang agreed to step down, opening the door for a fresh bid from Microsoft Corp. The company's market value has dropped by more than $20 billion since Yang took over as CEO in June 2007 as discussions with Microsoft ended in failure, an ad partnership with Google Inc. was derailed and talks with Time Warner Inc.'s AOL stalled. Yahoo ``might be worth $21'' a share to an acquirer, Goldman Sachs Group Inc. said.

Energy companies climbed 3.3 percent as a group, the most among 10 industries in the S&P 500, as they also traded close to their lowest price-to-earnings valuation on record. Exxon Mobil Corp., the largest U.S. energy company, gained $2.95, or 4 percent, to $76.33.

Home Depot Beats

Home Depot Inc., the world's largest home-improvement retailer, added 71 cents, or 3.6 percent, to $20.71 after profit declined less than analysts estimated and the company repeated its earnings forecast for the year. As U.S. consumers cut back on renovations and cabinet purchases, Home Depot has slashed corporate expenses and closed stores to help remain profitable.

Walt Disney Co. gained 4.7 percent to $20.67 for the biggest jump in the Dow average after Hewlett-Packard. The biggest theme- park operator was raised to ``buy'' from ``neutral'' by Pali Capital LLC, which predicted a ``modest positive'' rebound in attendance at the company's resorts in 2010.

Citigroup, CIT Tumble

Citigroup Inc. dropped 53 cents, or 6 percent, to $8.36 and traded below $8 for the first time since 1995. The bank that yesterday announced plans to cut 52,000 jobs may post a loss of 30 cents per share next year, compared with a previous estimate of a $1.50 profit, Deutsche Bank AG analyst Mike Mayo wrote in a note.

CIT Group Inc. fell the most in the S&P 500, losing 89 cents, or 26 percent, to $2.60. The commercial lender's stock- price forecast was reduced to $11 from $13 by Barclays Plc, which said its share sale will dilute earnings.

Corning Inc. declined 62 cents, or 6.9 percent, to $8.39. The biggest maker of glass for flat-panel televisions said fourth-quarter sales will miss its forecast as demand for TVs and computer monitors wanes.

Medtronic Inc. dropped $4.82, or 13 percent, to $31.60. The world's second-biggest maker of medical devices said fiscal second-quarter profit fell 14 percent, missing analysts' estimates, on legal costs.

`Far From Normal'

The cost of borrowing in dollars for three months in London fell for the first time in four days ahead of Congressional testimony from Federal Reserve Chairman Ben S. Bernanke and Treasury Secretary Henry Paulson. The London interbank offered rate, or Libor, that banks say they charge each other for three- month loans declined two basis points to 2.22 percent today, according to the British Bankers' Association.

Bernanke said lending in the U.S. is ``still far from normal,'' even after emergency federal programs helped reduce interest rates for some borrowers.

``There are some signs that credit markets, while still quite strained, are improving,'' Bernanke told the House Financial Services Committee. ``However, overall, credit conditions are still far from normal.''

To contact the reporter on this story: Eric Martin in New York at emartin21@bloomberg.net.

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Sharp Decline in Energy Prices Pushed PPI Lower in October

Daily Forex Fundamentals | Written by Wachovia Corporation | Nov 18 08 14:34 GMT |

The Producer Price Index (PPI) fell 2.8 percent in October, driven by a sharp drop in energy prices of 12.8 percent. Core PPI, which excludes food and energy prices, rose 0.4 percent. Core crude materials fell 17.0 percent, the biggest drop on record. The Fed continues to have the green light to ease policy at the December 16th FOMC Meeting. Headline PPI Falls for the Third Consecutive Month Headline PPI fell 2.8 in October with energy and food prices falling 12.8 and 0.2 percent on the month. Consumer goods fell 3.7 percent, driven by a 24.9 percent fall in gasoline prices. Core PPI rose 0.4 percent on the month. Consumer goods such as jewelry, mobile homes, soap, tires and alcoholic beverages posted gains. Pipeline Pressures Beginning to Ease Core crude goods fell 17.0 percent, the fastest decline on record, primarily driven by declining commodity prices. Prices for intermediate goods fell 3.9 percent on the month. Intermediate prices, excluding food and energy, fell 1.7 percent. As global economic growth trends downward, wholesale price inflation should be less of a problem in the coming months. Wachovia Corporation http://www.wachovia.com Disclaimer: The information and opinions herein are for general information use only. Wachovia Corporation and its affiliates, including Wachovia Bank, N.A., do not guarantee their accuracy or completeness, nor does Wachovia Corporation or any of its affiliates, including Wachovia Bank, N.A., assume any liability for any loss that may result from the reliance by any person upon any such information or opinions. Such information and opinions are subject to change without notice, are for general information only and are not intended as an offer or solicitation with respect to the purchase or sales of any security or any foreign exchange transaction, or as personalized investment advice. Securities and foreign exchange transactions are not FDIC-insured, are not bank-guaranteed, and may lose value.

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