BOJ Signals Economic Concern Even After Raising View

By Mayumi Otsuma

Sept. 17 (Bloomberg) -- Japan’s central bank policy makers said they remain concerned about the strength of a recovery even after raising their assessment of the nation’s economy.

Officials kept the benchmark overnight lending rate at 0.1 percent, and maintained their emergency lending programs to banks and companies. While describing the economy as “showing signs of recovery,” an upgrade from the “stopped worsening” assessment last month, the Bank of Japan said in a statement in Tokyo today that it still sees “downside” risks to growth.

Today’s statement reflected global doubts about the strength of a recovery from the deepest recession since the Great Depression. A Bloomberg News poll of U.S. households published today showed Americans plan to refrain from boosting spending even after the biggest drop in consumption in 29 years.

“Most countries are experiencing a recovery, but few can be confident about the sustainability of those recoveries,” said Yoshiki Shinke, a senior economist at Dai-Ichi Research Life Institute in Tokyo. “Japan will be the last country to raise its interest rate” because it has the added problem of deflation, he said.

Bank of Japan Governor Masaaki Shirakawa told reporters in Tokyo today that while stimulus measures have helped the economy improve, “we’re not confident about the strength of private final demand after those effects fade.” He added that central bankers are monitoring the appreciating exchange rate, which is contributing to the drop in Japanese consumer prices.

Yen Rises

The yen has climbed 4.3 percent against the dollar in the past month, and reaching 90.13 yesterday, its highest level since Feb. 12. Currency gains may erode Japanese exporters’ earnings and make it harder for the nation’s growth to accelerate. Currencies should move in a stable manner, Shirakawa said today.

Japanese stocks initially pared gains after the central bank statement, before recouping their advance. The Nikkei 225 Stock Average rose 1.7 percent at the close in Tokyo. The yen traded at 90.61 per dollar, up from 90.93 late yesterday.

The bank’s policy board said consumer spending remains weak and companies are still reducing investment because of falling profits. Financial conditions are showing signs of improvement “with some severity lingering,” the central bank said.

“While there are signs of a better-than-projected recovery in emerging economies, risks to the economy are still on the downside,” the bank said. “The outlook is attended by a significant level of uncertainty stemming mainly from developments in global financial markets.”

Return to Growth

Japan’s economy grew in the second quarter for the first time in more than a year, helped by some $2 trillion in global stimulus that bolstered exports and household spending.

Reports today showed Japanese manufacturers turned optimistic for the first time in almost two years and demand for services rose for a second month in July. Yet the recovery from the country’s worst postwar recession remains hampered by record unemployment, falling wages and consumer-price declines that threaten companies’ profits.

The value of households’ financial assets slid 3 percent from a year earlier to 1,441 trillion yen ($15.8 trillion) last quarter, the Bank of Japan said earlier today.

“Consumer spending will remain sluggish and deflationary pressure will mount,” said Akio Makabe, a professor of economics at Shinshu University in Matsumoto, central Japan. “Companies will continue to carry idle capacity and face pressure to streamline operations.”

Confidence Measure

A survey of Bloomberg users showed little change in global confidence in September from last month. The Bloomberg Professional Global Confidence Index was at 58.54, remaining above 50, which means optimists outnumbered pessimists.

Since its most recent rate cut in December, the Bank of Japan started buying corporate debt from lenders and offering them unlimited loans backed by collateral to channel funds to companies. The policy board extended the measures until Dec. 31 in July, saying funding conditions remain “tight.”

Masaaki Kanno, a former central bank official, said today’s upgrade to the economic assessment indicated the policy board may start discussing an end to the programs.

“Although we are nowhere near a phase where we can discuss prospects of tightening interest rates, the BOJ may want to start debate on the possibility of suspending, terminating or canceling part of its corporate fund-raising measures sooner rather than later,” said Kanno, who is now chief economist at JPMorgan Chase & Co. in Tokyo.

Rate Outlook

The central bank will hold the key rate at 0.1 percent at least through the end of 2010, according to 14 of 16 economists surveyed this month.

Consumer prices excluding fresh food fell a record 2.2 percent in July, and policy makers are likely to forecast the slide will extend into 2011 in their twice-annual outlook next month. They consider prices to be stable within a range of zero to 2 percent.

Economists say Shirakawa may face pressure from the Democratic Party of Japan, which took power yesterday, to increase the central bank’s monthly purchases of government bonds. While the DPJ has said it supports the Bank of Japan’s independence, the government may need to sell debt to pay for promises to provide child care benefits and cut taxes.

“The issue of an increase in the bank’s bond purchases may gain momentum if the government finds it has to sell more debt to make up for a shortage of revenue,” said Tetsufumi Yamakawa, chief Japan economist at Goldman Sachs Group Inc.

The central bank currently buys 1.8 trillion yen ($20 billion) of the securities each month.

To contact the reporter on this story: Mayumi Otsuma in Tokyo at motsuma@bloomberg.net

Read more...

China Import Surge Casts Obama Tariff as Phony War

By Bloomberg News

Sept. 17 (Bloomberg) -- Chinese consumers who buy $608 billion of goods from overseas are diminishing the prospects of a trade war with the U.S.

China’s imports, up 68 percent in five years, now amount to almost one-third of gross domestic product, according to World Bank data. The nation’s demand for foreign products is a boon for American companies, which exported $351 billion to China in the past five years.

U.S. President Barack Obama’s 35 percent tariff on tires from China spurred a Chinese investigation into prices of U.S. poultry and car products. Dangers of further escalation may be mitigated by the increasing benefit China provides the world economy. Poised to surpass Japan as No. 2 in GDP, its purchasing power is a lure to firms seeking new customers.

“As China depends more on domestic demand, its rise won’t be seen by the rest of the world to be as big a threat as some view it now,” said Shen Minggao, a former consultant to the World Bank who is chief economist in Hong Kong for the Greater China region at Citigroup Inc., the third-largest U.S. bank.

Tyson Foods Inc., the world’s biggest meat producer, entered China in 2001. Last year, the Asian nation accounted for 10 percent of the Springdale, Arkansas-based company’s $1.4 billion in beef sales and 12 percent of its $1.6 billion chicken sales.

Prevent Escalation

Meat consumption per person is about 20 pounds a year in China, compared with 89 pounds in the U.S., Tyson estimates. That helps explain why Tyson joined Hormel Foods Corp. and 32 other agriculture companies and industry associations this month to push the Obama administration to refrain from engaging in a trade battle with China.

“The size of China’s economy and the extent to which the nation is entwined with other major economies may prevent an escalation” of conflicts, said Lu Ting, an economist at Bank of America-Merrill Lynch in Hong Kong.

China accounted for a third of global expansion last year, according to International Monetary Fund data using purchasing- power-parity calculations to adjust for exchange-rate differences. Its growth this decade has averaged 10.2 percent, and it will overtake Japan next year with GDP of $5.3 trillion, surpassing its Asian neighbor’s $4.72 trillion, the IMF projects.

‘Dynamic’ Growth

Increasing consumer demand in China for foreign goods and services has been spurred by 4 trillion yuan ($586 billion) in stimulus spending. The import surge is helping reshape the region, with China passing the U.S. as Japan’s biggest export customer this year and also becoming the No. 1 export market for South Korea.

China is “providing a much more dynamic source of pan- regional growth, and ultimately of global growth” than Japan ever did, said Stephen Roach, chairman of Morgan Stanley Asia, based in Hong Kong. “China’s pretty open to both exports and imports.”

While some Chinese imports are components used in products that are later shipped to consumers abroad, that share is dropping. Government figures show it fell to about 33 percent last year from 39 percent in 2007. Analysts said the nation is likely to become a bigger final destination for global goods and services.

China’s advancing economy benefits from having the world’s largest population: At 1.33 billion, it is more than 10 times that of Japan. Chinese GDP per person was $3,300 in 2008, equal to Japan’s 1973 total, according to estimates by economists at Nomura International Ltd.

‘Early Stage’

“It just shows you that China is still at a very early stage of development,” said Robert Subbaraman, chief economist for non-Japan Asia at Nomura in Hong Kong, who worked at the Australian central bank.

Tyson -- along with Austin, Minnesota-based Hormel, the second-largest U.S. turkey processor -- and 32 other agriculture companies and industry associations pressed the Obama administration in a Sept. 3 letter to refrain from tariffs on Chinese tire imports, concerned that China would retaliate against U.S. products.

“For some, the Chinese market is the difference between profitability and possible bankruptcy,” the groups wrote to U.S. Trade Representative Ronald Kirk.

Gary Mickelson, a Tyson spokesman, declined to comment on why his company joined the effort. Julie Craven, a spokeswoman for Hormel, didn’t respond to requests for comment.

U.S. Factory Jobs

Obama said Sept. 11 he will boost by 35 percent the 4 percent tariff on $1.8 billion of imported Chinese car and light-duty truck tires. He acted on a petition from the United Steelworkers union that said surging imports are cutting factory jobs. The duties start Sept. 26 and last for three years, dropping 5 percentage points a year, according to a White House statement.

“China and the U.S. share extensive and broad common interests and we are ready to work with the U.S.,” Foreign Ministry spokeswoman Jiang Yu told reporters in Beijing today, when asked about the tire issue. China is ready to “strengthen communication, dialogue and cooperation in various fields and properly deal with our problems,” she said.

U.S. stocks showed little sign of investor concern, with the Standard & Poor’s 500 Index rising 2.5 percent since the announcement. American government bond yields are also little changed; China is the biggest holder of Treasury securities, with $800.5 billion. Benchmark 10-year notes closed to yield 3.47 percent yesterday, compared with an average 3.43 percent the past month.

Obama played down the danger of escalating tensions with China, arguing that trade rules must be enforced to build support among lawmakers and the American public.

Bilateral Ties

“We’re not going to see a trade war,” Obama said in a Sept. 14 interview at the White House. “We have rules on the books” and “we’ve got to establish credibility and enforcement of the rules precisely because I want to further expand trade,” he said when asked what he will tell China’s President Hu Jintao at the Group of 20 meeting next week in Pittsburgh.

While China’s Ministry of Commerce said it “strongly opposes” Obama’s decision and announced probes of chicken and auto products from the U.S., it also sought to underscore the importance of bilateral economic ties.

“We don’t want to see individual trade-remedy cases hurt the trade and economic relationship between China and the U.S.,” Yao Jian, a ministry spokesman, told reporters Sept. 15 in Beijing.

There may still be a risk that tensions will become more heated because China lacks the political and military ties Japan has with the U.S., said Nicholas Lardy, a senior fellow at the Peterson Institute for International Economics in Washington.

‘Trade Friction’

“The potential for trade friction, and any other kind of friction, is much higher with China than Japan,” Lardy said. “We don’t have a security relationship with China and we’re not likely to have one.”

U.S. Steel Corp. filed yesterday a petition with the U.S. International Trade Commission seeking dumping and anti-subsidy duties of as much as 90 percent on $400 million of Chinese-made steel pipes used in chemical, petrochemical, refineries and related operations, according to Roger Schagrin, a lawyer for the U.S. producers. The U.S. imposed tariffs this month on a different type of steel pipe from China in a separate case.

A Chinese Ministry of Commerce official, asked about the U.S. Steel filing, said that giving in to protectionism will only provoke more such actions. He spoke on condition of anonymity.

Obama and Hu are scheduled to meet at the summit of leaders from the world’s largest developed and emerging nations Sept. 24-25. The G-20 at its November and April gatherings committed to “reject protectionism” and promote global trade.

Rising Rank

China’s ascendance comes after it already surpassed Germany and the U.K. in global GDP rankings earlier this decade. IMF projections indicate its economy will climb to $8.5 trillion in 2014, about half the size of the $16.9 trillion estimate for the U.S.

Premier Wen Jiabao said last week tax cuts on property and car purchases, subsidies for low-income households and a three- year 850 billion yuan plan to improve health-care coverage were aimed at boosting income and spurring domestic demand.

Wen’s government is targeting 8 percent GDP expansion this year, after the growth rate averaged 9.9 percent during the past three decades. In Japan, the central bank estimates that potential growth has fallen to about 1 percent, roughly half the pace achieved during a six-year expansion through 2007.

“The big development this year is that China has become a market in and of itself, not just a production base,” said Jian-min Jin, a senior fellow at Fujitsu Research Institute in Tokyo who previously helped craft technology policy at China’s Department of Science and Technology. “China’s attitude towards its own market has changed. The government is actively trying to build a domestic market.”

For Related News and Information: China economic snapshot: ESNP CH Most-read China economy stories: TNI CHECO MOSTREAD BN Most-read stories on China: MNI CHINA 1W Stories on the credit crisis: NI CRUNCH BN Top China news: TOP CHINA Top economic news: TOP ECO

Read more...

Pound to Drop to Euro Parity, Dollar to Reach 85 Yen, BNP Says

By Candice Zachariahs

Sept. 17 (Bloomberg) -- The euro will surge to parity versus the pound and reach its highest level in more than a year against the greenback as investors borrow low-cost funds in the U.K. and U.S. to buy higher-yielding assets, BNP Paribas SA said.

The Bank of England and Federal Reserve are flooding their financial systems with cash to keep borrowing costs low on expectations their economies will recover slowly from recession. That will spur investors to use funds from the nations to buy securities in countries with higher interest rates, BNP Paribas said. The bank raised its forecast for the yen and expects it to climb to its highest since 1995 against the dollar by year-end.

“Sterling is likely to be the weakest currency in town followed by the U.S. dollar,” analysts led by Hans-Guenter Redeker, London-based global head of currency strategy at BNP Paribas, wrote in a note to clients yesterday. “The U.S. dollar has been used as a funding and a reserve currency simultaneously, suggesting the U.S. dollar will depreciate less than sterling.”

The euro bought 89.317 pence as of 10:49 a.m. in Tokyo, from 89.244 pence yesterday in New York. The 16-nation currency rose above 98 pence for the first time on Dec. 30. It advanced a third day to $1.4716 and yesterday reached $1.4737, the strongest level since Sept. 25, 2008.

The yen was at 91.12 per dollar and yesterday hit 90.13, the strongest level since Feb. 12. The pound was at $1.6477 from $1.6493.

The U.S. dollar will slide to 85 yen by year-end and recover to 90 yen in the first quarter, BNP Paribas said, revising forecasts for 93 and 95 yen respectively.

‘Funding Currency’

Benchmark interest rates are 0.5 percent in the U.K. and as low as zero in the U.S., compared with 3 percent in Australia, 7 percent in South Africa and 8.75 percent in Brazil. The yield gap lures investors to borrow low-cost funds and invest in higher-yielding assets in so-called carry trades.

Sterling will weaken in the coming months as the government needs to rein in spending and its central bank is likely to retain an expansionary monetary policy, BNP Paribas said.

“Sterling will degenerate from an investment into a funding currency,” said the analysts.

Moody’s Investors Service warned the U.K. and U.S. will need to “severely adjust their fiscal policies,” in a Sept. 9 report. Both nations have “lost altitude” in their ratings even as they remain resilient, Moody’s said.

Standard & Poor’s in May lowered its outlook on the U.K. to “negative” from “stable” and said it faces a one-in-three chance of a ratings cut as debt approaches 100 percent of gross domestic product.

Fragile Recovery

The pound traded near its lowest since May as a report yesterday showed the jobless rate in the U.K. rose to the highest since 1995. BOE Governor Mervyn King said Sept. 15 policy makers may cut the rate paid to hold reserves at the central bank.

“The strength and sustainability of the recovery is highly uncertain and the balance of risks to inflation around the 2 percent target remains on the downside,” King said.

The euro will trade at 98 pence by year-end and at parity in the first three months of 2010, BNP Paribas said, revising an earlier call for the currency to trade at 88 and 86 pence, according to Bloomberg News data. Sterling will buy $1.57 at the end of the fourth quarter and $1.48 in the following quarter, compared with earlier forecasts of $1.53 and $1.51.

Europe’s single currency will rise to $1.54, the most since August 2008, by year-end and buy $1.48 in the first quarter of 2010, compared to earlier expectations for $1.35 and $1.30.

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

Read more...

Obama, G-20 to Pledge to Keep Stimulus in Place, Froman Says

By Rebecca Christie and Hans Nichols

Sept. 17 (Bloomberg) -- President Barack Obama and other Group of 20 leaders next week will pledge to keep economic stimulus policies in place until a recovery is certain, the White House’s G-20 liaison said.

In talks in Pittsburgh, the U.S. also will seek to phase out fossil-fuel subsidies and agree on how to rein in bankers’ bonuses, said Michael Froman, a deputy assistant to Obama, in an interview yesterday. The U.S. wants to build on a G-20 agreement in London earlier this month to toughen oversight of compensation practices and curb pay excesses, he said.

“It is important to plan for exit but it is still too early to begin to withdraw stimulus,” Froman said in the interview. The global financial situation has “changed dramatically” since the April G-20 meeting in London, he said in a separate briefing with reporters.

The leaders gather as economies from Brazil to Japan show signs of emerging from recessions. The G-20, a collection of industrial economies and emerging nations, will try to ensure the expansion is balanced, a goal economists say will require more savings in the U.S. and greater domestic demand in countries such as China.

The Standard and Poor’s 500 Index is up 34 percent from early April and the London interbank offered rate, or Libor, is down 100 basis points from its peak, Froman said. Still, he cautioned that “Pittsburgh is not intended to be a victory lap.”

The Obama administration will use the summit to emphasize “the need to remain vigilant to avoid premature withdrawal of stimulus.”

IMF Forecasts

The International Monetary Fund expects G-20 countries to grow 3.2 percent next year after contracting 1.1 percent in 2009, according to estimates circulating among the G-20 ahead of the IMF’s annual meeting next month.

The U.S. has called on G-20 countries to take steps to increase domestic, private-sector demand, just as Treasury Secretary Timothy Geithner has urged China to do in recent months.

Froman said the results from the Sept. 24-25 summit may solidify commitments G-20 finance ministers made earlier this month. They agreed to sustain efforts to nurture a nascent recovery, while also agreeing on proposals to curb bank bonuses and force lenders to hold more capital.

In their Sept. 5 statement, the ministers united on a plan to tie executive pay to long-term performance and also allow for the “clawback” of cash awards if company conditions deteriorate.

Executive Pay

Next week, the U.S. will press the group to move quickly on executive pay and other proposals that would force banks to hold more capital, in order to guard against a repeat of the worst financial turmoil since the Great Depression.

“There will likely be a robust package of reforms on executive pay touching the structure of pay packages as well as their governance and their transparency,” Froman said in the Bloomberg interview. The U.S. also will move ahead with Geithner’s proposal to tighten capital requirements and limit the amount of leverage a bank can take on, he said.

At the Pittsburgh summit, the U.S. will seek G-20 pledges to reduce budget deficits, contain inflation and improve the way their economies operate. The U.S. wants to reach agreement on a framework for sustainable growth, along with renewed commitment to overhaul the IMF and avoid protectionist policies.

Froman said the U.S. so far isn’t overly concerned that recently erected trade barriers are hampering global trade flows. Next week’s meetings will provide an opportunity to reinforce commitments to maintain and expand trade where possible, he said.

‘Come Together’

“The G-20 leaders are likely to come together again and reaffirm their commitment to avoiding protectionism and to rectifying protectionism when it arises,” Froman said.

On climate change, Obama will press his counterparts to eliminate subsidies for fossil fuels and electricity, Froman said. The U.S. also wants to increase transparency in the oil market by making more data available and tightening supervision of derivatives markets.

“We’re in dialogue with countries about how to make sure that countries can continue to provide the sort of social policy around energy that they need to, while at the same time reducing greenhouse gasses,” Froman said. He said studies predict that if broad-based fossil-fuel subsidies were phased out, greenhouse-gas emissions would fall 10 percent or more by 2050.

To contact the reporters on this story: Rebecca Christie in Washington at Rchristie4@bloomberg.net; Hans Nichols in Washington at Hnichols2@bloomberg.net;

Read more...

Dollar Falls to One-Year Low Versus Euro on Signs Slump Easing

By Lukanyo Mnyanda and Yasuhiko Seki

Sept. 17 (Bloomberg) -- The dollar slid to a one-year low against the euro as a report showed Europe’s trade surplus grew in July and investors bet the U.S. housing market improved last month, sapping demand for the currency as a refuge.

The Dollar Index dropped to a 12-month low as the MSCI World Index of stocks advanced for a third day, boosting appetite for higher-yielding alternatives to the U.S. currency. Demand for riskier assets also increased as Japan’s central bank raised its assessment of the nation’s economy. The Swiss franc was little changed against the euro before the Swiss National Bank’s decision on interest rates.

“People are getting more optimistic and this is driving the dollar,” lower, said Ulrich Leuchtmann, head of currency research at Commerzbank AG in Frankfurt. “With more risk appetite and improved liquidity in the market, people are again looking at interest-rate differentials.”

The dollar traded at $1.4737 per euro at 10:12 a.m. in London, from $1.4709 yesterday in New York. It earlier reached $1.4767, the weakest level since Sept. 25, 2008. The yen strengthened to 90.70 per dollar, from 90.93 yesterday, when it appreciated to 90.13, the highest level since Feb. 12. Japan’s currency was at 133.66 per euro, from 133.78 yesterday.

Australia’s currency rose to 87.48 U.S. cents, from 87.35 cents yesterday. New Zealand’s dollar was at 71.34 U.S. cents, from 71.41 cents.

Interest Rates

Benchmark interest rates are 3 percent in Australia and 2.5 percent in New Zealand, compared with 0.1 percent in Japan and as low as zero in the U.S., attracting investors to the South Pacific nations’ higher-yielding assets. The risk in such trades is that currency market moves will erase profits.

The Nikkei 225 Stock Average rose 1.7 percent and Europe’s Dow Jones Stoxx 600 Index climbed 0.3 percent. The MSCI World advanced 0.5 percent.

The 16-nation euro area’s trade surplus widened to 6.8 billion euros ($10 billion) in July, the European Union’s statistics office said in Luxembourg today. Economists had forecast an increase to 1.2 billion euros, according to a Bloomberg survey of economists. The Dutch central bank said yesterday a “slight improvement” is visible in the global economy.

The Swiss franc traded at 1.5189 against the euro, from 1.5180 yesterday. It was at 1.0304 against the dollar, compared with 1.0322 yesterday and 1.0285 earlier today, the strongest level since July 22, 2008.

SNB Meeting

The SNB, led by Jean-Pierre Roth, will leave the three- month Libor target at 0.25 percent at today’s quarterly monetary policy assessment, according to all 21 economists in a Bloomberg News survey. The SNB publishes the decision in Zurich at 2 p.m.

Traders increased bets the European Central Bank will raise its main refinancing rate by the middle of next year, with the implied yield on the three-month Euribor futures contract for June 2010 delivery rising to 1.265 percent today from 1.225 percent yesterday. Federal funds futures contracts traded on the Chicago Board of Trade show a 3 percent chance of an increase in the U.S. benchmark interest rate in December.

The Dollar Index, which tracks the U.S. currency against the euro, yen, pound, Canadian dollar, Swiss franc and Swedish krona, sank as low as 76.010 today, the weakest level since Sept. 22, 2008. It was recently at 76.133.

‘Reinforcing Confidence’

“We are getting good economic data from the U.S. that is reinforcing confidence in the global recovery,” Derek Halpenny, European head of currency strategy in London at Bank of Tokyo- Mitsubishi UFJ Ltd., said in a Bloomberg Television interview. “Until we start to see interest rates respond to the positive news from the U.S., I think the line of least resistance is to continue selling the dollar.”

U.S. builders broke ground on 598,000 new homes last month at an annual rate from 581,000 in the previous month, according to a Bloomberg News survey before the Commerce Department releases the data today.

The Philadelphia Federal Reserve Bank will report today that its index of the region’s manufacturing advanced this month to the highest level since 2007, according to the median forecast of 55 economists in a Bloomberg News survey. The index is expected to increase to 8 from 4.2 in August, with a positive reading signaling expansion.

The Bloomberg Professional Global Confidence Index rose to 58.54 this month from 58.12 in August. The index exceeded 50 for a second month, which means optimists outnumbered pessimists. Measures of confidence in France and Germany surged after their economies unexpectedly returned to growth last quarter.

‘Downward Pressure’

“Given the fragility of the U.S. economy, the Fed can’t normalize credit and monetary-easing policies,” said Mitsuru Saito, chief economist in Tokyo at Tokai Tokyo Securities Co. “The bulk of highly liquid dollar assets will continue to flow into other currencies or commodities, putting downward pressure on the dollar.”

The yen rose against the dollar and the euro after Japan’s newly appointed Finance Minister Hirohisa Fujii said he doesn’t agree a weaker yen is necessarily good for exporters.

“It’s an absurd idea that the cheaper the yen is, the better for exports,” Fujii, 77, said at a press conference in Tokyo. “But it doesn’t mean higher yen is always the best.”

To contact the reporters on this story: Lukanyo Mnyanda in London at lmnyanda@bloomberg.net; Yasuhiko Seki in Tokyo at yseki5@bloomberg.net

Read more...

Copper, Little Changed in London, May Fall as Stockpiles Swell

By Anna Stablum

Sept. 17 (Bloomberg) -- Copper, little changed in London today, may fall as swelling inventories fuel concern that this year’s rally carried prices too high to reflect demand.

Stockpiles tallied by the London Metal Exchange expanded for a 15th day to 324,375 metric tons, the most since May 26. Inventories have increased 8.5 percent this month after rising 6.4 percent in August and 5.6 percent in July. In Shanghai, stockpiles rose 12 percent last week to 97,396 tons, the highest level since June 2007.

“The price should adjust to the high inventories and a looming oversupply,” Eugen Weinberg, an analyst at Commerzbank AG in Frankfurt, said by phone. “We have had huge increases in stocks on the LME and in Shanghai, and there are probably undisclosed inventories in China as well.”

Copper for three-month delivery rose $17.50, or 0.3 percent, to $6,437.50 a ton on the LME at 9:55 a.m. local time. The metal has doubled in 2009. Futures for December delivery slipped 0.1 percent to $2.9325 a pound in electronic trading on the New York Mercantile Exchange’s Comex division.

A report today probably will show that builders in the U.S., the world’s second-biggest copper user after China, broke ground in August on the most houses in nine months, according to economists. Construction uses 25 percent of world output of the metal, the Copper Development Association’s Web site shows.

Confidence Survey

Housing starts rose 2.9 percent to an annual rate of 598,000, according to a Bloomberg News survey. The Commerce Department report is due at 1:30 p.m. London time.

Prices also gained as a survey of Bloomberg users on six continents showed that confidence in the world economy held at a record high in September after reports suggested the recession is over. The Bloomberg Professional Global Confidence Index rose to 58.54 from 58.12 in August. It exceeded 50 for a second month, which means there were more optimists than pessimists.

Record first-half imports into China helped copper’s surge this year. The State Reserve Bureau, which buys commodities on behalf of the government, is estimated to have purchased 230,000 tons of copper this year, and Chinese traders and fabricators have bought another 600,000 tons, Mike Henry, head of base- metals marketing at BHP Billiton Ltd., said yesterday.

Consumer and industrial demand in China will support growth in copper demand, Henry said at a presentation in London. Existing supply and expanded production will be insufficient to meet demand by 2020, he said, predicting a 10 million-ton supply shortfall. BHP is the world’s biggest mining company.

Among other LME metals for three-month delivery, aluminum gained 1.3 percent to $1,951.50 a ton and tin fell 0.3 percent to $14,605 a ton. Lead rose 1.7 percent to $2,331 a ton, nickel advanced 2.5 percent to $17,730 a ton, and zinc gained 1.6 percent to $1,967 a ton.

To contact the reporter on this story: Anna Stablum in London at astablum@bloomberg.net

Read more...

Rubber Advances a Third Day as Higher Oil Boosts Cost of Rival

By Aya Takada

Sept. 17 (Bloomberg) -- Rubber advanced for a third day after crude oil increased, raising the appeal of the commodity as an alternative to synthetic products made from petroleum.

Futures in Tokyo gained as much as 3.5 percent to the highest since Sept. 14, when prices fell the most in nine months on concern that U.S. tariffs on tire imports from China may weaken rubber demand in the Asian country.

“Rubber chased a rally in oil and other commodities,” Shuji Sugata, research manager at Mitsubishi Corp. Futures & Securities Ltd., said by phone today. “Good economic data from the U.S. also supported rubber prices.”

February-delivery rubber climbed 1.7 percent to 206.8 yen ($2,280 a metric ton) a kilogram on the Tokyo Commodity Exchange.

Crude oil in New York jumped 2.2 percent yesterday after the U.S. Energy Department reported stockpiles of the fuel in the biggest energy consuming nation dropped to the lowest level since January.

Crude oil for October delivery was down 11 cents at $72.40 a barrel in electronic trading on the New York Mercantile Exchange at 3:49 p.m. Singapore time.

Reports on U.S. industrial production and consumer prices yesterday showed the country is emerging from the recession.

A report today may show U.S. builders broke ground in August on the most houses in nine months, another sign the industry that precipitated the worst financial crisis since the Great Depression is stabilizing, economists said. Separate data from the Federal Reserve Bank of Philadelphia may show manufacturing in the region increased this month.

To contact the reporter on this story: Aya Takada in Tokyo atakada2@bloomberg.net

Read more...

Oil Trades Near $72 After Supplies Drop to Lowest Since January

By Grant Smith and Christian Schmollinger

Sept. 17 (Bloomberg) -- Oil traded little changed near $72 a barrel in New York after the Energy Department reported that U.S. crude stockpiles dropped to the lowest level since January.

The inventories fell by 4.73 million barrels, the weekly report showed yesterday, more than the 2.5 million-barrel decline forecast by analysts in a Bloomberg News survey. Crude prices were also helped by the dollar, which extended declines to the weakest level in almost a year. Global equities advanced, spurring expectations of improving fuel demand.

“Fundamentals are improving a bit and now they’re better able to justify the actual oil price level,” said Hannes Loacker, an analyst at Raiffeisen Zentralbank Oesterreich in Vienna. “Inventories are coming down week by week, but it’s still going to be hard for crude to pass $75.”

Crude oil for October delivery was at $72.55 a barrel, up 4 cents, in electronic trading on the New York Mercantile Exchange at 9:23 a.m. in London. Yesterday, the contract rose $1.58, or 2.2 percent, to $72.51. Futures are up 63 percent this year.

The dollar fell to as low as $1.4767 per euro from $1.4709 yesterday in New York, the weakest level since Sept. 25, 2008. A lower dollar increases the appeal of commodities as an alternative investment and hedge against inflation.

“The dollar continues to hit new lows and equities markets are rallying, giving support to the renewed global economy, which will consume more oil,” said Mike Sander, an investment adviser at Sander Capital in Seattle. “There are not a lot of reasons to bet against oil at this point.”

Fuel Supplies

Crude stockpiles in the U.S., the biggest energy-consuming nation, fell to 332.8 million barrels, the Energy Department said. Stockpiles of distillate fuel climbed 2.24 million barrels to 167.8 million, the highest since January 1983. Gasoline inventories rose 547,000 barrels to 207.7 million last week, the department said.

Refineries operated at a three-week low of 86.9 percent of capacity in the week ended Sept. 11, down 0.3 percentage point from the previous week, according to the department.

Refiner’s profit margins have collapsed in the past month on expectations of falling fuel demand with the end of the peak summer demand season for gasoline. The profit from turning three barrels of crude into two barrels of gasoline and one barrel of heating oil has dropped to $4.72 a barrel today from $13.46 a month earlier.

“The crack spread and refining margins and the distillate inventories are all troubling,” said Victor Shum, a senior principal at consultant Purvin & Gertz Inc. in Singapore. “It points to the fact that U.S. refiners are likely to cut runs in the coming weeks.”

European and Asian stocks advanced, pushing the MSCI World Index higher for a third day, as Ireland detailed its plan to purge banks of toxic assets and gains in metal prices boosted earnings prospects for mining companies.

Brent crude oil for November settlement was at $71.64 a barrel, down 3 cents, on the London-based ICE Futures Europe exchange at 9:23 a.m. London time. Yesterday, the contract jumped 2.6 percent to $71.67, the highest since Aug. 28.

To contact the reporters on this story: Christian Schmollinger in Singapore at christian.s@bloomberg.net; Ben Sharples in Melbourne at bsharples@bloomberg.net.

Read more...

China-U.S. Dispute Unlikely to Impact Soybean Trade, Cofco Says

By Bloomberg News

Sept. 17 (Bloomberg) -- China’s imports of U.S. soybeans are unlikely to be affected by a trade dispute between the two countries over exports of Chinese tires, Li Ming, general manager of Cofco Ltd.’s agri-trading and logistics department, said.

Concern spread earlier this week that U.S. tariffs imposed on tires from China will spark a retaliatory slowdown in purchases of U.S. crops and farm products.

The U.S. placed tariffs of 35 percent on tires from China last week, acting on a union complaint that imports were pushing workers out of jobs. China announced a probe into the alleged dumping of American auto and chicken products after the U.S. actions. China is the biggest buyer of U.S. soybeans and the second-biggest importer of poultry and pork.

Read more...

Gold, Near a Record, May Extend Rally on Dollar and Inflation

By Nicholas Larkin and Kim Kyoungwha

Sept. 17 (Bloomberg) -- Gold, trading about 1 percent below a record, may extend gains in London as a weakening dollar and signs of a recovering global economy spur demand for the metal as an alternative investment and inflation hedge.

The U.S. Dollar Index fell to its lowest level in almost a year before reports that may show Europe’s trade surplus is swelling and the U.S. housing market is improving. U.S. consumer prices rose 0.4 percent in August, beating economists’ forecasts, data showed yesterday. Gold, up for a third day, reached a record $1,032.70 an ounce in London in March 2008.

“With the dollar under pressure and investment demand for equities and commodities increasing, gold will remain buoyant in coming sessions,” James Moore, an analyst at TheBullionDesk.com in London, said in a report. “There is little to stand in the way of last year’s all-time high, particularly with exchange- traded-fund buyers joining the frenzy.”

Immediate-delivery bullion advanced as much as $6.98, or 0.7 percent, to $1,024.28 an ounce, rising for a third day. The metal traded at $1,021.89 by 9:30 a.m. local time. December gold futures were 0.3 percent higher at $1,023.10 an ounce on the New York Mercantile Exchange’s Comex division. Other precious metals gained to the highest prices in a year.

Holdings of bullion in the SPDR Gold Trust, the biggest ETF backed by the metal, increased 7.63 metric tons to 1,086.48 tons yesterday, data on the company’s Web site showed. The fund’s holdings reached a record 1,134.03 tons on June 1.

Weaker Dollar

Gold has climbed 16 percent in London this year, while the dollar index, a six-currency gauge of the currency’s strength, has slipped 6.5 percent. The measure declined as much as 0.3 percent today.

“Yesterday’s higher-than-expected U.S. CPI numbers spurred further investment demand,” said Stefan Graber, an analyst with Credit Suisse Group in Singapore. “The move above $1,000 is being warranted by fundamentals” such as a weak dollar and inflation.

Silver for immediate delivery in London climbed as much as 1.5 percent to $17.6675 an ounce, the highest since August 2008, and was last at $17.56. The metal has rallied 54 percent this year.

An ounce of gold now buys about 58.2 ounces of silver in London, the least since August 2008, according to Bloomberg data. That’s down from a high of 84.4 ounces on Oct. 10, which was the most since March 1995.

Platinum gained as much as 0.5 percent to a one-year high of $1,351.50 an ounce and was last little changed at $1,346.50. Palladium, the best-performing precious metal this year, was 0.3 percent higher at $299 an ounce after reaching a one-year high of $301.

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

Read more...

Japan Stocks Rise on Commodities; Steelmakers Gain on Outlook

By Masaki Kondo

Sept. 17 (Bloomberg) -- Japanese stocks advanced as higher prices for oil and metals boosted commodity producers and after the Nikkei newspaper said recovering demand will prompt JFE Holdings Inc. to restart a mill.

Mitsubishi Corp., which jointly produces coking coal with Melbourne-based BHP Billiton Ltd., gained 2.8 percent after BHP said growth in emerging markets will keep the world short of resources. JFE, Japan’s second-biggest steelmaker, surged 5 percent. Sumitomo Mitsui Financial Group Inc. tumbled 5.6 percent on concern the incoming government’s policies will damage the consumer-finance business.

“Resource demand will increase over the long run and we can expect stable earnings at commodity producers,” said Naoki Fujiwara, chief fund manager at Shinkin Asset Management Co., which oversees the equivalent of $3.9 billion in Tokyo. “Investors expect the new government to favor policies helping socially weak people and tighten rules on consumer lenders.”

The Nikkei 225 Stock Average advanced 1.7 percent to close at 10,443.80 in Tokyo. The broader Topix index added 0.9 percent to 939.52, with five shares gaining for every two that retreated.

The value of stocks traded in Tokyo has stayed below the 12-month average in all but one of the past 30 days as investors took a wait-and-see attitude in the face of uncertainties over the new administration. Yukio Hatoyama, who replaced Taro Aso yesterday as Japan’s prime minister, pledged to save “hard- working people” from poverty by increasing minimum wages.

Exit Strategy

Japanese equities pared gains in the afternoon after the Bank of Japan raised its assessment of the nation’s economy.

“I’m afraid the BOJ will start talking about exit strategies including lifting interest rates and tightening liquidity,” said Shinkin’s Fujiwara “The economic situation isn’t” as bright as the BOJ maintained.

Mitsubishi, Japan’s biggest trading house by value, added 2.8 percent to 1,980 yen. BHP, the world’s largest mining company, said in its presentation material yesterday the world will be short of energy and copper in the medium to long term and global steel demand will double over the next 15 years. Melbourne-based BHP is the world’s No. 1 producer of coking coal through its alliance with Mitsubishi.

Mitsui & Co., Japan’s No. 2 trading house which counts commodities as its biggest source of profit, added 3.2 percent. Inpex Corp., the nation’s largest oil and gas explorer, added 3.5 percent. Crude oil climbed 2.2 percent to $72.51 a barrel, while gold futures added 1.4 percent to a record settlement price. Copper jumped 3.2 percent in New York.

Consumer Lenders

JFE, Japan’s No. 2 maker of the alloy, surged 5 percent to 3,390 yen, its steepest advance since July 28. It led a gauge of steelmakers to the biggest gain among the Topix’s 33 industry groups. The company may restart a scrap steel plant in Japan as early as October as orders recover, the Nikkei said.

Banks extended their decline to a fifth day on concern earnings will deteriorate. Sumitomo Mitsui, which owns a fifth of consumer lender Promise Co., dived 5.6 percent to 3,360 yen and was the most actively traded stock by value. Promise lost 4.4 percent to 604 yen. Banks were the biggest drag on the Topix.

A gap between the Nikkei and the Topix widened today to a level not seen in nine years, according to data compiled by Bloomberg. The gap was caused by bank shares because they have a bigger influence on the Topix than the Nikkei, said Makoto Haga, chief strategist at Tokyo-based Monex Group Inc.

“Lending is unlikely to increase in the current business environment, competition amid low interest rates is narrowing banks’ profits and there is a likelihood that financial companies will sell common stock to boost capital,” said Haga.

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

Read more...

Asian Stocks Rise to One-Year High as Investors Bet on Recovery

By Patrick Rial and Shani Raja

Sept. 17 (Bloomberg) -- Asian stocks rose, driving the MSCI Asia Pacific Index to a one-year high, as growing investor confidence in the global recovery sent commodity prices higher and prompted Japanese steelmakers to start idled plants.

BHP Billiton Ltd., the world’s largest mining company, rose 1.5 percent in Sydney after saying steel demand will double in the next 15 years. Nippon Steel Corp., the world’s No. 2 producer of the alloy, rallied 4.1 percent after saying it will reopen a furnace. Nissan Motor Co., which gets 34 percent of its revenue in North America, jumped 3.4 percent after U.S. industrial production increased more than forecast.

“The flow of good economic news has become an avalanche,” said Shane Oliver, head of investment strategy with AMP Capital Investors Ltd., which manages about $75 billion. “Six months ago, investors were allowing for a Great Depression-type of scenario. Instead, we’re seeing clear evidence of a recovery.”

The MSCI Asia Pacific Index gained 1.2 percent to 119.04 as of 5:37 p.m. in Tokyo, the highest since Sept. 8, 2008. The gauge has climbed 69 percent from a more than five-year low on March 9 as stimulus measures around the world pulled economies out of recession. Stocks on the gauge are priced at an average 1.6 times book value, up from 1.03 times at the March low.

Japan’s Nikkei 225 Stock Average rose 1.7 percent as a survey showed the nation’s manufacturers turned optimistic for the first time in almost two years. Australia’s S&P/ASX 200 Index gained 1.4 percent.

Warren Buffett’s Suits

Leading regional gains, Hong Kong’s Hang Seng Index climbed 1.7 percent, led by clothing retailer Esprit Holdings Ltd., which rose 2.5 percent after Goldman Sachs Group Inc. recommended the shares. China’s Shanghai Composite Index advanced 2 percent. Dalian Dayang Trands Co. jumped 10 percent after billionaire investor Warren Buffett said he wears the company’s suits.

Futures on the U.S. Standard & Poor’s 500 Index were little changed. The gauge climbed 1.5 percent yesterday as the Federal Reserve reported a 0.8 percent increase in factory output last month, exceeding the median estimate of economists surveyed by Bloomberg.

Raw-material producers accounted for 18 percent of the MSCI Asia Pacific Index advance today. Increasing steel use in China and emerging markets foretell rising demand for iron ore in the future, according to Vicky Binns, BHP’s head of commodity analysis. A surge in Chinese imports of coking coal is “sustainable,” she said.

BHP added 1.5 percent to A$39.59. Mitsubishi Corp., which is the world’s largest producer of coking coal in partnership with BHP, advanced 2.8 percent to 1,980 yen. Mitsui & Co., which produces iron ore, climbed 3.2 percent to 1,251 yen.

Increased Production

China Shenhua Energy Co., the nation’s largest coal producer, rose 3.4 percent to 34.74 yuan. The company said coal output in August climbed 13.3 percent from a year earlier.

Nippon Steel rose 4.1 percent to 353 yen. The company will restart the No. 2 blast furnace at its Kimitsu mill to offset lost production from a plant failure. Nippon Steel brought one of two idled blast furnaces back into operation last month as the economy began to recover from the worst recession since World War II.

JFE Holdings Inc. rallied 5 percent to 3,390 yen. Japan’s second-largest steelmaker will restart a scrap furnace as early as next month to meet a recovery in demand, a spokesman said. The steelmaker is also considering reopening a blast furnace next year should the economy continue to pick up, the Nikkei newspaper reported.

Woodside Petroleum Ltd., Australia’s second-largest oil producer, advanced 1.5 percent to A$51.60. Aluminum Corp. of China rose 3.5 percent to HK$9.52 in Hong Kong.

Beating Estimates

Crude oil climbed 2.2 percent to $72.51 a barrel yesterday, while gold futures added 1.4 percent to a record settlement price. Copper jumped 3.2 percent in New York.

The MSCI Asia Pacific Index’s six-month rally has been driven by better-than-estimated economic reports and corporate earnings. Of 646 companies on the gauge that reported net income for the latest quarter, 226 beat analyst predictions, compared with 138 that missed.

Confidence in the world economy held at a record high in September, a Bloomberg survey of users on six continents showed, after reports suggested the recession is over and officials said they won’t rush to withdraw stimulus. The Bloomberg Professional Global Confidence Index rose to 58.54 from 58.12 in August.

“The world’s economy is continuing to improve and investor sentiment remains solid, creating resilience in global stock markets,” said Mitsushige Akino, who oversees the equivalent of $660 million at Ichiyoshi Investment Management Co. in Tokyo.

Improving Sentiment

Nissan rose 3.4 percent to 613 yen on speculation demand for its vehicles will pick up in the U.S. Toyota Motor Corp., the world’s largest automaker, added 1.9 percent to 3,780 yen.

Sentiment among large Japanese manufacturers rose to 15.5 points this quarter, the highest reading since the survey began in 2004, a joint survey by the Cabinet Office and Finance Ministry showed today. A reading above zero signals optimists outnumber pessimists.

Esprit climbed 2.5 percent to HK$50.65 after it was raised to “buy” from “neutral” at Goldman Sachs, which said more “concrete” signs of recovery in Europe and the introduction of new products may be catalysts for the stock.

Federal Reserve Chairman Ben S. Bernanke said on Sept. 15 the U.S. recession is “very likely” over, while Buffett, chairman and chief executive officer of Berkshire Hathaway Inc., said the same day his company is buying equities.

Brokerage Upgrades

Dalian Dayang jumped 10 percent to 14.67 yuan, bringing gains this week to 46 percent, as it won praise from Buffett in a video congratulating the company and Chairman Li Guilian on its 30th anniversary.

Yokogawa Electric Corp., the world’s biggest maker of electronic measuring tools, jumped 11 percent to 828 yen after Nomura Holdings Inc. boosted the stock to “neutral” from “reduce” citing a recovery in orders.

Siam Cement Pcl, Thailand’s fifth-biggest publicly traded company, added 1.8 percent to 230 baht after DBS Vickers Securities (Thailand) lifted its rating to “buy” from “fully valued,” citing an expected increase in the profit margin of its petrochemical business.

To contact the reporter for this story: Patrick Rial in Tokyo at prial@bloomberg.net; Shani Raja in Sydney at sraja4@bloomberg.net.

Read more...

German Stocks Advance for Third Day as MAN, ThyssenKrupp Climb

By Daniela Silberstein

Sept. 17 (Bloomberg) -- German stocks rose for a third day, with the DAX Index extending an 11-month high, as MAN SE rallied and gains in metal prices boosted the earnings outlook for raw- material producers.

MAN surged 3.3 percent as the Financial Times reported Volkswagen AG is considering a revamp of its truck division. ThyssenKrupp AG and Salzgitter AG, the country’s largest steelmakers, also advanced. E.ON AG added 1 percent following a report that the utility is looking into a possible acquisition of Oxxio.

The DAX Index climbed 0.6 percent to 5,736.81 at 9:49 a.m. in Frankfurt. The measure has rebounded 56 percent since March 6 as companies reported better-than-estimated earnings and economic data signaled the global recession is nearing an end. The broader HDAX Index increased 0.7 percent today.

MAN rallied 3.3 percent to 61.29 euros. Volkswagen is considering an organizational overhaul of its truck business which may see a tie-up with the German truckmaker and engineering group, the Financial Times said, citing people familiar with the company. DZ Bank AG raised its share-price estimate for MAN to 71 euros from 55 euros.

Volkswagen, Europe’s largest carmaker, climbed 1.5 percent to 124.07 euros, snapping a three-day decline.

ThyssenKrupp added 1 percent to 25.03 euros. Salzgitter gained 0.7 percent to 72.29 euros as copper and lead climbed on the London Metal Exchange. Higher commodity prices prompted Japanese steelmakers to start idled plants.

E.ON advanced 1 percent to 28.62 euros. The German utility is looking into possibly buying Dutch energy company Oxxio, Het Financieele Dagblad reported, citing an interview with Joost van Dijk, E.ON’s Benelux director.

Fresenius Medical Care AG, the world’s largest provider of kidney dialysis, and parent Fresenius SE climbed 3.3 percent to 33.73 euros and 3.1 percent to 38.83, respectively.

The following stocks also rose or fell in German markets. Symbols are in parentheses after company names.

Bilfinger Berger AG (GBF GY) climbed 81 cents, or 1.6 percent, to 50.22 euros. Germany’s second-biggest builder had its share-price raised to 60 euros from 45 euros at Bank of America Corp.

Continental AG (CON GY) increased 42 cents, or 1.1 percent, to 39.87 euros after CA Cheuvreux lifted its share-price forecast for Europe’s second-biggest car-parts maker to 43 euros from 35 euros.

Demag Cranes AG (D9C GY) gained 62 cents, or 2.5 percent, to 25.31 euros. The world’s largest maker of harbor cranes had its price estimate increased to 30 euros from 22 euros at Equinet AG.

Deutsche Boerse AG (DB1 GY) added 65 cents, or 1.2 percent, to 57.34 euros, snapping a two-day decline. A bid from Deutsche Boerse for London Stock Exchange Group Plc is “unlikely” and the two exchange operators make a “poor strategic fit,” Bank of America Corp. wrote in a report to clients. The brokerage cited bid speculation that boosted LSE shares yesterday.

Hochtief AG (HOT GY) advanced 1.28 euros, or 2.3 percent, to 56.49 euros. Equinet lifted its price forecast for Germany’s largest construction company to 82 euros from 72 euros.

Infineon Technologies AG (IFX GY) declined 8 cents, or 2.1 percent, to 3.73 euros. Europe’s second-largest maker of semiconductors was reduced to “underperform” from “buy” at Bank of America, which said the stock “looks expensive relative to others in the sector.”

SAP AG (SAP GY) dropped 39 cents, or 1.1 percent, to 34.22 euros. The world’s biggest maker of business-management software faces resistance over its planned price increases from small and medium-sized German companies, Frankfurter Allgemeine Zeitung reported.

SMA Solar Technology AG (S92 GY) gained 1.44 euros, or 2.2 percent, to 67 euros. Commerzbank AG raised its share-price estimate for the solar company to 70 euros from 60 euros.

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

Read more...

European, Asian Stocks Gain; Irish Banks Rally on Asset Plan

By Sarah Jones

Sept. 17 (Bloomberg) -- European and Asian stocks advanced, pushing the MSCI World Index higher for a third day, as Ireland detailed plans to purge banks of toxic assets and Exane BNP Paribas recommended building-material and construction shares.

Bank of Ireland Plc and Allied Irish Banks Plc surged more than 9 percent after the government announced a proposal to spend 54 billion euros ($80 billion) buying real-estate loans. Cie. de Saint-Gobain SA, Europe’s biggest building-materials supplier, jumped 3.7 percent as Exane upgraded the construction industry to “outperform.” British Airways Plc rallied 4 percent after Goldman Sachs Group Inc. added Europe’s third- largest airline to its “conviction buy” list.

The MSCI World added 0.5 percent at 10:22 a.m. in London. The measure has soared 66 percent since March 9 as earnings at companies topped estimates and investors grow more confident in the strength of the global economic recovery.

The Irish agency “is actually a double whammy,” Chris McGale, head of European equities at Pali International in London, said in a Bloomberg Television interview. “It is great for the economy and the banks get stabilization out of it too.”

Europe’s Dow Jones Stoxx 600 Index climbed 0.4 percent, rising for the 10th time in 11 days. The MSCI Asia Pacific Index advanced 1.3 percent to a one-year high as growing investor confidence in the global economy prompted Japanese steelmakers to start idled plants.

U.S. Futures

Futures on the Standard & Poor’s 500 Index fluctuated before a report that may show U.S. builders broke ground on the most houses in nine months in August. Separate data from the Federal Reserve Bank of Philadelphia may show manufacturing activity in the region increased this month.

Bank of Ireland rallied 9.9 percent to 3.15 euros and Allied Irish jumped 23 percent to 3.23 euros. Ireland’s new National Asset Management Agency, or NAMA, proposes to pay a 30 percent discount on the 77 billion-euro book value of the loans, Finance Minister Brian Lenihan said in a speech in parliament in Dublin yesterday.

Allied Irish said it will seek to raise about 2 billion euros in capital from investors and asset sales after taking losses on loans it’s selling to NAMA. Bank of Ireland will publish a statement later today.

Saint-Gobain rose 3.7 percent to 35.47 euros after Exane raised its rating on the shares to “outperform” from “neutral” and upgraded the construction and building-material industries to “outperform” from “neutral.” The recommendation follows an upgrade from Goldman Sachs, which yesterday lifted its rating on European building shares to “neutral” from “cautious.”

Holcim Gains

Holcim Ltd., the world’s second-biggest cement maker, advanced 2.9 percent to 75.5 Swiss francs after Exane also raised its recommendation on the stock to “outperform” from “neutral.”

British Airways advanced 4 percent to 236.4 pence after Goldman Sachs added the shares to its “conviction buy” list, citing a recovery in sales, cost-cutting and synergies from a potential merger with Spain’s Iberia Lineas Aereas de Espana SA.

Iberia gained 3.1 percent to 2.06 euros.

EasyJet Plc surged 7.2 percent to 398.4 pence after Morgan Stanley upgraded Europe’s second-biggest discount carrier to “overweight” from “equal weight.”

Kingfisher Plc increased 2 percent to 209.7 pence. Europe’s largest home-improvement retailer posted a 37 percent increase in first-half profit to 201 million pounds ($332 million) after it increased sales of kitchens at its B&Q U.K. chain and closed a distribution center to cut expenses.

A gauge of technology shares led declines in Europe after Oracle Corp., the world’s second-biggest software maker, reported first-quarter sales that missed analysts’ estimates. The Redwood City, California-based company fell 2 percent to $21.69 in German trading.

To contact the reporter on this story: Sarah Jones in London at sjones35@bloomberg.net.

Read more...

Auxilium, Clarcor, Kodak, Oracle, Peabody: U.S. Equity Preview

By Lu Wang

Sept. 17 (Bloomberg) -- Shares of the following companies may have unusual moves in U.S. trading. Stock symbols are in parentheses.

Auxilium Pharmaceuticals Inc. (AUXL US): The company’s experimental drug, Xiaflex, won the support of a U.S. advisory panel for the first non-surgical treatment for Dupuytren’s contracture, a disabling hand disorder.

Clarcor Inc. (CLC US): The maker of Baldwin air filters reduced its 2009 earnings forecast, projecting $1.40 a share at most. That’s lower than the average analyst estimate of $1.44, according to a Bloomberg survey.

Eastman Kodak Co. (EK UST): The photography company reshaping itself in the digital age, said it expects to raise as much as $700 million, with KKR & Co. committing to buy more than half of the notes.

Oracle Corp. (ORCL US): The world’s second-largest software maker reported first-quarter sales that missed analysts’ projections after orders remained slow overseas.

Peabody Energy Corp. (BTU US): The third-largest eastern U.S. coal company and Patriot Coal Corp. (PCX US) were downgraded to “neutral” from “buy” at UBS AG, which said the stocks’ prices already reflected a recovery in the industry.

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

Read more...

U.S. Stock-Index Futures Advance; Citigroup Climbs in Europe

By Adam Haigh

Sept. 17 (Bloomberg) -- U.S. stock-index futures rose as speculation a report today may show housing starts increased in August overshadowed lower-than-estimated sales at Oracle Corp.

Citigroup Inc. climbed 4.8 percent in Germany before the Commerce Department’s figures. Oracle declined 1.9 percent after first-quarter revenue at the world’s second-largest software maker missed analysts’ projections, hurt by slowing demand for databases.

Futures on the Standard & Poor’s 500 Index expiring in December added 0.2 percent to 1,066 as of 10:53 a.m. in London, after falling as much as 0.1 percent earlier. The index closed at the highest level since Oct. 3 yesterday. Dow Jones Industrial Average futures rose 0.3 percent to 9,754 today, while Nasdaq-100 Index futures advanced 0.2 percent to 1,721.75.

Speculation that government measures will help revive the economy and better-than-estimated earnings at companies from Goldman Sachs Group Inc. to Johnson & Johnson spurred a 58 percent rally in the S&P 500 from its 12-year low on March 9.

“I expect some consolidation,” said Christoph Riniker, an equity strategist at Bank Julius Baer in Zurich. “The overall outlook is quite good in the medium term for equity markets, but after this sharp rise we’ve had since March that consolidation would be healthy for markets.”

Citigroup, the biggest user of U.S. government debt guarantees extended under last year’s bank rescue, climbed 4.8 percent to $4.40 in Germany. Bank of America Corp., which bought Merrill Lynch & Co. last year, rose 0.7 percent to $17.37.

Oracle Sales

The Federal Reserve has kept its target rate for overnight lending between banks at near zero to unlock credit markets after the bankruptcy of New York-based Lehman Brothers Holdings Inc. last September.

Oracle slid 1.9 percent to $21.71. Sales of database and so-called middleware programs plunged 22 percent to $711 million in the period ended Aug. 31, the company said yesterday. That compares with the $826 million estimate of Patrick Walravens, an analyst with JMP Securities Inc. in San Francisco.

Housing starts climbed 2.9 percent to an annual rate of 598,000, according to the median forecast of 74 economists in a Bloomberg News survey. The Commerce Department report is due at 8:30 a.m. in Washington.

At the same time, data from the Labor Department are projected to show that the number of Americans filing claims for jobless benefits increased to 555,000 last week from 550,000 the prior week.

Economy Watch

The Philadelphia Fed at 10 a.m. may say manufacturing activity in its region grew for a second consecutive month in September after contracting in the 10 previous months. The bank’s index probably rose to 8, according to economists surveyed, from 4.2 in August.

Paul Volcker, the former Fed chairman who’s an economic adviser to President Barack Obama, said there’s a “long way to go” before the economy returns to pre-recession levels.

“It will be a long slog -- a matter of years -- with the risk of some relapses along the way,” Volcker said yesterday at a financial conference in Beverly Hills, California.

To contact the reporter on this story: Adam Haigh in London at ahaigh1@bloomberg.net.

Read more...