Fed Signals Return to Growth Alone Won’t Warrant Rate Increase

By Scott Lanman

Nov. 5 (Bloomberg) -- Federal Reserve officials signaled a return to economic growth alone won’t warrant higher interest rates, saying an increase will instead depend on when the labor market and inflation pick up.

The Fed’s rate-setting Open Market Committee yesterday restated its pledge to keep rates “exceptionally low” for an “extended period.” The panel added for the first time that its commitment depends on “low rates of resource utilization, subdued inflation trends and stable inflation expectations.”

The comments prompted traders to reduce bets for an increase in borrowing costs in the first half of 2010, given that policy makers are focused on reducing unemployment that’s forecast to rise above 10 percent. The dollar weakened yesterday and short-term Treasury yields fell.

“There are still many downside risks to the recovery,” said Chris Rupkey, chief financial economist at Bank of Tokyo- Mitsubishi UFJ Ltd. in New York. “The Fed looks to be on hold for longer than I thought,” possibly beyond the second quarter, he said.

Policy makers, acting the week after a report showed the U.S. economy expanded in the third quarter for the first time in more than a year, left their target for the overnight interbank lending rate unchanged at a range of zero to 0.25 percent. The vote of 10 officials was unanimous.

The conditions “put some meat on the bones” of the Fed’s rate stance, said John Silvia, chief economist at Wells Fargo Securities LLC in Charlotte, North Carolina.

‘Not Unlimited’

“The Fed is simply trying to set up conditions or parameters for the continuation of the current easy policy, so that it’s not unlimited with no boundaries,” said Silvia, who previously worked as a senior economist in Congress. Silvia didn’t change his forecast for the Fed to raise interest rates after July 2010.

The dollar weakened after the decision, falling to $1.4861 against the euro from $1.4724 on Nov. 3, the biggest drop since Sept. 8. The yield on two-year Treasuries fell 2 basis points to 0.90 percent from 0.92 percent, while yields on 10-year securities rose 6 basis points to 3.53 percent from 3.47 percent. A basis point is 0.01 percentage point.

U.S. employers probably reduced payrolls by 175,000 in October, according to the median forecast in a Bloomberg News survey of 84 economists ahead of Labor Department report tomorrow. The unemployment rate probably rose to 9.9 percent from 9.8 percent, based on the median estimate of 81 analysts.

Prices Fall

Consumer prices have fallen on an annual basis for the past seven months in the longest such decline since 1955. The consumer-price index fell 1.3 percent in the 12 months to September. Excluding food and energy, prices rose at a 1.5 percent annual rate.

While some measures of inflation expectations have been rising, the Fed said longer-term expectations are “stable” and reiterated that price increases “will remain subdued for some time.”

The ebb of the global crisis that caused more than $1.6 trillion in credit losses and writedowns has already helped spur central banks from Australia to Norway to start increasing borrowing costs. Yesterday’s unanimous statement indicates the Fed isn’t yet ready to follow some of its counterparts abroad.

“We are nowhere near there,” Michael Holland, chairman of New York-based Holland & Co., which oversees more than $4 billion in assets, said on Bloomberg Television. “We don’t have anything approaching the position where they can start unwinding.”

Through First Quarter

The Fed completed its $300 billion program of purchasing Treasuries last month. Yesterday’s statement said the central bank will purchase a total of $1.25 trillion of agency mortgage- backed securities and about $175 billion of agency debt through the first quarter of next year.

Previously, the Fed said it would buy as much as $200 billion of debt issued by Fannie Mae and Freddie Mac, the government-supported mortgage-finance companies, and government- chartered Federal Home Loan Banks. The central bank said the change is “consistent with the recent path of purchases and reflects the limited availability” of the notes.

“It’s a relatively small change,” said Michael Hanson, senior economist at Bank of America-Merrill Lynch in New York and a former Fed economist. “They don’t want to do anything that’s going to really knock markets off kilter.”

The bigger change was adding the 13 words that clarified the “extended period” pledge on interest rates, economists said. The shift, while prompting investors to lengthen their prediction for a tightening, gives the Fed less leeway to avoid rate increases when labor and inflation indicators start rising.

Adding the three conditions “gives investors a framework when rate hikes are likely to come and forces discipline on the Fed,” said Chris Low, chief economist at FTN Financial in New York. “When those conditions change, it almost forces them to follow through.”

To contact the reporters on this story: Vivien Lou Chen in San Francisco at vchen1@bloomberg.netScott Lanman in Washington at slanman@bloomberg.net.

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Darling Seeks G-20 Plan to Deal With Asset Bubbles

By Gonzalo Vina and Emma Ross-Thomas

Nov. 6 (Bloomberg) -- U.K. Chancellor of the Exchequer Alistair Darling said the Group of 20 nations should develop a way to tackle asset-price bubbles as the world’s leading economies recover.

“We have got to make sure we don’t get ourselves into a situation where some pressure starts to rise and then it becomes bigger and bigger and when the whole thing comes to an end it has catastrophic consequences,” Darling said in an interview with Bloomberg Television.

The comments help shape the agenda for a meeting of G-20 finance ministers hosted by Darling today in St. Andrews, Scotland. They echo calls from the International Monetary Fund and Nouriel Roubini, the New York University professor who predicted the crisis that began in 2007.

The Federal Reserve, the European Central Bank and the Bank of England this week moved to unwind some of the emergency steps they took to rescue the world economy from its sharpest slump since the Great Depression. Finance ministers today also will discuss a strategy to exit their fiscal stimulus measures.

Near-zero interest rates in the U.S., Britain and Japan are depressing the dollar and fueling a surge in asset values, Roubini said on Nov. 1. Commodities led by gold are trading near record highs, and cheap borrowing costs are pushing up property and equity prices.

‘Bubble-Building’

“We also have this concern,” Russian Finance Minister Alexei Kudrin said in an interview in London yesterday. “We need to be very careful with this huge amount of injected liquidity.”

Henrique Meirelles, the Brazilian central bank governor, told reporters on Nov. 3 in Oxford, England, that “there’s a need for international cooperation in preventing imbalances and bubble-building and some of that demands international regulation, symmetry of regulation among several countries.”

Darling wants to incorporate any plans on asset prices into a broader framework of rules aimed at policing the global economy and stepping up oversight of banks blamed for causing the market turmoil over the past two years.

Finance ministers and central bankers gather in the golfing resort town north of Edinburgh this evening and will conclude their meetings about 4 p.m. tomorrow. Divisions remain about whether bubbles can correctly be identified and deflated without hurting the economy.

Head Off Problems

The G-20 must “guard against problems arising in the future and head them off as they develop,” Darling said in the interview, which was taped yesterday.

Fueled in part by record-low interest rates, the value of stocks worldwide has more than doubled to $47 trillion from this year’s low on March 9. Oil passed $80 a barrel on Oct. 21 for the first time in a year, and gold reached an all-time high of $1,097 an ounce on Nov. 4.

U.K. house prices climbed 1.2 percent last month to an average of 165,528 pounds ($270,000) after rising 1.5 percent in September, according to Halifax, a division of Lloyds Banking Group Plc. Hong Kong-based Henderson Land Development Co. said it sold an apartment in the Chinese city for a world-record price of HK$439 million ($56.6 million).

Using monetary policy to puncture bubbles would undo a previous consensus in which central bankers largely left investors to decide when asset prices were overvalued and then acted to address the economic aftershocks of market corrections. Central banks in Australia and Norway recently noted rising property prices when raising interest rates.

Tighter Regulation

Some central bankers including Bank of England Deputy Governor Paul Tucker promote tighter regulation as a better way of restraining speculation. Fed Chairman Ben Bernanke said in 2002 when he was a governor at the central bank that “monetary policy cannot be directed finely enough to guide asset prices without risking severe collateral damage to the economy.”

The IMF says central banks “should examine what is driving asset-price movements and be prepared to act,” the Washington- based lender said in its latest World Economic Outlook, published on Oct. 1.

A survey of 147 clients by New York-based Goldman Sachs Group Inc. found 75 percent think low rates are triggering “too-strong” climbs in assets.

Even as they kept interest rates on hold, the Bank of England and ECB both signaled yesterday that they may be approaching the end of their emergency stimulus policies. A day earlier, the Fed outlined the circumstances in which it would be prepared to raise rates.

Phasing Out Liquidity

The U.K. central bank increased its bond-purchase program by the lowest amount since the program began in March. ECB President Jean-Claude Trichet said emergency liquidity measures would be “phased out” in a “timely and gradual fashion.”

G-20 leaders at September’s Pittsburgh summit ordered finance chiefs and the IMF to develop a framework to guide their efforts to shift the world economy away from U.S. demand and Chinese savings. Economists have blamed distortions such as the U.S. trade deficit for helping trigger the crisis.

Some G-20 members will likely push Asian nations such as China to allow their currencies to appreciate, Geoffrey Yu, foreign-exchange strategist in London at UBS AG, told clients in a report today. China, the world’s third-largest economy, has prevented the yuan from gaining since July 2008.

Darling said mapping out a long-term architecture and a system to permit the G-20 to monitor each member nation’s policies will be a more pressing objective than shorter-term issues such as the fall in the value of the dollar.

Currency ‘Volatility’

“There has been a lot of volatility in markets for obvious reasons over the last 12 months,” Darling said. “What we need to do over this weekend is to concentrate on laying the foundations for the future.”

French Finance Minister Christine Lagarde said yesterday that she will use the talks to urge counterparts to implement agreements to crack down on banker pay. Almost three in five traders, analysts and fund managers polled by Bloomberg last month said they believe their 2009 bonuses will either increase or won’t change.

“I will ask my fellows at the St. Andrews meeting to apply all the rules that have been decided upon,” Lagarde said yesterday in Paris.

The G-20 members oversee about 85 percent of the world economy and are Argentina, Australia, Brazil, Canada, China, France, Germany, India, Indonesia, Italy, Japan, South Korea, Mexico, Russia, Saudi Arabia, South Africa, Turkey, the U.S., the U.K. and the European Union.

To contact the reporter on this story: Gonzalo Vina in London at gvina@bloomberg.net; Emma Ross-Thomas in St. Andrews, Scotland at erossthomas@bloomberg.net.

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Payrolls in U.S. Probably Fell at Slower Pace, Joblessness Rose

By Timothy R. Homan

Nov. 6 (Bloomberg) -- U.S. employers probably cut the fewest jobs in October in more than a year as the economic recovery eased the worst labor-market slump since the 1930s, economists said before a report today.

Payrolls fell by 175,000 workers, the smallest drop since August 2008, according to the median estimate of 84 economists surveyed by Bloomberg News. The jobless rate may have climbed to a 26-year high of 9.9 percent, the survey also showed.

Companies such as Deere & Co. are starting to recall staff after the world’s largest economy expanded last quarter at the fastest pace in two years, while Johnson & Johnson is among those cutting back further. Mounting unemployment is one reason Federal Reserve policy makers this week reiterated a pledge to keep their key interest rate low for an “extended period.”

“Employers remain cautious,” said Chris Low, chief economist at FTN Financial in New York. “As a result, employers are unlikely to start expanding their employee base any time soon, but are also unlikely to continue rapid layoffs.”

The Labor Department’s report is due at 8:30 a.m. in Washington. Economists’ payroll forecasts ranged from declines of 105,000 to 250,000.

The October projection would bring total jobs lost since the recession began in December 2007 to 7.4 million, the biggest decline of any economic slump since the Great Depression. Monthly losses accelerated after the collapse of Lehman Brothers Holdings Inc. in September 2008 and peaked at 741,000 in January.

Temporary Help

Neal Soss, chief economist at Credit Suisse in New York, is among those saying today’s report may show an increase in hiring of temporary workers, which will be a harbinger of gains in overall employment. Payrolls at temporary-help agencies often turn up before total employment because companies are not certain increases in demand will be sustainable enough to warrant the expense of taking on permanent staff.

Economists surveyed by Bloomberg last month projected the jobless rate will exceed 10 percent by early 2010 and average 9.9 percent for all of next year even as the economy expands 2.4 percent.

Fed officials met in Washington this week and signaled that a return to economic growth alone won’t result in higher interest rates. Economist Joseph LaVorgna of Deutsche Bank Securities Inc. in New York said in a note to clients that the jobless rate is “the dominant variable driving changes in the fed funds” rate, and the central bank “has never raised rates with unemployment rising.”

Voter Discontent

Voters in Virginia and New Jersey this week took out their frustration over joblessness on the political party in charge. The economy and jobs were the most important issues as Republicans won governorships in both states held by Democrats, according to election polls.

President Barack Obama in February signed into law a $787 billion stimulus package aimed at reviving growth and stemming job losses. The administration said last week that the plan was directly responsible for saving or creating about 640,000 jobs. Exit polling this week showed six in 10 New Jersey voters and 55 percent of Virginians said Obama didn’t influence their vote.

The U.S. economy grew last quarter for the first time in a year, expanding at a 3.5 percent pace as government incentives spurred consumers to spend more on homes and automobiles.

Job Cuts

Some companies are cutting payrolls amid concern spending will cool as government assistance wanes. The New Brunswick, New Jersey-based Johnson & Johnson, the world’s largest health- products company, said Nov. 3 it will shrink its workforce by as much as 7 percent, or 7,000 workers.

Other companies are gaining confidence. Deere, the world’s largest maker of agricultural equipment, said last week it’s recalling 452 workers, the majority of manufacturing employees dismissed earlier this year at a factory in Iowa.

Cisco Systems Inc.’s John Chambers, one of the first technology leaders to herald the recession two years ago, said yesterday he now sees a global economic recovery, fueling a rebound in his company’s sales this quarter.

“The numbers are indicating us being in the early, initial phase of a recovery -- with the U.S. leading the way,” Chambers said in an interview.

After reaching a 13-year low on March 9, the Standard & Poor’s 500 Index has gained 58 percent as the economy showed signs of recovering.

                        Bloomberg Survey

===============================================================
                          Nonfarm Unemploy     Manu   Hourly
                         Payrolls     Rate Payrolls Earnings
                           ,000’s        %   ,000’s     MOM%
===============================================================
Date of Release              11/06    11/06    11/06    11/06
Observation Period            Oct.     Oct.     Oct.     Oct.
---------------------------------------------------------------
Median                        -175     9.9%      -42     0.1%
Average                       -175     9.9%      -43     0.1%
High Forecast                 -105    10.1%      -30     0.3%
Low Forecast                  -250     9.8%      -55     0.0%
Number of Participants          84       81       22       60
Previous                      -263     9.8%      -51     0.1%
---------------------------------------------------------------
4CAST Ltd.                    -145     9.9%     ---      0.2%
Action Economics              -150     9.9%      -50     0.2%
AIG Investments               -150     9.8%     ---      0.2%
Aletti Gestielle SGR          -160     9.9%      -50     ---
Ameriprise Financial Inc      -170     9.8%      -35     0.1%
Banesto                       -175     ---      ---      ---
Bank of Tokyo- Mitsubishi     -185     9.8%     ---      0.2%
Bantleon Bank AG              -190     9.9%     ---      ---
Barclays Capital              -150     9.9%      -30     0.1%
Bayerische Landesbank         -180     9.9%     ---      ---
BBVA                          -185     9.9%      -48     0.1%
BMO Capital Markets           -170    10.0%     ---      0.1%
BNP Paribas                   -200    10.1%     ---      0.1%
BofA Merrill Lynch Resear     -180    10.0%     ---      0.1%
Briefing.com                  -230    10.0%     ---      0.0%
C I T I C Securities          -210     9.9%     ---      ---
Calyon                        -175     9.9%     ---      0.1%
Capital Economics             -180    10.0%     ---      0.0%
CIBC World Markets            -200     9.9%     ---      0.1%
Citi                          -175    10.0%      -45     0.1%
ClearView Economics           -150     9.9%      -35     0.2%
Commerzbank AG                -175     9.9%     ---      0.1%
Credit Suisse                 -150     9.9%     ---      0.3%
Daiwa Securities America      -150     9.9%     ---      ---
Danske Bank                   -120     9.9%     ---      ---
DekaBank                      -160     9.9%     ---      0.1%
Desjardins Group              -200     9.9%     ---      0.1%
Deutsche Bank Securities      -175     9.9%     ---      0.1%
Deutsche Postbank AG          -180     9.9%     ---      ---
DZ Bank                       -160     9.9%     ---      ---
Exane                         -150    10.0%     ---      0.1%
First Trust Advisors          -105     9.9%      -40     0.2%
Fortis                        -160     9.9%     ---      ---
FTN Financial                 -175     9.9%     ---      0.1%
GAIN Capital                  -190    10.0%     ---      ---
Goldman, Sachs & Co.          -200     9.9%     ---      0.1%
Helaba                        -200     9.8%     ---      0.1%
Herrmann Forecasting          -146    10.0%      -43     0.2%
High Frequency Economics      -175     9.9%     ---      0.1%
HSBC Markets                  -175     9.9%     ---      0.1%
Ibersecurities                -130     ---      ---      0.1%
IDEAglobal                    -150     9.9%      -35     0.1%
IHS Global Insight            -190     9.9%     ---      0.1%
Informa Global Markets        -200     9.9%      -40     0.2%
ING Financial Markets         -250    10.0%      -55     0.1%
Insight Economics             -175    10.0%     ---      0.1%
Intesa-SanPaulo               -170     9.9%     ---      0.1%
J.P. Morgan Chase             -140    10.0%      -30     0.1%
Janney Montgomery Scott L     -160     9.8%     ---      ---
Jefferies & Co.               -167     9.9%      -40     0.2%
Landesbank Berlin             -220    10.0%     ---      0.0%
Landesbank BW                 -160     9.8%     ---      ---
Maria Fiorini Ramirez Inc     -180     9.9%     ---      0.1%
MFC Global Investment Man     -160     9.9%      -40     0.1%
Mizuho Securities             -225     9.9%     ---      ---
Moody’s Economy.com           -175    10.0%      -50     0.1%
Morgan Keegan & Co.           -163     ---      ---      ---
Morgan Stanley & Co.          -150     9.9%     ---      0.1%
National Bank Financial       -110     9.9%     ---      ---
Natixis                       -180     9.9%     ---      0.1%
Newedge                       -200     9.9%      -40     ---
Nomura Securities Intl.       -185     9.9%     ---      0.1%
Nord/LB                       -200     9.9%      -55     0.1%
PNC Bank                      -190    10.0%      -35     0.1%
Prestige Economics            -190    10.0%     ---      ---
RBC Capital Markets           -185     9.9%     ---      ---
RBS Securities Inc.           -135     9.9%     ---      0.1%
Ried, Thunberg & Co.          -200     9.9%     ---      ---
Schneider Foreign Exchang     -205     9.9%     ---      0.1%
Scotia Capital                -210     9.9%     ---      0.1%
Societe Generale              -175     9.9%     ---      0.1%
Standard Chartered            -150     9.9%      -46     0.1%
Stone & McCarthy Research     -150     9.9%      -50     0.3%
TD Securities                 -175    10.0%     ---      ---
Thomson Reuters/IFR           -190     9.9%     ---      0.1%
Tullett Prebon                -185    10.0%     ---      0.1%
UBS                           -150     9.9%     ---      0.2%
UniCredit Research            -190    10.1%     ---      ---
University of Maryland        -180     9.9%      -45     0.1%
Wells Fargo & Co.             -208     9.9%     ---      ---
WestLB AG                     -170     9.9%     ---      0.1%
Westpac Banking Co.           -150    10.0%     ---      ---
Woodley Park Research         -221     9.8%     ---      0.1%
Wrightson Associates          -200     9.9%     ---      0.1%
===============================================================

To contact the reporter on this story: Timothy R. Homan in Washington at thoman1@bloomberg.net

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G-20 Members to Seek Appreciation of Asian Currencies, UBS Says

By Lilian Karunungan

Nov. 6 (Bloomberg) -- The Group of 20 finance chiefs will likely push for Asian nations to allow their currencies to appreciate when they meet in Scotland this weekend, according to UBS AG, the world’s second-largest foreign-exchange trader.

G-20 finance ministers and central bankers, including U.S. Treasury Secretary Timothy Geithner and European Central Bank President Jean-Claude Trichet, start two days of talks today in St. Andrews, Scotland. While exchange rates won’t be on the agenda, “many nations will seek to bring it up,” Geoffrey Yu, foreign-exchange strategist in London at UBS, wrote in a research report to clients today

China, the world’s third largest economy, has prevented the yuan from appreciating since July 2008, after it strengthened 21 percent against the dollar in the previous three years. Currency reserves have climbed about 20 percent in China, South Korea and Taiwan in the past year, a sign of dollar purchases designed to stop stronger exchange-rates from hurting exports.

“The Eurozone will likely press hard on the topic, and Asia will once again be on the receiving end of complaints due to inflexibility in many of the region’s currencies,” Yu wrote. “According to the U.S. Treasury, the U.S. is also seeking to use the G-20 to push for a plan for global rebalancing.”

The G-20 finance ministers’ agenda involves measuring the effects of member nations’ economic policies and proposing changes for their leaders, who meet in June. China and other Asian nations have accumulated dollars from widening trade surpluses, buying U.S. Treasury debt and depressing global yields. Lower borrowing costs helped stoke the U.S. housing and credit booms that turned to bust in 2007.

Boom and Bust

“If the G-20 succeeds in establishing a framework for global imbalance adjustments, investors can begin to look forward to gradual convergence in exchange rates towards fair value,” Yu wrote. “However, with growth still at the top of the countries’ individual agendas, realization of these goals may be many summits away.”

The Brazilian real has gained 36 percent against the dollar this year, the South African rand 23 percent, the Canadian dollar 14 percent and the euro 6 percent. The yuan is little changed over that period and the South Korean won gained 7.5 percent.

Brazil will propose the G-20 act to avoid overvaluation of the Brazilian, Australian, New Zealand and South African currencies against the U.S. dollar and the Chinese yuan, Folha de Sao Paulo reported yesterday, citing Finance Minister Guido Mantega. Canada is also concerned about the rising value of its currency, Yu at UBS wrote.

The World Bank said this week “exchange-rate flexibility” will be critical to prevent asset bubbles in East Asian economies. Developing East Asia, which excludes Japan, Hong Kong, Taiwan, South Korea, Singapore and the Indian subcontinent, will expand 6.7 percent this year, more than an April estimate of 5.3 percent, the Washington-based bank said a Nov. 4 report. Growth may accelerate to 7.8 percent next year, it said.

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

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China May Raise Retail Electricity Prices by 5%, CLSA Says

By Bloomberg News

Nov. 6 (Bloomberg) -- China, the world’s second-biggest energy user, may raise retail electricity prices by 5 percent this month to help power distributors cover losses, CLSA Asia- Pacific Markets said.

A possible increase is 0.025 yuan (0.4 cents) per kilowatt- hour, said Dave Dai, a utilities analyst, said in an e-mailed note today. The government may raise residential tariffs more than commercial and industrial charges to avoid overly increasing operating costs that will put pressure on the economic recovery, Dai said.

The Chinese government controls power costs to curb their impact on inflation and it last raised retail tariffs in July 2008. China’s two electricity distributors, State Grid Corp. of China and China Southern Power Grid Co., incurred a net loss of 4.39 billion yuan in the first eight months as the government kept power prices unchanged because of the economic slowdown.

This is in line with “our view that China may eventually subsidize grid companies via increase in retail tariff,” Dai said. The increase “can be negative to downstream end users including aluminum, steel, chemical and cement industries.”

Wang Yonggan, secretary-general at the China Electricity Council, said he hasn’t seen any official government notice of the potential power price adjustment. Li Pumin, a spokesman for the National Development and Reform Commission, didn’t answer calls made to his office.

On-Grid Charges

The Shanghai Securities News reported today that the government may also adjust wholesale electricity charges, or the on-grid cost of power paid by distributors to producers. China last raised on-grid power prices in August last year.

Wholesale prices may drop in eastern China and rise in the west as power plants’ costs vary in different regions, the newspaper reported, without saying where it got the information. Prices of electricity generated by coal-fired power stations may fall 0.007 yuan a kilowatt-hour in Guangdong while those in Shanxi may increase by 0.012 yuan a kilowatt-hour, it reported.

“The key reason for this up and down adjustments is related to different paces of profit recovery in 2009” between power producers in in-land regions and in coastal areas, Dai wrote in the note.

The country’s “top government officials” want to adjust prices this month or “no later than” coal producers and power utilities meet to discuss coal supply contracts for 2010, the report said, without giving details.

To contact the Bloomberg News staff on this story: Ying Wang in Beijing at ywang30@bloomberg.net

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Crude Oil Rises, Poised for Weekly Gain, on Signs of Recovery

By Yee Kai Pin and Ben Sharples

Nov. 6 (Bloomberg) -- Crude oil rose in New York, poised for a weekly gain, on optimism fuel demand will increase amid improved prospects for an economic recovery in the U.S., the world’s biggest energy consumer.

Oil rebounded from last week’s 4.4 percent decline after U.S. crude oil stockpiles unexpectedly fell, an Energy Department report showed this week. Futures also rose as Asian stocks followed U.S. equities higher and the dollar traded near a one-week low against the euro.

“Yesterday’s big gain in the stock market was a very good signal,” said Ken Hasegawa, a commodity derivatives sales manager at brokers Newedge in Tokyo. “Everyone understands commodities shouldn’t be different from stocks” as an indicator of the economy and demand, he said.

Crude oil for December delivery rose as much as 55 cents, or 0.7 percent, to $80.17 a barrel in electronic trading on the New York Mercantile Exchange. It was at $79.95 a barrel at 3:45 p.m. Singapore time. Yesterday, the contract slipped 78 cents to settle at $79.62 a barrel. Futures, up 80 percent in 2009, have gained 4 percent this week.

The Standard & Poor’s 500 Index added 1.9 percent in New York yesterday. The Dow Jones Industrial Average increased 2.1 percent to close above 10,000 for the first time since Oct. 22. Asian shares also rose, with the MSCI Asia Pacific Index up 1.1 percent at 4:46 p.m. in Tokyo, trimming its loss for the week.

“If you look at the trend over the past eight months, we’re certainly in a recovery phase,” said Toby Hassall, a research analyst at CWA Global Markets Pty in Sydney. “There are forecasts out there for $85 to $90 by year’s end, which I would say aren’t too far off the mark.”

Unemployment Rate

Oil declined 1 percent yesterday on concern that the Labor Department will say the U.S. unemployment rate rose to a 26-year high in October. An additional 175,000 jobs were probably lost in October, pushing unemployment to 9.9 percent, economists forecast before the Labor Department payrolls report due at 8:30 a.m. today in Washington.

“There has been some concern over the labor market and what that means for the consumer sector,” Hassall said. “The market is still looking for indications that the economy as a whole is improving.”

The dollar was little changed against the euro at $1.4877 at 7:50 a.m. in London. Yesterday it touched $1.4917, the weakest level since Oct. 27. The dollar’s decline bolsters the appeal of commodities as an alternative investment.

U.S. crude oil stockpiles fell 3.94 million barrels last week, more than reversing inventory gains made over the previous three weeks, the Energy Department said Nov. 4. An increase of 1.5 million barrels was forecast, according to the median estimate in a Bloomberg News survey of analysts.

Price Survey

Oil analysts and traders were split over whether crude oil prices will rise or fall next week, as investors focus on a weak dollar and ample product stockpiles.

Fourteen of 35 respondents polled by Bloomberg News, or 40 percent, said futures will drop through Nov. 13. Fourteen more predicted that oil will rise, while seven said prices may be little changed. Last week, 44 percent of survey respondents said the market would fall.

Brent crude oil for December settlement rose as much as 69 cents, or 0.9 percent, to $78.68 a barrel on the London-based ICE Futures Europe exchange. The contract was at $78.60 a barrel at 3:51 p.m. in Singapore.

To contact the reporters on this story: Yee Kai Pin in Singapore at kyee13@bloomberg.net; Ben Sharples in Melbourne at bsharples@bloomberg.net

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Euro Gaining Trend Revives, Citigroup Says: Technical Analysis

By Candice Zachariahs

Nov. 6 (Bloomberg) -- The euro may climb as much as 3 percent against the dollar after finding support at its 55-day moving average, Citigroup Inc. said, citing trading patterns.

Recent declines in Europe’s single currency stalled Nov. 3 at the 76.4 percent Fibonacci retracement of the rally from the euro’s Oct. 2 low of $1.4481 to its Oct. 26 high of $1.5063, Citigroup said. The euro may now gain to $1.5064 with a “firm” break of that level opening up a move to $1.5285, analysts Tom Fitzpatrick and Aron Gera in New York and London-based Shyam Devani wrote in a note to clients yesterday.

“At this stage it appears as though the correction down is over and the general uptrend is back in play,” according to the Citigroup team, led by chief technical analyst Fitzpatrick. “The recent highs at $1.50-plus will be tested again.”

The euro traded at $1.4870 as of 8:29 a.m. in Tokyo and has a 55-day moving average of $1.4661.

In technical analysis, investors and analysts study charts of trading patterns and prices to forecast changes in a security, commodity, currency or index. Fibonacci charts are based on the theory that securities tend to rise or fall by specific percentages after reaching a new high or low.

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

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Dollar Poised for Weekly Drop as U.S. Job Losses Seen Slowing

By Anchalee Worrachate and Yoshiaki Nohara

Nov. 6 (Bloomberg) -- The dollar fell, heading for a weekly loss against the euro, before a government report today forecast to show U.S. employers cut fewer jobs last month, boosting demand for higher-yielding assets.

The U.S. currency declined most compared with the South Korean won and the New Zealand dollar, sending the Dollar Index 0.1 percent lower. The euro was poised for a weekly gain versus the yen before data economists expect to show German factory orders rose for a seventh month. The Australian dollar climbed against all but two of its 16 major counterparts after the central bank said the nation’s economy will expand at more than three times the pace it forecast in August.

“The dollar should retain its weakening bias into the jobs data,” said Geoffrey Yu, a currency strategist in London at UBS AG. “Sentiment on the economic outlook seems to be stabilizing. People are expecting a slowdown in job losses, and you will need a really bad number to surprise the market.”

The dollar dropped to 90.45 yen as of 8:33 a.m. in London, from 90.71 yen in New York yesterday, paring its weekly gain to 0.4 percent. It was at $1.4877 per euro from $1.4871 yesterday, when it touched $1.4917 in New York, the weakest level since Oct. 27. The yen was at 134.57 per euro from 134.92.

The dollar has dropped 1.1 percent this week against the euro. The Labor Department may say today U.S. employers eliminated 175,000 jobs in October after a reduction of 263,000 in the previous month, according to the median estimate of 84 economists in a Bloomberg News survey. The report is scheduled for release at 8:30 a.m. in Washington.

‘Re-focus on $1.50’

“Good data is more likely to put pressure on the dollar as foreign-exchange markets are still being guided by global risk aversion,” Antje Praefcke, a currency strategist at Commerzbank AG in Frankfurt, wrote today in a report. “If the labor-market report does not bring any negative surprises, the improved sentiment on the financial markets is likely to support euro- dollar. In that case attention could soon re-focus on the $1.50 mark.”

The U.S. currency may also extend losses as Group of 20 finance chiefs push for Asian nations to allow their currencies to appreciate when they meet in Scotland this weekend, according to UBS, the world’s second-largest foreign-exchange trader.

While exchange rates won’t be on the agenda, “many nations will seek to bring it up,” Yu wrote in a research report today.

Euro-Yen

The euro headed for a weekly gain versus the yen. Germany’s Economy Ministry may say factory orders rose 1 percent in September after gaining 1.4 percent in August, according to the median estimate of economists in a Bloomberg News survey. The data are due for release at noon in Berlin.

European Central Bank President Jean-Claude Trichet yesterday indicated unlimited 12-month loans to commercial banks, one of the ECB’s main policies this year to support Europe’s economic recovery, won’t be extended after next month’s operation. The ECB kept its benchmark rate at 1 percent.

“Although his remarks were not particularly hawkish, this presented a positive surprise for the markets, which did not have strong prior expectations that the ECB President would in fact explicitly discuss prospects for an exit strategy and aided sentiment toward the euro,” Emmanuel Ng, an economist in Singapore at Oversea-Chinese Banking Corp., wrote today.

The world’s biggest central banks are starting to unwind emergency measures introduced earlier this year to stave off a second Great Depression. The Bank of England yesterday slowed the pace of bond purchases. A day earlier, the Federal Reserve outlined the circumstances in which it would be prepared to raise interest rates.

Aussie Gains

The Australian dollar climbed after the Reserve Bank of Australia today said the nation’s gross domestic product will expand 1.75 percent this year. In August, the bank forecast a 0.5 percent increase.

“Growth in business investment and exports is expected to be strong, underpinned by the ongoing expansion of the resources sector,” the central bank said. “The outlook for Australia’s terms of trade has also improved, with some increase now expected over the next year or two.”

The Australian dollar rose to 91.72 U.S. cents from 91.02 cents. It advanced to 83.02 yen from 82.57 yen.

Benchmark interest rates are 3.5 percent in Australia, compared with as low as zero in the U.S. and 0.1 percent in Japan, making the nation’s assets attractive to investors seeking higher returns.

Pound’s Weekly Gain

The pound headed for a second weekly advance against the dollar on speculation a U.K. report will show producer prices rose for a fourth month in October.

The central bank yesterday left its key rate at 0.5 percent and raised the amount of bonds it will buy as part of its quantitative-easing program to 200 billion pounds ($332 billion), less than the 225 billion pounds forecast in a Bloomberg News survey of economists.

There are “a number of indicators of spending and confidence” that “suggest that a pickup in economic activity may soon be evident,” the BOE Monetary Policy Committee said in a statement. “The committee believes that the prospect is for a slow recovery in the level of economic activity.”

The price of goods at U.K. factory gates rose 0.2 percent in October after a 0.5 percent increase in September, a separate Bloomberg survey showed before the Office for National Statistics releases the data at in London today.

“The BOE is sounding a little more upbeat on economic prospects and has increased its quantitative easing program by less than expected,” said Mike Jones, a currency strategist at Bank of New Zealand Ltd. in Wellington. “As a result, the pound is finding strength.”

The pound traded at $1.6618 from $1.6583 in New York yesterday, when it climbed to $1.6636, the highest level since Oct. 23. It gained 1 percent on the week.

To contact the reporters on this story: Anchalee Worrachate in London at aworrachate@bloomberg.net; Yoshiaki Nohara in Tokyo at ynohara1@bloomberg.net

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Thai Rice Production May Beat Forecast, Official Says

By Supunnabul Suwannakij and Luzi Ann Javier

Nov. 6 (Bloomberg) -- Rice production in Thailand, the world’s biggest exporter, may beat a previous projection in the current crop year as increasing prices drive farmers to plant more, an official said.

Output in the crop year that began Oct. 1 may rise to as much as 35 million metric tons, Chairit Damrongkiat, deputy director general of rice department, said in an interview in Bangkok yesterday. The department’s previous projection for the 2009-2010 crop was 32 million tons.

“We see lower global production,” Chairit said. “This provides us with an opportunity to increase output.”

Higher output from Thailand may slow a decline in global production and boost exports available to buyers including the Philippines, preventing prices from returning to 2008’s record levels. The global rice crop is forecast to drop 2.7 percent to 433.7 million metric tons in the 2009-2010 marketing year, the U.S. Department of Agriculture estimated on Oct. 9.

Rice traded in Chicago jumped 15 percent in the past month on concern that crop losses from storms in the Philippines and drought in India would curb supply and boost demand for imports.

The contract for January delivery last traded at $15.12 per 100 pounds as of 10 a.m. in Singapore. Futures climbed to a record $25.07 in April 2008 as surging food prices sparked protests around the globe.

Production from Thailand’s main crop, harvested from October, is estimated to be about 23 million tons. The output increase is likely to come from the second crop, which is harvested from March, Chairit said.

Supply Response

“You would expect that with these kinds of market price signals that there is certainly potential to see more acreage, particularly in irrigated rice areas,” Eric Wailes, an agricultural economics professor at the University of Arkansas, said Nov. 2. “There will be a supply response into the next spring of 2010.”

India’s wet season harvest, which accounts for 80 percent of the country’s total output, may slump to 65 million tons, from 85 million tons a year ago, said Samarendu Mohanty, a senior economist at the Manila-based International Rice Research Institute.

The weakest monsoon in India since 1972 may help pull stockpiles in the world’s five biggest rice-exporting nations down by a third to 20 million tons in the 2009-2010 marketing year, Concepcion Calpe, senior economist at the U.N. Food and Agriculture Organization, said last month.

Tender Increased

The Philippines, which lost about 1 million tons of rice to Tropical Storm Ketsana and Typhoon Parma, may buy as much as 312,500 tons of rice, 25 percent more than sought in its first tender for 2010 supplies. The Nov. 4 tender took place a month earlier than usual on concern that a supply shortage may cause prices to surge.

The State Trading Corp. of India Ltd. is seeking bids from overseas suppliers for about 10,000 metric tons of 25 percent broken rice for delivery by December at a tender on Nov. 9, according to a notice sent to traders on Oct. 30.

India may import as much as 3 million tons next year, Mohanty said, turning the country into a net importer for the first time in more than two decades.

To contact the reporters on this story: Supunnabul Suwannakij in Bangkok at ssuwannakij@bloomberg.net Luzi Ann Javier in Singapore at ljavier@bloomberg.net

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Copper to Outperform in 2010 on Stimulus Effect, Tong Yang Says

By Sungwoo Park

Nov. 6 (Bloomberg) -- Copper, which has more than doubled in price this year, may outperform other metals in 2010 as government infrastructure spending boosts demand for the metal used in electrical wires, Tong Yang Securities Inc. said.

“Prices of industrial metals will advance next year,” Yi Seong Je, a commodities analyst at Tong Yang Securities in Seoul, said by phone yesterday. “Copper will outperform since stimulus spending is focused mostly on infrastructure, which primarily needs the metal.”

Copper gained to a one-year high last month on demand from China, the world’s biggest metals user, and as the dollar slumped against major currencies. China’s government is spending $586 billion to spur the local economy, helping to drive imports to record levels in the first half of 2009.

Yi forecast copper for delivery in three months on the London Metal Exchange may average around $6,500 a ton next year, and top $7,000 a ton by the end of 2010.

Copper on the LME has averaged $4,907 a ton this year, according to Bloomberg data. The metal gained 0.5 percent to $6,562 a ton at 10:06 a.m. Seoul time.

“What I am closely looking at now is demand-related indicators because current price levels fueled by increased liquidity cannot be sustainable without support from actual demand,” Yi said. “The key is by how much demand in major consuming nations apart from China will recover.”

Aluminum in London has gained 26 percent this year, while zinc has jumped 85 percent and lead has more than doubled.

Base-metal prices may decline toward the end of this year because “fundamentals are too weak” to justify current levels and a rebound in the dollar cannot be ruled out, he said.

To contact the reporter on this story: Sungwoo Park in Seoul at spark47@bloomberg.net.

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Soybeans Rise as Investors Judge Recent Declines as Excessive

By Luzi Ann Javier

Nov. 6 (Bloomberg) -- Soybeans rose as investors judged the drop in the past two days as excessive and higher crude oil prices boosted prospects for crops used in biofuels.

Soybean futures fell 3.8 percent in the past two days and corn futures lost 3.5 percent on speculation warmer, drier weather in the U.S. Midwest will help accelerate harvesting in the largest exporter of both crops. Crude oil traded near $80 a barrel in New York on optimism demand will rise amid improved prospects for an economic recovery in the U.S.

“There’s been heavy selling in the market” Tetsu Emori, a commodity fund manager at Astmax Co., said by phone from Tokyo today, referring to soybeans, corn and wheat. Some investors are covering their short positions, or bets prices will fall, helping support prices, he said.

Soybeans for January delivery rallied as much as 1.1 percent to $9.825 a bushel in after-hours electronic trading on the Chicago Board of Trade before trading at $9.805 at 2:06 p.m. Singapore time. Soybeans yesterday had the biggest drop for the most-active contract in almost five weeks.

Corn for December delivery was little changed at $3.7675 a bushel, after gaining as much as 0.5 percent earlier. The most- active contract, which closed 2 percent lower yesterday, is headed for a 2.9 percent gain this week.

Wheat Declines

December-delivery wheat fell 0.2 percent to $5.115 a bushel, trimming the weekly gain to 3.5 percent.

Higher crude oil boosted demand prospects for corn, processed into ethanol to stretch gasoline supplies, and soybean oil, used to make biodiesel, Emori said.

Denatured ethanol for December delivery added 0.1 percent to close at $1.867 a gallon on the Chicago Board of Trade yesterday, as its discount to gasoline encouraged refiners and blenders to boost usage.

Still, drier, warmer weather in the Midwest, the largest U.S. growing region, may accelerate harvesting, lowering the risk of frost damage and damping prices, Emori said.

“Good production in the U.S. would ease the supply tightness in the oilseed and grain market,” he said.

Global stockpiles of all major oilseeds including soybeans were estimated to drop 12 percent to 55 million tons before the start of the 2009-2010 marketing year, from a year earlier, as production lags behind demand, according to a U.S. Department of Agriculture forecast on Oct. 9.

The USDA forecast in October that the nation’s soybean output will rise to a record 3.25 billion bushels from 3.245 billion bushels it estimated a month earlier.

It also increased in October its U.S. corn output estimate to 13.018 billion bushels, the second-largest on record, from 12.955 billion bushels a month earlier.

To contact the reporter on this story: Luzi Ann Javier in Singapore at ljavier@bloomberg.net

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Most Japanese Stocks Fall; Financial Shares Decline, Sony Rises

By Kana Nishizawa and Satoshi Kawano

Nov. 6 (Bloomberg) -- Most Japanese stocks fell, led by financial companies on concern stricter rules will force them to raise funds, diluting the value of current shareholdings, and after companies cut their profit forecasts.

T&D Holdings Inc., Japan’s biggest listed life insurer, tumbled 11 percent after it registered to sell 120 billion yen ($1.3 billion) in new shares. NTT Urban Development Corp. tumbled 7 percent after reducing its full-year net income forecast by more than half. Sony Corp., the nation’s biggest television exporter, added 1.6 percent after the U.S. reported lower-than-expected jobless claims and higher productivity.

“Regulations are expected to be tightened, so financial companies have to raise capital to maintain their size,” said Kiyoshi Ishigane, strategist at Mitsubishi UFJ Asset Management Co., which oversees the equivalent of $56 billion in Tokyo. “An excess supply of their shares will lead to sell-offs.”

Japan’s Topix index lost 0.1 percent to 874.01 at the close in Tokyo, with more than two shares falling for each that rose. The Nikkei 225 Stock Average climbed 0.7 percent to 9,789.35. The Topix lost 2.3 percent for the week, while the Nikkei declined 2.5 percent. Stocks in the Topix are valued at 36 times estimated earnings, compared with 20 at the start of 2009.

Financial stocks dropped after T&D, Japan’s biggest listed life insurer, announced it may sell stock to repay debt. T&D shares plunged 11 percent to 2,115 yen. Sompo Japan Insurance Inc., a casualty insurer, retreated 2 percent to 544 yen. Resona Holdings Inc., Japan’s fourth-largest bank by market value, fell 1.7 percent to 1,037 yen.

Financial Companies

Leaders from the Group of 20 nations are expected to favor stricter capital requirements at a meeting today that will exclude preferred shareholdings from core capital, a move that may force Japanese banks to issue new shares, the Nikkei reported.

NTT Urban Development Corp. tumbled 7 percent to 66,600 yen. The property developer cut its full-year net income forecast by more than half, to 5 billion yen from 12 billion yen because of impairment losses on inventory assets.

Acom Co., Japan’s largest consumer-finance lender by market value, dropped 7.5 percent to 1,477 yen after forecasting a loss of 11.4 billion yen for the year ending March to pay for headcount reductions. It plans to close branches and eliminate 550 jobs.

Mitsumi Electric Co. slid 6.3 percent to 1,631 yen, after the electronic-component maker reduced its full-year net income outlook to 5.3 billion yen from 7 billion yen. The company had a 11.2 billion yen profit a year ago. Its first-half profit tumbled 63 percent to 3.51 billion.

Exporters Advance

Bridgestone Corp. fell 3.3 percent to 1,436 yen. The world’s largest tiremaker by sales expects an annual loss of 10 billion yen as a result of plant closures in Australia and New Zealand. The company had previously expected a profit of 6 billion yen for the year through Dec. 31.

In New York, the Dow Jones Industrial Average jumped 2.1 percent yesterday, the biggest gain since July. Worker productivity surged at a 9.5 percent annual rate in the third quarter, the fastest pace in six years, according to the Labor Department. Initial jobless claims dropped by 20,000 to 512,000 in the week ended Oct. 31, the fewest since January. Labor costs also fell, signaling companies may start hiring again.

“Unemployment is the biggest problem in the U.S. and we’re seeing positive signs there, which boosts exporters here,” said Mitsubishi UFJ’s Ishigane.

Sony gained 1.6 percent to 2,590 yen. Canon Inc., the world’s largest camera maker, rose 1.8 percent to 3,410 yen.

“Investors are likely to buy into exporter shares with the improvements in the U.S. economic data,” said Juichi Wako, a senior strategist at Tokyo-based Nomura Holdings Inc.

To contact the reporter for this story: Kana Nishizawa in Tokyo at knishizawa5@bloomberg.net; Satoshi Kawano in Tokyo skawano1@bloomberg.net.

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Asian Stocks Rise on Australian Growth Outlook, Data From U.S.

By Jonathan Burgos

Nov. 6 (Bloomberg) -- Asian stocks rose, paring a weekly loss, after Australia’s central bank more than tripled its economic-growth forecast and reports showed U.S. unemployment claims and worker productivity beat estimates.

Macquarie Group Ltd., Australia’s largest investment bank, and Westpac Banking Corp., the country’s second-largest bank, both gained more than 2.5 percent. James Hardie Industries NV, the top seller of home siding in the U.S., advanced 2.6 percent. Asahi Glass Co., Asia’s largest glassmaker, climbed 6.5 percent in Tokyo after forecasting a narrower loss. Pioneer Corp. surged 8.9 percent after the maker of car-navigation systems said it needs less funds than previously expected as earnings improve.

“Macro-economic numbers and earnings should continue to surprise on the upside,” said Manpreet Gill, Singapore-based strategist for Asia at Barclays Wealth, which has $223 billion in assets. “Equities are not expensive, and investors waiting for a big correction may miss the boat.”

The MSCI Asia Pacific Index gained 1 percent to 115.88 as of 4:15 p.m. in Tokyo, with twice as many stocks advancing as declining. The gauge has fallen 0.5 percent this week. It has climbed 29 percent this year, on course for its steepest annual increase since 2003, as governments around the world pumped money into the financial system to revive the global economy.

Japan’s Nikkei 225 Stock Average added 0.7 percent to 9,789.35. China’s Shanghai Composite Index rose 0.3 percent and Hong Kong’s Hang Seng Index gained 1.6 percent. Australia’s S&P/ASX 200 Index climbed 1.9 percent, the sharpest advance in the Asia-Pacific, and most of the region’s benchmark indexes gained.

U.S. Stocks Surge

In the U.S. yesterday, the Dow Jones Industrial Average surged 2.1 percent, the most since July. Data from the Labor Department showed initial joblessness claims dropped to 512,000 last week, the lowest level since January, and worker productivity climbed at a 9.5 percent annual rate in the third quarter, the fastest pace in six years. Labor costs also fell, signaling companies may start hiring again. Futures on the Standard & Poor’s 500 Index were little changed today.

“Unemployment is the biggest problem in the U.S. right now and we’re seeing some positive signs there,” Kiyoshi Ishigane, a strategist in Tokyo at Mitsubishi UFJ Asset Management Co., which oversees about $56 billion.

James Hardie gained 2.6 percent to A$7.18. Sony Corp., Japan’s biggest exporter of televisions, climbed 1.6 percent to 2,590 yen. Canon Inc., the world’s largest camera maker, advanced 1.8 percent to 3,410 yen. Li & Fung Ltd., the biggest supplier of clothes and toys to Wal-Mart Stores Inc. and Target Corp., added 0.8 percent to HK$32.85 in Hong Kong.

Macquarie Group climbed 4.1 percent to A$49.60. Westpac gained 2.6 percent to A$26.55 and Melbourne-based BHP Billiton Ltd., the world’s largest mining company, added 2.6 percent to A$37.40. BHP and Westpac were the biggest contributors to the MSCI index’s advance.

Australian GDP

Australia’s central bank said the economy will expand at more than three times the pace forecast in August, and signaled it will continue to lead the world in raising interest rates.

“A further gradual lessening of monetary stimulus is likely to be required over time,” the Reserve Bank said in Sydney today. Gross domestic product will rise 1.75 percent this year and 3.25 percent in 2010, the bank said. Three months ago, it forecast gains of 0.5 percent and 2.25 percent respectively.

Stocks in the MSCI Asia Pacific Index are valued at 22 times estimated earnings, compared with 17 times for the Standard & Poor’s 500 in the U.S. and 15 times for the Dow Jones Stoxx 600 Index in Europe.

Earnings, Financing

Asahi Glass jumped 6.5 percent to 815 yen. The company said it will book a net loss of 5 billion yen ($55 million) this year, narrower than its previous forecast of 34 billion yen.

DBS Group Holdings Ltd., Southeast Asia’s biggest lender, added 2.9 percent to S$13.36 and was the biggest contributor to gains in Singapore’s benchmark index. The company reported third-quarter net income of S$563 million ($403 million), compared with the S$438 million estimated on average by analysts surveyed by Bloomberg.

Pioneer advanced 8.9 percent to 246 yen. The company said it needs to raise only half of the 40 billion yen it had targeted by March 2012.

NEC Corp., Japan’s largest maker of personal computers, surged 10 percent to 273 yen. The company plans to raise as much as 134 billion yen ($1.5 billion) by selling stock to help fund new businesses and pay off debt. NEC had the steepest gain in the MSCI index.

To contact the reporter for this story: Jonathan Burgos in Singapore at jburgos4@bloomberg.net.

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Deutsche Boerse Follows NYSE With Third-Quarter Earnings Drop

By Nandini Sukumar and Whitney Kisling

Nov. 6 (Bloomberg) -- Deutsche Boerse AG joined NYSE Euronext in reporting a decline in third-quarter profit as trading slowed and the largest exchanges in Europe and the U.S. lost business to smaller competitors.

Deutsche Boerse’s net income fell 38 percent to 158.3 million euros ($235.4 million) from 257.3 million euros a year earlier on fewer transactions and lower fees, the Frankfurt- based exchange said yesterday. NYSE Euronext reported a 28 percent decline in third-quarter profit last week as equity trading revenue fell and European competitors took market share.

Business at NYSE Euronext, London Stock Exchange Group Plc and Deutsche Boerse has slowed following the worst financial crisis since the Great Depression. At the same time, competition from so-called multilateral trading facilities, such as Chi-X Europe Ltd., Turquoise and Bats Global Markets, has wrested more than 25 percent of trading from traditional exchanges in the last two years.

“The competition has stiffened up, and the overall market volume is down a bit from last year,” said Sang Lee, a market analyst at Aite Group LLC, a Boston-based financial-services consultant. The biggest exchanges “see their revenue coming from the trading side declining, driven by the competition from some of their smaller, more nimble competitors that are out there,” he said.

Biggest Stock Retreat

Deutsche Boerse’s profit of 85 euro cents a share missed the average adjusted estimate of analysts surveyed by Bloomberg by 4.4 percent. While NYSE’s profit beat analysts’ estimates, it still spurred a 6.3 percent retreat in the stock on Oct. 30, its steepest sell-off in four months.

Nasdaq OMX Group Inc., owner of the second-largest U.S. stock exchange, said yesterday that profit rose 3.4 percent after it cut expenses and recovered market share in the nation’s equity trading with lower fees. Third-quarter net income climbed to $60 million, or 28 cents a share, from $58 million, or 27 cents, a year earlier. Excluding some items, profit was 42 cents a share, matching the average estimate of 18 analysts surveyed by Bloomberg.

NYSE’s net income fell to $125 million, or 48 cents a share, in the third quarter from $174 million, or 66 cents, a year earlier, the New York-based company said on Oct. 30. Excluding some costs, profit was 53 cents a share, beating the 46 cent average of 17 analysts surveyed by Bloomberg.

Market Share Drops

NYSE’s share of U.S. equity trading in September fell to 28 percent from 34.3 percent a year earlier. Its share of France’s CAC 40 Index volume dropped to 46 percent in September from 55 percent a year earlier, according to data compiled by Thomson Reuters. NYSE boosted rebates for its biggest customers and cut fees at two options exchanges in the past year to stem losses in market share in Europe and the U.S. to newer competitors such as Chi-X and Direct Edge Holdings LLC.

Nasdaq and NYSE battled only each other for U.S. equity trading for about three decades, with the New York Stock Exchange claiming most of the market, until Bats and Direct Edge started about four years ago, now accounting for about 20 percent combined.

Deutsche Boerse’s costs fell 1 percent to 306.7 million euros in the third quarter, and revenue dropped 19 percent to 500.9 million euros.

“The decline is largely due to price changes in trading of U.S. options and in the settlement of German securities as well as effects caused by the weaker U.S. dollar,” the exchange said in the statement yesterday. Costs in 2010 won’t exceed the 1.28 billion euros it’s targeting for 2009, a forecast that the exchange reiterated yesterday.

Sales Decline

Deutsche Boerse is part-owner of Eurex, Europe’s largest futures market. It bought New York-based International Securities Exchange Holdings Inc. in 2007 and also owns Clearstream, the region’s No. 2 securities-settlement company.

Sales from the company’s Xetra stock trading unit dropped 37 percent to 63.1 million euros. Revenue from Eurex slid 26 percent to 191.5 million euros. Sales at Clearstream declined 7 percent to 176.6 million euros. Revenue from Market Data & Analytics fell 2 percent to 45.4 million euros.

“Competition in Europe has given a big headache to incumbent exchanges,” Mamoun Tazi, an exchange analyst at MF Global Ltd. in Geneva who rates Deutsche Boerse “neutral,” said in an interview yesterday.

To contact the reporters on this story: Nandini Sukumar in London at nsukumar@bloomberg.net; Whitney Kisling in New York at wkisling@bloomberg.net.

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Global Stocks May Fall as U.S. Yields Rise: Technical Analysis

By Patrick Rial

Nov. 6 (Bloomberg) -- Global stocks may be headed for a “correction” as an increase in U.S. 10-year yields prompts a reduction of carry trades, according to Citigroup Inc.

The yield on 10-year government bonds climbed 37 basis points from a July 31 low to Aug. 8. Using that range, the resistance level stands at 3.55 percent from a low of 3.18 percent on Oct. 1, said Yutaka Yoshino, chief technical analyst at Citigroup in Tokyo, who uses the Japanese technical analysis method of “ichimoku kinko,” which looks at wave patterns and repeating trends. Yields move inversely to bond prices and 1 basis point is equal to 0.01 percentage point.

“If we pass that 3.55 level on the yield, we stop being in a rebound phase and enter into a rising trend,” said Yoshino. “Inflation concerns are starting to creep in and the Federal Reserve has no control over long-term interest rates.”

The yield on the 10-year note finished at 3.53 percent yesterday and will keep rising should it break above the resistance level, Yoshino said. Rising U.S. interest rates mean investors can’t borrow as cheaply in dollars to fund purchases of higher-yielding assets including stocks, a strategy known as a carry trade, he said.

The Dow Jones Industrial Average could decline 14 percent to as low as 8,600 and the Nikkei 225 Stock Average may slide 13 percent to 8,450, he said.

Fed officials said on Nov. 4 they’re more optimistic about the economic outlook and maintained a commitment to keeping interest rates near zero for an “extended period.” The central bank specified for the first time that policy will stay unchanged as long as inflation expectations are stable and unemployment fails to decline.

Ichimoku kinko, a strategy developed by a Japanese journalist prior to World War II, translates as “one glance equilibrium chart” because of the cloud-like patterns formed by trend lines that make it easy to understand at a glance. The style of analysis is similar to the Elliott Wave theory developed by accountant Ralph Nelson and popularized by Robert Prechter.

Technical analysts make predictions based on patterns in price charts and market data.

To contact the reporter for this story: Patrick Rial in Tokyo at prial@bloomberg.net.

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Bebe, Hansen, Nvidia, Sotheby’s, Starbucks: U.S. Equity Preview

By Rita Nazareth

Nov. 6 (Bloomberg) -- Shares of the following companies may have unusual moves in U.S. trading. Stock symbols are in parentheses.

Bebe Stores Inc. (BEBE US): The clothing retailer reported first-quarter adjusted loss of 4 cents a share, wider than the average analyst estimate of a loss of 2 cents.

Crocs Inc. (CROX US): The maker of colorful clogs with holes forecast fourth-quarter adjusted loss of as much as 20 cents a share, wider than the average analyst estimate of a loss of 16 cents.

Hansen Natural Corp. (HANS US): The beverage maker reported third-quarter profit excluding some items of 60 cents a share, missing the average analyst estimate by 5.4 percent.

Nvidia Corp. (NVDA US): The maker of graphics chips reported third-quarter profit excluding some items of 19 cents a share, beating the 10-cent average of analyst estimates compiled by Bloomberg.

Sotheby’s (BID US): The auction house reported third- quarter adjusted loss of 84 cents a share as art sales contracted with the global economy. On average, the three analysts surveyed by Bloomberg forecast a loss of 29 cents a share.

Starbucks Corp. (SBUX US): The world’s largest coffee-shop operator reported fourth-quarter profit excluding some items of 24 cents a share as cost cuts expanded margins. The earnings beat the average analyst estimate by 15 percent.

To contact the reporter on this story: Rita Nazareth in New York at rnazareth@bloomberg.net

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