China Central Banker Zhu Says Stable Yuan ‘Important’

By Rob Delaney and Simon Kennedy

Jan. 27 (Bloomberg) -- People’s Bank of China Deputy Governor Zhu Min defended his country’s “stable” yuan policy and warned that dollar volatility is threatening a global economic recovery.

“It’s absolutely important to have rmb stability. It’s good for China. It’s also good for the world” Zhu said in a panel discussion at the World Economic Forum in Davos, Switzerland. Rmb is an abbreviation for renminbi, the yuan’s formal name.

“Everybody understands that because of the U.S. dollar carry trading, all this money was brought into the emerging market, and someday if U.S. monetary policy changes, this money will go back to the U.S. market,” Zhu said.

China is fighting criticism from countries, including the U.S., that it’s keeping the yuan’s value artificially low, making it more difficult for exporting nations to compete. China has kept a lid on its currency since July 2008 after it strengthened 21 percent against the dollar over the previous three years.

“I think they have been excessively self-interested. I think they’ve been very uncooperative,” Barney Frank, chairman of the U.S. House Financial Services Committee, said of China’s currency policy. Frank was on the same panel as Zhu and made his comments to reporters afterwards.

Yuan Peg

China’s economy rebounded stronger than anticipated in the fourth quarter, and the inflation rate accelerated to a 13-month high of 1.9 percent in December, igniting speculation the government will abandon the yuan peg to avoid the economy from overheating.

The Chinese government may allow the yuan to have “a bigger one-off move than people talk about, at least 5 percent, maybe more,” Goldman Sachs Group Inc. Chief Economist Jim O’Neill said in a Jan. 23 interview. “They may also consider having a wide band to let it move more frequently on the daily basis to stop speculative players.”

To contact the reporter on this story: Rob Delaney in Davos at robdelaney@bloomberg.net

Read more...

Dollar Trades at Almost Five-Week Low Before Fed’s Statement

By Ben Levisohn

Jan. 27 (Bloomberg) -- The dollar traded at almost a five- week low against the yen before the Federal Reserve’s policy statement, which is forecast by analysts to maintain a pledge to hold interest rates at virtually zero for an extended period.

“The Fed is having to walk a fine line now,” said Omer Esiner, a senior foreign-exchange analyst in Washington at Travelex Global Business Payments, a currency exchange network. “There’s a lot of political pressure to signal that they’ll keep rates low for the foreseeable future, and the market is getting anxious that there hasn’t been an articulated exit.”

Sterling rose versus all of its 16 most-traded counterparts on speculation the Bank of England will halt its bond-purchase program. The euro was at almost six-month low versus the dollar as New York University Professor Nouriel Roubini, who predicted the financial crisis, said he’s never been more pessimistic about the European monetary union’s future.

The dollar fell 0.2 percent to 89.48 yen at 8:58 a.m. in New York, from 89.65 yesterday. It traded earlier at 89.14, the lowest level since Dec. 18. The U.S. currency was little changed at $1.4057 per euro, compared with $1.4072. It touched $1.4022, the strongest level since July 30. The euro dropped 0.3 percent to 125.78 yen, from 126.16, after reaching 125.24, the lowest level since April 28.

The greenback weakened versus the yen on speculation the Fed reiterate that interest rates will stay low, discouraging demand for dollar-denominated assets. The Fed may acknowledge growth accelerated last quarter while noting that tight credit and unemployment at almost a 26-year high still pose risks.

Roubini on Euro

Spain represents a looming threat to the ability of the euro region to hold together, said Roubini in a Bloomberg Radio interview from the World Economic Forum’s annual meeting in Davos, Switzerland.

“Down the line, not this year or two years from now, we could have a breakup of the monetary union,” Roubini said. “It’s a rising risk.”

Speculation of a breakup has mounted in financial markets as Greece struggles to cut the continent’s biggest budget deficit and countries from Spain to Ireland face rising debt.

Luxembourg’s Jean-Claude Juncker, who leads the group of euro-area finance ministers, said in Luxembourg today there is no risk of a state bankruptcy for Greece and the possibility of the nation’s leaving the euro region is “an absurd theory.”

The common currency pared declines versus the dollar as the European Central Bank council member Axel Weber said policy makers may take further steps in the first half of this year to withdraw stimulus measures as the economy gathers strength.

Germany’s Inflation

German consumer prices, calculated using a harmonized European Union method, fell 0.4 percent this month after rising 0.9 percent in December, according to the median forecast of 21 economists in a Bloomberg News survey. The report from the Federal Statistics Office is due later today.

The pound rose 0.5 percent to $1.6224 on speculation the Bank of England will announce a pause in its 200 billion-pound ($323 billion) bond-purchase program next week. Sterling advanced 0.5 percent to 86.74 pence per euro.

Bank of England policy maker Andrew Sentance said the Monetary Policy Committee must be ready to shift gears as the economic recovery strengthens.

“The Bank of England will soon stop buying gilts, and that will help the pound,” said John Hydeskov, a currency strategist at Danske Bank A/S in Copenhagen.

The Fed will keep its target rate for overnight bank loans between zero and 0.25 percent today, according to all 93 economists surveyed by Bloomberg.

Fed Rate Outlook

Futures on the CME Group exchange indicate traders have been cutting bets the Fed will raise its target lending rate by June. The odds of an increase of at least a quarter-percentage point were 21 percent, down from 26 percent a week ago.

“Policy makers will maintain the status quo this time,” said Takako Masai, general manager of the capital markets division at Shinsei Bank Ltd. in Tokyo. “They are unlikely to change their economic outlook because U.S. economic reports haven’t been good.”

To contact the reporter on this story: Ben Levisohn in New York at blevisohn@bloomberg.net

Read more...

Rusal Drops in First Hong Kong IPO in 2010 as Market Slips 13%

By Bloomberg News

Jan. 27 (Bloomberg) -- United Co. Rusal Ltd., the world’s largest aluminum producer, tumbled 11 percent in its Hong Kong trading debut as demand for new equity waned after the city’s benchmark index dropped from a November high.

The Moscow-based company fell to HK$9.66, the worst Hong Kong debut since Dec. 18, from its listing price of HK$10.80. Rusal, the first 2010 IPO in the city, will use net proceeds of HK$16.7 billion ($2.1 billion) to pay down $14.9 billion of debt.

Rusal, barred from marketing to retail investors, found buyers for all the stock on offer after winning investments from Asian billionaire Li Ka-shing and New York hedge-fund manager Paulson & Co. Hong Kong’s Hang Seng Index and aluminum prices have dropped this week as investors globally retreat from risk on concern lending curbs in China, and U.S. plans to rein in banks will stifle the global economic recovery.

“The market sentiment right now isn’t very good,” said Helen Lau, an analyst at OSK Asia Holdings. “Investors are concerned about its debt risks. If the market outlook for aluminum improves and the potential risks diminish, people would be interested.”

Aluminum prices in Shanghai have dropped 8 percent from this year’s high on Jan. 7. The Hang Seng Index fell for a sixth day, extending a decline from its Nov. 16 high to 13 percent. Investors are concerned the Chinese government will rein in liquidity to contain asset bubbles after the country posted the fastest economic growth since 2007 in the fourth quarter.

“You’ve seen what’s happened with the financial situation in recent days,” Rusal Chief Executive Officer Oleg Deripaska said today in the city. Today’s “price is reasonable,” he said.

Rich Friends

Rusal’s global depositary shares fell 11.6 percent to 17.60 euros on their first day of trading in Paris as of 10:39 a.m. local time.

The first Russian company to IPO in Hong Kong had its offering delayed at least twice by regulators and restricted to wealthy and corporate investors on concern about its debt. The stock trades in blocks of 24,000 shares.

“The minimum trading board lot plus the weak market atmosphere will be obstacles for retail investors,” Allen Wong, senior research analyst at Quam Ltd., said in Hong Kong.

Rusal reserved about 39.4 percent of the IPO shares for Malaysian billionaire Robert Kuok, hedge fund Paulson, NR Investments Ltd., the principal investment company of Nathaniel Rothschild of the banking family, and Russian state development bank Vnesheconombank, or VEB.

Today’s decline means shares owned by Paulson, NR Investments and Kuok would have a combined paper loss of about HK$180 million.

Buy Chalco

The IPO price gives Rusal an enterprise value that is 11.7 times the 2010 earnings before interest, tax, depreciation and amortization, or Ebitda, people familiar with the sale said last week. The enterprise value is a sum of a company’s market value, equity and debt minus cash.

Aluminum Corp. of China Ltd., the nation’s largest producer of the metal known as Chalco, trades at an enterprise value 13.6 times its 2010 Ebitda, according to data compiled by Bloomberg.

“Some analysts say that Rusal is most sensitive to aluminum price changes, which might be true,” Quam’s Wong said. “But it seems prudent to buy Chalco,” which will also benefit from higher prices without Rusal’s debt, Wong said.

Beijing-based Chalco fell 3.4 percent to close at HK$7.90 in Hong Kong. Rusal’s IPO comes less than two months after it completed Russia’s biggest corporate debt restructuring.

Rusal posted a loss of $868 million in the first half of 2009, compared with net income of $1.4 billion a year earlier. Full-year profit won’t be less than $434 million for 2009, it said in the prospectus.

Other Russians

Rusal’s IPO will lure other companies in Russia, Ukraine and Kazakhstan to list in the city, Deputy Chief Executive Officer Artem Volynets said today in a Bloomberg Television interview.

“We do believe that Rusal listing here opens up an alternative market for our region,” Volynets said. “There’s a very high level of interest.”

OAO Russian Railways, operator of the world’s longest rail network, said Jan. 21 it may consider the city for the proposed dual listings of two units.

“Russian companies have looked to London for finance,” said Eric Kraus, a strategist at Otkritie Financial Co. in Moscow. “But with large pools of capital in Greater China, particularly interested in resources companies, then the trend will move towards the East.”

China’s Demand

China, the world’s largest metal consumer, spurred price increases in raw materials last year as its $586 billion stimulus spending raised demand from builders and automakers.

Aluminum futures gained 45 percent in London last year, and Alcoa Inc. said on Jan. 11 that global demand will increase 10 percent this year, led by China.

“Last year, China’s growth supported the demand,” Rusal Deputy CEO Volynets said in the interview. “We see strong end- user demand. We see restocking in the global supply chain.”

BNP Paribas SA and Credit Suisse Group AG led banks including Bank of America Merrill Lynch, BOC International Holdings Ltd., Nomura Holdings Inc., Renaissance Capital Ltd., OAO Sberbank and VTB Capital SA in arranging the sale.

--John Duce and Paul Gordon in Hong Kong, Xiao Yu in Beijing, and Maria Kolesnikova in Moscow. Editors: Tan Hwee Ann, Jacob Lloyd-Smith.

To contact the Bloomberg News Staff of this story: Xiao Yu in Beijing at yxiao@bloomberg.net. John Duce in Hong Kong at Jduce1@bloomberg.net.

Read more...

Sugar Falls for a Second Day in London on Supply Speculation

By M. Shankar

Jan. 27 (Bloomberg) -- White sugar dropped for a second day in London to a one-week low on speculation that Brazilian and European Union supplies may help ease a production deficit.

Output in Brazil’s Center South, the world’s largest sugar- producing region, rose 34 percent to 68,800 metric tons in the first half of January from a year earlier, industry association Unica said yesterday. The European Commission said today it plans to permit exports of an additional 500,000 tons of sugar above the EU’s quota to check rising prices.

“The price situation on the EU and world market as well as production costs for beet and sugar in the EU are such that out- of-quota sugar can be exported without violating WTO subsidy commitments,” Agriculture Commissioner Mariann Fischer Boel said in the statement.

White, or refined, sugar for March delivery fell as much as $6.30, or 0.8 percent, to $738 a ton, the lowest price since Jan. 19, on the Liffe exchange. The contract was at $738.60 at 11:15 a.m. local time. Raw sugar for March delivery slid 0.4 percent to 29.18 cents a pound on ICE Futures U.S. in New York. Prices doubled last year in both markets.

The EU had set a sugar-export quota of 1.35 million tons for 2009-10 to comply with a World Trade Organization ruling from 2005. Global demand for sugar will outpace supply by 13.5 million tons this season, according to Czarnikow Group Ltd., a broker of the sweetener.

Among other agricultural commodities traded on Liffe, cocoa for March delivery fell 9 pounds, or 0.4 percent, to 2,300 pounds ($3,730) a ton. The retreat was the third in a row. Robusta coffee for March delivery climbed $19, or 1.4 percent, to $1,366 a ton.

To contact the reporter on this story: M. Shankar in London at mshankar@bloomberg.net.

Read more...

Palm Oil Forecast Raised by RBS on El Nino, Crude

By Claire Leow

Jan. 27 (Bloomberg) -- Palm oil may average $850 a metric ton this year, more than previously forecast, as El Nino pares production and higher crude oil prices lift demand for biofuels, said Nirgunan Tiruchelvam, an analyst at Royal Bank of Scotland Asia Securities (Singapore) Pte. in a report today.

Tiruchelvam raised his forecasts to $950 a ton for 2011, and to $950 a ton for 2012. Palm oil in Rotterdam, which averaged $681 last year, closed at $760.50 a ton yesterday.

“We expect El Niño and tree stress to depress productivity,” he said in the report. “Higher crude prices should vastly improve the viability of crude palm oil-based bio- diesel.”

Central Pacific Ocean temperatures are “well above El Niño thresholds” and some areas “generally remain above values observed at the peak of the 2006 El Niño event,” the Australian Bureau of Meteorology said on its Web site on Jan. 20. El Niño causes dry weather in Southeast Asia, hurting crops.

Between the weather phenomenon and higher demand for alternatives to fossil fuels, palm oil inventory could be depleted because of “significant under-investment in agriculture, combined with demand growth,” Tiruchelvam said.

Palm oil stockpiles in Malaysia, the second-biggest producer, last month reached 2.24 million tons, the second- highest level on record.

Recommended Stocks

Tiruchelvam recommended Indofood Agri Resources Ltd. and Golden Agri-Resources, both companies with plantations in Indonesia and shares listed in Singapore, as his top picks.

“We see potential for the sector to be re-appraised as a green energy play,” he said.

Indofood Agri shares may reach S$3.41 in 12 months, from a closing price of $1.98 yesterday, while Golden Agri may reach 71 Singapore cents, from a close of 50.5 cents yesterday, he said.

Among Malaysian planters, he recommended IOI Corp., Kuala Lumpur Kepong Bhd., and Sime Darby Bhd. He also advised investors to buy Indonesia-listed planters PT Perusahaan Perkebunan London Sumatra Indonesia and PT Astra Agro Lestari.

His price forecasts are based on crude oil at $75 a barrel this year, exceeding $80 a barrel next year and rising above $90 a barrel in 2012 amid a global economic recovery.

Crude oil in New York averaged $62.10 last year and traded unchanged at $74.71 a barrel at 11:46 a.m. Singapore time. Biofuels are produced by mixing ethanol from sugar -- or oils from corn, soybeans or palm fruit -- with fossil fuels.

To contact the reporter on this story: Claire Leow in Singapore at cleow@bloomberg.net;

Read more...

S&P 500 Is on ‘Precipice,’ May Extend Drop: Technical Analysis

By Adam Haigh

Jan. 27 (Bloomberg) -- The Standard & Poor’s 500 Index may extend its decline from the peak of the rally to 9.6 percent if a key support level is breached, according to the head of technical analysis at Mint Equities Ltd.

The S&P 500 closed at 1,092.17 yesterday, 5 percent below the 15-month high of 1,150.23 on Jan. 19. If the benchmark gauge for U.S. equities breaches the level at 1,087 to 1,091, the next support is at 1,040, 4.8 percent below yesterday’s close, according to Mint’s Geoff Wilkinson.

“We now stand on the edge of a proverbial precipice,” Wilkinson, who is based in London, wrote in a note to clients today. Investors who are betting that the market will rally might get “stranded by the sheer pace of the recent declines and, with the lack of any ‘get out of jail free’ subsequent recovery, start to reach for the ‘panic’ button.”

Technical analysts use price and volume history to predict levels of possible support against further declines or resistance to gains. The S&P 500 posted its biggest three-day slump in 10 months last week, erasing its gains for the year, amid concern China’s curbs on lending will slow the global economy’s rebound from its first recession since World War II.

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

Read more...

Brazilian Stocks Fluctuate on Inflation Concern; Real Slips

By Alexander Ragir

Jan. 27 (Bloomberg) -- Brazilian stocks fluctuated from gains to losses as heightened concern accelerating inflation will prompt central banks to increase interest rates overshadowed a gain in steelmakers.

Usinas Siderurgicas de Minas Gerais SA, Brazil’s second- biggest steelmaker, jumped after Itau Unibanco Holding SA upgraded the stock on prospects of a 30 percent rise in domestic sales this year. BM&FBovespa SA, the owner of Latin America’s biggest bourse, sank after Goldman Sachs Group Inc. stripped the stock of its “buy” rating, citing prices relative to earnings prospects.

The Bovespa stock index fell 0.1 percent to 65,429.46 at 8:40 a.m. New York time. Thirty-nine stocks rose on the index while 21 fell. The BM&FBovespa Small Cap index added 0.3 percent to 1,144.75. The real lost 0.7 percent to 1.8474 per dollar on concern slower global growth will cut demand for commodities and slow foreign-currency inflows.

Investors around the world are concerned that economic growth will falter as the Federal Reserve and European Central Bank curb stimulus measures and economists predict central banks in China, India, Brazil and Australia will push up borrowing costs.

Brazil’s central bank will probably hold the overnight rate at 8.75 percent for a fourth straight meeting today, according to all 41 economists surveyed by Bloomberg. The bank’s statement accompanying the decision may indicate policy makers’ willingness to raise rates in April to keep inflation in line with their 4.5 percent target, said Benito Berber, senior analyst for Latin America at RBS Securities Inc.

To contact the reporter on this story: Alexander Ragir at aragir@bloomberg.net

Read more...

AGF Management, CN Railway, Sherritt: Canada Equity Preview

By Matt Walcoff

Jan. 27 (Bloomberg) -- Shares of the following companies may have unusual moves in Canadian trading. Stock symbols are in parentheses.

The Standard & Poor’s/TSX Composite Index rose for a second day, gaining 6.68 points, or 0.1 percent, to 11,361.19.

AGF Management Ltd. (AGF/B CT): The mutual-fund manager said it earned 40 cents a share in the fourth quarter, excluding certain items, surpassing the average estimate in an analyst survey by 32 percent. The company also increased its quarterly dividend 4 percent to 26 Canadian cents a share, effective in March.

Canadian National Railway Co. (CNR CT): Canada’s largest railroad said it earned 90 Canadian cents a share in the fourth quarter, missing the average analyst estimate by 1 cent a share, or 1.2 percent. The company also said it will increase its quarterly dividend 6.9 percent to 27 Canadian cents a share effective in March and buy back as much as 3.2 percent of its outstanding shares this year.

Enablence Technologies Inc. (ENA CV): The supplier of fiber-optic equipment said it will sell as many as 62.5 million shares, not including over-allotment shares, at 40 Canadian cents a share. The company had 254.7 million shares outstanding as of Dec. 31. Shares fell 4.7 percent to 41 cents.

Metro Inc. (MRU/A CT): The grocery-store chain had its rating raised to “buy” from “neutral” by analyst Chris Li of Bank of America Corp. Li told clients Metro’s first-quarter earnings have “given us more confidence in the company’s ability to improve its margins over the longer term.” Metro’s profit, excluding certain items, topped analyst estimates by 6.6 percent, according to Bloomberg data.

Sherritt International Corp. (S CT): The diversified mining company had its rating increased to “outperform” from “sector perform” by analyst Ian Howat of National Bank of Canada, who cited the likelihood of higher coal prices and demand growth in Asia.

Whiterock Real Estate Investment Trust (WRK-U CT): The owner of commercial properties in Canada said it will sell at least 3 million units at C$14.95 a unit in part to help fund the C$214 million ($201.4 million) purchase of a minority interest in seven Toronto-area office buildings. Whiterock units rose 0.3 percent to C$15.60 before being halted.

To contact the reporter on this story: Matt Walcoff in Toronto at mwalcoff1@bloomberg.net.

Read more...

Berkshire, BlackRock, DeVry, Gilead, Yahoo: U.S. Equity Preview

By Emily Schmitt

Jan. 27 (Bloomberg) -- Shares of the following companies may have unusual moves in U.S. trading. Stock symbols are in parentheses. Prices are as of 7:45 a.m. in New York.

Altera Corp. (ALTR US): The maker of programmable semiconductors reported fourth-quarter profit excluding some items of 34 cents a share. The average estimate of analysts surveyed by Bloomberg was 29 cents.

Amazon.com Inc. (AMZN US) rose 1.7 percent to $121.51. The world’s biggest online retailer was raised to “buy” from “hold” at Kaufman Brothers LP.

BlackRock Inc. (BLK US): The world’s biggest money manager reported fourth-quarter profit excluding some items of $2.39 a share, beating the average analyst estimate by 15 percent, as last month’s purchase of Barclays Global Investors lifted fee revenue and investors poured $82 billion into funds.

Berkshire Hathaway Inc. (BRK/B US) gained 7.4 percent to $73.01. Billionaire Warren Buffett’s insurance and investment company was picked to join the Standard & Poor’s 500 Index, the benchmark for U.S. stocks that investors with about $1 trillion in assets mimic.

DeVry Inc. (DV US): The for-profit college reported second- quarter profit excluding some items of $1 a share, beating the average analyst estimate by 21 percent.

Gilead Sciences Inc. (GILD US) rose 5.9 percent to $47.50. The drugmaker reported fourth-quarter profit of 93 cents a share, beating the average analyst estimate by 10 percent, on demand for AIDS drugs and surging royalties from the anti-flu treatment Tamiflu.

Nvidia Corp. (NVDA US): The maker of graphics chips that help run video games said it won’t negotiate with Rambus Inc. (RMBS US) after losing a U.S. trade agency decision that it violated three Rambus-owned patents.

Pactiv Corp. (PTV US): The maker of Hefty garbage bags forecast first-quarter adjusted profit of 42 cents a share at most. The average analyst estimate in a Bloomberg survey is for earnings of 51 cents a share.

RF Micro Devices Inc. (RFMD US): The U.S. maker of chips and radio systems for mobile phones reported third-quarter profit excluding some items of 14 cents a share, beating the average analyst estimate by 16 percent.

Yahoo! Inc. (YHOO US) added 3.2 percent to $16.50. The owner of the second most-used Internet search engine in the U.S. reported fourth-quarter sales that topped analysts’ estimates as the online advertising market showed signs of recovery.

To contact the reporter on this story: Emily Schmitt in New York at eschmitt1@bloomberg.net.

Read more...

World Stock Index Declines for Sixth Day as Yen, Bonds Rally

By Stuart Wallace

Jan. 27 (Bloomberg) -- The MSCI World Index of stocks fell for a sixth day, its longest losing streak in almost a year, on concern the global economic recovery will falter. The yen and bonds rose while industrial metals dropped.

The MSCI Index retreated 0.2 percent at noon in London, bringing its six-day slide to 5.2 percent. Futures on the Standard & Poor’s 500 Index rose 0.2 percent. The yen strengthened against 11 of its 16 biggest counterparts and copper declined for a second day. Greek bonds tumbled, driving the 10-year note yield up 18 basis points to 6.42 percent.

Investors are concerned that economic growth will falter as the Federal Reserve and the European Central Bank curb stimulus measures and economists predict central banks in China, India, Brazil and Australia will push up borrowing costs. Earnings setbacks also hurt stocks. Banco Bilbao Vizcaya Argentaria SA, Spain’s second-biggest lender, and SAP AG, the biggest maker of business-management software, missed analysts’ estimates.

“People came into this year with too optimistic a view and now they are being punished for that,” said Charles Morris, who runs HSBC Investment Management’s Absolute Return Fund in London with about $2.5 billion in assets. “It’s perfectly healthy to have this correction.”

Europe’s Dow Jones Stoxx 600 Index fell 0.3 percent as financial shares retreated. Banco Bilbao sank 5.3 percent in Madrid. Man Group Plc, the largest publicly traded hedge fund company, plunged 3.2 percent in London after the value of its biggest program-driven fund dropped the most in seven weeks.

Emerging Markets

Asian stocks declined for an eighth day, the longest losing streak since May 2005 as the MSCI Asia Pacific Index slid 1.1 percent. The MSCI Emerging Markets Index fell 0.5 percent, taking its six-day retreat to 7.8 percent in the longest slump in a year. The Shanghai Composite Index sank 1.1 percent as banks dropped on lending curbs and investors speculated policy makers may soon raise rates.

Westpac Banking Corp. declined 2.4 percent in Sydney as investors increased bets the central bank will raise interest rates as early as next week. Toyota Motor Corp. fell 4.3 percent in Tokyo on plans to halt U.S. sales of eight models involved in a recall.

U.S. futures advanced after the S&P 500 fell 0.4 percent yesterday. A record nine-quarter earnings slump for S&P 500 companies is projected to have ended in the fourth quarter with a 73 percent increase in profits. More than 130 companies are scheduled to release results this week, including Abbott Laboratories, Boeing Co. and Caterpillar Inc. today.

Fed Decision

The Federal Open Market Committee, gathering while Chairman Ben S. Bernanke awaits a Senate vote on whether to confirm him for a second term, is forecast to keep the benchmark for short- term interest rates in the zero to 0.25 percent range, where it’s been since December 2008. The Fed may take a chance the housing market can stage a comeback without its support by announcing today it will stick to the plan to end a $1.25 trillion program of mortgage-debt purchases in March. The statement is scheduled for release at 2:15 p.m. New York time.

The Bombay Stock Exchange Sensitive Index lost 2.9 percent before a central bank meeting this week that economists predict will result in higher reserve requirements for banks. Brazil’s central bank will probably signal its readiness to raise borrowing costs after leaving its benchmark interest rate at a record low, economists said before today’s policy meeting.

Rand, Yen

Most developing-nation currencies weakened against the dollar, led by a 1 percent slide in South Africa’s rand as a split vote by the central bank’s Monetary Policy Committee to leave the benchmark interest rate unchanged spurred expectations of a rate cut.

The yen advanced as investors scaled back purchases of higher-yielding currencies. It climbed 0.1 percent against the dollar.

Greek bonds declined after the Finance Ministry in Athens denied a Financial Times report that it plans to sell 25 billion euros ($35 billion) of debt to China as the government struggles to cut the largest budget deficit in the European Union. The extra premium investors demand to hold Greek 10-year bonds instead of benchmark German securities of similar maturity widened 16 basis points to 320 basis points.

The cost of protecting against losses on European corporate bonds using credit-default swaps rose, with the high-yield Markit iTraxx Crossover Index climbing 9 basis points to 448, near the highest level in five weeks, according to JPMorgan Chase & Co.

Deficit Concern

Traders are buying protection against defaults on sovereign debt at more than five times the pace of company bonds, as governments fund ballooning deficits. The net amount of credit- default swaps outstanding on 54 governments from Japan to Italy jumped 14.2 percent since Oct. 9, compared with 2.6 percent for all other contracts, according to Depository Trust & Clearing Corp. data. European countries led the increase, with the amount of protection on Portugal rising 23 percent, Spain 16 percent and Greece 5 percent.

U.K. natural gas for February delivery rose 5.3 percent to its highest price in more than 11 months as forecasts for colder weather boosted demand. Crude oil for March delivery in New York rose 16 cents to $74.87 a barrel. Copper for delivery in three months fell 1.5 percent to $7,270 a metric ton on the London Metal Exchange, leading a retreat in metals. China accounts for more than a quarter of global copper demand.

To contact the reporter on this story: Stuart Wallace in London at swallace6@bloomberg.net

Read more...

Faber Says S&P 500 May Drop 20% on Economic, Earnings Prospects

By Rita Nazareth

Jan. 27 (Bloomberg) -- The Standard & Poor’s 500 Index may retreat 20 percent from a 15-month high because stocks are expensive given prospects for economic and profit growth, Marc Faber said.

The benchmark index for U.S. stocks, which closed at 1,150.23 on Jan. 19, may fall to 920, said Faber, 63, who recommended buying stocks in March, before the biggest rally since the Great Depression. The index surged 70 percent from a 12-year low in March before dropping 5.1 percent to 1,092.17 through yesterday. The S&P 500’s price-earnings ratio had jumped to 25, the highest since 2002, data compiled by Bloomberg show.

“The market has become overbought,” Faber, who publishes the Gloom, Boom and Doom report, said in a phone interview from Switzerland. “There isn’t a meaningful improvement in the economy taking place. The economy may disappoint somewhat in the next few months. The statistics that are being published are very questionable. The economy has stabilized, but isn’t really expanding.”

Consumer spending, which accounts for about 70 percent of the economy, probably increased at a 1.8 percent annual rate in the fourth quarter after rising at a 2.8 percent pace in the previous three months, economists said before a Jan. 29 report from the Commerce Department. The jobless rate held at 10 percent in December, near a 26-year high, the Labor Department said on Jan. 8.

Not That Great

“With unemployment staying at a relatively high level and with the revenue side being weak, I don’t think that corporate profits will be that great in 2010,” Faber said. “Basically, the profits have been boosted by aggressive cost-cutting. The revenue side of corporations is weak.”

A record nine-quarter profit slump for S&P 500 companies is projected to have ended in the fourth quarter with a 73 percent increase in earnings. Sales at the 122 S&P 500 companies that have reported results for the period since Jan. 11 have increased 13 percent, Bloomberg data show.

Faber, who advised investors to buy U.S. stocks on March 9, when the S&P 500 reached its lowest level since 1996, said the gauge may end the year lower than the close on Dec. 31. The index rose 23 percent in 2009, ending the year at 1,115.10.

“This year, investors will never achieve returns as high as in 2009,” he said. “Stocks are relatively high compared to the fundamentals.”

Financials, Commodities

While Faber said he cannot predict which industries will be the laggards, he highlighted weakness among financial and commodity-related companies.

“Financials have already been quite weak,” Faber said. “It’s kind of a warning sign for the market. They may weaken further, especially the banks. Also commodities-related stocks could weaken somewhat as commodity prices ease.”

The S&P 500 Financials Index rallied 146 percent from a 17- year low in March before dropping 5.2 percent last week as President Barack Obama called for limiting the size and trading activities of financial institutions as a way to reduce risk- taking and prevent another financial crisis. Measures of energy and raw-materials and energy shares in the S&P 500 have retreated more than 1.5 percent in 2010.

Faber correctly predicted in May 2005 that stocks would make little headway that year. The S&P 500 gained 3 percent. He was less prescient in March 2007, when he said the S&P 500 was more likely to fall than rise because the threats of faster inflation and slower growth persisted. The S&P 500 climbed 10 percent between then and its record of 1,565.15 seven months later.

In his interview this week, Faber said that the S&P 500 may rise as high as 1,250 or 1,300 this year before declining again.

“Usually March, April are seasonally strong months,” he said. “We’ll get a rebound. In general, high-quality and large market capitalization stocks are reasonably priced considering you have zero interest-rates. As these markets go down, the high-quality, large-market-cap stocks will go down less than the smaller-cap stocks.”

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

Read more...

U.S. Stock Futures Fluctuate; Yahoo Gains, Caterpillar Falls

By Daniela Silberstein and Elizabeth Stanton

Jan. 27 (Bloomberg) -- U.S. stock-index futures fluctuated as a disappointing profit forecast at Caterpillar Inc. offset higher-than-estimated sales at Yahoo! Inc.

Caterpillar, the largest maker of bulldozers and excavators, declined 4.4 percent after projecting 2010 profits that fell short of the average analyst estimate. Yahoo, owner of the second-most-used Internet search engine in the U.S., advanced after online advertising revenue exceeded projections. Berkshire Hathaway Inc.’s Class B stock soared 8.3 percent after being picked to join the Standard & Poor’s 500 Index.

Futures on the S&P 500 expiring in March rose 0.1 percent to 1,088.4 as of 8:47 a.m. in New York. Dow Jones Industrial Average futures fell 4 points, or less than 0.1 percent, to 10,134 and Nasdaq-100 Index futures added 0.2 percent to 1,799.5. Stocks in Europe and Asia fell.

“If we have good economic data and good earnings reports the market will gain a foothold again,” said Peter Braendle, who helps oversee about $50 billion at Swisscanto Asset Management in Zurich. “I can imagine that we can come back up as fast as we fell. I’m surprised that we saw such a setback at the beginning of the year already.”

Tumble From Peak

After closing at a 15-month high on Jan. 19, the S&P 500 slumped 5.1 percent in its biggest three-day drop in 10 months as President Barack Obama called for limits on risk- taking by banks and China moved to restrict lending and cool economic growth. The move erased the index’s gain for the year. Valued at more than 18 times forecast earnings at the start of the year, the benchmark now trades at 14.2 times projected profit.

Stocks fell yesterday as investors speculated the Federal Reserve policy makers, concluding a two-day meeting in Washington today, may signal more plans to unwind stimulus measures and as Elliott Wave International Chief Executive Officer Robert Prechter said a new bear market may have begun.

A record nine-quarter earnings slump for S&P 500 companies is projected to have ended in the fourth quarter with a 73 percent increase in profits. More than 130 companies in the index are scheduled to release results this week, including Procter & Gamble, 3M Co., Microsoft Corp. and Amazon.com Inc.

Earnings Season

About three-quarters of the companies that have reported fourth-quarter results have beaten analyst estimates for per-share earnings, according to Bloomberg data.

The Fed Open Market Committee, gathering while Chairman Ben S. Bernanke awaits a Senate vote on whether to confirm him for a second term, is expected to keep the benchmark for short-term interest rates in the zero to 0.25 percent range, where it’s been since December 2008. Investors’ focus has been on how and when the central bank will signal its intention to start raising rates, and to dismantle the programs by which it has financed risky assets for the banking system.

The Fed may also take a chance the housing market can stage a comeback without its support by announcing today it will stick to the plan to end a $1.25 trillion program of mortgage-debt purchases in March. The statement is scheduled to be released at around 2:15 p.m.

Housing Market

Americans probably bought more new homes in December, signaling a government tax credit will prevent the industry from backsliding, economists expect a government report today to show. Purchases rose 3 percent to an annual pace of 366,000, according to the median estimate of 70 economists surveyed by Bloomberg News. The figures are due at 10 a.m. Washington time.

Caterpillar fell 4.4 percent to $53.40 in pre-market New York trading. The company forecast 2010 profit of about $2.50 a share. Analysts, on average, estimated per-share earnings of $2.70.

Yahoo advanced 3.2 percent to $16.50. Excluding revenue passed on to partner sites, sales were $1.26 billion, beating the average estimate of $1.23 billion in a Bloomberg survey of analysts. The company’s total sales fell 4.1 percent to $1.73 billion, yet still edged out its own forecast of $1.6 billion to $1.7 billion.

Berkshire Hathaway Class B shares soared 8.3 percent to $73.61 in early trading. The company was picked to join the S&P 500, the benchmark index for U.S. stocks that investors with about $1 trillion in assets mimic. The firm will replace Burlington Northern Santa Fe Corp. after completing the takeover of the railroad, S&P said yesterday.

BlackRock

BlackRock Inc., the world’s largest money manager, said fourth-quarter net income rose as last month’s purchase of Barclays Global Investors lifted fee revenue and investors poured $82 billion into funds. Adjusted net income, including certain one-time items, was $2.39 a share. Eleven analysts surveyed by Bloomberg on average expected BlackRock to earn $2.08 a share. The stock added 2.1 percent to $229.32 in Germany.

U.S. Steel Corp. dropped 1 percent to $49.10. The second-largest U.S.-based steelmaker was downgraded to “neutral” from “buy” at Goldman Sachs Group Inc. after the company reported a wider-than-estimated quarterly loss yesterday.

To contact the reporter on this story: Daniela Silberstein in Zurich at dsilberstei2@bloomberg.net. Elizabeth Stanton in New York at estanton@bloomberg.net

Read more...

United Kingdom Expands While Confidence In Germany Climbs To 18-Month High!

Daily Forex Fundamentals | Written by ecPulse.com | Jan 26 10 09:52 GMT |

As the global outlook reveals more bright signs that the worst recession since post world era is over, confidence levels continue to inch higher, although the improvement we are witnessing currently is as a result of the temporarily measures taken by the central bank and governments around the world. First on our calendars, we see that confidence in Germany inched higher as IFO survey regarding business climate in January which measures the level of confidence in the business sector rose to 95.8 from the revised prior 94.6 from 94.7. Also the survey released the current assessment which is an index on the current German business conditions along with expectations for the upcoming conditions in the next six months. The survey for January inclined to 91.2 from the revised previous reading of 90.4 from 90.5. Furthermore, the IFO expectations for January jumped to 100.6 higher than the revised previous reading of 98.9 from 99.1 and also surpassed the market expectations of 99.1. Germany is the biggest nation in the euro zone contributing nearly a quarter of the euro zone GDP, and the higher the confidence levels rose to an 18-month high, shows that businesses and consumers are optimistic about the outlook of the nation therefore hinting that the recession loosening its grip on the economy. The highlight of today was on the United Kingdom releasing its fourth quarter GDP advanced reading which showed that the economy expanded to 0.1% from the prior third quarter contraction of 0.2%, the markets were projecting an expansion of 0.4%. On the year, the contraction eased to -3.2% from -5.1% which is worse than the predicted contraction of 3.0 percent. The Bank of England is using 200 billion pounds towards buying gilts, and this measure has so far been successful into helping ease the economic recession in the UK as we have been witnessing an improvement in the dominate sectors that support GDP while the severe decline in general price levels have eased. The UK is the last economy out of the major nations to step out of the recession, while next week, officials will discuss the economic progress and decide to whether continue the APF program or start to pull the measures gradually like other major economies. The BoE anticipates that the UK will expand in the last quarter of this year. The economy is expected to grow 2.2% this year and 4.1% in 2011, according to policy makers' projections announced in November. Ecpulse disclaimer: The content of ecPulse.com and any page in the website contain information for investors/traders and is not a recommendation to buy or sell currencies, stocks, gold, silver & energies, nor an offer to buy or sell currencies, stocks, gold, silver & energies. The information provided reflects the writers' opinions that deemed reliable but is not guaranteed as to accuracy or completeness. ecPulse is not liable for any losses or damages, monetary or otherwise that result. I recommend that anyone trades currencies, stocks, gold, silver & energies should do so with caution and consult with a broker before doing so. Prior performance may not be indicative of future performance. Currencies, stocks gold, silver &energies presented should be considered speculative with a high degree of volatility and risk

Read more...

China Raises Reserve Ratio & Scares Risk Takers

Daily Forex Fundamentals | Written by AC-Markets | Jan 26 10 10:26 GMT |

Market Brief USD rallied back in the Asian session, as news that China was again raising its reserve requirements on select banks and S&Ps lowering of Japans outlook spooked investors. Yesterday, Wall Street was able to close on a postive note, but news from China and Japan clouded the sentiment.The Nikkei closed down -1.78%, while Shanghai was down -2.42%. After an encouraging start, the EURUSD traded higher to 1.4180 and pushing JPY cross higher as well, but around midday sentiment shifted and risk correlated trades tumbled. With Australia on holiday, Tokyo were the main players in AUD, selling the pair down to 0.8960 as high beta trades came under the knife. Outside Asia, political issues in the US continued to also weigh on risk taking, particularly Bernanke's potential confirmation of a second term. While the White House sounds confident that the Senate will confirm the current chairman, and positive comment have helped ease concerns, Obama public mandate is currently being questioned, a rogue senators effecting the vote should be priced in. In Japan, the BoJ voted unanimously to keep the policy rate unchanged at 0.1%. The meeting went widely as expected with no new policies or adjustments to existing schemes/operations being announced. Core CPI forecast was revised higher for fiscal 2010 to -0.5% y/y from -0.8% y/y previously, which was followed up by FM Kan stating that Japan could be clearly out of a deflationary environment in 2-3 years with the BoJ help. While he didn't elaborate on what monetary policy tools the BoJ has to achieve this feat, they could include increasing the central banks monthly purchases of JGB. Later in the day the S&P inexpertly lowered Japan's sovereign rating outlook from 'stable' to 'negative'. Japan's rating remains at AA, fiscal outlook is unlikely to improve as the new government spending plans restrict any positive adjustment to surge debt and we would expect other rating agencies to also lower in the near term. UK GDP just sqeeked out recession with today q/q print of 0.1% vs. 0.4% exp , -0.2% prior read (y/y -3.2% vs. -3.0% exp). Perhaps Chancellor Darling comments on today's GDP data that he remains 'cautious' was more than just easing the markets optimism (however, historically UK GDP are revised upwards). The economic data was very close to the bone and can easily be revised down. The disappointing report causedthe GBPUSD to collapse to 1.6150 from 1.6230. ACM FOREX Disclaimer: This report has been prepared by AC Markets (thereof ACM) and is solely been published for informational purposes and is not to be construed as a solicitation or an offer to buy or sell any currency or any other financial instrument. Views expressed in this report may be subject to change without prior notice and may differ or be contrary to opinions expressed by Salesperson or Traders of ACM at any given time. ACM is under no obligation to update or keep current the information herein, the report should not be regarded by recipients as a substitute for the exercise of their own judgment.

Read more...

China Raises Reserve Ratio & Scares Risk Takers

Daily Forex Fundamentals | Written by AC-Markets | Jan 26 10 10:26 GMT |

Market Brief USD rallied back in the Asian session, as news that China was again raising its reserve requirements on select banks and S&Ps lowering of Japans outlook spooked investors. Yesterday, Wall Street was able to close on a postive note, but news from China and Japan clouded the sentiment.The Nikkei closed down -1.78%, while Shanghai was down -2.42%. After an encouraging start, the EURUSD traded higher to 1.4180 and pushing JPY cross higher as well, but around midday sentiment shifted and risk correlated trades tumbled. With Australia on holiday, Tokyo were the main players in AUD, selling the pair down to 0.8960 as high beta trades came under the knife. Outside Asia, political issues in the US continued to also weigh on risk taking, particularly Bernanke's potential confirmation of a second term. While the White House sounds confident that the Senate will confirm the current chairman, and positive comment have helped ease concerns, Obama public mandate is currently being questioned, a rogue senators effecting the vote should be priced in. In Japan, the BoJ voted unanimously to keep the policy rate unchanged at 0.1%. The meeting went widely as expected with no new policies or adjustments to existing schemes/operations being announced. Core CPI forecast was revised higher for fiscal 2010 to -0.5% y/y from -0.8% y/y previously, which was followed up by FM Kan stating that Japan could be clearly out of a deflationary environment in 2-3 years with the BoJ help. While he didn't elaborate on what monetary policy tools the BoJ has to achieve this feat, they could include increasing the central banks monthly purchases of JGB. Later in the day the S&P inexpertly lowered Japan's sovereign rating outlook from 'stable' to 'negative'. Japan's rating remains at AA, fiscal outlook is unlikely to improve as the new government spending plans restrict any positive adjustment to surge debt and we would expect other rating agencies to also lower in the near term. UK GDP just sqeeked out recession with today q/q print of 0.1% vs. 0.4% exp , -0.2% prior read (y/y -3.2% vs. -3.0% exp). Perhaps Chancellor Darling comments on today's GDP data that he remains 'cautious' was more than just easing the markets optimism (however, historically UK GDP are revised upwards). The economic data was very close to the bone and can easily be revised down. The disappointing report causedthe GBPUSD to collapse to 1.6150 from 1.6230. ACM FOREX Disclaimer: This report has been prepared by AC Markets (thereof ACM) and is solely been published for informational purposes and is not to be construed as a solicitation or an offer to buy or sell any currency or any other financial instrument. Views expressed in this report may be subject to change without prior notice and may differ or be contrary to opinions expressed by Salesperson or Traders of ACM at any given time. ACM is under no obligation to update or keep current the information herein, the report should not be regarded by recipients as a substitute for the exercise of their own judgment.

Read more...

Forex Technical Analysis

Daily Forex Technicals | Written by DeltaStock Inc. | Jan 26 10 09:37 GMT |

EUR/USD Current level-1.4086 EUR/USD is in a downtrend, after peaking at 1.5146 (Nov.25,2009). Technical indicators are neutral, and trading is situated below the 50- and 200-Day SMA, currently projected at 1.4793 and 1.4169. The consolidation above 1.4031 was completed at 1.4195 high and the pair is ready to renew its downtrend towards 1.3924. The intraday bias is negative with resistance around 1.4127 and risk limit above 1.4180. Resistance Support intraday intraweek intraday intraweek 1.4127 1.4260 1.4030 1.40+ 1.4180 1.5146 1.3924 1.3740 USD/JPY Current level - 90.07 The overall downtrend has been renewed with the recent break below 87.12. Trading is situated below the 50- and 200-day SMA, currently projected at 89.50 and 93.54. Obviously the resistance around 90.80 is intact and yesterday's high at 90.58 was the final of the consolidation above 89.77, so further depreciation is to be expected, towards 88.53 Resistance Support intraday intraweek intraday intraweek 90.80 93.40 89.77 88.90 92.04 95.60 88.52 79.60 GBP/USD Current level- 1.6228 The pair is in a downtrend after peaking at 1.7042. Trading is situated between the 50- and 200-day SMA, currently projected at 1.6454 and 1.5258. Yesterday's break above 1.6170 has neutralized the bearish momentum and although the crucial 1.6283 is still intact, we are rather neutral on that pair. Important on the downside is 1.6077. Resistance Support intraday intraweek intraday intraweek 1.6283 1.6410 1.6170 1.5833 1.6410 1.7042 1.6077 1.5352 DeltaStock Inc. - Online Forex & Securities Broker www.deltastock.com RISK DISCLAIMER: These analyses are for information purposes only. They DO NOT post a BUY or SELL recommendation for any of the financial instruments herein analyzed. The information is obtained from generally accessible data sources. The forecasts made are based on technical analysis. However, Delta Stock’s Analyst Dept. also takes into consideration a number of fundamental and macroeconomic factors, which we believe impact the price moves of the observed instruments. Delta Stock Inc. assumes no responsibility for errors, inaccuracies or omissions in these materials, nor shall it be liable for damages arising out of any person's reliance upon the information on this page. Delta Stock Inc. shall not be liable for any special, indirect, incidental, or consequential damages, including without limitation, losses or unrealized gains that may result. Any information is subject to change without notice.

Read more...

Vietnam Sells $1 Billion of Bonds in 2nd Global Issue

By David Yong and Veronica Navarro Espinosa

Jan. 26 (Bloomberg) -- Vietnam raised $1 billion from its second global bond sale, offering higher yields than lower-rated Philippines and Indonesia, amid the busiest start to a year for global borrowing by developing nations since 2005.

The Southeast Asian nation’s government sold 10-year bonds to yield 6.95 percent, or 3.33 percentage points more than Treasuries, according to Bloomberg data. Barclays Plc, Citigroup Inc. and Deutsche Bank AG managed the sale. Indonesia paid 2.28 percentage points more and the Philippines gave an extra yield of 1.84 percentage points in sales earlier this month.

Vietnam’s sale raised money for energy and infrastructure projects that will support growth in an economy suffering a shortage of foreign exchange, accelerating inflation and a widening trade deficit. The central bank set a 7 percent limit on the yield, the minimum amount investors AllianceBernstein L.P. and Western Asset Management Co. estimated would be required to attract sufficient orders.

“I like the country and see continuing inflows into emerging markets,” said Francesca di Cesare, a bond manager who helps oversee the equivalent of $10 billion at Aletti Gestielle SGR SpA in Milan and bought the notes. “Vietnam is not a frequent issuer and thus offers a diversification factor.”

Twice Subscribed

Demand for the notes reached $2.4 billion, more than double the amount on offer, said a person close to the transaction who declined to be identified because he’s not allowed to speak publicly. Indonesia’s $2 billion sale this month drew orders for more than twice debt on offer and the $1.5 billion issue by the Philippines was subscribed more than six times. Investors in the U.S. bought 56 percent of the Vietnam notes, while Asian buyers accounted for 28 percent and Europe funds 16 percent.

The 2020 notes were bid at a yield of 6.837 percent, according to prices provided by the Royal Bank of Scotland Group Plc. The benchmark VN Index of shares rallied 3.5 percent to 497.90, the biggest gain in three weeks.

Developing nations from Turkey to Slovenia sold more than $14 billion in overseas bonds so far this year, compared with $24.7 billion at the start of 2005, according to Bloomberg data. Greece yesterday sold 8 billion euros ($11.3 billion) of five- year bonds at premium yields, the first sales since the nation’s debt was downgraded last month by Standard & Poor’s, Moody’s Investors Service and Fitch Ratings.

Increased Volatility

The JPMorgan Chase & Co. EMBI Global Spread was 3.15 percentage points as of 9:20 a.m. in London, up from 2.94 points at the end of last year. Vietnam has a 0.23 percent weight in the index, which tracks the dollar-denominated bonds of 37 emerging-market countries.

Vietnam delayed its debt issue on Jan. 22 because of increased market volatility as global stocks slumped after President Barack Obama unveiled measures to curb risk-taking by U.S. banks. The sale was completed yesterday in New York to yield about a percentage point more than was paid this month by the Philippines and Indonesia, which carry lower debt ratings from S&P.

The bond sale outcome was “important and successful,” opening an international funding channel for the government and businesses, Vietnam’s finance ministry said in an e-mailed statement today.

“The outlook for Vietnam remains constrained by questions around the government’s ability to rein in the fiscal deficit, reduce the trade imbalance and moderate inflation,” analysts at debt-research firm CreditSight Inc. wrote in a report.

Policy Balance

Vietnam is struggling to balance policies that spur growth with efforts to ensure its economy remains stable, said Jan. 15. The nation is rated Ba3 by Moody’s, three levels below investment grade, with a negative outlook. The ranking is on par with the Philippines and one grade weaker than Indonesia. S&P rates Vietnam BB, one level higher than the BB- ranking for Indonesia and the Philippines.

The government sold $750 million of 10-year bonds to yield 7.125 percent at its inaugural sale in October 2005, a premium of 2.56 percentage points over similar-maturity Treasuries. The 2016 notes yielded 6.13 percent yesterday or an equivalent of 3.35 points spread, according to Bloomberg data.

“Investors got nothing” for the additional four years of maturity in the new bonds, said Tim Condon, head of Asia research at ING Groep NV in Singapore. “Nor was there a new issue premium.”

To contact the reporters on this story: David Yong in Singapore at dyong@bloomberg.net. Veronica Navarro Espinosa in New York at vespinosa@bloomberg.net

Read more...

Sarkozy Says French Economic Growth May Exceed 1.4% Estimate

By Helene Fouquet and Gregory Viscusi

Jan. 26 (Bloomberg) -- France’s 2010 economic growth may exceed the government’s 1.4 percent forecast, President Nicolas Sarkozy said, helping spur hiring.

“We’ve doubled our economic growth forecast for this year, it will be 1.4 percent and maybe more,” Sarkozy said on French television channel TF1 late yesterday. “And you’ll see unemployment will fall starting this year.”

France’s economy emerged from recession last year, growing 0.3 percent in the second and third quarters, and prompting the government to double its economic forecast. Sarkozy was more confident than his finance minister on employment, pledging an end to job losses in the “coming weeks, months.”

Finance Minister Christine Lagarde said Jan. 20 that Europe’s second-largest economy was likely to lose a further 71,000 jobs this year after 373,000 were lost in 2009. Insee, the national statistics office, said Dec. 18 unemployment will continue to rise through the middle of the year to 10.2 percent. Unemployment stood at a three-year high of 9.5 percent at the end of the third quarter.

Sarkozy, who participated in a live television show with French voters for the first time since his May 2007 election, has said he’d consider that France has “exited the crisis only when unemployment starts falling.”

To contact the reporters on this story: Helene Fouquet in Paris at hfouquet1@bloomberg.net; Gregory Viscusi in Paris at gviscusi@Bloomberg.net.

Read more...

German Business Confidence Rises to 18-Month High

By Gabi Thesing

Jan. 26 (Bloomberg) -- German business confidence rose more than economists forecast to an 18-month high in January as the global economic recovery boosted exports.

The Ifo institute in Munich said its business climate index, based on a survey of 7,000 executives, increased to 95.8 from 94.6 in December. That’s the highest since July 2008 and the tenth straight increase. Economists expected a gain to 95.1, according to the median of 41 forecasts in a Bloomberg News survey. The index reached a 26-year low of 82.2 in March last year.

Rising foreign sales, fueled by Asian demand, may help offset a slide in domestic spending and ensure Germany’s economy continues to expand. The government said last week it will raise its 2010 growth forecast to 1.5 percent from 1.2 percent even as some of its stimulus measures expire. Europe’s largest economy shrank 5 percent last year, the most since World War II.

Today’s report “laid to rest some of the concerns that the economy is running out of steam,” Carsten Brzeski, an economist ING Group in Brussels, said in a telephone interview. “The recovery is still very strong. It’s industry-led, which should hopefully also support the labor market.”

Ifo’s gauge of executives’ expectations jumped to 100.6, the highest since July 2007, from 98.9. A measure of current conditions gained to 91.2 from 90.4.

The euro rose after the report to $1.4103 from $1.4084.

Mixed Picture

Recent data have painted a mixed picture of the state of the German recovery. While investor and consumer confidence declined this month, the country’s manufacturing industries expanded more than economists expected and the Economy Ministry unexpectedly revised up its estimate of November factory orders last week.

That prompted Bundesbank President Axel Weber to say on Jan. 22 that he’s “a bit more optimistic” about the outlook for German growth. At the same time, cold weather and weak consumption “speak against too much euphoria,” he said.

Ifo economist Gernot Nerb said the increase in business confidence was partly due to exports boosting manufacturing. Sentiment in the construction sector also improved, he told Bloomberg Television in an interview.

Government Subsidy

Germany’s Volkswagen AG, Europe’s largest carmaker, said on Jan. 11 it wants to increase its worldwide market share further in 2010 after reporting record sales for 2009. Sales in China surged 37 percent. Still, the company’s Skoda Auto division forecasts sales in Germany, the brand’s largest market, will fall 37 percent this year after a government subsidy on new car purchases expired.

The prospect of rising unemployment will weigh on household spending in Germany, Klaus Baader, co-chief European economist at Societe Generale SA in London, wrote in a note to investors. There is “virtually no scope for gains in private consumption in 2010,” he said.

Metro AG, Germany’s largest retailer, said on Jan. 12 it expects economic conditions to “remain challenging” this year.

The outlook for the global economy and the euro’s 7 percent drop against the dollar since November bode well for exporters. The U.K., Germany’s fourth-largest export destination, exited recession in the fourth quarter, a report showed today.

Confidence in the world economy rose in January, the Bloomberg Professional Global Confidence Index showed Jan. 14, with Asia’s index outpacing those of other economic blocs.

The International Monetary Fund will probably raise its estimate for 2010 world growth this month from a 3.1 percent forecast in October, John Lipsky, the organization’s first deputy managing director, said Jan. 6.

To contact the reporter on this story: Gabi Thesing in London at gthesing@bloomberg.net

Read more...