RBS in Talks to Sell ABN Assets to National Australia

By Stuart Kelly

July 11 (Bloomberg) -- Royal Bank of Scotland Group Plc, seeking to restore capital depleted by writedowns, is in talks to sell assets in Australia and New Zealand to National Australia Bank Ltd.

National Australia said today it's in discussions to buy the investment and corporate banking units that RBS acquired in last year's 14.3 billion-euro ($23 billion) purchase of part of ABN Amro Holding NV. There is ``no certainty'' that a deal will happen, Australia's biggest bank said in a statement.

RBS led the ABN takeover, the biggest banking acquisition on record, just as credit markets froze up, and the transaction resulted in about 2 billion pounds ($4 billion) of writedowns at the Edinburgh-based bank this year. A sale to National Australia could fetch as much as A$450 million ($430 million), said Wilson HTM analyst Brett Le Mesurier.

``After the past year, RBS will want to get as many of their non-core assets out of the way as quickly as they can so they can rebuild their reserves,'' said Angus Gluskie, who helps oversee the equivalent of $500 million at White Funds Management in Sydney. ``At the time of the ABN acquisition, it was flagged that the Australian operations may be hived off.''

Melbourne-based National Australia would get a business ranked sixth in underwriting stock sales in Australia and New Zealand, adding about 750 employees. The bank's shares slipped 0.6 percent at 3:38 p.m. in Sydney, bringing declines this year to 27 percent.

ABN Picked Apart

RBS has posted $15.4 billion of asset writedowns and credit losses amid the global credit squeeze, ranking it seventh among the biggest losers in slumping financial markets. Last month it raised 12.3 billion pounds in Europe's biggest rights offering. Financial Services AG, Switzerland's biggest insurer, yesterday pulled out of bidding for RBS's insurance unit.

The talks with National Australia come as Zurich Financial Services AG yesterday pulled out of bidding for RBS's insurance unit, a deal valued at as much as 7.5 billion pounds.

RBS and Fortis, partners in the ABN acquisition, have been selling assets of the Amsterdam-based company in Europe and Asia. Deutsche Bank AG this month agreed to pay 709 million euros for the Dutch commercial-lending units Fortis got in the takeover.

Fortis is also auctioning its stake in a Chinese fund manager that accompanied the ABN purchase, seeking as much as $250 million, people familiar with the matter said last month.

Bad Idea?

ABN Amro Australia Holdings Pty spokeswoman Jill Valentine said the bank appointed Lazard Carnegie Wylie in March to advise on its businesses. She declined to comment on today's statement by National Australia.

ABN Amro advised on 11 Australian deals valued at $5.1 billion over the past year, Bloomberg data show. It has a 7.9 percent market share in Australia and New Zealand of equity underwritings worth $1.26 billion in 2008.

National Australia might struggle to digest the ABN businesses, said Wilson HTM's Le Mesurier.

``I'm not convinced that commercial banks should be buying investment banks,'' he said. ``They're very different types of businesses.''

More Provisions

In a separate statement, National Australia said it may have to increase provisions for $1.1 billion of investments in collateralized debt obligations as the global economy weakens.

The economic environment has deteriorated since March 31, when an A$181 million provision was made against the CDO investments, which include some U.S. subprime mortgage securities, said Brandon Phillips, a spokesman for the company.

``It tells us that National Australia is more exposed than it and the market previously thought,'' said Hans Kunnen, head of investment market research in Sydney at Colonial First State Global Management, which holds about $128 billion of assets.

To contact the reporter for this story: Stuart Kelly in Sydney skelly22@bloomberg.net




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U.K. Banks Want More Liquidity Help From BoE, Telegraph Says

By David Altaner

July 11 (Bloomberg) -- U.K. banking officials will meet today with the Bank of England to seek broader terms for a liquidity funding plan that was started in April, the Daily Telegraph reported, citing people familiar with the matter.

The bankers will say that the Special Liquidity Scheme hasn't brought down Libor, the lending rate between banks, or mortgage rates, the newspaper said.

The plan accepts triple A-rated securitized bonds backed by mortgages and credit-card debt and the underlying business must have been transacted by the end of last December, the Telegraph said.

Some bankers may press for the plan to include mortgages written this year, the newspaper said, adding that it started at 50 billion pounds ($99 billion) and may need to go to 100 billion pounds. The Bank wouldn't comment, the Telegraph said.

To contact the reporter on this story: David Altaner in London at daltaner@bloomberg.net



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Asian Currencies Set for Weekly Gain, Led by South Korea's Won

By Aaron Pan and Kim Kyoungwha

July 11 (Bloomberg) -- Asian currencies headed for a weekly gain, led by South Korea's won as policy makers there pledged to shore up the local currency and tame inflation.

The won's 4.7 percent gain this week, the most since March 1998, makes it the world's best performer. Finance Minister Kang Man Soo yesterday announced the government will tackle risks stemming from oil costs and inflation, while Bank of Korea Governor Lee Seong Tae said the bank may intervene if necessary because the currency market ``overreacts.'' Six out of the 10 most-traded currencies in Asia outside of Japan rose this week.

``Few market participants are willing to run counter to the government that remains so steadfast in stopping the dollar's ascent,'' said Ko Yun Jin, a currency dealer with Kookmin Bank in Seoul. ``Still, there's pent-up demand for the dollar from importers in need of settlements.''

South Korea's currency traded at 1,001.60 against the dollar at 12:26 p.m. in Seoul, from 1,002.90 yesterday, according to Seoul Money Brokerage Services Ltd. The weekly advance trims its loss this year to 7 percent.

The currency rallied this week as President Lee Myung-Bak dismissed the nation's currency policy chief, signaling the end of his support for a weaker won. Industrial Bank of Korea estimated the government sold as much as $7 billion on July 9 alone to shore up the won.

Elsewhere, the Singapore dollar added 0.2 percent this week to S$1.3604, Indonesia's rupiah advanced 0.5 percent to 9,164 and Vietnam's dong rose 0.2 percent to 16,821.50.

Malaysia's Ringgit

Malaysia's ringgit climbed on speculation investors will shun the U.S. currency as the prospect of widening credit-market losses gives the Federal Reserve less room to raise interest rates. The two largest buyers of U.S. home loans, Fannie Mae and Freddie Mac, may need to be bailed out, former St. Louis Fed President William Poole said this week.

The ringgit headed for its first weekly gain in three after U.S. stocks entered a bear market this week for the first time since 2002. Six of Asia's 10 most-traded currencies climbed this week after traders said central banks from South Korea to Malaysia bought their own currencies to help stem inflation.

``The dollar is on a weak footing and the flows are slowly coming for the ringgit,'' said Suresh Kumar Ramanathan, a rates and currency strategist at CIMB Investment Bank Bhd. in Kuala Lumpur. ``Asia's inflation is still a problem and the authorities are looking for currency strength to soak up the price pressure.''

The ringgit traded at 3.2455 per dollar compared with 3.2465 late yesterday, according to data compiled by Bloomberg. The currency has risen 0.7 percent this week.

Philippine Peso

The Philippine peso headed for a third week of declines on speculation higher oil costs will stoke inflation and spur demand for the U.S. currency to meet the cost of fuel imports.

The peso, the worst performer of the past three months among the 10 most-active Asian currencies excluding the yen, fell after crude oil rose 4 percent yesterday. The Philippines imports almost all of the oil it needs and the cost of these purchases jumped 58 percent in the first four months of the year, official figures show. Inflation in the Southeast Asian nation accelerated to a 14-year high of 11.4 percent in June.

``Because of the Philippines dependency on imports, it's been performing worse'' than most currencies in the region as higher oil prices boost demand for dollars, said Dwyfor Evans, a currency strategist at State Street Global Markets in Hong Kong. While ``others have come out strongly to defend their currencies, this seems to be lacking in the Philippines,'' he said.

The currency fell 0.5 percent to 45.820, according to Tullett Prebon Plc. It's set for a 1 percent drop this week.

Taiwan's dollar slid 0.1 percent to NT$30.427 this week and Thailand's baht declined 0.7 percent to 33.73.

To contact the reporters on this story: Aaron Pan in Hong Kong at apan8@bloomberg.net; Kim Kyoungwha in Beijing at kkim19@bloomberg.net.



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Korean Won Completes Biggest Weekly Gain Since 1998; Bonds Fall

By Kim Kyoungwha and Judy Chen

July 11 (Bloomberg) -- South Korea's won had its biggest weekly gain in a decade as President Lee Myung Bak vowed to ``get rid of factors'' in the foreign-exchange markets that are pushing up inflation. Bonds declined.

The won rose 4.8 percent this week, the world's best performer, after the Ministry of Finance and central bank said they would use the nation's $258 billion of foreign reserves to support the currency. Industrial Bank of Korea estimated they spent as much as $7 billion buying the won on July 9 alone.

``Few market participants are willing to run counter to the government that remains so steadfast in stopping the dollar's ascent,'' said Ko Yun Jin, a currency dealer with Kookmin Bank in Seoul. ``Still, there's pent-up demand for the dollar from importers in need of settlements.''

South Korea's currency rose 0.1 percent to 1,002.30 against the dollar at the 3 p.m. close of trading, compared with 1,002.90 yesterday, according to Seoul Money Brokerage Services Ltd. Its weekly advance was the most since March 1998 and trimmed its loss this year to 6.6 percent.

``I will do my utmost to revive the economy, a task which was entrusted to me,'' Lee said in a speech delivered at the National Assembly today in Seoul. ``The government will gradually get rid of factors in the financial and foreign exchange markets that are putting upward pressure on prices.'' Lee dismissed the nation's currency policy chief on July 7, signaling the end of his support for a weaker won.

Finance Minister Kang Man Soo pledged yesterday the government will tackle risks stemming from oil costs and inflation, while Bank of Korea Governor Lee Seong Tae said the bank may intervene if necessary because the currency market ``overreacts.''

`Poor Fundamentals'

Record oil prices caused inflation to accelerate in June to a 10-year high of 5.5 percent, widening the nation's current- account deficit and triggering a truckers' strike.

New York-based Brown Brothers Harriman & Co. recommended buying the dollar at 1,000 with a target of 1,030, citing the nation's weak economic conditions.

``We think Korea fundamentals remain poor, and that foreign-exchange intervention without a supportive rate hike will not have any lasting impact,'' the firm's currency strategists led by Marc Chandler wrote in a note to clients yesterday.

Central banks intervene in currency markets by arranging sales or purchases of foreign exchange.

Local-currency bonds fell for a second day, keeping the benchmark five-year yield near the highest since 2002 on speculation the Bank of Korea will raise borrowing costs.

Governor Lee, after leaving the benchmark interest rate unchanged at a seven-year high of 5 percent yesterday, said the pace of inflation won't slow quickly.

Lee's comments ``turned hawkish,'' DBS Group Holdings Ltd.'s economist Ma Tieying said in a report today. That ``raises market expectations that the Bank of Korea may hike rates in the next few months.''

The yield on the 5.25 percent note due March 2013 rose 5.3 basis points to 6.16 percent, according to Korea Exchange. The price fell 0.16, or 16 won per 10,000 won face amount, to 98.13. A basis point is 0.01 percentage point.

To contact the reporters on this story: Kim Kyoungwha in Beijing at kkim19@bloomberg.net; Judy Chen in Shanghai at xchen45@bloomberg.net;



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Australia, New Zealand Dollars Gain on Outlook for U.S. Rates

By Ron Harui and Candice Zachariahs

July 11 (Bloomberg) -- The Australian and New Zealand dollars gained speculation credit-market losses in the U.S. will deepen, undermining the case for the Federal Reserve to raise interest rates.

Australia's dollar traded near a 25-year high and New Zealand's dollar headed for a third day of gains after Treasury Secretary Henry Paulson told lawmakers that markets will take ``additional time'' to stabilize Fannie Mae and Freddie Mac, the largest U.S. providers of home-mortgage financing. Prospects the two nations will retain their interest-rate advantage over the U.S. spurred investors to put funds into higher-yielding assets.

``A Fed rate hike may no longer be on the cards as the U.S. financial market turmoil hasn't ended yet,'' said Tsutomu Soma, a bond and currency dealer at Okasan Securities Co. in Tokyo. ``High-yielding currencies such as the Australian and New Zealand dollars are likely to appeal to investors.''

Australia's dollar traded at 96.04 U.S. cents at 4:31 p.m. in Sydney from 96.03 cents late in Asia yesterday. It reached 96.68 cents on June 30, the strongest since February 1983. It was poised for its first weekly loss in four. The currency bought 103.03 yen from 102.94 yen yesterday and 102.89 yen late in New York on July 4.

New Zealand's dollar advanced to 75.80 U.S. cents from 75.72 cents late in Asia yesterday. The currency traded at 81.32 yen from 81.18 yen yesterday and 81.07 yen on July 4.

Near 25-Year High

The Australian dollar gained for a second day after former St. Louis Fed President William Poole said there is a growing chance the government will need to bail out Fannie Mae and Freddie Mac, contributing to respective slides of 14 percent and 22 percent in the stocks. Paulson said the regulator that oversees the two mortgage-financing companies told him they have enough capital.

Benchmark interest rates are 7.25 percent in Australia and 8.25 percent in New Zealand, compared with 2 percent in the U.S. and 0.5 percent in Japan, making them popular destinations for international investors seeking higher returns.

Futures on the Chicago Board of Trade show an 86 percent probability that the Fed will keep borrowing costs unchanged at 2 percent at the next meeting on Aug. 5, compared with 34 percent odds a month ago.

The Australian dollar, known as the Aussie, also was supported after the UBS Bloomberg Constant Maturity Commodity Index gained 2 percent, the most in nine days. Gold, Australia's third-most valuable raw material export, climbed the most in a week as investors bought the metal as a safe haven.

`Pretty Positive Story'

``Oil, gold and aluminum prices moved sharply higher,'' said Tony Morriss, a senior currency strategist at Australia & New Zealand Banking Group Ltd. in Sydney. ``That's a pretty positive story for the Aussie. It reflects U.S. dollar weakness as much as supply and demand dynamics.''

Exports of raw materials contribute about 17 percent to Australia's economy. The Australian government last month forecast sales of coal, iron ore and other commodity exports will generate a record A$212 billion ($204 billion) windfall for the economy in the year ending June 30, 2009, compared with A$151 billion estimated sales in 2008.

Gold futures for August delivery climbed $13.40, or 1.4 percent, to $942 an ounce yesterday on the Comex division of the New York Mercantile Exchange, the biggest percentage gain for a most-active contract since July 1. Gold is Australia's third- biggest export earner.

Australian 10-year government bonds headed for a fourth weekly gain, with the yield falling to 6.37 percent from 6.42 percent on July 4. The price of the 5.25 percent bond maturing in March 2019 rose 0.405, or A$4.05 per A$1,000 face amount, to 91.430 from 91.025 a week earlier. Yields move inversely to prices.

New Zealand 10-year government debt was poised for a third weekly advance. The yield on the 10-year note dropped 22 basis points to 6.11 percent from 6.33 percent on July 4. A basis point is 0.01 percentage point.

To contact the reporter on this story: Ron Harui in Singapore at rharui@bloomberg.net; Candice Zachariahs in New York at czachariahs1@bloomberg.net.



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Crude Oil Rises on Concern About Brazilian, Nigerian Supplies

By Nesa Subrahmaniyan

July 11 (Bloomberg) -- Crude oil rose for a third day in New York, building on its largest one-day gain for more than a month yesterday, after Brazilian oil workers threatened a strike and on concern that Middle East and Nigerian supplies may be disrupted.

Oil gained 4.1 percent yesterday after Brazil's Oil Workers Confederation said it is planning a five-day strike from July 14 against Petroleo Brasileiro SA on platforms in the offshore Campos Basin, the source of 80 percent of the country's supply. Iran test-fired more missiles in the Persian Gulf and a Nigerian militant group said it will end a cease-fire this week.

``It's a supply-focused market and trading has become very volatile,'' said Gerard Burg, energy and minerals economist at National Australia Bank Ltd. in Melbourne. ``Right now, geopolitical events are critical supply-related drivers.''

Crude oil for August delivery rose as much as $1.54, or 1.5 percent, to $143.19 a barrel on the New York Mercantile Exchange and was trading at $143.10 at 3:09 p.m. in Singapore. Yesterday, it soared $5.60 to settle at $141.65 a barrel, the biggest one- day increase since June 6. Prices had risen to an intra-day high of $142.13 a barrel. Nymex crude oil touched a record $145.85 on July 3. Futures are up 96 percent from a year ago.

In the last hour of floor trading in New York yesterday, prices jumped more than $5 a barrel as investors bought contracts based on technical trends indicating a rally in futures. The increase accelerated after futures broke through the July 9 high of $138.28 at 2:09 p.m. New York time yesterday after approaching it at least five times.

Oil may rise next week because of threats to supply from Iran and Nigeria and falling stockpiles in the U.S., the biggest energy-consuming country, according to a Bloomberg News survey.

Supply Threats

About 4,500 employees of state-controlled Petrobras in the Campos Basin will take part in the protest to get full pay for the day they return to the mainland after a 14-day shift at sea, Jose Maria Rangel, the Brazil Oil Workers Confederation coordinator for the basin, said yesterday.

Iran, the second-biggest producer in the Middle East, this week tested missiles capable of reaching Israel, increasing concern that a conflict may cut supply. Iran's military yesterday fired the missiles during a third day of war games, Agence France-Presse reported, citing the Web site of Iranian state-run television. Missiles were also launched on July 9.

Iran has ignored United Nations efforts to halt its uranium-enrichment program and says further sanctions won't affect its plans to develop nuclear energy. The U.S. has led international efforts to force Iran to give up enrichment because of concern the technology may be used to develop nuclear weapons.

Iran's Exports

The standoff has led to concern that Iran may come under attack from the U.S. or Israel, disrupting exports from OPEC's second-biggest producer.

OPEC Secretary-General Abdalla El-Badri said at a press conference in Vienna yesterday that ``if something were to happen, it is impossible to replace the production of Iran.''

The Movement for the Emancipation of the Niger Delta said attacks will resume on oil facilities. The Nigerian militant group will call off its unilateral cease-fire beginning midnight on July 12, the group's spokesman, Jomo Gbomo, said yesterday.

MEND's attacks on pipelines and other installations have cut more than 20 percent of Nigeria's oil exports since 2006. MEND says it is fighting for a greater share of oil wealth for the impoverished inhabitants of the Niger Delta.

The group declared a cease-fire after a June 19 attack on Royal Dutch Shell Plc's Bonga deep-water oilfield, located 120 kilometers (75 miles) offshore that cut 190,000 barrels a day of oil output.

Market Boiling

``Anything supply-related is going to keep this market boiling over,'' said Anthony Nunan, Tokyo-based assistant general manager for risk management at Mitsubishi Corp. ``Brazil's domestic disruption only adds to a bigger supply problem with MEND back in the news.''

The Organization of Petroleum Exporting Countries, which supplies more than 40 percent of the world's oil, cut its forecast of demand for its crude oil through 2030, as record prices and environmental considerations encourage consumers to conserve fuel and rely more on biofuels.

OPEC lowered demand forecasts by 4.4 percent to 32.3 million barrels a day in 2015, and by 12 percent to 43.6 million a day in 2030, the group's secretariat said yesterday in its World Oil Outlook report. This means OPEC may unnecessarily commit $300 billion to new fields over the next 12 years, it said.

``This is the danger that OPEC may not invest because they are probably worried about a crash in demand and prices,'' said Mitsubishi's Nunan. ``The market now focuses on the medium to long term and if they don't invest in new capacity, that's obviously bullish.''

Brent crude oil for August settlement rose as much as $1.53 a barrel, or 1.1 percent, to $143.56 a barrel and was trading at $143.23 at 3:10 p.m. Singapore time on London's ICE Futures Europe exchange. Yesterday, the contract gained $5.45, or 4 percent, to $142.03 a barrel. Prices climbed to a record $146.69 on July 3.

To contact the reporter on this story: Nesa Subrahmaniyan in Singapore at nesas@bloomberg.net.



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Gold Heads for Fourth Weekly Gain on Inflation Concern, Dollar

By Iris Leung and Feiwen Rong

July 11 (Bloomberg) -- Gold headed for a fourth weekly gain on concern high commodity prices and a weakening U.S. dollar are likely to spur more demand for the precious metal as hedge against inflation.

Gold was boosted after crude oil climbed 4 percent yesterday as Iran test-fired more missiles in the Persian Gulf and a Nigerian militant group said it will end a cease-fire this week. Aluminum prices rose to a record yesterday while lead prices jumped more than 10 percent. The dollar headed for a weekly loss against the euro.

``We saw a bit profit-taking this morning, but gold looks supported between $938-$940 as all the factors are in favor of the metal right now,'' K C Wong, trader at Standard Bank Asia Ltd., said today by phone from Singapore. ``The U.S. dollar in the long-term will have to weaken against other currencies, while the inflation fear will be here for a while.''

Bullion for immediate delivery traded at $942.29 an ounce at 9:29 a.m. in Singapore, down from $947.66 yesterday in New York. Silver traded little changed at $18.2900 an ounce.

Signs of a weakening U.S. economy may deter the Federal Reserve from increasing borrowing costs this year, diminishing the allure of dollar-denominated assets. The dollar traded at $1.5789 against euro at 9:31 a.m. in Singapore.

The dollar is also under pressure as a report today may show U.S. consumer confidence fell to the lowest level in 28 years, adding to concern the economic slowdown will be prolonged. Crude oil in New York traded at $141.61 a barrel at 9:33 a.m. in Singapore.

`Critical Factor'

``Oil has become the critical factor driving up the gold prices.'' Dick Poon, manager of precious metals trading desk at Heraeus Ltd., said today by phone. ``Political tensions in Iran and instability in the stock market have brought capital into commodities.''

Gold for August delivery was little changed at $943.10 an ounce in after-hours electronic trading on Comex at 9:33 a.m. Hong Kong time, while gold for December delivery traded in Shanghai gained 1.1 percent to 207.92 yuan a gram ($945 an ounce) at the same time.

Gold for June 2009 delivery rose 1.3 percent to 3,270 yen a gram ($950 an ounce) on the Tokyo Commodity Exchange at 10:35 a.m. local time.

To contact the reporters for this story: Iris Leung in Hong Kong at ileung7@bloomberg.net; Feiwen Rong in Singapore at frong2@bloomberg.net



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Aluminum Heads for Second Weekly Gain on China Output Cut Plan

By Feiwen Rong

July 11 (Bloomberg) -- Aluminum in London headed for a second weekly gain after China's top producers agreed to cut output by as much as 10 percent, sending the light metal to a record yesterday.

Aluminum Corp. of China Ltd. and another 19 companies in China, the world's largest producer, signed an accord yesterday to cut output by 5-10 percent because of a power shortage in the country, a government official said. Prices rallied as much as 6 percent to an all-time high at $3,380 a ton yesterday.

``Because of the large energy component of the production cost, aluminum remained a favored metal in the medium-to-long term outlook despite a short-term supply glut,'' Li Rong, chief analyst at Great Wall Futures Co. in Shanghai, said by phone.

Aluminum for delivery in three months traded unchanged at $3,290 a ton at 10:54 a.m. in Singapore in after-hours electronic trading on the London Metal Exchange.

The metal, used in aircraft and beverage cans, has more than doubled in five years as rising power prices buoy output costs, queezing profit margins at companies including Alcoa Inc., the largest U.S. producer. Energy accounts for 30 percent to 40 percent of the cost of producing aluminum.

Lost Production

The top 20 aluminum smelters in China account for about 70 percent of the country's capacity of about 14 million tons, Leon Westgate, a London-based analyst at Standard Bank Plc wrote in a report yesterday. A 10 percent cut would amount to just under 1 million tons of lost production annually, or around 80,000 tons per month, he said.

``A prolonged cutback would see the market shift from surplus to deficit quite easily,'' said Westgate, who estimated the global surplus of the metal at 284,000 tons this year.

Still, aluminum prices are subject to selling pressure in the short-term from Chinese smelters looking to lock in profit at a time of domestic market oversupply, said Great Wall's Li.

``If the aluminum futures in Shanghai rally to above 20,000 yuan ($2,925) a ton, I think a lot of the smelters would be enticed to sell their output in advance,'' Li said.

China's exports of aluminum and alloys surged 43 percent to 123,538 tons in June, from a month earlier, preliminary customs data showed yesterday. That's the highest since August 2006, according to Bloomberg data.

Aluminum for September delivery traded in Shanghai gained 0.7 percent to 19,705 yuan a ton at 10:56 a.m. local time. It has gained 11 percent this year, lagging behind the 37 percent gain in the London benchmark.

Among other metals traded on the LME, lead fell 1.9 percent to $1,946 a ton, copper added 0.4 percent to $8,266 a ton and zinc fell 3.4 percent, to $1,922 a ton. Nickel and tin had not traded as of 10:42 a.m. in Singapore.

To contact the reporter for this story: Feiwen Rong in Singapore at frong2@bloomberg.net



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Corn Rallies as Recent Declines Seen Overdone, Crude Oil Jumps

By Jae Hur

July 11 (Bloomberg) -- Corn rose for the first time in six days on speculation that losses were overdone and as an increase in energy costs may boost demand for biofuel made from the grain.

The price of corn, used to feed livestock and produce grain- based ethanol, fell 9.4 percent this week before today, heading for a second weekly decline, on favorable crop weather in the U.S. Midwest. The Department of Agriculture will update its supply and demand estimates today. Oil rose more than $5 a barrel yesterday.

``It's a simple technical correction for corn,'' Kazuhiko Saito, strategist at Interes Capital Management Co. in Tokyo, said today by phone. ``In today's USDA report we may see bearish data for corn, and bullish data for soybeans.''

Corn for December delivery added 1.25 cents, or 0.2 percent, to $7.055 a bushel as of 11:51 a.m. in Singapore after trading as high as $7.1075 in after-hours trading on the Chicago Board of Trade and traded at $7.08. The contract declined 1.2 percent yesterday after touching $7.01, the lowest since June 12.

Corn prices have almost doubled in the past year, reaching a record $7.9925 on June 27, as global reserves were forecast to fall to a 24-year low before the start of the U.S. harvest later this year.

The grain market also gained after crude oil gained 4.1 percent yesterday, the biggest one-day increase since June 6, boosting demand prospects for biofuel.

USDA Report

The U.S. Department of Agriculture today may increase its estimate of corn reserves on Aug. 31 to 1.52 billion bushels, up 6.1 percent from a June forecast, according to the average estimate of 14 analysts in a Bloomberg survey. That would be up 17 percent from a year ago. Supplies before the 2009 harvest will total 839 million bushels, 25 percent larger than the previous estimate, the analysts said.

The USDA will peg the surplus before the 2009 harvest at 141 million bushels, below a forecast of 175 million in June, said the analysts. Stockpiles will fall 78 percent to 125 million this year from a record 574 million last year, the USDA said in June.

Soybeans for November delivery fell 1 cent, or 0.1 percent, to $15.86 a bushel as of 11:54 a.m. Singapore time. The contract yesterday rose 1.9 percent on speculation that the USDA report will show falling U.S. inventories after flooding last month reduced acreage.

Most-active futures have risen 78 percent in the past year, reaching a record $16.3675 on July 3.

The oilseed market was also supported by the possibility that farmers in Argentina will resume a strike to protest against grain export taxes proposed by the government.

Argentina Farmers

Farmers plan to resume roadblocks they have manned for the past four months, which have disrupted Argentine grains exports and emptied supermarket shelves in Buenos Aires this year. Protesters will march to Buenos Aires on July 16, when the Senate is set to vote on the new tax, farm group leader Eduardo Buzzi told reporters on July 9.

Wheat for September delivery gained 0.5 cent to $8.185 a bushel as of 11:42 a.m. Singapore time after losing 0.9 percent yesterday on speculation the USDA will raise its output estimate as favorable weather improves prospects for the winter crop now being harvested.

The USDA today will project a total wheat crop of 2.476 billion bushels, up 0.2 percent from a June forecast, according to the average estimate of 11 analysts surveyed by Bloomberg News. Dry weather is helping farmers collect what may be the biggest winter crop since 1998.

The most active contract declined 39 percent from a record $13.495 set on Feb. 27 as world farmers planted more to take advantage of higher prices.

To contact the reporter on this story: Jae Hur in Singapore at jhur1@bloomberg.net



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Platinum Futures Gain as Oil Stokes Concern Inflation Rising

By Dave McCombs

July 11 (Bloomberg) -- Platinum futures in Tokyo had the biggest gain in a month as oil yesterday surged more than $5 a barrel, spurring speculation that higher energy prices will fuel demand for precious metals as a hedge against inflation.

Precious metals including platinum have drawn investors seeking protection against climbing consumer prices and a weakening dollar. Oil jumped 4 percent yesterday in New York amid concern a threatened strike in Brazil may disrupt supply.

``Oil was sharply higher in New York, so platinum is being bought today,'' Kazuhiko Saito, a commodity strategist at Interes Capital Management, said today in Tokyo by telephone.

Platinum for June delivery in Tokyo gained 160 yen, or 2.4 percent, to 6,884 yen a gram ($2,001 an ounce) at the 11 a.m. break on the Tokyo Commodity Exchange. The most-active contract earlier jumped as much as 2.9 percent, the biggest gain since June 6.

Metal for immediate delivery advanced $20.50 to $2,027 an ounce at 12:07 p.m. in Tokyo, 1 percent higher than late yesterday in New York.

Gains in platinum may be limited as higher oil prices raise concern that demand for autos and exhaust filters that use platinum may decline, said Saito. Prices for platinum futures in New York may drop below $2,000 an ounce and ``target'' $1,950 next week, he said.

Platinum futures for October delivery rose $32.60, or 1.6 percent, to $2,031 an ounce at 11:37 a.m. Tokyo time, in after- hours trading on the New York Mercantile Exchange.

Brazil's Oil Workers Confederation is planning a five-day strike from July 14 against Petroleo Brasileiro SA on platforms in the offshore Campos Basin, the source of 80 percent of the country's supply, a union official said. Oil also rose after Iran test-fired more missiles in the Persian Gulf and a Nigerian militant group said it will end a cease-fire this week.

To contact the reporter for this story: Dave McCombs in Tokyo at dmccombs@bloomberg.net



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Commodity Investments Advanced 19% Last Quarter, Barclays Says

By Stuart Wallace

July 11 (Bloomberg) -- Commodity assets under management rose 19 percent to $270 billion in the second quarter, a ``sub- optimal performance,'' Barclays Capital said.

Investment related to commodity indexes advanced 26 percent to $175 billion, ``all of which was due to price appreciation, as we estimate inflows remained largely flat,'' the bank said in a report e-mailed late yesterday.

Investments in commodity-linked medium-term notes and exchange-traded products climbed about 10 percent to $50 billion and $45 billion respectively, Barclays Capital said.

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



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Forex Market Update: If The US Housing Crisis Reaching Its Climax?

Daily Forex Fundamentals | Written by Saxo Bank | Jul 11 08 07:11 GMT |

Forex Market Update: If The US Housing Crisis Reaching Its Climax? US Government Apparently Weighing Effective Nationalization Of Mortgage Giants Fannie And Freddie.

Any takeover of the two companies by the government could mark the low of the housing crisis and turning point for the USD.

MAJOR HEADLINES - PREVIOUS SESSION

• US ICSC Chain Store Sales rose 4.3% YoY vs. 3.3% expected
• New Zealand Jun. REINZ House Sales fell -42.4% YoY vs. -52.9% in May
• Japan Jun. Consumer Confidence fell to 32.9 vs. 33.0 expected and 34.1 in May
• Germany Jun. Wholesale Price Index rose 8.9% YoY as expected.

THEMES TO WATCH - UPCOMING SESSION

Key event risks today (all times GMT):

• Canada Jun. Employment Rate and Net Change in Employment (1100)
• Canada May International Merchandise Trade (1230)
• Canada May New Housing Price Index (1230)
• US May Trade Balance (1230)
• US Jun. Import Price Index (1230)
• US July Preliminary University of Michigan Confidence (1400)

Market Comments

An article from the New York Times is making the rounds this morning, explicitly describing how the US government might take over (effectively nationalize) the key mortgage lenders Fannie Mae and Freddie Mac, who together represent in the neighborhood of half of the US mortgage market. The market has been nervous about the financial health of these companies for some time as rumors have swirled, home price indexes have been falling relentlessly and their stock prices have dropped. If they were simply allowed to fail, we would have a 19th-century style liquidity crisis on our hands as the US housing market would effectively grind to a halt. But this is obviously not the 19th century and these institutions are truly too big to fail with activist governments ever at the ready to bail out almost any mess, particularly one with systemic implications.

The US government will step in if necessary, and it is likely that stepping in will be necessary soon. The only final question may be how much Fannie's and Freddie's "nationalization" will cost US taxpayers and the US economy. This story is inseparable from the fall in overall US house prices. After all, as Fannie and Freddie are going down the tubes, their credit costs are rising dramatically and creating a vicious circle for their balance sheet. A more explicit government backing sooner rather than later could reduce credit costs more quickly for the institutions, which could be passed on to qualified buyers and help stabilize home prices more quickly and shore up confidence. It's a sad state of affairs, but the final capitulation of these institutions into the government's arms could finally mark the climax of the fall in housing prices and the bottom for the US dollar. For now, the market has hardly reacted to this story, despite its huge long term implications. Stabilization of these institutions is eventually a USD bullish story, however.

Oil snapped higher on a series of stories playing on supply fears, though it seems that the market reacts less and less to the short term moves in energy prices, with NOK as a possible exception. Any move to new highs just tightens the inflation thumbscrews already cinching off growth around the globe. Oil has certainly shown little effect on CAD, which today sees employment and trade numbers releases. USDCAD is at the lower end of the range within the range with a small tipping point support down around 1.0050. In the bigger picture, we like buying USDCAD, but six months of range trading do not a compelling short term view make. We need to see the pair all the way back above 1.0300 before we can talk about an uptrend again.

Volatility in the major FX crosses is collapsing. While some say that this could continue for some time as we pass through the lower volume summer months of July and August, it feels like something needs to happen soon and something often does happen when volatility begin rising from low levels - a development we must keep an eye out for. Carry trades keep drifting higher and higher on apparent complacency and despite complete lack of support from fundamental inputs (risk spreads and interest rate differentials), so we view that phenomenon with suspicion and we're unwilling to chase it higher. Perhaps we should focus on a high momentum turnaround in these trades as a sign that a new cycle is beginning. And a new cycle would certainly be welcome as we are tiring of this morass of range-trading, which is certainly no fun from an analytical standpoint! Come on, market: throw us a bone already.

Chart: EURUSD

We set up 1.5800 as an important break level to the upside. This level was touched yesterday. The rally to get to this level has been so slow, however, and the bout of range trading so persistent, and overall volatility so low, that we are beginning to wonder whether break-outs of price levels are especially significant in this environment. Perhaps instead we should look for a pick up in volatility as a sign of which way things are headed. Still, enormously negative EUR news of late has failed to trigger a sell-off in the currency, so it's hard to be bearish EUR until we get a chunky sell-off. We raise the bar for the bulls and now would like to see a strong 1.5900 breakout to the upside before getting excited about potential for a new high. And a sharp move back to 1.5600 and break is needed for the bears to shows signs of asserting control. Note that the 20-period ATR is edging back toward the lows of the year.

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Cencosud, Even Construtora, Pao de Acucar: Latin Equity Preview

By William Freebairn and Paulo Winterstein

July 11 (Bloomberg) -- The following stocks may have significant gains or losses in Latin American markets. Symbols are in parentheses after company names, and stock prices are from the last session.

The MSCI index of Latin American shares fell 0.4 percent to 4,341.77 yesterday. In Brazil, preferred shares are the most commonly traded class of stock.

Brazil

Cia. Brasileira de Distribuicao Grupo Pao de Acucar SA (PCAR4 BS): Brazil's biggest food retailer said sales at stores open for more than a year rose 9.8 percent in June on increased demand for electronics and home products. Total sales in all stores rose 23 percent in June to 1.39 billion reais ($863 million), the Sao Paulo-based company said yesterday in an e- mailed statement. Second-quarter same-store sales rose 7.3 percent. Grupo Pao de Acucar gained 4.4 percent to 35.50 reais.

Even Construtora e Incorporadora SA (EVEN3 BS): Brazil's fifth-largest real estate developer had 434 million reais of presales contracts at the end of the second quarter, compared with 179 million reais a year earlier. Even began work on 683 million reais of new projects, compared with 248 million reais in the second quarter of last year, the Sao Paulo-based builder said yesterday in a regulatory filing. Even fell 7.7 percent to 7.34 reais.

Gol Linhas Aereas Inteligentes SA (GOLL4 BS): The Varig unit of Brazil's second-biggest airline signed an agreement with American Airlines that allows the companies to sell tickets for each others' flights, Gol said in a regulatory filing yesterday. Sao Paulo-based Gol gained 3.2 percent to 14.63 reais.

Chile

La Polar SA (LAPOLAR CC), Cencosud SA (CENCOSUD CC) and Distribucion y Servicio D&S SA (DYS CC): Chile's central bank last night raised the benchmark lending rate to a nine-year high of 7.25 percent from the current 6.75 percent. The rate increase may worsen the outlook for retail sales as the Chilean economy slows, Mariana Larrain, a retail analyst at brokerage BCI Corredor de Bolsa SA, said in an interview yesterday. Department store operator La Polar fell 1.5 percent to 1,822.90 pesos. Cencosud, Chile's largest retailer, dropped 2.1 percent to 1,439.70 pesos. D&S, the country's largest grocer, slipped 1.6 percent to 184.74 pesos.

Mexico

Empresas ICA SAB (ICA* MM): Mexico's biggest construction company and two partners signed a previously announced 15.3 billion peso ($1.48 billion) contract to build a 21-station subway line in the nation's capital, ICA said yesterday in an e- mailed statement. Work will begin immediately and be completed by the end of 2011, the company said. ICA fell 1.3 percent to 63.55 pesos.

To contact the reporters on this story: William Freebairn in Mexico City at wfreebairn@bloomberg.net; Paulo Winterstein in Sao Paulo at pwinterstein@bloomberg.net



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Lehman Takes `Pounding' Again as Speculation Drags Down Shares

By Yalman Onaran

July 11 (Bloomberg) -- Lehman Brothers Holdings Inc., the securities firm that lost almost 75 percent of its market value this year, sank to the lowest since 2000 in New York trading as customers' votes of confidence failed to halt speculation that the stock may drop further.

Lehman, once the biggest U.S. underwriter of mortgage bonds, fell $2.44, or 12 percent, to $17.30 in New York Stock Exchange composite trading yesterday. Shares of the New York- based investment bank lost 22 percent in the last two days.

Yesterday's speculation centered on two clients backing away from the firm. Pacific Investment Management Co., manager of the world's biggest bond fund, and hedge fund SAC Capital Advisors LLC both said publicly that they continued to do business with the company. Pimco fund manager Bill Gross said in an interview with CNBC that there's ``no question'' about the firm's solvency.

Pimco and SAC's endorsements were overwhelmed as Lehman, led by Chief Executive Officer Richard Fuld, dropped alongside home-loan financing companies Fannie Mae and Freddie Mac. Both face pressure to raise more capital amid a credit contraction that has saddled banks with $408 billion of writedowns. Lehman has taken a ``pounding'' from traders betting the shares will drop since rival Bear Stearns Cos. collapsed in March, according to Richard Bove, an analyst at Ladenburg Thalmann & Co.

``People are worried about Fannie and Freddie, Lehman falls; people aren't worried about them, Lehman falls again,'' said Brad Hintz, an analyst at Sanford C. Bernstein & Co. ``This is one where you scratch your head and ask `what's going on?' It's fear and over-reaction.''

`Concentrated Effort'

Fuld, 62, declined to comment through a firm spokesman.

Short-sellers, who borrow shares betting that they'll decline, are spreading rumors about the bank in an organized attempt to depress the stock, according to Bove.

``There's a concentrated effort to break Lehman,'' Bove said. `` And I can't say it won't work because it worked with Bear.''

Similar speculation may have contributed to the demise of Bear Stearns when clients and creditors stopped doing business with the firm. The Federal Reserve has since allowed brokers to borrow from the central bank, as commercial lenders do. Since Bear Stearns's failure and takeover by JPMorgan Chase & Co. in March, Lehman has boosted its cash holdings and reduced dependence on short-term funding.

U.S. Representative Paul Kanjorski, a Democrat from Pennsylvania, said he wasn't convinced the sinking share prices resulted from wrongdoing.

`Disrupt the Balance'

``There are winners and losers in the market,'' said Kanjorski, chairman of the House Subcommittee on Capital Markets, Insurance and Government Sponsored Enterprises. ``We've got to be very careful not to disrupt that balance because if we do we're effectively destroying the market.''

Freddie Mac shares dropped 22 percent yesterday to $8, extending its drop in two days to 41 percent. Fannie Mae has sunk 25 percent in the last two days.

The cost of protecting debt sold by Lehman Brothers from default rose to the highest in almost four months, according to traders of credit-default swaps.

Contracts on the New York-based broker jumped 40 basis points to 325 yesterday, according to Phoenix Partners Group in New York. A basis point on a credit-default swap contract protecting $10 million of debt from default for five years is equivalent to $1,000 a year.

Credit-default swaps are financial instruments based on bonds and loans that are used to speculate on a company's ability to repay debt. They pay the buyer face value in exchange for the underlying securities or the cash equivalent should a borrower fail to adhere to its debt agreements. A rise indicates deterioration in the perception of credit quality; a decline, the opposite.

To contact the reporter on this story: Yalman Onaran in New York at yonaran@bloomberg.net.



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Daily Financial Market Outlook

Daily Forex Fundamentals | Written by Lloyds TSB | Jul 11 08 06:52 GMT |

Overview & economic commentary

Today sees the release of some important data out of North America. High oil and other commodity prices have already pushed up US import price inflation to decade highs, see chart below. The recent rise threatens to do more of the same. This will have a double whammy; widening the trade deficit and at the same time increasing inflation pressure in the US economy. We look for a 2% rise in May, to take the annual rate up to nearly 20%. As a result of higher oil prices, we expect the trade deficit to widen, to just over $62bn in May. Ex oil, the trade deficit is narrowing, but the recent rise in oil prices means that the overall deficit may widen further in the months ahead if oil prices remain at $140 a barrel. With higher prices, and rising unemployment, has come a sharp fall in consumer confidence, and we expect this to be reflected once again in the University of Michigan survey, for June. But this gloom, which has continued despite the arrival of tax rebates in the post, has not stopped consumer spending from being firm. However, the government fiscal deficit in May is likely to have been around $30bn. In Canada, the trade surplus should remain around $5bn, despite higher oil prices. Unemployment has been rising has the economy slowed, but the unemployment rate should remain steady in June as employment rises. Japanese industrial production is out and the data are likely to show that the annual rate of growth is being maintained at just over 1%, even as the developed economies see a slower pace of expansion

Currency commentary

General Electric is expected to report 0.54ct profit/share around midday and the company's guidance for Q3/Q4 is what may dictate price action in fx/ bonds and equities on the final trading day of the week. The dollar is a touch weaker this morning and, aside from the GE results, it may be influenced by US trade and consumer confidence data this afternoon. Record energy prices and oil imports are forecast to have pushed the deficit to $62bn in May, but markets will focus on the ex-oil number to gauge the strength of US exports and their contribution to Q2 gdp. Michigan confidence could be a market mover if it deviates significantly from the 56.0 forecast. Tax rebates may well have propped up morale and this could be a portent of strong retail numbers next week. €/£ trades at the upper end of the trading range this morning around 0.7980. Canadian employment data is also due and may move the C$ if the data sparks a reassessment of BoC interest rate expectations. £/C$ could break 1.9950 support in the event of a stronger set of numbers.

Major data and events today

• US Trade balance (sa) (13:30)
  Apr -$60.9bn
  May (f'cast) -$62.0bn
  Median -$62.2bn Range-$64.6bn:-$58.4bn
• US Import prices (13:30)
  Apr +2.3% Y-O-Y +17.8%
  May (f'cast) +2.0% Y-O-Y +18.7%
  Median +1.9% Range +0.6%:+2.8%
• University of Michigan confidence (prel) (15:00)
  May 56.4
  Jun (f'cast) 56.0
  Median 55.8 Range 54.0:57.0
• US Treasury statement (sa) (19:00)
  Apr +$27.5bn
  May (f'cast) -$30.0bn
  Median -$30.0bn Range -$20.0bn:-$50.0bn
• Canada unemployment rate (12:00)
  May 6.1%
  Jun (f'cast) 6.1%
  Median 6.1% Range 6.1%:6.2%
• Canada employment change (12:00)
  May +8.4K
  Jun (f'cast) +10.0K
  Median +10.0K Range 5.0K:+15.0K
• Canada trade balance (sa) (13:30)
  Apr +C$5.1bn
  May (f'cast) +C$5.2bn
  Median +C$5.0bn Range +C$4.5bn:+C$5.6bn
• Canada new housing index (13:30)
  Apr zero
  May (f'cast) +0.1%
  Median +0.1% Range -0.2%:+0.2%
• Japan Industrial output (05:30) (final)
  May (prel) Y-O-Y +1.2%
  May (f'cast) Y-O-Y +1.2%
  Median +1.2% Range +1.1%:+1.2%

Chart of the day: US import prices have risen dramatically since last year, adding upward pressure on overall inflation

Lloyds TSB Bank
http://www.lloydstsbfinancialmarkets.com

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European Stock Futures Rise; BP, Total, BHP Billiton May Gain

By Sarah Thompson

July 11 (Bloomberg) -- European stock-index futures rose, following gains in the U.S. and Asia, after a report suggested the U.S. government may take over Fannie Mae and Freddie Mac and higher oil and metals prices boosted commodity producers.

U.S.-traded securities of BP Plc, Europe's second-biggest oil company, and Total SA advanced after crude jumped more than $5 a barrel yesterday. BHP Billiton Ltd., the world's largest mining company, and Rio Tinto Group gained in Australia.

Futures on the Dow Jones Euro Stoxx 50 Index, a benchmark for the euro region, added 23, or 0.7 percent, to 3,324 at 7:40 a.m. in London. The U.K.'s FTSE 100 Index may gain 30, according to CMC Markets.

U.S. officials are considering a plan to have the government take over one or both of Fannie Mae and Freddie Mac, the largest buyers of U.S. home loans, if they continue to deteriorate, The New York Times reported. The newspaper cited unidentified government officials briefed on the plan.

``News that Freddie Mac and Fannie Mae may be thrown a lifeboat will be very well-received by the markets,'' said David Buik, a London-based market analyst at BGC Partners. ``These companies have had investors asking some severe questions about their liquidity. Oil and mining stocks are also likely to rally.''

U.S. stocks rose yesterday, helping the Standard & Poor's 500 Index rebound from a two-year low, after Dow Chemical Co.'s agreed to buy Rohm & Haas Co. for $15.4 billion. Asian shares climbed today as commodity producers gained along with metals prices.

The cost of protecting Japanese and Australian bonds from default declined after the New York Times report.

BP, BHP

American depositary receipts of BP rose 1.3 percent from the close in London yesterday. ADRs of Total, Europe's third-largest oil company, ended 1.2 percent above the finish in Paris.

Oil for August delivery rose $5.60, or 4.1 percent, to $141.65 yesterday as Brazilian oil workers threatened a strike and on rising concern that supplies from the Middle East and Nigeria may be disrupted. It traded up 22 cents today.

Cadogan Petroleum Plc will probably gain. The oil and natural-gas producer operating in Ukraine said it found unexpected gas in its Borynya-3 well and reached its target depths in Pirkovskoe-1.

BHP jumped 3.4 percent in Australia, while Rio Tinto Group, the world's third-largest mining company, gained 2.7 percent.

Copper increased today in London while gold headed for a fourth weekly gain. Aluminum prices rallied as much as 6 percent to an all-time high of $3,380 a ton yesterday.

Nokia, Royal Bank

Nokia Oyj, the largest mobile phone maker, may gain. Nokia Siemens Networks won a contract valued at 550 million euros ($868 million) to expand the nationwide network belonging to China Mobile Communications Corp. Nokia Siemens, the world's second-biggest maker of wireless networks, is a joint venture between Nokia and Siemens AG.

Royal Bank of Scotland Group Plc might be active. The company, seeking to restore capital depleted by writedowns, is in talks to sell assets in Australia and New Zealand to National Australia Bank Ltd.

Mitchells & Butlers Plc may rise. UBS AG upgraded shares of the owner of O'Neill's pubs to ``buy'' from ``neutral.''

Zurich Financial Services AG might gain. Switzerland's biggest insurer pulled out of bidding for Royal Bank of Scotland's insurance unit and agreed to buy a 50 percent stake in Banco Sabadell SA's insurance units to become Spain's second- largest insurer.

Casino, Vodafone

Casino Guichard-Perrachon SA might advance. The biggest supermarket owner in Paris raised second-quarter sales by 15 percent after taking control of its Colombian and Dutch units and drawing French shoppers back to its discount stores.

Vodafone Group Plc is likely to fall. Thee world's biggest mobile-phone company may have to pay more than $4 billion in taxes if it loses a court case with the Indian government, the Financial Times reported.

Heineken NV will probably fall after the largest Dutch brewer was downgraded to ``underweight'' from ``overweight'' at JPMorgan Chase & Co., which cited the risk this year's acquisition of Scottish & Newcastle Plc assets may hurt earnings.

``Heineken offers half the medium-term growth rate of its brewing peers but is on a similar multiple and carries more forecast risk,'' JPMorgan analysts Mike Gibbs and Vanessa Lai Min wrote in a note dated today.

European Aeronautic, Defence & Space Co. might be active. The company doesn't rule out cutting the full-year earnings forecast when it releases six-month figures, Boersen-Zeitung reported, citing Chief Financial Officer Hans Peter Ring.

C&C Group Plc might slide. The Irish beverage maker whose shares plunged 70 percent in 2007 said sales continued to decline in the current fiscal year's first four months as Britons drank less Magners cider.

To contact the reporter on this story: Sarah Thompson in London at sthompson17@bloomberg.net.



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Forex Technical Analytics

Daily Forex Technicals | Written by FOREX Ltd | Jul 11 08 07:14 GMT |

CHF

The assumed test of the key supports has been confirmed with conditions for realization of buyers' positions. OsMA trend indicator following the results of previous trading day has not revealed the advantage of any party to make a choice of planning priorities for today. Hence because of chosen strategy based on presumptions about possible range movement of the rate as well as taking into account the ascending direction of indicator chart, we assume a possibility of another test of channel line '1' within the range 1.0310/30, where it is recommended to evaluate the activity development according to the charts of shorter time interval. For short-term buyers' positions on condition of formation of topping signals the targets will be 1.0270/80, 1.0220/40 and/or further breakout variant below 1.0200 with the targets 1.0120/40, 1.0080/1.0100. An alternative for buyers will be above 1.0360 with the targets 1.0400/20, 1.0460/80, 1.0500/20.

GBP

The assumed test of the key supports has been confirmed but the progress of bearish activity revealed by OsMA indicator did not dispose to realization of the pre-planned buyers' positions. At present taking into account the general activity parity of both parties as well as the feature of incompletion of bearish development, we assume a possibility of short-term breakout of channel line '1' with pair return to resistance range 1.9790/1.9810, where it is recommended to evaluate the activity development according to the charts of shorter time interval. For short-term sells on condition of formation of topping signals the targets will be 1.9720/40, 1.9660/80 and/or further breakout variant up to 1.9600/20, 1.9520/40, 1.9480/1.9500. An alternative for buyers will be above 1.9850 with the targets 1.9890/1.9910, 1.9960/80, 2.0000/20.

JPY

The pre-planned breakout variant for buyers has been realized but without attainment of minimal assumed target. OsMA trend indicator with preservation of pair movement within the version of ascending trading channel has not revealed the features of determinate advantage of any party. Hence because of chosen strategy with presumptions of possible range movement of the rate, we assume a possibility of another test of channel support '1' within the range 106.95/107.05, where it is recommended to evaluate the activity development according to the charts of shorter time interval. For short-term buyers' positions on condition of formation of topping signals the targets will be 107.40/60, 107.90/108.10 and/or further breakout variant up to 108.50/70, 109.00/20. An alternative for sells will be below 106.70 with the targets 106.10/30, 105.70/90.

EUR

The pre-planned buyers' positions from the key supports have been realized with attainment of main assumed target. OsMA trend indicator having marked the preservation of parties' low activity gives grounds to further range movement of the rate of further existent tendency with a risk of sharp advantage change in favor of bearish party. Hence and because of descending direction of indicator chart we assume a possibility of pair return to supports 1.5740/60, where it is recommended to evaluate the activity development according to the charts of shorter time interval. For short-term buyers' positions on condition of formation of topping signals the targets will be 1.5790/1.5800 and/or further breakout variant above 1.5820 with the targets 1.5860/80, 1.5900/20. An alternative for sells will be below 1.5680 with the targets 1.5620/40, 1.5580/1.5600, 1.5520/40, 1.5460/80.

FOREX Ltd
www.forexltd.co.uk



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Carbone Lorraine, Casino, Groupe SEB: French Stocks Preview

By Anne-Sylvaine Chassany

July 11 (Bloomberg) -- The following is a list of companies whose stocks may have unusual changes in Paris. Symbols are in parentheses after company names and prices are from the last close.

France's CAC 40 Index tumbled 108.10, or 2.5 percent, to 4,231.56 in Paris for its biggest drop since March. The SBF 120 Index also lost 2.5 percent.

Carbone Lorraine SA (CRL FP): Axa Private Equity bought 10.5 percent of the world's second-biggest maker of industrial fuses and said it may raise its holding to as much as 22.5 percent. The shares lost 17 cents, or 0.5 percent, to 37.83 euros.

Casino Guichard-Perrachon SA (CO FP): The biggest supermarket owner in Paris reports second-quarter sales before the market opens in Paris. The company may say revenue rose 11 percent to 7.03 billion euros, according to the median of six analyst estimates, after it took control of operations in Colombia and the Netherlands. The shares fell 2.31 euros, or 3.3 percent, to 67.90 euros.

Esker SA (ESK FP): The supplier of fax software to Whirlpool Corp. and Adecco SA said second-quarter sales rose 10 percent to 6.97 million euros. The company also said it won a $1 million contract from an unidentified electronics group. The shares gained 1 cent, or 0.2 percent, to 4.21 euros.

Groupe SEB SA (SK FP): The world's largest maker of countertop kitchen appliances said first-half sales rose 15 percent, boosted by French demand for products such as the Actifry deep fryer and by market growth in central Europe. The shares rose 17 cents, or 0.5 percent, to 34.19 euros.

Jacquet Metals SA (JCQ FP): The metals producer said second-quarter revenue dropped to 62.8 million euros from 81.9 million euros last year and forecast profit margins will be hurt by a drop in European sales. The shares fell 3.80 euros, or 7.5 percent, to 47.21 euros.

Poncin Yachts (PONY FP): The sailboat maker that filed for creditor protection last month aims to reach an accord with banks over its 22 million euros of debt by the autumn, Chief Financial Officer David Etien said. The shares closed unchanged at 97 cents.

Radiall SA (RLL FP): The maker of electronics products and connectors said second-quarter sales increased 8.2 percent to 52.8 million euros. Full-year sales will be close to 2007 levels, the company said, citing an ``uncertain environment'' and currency movements. The shares gained 38 cents, or 0.5 percent, to 75.38 euros.

Stallergenes SA (GEN FP): Europe's second-largest maker of allergy drugs said sales advanced 18 percent to 38 million euros in the second quarter. The shares added 32 cents, or 0.6 percent, to 58.2 euros.

To contact the reporter on this story: Anne-Sylvaine Chassany in Paris at achassany@bloomberg.net.



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EURUSD, AUDUSD, EURCHF Daily Outlook

Daily Forex Technicals | Written by E-Forex | Jul 11 08 07:07 GMT |

EURUSD

The upside is on focus once again due to recent rally to 1.5800. Strong resistance is formed into the 1.5795/00 region by an upward trendline and also by the 62% retracement of the 1.5909-1.5611 move. A potential break will confirm the uptrend. On the downside, interim support starts at 1.5760 formed by a previous resistance backed by an upward trendline support around 1.5715 then 1.5680 lower. While maintaining the bid tone, the Euro may advance higher past the 1.5795 resistance and aim towards next barrier at 1.5890/00. Current quote is 1.5771 @06:30 GMT

Support levels: 1.5760, 1.5715 and 1.5680
Resistance levels: 1.5795/00, 1.5835 and 1.5890.
Market sentiment: long-term : bullish, mid-term : bullish, short-term : slightly bullish
AUDUSD

Resistance into the .9625-.9650 zone remains intact and the Aussie is currently losing some ground against the buck, testing bids around the .9600 mark. Daily sentiment is slightly bullish but a break past .9625-.9665 resistance region is needed to confirm the uptrend. Support starts at .9550 backed by .9495. Current quote is .9600 @06:30 GMT

Support levels: .9550, .9535 and .9495
Resistance levels: .9620, .9640 and .9650/66
Market sentiment: long-term : bullish, mid-term : bullish, short-term : slightly bullish
EURCHF

Interim resistance is seen at 1.6245 and a potential break may encourage further gains towards next resistance levels at 1.6270 and 1.6295/00. Support is seen at 1.6213 backed by 1.6190 and 1.6170. Current quote is 1.6235 @06:30 GMT

Support levels: 1.6213, 1.6190 and 1.6170
Resistance levels: 1.6245, 1.6270 and 1.6295/00.
Market sentiment: long-term : bullish, mid-term : bullish, short-term : bullish

E-Forex



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Asian Stocks Advance, Led by BHP on Higher Oil; Banks Rebound

By Chua Kong Ho and Shani Raja

July 11 (Bloomberg) -- Asian stocks rose, snapping a four- week loss, as commodity producers climbed along with metals prices and the New York Times reported the U.S. government may act to prevent defaults by Fannie Mae and Freddie Mac.

BHP Billiton Ltd. and Mitsubishi Corp. climbed after oil jumped more than $5 a barrel yesterday and zinc advanced the most since February. Mizuho Financial Group Inc. led banks higher after the New York Times said the government may take over the two largest buyers of U.S. home loans and guarantee their debt, reducing the risk of further credit-market losses.

``People are comforted to see that some action is being taken,'' said Angus Gluskie, who helps oversee the equivalent of $500 million at White Funds Management in Sydney. ``It eliminates one of the risks that they're concerned about: the risk that we'll get a breakdown of a big player in the marketplace.''

The MSCI Asia-Pacific Index rose 0.5 percent to 132.94 at 2:45 p.m. Tokyo time, reversing a drop of 0.7 percent.

Japan's Nikkei 225 Stock Average gained 0.1 percent to 13,081.50. Most Asian benchmark indexes rallied after the New York Times report.

The MSCI Asian gauge slumped 12 percent in the past four weeks as oil climbed to a record, eroding earnings and deterring consumer spending, and as concerns over subprime losses rekindled. The world's largest banks and securities firms have posted writedowns and credit losses of more than $400 billion as the U.S. housing market collapsed, sparking turmoil in financial markets.

U.S. stocks rose yesterday, helping the Standard & Poor's 500 index rebound from a two-year low. Futures for the index declined 0.1 percent today.

Commodities Rally

BHP rose 3.3 percent to A$40.07 in Sydney, while rival Rio Tinto Group climbed 2.7 percent. Woodside Petroleum Ltd., Australia's second-biggest oil and gas producer, gained 4 percent to A$60.20, the most since May 29.

Newcrest Mining Ltd., the largest Australian gold mining company, jumped 4.1 percent to A$31.05, as the price of the precious metal climbed in Shanghai and Tokyo. Jiangxi Copper Co., China's second-biggest producer of the metal, advanced 1.4 percent to HK$15.60 in Hong Kong.

Mitsubishi Corp., which gets half of its profit from commodities, advanced 2.2 percent to 3,250 yen. Mitsui & Co., for which energy trading is the second-biggest contributor to profit, rose 1.2 percent to 2,120 yen.

Oil climbed $5.60 a barrel to $141.65 in New York yesterday, the biggest one-day increase since June 6, and was at $141.92 at 2:45 p.m. in Tokyo. A measure of six metals traded on the London Metal Exchange advanced 1.7 percent. Zinc rose 6.7 percent, copper 0.2 percent and nickel 2.1 percent.

Alumina Jumps

Alumina Ltd., a partner in the world's largest producer of the material used to make aluminum, surged 7.6 percent to A$4.55, the most in five months and the third-biggest percentage gain on MSCI's Asian gauge. Chinese smelters agreed to cut output of the metal by as much as 10 percent, sending prices to a record.

Aluminum Corp. of China Ltd., the nation's biggest producer of the metal, gained 7.4 percent to HK$9.46. Midwest Corp., a Perth-based iron ore mining company, added 0.9 percent to A$6.46, after Sinosteel Corp. won control in the biggest overseas mining takeover by a Chinese company.

Kenmec Mechanical Engineering Co. climbed 7 percent to NT$42.10, the daily limit, in Taipei trading after its solar-cell unit agreed to a 10-year supply of raw materials and said it may sell shares to MEMC Electronic Materials Inc.

`Toxic Waste'

``Equity owners are asking, `What do I need to hold?' and the answer is, `More hard commodities, less financials,''' said Hans Kunnen, head of investment market research in Sydney at Colonial First State Global Management, which manages about $128 billion. ``The banks are suffering from America's toxic waste.''

Mizuho Financial climbed 2.7 percent to 540,000 yen, reversing a 1.7 percent loss. Mitsubishi UFJ Financial Group Inc., the largest Japanese bank by value, gained 1.3 percent to 1,001 yen, rebounding from a 3.3 percent decline. National Australia Bank Ltd., which today said it may have to increase provisions for credit-related investments, pared its decline to 0.7 percent.

Financial stocks as a group surged after the New York Times report, which cited unidentified U.S. government officials briefed on the plan to place Fannie Mae and Freddie Mac under conservatorship.

``It goes to show how fragile the financial world is at the moment,'' said Stewart Paterson, joint managing director at Singapore-based hedge fund Riley Paterson Investment Management. ``Nationalization of the financial system is not a good thing.''

To contact the reporter for this story: Chua Kong Ho at in Shanghai or kchua6@bloomberg.net; Shani Raja in Sydney at sraja4@bloomberg.net.



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Japan Stocks Decline, Cap 5th Weekly Drop, on Surge in Crude

By Makiko Kitamura and Masaki Kondo

July 11 (Bloomberg) -- Japan's stocks fell, capping a fifth- straight weekly decline, after the steepest jump in crude prices in a month raised concern earnings at automakers will fall.

Toyota Motor Corp., Japan's largest automaker, and Nissan Motor Co. fell to the lowest in almost three months. Inpex Holdings Inc., Japan's biggest oil explorer, gained for the first time in four days, while Mizuho Financial Group Inc. rallied on a newspaper report regulators may take over the biggest U.S. mortgage lenders.

The Nikkei 225 Stock Average sank 27.52, or 0.2 percent, to close at 13,039.69, capping a 1.5 percent drop this week. The broader Topix index dropped 4.85, or 0.4 percent, to 1,285.91, falling 0.9 percent in the past five days.

``Auto sales are plummeting in the U.S. and in Japan because of rising oil prices,'' said Yoku Ihara, head of equity research at Tokyo-based Retela Crea Securities Co. ``Trains are packed, and bicycle sales seem to be rising.''

Crude oil for August delivery rose 4.1 percent yesterday, the most since June 6, as Brazilian oil workers threatened a strike and on rising concern supplies from the Middle East and Nigeria may be disrupted.

To contact the reporter for this story: Makiko Kitamura in Tokyo at mkitamura1@bloomberg.net; Masaki Kondo in Tokyo at mkondo3@bloomberg.net.
Last Updated: July 11, 2008 02:18 EDT



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China's Stocks Drop for Second Day; Air China, Angang Decline

By Zhang Shidong

July 11 (Bloomberg) -- China's stocks fell for a second day after oil prices jumped and Angang Steel Co. said an accounting rule change may cut earnings, renewing concern that corporate profit growth may slow.

Air China Ltd. led carriers lower on concern jet fuel costs will rise. Aluminum Corp. of China Ltd., known as Chalco, climbed on speculation prices of the metal will rise after the country's producers agreed to reduce output.

``Rising fuel costs and some bad corporate news have put pressure on the market,'' said Yan Ji, an investment manager at HSBC Jintrust Fund Management Co. in Shanghai, which manages the equivalent of about $850 million. ``The restricted aluminum supply will be an incentive for the industry.''

The CSI 300 Index, which tracks yuan-denominated A shares listed on China's two exchanges, declined 23.72, or 0.8 percent, to 2,950.01 at 1:14 p.m. local time. Two stocks dropped for each one that advanced.

The measure has gained 7.6 percent the past five days, on course for the first winning week in eight, as forecasts of higher profits at companies including China Merchants Bank Co. and Poly Real Estate Co. eased concern that government measures to curb inflation will hurt earnings.

The central bank this year ordered banks to set aside a record amount in reserve after raising interest rates six times last year. The CSI 300 is down 45 percent this year, the world's second-worst performing major benchmark index tracked by Bloomberg.

Air China, Angang

Air China, the world's biggest airline by market value, fell 2.9 percent to 9.67 yuan. China Southern Airlines Co., the nation's largest carrier by fleet size, dropped 1.7 percent to 7.74 yuan. Jet fuel accounted for about 40 percent of Chinese airlines' costs in 2007, according to their annual reports.

Crude oil yesterday soared 4.1 percent to settle at $141.65 a barrel in New York, the biggest one-day increase since June 6. It was little changed at 141.73 a barrel in after-hours trading.

Angang Steel, China's second-biggest steelmaker by value, retreated 3.2 percent to 13.60 yuan, the biggest drop since July 1. Angang said its 2008 profit will be cut by 126 million yuan ($18 million) because of changes in the rules for asset depreciation.

Chalco, the nation's biggest aluminum maker, gained 3.6 percent to 14.52 yuan. Yunnan Aluminium Co., China's fourth- largest producer, added 3 percent to 9.28 yuan.

Chalco and 19 of its peers signed the accord yesterday to curb supply by 5 percent to 10 percent, the China Nonferrous Metals Industry Association said in a statement. The agreement will cut output by a maximum 400,000 metric tons in the second half, the group said. Aluminum gained as much as 6 percent to $3,380 a ton on the London Metal Exchange.

The Shanghai Composite Index, which tracks the bigger of China's stock exchanges, retreated 0.8 percent to 2,852.40. The Shenzhen Composite Index lost 1.3 percent to 858.93.

The following stocks rose or fell. Stock symbols are in brackets after company names.

Shanxi Xinghuacun Fen Wine Factory Co. (600809 CH), a wine maker, fell 0.56 yuan, or 4 percent, to 13.40, a second day of declines. The company said first-half profit probably fell more than 50 percent because of lower sales. The company is due to report earnings on Aug. 20.

Western Mining Co. (601168 CH), China's second-largest maker of lead concentrate, slipped 0.41 yuan, or 2.6 percent, to 15.60. The company said 1.2 billion shares will become tradable July 15 as a lock-up period expires for investors who bought stock before the company's initial share sale.

To contact the reporter on this story: Zhang Shidong in Shanghai at szhang5@bloomberg.net



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Australia Stocks: Alumina, Anvil, BHP, CSR, Equinox, Queensland

By Shani Raja

July 11 (Bloomberg) -- The S&P/ASX 200 Index rose 10, or 0.2 percent, to 4,947.40 at 1:45 p.m. in Sydney. The broader All Ordinaries Index gained 12.80, or 0.3 percent, to 5,033.30, while the futures index expiring in September lost 2 points to 4,944.

Mining shares: BHP Billiton Ltd. (BHP AU), the world's largest mining company, advanced A$1.13 cents, or 2.9 percent, to A$39.93, the most since June 17. Rio Tinto Group (RIO AU) gained A$2.52, or 2.1 percent, to A$124.12, the most in a week.

A measure of six metals traded on the London Metal Exchange advanced 1.7 percent. Zinc rose 6.7 percent, copper 0.2 percent and nickel 2.1 percent.

Oil companies: Woodside Petroleum Ltd. (WPL AU), Australia's second-largest oil and gas producer, rose A$2.06, or 3.6 percent, to A$59.96, the most since May 29. Santos Ltd. (STO AU) jumped 45 cents, or 2.4 percent, to A$18.91, the most in two weeks.

Crude oil for August delivery rose $5.60, or 4.1 percent, to settle at $141.65 a barrel at 2:53 p.m. on the New York Mercantile Exchange, the biggest one-day increase since June 6.

Alumina Ltd. (AWC AU), partner in the world's biggest producer of the material used to make aluminum, rallied 33 cents, or 7.8 percent, to A$4.56, the most since Feb. 15 and the index's third-biggest gainer. China's biggest aluminum producers, the largest in the world, agreed yesterday to cut output by as much as 10 percent to ease a power shortage, sending metal prices to their highest ever.

Anvil Mining Ltd. (AVM AU), an Australian producer of copper in the Democratic Republic of Congo, advanced A$2.02, or a record 22 percent, to A$11.02, after saying it raised C$296.7 million ($293.7 million) in a private placement of shares to fund development of its African projects.

CSR Ltd. (CSR AU), Australia's third-largest maker of building products, rose 14 cents, or 7.1 percent, to A$2.11, the most since July 2004. The company's rating was raised to ``overweight'' from ``neutral'' by JPMorgan Chase& Co., and to ``outperform'' from ``neutral'' by Credit Suisse Group AG. CSR was the index's biggest gainer.

Equinox Minerals Ltd. (EQN AU), developing Africa's largest copper mine, added 21 cents, or 5.1 percent, to A$4.31, the most in almost a month. The company may start production at the Lumwana project in Zambia within five weeks, after a fire gutted a processing plant's substation and transformer two days ago.

National Australia Bank Ltd. (NAB AU), the countries biggest by assets, declined 57 cents, or 2.1 percent, to A$27.04, reversing two days of gains. The lender said it's in talks to buy ABN Amro Holding NV's investment banking businesses in Australia and New Zealand from Royal Bank of Scotland Group Plc, and separately that it may have to increase provisions for $1.1 billion of investments in collateralized debt obligations as the global economy weakens.

Queensland Gas Co. (QGC AU), BG Group Plc's partner in a proposed Australian liquefied natural gas plant, advanced 27 cents, or 6 percent, to A$4.79, the most since June 24 and the eighth-biggest gainer. Queensland said it will increase the cash component of its offer for Roma Petroleum NL to 11 cents from 10 cents.

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



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U.S. stocks gain on Fed talk, M&A news

By Kate Gibson, MarketWatch

NEW YORK (MarketWatch) - U.S. stocks on Thursday tried and mostly succeeded in bouncing back from the prior day's credit crisis-fueled losses, with concerns about the viability of government-sponsored mortgage buyers Fannie Mae and Freddie Mac offset by a large takeout bid in the chemical sector and a 10% rise in shares of Alcoa Inc.

"Freddie Mac is already insolvent and Fannie Mae is running on fumes," said Len Blum, managing director of Westwood Capital.
But in testimony to Congress, Treasury Secretary Henry Paulson assured that the two entities remain well capitalized. See full story.

Up and down throughout the session, the major indexes found firmer footing late in the day, with the Dow Jones Industrial Average churning higher in the final hour of trade, rising 81.58 points, or 0.7%, to 11,229.02.
Of the blue-chip index's 30 components, 19 closed with gains, led by aluminum producer Alcoa Inc. , which ended with a 9.7% gain as aluminum prices hit their highest level on record after China said it would cut its production of the metal by up to 10% to save energy. See full story.
The S&P 500 climbed 8.71 points, or 0.7%, to 1,253.39, with materials leading sector gains, up 3.5%, supported in part by Dow Chemical Co.'s agreement to buy Rohm & Haas Co. for $15 billion.
Shares of Dow lost 4.2%, while Rohm & Haas rallied 64.2%. Read full story.
The energy sector was the second best performing sector on the S&P, up 2.9%, as crude oil prices jumped over $5 to end above $141 a barrel, as geopolitical tensions in oil-rich countries such as Nigeria and Iran intensified. See Futures Movers.
Consumer discretionary fronted declines among the S&P's 10 industry groups, down 2.3%. J.C. Penney Co. Inc. led the declines among retailers, down 10.1%.
Wal-Mart Stores Inc. tilted lower despite exceeding expectations in offering sales results for June. See full story.
Chart of FRE
Weighing on financials, shares of large mortgage buyers Fannie and Freddie fell for a third time in four days, raising worries about the viability of the publicly traded government-sponsored mortgage buyers.
"It's getting to the point where the U.S. government is going to have to explicitly back these two companies or let them fend for themselves," said Peter Boockvar, equity strategist at Miller Tabak.
"I don't think financials can recover until we know what real estate is worth. Right now, if you buy a financial institution stock, you're buying a black box."
Shares of Fannie fell 13.8% while shares of Freddie declined 22%. Read full story.
Investment banks were also hit, with Lehman Brothers Holdings Inc. advanced 22.96 points, or 1%, to 2,257.85.
Volume on the New York Stock Exchange came to 1.5 billion, with decliners just ahead of advancers. On the Nasdaq, 973.7 million shares traded, and advancers outran declining issues 5 to 4.
Hill talk
In testimony before the House Financial Services Committee, Federal Reserve Chairman Ben Bernanke and Paulson called for regulatory revamping and legislation to strengthen oversight of investment banks. See full story.
Earlier Thursday, stock futures were little changed after the government said weekly jobless claims fell to the lowest level since April. Read Economic report.
While "Fannie and Freddie, Paulson and Bernanke [were] the big story all day long," jobless claims are reflective of important, underlying themes "that consumers are hurting and companies aren't hiring," said Terrin Griffiths, economist and industry analyst at the California Credit Union League.
With continuing claims at their highest level since December 2003, the 5.5% unemployment rate is unlikely to recede in July, said Griffiths. "If anything it will start edging up," she added.
U.S. foreclosures slipped 3% from May levels but are up 53% from the previous year, RealtyTrac reported. Listen to report on foreclosures.
U.S. stocks stumbled on Wednesday, with financials pacing the retreat as worries grow about the financial health of Fannie and Freddie. And, worries about tech bellwether Cisco Systems ahead of next week's earnings also weighed. End of Story
Kate Gibson is a reporter for MarketWatch, based in New York.




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New Zealand House Sales Fall 42% From Year Ago, Prices Decline

By Tracy Withers

July 11 (Bloomberg) -- Sales of New Zealand houses slumped for a fourth straight month in June as record-high interest rates curtailed demand for property.

The number of homes sold dropped 42.4 percent to 4,305 from 7,474 a year earlier, according to a report from the Real Estate Institute of New Zealand Inc. e-mailed to Bloomberg News today. Sales were at the lowest level since December 1991.

A cooling real estate market supports Reserve Bank Governor Alan Bollard's view that house prices will fall for the next three years as economic growth slows. Bollard said last month he may cut the benchmark interest rates from a record-high 8.25 percent later this year as inflation pressures ease.

``There isn't a lot of confidence in the residential property market,'' Murray Cleland, the institute's national president, said in a statement. Still, ``the market is finding its own level and there is certainly no indication of any significant slump in values.''

The median house price fell 2.2 percent from a year earlier to NZ$340,000 ($258,000). Prices declined NZ$5,000 from May.

Investors are deferring decisions on buying or selling until a clearer trend emerges, Cleland said. Lower prices are being accepted to complete faster sales.

The median time it took to sell a house increased to 53 days, the highest since January 2002, from 49 days in May.

To contact the reporter on this story: Tracy Withers in Wellington at twithers@bloomberg.net.



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