Bombardier, Enbridge, CIBC, Yamana Gold: Canada Stock Movers

By John Kipphoff

Dec. 4 (Bloomberg) -- The following companies were having unusual price changes in Canadian trading. Stock symbols are in parentheses, and share prices are as of 10:14 a.m. in Toronto.

The Standard & Poor’s/TSX Composite Index rose 1.1 percent to 8,391.54.

Bombardier Inc. (BBD/B CN) gained 5.1 percent to C$4.09 and earlier rose 7.5 percent fort its steepest intraday advance since Nov. 25. The third-largest maker of commercial aircraft said fiscal third-quarter profit jumped 169 percent to $245 million (C$309.3 million), or 14 cents a share, as it paid less tax. The company also predicted that plane deliveries this year will slightly exceed last year’s total. Earnings per share surpassed the average estimate of 13 cents from 15 analysts surveyed by Bloomberg.

Canadian Imperial Bank of Commerce (CM CN) climbed 5.2 percent to C$47.65 and earlier jumped 5.9 percent for its steepest intraday gain since Nov. 28. The country’s fifth- largest lender by assets said fourth-quarter profit fell 51 percent to C$436 million, or C$1.06 a share, after taking writedowns tied to debt investments.

Enbridge Inc. (ENB CN), Canada’s largest pipeline company, rose 2.2 percent to C$38.25, gaining for second day after forecasting yesterday 2009 higher-than-estimated earnings in 200i and raising the dividend. Scotia Capital analyst Sam Kanes raised his one-year share-price estimate to C$49 from C$47. today.

National Bank of Canada (NA CN) climbed 3.4 percent to C$39.12 and earlier added 5.4 percent for its steepest intraday gain since Nov. 28. The nation’s sixth-largest bank reported fourth-quarter profit of C$70 million, reversing a loss from a year earlier when it had more writedowns. Net income for the period ended Oct. 31 was 37 cents a share, compared with a loss of C$175 million, or C$1.14, the Montreal-based bank said. Profit matched preliminary results released on Nov. 26.

Toronto-Dominion Bank (TD CN) added 2.2 percent to C$43.42 and earlier advanced as much as 2.9 percent. Canada’s second- largest bank said profit declined for the third straight quarter after it reported credit trading losses. Net income for the fourth-quarter ended Oct. 31 dropped 7.3 percent to C$1.01 billion, or C$1.22 a share, the Toronto-based bank said. Profit matched preliminary results released Nov. 20.

Thomson Reuters Corp. (TRI CN) climbed 3.8 percent to C$31.54, rising for a third-straight day. The news and data provider was raised to “equalweight” from “underweight” at Morgan Stanley.

Separately, Thomson Reuters greed to acquire Plymouth, Minnesota-based software maker Paisley for undisclosed terms to add corporate compliance products at the company’s tax and accounting software unit.

Tundra Semiconductor Corp. (TUN CN) rose 1.6 percent to C$3.15. The semiconductor designer reported fourth-quarter profit excluding some items of 12 Canadian cents a share, exceeding by 85 percent the 6.5 cents average of four analysts estimates compiled by Bloomberg.

Yamana Gold Inc. (YRI CN) added 3.9 percent to C$6.65 and earlier added as much as 4.4 percent: The owner of the Chapada copper and gold mine in Brazil was restarted with an “outperform” rating by Brad Humphrey at Raymond James & Associates. The Toronto-based analyst set a share-price target of C$12.25.

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

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U.S. Stocks Rise for Third Day; Wal-Mart Leads Retailer Rally

By Elizabeth Stanton

Dec. 4 (Bloomberg) -- U.S. stocks rose for a third day, erasing early declines, after better-than-expected sales at Wal- Mart Stores Inc. overshadowed concern General Motors Corp. may make a pre-arranged bankruptcy filing.

Wal-Mart, the biggest discounter, helped push up retailers in the Standard & Poor’s 500 Index by 4.8 percent. D.R. Horton Inc., the largest U.S. homebuilder, rallied 16 percent after mortgage rates decreased. General Motors, the largest U.S. automaker, slipped 2.8 percent after a person familiar with the matter said the company is exploring a reorganization with workers, creditors and lenders.

The S&P 500 added 2.7 points, or 0.3 percent, to 873.44 as of 11:03 a.m. in New York. The Dow Jones Industrial Average gained 26.05, or 0.3 percent, to 8,617.74. The Nasdaq Composite Index climbed 7.28, or 0.5 percent, to 1,499.67. Futures dropped earlier after the Labor Department said more Americans are collecting jobless benefits than at any time since 1982.

“When you keep getting bad news and stocks still go up, that’s when the market is going to turn,” said Thomas Garcia, head of trading at Thornburg Investment Management, which oversees $35 billion in Santa Fe, New Mexico. “We’re getting to the point where all the bad news is priced in and stocks are so beat up that there are some bargains out there.”

The S&P 500 has increased 16 percent since dropping to an 11-year low of 752.44 on Nov. 20. The index is down 41 percent this year as writedowns at financial firms approach $1 trillion and more economists forecast that the U.S. recession will be one of the most severe in the post-World War II era.

Shares rose in London after the European Central Bank lowered interest rates by the most in its 10-year history and the Bank of England cut its benchmark rate to the lowest since 1951.

November Sales

Wal-Mart gained 1.8 percent to $55.34. The world’s largest retailer said November sales rose, spurred by discounts. Revenue at U.S. stores open at least a year increased 3.4 percent, exceeding Wal-Mart’s forecast of 1 percent to 3 percent. December sales may rise near the “high end” of its 1 percent to 3 percent estimate, Wal-Mart said.

Other chain stores rallied on November sales that topped analysts’ estimates. Nordstrom Inc., the U.S. department store operator with more than 100 namesake locations, jumped 15 percent to $12.56. Office Depot Inc. added 14 percent to $2.15. Macy’s Inc., the second-biggest department store chain, climbed 9.2 percent to $8.07 after affirming its fourth-quarter sales outlook.

Homebuilder Rally

Homebuilders gained amid reports the Treasury Department is considering stepping up purchases of mortgage-backed securities to drive rates on some loans down to 4.5 percent. The average rate on a 30-year fixed-rate loan dropped to 5.47 percent last week, the lowest level since 2005, according to the Mortgage Bankers Association.

D.R. Horton advanced $1.21 to $8.45. Lennar Corp. added 17 percent to $9.01. Centex Corp. climbed 15 percent to $11.70. An index of homebuilders in the S&P 500 rose 13 percent to 241.64, the highest since Oct. 8.

General Motors fell 2.8 percent to $4.76. Chrysler LLC executives also are considering a pre-arranged bankruptcy filing, a person familiar with the companies’ internal discussions said.

GM and Chrysler told Congress Dec. 2 that they need $11 billion in government loans just to survive the year as the auto industry slump deepens. To get the money, the companies agreed to slash payrolls, shed brands and shrink dealerships. Bankruptcy was not part of their plans.

Merck Drops

Merck dropped 2.2 percent to $25.89. The company said net income in 2009 may miss analysts’ expectations as it works to offset falling sales of its top-selling products with job reductions and spending cuts.

Adobe Systems Inc. lost 5.2 percent to $21.37. The world’s biggest maker of graphics and Web-design software forecast sales that trailed analysts’ estimates. Revenue in the first quarter ending in February probably will fall to between $800 million and $850 million, Adobe said. That missed the $928.8 million average of estimates compiled by Bloomberg.

Adobe also plans to cut 600 jobs, which amount to about 8 percent of the workforce globally as of the end of the third quarter.

The Labor Department said today that 4.09 million fired workers received government unemployment checks in the week ended Nov. 22, the most since December 1982 and more than economists estimated in a Bloomberg survey.

AT&T Inc., the largest U.S. phone company, and DuPont Co., the third-biggest U.S. chemical maker, said they will cut jobs to lower costs as the recession erodes profit.

Labor Department data to be released tomorrow are forecast to show U.S. payrolls shrank in November for the 10th straight month, sending the unemployment rate to 6.8 percent, the highest since 1993.

AT&T rose 0.3 percent to $29.16. The company plans to cut 12,000 jobs, or about 4 percent of its workforce. DuPont lost 2.6 percent to $23 after saying it will cut about 2,500 jobs because the global recession is cutting demand for products such as auto paint and Tyvek weather wrap.

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

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Alcoa, Nordstrom, Toll Brothers, SanDisk: U.S. Equity Movers

By Lu Wang

Dec. 4 (Bloomberg) -- The following companies are having unusual price changes in U.S. trading. Stock symbols are in parentheses, and share prices are as of 10:25 a.m. in New York.

Homebuilders rose after Toll Brothers Inc. (TOL US), the largest U.S. luxury homebuilder, reported its fourth-quarter loss narrowed and sales topped some analysts’ estimates.

Toll Brothers climbed 8.9 percent to $20.95.

Beazer Homes USA Inc. (BZH US) surged 23 percent to $2.17. Centex Corp. (CTX US) increased 12 percent to $11.37. D.R. Horton Inc. (DHI US) added 14 percent to $8.29.

KB Home (KBH US) advanced 7.3 percent to $13.91. Lennar Corp. (LEN US) rose 14 percent to $8.84. Meritage Homes Corp. (MTH US) rallied 11 percent to $12.79. Pulte Homes Inc. (PHM US) jumped 8.2 percent to $12.05. Standard Pacific Corp. (SPF US) climbed 9.3 percent to $1.88.

Retailers gained as J.C. Penney Co. (JCP US) and Nordstrom Inc. (JWN US) reported November sales that declined less than some analysts estimated. J.C. Penney added 7.1 percent to $19.81. Nordstrom jumped 9.4 percent to $11.92. Wal-Mart Stores Inc. (WMT US, one of a handful of U.S. retailers to post November sales gains, advanced 2.5 percent to $55.76.

Macy’s Inc. (M US) climbed 12 percent to $8.26. Limited Brands Inc. (LTD US) rose 7.4 percent to $9.39. Office Depot Inc. (ODP US) increased 7.4 percent to $2.03. Tiffany & Co. (TIF US) rallied 10 percent to $21.15. Home Depot Inc. (HD US) gained 4.1 percent to $23.70.

Adobe Systems Inc. (ADBE US) dropped 7 percent to $20.97, and fell to $20.67 earlier, the lowest intraday price since Nov. 21. The biggest maker of design software cut its forecast for fourth-quarter sales to as much as $915 million. Analysts on average predicted $926.8 million, according to a Bloomberg survey.

Alcoa Inc. (AA US) fell the most in the Dow Jones Industrial Average, losing 4.1 percent to $8.91. The largest U.S. aluminum producer may be forced to halt is dividend payment as the drop in aluminum prices constrains cash flow, according to JPMorgan Chase & Co.

Amazon.com Inc. (AMZN US) added 6.8 percent to $48.30, after climbing to $49.67, the highest price since Nov. 10. The world’s largest Internet retailer was raised to “overweight” from “equal weight” at Barclays Plc, as rival retailers closed stores and struggled to find inventory.

Cirrus Logic Inc. (CRUS US) fell 22 percent to $3.32 and retreated earlier to $3.29, the lowest price since June 2003. The graphics chipmaker reduced its forecast, saying it expects revenue of up to $45 million in the fiscal third quarter. That trailed the average analyst estimate of $52.9 million in a Bloomberg survey.

Diamond Foods Inc. (DMND US) tumbled 20 percent to $42.21 and earlier slumped 22 percent for the biggest intraday loss since its initial public offering in July 2005. The seller of Diamond and Emerald nuts and snacks was cut to “neutral” from “buy” at Merrill Lynch & Co., which said share-price appreciation will slow.

Dynamex Inc. (DDMX US) fell 20 percent to $13.09 and slipped earlier to $12.70, the lowest level since March 2004. The provider of same-day delivery services in the U.S. and Canada posted fiscal first-quarter profit and sales that missed analysts’ estimates, according to a Bloomberg survey. The company also said it expects 2009 sales to be as much as 12 percent below last year.

General Motors Corp. (GM US) slid 3.5 percent to $4.73 for the fourth-biggest drop in the Dow average. The largest U.S. automaker is exploring whether a reorganization negotiated with workers, creditors and lenders would avert a liquidation, a person familiar with the matter said.

Intersil Corp. (ISIL US) dropped 11 percent to $8.06, after falling to $7.53, the lowest price since its 2000 IPO. The semiconductor maker said it expects fourth-quarter profit of as much as 12 cents a share, excluding some items. That missed the 13-cent average estimate from analysts in a Bloomberg survey.

I2 Technologies Inc. (ITWO US) fell 18 percent to $6.31 and slumped earlier to $5.90, the lowest price since June 2004. The supplier of software to manage business supply chains said it ended talks to be acquired by JDA Software Group Inc. (JDAS US)

Jefferies Group Inc. (JEF US) fell 6.1 percent to $10.92. The brokerage specializing in mid-size companies said it expects to report a fourth-quarter loss of about $400 million as it cuts jobs and shuts offices. The stock rose 5 percent to $11.63 in regular trading.

Jo-Ann Stores Inc. (JAS US) dropped 9.5 percent to $12.48. The largest U.S. fabric retailer cut its full-year profit forecast to a range of 75 cents to 85 cents a share. Analysts, on average, expected the company to earn $1.07, according to a Bloomberg survey.

MannKind Corp. (MNKD US) rose 8.3 percent to $3.15, and gained as much as 17 percent earlier, the steepest intraday climb since Sept. 23. The company staking its future on inhaled insulin said its Afresa drug worked against diabetes without causing adverse lung effects in the last studies for U.S. regulatory approval. The company plans to file to the Food and Drug Administration early next year for permission to sell the drug.

Merck & Co. (MRK US) posted the third-biggest decline in the Dow average, sliding 3.7 percent to $25.48. The pharmaceutical company that makes the cervical cancer preventative shot Gardasil said net income in 2009 may miss analysts’ expectations as it works to offset falling sales of its top-selling products with job reductions and spending cuts.

Red Hat Inc. (RHT US) rose 6 percent to $11.09 and earlier increased to $11.68, the highest intraday price since Nov. 12. The world’s largest seller of Linux software was raised to “buy” from “hold” at Jefferies Group Inc., which said the company is “well-positioned to buffer the ‘09 spending storm.”

SanDisk Corp. (SNDK US) fell the most in the Standard & Poor’s 500 Index, dropping 12 percent to $7.92. Toshiba Corp. (6502 JP), Japan’s biggest chipmaker, said it doesn’t plan to acquire its semiconductor-production partner SanDisk.

Synopsys Inc. (SNPS US) rose 18 percent to $17.86 and jumped 20 percent earlier for the biggest intraday gain since April 1997. The maker of semiconductor-design software said that, excluding some items, it earned 43 cents a share in the fourth quarter. That topped the average analyst estimate by 14 percent, according to Bloomberg data.

Williams-Sonoma Inc. (WSM US) climbed 8.9 percent to $8.35 and earlier rose to $8.91, the highest intraday price since Nov. 10. The biggest U.S. gourmet-cookware chain posted a third- quarter loss smaller than the average analyst estimate and reiterated its earnings forecast for the rest of the year.

To contact the reporter on this story: Whitney Kisling in New York at wkisling@bloomberg.net

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Markets Pondering Size Of Rate Cuts From ECB, BOE And Riksbank Today

Daily Forex Fundamentals | Written by Saxo Bank | Dec 04 08 08:41 GMT |

Risk appetite surged briefly late yesterday on report that US Treasury attempting to lower mortgage rates to slow house price decline. LATEST HEADLINES US ISM Non-manufacturing Index declined to a record low of 37.3 vs. 42.0 expected New Zealand RBNZ lowered the cash target by 150 bps to 5.00% as expected Japan Q3 Capital Spending fell -13.0% vs. -9.9% expected Australia Oct. Trade Balance outs at 2952M vs. 1410M expected Australia Oct. Building Approvals fell -26.1% YoY vs. -21.5% expected Switzerland Q3 GDP out at 1.6% YoY vs. 1.7% expected THEMES TO WATCH - UPCOMING SESSION Sweden Riksbank Interest Rate Decision (0830) EuroZone Q3 GDP (1000) UK BOE Announces Rates (1200) ECB Announces Interest rates (1245) ECB Press Conference (1330) Canada Oct. Building Permits (1330) US Weekly Initial Jobless Claims (1330) Canada Nov. Ivey PMI (1500) US Fed's Evans to Speak (1545) US Treasury's Kashkari to Speak (1600) US Fed's Bernanke to Speak (1615) US Fed's Kroszner to Speak (2130) Australia Nov. AiG Performance of Construction Index (2230) Market Comments Today is central bank day for Europe, with the ECB, BOE and Riksbank all on tap for rate decisions. The Riksbank brought their meeting forward by two weeks in order to chop rates at today's meeting, and for good reason: our models show that Sweden is one of the most rapidly decelerating economies in the developed world right now. Its exports are plummeting and its banking system is under siege from ill advised loans to especially Baltic countries. Baseline expectations are looking for a 100-bp cut to the rate. Speculation is mounting that the BOE will chop by 150 basis points rather than the 100 bps baseline consensus. The ECB baseline is moving to 75, but if the ECB can surprise, then today would be the day to do it, considering the rapidly mounting horrors taking place in the economy. As a side note, it seems more than a touch silly to fret about the size of the cuts here. All major central banks are moving towards zero to 0.50% by mid next year anyway... The setup for the US job report on Friday looks increasingly bleak, and we have a hard time understanding the apparent attempts to find optimism on equity markets, despite the old-fashioned wisdom that stocks like to climb a wall of worry. Yesterday's Non-manufacturing ISM was a record low for the 11 year history of the survey and far worse than expected. The news headlines are showing layoffs from every corner and the ADP number out yesterday was far worse than expected. Employment is a lagging indicator, but increasing unemployment also dangerously reinforces the power of the negative cycle, especially now that central banks efforts are geared toward damage control from deleveraging, as the game of economic stimulus by interest rate manipulation was over a long time ago. The employment fall out in the services sector after a weak Christmas shopping will yet another problem for the incoming Obama administration to tackle in the new year. The US' Paulson is in China over the next couple of days for talks. PBOC chief Zhou was out trying to tell the world that US overconsumption was to blame for the crisis, but this is an absurd statement, as US overconsumption was simply a product of the global imbalances that were developing for years and were to a great degree enabled by China's suppression of its currency and buying of US treasuries which kept US interest rates artificially low. The trajectory of the Yuan in the short term will be very interesting for the USD: will the Chinese attempt to maintain a steady course or will they look to keep their currency weaker in the coming time frame to boost exports now that commodity pricing pressures have eased so sharply? Our bleak outlook suggests that there is not much for this market to get its hopes up about in the risk appetite department and that the USD and JPY will break to the upside once again. Unfortunately, as we mentioned yesterday, the technical triggers are not yet there, but pressure seems to be mounting. Let's see EURUSD through 1.2560 to start and EURJPY through 116.50 again as two indicators suggesting that a new wave of the current trend is being set in motion. Around the edges of the market, we note with interest that the weak AUDUSD rally brought on by the short bout of risk appetite yesterday was pushed back sharply overnight. It feels like the next couple of days are a fulcrum that either launch into a strong new leg of USD and JPY rallying or the opposite. We're surprised to see AUD this high, is there more potential volatility in AUDUSD than is apparent from the recent action in that pair? Analysis Disclosure & Disclaimer SaxBank A/S shall not be responsible for any loss arising from any investment based on any recommendation, forecast or other information herein contained. The contents of this publication should not be construed as an express or implied promise, guarantee or implication by SaxBank that clients will profit from the strategies herein or that losses in connection therewith can or will be limited. Trades in accordance with the recommendations in an analysis, especially leveraged investments such as foreign exchange trading and investment in derivatives, can be very speculative and may result in losses as well as profits, in particular if the conditions mentioned in the analysis dnot occur as anticipated. SaxBank utilizes financial information providers and information from such providers may form the basis for an analysis. SaxBank accepts nresponsibility for the accuracy or completeness of any information herein contained. Any recommendations and other comments in SaxBanks analysis derive from objective fundamental macreconomical and company specific calculations, statistical and technical analysis, and subjective general market assessment. If an analysis contains recommendations tbuy or sell a specific financial instrument, such recommendation should be seen as SaxBanks opinion that the specific instrument will respectively outperform the relevant market or underperform compared tthe market. SaxBanks recommendations should statistically correspond tan even distribution between buy and sell recommendations. The recommendations may expire promptly due tmarket volatility and in general, SaxBank does not anticipate its recommendations tbe valid more than one month. An analysis will be updated if and only if a market development or other issues relevant tthe analysis render a new analysis on the same topic relevant. SaxBanks analysis does not cover any specific financial product over time but only products which SaxBanks strategy team finds it important tcover at any given point in time. In order tprevent conflicts of interest, SaxBank has established appropriate business procedures, incl. procedures applicable tresearch and analysis tensure objective research reports. SaxBanks research reports have not been discussed with the parties, e.g. issuers of securities, mentioned in the analysis. SaxBank is under supervision by the Danish Financial Supervisory Authority. SaxBank does not engage in corporate finance activities and accordingly, SaxBanks employees, incl. the persons responsible for an analysis, dnot receive remuneration associated with investment banking transactions.

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Swiss Franc Crosses Pare Gains, Driven by Risk Aversion

Daily Forex Fundamentals | Written by DailyFX | Dec 04 08 08:37 GMT |

The Swiss franc firmed up in to the European session, with gains coming against the euro and sterling ahead of today's key rate decisions from the BoE and the ECB. EUR-CHF traded back in to 1.5300 versus an Asian peak of 1.5381 and GBP-CHF reverted to the 1.7750 area against an Asian high of 1.7898. Both crosses are expected to trade defensively during the European morning, with appetite for risk hampered ahead of the policy announcements. Meanwhile, USD-CHF is marking time around 1.2100 after making a modest move higher in to the European open. Again, momentum in the dollar pairing is lacking, although low risk trading strategies should favor the dollar in the near-term. Elsewhere, comments from SNB's Roth on Wednesday did not have a significant impact on price action. He said that the Swiss economy probably escaped contraction in Q3, which was confirmed today after the release showed a flat outturn, but growth was revised down to 0.3% in Q2. Roth didn't offer anything to suggest another intermeeting cut is on the card, after he said that the SNB's cut on November 20th was to encourage a relaxing of the money market. Swiss 3Q GDP Fails to Impress, Heightening Growth Fears Swiss GDP growth was flat q/q in Q3, in line with expectations, while Q2 growth was revised down to 0.3% q/q from 0.4%. Private consumption rose by 0.3% q/q, while public consumption increased by 0.7%, highlighting government efforts to boost the economy and compared to 0.6% q/q and 0.4% q/q respectively in Q2. Investment growth continued to contract for a second quarter, down 1.4% q/q in Q3. Meanwhile, y/y GDP was 1.6%, versus a 1.7% median and compared to 2.6% in Q2 (revised down from 2.3%). Although the Swiss economy proved more resilient than most European economies to the credit crunch and the global slowdown in the first half of the year, economic activity is now slowing rapidly, as seen in recent sharp drops to the KOF leading indicator and PMI, and the risk for recession lingers. DailyFX Disclaimer Investment in the currency exchange is highly speculative and should only be done with risk capital. Prices rise and fall and past performance is no assurance of future performance. This website is an information site only. Accordingly we make no warranties or guarantees in respect of the content. The publications herein do not take into account the investment objectives, financial situation or particular needs of any particular person. Investors should obtain individual financial advice based on their own particular circumstances before making an investment decision on the basis of the recommendations in this website. While we try to ensure that all of the information provided on this website is kept up-to-date and accurate we accept no responsibility for any use made of the information provided. All intellectual property rights are the property of Daily FX. Daily FX and its affiliates, will not be held responsible for the reliability or accuracy of the information available on this site. The content herein is provided in good faith and believed to be accurate, however, there are no explicit or implicit warranties of accuracy or timeliness made by Daily FX or its affiliates. The reader agrees not to hold Daily FX or any of its affiliates liable for decisions that are based on information from this website. Daily FX highly recommends that before making a decision, the reader collects several opinions related to the decision and verifies facts from at least several independent sources.

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Daily Financial Market Outlook

Daily Forex Fundamentals | Written by Lloyds TSB | Dec 04 08 08:37 GMT |

Overview & economic commentary Today will see the Bank of England and the ECB meet for their monthly monetary policy deliberations on what to do with interest rates. On this occasion, just like the last one, the outcome is very clear: interest rates will be cut. The only question is by how much. In the case of the UK, the economic data have been unequivocally poor. Take the Purchasing Managers Indices (PMI) for manufacturing, construction and services for November, all fell to series lows, about 12 years. Data for retail sales, manufacturing output, consumer confidence, business confidence and equity markets also weakened further. It is clear that the economic downturn is deepening and that financial markets remain in turmoil. With this background UK Bank rate will be cut by 1 percentage point and possibly more, even a repeat of the 1½% cut in November is possible, taking rates to 1.5%, the lowest since 1694. The ECB may not cut their repo rate by as much, but cut them they will, at least 0.5% and possibly up to 1% is likely. However much will depend on the ECB's latest projections for inflation and gdp growth in 2009, and whether president Trichet feels he can reach a consensus for a bigger reduction at the meeting that takes place in Brussels and not in Frankfurt. By cutting in even steps, the MPC and the ECB may ease the potential for pressure on their respective currencies. In the US, the trend of data will continue to show that the economy is weakening, and that growth will fall sharper in Q4 than it did in Q3. The weekly claims data will provide the last data point for unemployment ahead of the non-farm payrolls release tomorrow. Currency commentary A big day for UK and euro zone markets is lined up today with rate decisions by the BoE and ECB potentially sending ripples across all asset markets. £/ $ was offered in Asia and looks in danger of sliding back to the Nov 13 low of 1.4557 if the BoE delivers a rate cut of more than 100bps which we think is possible. This could also cause the spread UK/EU 2s to widen beyond -40bps (provided the ECB cuts by less than the BoE), giving markets a reason to push €/£ towards 0.8650. The cross cleared 0.86 resistance o/n and may target a move up to 0.8663, the Nov 13 high. A 50bps cut by the ECB is priced in so a bigger reduction could well pull the rug from under €/$. In the US, the widening in mortgage spreads (5yr GSE over treasuries rose to 315bps) and the rise in 5yr swap spreads to 93bps are signs of heightened risk aversion as markets price in a very weak NFP report tomorrow. $/NZ$ is broadly steady at 0.5314 after the RBNZ slashed rates by 150bps. €/Sek could extend to 10.60 if the Riksbank cuts rates by more than 50bps. Major data and events today BoE MPC interest rate decision (12:00) Current: 3.00% Forecast: 2.00% EU-15 GDP (10:00) (2nd estimate) Q3 (prel) -0.2% Y-O-Y +0.7% Q3 (f'cast) -0.2% Y-O-Y +0.7% Median -0.2% Range -0.3%:-0.2% ECB interest rate decision (12:45) Current: 3.25% Forecast: 2.75% US Initial claims (w/e 29/11) (13:30) Previous 529K Forecast 530K Median 540K Range 527K:550K US Factory Orders (15:00) Sep -2.5% Oct (f'cast) -3.8% Median -4.0% Range -6.5%:-0.5% Australia trade balance (00:30) Sep +A$1.46bn Oct (f'cast) +A$1.40bn Median +A$1.41bn Range+A$0.1bn:+A$3.85bn Canada building permits (13:30) Sep +13.4% Oct (f'cast) -5.0% Median -5.5% Range -10.2%:+2.0% Canada Ivey PMI (15:00) Oct 52.2 Nov (f'cast) 49.9 Median 50.0 Range 47.0:55.0 Riksbank rate decision (50bps cut expected, risk of a bigger reduction) (08:30) US Fed member Evans speaks in Michigan (15:45) US Fed member Bernanke speaks in Washington on housing finance (16:15) New Zealand interest rate decision, rates expected to be cut by 150bps to 5.00% (20:00) US Fed member Kroszner speaks on a panel on mortgage-backed securities in Washington (21:30) Chart: The cut in UK base rate today will temporarily cause the spread with 3-month Libor to widen back above 100bps Lloyds TSB Bank http://www.lloydstsbfinancialmarkets.com Disclaimer: Any documentation, reports, correspondence or other material or information in whatever form be it electronic, textual or otherwise is based on sources believed to be reliable, however neither the Bank nor its directors, officers or employees warrant accuracy, completeness or otherwise, or accept responsibility for any error, omission or other inaccuracy, or for any consequences arising from any reliance upon such information. The facts and data contained are not, and should under no circumstances be treated as an offer or solicitation to offer, to buy or sell any product, nor are they intended to be a substitute for commercial judgement or professional or legal advice, and you should not act in reliance upon any of the facts and data contained, without first obtaining professional advice relevant to your circumstances. Expressions of opinion may be subject to change without notice. Although warrants and/or derivative instruments can be utilised for the management of investment risk, some of these products are unsuitable for many investors. The facts and data contained are therefore not intended for the use of private customers (as defined by the FSA Handbook) of Lloyds TSB Bank plc. Lloyds TSB Bank plc is authorised and regulated by the Financial Services Authority and is a signatory to the Banking Codes, and represents only the Scottish Widows and Lloyds TSB Marketing Group for life assurance, pension and investment business.

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Technical Analysis Daily: GBP/USD

Daily Forex Technicals | Written by iFOREX.bg | Dec 04 08 09:22 GMT |

GBP/USD 1.4537 GBP/USD Open 1.4771 High 1.5065 Low 1.4756 Close 1.4776 After two days of uncertain movement yesterday Pound/Dollar continued with the downward direction. Traders are awaiting news on interest rate policy of the BOE at noon GMT. This will lead to serious volatility in the market as a whole. Yesterday's bottom during yesterday was 1.4664, with closing price 1.4776. The trend remains in favour of the Dollar with targets towards 1.4500. Present short-term resistance level is 1.4800 followed by 1.4970. Immediate support represents the 1.4460 level. The CCI indicator crossed down the 100 line on the daily chart, indicating further potential downward pressure. Technical resistance levels: 1.4800 1.4970 1.5060 Technical support levels: 1.4460 1.4395 1.4470 Trading range: 1.4550 - 1.4475 Trend: Downward Sell at 1.4537 SL 1.4567 TP 1.4487 iFOREX.bg Forecasts and Trading Signals http://www.zifx.com

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Forex Depth Analysis: EUR/GBP

Daily Forex Technicals | Written by Finotec Group | Dec 04 08 08:53 GMT |

Euro takes early lead against GBP ahead of rate verdicts The euro declined against the dollar and the yen on speculation the European Central Bank will cut interest rates by half a percentage point today, reducing the appeal of assets denominated in the currency. The British pound dropped to its lowest level in almost three weeks versus the greenback as economists forecast the Bank of England will reduce borrowing costs by 1 percentage point. The following technical analysis gives us a detailed lookout on what is expected to happen to EUR/GBP. The buying point is at 0.8615; based on a clear uptrend. Pivot point is the take profit at 0.8670 Fibonacci 23.6% is the stop loss at 0.8535 The selling point is at 0.8520; based on a break of a strong support level. Fibonacci 50% is the take profit at 0.8435 Pivot point is the stop loss at 0.8572 To strengthen our analysis; we use many other indicators, starting with MACD (Moving Averages convergence divergence); we notice the crossing of MACD line to the signal line upwards. In order to find the power of the market, we use RSI (Relative Strength Index).With RSI; we can determine that the market is still in a bullish direction. The ROC oscillator is very important to understand the demand in the market and as we see on the graph it breaks the zero level upwards. The stochastic oscillator crosses %D line and gives us a bullish signal. * The following analysis is for information only; Finotec is not responsible for any decisions or misinterpretations based on the given text Finotec Group Inc. http://www.finotec.com/ Disclaimer: FINOTEC Tradings Market Commentaries are provided for informational purposes only. The information contained within these reports is gathered from reputable news sources and not intended as investment advice. FINOTEC Trading assumes no responsibility or liability from gains or losses incurred by the information herein.

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Daily FX Report

Daily Forex Technicals | Written by Varengold Bank | Dec 04 08 09:19 GMT |

Good morning from wonderful Hamburg. Today we have two very important rate decisions by the ECB and BoE. Nevertheless we wish you a nice Thursday with a better weather than in Hamburg Markets review The JPY and the USD traded little changed against other major currencies before the important interest rate decisions in the euro zone and Great Britain. But the EUR and the GBP remained vulnerable before the rate decisions by the central banks, while there are still expectations on aggressively reductions. Yesterday the GBP/USD lost 0.9 % and once more 0.25 % in the morning session because of rumors in the market about a rate cut of 125 basis points. Additionally economic data showed that the service sector shrank faster than expected in November. Also the European retail sales decreased more than expected by 2.1 % in October; data showed yesterday and confirmed the assessment that the financial turmoil took its toll on consumer confidence. The EUR/USD dipped 0.3 % from its opening at 1.2709 on Monday. According to a report, Japanese companies cut investments in the third quarter by 13 % compare to last year. Leading economists expect the country's gross domestic data, which has already initially shown a contraction, will be adjusted lower. The RBNZ reduced interest rates by a record of 1.5 % points to 5 %. The fourth cut since July, is the biggest since the official cash rate was instituted in early 1999. However this move was widely expected. The NZD/JPY is down by 0.5 % on the day and reached a low at 49.40. In a result the currency decreased 5 % this week Technical analysis NZD/USD Since the end of September the NZD/USD has been trading in Fibonacci retracement lines. After touching the 0.0 % retracement line twice, the market pulled back and touched the bearish trend line for the second time. If the market breaks through the 0.0 % retracement level it could continue the falling under the bearish trend line EUR/GBP Since the middle of November, the EUR/GBP has been trading in a horizontal trend channel. After breaking through the bullish trend line and touching once the support line at 0.822, the market came back and is now trading near the 0.864 resistance level. If the pair doesn't break the resistance line it could sink towards the 0.822. Pivot Points - Daily FX Support and Resistance Levels Daily Calendar & Key FX Events Varengold Bank IMPORTANT NOTIFICATION TO BE READ IN CONJUNCTION WITH THE CONTENTS OF THIS DOCUMENT This document is issued and approved by Varengold WPH Bank AG. The document is only intended for market counterparties and intermediate customers who are expected to make their own investment decisions without undue reliance on the information set out within the document. It may not be reproduced or further distributed, in whole or in part, for any purpose. Due to international laws/regulations not all financial instruments/services may be available to all clients. You should have informed yourself about and observe any such restrictions when considering a potential investment decision. This electronic communication and its contents are intended for the recipient only and may contain confidential, non public and/or privileged information. If you have received this electronic communication in error, please advise the sender immediately, and delete it from your system (if permitted by law). Varengold does not warrant the accuracy, completeness or correctness of any information herein or the appropriateness of any transaction. Nothing herein shall be construed as a recommendation or solicitation to purchase or sell any financial product. This communication is for informational urposes only. Any market or other views expressed herein are those of the sender only as of the date indicated and not of Varengold. Varengold reserves the right to consider any order sent electronically as not received unless it is confirmed verbally or through other means.

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Technical Analysis for Crosses

Daily Forex Technicals | Written by Crown Forex | Dec 04 08 08:47 GMT |

EUR/JPY The euro is weakening against the Japanese yen while momentum indicators are reflecting that the pair is oversold and providing buy signals over the medium term while direction indicators are starting to adjust to point to the upside over the short term; the hurdle against the upside wave remains the resistance level at 118.52 which the pair failed to breach in three attempts adding to that the pair might find some support form the medium term downside channel resistance; the upside targets over the medium term to short remain at 121.42 which resides with the 50 and 100 MA over four hour basis. Support: 117.06, 116.70, 116.38, 116.15, 115.85 Resistance: 118.52, 119.01, 119.47, 119.77, 120.50 GBP/JPY The pair managed to breach into the descending channel for the medium term and now trading within; momentum indicators are reflecting the provide the validity for further downside moves over the short term; the ADX on a daily basis shows the continued downside direction yet with weak momentum despite that the upside targets remain over the short term at 139.00 which resembles the end of the downside wave over the medium term along side the 50 MA over four-hour basis. Support: 136.00, 135.35, 135.07, 134.50, 133.85 Resistance: 136.80, 137.12, 137.61, 137.98, 138.27 EUR/GBP The euro continues to acquire more gains against sterling as momentum and direction indicators over the medium term still support the move; while the pair is trading in overbought areas over the short term yet still upside targets over the medium term are set at 0.8662 Support: 0.8616, 0.8600, 0.8578, 0.8560, 0.8546 Resistance: 0.8640, 0.8655, 0.8662, 0.8682, 0.8700 Crown Forex disclaimer:The above may contain information for investors/traders and is not a recommendation to buy or sell currencies, gold, silver & energies, nor an offer to buy or sell currencies, gold, silver & energies. The information provided is obtained from sources deemed reliable but is not guaranteed as to accuracy or completeness. I am not liable for any losses or damages, monetary or otherwise that result. I recommend that anyone trading currencies, 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, gold, silver &energies presented should be considered speculative with a high degree of volatility and risk.

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Dutch November CPI: Statistical Summary (Table)

By Ainhoa Goyeneche

Dec. 4 (Bloomberg) -- Following is a summary of the November CPI report from the CBS in Voorburg:

===============================================================================
                        Nov.   Oct.  Sept.   Aug.   July   June    May
                        2008   2008   2008   2008   2008   2008   2008
===============================================================================
                       -------------------Main Index--------------------
Index Level            104.57 104.95 105.19 104.74 104.53 104.38 104.57
MoM %                  -0.4%  -0.2%   0.4%   0.2%   0.1%  -0.2%   0.4%
YoY %                   2.3%   2.8%   3.1%   3.2%   3.2%   2.6%   2.3%
                       -----------------EU Harmonised-------------------
YoY %                   1.9%   2.5%   2.8%   3.0%   3.0%   2.3%   2.1%
===============================================================================
NOTE: Consumer Price Index: Base year 2006=100;
     (*)EU-Harmonised CPI base year 2005=100.
     Historical data is based on previous press releases and may be
     subject to change.


SOURCE: CBS (Dutch Statistics Office)

To contact the reporter on this story: Ainhoa Goyeneche in Madrid at agoyenechecu@bloomberg.net

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Mumbai Realty Market `Completely Quiet' After Attacks

By Sumit Sharma

Dec. 4 (Bloomberg) -- India's worst terrorist attack in 15 years has caused Mumbai's property market, already faltering in a slowing economy, to grind to a halt.

``The market's gone completely quiet,'' said Shiv Kumar Dembla, a property broker who owns Shiv Real Estate Consultants in Mumbai. ``The future doesn't look bright either. The last six months were quiet, but now it could get worse.''

The city's home sales dropped 21 percent in the seven months to Oct. 31, according to estimates from UBS AG. That was before terrorists held south Mumbai under siege for almost 60 hours, with attacks on luxury hotels, a railway station and a Jewish center leaving more than 195 people dead last week.

Terrorists targeted the foreigners who helped make Mumbai the world's second-most expensive city for offices last year, as companies including Macquarie Group Ltd. and Barclays Plc sought space in India's financial capital. Now, apartment buyers are walking away and developers may be forced to shelve projects as companies rethink the risks of doing business in India, brokers and analysts said.

Mumbai, which accounts for a third of India's taxes, is home to the nation's central bank and primary stock and commodity exchanges, as well as its largest companies and the local headquarters of overseas firms such as Citigroup Inc. and Barclays.

The city is the world's sixth most-expensive in terms of apartment rentals, and ranks second in Asia behind Hong Kong, according to a survey released by ECA International in April.

Dearth of Inquiries

``Rentals in Mumbai have climbed up steeply over the past few years,'' Mridul Upreti, joint managing director for capital markets at commercial property broker Jones Lang LaSalle Inc.'s local unit, said in an interview in New Delhi on Dec. 2. ``In the short term, residential prices are going to correct.''

Registrations of new homes in Mumbai dropped 35 percent in October from a year earlier as a slump in demand gathered pace, according to UBS analyst Suhas Harinarayanan. November sales data could be worse, he wrote in a note to clients on Dec. 2, without commenting on the terrorist attacks.

``Several non-resident Indians who were planning to come later this month to purchase properties have postponed their trips'' following the attacks, said Ashwin Mehta, who runs real estate brokerage Astute Acres Pvt. in Mumbai. ``We've gotten hardly any inquiries since last week.''

Demand for housing in south Mumbai was already under pressure because of high borrowing costs and developers' reluctance to cut prices, Macquarie Research analyst Unmesh Sharma wrote in a note to clients Dec. 1.

Dud Auction

An October auction for land near Mumbai's emerging financial district of Bandra-Kurla Complex, home to Citigroup, ICICI Bank Ltd. and the National Stock Exchange, lured just one bidder. Mumbai officials also had to twice defer plans to lease two plots of land for offices in a north-central suburb because of slack demand.

Mumbai, along with New Delhi, will continue to be harder hit by the economic slowdown partly because of their dependence on the banking and financial services industry, Sandeep Mathew, an analyst at BNP Paribas, wrote in a note to clients today.

An index tracking 14 Indian real estate stocks has slumped 87 percent as a five-year rally in property prices ended and the global financial crisis choked off funding for developers. The nation's economy grew last quarter at the slowest pace since 2004, fueling expectations that property costs will decline further.

Home Prices

DLF Ltd., the nation's biggest real estate company, and Emaar MGF Land Pvt., the Indian unit of the Middle East's largest developer, have been cutting prices or offering cheaper homes to revive demand. Yet sales will rebound only if home prices in the nation decline by 25 percent to 30 percent, or borrowing costs drop, UBS's Harinarayanan estimated.

If the government's response to the terror attack fails to restore confidence among overseas investors, demand for office and retail space may drop further, Macquarie's Sharma said.

An added danger comes from private equity firms and overseas developers demanding higher risk premiums for investing in India, said Upreti of Jones Lang LaSalle.

``Investors will start seeking a high risk premium for investing in real estate in India,'' Upreti said. ``So instead of 20 percent to 23 percent returns, you will start seeking 25 percent to 26 percent returns because country risk-premium will go up.''

Nowhere is the fallout more keenly felt than in Colaba, the upscale neighborhood in south Mumbai where gunmen stormed into the Taj Mahal Palace & Tower hotel and a Jewish center, took hostages and fought running battles with Indian special forces.

``People who were earlier planning to buy in Colaba now want to cancel the plans,'' said Narender Bhagwanani, who runs Om Sai Estate Property Consultants. ``They are too scared to live around Colaba.''

To contact the reporters on this story: Sumit Sharma in Mumbai at sumitsharma@bloomberg.net

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Swiss Economy Fails to Grow for First Time Since 2004

By Joshua Gallu

Dec. 4 (Bloomberg) -- Switzerland’s economy stagnated in the third quarter, ending a four-year streak of growth and reinforcing the case for the central bank to reduce interest rates.

Gross domestic product, the value of all goods and services, was unchanged from the second quarter, when it increased a revised 0.3 percent, the State Secretariat for Economic Affairs in Bern said today. That’s the worst performance since the third quarter of 2004 and in line with the median of 15 forecasts in a Bloomberg News survey. From a year earlier, the economy grew 1.6 percent.

Switzerland’s economy may weaken further in the coming months as recessions in Europe and the U.S. hurt exports and financial- market turmoil erodes banks’ earnings. The central bank has already cut 175 basis points from its benchmark rate since early October and says the economy may contract next year.

“Everything depends on the financial-market crisis right now,” said Claude Maurer, an economist at Credit Suisse in Zurich. “We’re seeing the impact on exports and investments. The longer the crisis continues, the heavier the impact will be.”

Switzerland has held up better than the rest of Europe as near-full employment boosts spending and exports of products like Swatch watches and pharmaceuticals offset a drop in investment.

‘Astonishing’

With Europe’s economy contracting, it is “astonishing” that the Swiss economy didn’t shrink, Swiss National Bank President Jean-Pierre Roth said yesterday.

Consumption rose 0.4 percent from the second quarter and exports gained 1.2 percent, today’s release showed. Investment shrank by 1.4 percent, led by a decline in equipment spending.

“Capital investments respond very quickly to a worsening economic outlook, but private consumption won’t plummet overnight because of the strong labor market,” Maurer said. “Switzerland also benefits from having diversified exports, both in terms of products and regions.”

Still, Swiss manufacturing contracted at the fastest pace since at least 1995 last month and leading indicators dropped to the lowest level in more than five years. Unemployment rose for a second month in October as companies ranging from chemical makers to banks trimmed workforces to cope with stalling growth.

Job Cuts

Credit Suisse Group AG, Switzerland’s second-largest bank, said today that it will cut 5,300 jobs, or 11 percent of its workforce, after losses of about 3 billion francs ($2.5 billion) in the first two months of this quarter.

The SNB plans to maintain a “resolutely expansionary” monetary policy to counter stalling growth, Roth said yesterday. The central bank will “use all means at its disposal to limit as far as possible the consequences of the international financial crisis on the economy.” The central bank is scheduled to hold its next policy meeting Dec. 11 in Zurich.

Investors predict the SNB may lower borrowing costs further by the end of the year, futures trading shows. The implied rate on the 3-month Liffe contract was unchanged at 0.93 percent at 8:37 a.m. in Zurich. The SNB’s benchmark currently stands at 1 percent.

The franc, which has gained almost 8 percent against the euro this year, was little changed 1.5337 at 9:06 a.m. Against the dollar, the Swiss currency fell to 1.2107 from 1.2094 yesterday.

Coordinated Action

Central banks from London to Washington have lowered their benchmark rates as a freeze in lending between banks and falling commodity prices switched policy makers’ emphasis from price growth to the state of the economy. The International Monetary Fund last month predicted advanced economies will contract simultaneously in 2009 for the first time since World War II.

In the euro region, destination for more than half of Switzerland’s exports, manufacturing and service industries contracted at the fastest pace in at least a decade last month. The European Central Bank will probably cut its key rate by half a percentage point today.

Clariant AG, the world’s biggest maker of chemicals, is cutting 2,200 jobs, or 10 percent of its workforce, through 2009 as it seeks to boost profitability. The Muttenz-based company said on Nov. 4 that it will need to cut costs further as slumping automotive and construction industries and slowing growth in China damp sales.

Switzerland’s economy will probably contract in the fourth quarter and through the first half of next year before starting to recover in late 2009, the Zurich-based industry group Economiesuisse said yesterday.

To contact the reporter on this story: Joshua Gallu in Zurich at jgallu@bloomberg.net

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Indonesia Unexpectedly Cuts Key Rate to Boost Growth

By Aloysius Unditu and Arijit Ghosh

Dec. 4 (Bloomberg) -- Indonesia’s central bank unexpectedly lowered interest rates for the first time in a year to shield Southeast Asia’s biggest economy from the global recession.

Governor Boediono and his seven colleagues reduced the benchmark rate to 9.25 percent from 9.5 percent, Bank Indonesia said in a statement in Jakarta today. Just six of 23 economists surveyed by Bloomberg News had forecast a cut.

Indonesia joins other Asian central banks in reducing borrowing costs to help boost growth, after the government cut its economic-growth forecast for 2009 to a seven-year low of 4.5 percent. The Bank of Thailand yesterday slashed its key policy rate by the most ever.

““Today’s rate cut tells you that growth is the overarching concern right now,” said Lim Su Sian, an economist at DBS Group Holdings Ltd. in Singapore, who forecasts a quarter-point reduction every month till March. “Eventually the global slowdown must have some kind of impact on the economy and Bank Indonesia is probably aware of it.”

Indonesia’s government on Dec. 2 said it expects the $433 billion economy to expand 4.5 percent next year, the slowest pace since 2002, as a worldwide slump saps demand for exports. The International Monetary Fund predicts the euro-region economy will contract 0.5 percent in 2009. The U.S. slipped into recession in December 2007.

Financial Crisis

“The decision to cut the rate was taken after evaluating financial and economic prospects, both in the domestic and global market,” Bank Indonesia said today. “The impact of the financial crisis on the global economy is getting real.”

Still, the rupiah has declined 23.5 percent in the past three months, making it the second-worst performing among Asia’s 10 most-traded currencies outside Japan.

The rupiah fell 1.7 percent to 12,150 against the dollar at 2:11 p.m., the biggest drop in more than a week, in Jakarta. The benchmark stock index gained 0.9 percent.

“The high policy rate seems no longer effective for defending the rupiah,” said Alexander Sugandi, an economist at Standard Chartered Plc in Jakarta. “Bank Indonesia wants to signal to the market that it is acting preemptively to prevent growth from slowing sharply in 2009.”

Indonesia’s economy will expand at a slower pace in the fourth quarter than in the preceding three months, said central bank Deputy Governor Hartadi Sarwono. The full impact of the global crisis will be felt in 2009, he said. The economy grew 6.1 per cent in the third quarter from a year earlier.

More Reductions

New Zealand’s central bank today reduced its benchmark rate by a record 1.5 percentage points to 5 percent and signaled more reductions. The Reserve Bank of Australia on Dec. 2 lowered its key rate by one percentage point, extending the biggest round of reductions since a recession in 1991.

Indonesia’s consumer prices increased 11.7 percent in November from a year earlier, after gaining 11.8 percent in October. That’s the highest in Southeast Asia outside Vietnam. Wholesale-price inflation slowed to 27.5 percent in September, when money-supply growth accelerated to 16.9 percent.

Inflation may slow further after the government cut gasoline prices by 8.3 percent on Dec. 1 and President Susilo Bambang Yudhoyono said subsidized diesel prices may be reduced in the “following month.”

The central bank said it expects inflation to be in the lower end of its 6.5 percent to 7.5 percent range next year.

Bank Indonesia also cut its overnight repurchase rate to 9.75 percent, while the deposit rate was raised to 8.75 percent, the central bank said.

To contact the reporters on this story: Arijit Ghosh in Jakarta at aghosh@bloomberg.net; Aloysius Unditu in Jakarta at aunditu@bloomberg.net

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China, U.S. to Counter Financial Crisis as ‘Most Pressing Task’

By Li Yanping and Dune Lawrence

Dec. 4 (Bloomberg) -- China and the U.S. must work to counter the global financial crisis as their “most pressing task,” Chinese Vice Premier Wang Qishan said as the nations started talks in Beijing today.

“We hope that the U.S. can take all necessary measures to stabilize its financial markets and economy as soon as possible and ensure the safety of China’s assets and investments in the U.S.,” Wang said. “To work together to tackle the financial crisis is the most pressing task that we are facing.”

Treasury Secretary Henry Paulson and Wang began the fifth round of the Strategic Economic Dialogue against the backdrop of a U.S. recession and waning demand for exports that is deepening China’s economic slowdown. The focus on the crisis switches attention from U.S. claims that China has an undervalued currency.

“Their growing interdependence means both sides see more reasons to talk in a less emotional manner,” said Willy Wo-Lap Lam, an adjunct professor of history at the Chinese University of Hong Kong. “The U.S. has a good realization that the Chinese economy is in real trouble.”

Paulson didn’t refer to the yuan in his opening remarks and praised China for playing “a responsible role” in efforts to combat the crisis. A U.S. official later said China remained committed to the appreciation of its currency over the medium to long term. The official couldn’t be identified under the rules of a briefing.

The two nations need to counter protectionism and cooperate in “reforming the global financial system,” restoring investor confidence and preventing a global recession, Wang said. China’s contribution includes maintaining its own growth, he said.

Paulson’s Swan Song

The two-day talks are a swan song for Paulson, who initiated the dialogue and will exit with the Bush administration.

China threw “a spanner in the works” on Dec. 1 by allowing the yuan’s biggest drop against the dollar since the end of a fixed exchange rate in 2005, said Dwyfor Evans, a strategist with State Street Global Markets in Hong Kong.

“It may mean a more heated debate on the currency,” Evans added.

Today, the two sides highlighted areas of agreement. The discussions will yield “substantive agreements” on electricity generation, transportation, and environmental cooperation, Paulson said. China is seeking more energy- efficient technology.

Wang said there had been “positive progress” on an accord to facilitate investment by Chinese and U.S. companies in each other’s assets.

Melamine, Toys

Discussions will also continue on food safety after a series of Chinese scandals from lead in toys to melamine in milk. The U.S. Food and Drug Administration opened three offices in China last month to try to make exports safer.

The talks’ effectiveness is limited because President- elect Barack Obama is taking office in less than two months, said Sun Zhe, a Beijing academic who advises the Chinese government. Obama’s transition team is not taking part, U.S. Agricultural Secretary Ed Schafer said yesterday.

Wang said he was pushing for the dialogue to continue. Paulson, who may be casting an eye to his legacy, said the talks had helped in managing complex issues, such as the global turmoil, and he was committed to “a strong finish.”

The U.S. is China’s second-largest export market after Europe. China, with the world’s largest currency reserves -- poised to top $2 trillion -- surpassed Japan in September to become the biggest foreign holder of U.S. Treasuries.

Buying U.S. Debt

Its role as a buyer of U.S. debt may only become more important as the U.S. spends to revive its economy and thaw credit markets.

The 0.7 percent drop by the yuan against the dollar on Dec. 1 triggered speculation that China had switched to favoring a depreciating currency, which would help exporters by pulling down prices in overseas markets.

The plunge may instead have been a message to Obama, who has called China a currency manipulator and “is taking a much harder line on trade issues,” said Frank Gong, head of China research at JPMorgan Chase & Co. in Hong Kong.

China wants to highlight both the urgency of the nation’s own economic problems and the importance of continuing the Strategic Economic Dialogue, the economist said.

“We believe China likes the SED platform very much,” said Gong. “However, U.S. President-elect Obama has so far never indicated that he would want to continue the dialogue.”

The yuan was trading at 6.8839 against the U.S. dollar as of 1:10 p.m. today, close to five-month low.

To contact the reporter on this story: Li Yanping in Beijing at yli16@bloomberg.net; Dune Lawrence in Beijing at dlawrence6@bloomberg.net

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Bank of England May Cut Rate to Lowest Since 1951

By Jennifer Ryan

Dec. 4 (Bloomberg) -- The Bank of England may cut interest rates to the lowest since 1951 today, bringing them closer to zero and challenging officials to find new tools to head off the threat of deflation.

The Monetary Policy Committee, led by Governor Mervyn King, will lower the bank rate by 1 percentage point to 2 percent, according to the median forecast of 60 economists in a Bloomberg News survey. Sweden’s central bank cut its interest rate by the most since 1992 today.

King’s dilemma mirrors that facing Federal Reserve Chairman Ben S. Bernanke, who said Dec. 1 that he may have to adopt less conventional policies as U.S. borrowing costs approach zero. The Bank of England governor conceded to lawmakers last month that he may have to coordinate policies with Prime Minister Gordon Brown to manage bond markets as U.K. rates fall.

“Rate cuts will help confidence and reduce default risk but they’re not a solution to the global and economic turmoil,” said Lena Komileva, an economist at Tullett Prebon Plc in London. “They’re coming to the realization that they’ll need to do more.”

Other steps may include expanding money supply and using it to finance government deficits or buying securities such as bonds or stocks, former policy maker Willem Buiter said this week. The last central bank to use unorthodox methods on a widespread scale was the Bank of Japan earlier this decade.

Bernanke’s Plans

The Bank of England isn’t alone in its predicament. Bernanke said Dec. 1 that he has “obviously limited” room to cut interest rates further after cutting the U.S. benchmark to 1 percent, and may use less conventional policies such as buying Treasury securities.

The European Central Bank, which has yet to elaborate on how it would expand its monetary toolkit, will cut its interest rate by a half point to 2.75 percent at 1:45 p.m. in Brussels today, according to the median estimate of 56 economists in a Bloomberg News survey.

Sweden’s Riksbank lowered its key rate by 1.75 percentage points to 2 percent today. New Zealand’s central bank cut its rate by a record 1.5 percentage points to 5 percent, and Bank Indonesia lowered its rate to 9.25 percent from 9.5 percent.

The pound fell to near an all-time low against the euro and traded close to its weakest since 2002 versus the dollar before the Bank of England decision. The currency was at $1.4587 and 86.43 pence per euro as of 8:37 a.m. today in London.

Zero Rate

The U.K. interest rate will reach zero early next year, Buiter told Bloomberg Television this week. Buiter, who correctly predicted last month’s 1.5 percentage-points cut, said the bank will repeat it today and again in January. The rate has never been lower than 2 percent since the Bank of England was founded in 1694.

Chancellor of the Exchequer Alistair Darling has also taken action to bolster the economy, unveiling the biggest fiscal stimulus in two decades on Nov. 24 and pledging to do “whatever is necessary” to get banks lending again.

King said Nov. 25 that “close coordination” with the government is needed if the interest rate reaches zero and said the biggest challenge facing policy makers is getting credit flowing through the economy again. Banks approved just 32,000 mortgages in October, matching the least since 1999.

Credit Problem

“It’s not just about the price of credit but the availability of it,” said Stewart Robertson, an economist at Aviva Investors Ltd. in London, which manages about $230 billion in assets. “The message from central banks is that they recognize the severity of the situation and they will do something about it.”

The U.K. economy may contract by 1.1 percent next year, the most since 1991, the Organization for Economic Cooperation and Development said Nov. 25. Gross domestic product fell by 0.5 percent in the third quarter, the first drop in 16 years.

Policy makers face a growing risk of missing their 2 percent inflation target as economic growth slows. King refused to rule out the risk of deflation when he presented forecasts in November, which showed a danger that consumer prices may start to fall across the U.K. economy. An index showing prices charged by services companies fell to the lowest since 2001 last month.

“All the policy instruments that are available, fiscal stimulus, cuts in rates that have been tried and don’t work,” Vince Cable, the Liberal Democrat lawmaker who speaks on finance matters, said in a Dec. 2 speech in London. What will follow “is called quantitative easing, which in the language of the man in the street is printing money. That’s being discussed in the U.S. and will be tried here,” he said.

To contact the reporter on this story: Jennifer Ryan in London at Jryan13@bloomberg.net

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