Wednesday, February 4, 2009

Natural Gas Advances as Supplies May Decline More Than Average

By Reg Curren

Feb. 4 (Bloomberg) -- Natural gas futures advanced in New York on speculation a government report tomorrow will show the biggest weekly drop in supplies thus far in the heating season.

Stockpiles may have dropped 200 billion cubic feet last week, according to the median of five analyst estimates compiled by Bloomberg. The five-year average decline for the week is 183 billion cubic feet, according to Energy Department data.

“In the short term, there’s a bullish withdrawal expected tomorrow,” Michael Rose, a director of trading at Angus Jackson Inc. in Fort Lauderdale, Florida. “And you have to start taking into consideration that production has been cut.”

Natural gas for March delivery rose 6.1 cents, or 1.4 percent, to $4.574 per million British thermal units at 9:36 a.m. on the New York Mercantile Exchange. Gas has dropped 19 percent this year and is down 67 percent from the 2008 high of $13.694 reached July 2.

Cuts in gas exploration and production will begin to show up in supplies later this year, when the U.S. economy may start to recover, Rose said.

The prices for gas also appears to be at a bottom and at this level makes it attractive to large consumers to make purchases now to lock in prices in the future, he said.

To contact the reporter on this story: Reg Curren in Calgary at rcurren@bloomberg.net.

Union Recommends Lindsey Refinery Contractors Return to Work

By Thomas Penny and Rachel Graham

Feb. 4 (Bloomberg) -- Union officials at the U.K.’s Lindsey refinery operated by Total SA recommended contractors return to work after reporting “significant progress” in talks to end a dispute over the use of foreign labor.

A total of 102 new jobs at the refinery will be offered to British nationals for nine weeks, Keith Gibson, a Unite union shop steward, told a mass rally today. There are still “one or two details” to agree and contractors will vote on the offer tomorrow.

About 600 contractors walked out at Lindsey last week after Italy’s IREM brought in its own workers to carry out a construction project. The protest sparked a wave of industrial action across Britain as concerns mount over the severity of the recession and the number of people out of work has surged to an 11-year high.

“It’s a powder keg unless we have a political solution,” Derek Simpson, joint general secretary of the Unite union, said earlier today in an interview with Sky News. “What we really want is proper open and transparent access to apply for jobs.”

Talks between Total, the conciliation and arbitration service ACAS and union representatives continued today, company spokesman Iain Hutchison said in a telephone interview.

Protectionist Charge

The protest is embarrassing for the Labour government and Prime Minister Gordon Brown, who in 2007 said he supported “British jobs for British workers.” David Cameron, leader of the opposition Conservative Party, today accused Brown of pandering to protectionist fears, a charge the prime minister denied.

“We are far from protectionist,” Brown told lawmakers during the weekly Prime Minister’s Questions session in Parliament. “ACAS has put its proposal to the workforce. I hope they will accept that despite their initial reservations.”

Scottish Power, the U.K. unit of Iberdrola SA, said contractors are continuing to strike at two of its power stations.

“It is our understanding that about 500 contractors” from the Longannet and Cockenzie coal-fired plants remain off site, company spokesman Simon McMillan said by phone today.

ConocoPhillips said contractors at its Humber refinery in the U.K. have returned to work after staging a protest.

About 300 contractors at the nearby Immingham power plant are continuing an unofficial strike, company spokeswoman Nina Krogh Nielsen said.

As many as 900 contractors walked out for 24 hours at the Sellafield nuclear fuel-processing plant on Feb. 2.

RWE AG’s U.K. unit said yesterday contractors returned to work at its Didcot, Aberthaw and Tilbury power stations.

Royal Dutch Shell Plc said about 370 contract workers at its St. Fergus gas plant in Scotland joined the strikes Jan. 30 and returned to work Feb. 2. Workers at the company’s Mossmorran processing facility in Scotland also participated in strike action.

Labor unrest also spread in recent days to BP Plc’s Forties Pipeline System and Scottish & Southern Plc’s Fiddler’s Ferry power station in Cheshire.

To contact the reporters on this story: Thomas Penny in London at tpenny@bloomberg.net.

Norway’s Krone Climbs After Central Bank Cuts Key Rate to 2.50%

By Bo Nielsen

Feb. 4 (Bloomberg) -- Norway’s krone climbed against the euro after Norges Bank cut its benchmark interest rate by 50 basis points to 2.50 percent to revive the economy.

The Norwegian currency posted the biggest gain versus the euro in seven days after the Oslo-based central bank said the lowering of its key rate will curb the negative effects of the financial crisis on the economy. The reduction matched the median estimate in a Bloomberg survey of economists.

“The meeting didn’t bring any surprises so the krone will continue its strengthening path,” said Dag Muller, an analyst in Stockholm at SEB AB.

The krone jumped 1.4 percent to 8.8708 per euro, before trading at 8.8978 as of 2:50 p.m. in Oslo. Against the dollar, the krone slipped 0.4 percent to 6.9241.

“Expectations of low and stable inflation now make it possible to use monetary policy actively,” central bank Governor Svein Gjedrem said in a statement following the decision.

Norway reduced the main rate by 175 basis points in December, fueling an 8.4 percent plunge for the krone against the euro in the month. The krone gained 9.7 percent versus the European common currency in January.

In other trading, the Swedish krona dropped against the dollar on concern the country’s banking industry is vulnerable after Standard & Poor’s said two days ago the nation’s lenders face rising loan losses.

The krona fell 0.9 percent to 8.2788 per dollar. It rose 0.4 percent to 10.6550 against the euro.

Government bonds fell. The yield on Sweden’s 5.25 percent government note due in March 2011 rose five basis points to 1.42 percent. The yield on Norway’s 6 percent bond due in May 2011 increased six basis points to 2.34 percent. Yields move inversely to bond prices.

To contact the reporter on this story: Bo Nielsen in Copenhagen at bnielsen4@bloomberg.net

British Pound Rises 0.2% Against Dollar to Trade at $1.4482

By Daniel Tilles

Feb. 4 (Bloomberg) -- The pound rose versus the dollar, gaining 0.2 percent to $1.4482 as of 1:33 p.m. in London.

Against the euro, the British currency strengthened 1.4 percent to 88.92 pence per euro.

To contact the reporter on this story: Daniel Tilles in London at dtilles@bloomberg.net

Canada’s Dollar Depreciates on Renewed Aversion to Risk

By Whitney Kisling

Feb. 4 (Bloomberg) -- Canada’s currency weakened, paring some of yesterday’s gain, as the global recession led more investors to take refuge in the U.S. dollar.

“The main catalyst so far today has been the broad-based strength in the U.S. dollar,” said George Davis, chief technical analyst at RBC Capital Markets in Toronto. “Yesterday we saw a fairly sharp rally in the Canadian dollar, and it was starting to get a little bit overextended.”

The loonie, as Canada’s dollar is known, declined 0.9 percent to C$1.2386 per U.S. dollar at 8:34 a.m. in Toronto, from C$1.2296 yesterday. The Canadian dollar appreciated yesterday as equities and crude oil climbed, reducing the comparative appeal of the U.S. dollar as a haven. One Canadian dollar buys 80.88 U.S. cents.

Government reports later this week may show the unemployment rate rose to 7.5 percent in the U.S. and 6.8 percent in Canada, according to the median estimate of economists surveyed by Bloomberg, increasing demand for the safest assets.

Canada’s currency will weaken to C$1.26 against the U.S. dollar by the end of March and remain there through the end of June, according to the median forecast in a Bloomberg News survey of 42 economists.

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

Euro Falls on Bets Eastern Europe’s Slump Will Weigh on Growth

By Ye Xie and Kim-Mai Cutler

Feb. 4 (Bloomberg) -- The euro declined against the yen and the dollar on speculation the slump in Eastern Europe will cause the global economic slowdown to deepen.

Kazakhstan devalued the tenge by 18 percent today, and Russia’s ruble approached an 11-year low versus the dollar after Fitch Ratings Ltd. cut the nation’s debt rating. The euro fell toward an eight-week low against the dollar after a report showed retail sales declined more than economists forecast.

“Eastern European currencies are melting down,” said Alan Ruskin, head of international currency strategy in North America at RBS Greenwich Capital Markets Inc. in Greenwich, Connecticut. “The cold wind from the east is also knocking down the euro. Emerging markets are still a sell.”

The euro fell 1.4 percent to 114.98 yen at 9:56 a.m. in New York, from 116.63 yesterday. The 16-nation currency dropped 1.3 percent to $1.2877 from $1.3040, touching $1.2706 on Feb. 2, the lowest level since Dec. 5. The dollar fell 0.2 percent to 89.25 yen from 89.44.

Norway’s krone gained 1 percent to 8.904 per euro after Norges Bank lowered the nation’s target lending rate by a half- percentage point to 2.5 percent. Governor Svein Gjedrem said in a statement that borrowing costs have been cut “considerably.”

Kazakhstan followed Russia, Ukraine and Belarus in devaluing its currency, abandoning intervention to preserve reserves as local banks and companies struggled to refinance debt. Kazakhstan’s tenge weakened to 149.67 per dollar from 123.48 yesterday after the central bank said in a statement that the currency will trade at about 150 versus the dollar.

Russia’s Ruble

The ruble fell as much as 1 percent to 36.3278 per dollar, near the lowest since the currency was redenominated in 1998, after Fitch Ratings cut Russia’s debit rating for the first time in more than a decade as falling oil prices contributed to dwindling foreign currency reserves and record capital flight. Fitch reduced the rating to BBB, the second-lowest investment grade, and maintained a negative outlook.

The Polish zloty slumped as much as 1.4 percent to 4.6995 per euro, the weakest level since June 2004, on concern the economic slowdown is worsening and speculation the central bank won’t step into the market to support the currency. Economy Minister Waldemar Pawlak told public radio that trying to halt the zloty’s slide would be a mistake.

The euro also dropped versus the dollar and yen as the European Union’s statistics office in Luxembourg said retail sales fell 1.6 percent in December from a year earlier. The median forecast of 13 economists surveyed by Bloomberg News was for a decrease of 1.4 percent.

Euro’s ‘Bad News’

“If traders think that the euro-zone recession will be more prolonged, that’s ultimately bad news for the euro,” said Danica Hampton, a currency strategist at Bank of New Zealand Ltd. in Wellington.

The ECB will keep its main refinancing rate at 2 percent at a policy meeting tomorrow, according to the median forecast of 53 economists surveyed by Bloomberg. ECB President Jean-Claude Trichet reiterated last week that the next “important” meeting for policy makers will be in March.

The euro’s decline against the dollar may be petering out, according to ABN Amro Holding NV and Citigroup Inc.

The dollar’s gain over the past few weeks “appears to have lost momentum,” Greg Gibbs, director of foreign-exchange strategy at ABN Amro Australia Ltd. in Sydney, wrote in a note to clients. Citigroup analysts led by New York-based Todd Elmer said yesterday the euro is “close to a bottom.”

Senate Resistance

The yen and dollar also gained versus the euro on concern the U.S. fiscal stimulus plan will meet Senate resistance and widening credit losses will erode earnings.

In the first Senate vote yesterday on amending President Barack Obama’s $885 billion plan, Democrats fell two votes short of the 60 needed to proceed on a proposal to add $25 billion in spending on highways, mass-transit programs and water projects. The vote was 58-39 in favor of clearing the procedural hurdle.

“Risk reduction has become a key theme,” said Michiyoshi Kato, a senior vice president of currency sales at Mizuho Corporate Bank Ltd., a unit of Japan’s second-largest bank by assets. “Investors are buying the yen.”

Companies in the U.S. cut an estimated 522,000 jobs in January as the economy weakened at the start of the year, a private report based on payroll data showed today. The drop in the ADP Employer Services gauge was less than the median forecast of 23 economists and followed a revised cut of 659,000 for the prior month.

To contact the reporters on this story: Ye Xie in New York at yxie6@bloomberg.net; Kim-Mai Cutler in London at kcutler@bloomberg.net

Corn, Soybeans Gain on Speculation Recent Drop May Lure Buyers

By Jae Hur

Feb. 4 (Bloomberg) -- Corn gained for the first day in five and soybeans climbed for the first time in three days on speculation that recent price declines may lure buyers and China will resume purchases of the oilseed.

Corn dropped to the lowest in more than seven weeks yesterday and soybeans fell to a five-week low. China, the world’s top soybean buyer, will purchase an additional 2.5 million metric tons of domestic new-crop supplies for temporary stockpiles in the northeast province of Heilongjiang, the official Xinhua News Agency reported yesterday.

“China’s news has lent support to the grains market, together with a technical rebound,” Takaki Shigemoto, an analyst at Tokyo-based commodity broker Okachi & Co., said by phone.

Corn for March delivery rose 0.2 percent to $3.625 a bushel in electronic trading on the Chicago Board of Trade, as of 1 p.m. in Paris. The grain lost 2.4 percent yesterday after touching $3.56, the lowest for the most-active contract since Dec. 12. Prices have fallen 55 percent from a record $7.9925 in June.

Soybeans for March delivery gained 0.9 percent to $9.5425 a bushel. The contract fell 1.4 percent yesterday after dipping to $9.345, the lowest since Dec. 26. Futures are down 42 percent from an all-time high of $16.3675 on July 3.

China’s soybean purchases, to be carried out before the end of April, will bring the amount the government plans to buy to bolster reserves to 4.53 million tons in Heilongjiang, the Xinhua report said, citing the State Administration of Grain’s provincial branch. The move is aimed at stabilizing local oilseed prices and protecting farmers’ interests, the report said.

The grains market was also supported by the dollar’s decline and crude oil’s gain yesterday, Shigemoto said.

Oil Gains

The dollar rose 1.6 percent against the euro at 1:09 p.m. in London after losing 1.5 percent yesterday.

Argentine farms will get more rainfall this week, easing a drought that is cutting the yields of corn and soybean crops, a weather forecaster said yesterday. Argentina is the second- largest exporter of corn after the U.S.

The nation’s farms will receive rain on Feb. 5, though it will be too late for corn plants already damaged by dry weather, Stella Maris Carballo, a forecaster at the National Institute of Agriculture Technology in Buenos Aires, said yesterday.

Wheat for March delivery rose 0.6 percent at $5.56 a bushel after falling 2 percent yesterday. Prices have tumbled 59 percent from a record $13.495 on Feb. 27.

Milling wheat futures traded on Euronext in Paris gained 2 euros, or 1.4 percent, to 148.25 euros a metric ton.

In the export market, Egypt is seeking to buy at least 55,000 tons of wheat at a tender today and Japan plans to buy 128,000 tons of the grain tomorrow, including 86,000 tons from the U.S.

South Korea bought 165,000 tons of corn for feed production and 165,000 tons of feed wheat yesterday, according to two industry executives familiar with the transactions.

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

Nickel Rises in London on Speculation Surplus Is Being Curbed

By Claudia Carpenter

Feb. 4 (Bloomberg) -- Nickel rose for a third day in London on speculation production cuts are starting to curb a surplus of the metal used mostly in stainless steel. Copper also gained.

Supplies of nickel in warehouses monitored by the London Metal Exchange fell 114 metric tons to 83,964 tons, narrowing this year’s climb to 7.1 percent. Stockpiles are up 47 percent for copper and 22 percent for aluminum over the same period. BHP Billiton Ltd., the world’s largest mining company, closed an Australian nickel mine last month after prices plunged.

“Inventories of nickel are not rising as sharply as the other metals, suggesting the supply-demand balance for nickel has stabilized a bit,” said Daniel Smith, an analyst at Standard Chartered Plc in London. “We’re not looking for a huge surplus this year because supply has been cut back so sharply.”

Nickel for delivery in three months gained $195, or 1.7 percent, to $11,800 a ton at 1:22 p.m. local time, paring a climb of as much as 3 percent. The contract has added 5.4 percent this week.

Reductions in output are greater for nickel than any other metal, equal to almost 14 percent of last year’s production, Citigroup Inc. estimates. Nickel supply will exceed demand by 50,000 tons this year, according to Smith.

“Deliveries into LME inventories are set to subside,” Michael Widmer, an analyst at BNP Paribas SA in London, wrote yesterday in a research report. “There is no need for those producers who cut to deliver any longer into warehouses.”

‘Awful’ Demand

Nickel demand is “awful,” with first-quarter stainless- steel consumption expected to decline more than 20 percent from a year earlier, Smith said. Outokumpu Oyj, the world’s fourth- biggest stainless-steel maker, said yesterday it’s operating at half of capacity and reported a wider-than-estimated loss.

Aluminum for delivery in three months rose $18, or 1.3 percent, to $1,423 a ton. Inventories in warehouses monitored by the LME dropped 775 tons to 2.8 million tons, the first decline since Nov. 7.

Copper advanced $51, or 1.5 percent, to $3,424 a ton. China’s stockpiling agency is buying the metal from domestic warehouses and from overseas, Reuters reported, citing trade sources. Kevin Norrish, an analyst at Barclays Capital in London, said last week the bureau had obtained at least 50,000 tons on the international market.

Shang Fushan, director of the copper department at the China Nonferrous Metals Industry, said today he was unaware of the buying. Shanghai-based analyst Bonnie Liu of Macquarie Group Ltd. said she didn’t believe they had bought.

Tin advanced $275 to $11,275 a ton, and zinc gained $1 to $1,175 a ton. Lead jumped $20 to $1,190 a ton.

To contact the reporter on this story: Claudia Carpenter in London at ccarpenter2@bloomberg.net

Gold Futures Rise on Demand for Store of Value; Silver Advances

By Pham-Duy Nguyen

Feb. 4 (Bloomberg) -- Gold rose for the first time in three days on demand for the precious metal as a store of value amid global financial turmoil. Silver also gained.

UBS AG said today gold will average $1,000 an ounce this year, up 43 percent from its previous forecast. Investment in the SPDR Gold Trust, the biggest exchange-traded fund backed by bullion, rose to a record 853.4 metric tons on Feb. 2.

“Worldwide, gold is seen as a safe place to be,” said Frank Lesh, a trader at FuturePath Trading LLC in Chicago. “It’s one of the few assets that made money last year. Everybody wonders: Where should I go with my money this year? When you look around, gold is one of the few recipients.”

Gold futures for April delivery rose $10.20, or 1.1 percent, to $902.70 an ounce at 9:23 a.m. on the Comex division of the New York Mercantile Exchange. The price dropped 3.9 percent in the previous two days.

Silver futures for March delivery climbed 16 cents, or 1.3 percent, to $12.46 an ounce. The metal slumped 24 percent in 2008, while gold gained 5.5 percent.

To contact the reporter on this story: Pham-Duy Nguyen in Seattle at pnguyen@bloomberg.net.

Oil Rises a Second Day on Signs OPEC Is Implementing Supply Cut

By Mark Shenk

Feb. 4 (Bloomberg) -- Crude oil rose for a second day on signs that OPEC is implementing a record production cut announced in December.

Prices are “firming up” because of output constraint by the Organization of Petroleum Exporting Countries, and further cuts may not be necessary, Libya’s top oil official, Shokri Ghanem, said in an interview. A government report later today will probably show U.S. crude stockpiles increased last week, according to a Bloomberg News survey.

“OPEC is still short of their goal but they are making impressive progress,” said Michael Fitzpatrick, vice president for energy at MF Global Ltd. in New York. “The cuts went into effect on Jan. 1 so we probably won’t see the whole impact for another month.”

Crude oil for March delivery rose 98 cents, or 2.4 percent, to $41.76 a barrel at 9:25 a.m. on the New York Mercantile Exchange. Prices are down 6.4 percent this year and 54 percent from a year ago.

OPEC, supplier of more than 40 percent of the world’s oil, may not need to reduce output when it meets next month, Libya’s Ghanem said. The group decided on Dec. 17 to trim output by 9 percent beginning on Jan. 1.

The Energy Department is scheduled to release its weekly petroleum supply report at 10:30 a.m. today in Washington.

Crude-oil stockpiles increased by 3 million barrels in the week ended Jan. 30 from 338.9 million the week before, according to the median of 14 analyst estimates before the report. It would be the 17th gain in 19 weeks. All of the analysts surveyed said supplies rose.

API Report

The industry-funded American Petroleum Institute reported yesterday that crude oil inventories rose 8.13 million barrels to 346.2 million last week. The API moved release of its inventory data to Tuesday afternoons beginning last week. It had been issuing its reports on Wednesday mornings since 2003 to coincide with supply totals released by the government.

“Any rally this morning will be tempered by the fact that we might be getting a big inventory number,” said Phil Flynn, senior trader at Alaron Trading Corp. in Chicago.

Brent crude oil for March settlement rose 49 cents, or 1.1 percent, to $44.57 a barrel on London’s ICE Futures Europe exchange.

To contact the reporter on this story: Mark Shenk in New York at mshenk1@bloomberg.net.

Chilean Peso Climbs on Risk Appetite; Colombia Peso Declines

By Drew Benson

Feb. 4 (Bloomberg) -- Chile’s peso climbed for a second day as global stock markets rose, boosting investor demand for higher-yielding emerging-market assets.

“There is a sense of tranquility, optimism today and that generates risk appetite,” said Ricardo Gomez, head of fixed- income sales and trading at Larrain Vial SA in Santiago. “You look at the screen and there is a lot of green, not so much red; stocks are higher, commodities, too.”

Chile’s peso climbed 0.6 percent to 617.5 per dollar as of 8:45 a.m. New York time, from 620.95 yesterday.

Stocks in Europe and Asia rose as companies reported better-than-estimated profits and governments stepped up efforts to revive growth. The MSCI World Index of developed-nation stocks increased 0.4 percent, while the MSCI Emerging Markets Index gained 1.8 percent.

The yield for a basket of five-year peso bonds in inflation-linked currency units, known as unidades de fomento, dropped two basis points to 2.56 percent, its lowest since May 23, according to Bloomberg composite prices.

In Colombia, the peso slid for a seventh day, falling 1.2 percent to 2,486 per dollar, from 2,455.8 yesterday, according to the Colombian foreign-exchange electronic transactions system, known as SET-FX.

The yield on the nation’s benchmark 11 percent bonds due in July 2020 was little changed at 9.785 percent, from 9.781 percent yesterday, according to Colombia’s stock exchange.

Colombia is scheduled later today to announce the results of a swap that gives investors peso-denominated notes due between 2012 and 2018 in exchange for securities maturing between 2009 and 2011.

To contact the reporter on this story: Drew Benson in Buenos Aires at Abenson9@bloomberg.net

Brazil’s Bovespa Rises to Highest in Month on Stimulus, Rates

By Allen Wan

Feb. 4 (Bloomberg) -- Brazil’s Bovespa index rose to the highest in almost a month as the prospect of interest-rate cuts and global economic stimulus spurred gains for homebuilders and commodity producers.

The Bovespa gained 1.3 percent to 40,255.32 at 8:37 a.m. New York time.

Brazil will increase spending on roads, power dams and other infrastructure projects by 142 billion reais ($61.5 billion), to 646 billion reais, to fuel growth, the government said today. Steelmaker Gerdau SA advanced to the highest in two weeks, adding 3.3 percent to 16.10 reais.

To contact the reporter on this story: Allen Wan in New York at awan3@bloomberg.net

Costco, Disney, Kraft, MetLife, Rambus: U.S. Equity

By Cordell Eddings

Feb. 4 (Bloomberg) -- Shares of the following companies may have unusual fluctuations in U.S. trading. Stock symbols are in parentheses and share prices are as of 8:20 a.m. in New York, unless specified otherwise.

Costco Wholesale Corp. (COST US) fell 6.8 percent $43. The largest U.S. warehouse-club chain said profit will be “substantially below” analysts’ estimates after the company cut prices to keep customers as the recession deepens. Earnings per share for the fiscal second quarter will miss the First Call consensus estimate of 70 cents, Costco said.

Electronic Arts Inc. (ERTS US) gained 3.9 percent to $16.10. The world’s second-largest maker of video games accelerated plans to cut costs, adding 100 new job reductions to the 1,000 previously announced and saying it will trim fiscal 2010 operating costs by $500 million.

Kraft Foods Inc. (KFT US) fell 10 percent to $25.75. The world’s second-largest foodmaker reported fourth-quarter profit dropped 72 percent on restructuring costs and said 2009 earnings will be less than its previous forecast because of the stronger dollar. Excluding the restructuring and asset writedowns, earnings of 43 cents a share missed analysts’ projections by 1 cent, according to the average of estimates compiled by Bloomberg.

MetLife Inc. (MET US) added 1.1 percent to $28.82. The largest U.S. life insurer reported fourth-quarter profit, excluding some investment results, of 19 cents a share, six cents better than the average estimate of 17 analysts surveyed by Bloomberg.

Rambus Inc. (RMBS US) fell 21 percent to $7.11. The California trial of the company’s patent lawsuit against memory- chip makers will be delayed because of a Delaware ruling against the designer and licensor of chips, a federal judge ruled.

Travelzoo Inc. (TZOO US): The Internet travel marketer reported a fourth-quarter loss of 1 cent a share, narrower than the 11-cent average loss estimate from analysts in a Bloomberg survey.

Vascular Solutions Inc. (VASC US): The medical-device maker forecast first-quarter profit of as little as 5 cents a share, or 44 percent less than FTN Midwest Securities analyst Christopher Cooley’s estimate.

Walt Disney Co. (DIS US) fell 6.2 percent to $19.35. The second-largest U.S. media company reported first-quarter sales and profit that missed analysts’ estimates because of flagging ad sales and consumer spending.

To contact the reporter on this story: Cordell Eddings in New York at ceddings@bloomberg.net.

U.S. Stock-Index Futures Gain on Bank Plan; Kraft, Disney Fall

By Adam Haigh and Elizabeth Stanton

Feb. 4 (Bloomberg) -- U.S. stock-index futures advanced as speculation President Barack Obama’s guarantee for illiquid bank assets will shore up the economy overshadowed lower-than- estimated earnings from Kraft Foods Inc. and Walt Disney Co.

Bank of America Corp., the biggest U.S. lender by assets, and Citigroup Inc. advanced more than 1 percent in pre-market trading in New York. Kraft, the world’s second-largest food company, fell 10 percent after lowering its 2009 profit forecast. Disney, the second-biggest U.S. media company, slid 7 percent after sales and profit fell short of analyst estimates.

Futures on the Standard & Poor’s 500 Index expiring in March added 0.4 percent to 835.2 at 9:03 a.m. in New York. Dow Jones Industrial Average futures climbed 18 points, or 0.2 percent, to 8,004. Nasdaq-100 Index futures advanced 0.3 percent to 1,211.5.

“One more bear-market rally is coming up and it will be that Obama bank plan that will drive it,” said Philippe Gijsels, a Brussels-based senior structured-product strategist at Fortis Global Markets. “Next week we will be through most of the earnings season so that bad news will be out of the way and we will look forward to better news flow,” he said in a Bloomberg Television interview.

The S&P 500 has dropped 7.2 percent this year as companies from Microsoft Corp. to SanDisk Corp. and Motorola Inc. reported disappointing earnings and the economy shrank at the fastest pace in 26 years. The gauge is still 11 percent above an 11-year low reached on Nov. 20 amid optimism Obama’s stimulus package with spur growth.

Earnings Slump

Profits decreased 37 percent on average for the 261 companies in the index that have released fourth-quarter results since Jan. 12. The period is projected to be the sixth straight quarter of decreasing profits, the longest streak on record.

Futures remained higher even after an industry report showed U.S. companies cut 522,000 people from payrolls in January, the 12th straight month of private-sector job loss. The number was lower than the average economist estimate and followed a revised cut of 659,000 in December that was the biggest in seven years of data gathered by ADP employer services.

Labor Department data to be released on Feb. 6 is forecast to show economy-wide job losses of 540,000, adding to almost 2.6 million jobs lost last year.

Toxic Securities

Citigroup added 5 cents to $3.51. Bank of America climbed 10 cents to $5.40.

Treasury Secretary Timothy Geithner is skeptical of setting up a so-called bad bank to hold toxic securities, though the option may still form part of a final rescue program for financial companies, people familiar with the matter said. Senator Charles Schumer yesterday said debt guarantees are becoming “a favorite choice” of options because a bad bank would be too costly.

Kraft lost $2.89 to $25.85. The maker of Nabisco cookies, Oscar Mayer lunchmeats and Maxwell House coffee forecast 2009 earnings per share of $1.88, compared with its previous forecast of at least $2.

Disney dropped $1.44 to $19.18 as first-quarter sales and profit missed analysts’ estimates on shrinking sales at television networks, theme parks and the film studio.

Costco Wholesale Corp., the biggest U.S. warehouse-club chain, slid 7.4 percent to $42.69 after saying earnings per share for the fiscal second quarter will be “substantially below” analysts’ estimates.

Time Warner

Time Warner Inc., the owner of AOL and People magazine, retreated 3.5 percent after reporting a $16 billion loss, its first in 14 quarters. The company lost $4.47 a share in the fourth quarter because of plunging advertising sales and a writedown tied to the value of assets.

Electronic Arts Inc. gained 3.7 percent to $16.07 as the world’s second-largest video game maker slashed costs. The company eliminated 1,100 jobs as it forecast fiscal 2010 profit of $1 a share, 11 percent less than the average analyst estimate.

MetLife Inc. rose 2.7 percent to $29.30. The largest U.S. life insurer reported fourth-quarter profit of 19 cents a share, or 42 percent more than the average analyst estimate.

To contact the reporters on this story: Adam Haigh in London at ahaigh1@bloomberg.net. Elizabeth Stanton in New York at estanton@bloomberg.net

Lowering Interest Rates in Europe: What will be the Impact?

Daily Forex Fundamentals | Written by FOREXYARD | Feb 04 09 10:33 GMT |

Recently, the developed countries, from the West to the Far East, have substantially cut short-term interest rates in order to stimulate their economies.

When we take a look at the Euro-Zone Minimum Bid Rate, we see that the European Central Bank (ECB) currently holds the lowest interest rate it has had since the EUR's introduction in 1999. It currently stands at 2.00% from 3.75% back in October.

The most significant economic news releases that analysts are focusing their attention on this week are the scheduled decisions by the BoE and ECB on Thursday at around 12:00 GMT on whether or not to cut these rates even further. Here is ForexYard's analysis as to the impact these decisions will carry on the EUR and how forex traders can benefit from the impending price movements. Read the next article to see the impact the BoE's rate cut will have on the Pound.

EUR - ECB Minimum Bid Rate Decision and its Impact

In the past 3 months, the Euro-Zone's economy has continued to deteriorate. Several months ago, it was previously thought that Europe's economy wouldn't suffer as much as Britain and the U.S. However, recent economic data has proven the forecast to be incorrect. As a result, the European Central Bank (ECB) has continued to make successive rate cuts since October 2008 in order to stimulate the Euro-Zone economy, and lift it out of recession. For example, the ECB made a 50 basis point rate cut last month, following Britain's own cut of a similar size.

On one hand, there is evidence that backs a possible Euro-Zone rate cut. The reason is because large European banks, such as Spain's Santander and Germany's Deutsche Bank, have suffered losses mirroring those of Britain's Barclays, RBS, and Lloyds. One may draw from this that the situation in the Euro-Zone is catching up with Britain very quickly. Despite this, many analysts forecast that the ECB won't cut rates. This is so because analysts believe the ECB's main rate cuts have already taken place. Therefore, cutting the Minimum Bid Rate in the Euro-Zone will abolish the ECB's ability to use further monetary easing to overcome the current recession.

However, if rates are cut, the EUR may fall dramatically against the USD and JPY. This is because investors buying the EUR with these other currencies to fund carry-trades would then likely unwind these positions and buy back into the lower-yielding currencies. In this scenario, the EUR may also record bearishness against the GBP, as investors have already taken Britain's rate cut into account.

Additionally, investors might pour back into the Pound due to fears about increasing instability in the Euro-Zone, and could possibly drop the pair to 0.8500 price level by the middle of next week. The EUR/USD rate is currently at 1.2990, and could hit 1.2550 if the ECB cuts its Minimum Bid Rate from 2.00% to 1.50% tomorrow afternoon. Traders can capture the profits from this bearishness by entering their short positions early and riding the wave as it picks up momentum directly after the interest rate decision is announced.

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 and any analysis published or received from FOREXYARD is for informational use. 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 the analyses. While we try to ensure that all of the information provided is kept up-to-date and accurate we accept no responsibility for any use made of the information provided. FOREXYARD will not be held responsible for the reliability or accuracy of the information available. 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 FOREXYARD or its affiliates. The reader agrees not to hold FOREXYARD 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.

Lowering British Interest Rates: What to Expect

Daily Forex Fundamentals | Written by FOREXYARD | Feb 04 09 10:32 GMT |

Over the past 6 months the developed countries, from the West to the Far East, have substantially cut short-term interest rates in order to stimulate their economies. Since October, the British Official Bank Rate has been cut from a high of 4.50% back in October, to 1.5% in January, making this the lowest rate in the Bank of England's (BoE) history.

The most significant economic news releases that analysts are focusing their attention on this week are the scheduled decisions by the BoE and ECB on Thursday at around 12:00 GMT on whether or not to cut these rates even further. Here is ForexYard's analysis as to the impact these decisions will carry on the GBP and how forex traders can benefit from the impending price movements. Read the previous article to see the impact which the ECB rate cut will have on the EUR.

GBP - BoE Official Bank Rate Decision and its Impact

Prior to the commencement of 2009, it seemed that Britain's economy was in much worse condition than that of the Euro-Zone. However, recent developments have revealed this not to be the case. The dire situation in Britain is also matched by that in places such as the Euro-Zone, China, Japan, and the United States.

Most analysts predict that Britain will cut her Interest Rates by an additional 50 basis points to 1% this Thursday. Such a move would not be taken by the BoE unless it was pre-determined that it would instill strength back into the British economy. Typically a rate reduction weakens the national currency; however, lately these reductions have performed the necessary function of putting some confidence back into the market.

As we have seen with the U.S., Canadian, and Japanese economies, rate cuts these days have produced a rally to the currency directly affected, contrary to the usual effect. Many experts agree that this may in fact be the case with the GBP. We could see a strong appreciation of the Cable up towards levels of 1.4550 if the BoE does indeed cut its rate.

Forex traders should take advantage of this information by entering their long positions before the rate cut is announced and capturing profits from the price swing which may result.

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 and any analysis published or received from FOREXYARD is for informational use. 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 the analyses. While we try to ensure that all of the information provided is kept up-to-date and accurate we accept no responsibility for any use made of the information provided. FOREXYARD will not be held responsible for the reliability or accuracy of the information available. 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 FOREXYARD or its affiliates. The reader agrees not to hold FOREXYARD 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.

Daily FX Report

Daily Forex Technicals | Written by Varengold Bank | Feb 04 09 10:21 GMT |

Good morning from beautiful and cold Hamburg. Step by step the speculators of tomorrows European rate decisions become more important. Economists expect no rate cut. They will accurately listen what the President of the ECB would say about the future interest rate trend.

Markets review

In the late New York trading the EUR gained versus USD and JPY. These moves were supported by the release of an unexpected jump in the U.S. pending home sales together with the fresh stimulus measures by central banks worldwide. The U.S. Federal Reserve Bank extended its emergency-lending programs and foreign currency-swap lines by six months. The lending programs are authorized to approve loans to non-banks under 'unusual and exigent circumstances'. Outstanding loans and swaps of the programs are totaled $884 bln USD. This morning, the EUR/USD dropped again before a report may show that the retail sales declined for the seventh month in a row and trades currently around 1.30.

The AUD climbed against USD the most in seven days after a government report showed that retail sales had its biggest gain in December for more than eight years. Furthermore Australia's central bank cut its interest rate to the lowest since 1964. The government also plans a record bond sale of $24 bln AUD. The NZD benefited from this and climbed versus the USD to 0.5153 from its opening at 0.5040.

The USD/CAD declined for the first time in four days as equities and crude oil, one of the most important exports of Canada, climbed up. The currency pair fell yesterday from its opening at 1.2449 to 1.2293 at its lowest level

Technical analysis

AUD/JPY

After the Fibonacci retracement shows its lowest level on the 27th of October the AUD/JPY recovered. But it has been trading in a downward movement again since 07th of January. The next support for the currency pair could be the 0.0 % retracement line. When the bearish trend breached on this support, maybe it could be a signal for the next bullish trend.

EUR/GBP

The EUR/GBP has been trading in a bullish trend since the end of October. It lost with the beginning of 2009 much of its power and fell to its support at 0.8812. While this support is holding it seems that the currency pair could test the resistance at 0.9063. On the other hand the momentum indicator shows a risk for a bearish trend. It is supported by the fact that the momentum as well as the moving average fell below the zero-level

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.

Currency Pair Daily Forecasts

Daily Forex Technicals | Written by Finotec Group | Feb 04 09 10:17 GMT |

EUR/USD Daily Technical Reports

EUR/USD-market strategy can be a buy from the level 1.2965$

Technical oscillators supporting the bullish trend for the currency pair

To strengthen our analysis; we use many other indicators, starting with MACD (Moving Averages convergence divergence); we notice the MACD lines in a bullish direction and crossing below the zero line. In order to find the power of the market, we use RSI (Relative Strength Index).With RSI; we can determine that the market is in a bullish direction. Also, MA oscillators indicate a bullish cross on the short MA line

USD/JPY Daily Technical Reports

USD/JPY-market strategy can be a sell form the level 89.10

Technical oscillators supporting the bearish trend for the currency pair

To strengthen our analysis; we use many other indicators, starting with MACD (Moving Averages convergence divergence); we notice the MACD in a bearish direction below the zero line. In order to find the power of the market, we use RSI (Relative Strength Index).With RSI; we can determine that the market is in a bearish direction

GBP/USD Daily Technical Reports

GBP/USD-market strategy can be a buy from the level 1.4440$

Technical oscillators supporting the bullish trend for the currency pair

To strengthen our analysis; we use many other indicators, starting with MACD (Moving Averages convergence divergence); we notice the MACD lines are in a bullish direction. In order to find the power of the market, we use RSI (Relative Strength Index).With RSI; we can determine that the market is in a bullish direction. Also, MA oscillators indicate a bullish cross on the short MA line.

USD/CHF Daily Technical Reports

USD/CHF-market strategy can be a sell from the level 1.1500

Technical oscillators supporting the bearish trend for the currency pair

To strengthen our analysis; we use many other indicators, starting with MACD (Moving Averages convergence divergence); we notice the MACD lines in a bearish direction above the zero line. In order to find the power of the market, we use RSI (Relative Strength Index).With RSI; we can determine that the market is in a bearish direction. Also, MA oscillators indicate a bearish cross on the short MA line.

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.

U.K. Will Shrink Until Fourth Quarter, Niesr Says

By Svenja O’Donnell and Jennifer Ryan

Feb. 4 (Bloomberg) -- The British economy will shrink until the fourth quarter of this year as the world endures the slowest growth since the end of World War II, the National Institute of Economic and Social Research said.

Gross domestic product will fall 2.7 percent in 2009, compared with a previous forecast of a 0.9 percent contraction, Niesr, whose clients include the Treasury and the Bank of England, said in a report today. It predicts the global economy will expand 0.5 percent, the slowest pace in 60 years.

Consumer confidence dropped to the lowest level in at least four years in January and service industries from banks to airlines shrank for a ninth month, reports showed today. The central bank may cut the benchmark interest rate to a record low of 1 percent tomorrow as policy makers try to unblock credit markets and fight the economic slump.

“The economy’s still in the throes of recession,” George Johns, an economist at Barclays Capital in London, said in an interview. “There will still be a sizable contraction in the first quarter, and it will be some time before services get growing again.”

Chancellor of the Exchequer Alistair Darling has suggested that he may have to scale back his prediction of a recovery in the second half of the year. He said yesterday that major economies are facing the worst slump since the 1930s.

Five Quarters

The Niesr forecasts show Britain’s recession, which began in the three months through September, will last through the third quarter of this year. With five quarters of uninterrupted contraction, that would match the length of the recession from 1990 until 1991.

“The U.K. economy has itself entered a rather severe recession,” said Simon Kirby, an economist at Niesr. “Household consumption expenditure will be a major contributor to the contraction.”

A measure of consumer sentiment fell 8 points to 40 in January, the lowest since the survey began in 2004, Nationwide said today. A gauge of the present situation dropped to 23 last month from 29 in December, the report showed. The readings were taken from a survey of 1,000 people between Dec. 15 and Jan. 18.

Demand for staff fell at the fastest pace in more than a decade, a report by the Recruitment and Employment Confederation and KPMG showed today. A gauge of job vacancy levels dropped to 27.4 in January from 29.2 in December, falling for an eighth month, at the fastest pace since the survey began in 1997.

Services Shrink

The Chartered Institute of Purchasing and Supply’s survey of about 700 service companies showed an index reading of 42.5 in January, compared with 40.2 the previous month, the Markit research company said today. The result exceeded the 40.3 forecast in a Bloomberg News survey of 29 economists. Readings below 50 indicate contraction.

The Bank of England cut its interest rate to 1.5 percent last month in a bid to kick-start the economy, its lowest level since the bank was created in 1694. Policy makers will trim the rate by a half-point at their meeting tomorrow, according to the median forecast of 61 economists surveyed by Bloomberg.

Darling has also given the Bank of England authority to manage a 50 billion-pound ($71 billion) fund to purchase bonds and commercial paper, providing policy makers with another tool to fight the recession.

“I would be inclined to do it sooner rather than later,” Niesr’s director, Martin Weale, told journalists at a briefing yesterday. “I don’t see any reason why conventional interest changes should be preferred over this sort of policy.”

To contact the reporters on this story: Svenja O’Donnell in London at sodonnell@bloomberg.net; Jennifer Ryan in London at Jryan13@bloomberg.net.

Japanese Economy May Shrink 3.8% Next Fiscal Year, Muto Says

By Mayumi Otsuma

Feb. 4 (Bloomberg) -- Japan’s economy may shrink more than 3.8 percent in the year starting April 1 as exports decline, according to Toshiro Muto, a former central bank deputy governor.

“All the bad news has emerged from overseas,” Muto, who now heads the Daiwa Institute of Research, said in a speech in Tokyo today. “We can’t help but say the Japanese economy remains export-driven and the next recovery will probably be also led by exports.”

Muto said the number could be worse, after reports last month showed production and shipments abroad fell at a record pace in December. His projection is more pessimistic than the Bank of Japan’s forecast for a 2 percent contraction. Both would still be the sharpest decline in the postwar era.

The world’s second-largest economy may have shrunk as much as 12 percent on an annualized basis in the last quarter of 2008, the former central banker said. Muto served on the policy board for five years until March 2008.

The U.S. budget deficit is expanding rapidly because of economic stimulus measures, increasing the risk of weakening the dollar and driving long-term interest rates higher, Muto said. When including President Barack Obama’s $819 billion dollar stimulus package, the shortfall will swell to the equivalent of about 11 percent of nominal gross domestic product in 2009, more than double Japan’s 4 percent, he said.

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

Taiwan, Singapore GDP May Shrink by a Tenth in 2009, CLSA Says

By Shamim Adam

Feb. 4 (Bloomberg) -- Taiwan and Singapore may see their economies shrink by a tenth this year as Asia’s export-dependent nations trade less with each other, according to CLSA Asia- Pacific Markets.

Taiwan’s gross domestic product will probably decline 11 percent and Singapore’s economy will contract 10 percent, according to a CLSA report published today. South Korea’s GDP will drop about 7 percent, the report said.

“In a number of countries, the wheels have fallen off the primary driver of Asian growth: exports,” the CLSA report said. “Intraregional trade has slowed more aggressively than has extra regional.”

Asia’s export-driven economies are slowing as demand for their products diminishes amid recessions in the U.S., Japan and Europe. Exports account for about 32 percent of Asia’s GDP, according to the World Bank.

The International Monetary Fund yesterday slashed its 2009 growth forecast for Asia to 2.7 percent from 4.9 percent, and Managing Director Dominique Strauss-Kahn said a “worse outcome cannot be ruled out.”

Developing Asia, which excludes Japan, Australia and New Zealand, will probably expand 5.5 percent this year, the slowest pace since 1998, the IMF said in an update of its World Economic Outlook report last week.

China will expand 5.5 percent this year, while India’s economy will grow 5 percent, CLSA said.

Hong Kong, Malaysia and Thailand will see GDP contractions of 5 percent this year, while the Philippines and Indonesia will expand less than 1 percent in the same period, the report said.

“The exceptional weakness of indicators at the end of last year and the evidence so far that any rebound will be muted makes for extremely weak Asian growth forecasts,” CLSA said.

To contact the reporter on this story: Shamim Adam in Singapore at sadam2@bloomberg.net

Europe Retail Sales Drop More Than Expected as Confidence Wanes

By Jurjen van de Pol

Feb. 4 (Bloomberg) -- European retail sales declined more than economists expected in December as consumer confidence sank in the face of the worst recession since World War II.

Sales in the euro region fell 1.6 percent from a year earlier after a revised 2.6 percent decline in November, the European Union’s statistics office in Luxembourg said today. The December drop, the seventh straight decline, was sharper than the 1.4 percent fall economists forecast, according to the median of 13 estimates in a Bloomberg survey. From the previous month, sales were unchanged in the latest month.

European consumers are cutting back on spending as higher unemployment and tighter credit conditions erode confidence in the economic outlook. Consumer sentiment fell to a record low in January and inflation eased to the slowest since 1999, adding to arguments for the European Central Bank to cut interest rates further to bolster the economy.

“Consumers are clearly benefiting from the falling back in inflation, but that’s being increasingly countered by the rising unemployment and the concerns about the economic outlook,” said Howard Archer, chief European economist at IHS Global Insight in London. “That’s going to weigh down very heavily on consumer spending” this year.

The International Monetary Fund last week cut its forecast for the euro-zone economy to predict a contraction of 2 percent this year. It previously projected the economy would shrink 0.5 percent in 2009. Europe’s services industries contracted for an eighth straight month in January, data today showed.

Largest Economy

Euro-area retail sales were unchanged in December from the prior month, today’s report showed, after a 0.1 percent drop in November. Sales in Germany, Europe’s largest economy, unexpectedly fell for a third month in December after unemployment rose, the Federal Statistics Office in Wiesbaden said yesterday.

Metro AG, Germany’s largest retailer, on Jan. 13 reported slowing sales growth and said fourth-quarter profit missed its forecast as consumer spending weakened. Metro intends to cut 15,000 jobs as part of a plan to increase profit.

“Economic indicators do not bode well for food retailers,” analysts John David Roeg and Peter Brockwell at ING Wholesale Banking said in a note to investors yesterday. “We favor more defensive groups, such as Ahold and Sainsbury, over more cyclical ones, such as Carrefour and Metro.”

Hawesko Holding AG, Germany’s biggest wine seller, last week said fourth-quarter profit fell 1.5 percent as sales of Bordeaux declined at its French unit. This year will be “more difficult,” particularly in the first half, Chief Executive Officer Alexander Margaritoff said.

Shop owners across Europe missed their revenue targets in January and expect to do so again in February as consumers hold off on purchases of goods such as clothing and shoes, the Bloomberg January purchasing managers index showed last week.

To contact the reporter on this story: Jurjen van de Pol in Amsterdam jvandepol@bloomberg.net

U.K. Services Shrank for a Ninth Month in January, CIPS Says

By Jennifer Ryan

Feb. 4 (Bloomberg) -- U.K. service industries from banks to airlines contracted for a ninth month in January as the credit squeeze kept the nation mired in the recession.

An index based on a survey of about 700 service companies by the Chartered Institute of Purchasing and Supply was at 42.5, compared with 40.2 in December, the Markit research company said today. The result exceeded the 40.3 forecast in a Bloomberg News survey of 29 economists.

Royal Bank of Scotland Group Plc said last month it may post the biggest loss ever by a U.K. company, prompting the government to raise its stake in the lender. The Bank of England may cut the benchmark interest rate to a record low from the current 1.5 percent tomorrow as it prepares to buy assets such as corporate bonds to unblock credit markets.

“We’re going to get more bad news on services,” said James Knightley, an economist at ING Financial Markets in London. “If lenders continue to restrict access to credit, the Bank of England is going to try to ease conditions as much as possible.”

The U.K. economy will contract 2.7 percent this year as the financial market turmoil inhibits bank lending and stymies growth, the National Institute for Economic and Social Research said in a separate report today.

The government increased its stake in Royal Bank of Scotland to 70 percent after the lender said Jan. 19 it may post a loss of as much as 28 billion pounds ($40 billion). Moody’s Investors Service cut the bank’s credit rating to Aa3 from Aa1 the next day, and lowered Barclays Plc’s grade on Feb. 2 on risks the bank may announce more credit losses and bad loans.

Consumer Confidence

Consumer confidence sank to the lowest level since at least 2004 last month as shoppers found it harder to access credit and became more concerned about job losses, Nationwide Building Society said today.

The Bank of England said Jan. 21 it will buy “high- quality” assets “within weeks” to ease market strains. Governor Mervyn King is pursuing alternative measures to revive lending after cutting the key rate to 1.5 percent last month, the lowest since the bank was founded in 1694.

Policy makers may still lower the benchmark by another half point tomorrow to 1 percent, according to the median forecast of 61 economists in a Bloomberg News survey.

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

China’s Oil, Gas Outlook Cut as Manufacturing Slumps

By Wang Ying and Chua Kong Ho

Feb. 4 (Bloomberg) -- China’s oil and gas industry was downgraded to “cautious” from “attractive” at Morgan Stanley as manufacturing in the world’s third-biggest economy shrank, cutting demand for fuels and petrochemicals.

Chinese oil demand may increase by 1.9 percent this year, less than a previous estimate of 5.4 percent, Morgan Stanley said in a research report today. The stock ratings for Hong Kong- listed Cnooc Ltd. and China Petroleum & Chemical Corp., Asia’s largest refiner, were reduced to “underweight.”

China’s factory output contracted for a fourth month in January as exports fell because of the global recession, a government-backed survey showed today. The latest oil-demand forecast is significantly lower than the average of 7.8 percent over the past few years, Morgan Stanley said in the report.

“Product demand growth in China is expected to slow down in line with the macro-environment,” according to the report. China increased crude oil imports at the slowest pace in three years in 2008, with shipments up 9.6 percent to 178.9 million metric tons.

In line with the demand deceleration, China may rely on imports for about 47 percent of its crude oil consumption by 2010 compared with a previous forecast of more than 50 percent, Morgan Stanley said.

Cnooc shares rose 2.6 percent to close at HK$6.75 in Hong Kong, while Sinopec, as China Petroleum is known, advanced 4.1 percent to HK$4.34. The benchmark Hang Seng Index added 2.3 percent to 13,063.89, up for the first time in three days on speculation China’s stimulus package will support economic growth.

PetroChina Shares

PetroChina Co. remains Morgan Stanley’s “preferred pick” because the Beijing-based company’s refining operations are expected to offset the impact of reduced income from exploration and production, and as it has “limited exposure” to petrochemicals. The stock gained 4.4 percent to HK$5.91.

Morgan Stanley is “bearish” on prices of petrochemicals, with “supply growth running ahead of demand” and industries such as electronics and autos decelerating.

Investment in China’s energy industry has slowed, a reflection of restrained demand, Zhang Guobao, head of the National Energy Administration, said in a broadcast on the official China Central Television today.

Benchmark crude oil prices in New York have slumped 72 percent from a record in July as the worst financial crisis since the Great Depression curbs demand for commodities and energy.

Chinese factories’ plummeting demand for raw materials and parts is hurting suppliers across Asia and the Pacific, helping to send South Korean exports tumbling by a record in January. China’s own shipments fell by the most since 1999.

Government Stimulus

The government is considering additional steps to boost its economy, the Financial Times reported on Feb. 2, citing an interview with Premier Wen Jiabao in London. Gross domestic product expanded 6.8 percent in the last quarter, the least in seven years.

China may enact a stimulus plan for the oil-refining and petrochemicals industry before a meeting of the country’s legislature in March, an official said yesterday. Government departments are discussing the proposal, the official at the state-backed China Petroleum and Chemical Industry Association said, declining to be identified because of internal rules.

To contact the reporter on this story: Wang Ying in Beijing at ywang30@bloomberg.net; Kong Ho Chua in Shanghai at kchua6@bloomberg.net

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