Bovespa Falls to Lowest in Week on Commodity Drop; Bolsa Slips

By Alexander Ragir

April 20 (Bloomberg) -- Brazil’s Bovespa index fell to the lowest in more than week after commodity prices tumbled and economists forecast a bigger contraction for Latin America’s largest economy this year.

Petroleo Brasileiro SA, Brazil’s state-controlled oil company, slid 1.5 percent as oil fell the most in three weeks. Cia. Vale do Rio Doce, the world’s biggest iron ore miner, sank 1.6 percent as metal prices retreated. Itau Unibanco Banco Multiplo SA, Latin America’s biggest bank, declined more than 2 percent on concern a slowing economy will cut demand for loans.

“You’ve moved from many distressed valuations to fair value,” said Bill Rudman, who helps manage $1.5 billion at Blackfriars Asset Management in London. “We wouldn’t be adding at this point” to the country’s stocks.

The Bovespa declined for a second day, losing 2 percent to 44,876.25 at 9:28 a.m. in New York. Brazilian stocks fell on April 17, paring a weekly gain, on concern demand from China won’t sustain commodity prices and the prospect earnings estimates may need to be cut as global growth slows this year.

The six-week advance in the Bovespa pushed its price-to- earnings ratio to a nine-month high of 14.7 last week, 31 percent more expensive than the five-year average, according to data compiled by Bloomberg.

Analysts reduced 2009 earnings estimates last week to the lowest level since Bloomberg began compiling the data in 2006 as Brazilian companies scaled back output in a recession that economists predict will be the most severe since 1992.

Worsening Economy

Brazil economists forecast the economy will contract 0.49 percent this year, bigger than the 0.3 percent average of the previous week’s central bank survey of about 100 economists.

The Bloomberg Base Metals 3-Month Price Commodity Index lost 2.4 percent to 138.57. The Dollar Index, a measure against six counterpart currencies, rose for a fifth consecutive day, making dollar-denominated commodities more costly for those holding other currencies.

Vales decreased 46 centavos to 29.34 reais.

Cia. Siderurgica Nacional SA, Brazil’s third-biggest steelmaker, fell 2.4 percent to 39.31 reais on concern lower metal prices will hurt earnings.

Benchmark steel prices in China have dropped 9 percent since February, according to Beijing Antaike Information Development Co. China’s steel prices will fluctuate at a low level this year because of the industry’s overcapacity, said Xu Lejiang, chairman of Baoshan Iron & Steel Co., China’s biggest steelmaker.

Petrobras dropped 46 centavos to 29.06 reais. Oil plunged more than 6 percent in New York.

Itau sank 71 centavos to 27.59 reais.

The index has climbed 19 percent this year on speculation government measures, falling interest rates and a recovery in commodity prices will boost growth. The gauge is up 56 percent from its Oct. 27 low.

In other Latin America markets, the Bolsa index slid 1.2 percent and Chile’s Ipsa retreated 0.4 percent.

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

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U.S. Stocks Fall as Banks, Commodity Shares Drop

By Rita Nazareth

April 20 (Bloomberg) -- U.S. stocks declined, indicating the market may retreat following six weeks of gains, as concern grew that credit losses are worsening and lower commodity prices dragged down energy and material producers.

Bank of America Corp., the lender that’s fallen 72 percent in the past year, tumbled 11 percent as rising charge-offs for uncollectible loans overshadowed better-than-estimated earnings. Citigroup Inc. dropped 12 percent as Goldman Sachs Group Inc. said the bank’s credit losses are growing at a “rapid rate.” U.S. Steel Corp. and Halliburton Co. declined as oil and industrial metal prices decreased.

The Standard & Poor’s 500 Index slid 1.9 percent to 853.48 at 9:35 a.m. in New York. The Dow Jones Industrial Average lost 130.47 points, or 1.6 percent, to 8,000.86. The Russell 2000 Index of small companies fell 2.1 percent.

“We’ve had a big rally for six weeks and I wouldn’t be surprised to a see consolidation phase that could last anywhere from two to four weeks,” said Bruce Bittles, the Nashville-based chief investment strategist at Robert W. Baird & Co., which oversees $16 billion. “Financials had a bigger run than the market and certainly they are not out of the woods as well as the rest of the economy.”

The S&P 500 wrapped up its steepest six-week gain since 1938 on April 17, as profits at Goldman Sachs and JPMorgan Chase & Co. ignited gains in bank shares. The rally may falter as a prolonged recession dents corporate earnings, George Hoguet, global investment strategist at Boston-based State Street Global Advisors Inc., said in an April 18 interview.

Leading Indicators

The S&P 500 surged 29 percent from a 12-year low on March 9 through last week as banks including Citigroup said they were profitable at the start of the year and expectations grew that the worst of a global recession is past. The index of U.S. leading indicators for March may today show the longest economic slowdown in the post-World War II era will start loosening its grip in coming months.

The gauge of the outlook over the next three to six months dropped 0.2 percent following a 0.4 percent February decrease, according to the median estimate of 40 economists surveyed by Bloomberg News. The New York-based Conference Board’s index is due at 10 a.m. Washington time.

Analysts estimate that profits at S&P 500 companies decreased for the seventh straight quarter in the January to March period, the longest stretch of declines since at least the Great Depression.

‘Pullback’

“We’re likely to see a pullback in stock markets as earnings disappoint,” Hoguet said in an interview in Shanghai. “We are undergoing a severe shock and the global economy will take several quarters to get back to trend growth.” State Street Global Advisors oversees $1.4 trillion.

Bank of America fell 11 percent to $9.43 even after saying first-quarter net income more than tripled on gains from home refinancing and trading.

Citigroup declined 45 cents, or 12 percent, to $3.20. The bank’s credit losses are growing at a “rapid rate,” undermining Chief Executive Officer Vikram Pandit’s efforts to stabilize the company, according to Goldman Sachs.

While Citigroup posted first-quarter net income of $1.6 billion last week, the New York-based bank suffered an “underlying” loss of 38 cents a share, Richard Ramsden, a Goldman Sachs analyst, wrote in a research note dated yesterday. He repeated a “sell” rating on the stock.

American International Group Inc. fell 7.4 percent to $1.50. The insurer bailed out by the U.S. agreed to sell preferred stock and warrants for common shares to the government in return for access to $29.8 billion.

Stress Tests

Obama administration officials signaled there may be no need to request more financial-rescue funds from Congress as several banks plan to return taxpayer money and others are pushed to tap private markets first.

The White House chief of staff, Rahm Emanuel, said while he had not seen results of stress tests on the 19 biggest banks, he believed the White House won’t have to request more bailout funds.

“The first resort for more capital is going to the private markets,” by issuing new equity or swapping some liabilities into stock that dilutes other stakeholders, National Economic Council Director Lawrence Summers said.

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

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Dubai Stocks Drop Most in 3 Months, Lead Gulf Slump on Earnings

By Tal Barak Harif and Arif Sharif

April 20 (Bloomberg) -- Dubai stocks dropped the most in three months, leading a slump in Gulf markets after Arabtec Holding PJSC and Saudi International Petrochemical Co. said first-quarter profit tumbled.

Arabtec, the United Arab Emirates’ biggest construction company, lost the most in two months after saying first-quarter profit declined 30 percent. Saudi International Petrochemical Co. dropped the most in two weeks. Doha Bank QSC, Qatar’s third- biggest bank by assets, fell for the first time in five days.

The Dubai Financial Market General Index slid 4.5 percent to 1,666.52, the lowest in five days and the second-biggest decline worldwide after Vietnam. Abu Dhabi shares fell for the first time in eight days, losing 2.7 percent. Before today the measures had gained 11 percent and 8.3 percent in April. Saudi Arabia’s Tadawul All Share Index retreated 0.6 percent.

First quarter earnings “aren’t enough to push the market out of the gloom,” said Vyas Jayabhanu, head of Al Dhafra Financial Brokerage LLC. in Abu Dhabi. The market “went a bit too high without any strong fundamentals,” he said.

The worst financial crisis since the 1930s has hurt Dubai’s once booming real-estate industry as banks cut back on mortgage lending and speculators fled. Dubai house prices have fallen as much as 42 percent in the past six months and are likely to drop further as new homes are completed amid waning demand, Colliers CRE Plc said in a research report yesterday.

Arabtec posted a consolidated first-quarter profit of 161 million dirhams ($43.8 million). Saudi International Petrochemical said first-quarter profit slumped 87 percent as demand for plastics and chemicals dropped because of the global financial crisis.

Doha Bank

Arabtec fell 8.4 percent to 2.19 dirhams, while Saudi International retreated 3.4 percent to 17.25 riyals.

Doha Bank lost 2.6 percent to 34 riyals after Chief Executive Officer Raghavan Seetharaman said he expects earnings to grow by less than 10 percent this year.

Saudi Research & Marketing Group fell 6.1 percent to 29.5 riyals after the newspaper publisher said first-quarter profit tumbled 65 percent to 20.5 million riyals ($5.5 million).

Oman’s Muscat Securities Market fell 3.1 percent, the Bahrain All Share Index declined 0.3 percent and Qatar’s measure retreated 1.4 percent. Kuwait’s gauge added 0.1 percent.

Aldar Properties PJSC declined the most in three months, retreating 7 percent to 3.87 dirhams. The real-estate developer that raised cash this year expects a “flat period” for property values in its home market of Abu Dhabi, Chief Executive Officer John Bullough said.

Sorouh Real Estate Co. fell 7 percent to 2.78 dirhams after the Abu-Dhabi-based real estate developer said it will reduce prices at its Alghadeer project, a 3 million square-meter development on the border between Abu Dhabi and Dubai.

To contact the reporter on this story: Tal Barak Harif in Tel Aviv at tbarak@bloomberg.netArif Sharif in Dubai at asharif2@bloomberg.net

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Gold Extends Decline for Third Day as Equity Rally Trims Demand

By Glenys Sim

April 20 (Bloomberg) -- Gold dropped for a third day as the strength of global equity markets eroded demand for the precious metal as a safe-haven investment.

Investment in the SPDR Gold Trust, the biggest exchange- traded fund backed by bullion, fell for a second day, dropping 1.2 percent to 1,105.98 metric tons on April 17, the lowest since March 19. The decline in the fund’s holdings may put pressure on bullion at the start of the week, according to UBS AG.

“The decline in the SPDR, while significant, does not yet challenge the view that most holders of gold ETFs are in it for the long-term,” John Reade, UBS’s head metals strategist, said in an e-mail. “Sustained, large declines in holdings of the SPDR will give us cause for concern.”

Bullion for immediate delivery fell as much as 0.4 percent to $865.33. It was at $867.18 at 9:31 a.m. Singapore time.

Gold fell in each of the past four weeks, the longest losing streak since August, on speculation bullion sales by central banks or the International Monetary may depress prices and as U.S., European and Asian stocks capped six straight weekly gains.

Still, gold may climb this week on speculation the decline in prices may boost demand from jewelers and other buyers of the physical metal. Fourteen of 34, or 41 percent, of traders, investors and analysts surveyed by Bloomberg News said gold would advance this week. Eleven of them forecast lower prices and nine were neutral.

Hedge-fund managers and other large speculators increased their net-long position in New York gold futures by 2 percent in the week ended April 14, according to U.S. Commodity Futures Trading Commission data. Speculative long positions, or bets prices will rise, outnumbered short positions by 129,895 contracts on the Comex division of the New York Mercantile Exchange.

Among other precious metals for immediate delivery, silver was little changed at $11.87 an ounce, platinum lost 1.1 percent to $1,196.75 an ounce, and palladium dropped 0.4 percent to $233 an ounce.

To contact the reporter on this story: Glenys Sim in Singapore at gsim4@bloomberg.net

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Crude Oil Falls on Concern Recession to Sap Demand for Fuels

By Christian Schmollinger

April 20 (Bloomberg) -- Crude oil fell on concern inventories will rise as the global recession saps demand for fuels in the U.S., the world’s biggest energy user.

A U.S. Commerce Department report on April 24 may show orders for durable goods such as refrigerators and computers declined for the fifth time in six months in March, according to a Bloomberg News survey of economists. Crude-oil inventories are at 366.7 million barrels, the highest since September 1990, the Energy Department said on April 15.

“The U.S. is clearly the economy we have to look at to see how the demand side of the equation is working,” said Geoff Clear, the head of Asia Commodities for Australia & New Zealand Banking Group Ltd. in an interview with Bloomberg Television in Singapore. “With that in mind we’ve seen stockpiles growing and we aren’t seeing signs that these builds are being tempered.”

Crude oil for May delivery fell as much as $1.03, or 2.1 percent, to $49.30 a barrel in electronic trading on the New York Mercantile Exchange. It was at $49.50 a barrel at 2:34 p.m. Singapore time. Prices are up 11 percent this year.

The May contract expires tomorrow. The more-active June futures were down 82 cents, or 1.6 percent, to $51.65 a barrel, at 2:36 p.m. Singapore time.

“The uncertain demand outlook is going to continue to dominate the outlook for crude,” said Toby Hassall, an analyst at Commodity Warrants Australia Ltd. in Sydney. “The fundamentals really haven’t shown any improvement.”

China’s Demand

Crude rose on April 17 on reports that oil refiners in China, the world’s second-largest crude consumer, increased their output last month. The country refined 29.4 million metric tons of crude, or about 6.92 million barrels a day, in March, the China Mainland Marketing Research Co. said in a statement April 17. That’s up 0.7 percent from a year earlier.

Still, China’s gross domestic product increased 6.1 percent in the first quarter, the slowest pace in 10 years, a sign that oil-demand growth could be tempered by the global recession.

“China’s GDP number was slightly weaker than expected last week,” said Commodity Warrants’ Hassall. “We are looking to China as well as India to underpin demand as a lot of the industrialized nations contract.”

Oil prices around $50 a barrel will help the economy recover, according to Mohamed al-Hamli, the oil minister of the United Arab Emirates.

OPEC is concerned about oil demand uncertainty and maintaining crude prices at reasonable levels is vital, he said.

U.S. fuel demand in the first quarter fell to the lowest for the period in 11 years, the American Petroleum Institute said in a monthly report on April 16. Deliveries of petroleum products, a measure of consumption, averaged 19.2 million barrels a day, 3.4 percent less than during the same period in 2008, the industry-funded API said.

Angola Loadings

Angola, Africa’s second-largest producer, will increase daily crude shipments, including the Palanca grade, by 7.3 percent in June as OPEC’s output cuts stall.

BP Plc, Total SA, Chevron Corp., Exxon Mobil Corp. and other companies are scheduled to load an average of 1.83 million barrels a day in June, compared with May’s 1.7 million barrels a day, according to loading programs released through today.

Angola’s output totaled 1.6 million barrels a day in March, according to a Bloomberg survey of analysts, traders and producers. That’s 103,000 barrels a day over their quota, set by the Organization of Petroleum Exporting Countries.

“It’s unlikely that you’ll get 100 percent compliance,” said Hassall. “Given the lift we’ve seen in oil prices there is a greater incentive to cheat on those quotas.”

Brent crude oil for June settlement fell as much as 90 cents, or 1.7 percent, to $52.45 a barrel on London’s ICE Futures Europe exchange. It was at $52.61 at 2:37 p.m. Singapore time.

Hedge-fund managers and other large speculators decreased their net-long positions in New York crude-oil futures in the week ended April 14, according to U.S. Commodity Futures Trading Commission data.

Speculative long positions, or bets prices will rise, outnumbered short positions by 4,962 contracts on the New York Mercantile Exchange, the Washington-based commission said in its Commitments of Traders report. Net-long positions fell by 7,531 contracts, or 60 percent, from a week earlier.

To contact the reporters on this story: Christian Schmollinger in Singapore at christian.s@bloomberg.net;

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Rio’s Albanese Says Chinalco Pact Good for Australia

By Jesse Riseborough and Madelene Pearson

April 20 (Bloomberg) -- Rio Tinto Group, the mining company that agreed to a $19.5 billion investment from Aluminum Corp. of China, said Australia has a large stake in the outcome of the proposed deal.

“There is currently an opportunity for Australia to position itself for a mutually rewarding relationship that could define the next few decades,” Chief Executive Officer Tom Albanese said in speech notes prepared for today’s annual shareholder meeting in Sydney.

State-owned Chinalco, as the Beijing-based company is known, plans to buy $7.2 billion of convertible debt and $12.3 billion worth of stakes in projects owned by Rio, the world’s third- largest mining company. The deal faces scrutiny from Australian politicians because the bailout plan would hand partial ownership of some mines and plants to a state-owned Chinese firm. Shareholders are calling for an alternate proposal.

“By facilitating a deeper engagement with China, including by allowing substantial inflows of capital, we could forge stronger and more enduring export markets,” Albanese said in the speech notes. “The Australia-China relationship is critical for both countries and Rio Tinto supports efforts that will bring the two countries closer together.”

To contact the reporter on this story: Jesse Riseborough in Sydney at jriseborough@bloomberg.net; Madelene Pearson in Melbourne on mpearson1@bloomberg.net.

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OneSteel Raises $422 Million Selling Shares to Funds

By Gavin Evans

April 20 (Bloomberg) -- Onesteel Ltd., the second-largest Australian producer of the metal, raised A$584 million ($422 million) selling shares to institutions to bolster capital.

The shares were offered at A$1.80 each, 30 percent below the last traded price, the Sydney-based company said in a statement today. Existing shareholders took up A$344 million of shares through entitlements, 95 percent of the facility announced as part of the capital raising last week.

OneSteel joins BHP Billiton Ltd. and Alcoa Inc. in selling shares and bonds to help trim debt and boost cash as the global recession crimps demand and slashes earnings. The company last week cut its operating earnings forecast citing lower iron ore prices, falling demand and lower output.

OneSteel shares traded at A$2.56 on April 9 before being halted. Existing retail investors will be offered A$295 million of stock at A$1.30, the company said today. The offer opens April 22 and will close May 6.

To contact the reporter on this story: Rebecca Keenan in Melbourne at rkeenan5@bloomberg.net

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Asian Market Update

Daily Forex Fundamentals | Written by Trade The News | Apr 20 09 06:08 GMT |

Asian Bourses Pare Early Weakness, Return toward Unchanged Levels in Quiet Session ; Australia Q1 PPI Unexpectedly Contracts to Multi-Year Lows; EUR Extends Slide Below 1.30 as ECB's Trichet Grows More Cautious; Gold ETF Holding Contract for 2nd Session Asian equity markets appear to be tracking the absence of any meaningful directional bias exhibited in final day of trading in the US last week, where earnings season is set to shift into higher gear on Monday with the last large Financial in BAC and the next blue-chip tech in IBM. In Tokyo, the Nikkei had entered mid-day break down about 0.9% at session lows before recovering toward unchanged levels as trading entered the final hour. Korea's Kospi and Australia's S&P/ASX traded comparably, falling by just over 1% in opening hours before paring those losses to decline just over 0.5% ahead of close. The absence of substantially meaningful macro theme is also translating into diminished volatility. Light economic calendar saw data limited to Australia's Q1 PPI which came in at -0.4% Q/Q v +0.6% expected, surprisingly registering the first negative print for the first time since Q2 of 2003. This could potentially cement the case for a further RBA cut in early May, particularly if subsequent CPI figure to be released on Wednesday (Tuesday 9:30pmET) confirms hints of disinflationary trends. Statements from a handful of notable speakers in today's session and earlier over the weekend also painted a mixed picture with varied assessment of current conditions and prospects for economic recovery. IMF's Managing Director Strauss-Kahn, interviewed by Handelsblatt, signaled a continued bearish stance, planning to restate his outlook for 2009 global growth to the downside beyond -0.5% to -1.0% in the coming week. ECB's Trichet, in characteristically opaque address, suggested that 'measured' additional rate cuts were still possible even though a zero interest rate policy was out of the question. MOre notably, Trichet confirmed May 7th as decision date to implement and subsequently explain the governing board's plan on use of 'non-standard' easing steps, warning against 'over-interpreting' of other members' comments. ECB member Bini Smaghi's stance was more hawkish as he warned against overemphasizing the threat of deflation in policy decision, urging clearly expressed exit strategy for central bank's innovative measures. Statements coming out of Asia's Boau Forum this weekend are also mixed as markets grapple with last week's poor Q1 GDP from China against some tentative evidence of a bottoming process in the region. Vice Head of Policy Research Zheng thinks the economy has hit bottom in Q1 and target 7.0% growth in Q2, but does suggest that achieving 8% 2009 target would be difficult. Likewise, PM Wen sees the results of implemented stimulus response as better than expected amid stabilizing industrial production. However, PBOC's Zhou sees China economy still struggling on impact of global crisis and shattered export demand, looking for continued policy adjustment to reflect the weak environment. In notable company developments, Japanese press speculated on a number of corporate earnings and equity offering with a predominantly poor outlook. Toshiba was one of the bigger names in play as it was rumored to plan a capital raise of ¥500B, sending its shares down 6% despite denial of the rumor by company spokesman. In Tokyo Financials, Sumitomo Trust fell 4% on media speculation of lowered FY net forecast by over 80%, while in Materials, Marubeni and Nippon Steel were also forecasted to post lower than expected Net income figures. Additionally, Nikkei speculated on TDK and Mitsui OSK falling short of FY09 and FY10 net respectively on tech and materials sector slump. In notable gainers, Fuji Electric picked up 4% on speculation the company would develop power components for hybrid cars, improving their mileage per hour by as much as 10%. In Sydney, Fortescue Metals was sharply higher on speculation of investment talks with China's sovereign wealth funds for the company's widely coveted Pilbara iron ore mine. However, other materials names traded weaker, with OneSteel reopening well to the downside following a A$559M equity raise and Rio Tinto falling on reiterated non-communication with BHP and denial of 'Plan B' equity offer in the event of failed Chinalco deal. In currencies, the dollar and JPY are notably stronger despite the absence of greater conviction by equity sellers. EUR/USD fell below 1.30 for the first time since March 18th, GBP/USD was at lowest level in a week just above 1.47, and USD/CHF extended its rally above 1.17 - also highest level since pre-Fed quantitative easing. USD/JPY fell as low as 98.60s, while EUR/JPY saw its lowest level in April, bottoming around 128.20. In commodity FX, USD strength vs AUD was magnified after poor Q1 PPI from Australia, as the pair reached its lowest on session level around 0.7150. USD/CAD saw its best levels around 1.2180, technically pivotal resistance seen early last week. Crude oil has moved below $50/bbl and is lower by more than 1% on today's session. The losses in oil prices are coming as US equities futures are trading lower. With respect to crude oil options, the May crude contract expires tomorrow. At the time of writing, spot gold prices are little changed, despite the declines in equities. In terms of investment flows, the SPDR Gold Trust ETF announced that as of April 17 its holdings declined by 13.5 tons and this was the second consecutive daily decline reported in the ETF's gold holdings. In other metals news, some dealers are noting that Silver broke below its 200-day moving average, which was seen around $12.30/oz, and this could imply further weakness for the metal. Trade The News Staff Trade The News, Inc. Legal disclaimer and risk disclosure All information provided by Trade The News (a product of Trade The News, Inc. "referred to as TTN hereafter") is for informational purposes only. Information provided is not meant as investment advice nor is it a recommendation to Buy or Sell securities. Although information is taken from sources deemed reliable, no guarantees or assurances can be made to the accuracy of any information provided. 1. Information can be inaccurate and/or incomplete 2. Information can be mistakenly re-released or be delayed, 3. Information may be incorrect, misread, misinterpreted or misunderstood 4. Human error is a business risk you are willing to assume 5. Technology can crash or be interrupted without notice 6. Trading decisions are the responsibility of traders, not those providing additional information. Trade The News is not liable (financial and/or non-financial) for any losses that may arise from any information provided by TTN. Trading securities involves a high degree of risk, and financial losses can and do occur on a regular basis and are part of the risk of trading and investing.

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FX Technical Analysis

Daily Forex Technicals | Written by Mizuho Corporate Bank | Apr 20 09 06:13 GMT |

EURUSD Comment: Dropping to its lowest level in a month as it struggles with the top of the Ichimoku 'cloud' (which becomes very thin this week). Possibly the lagging Chikou Span will get support from Fibonacci retracement and the candles of 26 days ago. The Euro is slightly oversold. Strategy: Attempt small longs at 1.3000; stop below 1.2900. Add to longs on a sustained break above 1.3100 for 1.3400 short term. Direction of Trade: →↗ Chart Levels: Support Resistance 1.2967 " 1.302 1.2930* 1.3078 1.2855 1.31 1.2825 1.313 1.2765 1.3185 GBPUSD Comment: Retreating to retracement support as we still cannot manage a weekly close above 1.5000. Watch for signs of basing early this week for another attempt higher later this month. Strategy: Attempt longs at 1.4730; stop below 1.4550. Short term target 1.5000/1.5050. Direction of Trade: →↗ Chart Levels: Support Resistance 1.4706 " 1.4815 1.465 1.485 1.4580* 1.4945/1.4960 1.4475 1.5000* 1.445 1.5155/1.5185 USDJPY Comment: Slightly worrying and rather tricky as prices hover unsteadily at current levels for a fourth consecutive day. We still favour an upside probe some time this month. Strategy: Attempt longs at 98.95; stop below 97.50. First target 99.50, then 100.70 Direction of Trade: →↗ Chart Levels: Support Resistance 98.50 " 99.42 98.15 99.68/99.79 97.50* 100 97.1 100.75 96.5 101.45* EURJPY Comment: Dropping below channel support and the moving averages look set to turn negative. Price action this month might be seen as a 'triple top' though currently we still se it merely as consolidation around the fairly pivotal 130.00 area. Strategy: Attempt tiny longs at 128.50; stop below 127.50. Short term target 132.00 then 133.50/134.00 Direction of Trade: → Chart Levels: Support Resistance 128.14 " 129.5 127.7 129.71 127.2 130.5 126.40* 131.5 125.45 132.1 Mizuho Corporate Bank Disclaimer The information contained in this paper is based on or derived from information generally available to the public from sources believed to be reliable. No representation or warranty is made or implied that it is accurate or complete. Any opinions expressed in this paper are subject to change without notice. This paper has been prepared solely for information purposes and if so decided, for private circulation and does not constitute any solicitation to buy or sell any instrument, or to engage in any trading strategy.

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Forex Technical Update

Daily Forex Technicals | Written by India Forex | Apr 20 09 05:13 GMT |

Rupee: Referring to our previous charts and updates we still maintain a bullish view on rupee aiming 48.80 levels. Dollar has slightly gone strong in the last couple of trading sessions which is looked more as a retracement. Only a break above 50.30 would change the view to neutral otherwise indicators are quite bullish. Bullish Euro: Euro fell sharply due to poor economic expectations and bearish chart formations. The charts are looking quite oversold and retracements are expected to the tune of 1.3130 levels. Look for opportunities to go short around those levels or in turn go long around current levels for 70-80 pips. (Eur/Usd:1.2985). Bearish. Pound: The pair broke the channel support at 1.4770 but is likely to take support from the 100 4-hourly and 21 Daily EMA at 1.4650-4690 levels. Incase the market is turning again from those levels we would look at buying for 100 pips. (Gbp/Usd: 1.4740). Neutral Yen: The Usd/Jpy pair is still stuck in the weekly triangle support at 98.32 and resistance at 101.70 levels. The pair is likely to break the consolidation soon. The direction of the break is likely to determine the direction of the pair for the next few sessions. (Usd/Jpy: 98.60). Australian Dollar: Aussie has just broken the trend line support. It should ideally hold 0.7100 levels. Only a break below 0.7100 for 2 consecutive sessions would change the outlook neutral. (Aud/Usd: 0.7180). Gold: Gold as expected plunged to the 200 Day EMA at $864 levels. Gold is holding below the daily and weekly trend lines and crucial moving averages. Strong break of $864 support can bring a fall upto $850. Sell at retracements around 880 to 890 levels. Short term Bearish (Gold: $887.00) Dollar index : Dollar Index firmed up in the last few trading sessions mainly due to Euro weakness and is seen pressing the 86 – resistance levels once again. The bias for DX remains bullish above the 82-key support. Decisive break above 86.15 could march a rally upto 88 levels. Bullish. India Forex http://www.indiaforex.in DISCLAIMER These views/ forecasts/ suggestions, though proferred with the best of intentions, are based on our reading of the market at the time of writing. They are subject to change without notice.Though the information sources are believed to be reliable, the information is not guaranteed for accuracy. Those acting in the market on the basis of these are themselves responsible for any profits or losses that might occur, without recourse to us. World financial markets, and especially the Foreign Exchange markets, are inherently risky and it is assumed that those who trade these markets are fully aware of the risk of real loss involved.

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Oil Declines on Concern U.S. Economic Recovery Will Be Slow

By Christian Schmollinger

April 20 (Bloomberg) -- Crude oil declined on concern reports this week may indicate that any economic recovery in the U.S., the world’s biggest energy user, will be slow to develop.

A U.S. Commerce Department report on April 24 may show orders for durable goods such as refrigerators and computers fell for the fifth time in six months in March, according to a Bloomberg News survey of economists. Crude-oil inventories are at 366.7 million barrels, the highest since September 1990, the Energy Department said on April 15.

“The U.S. is clearly the economy we have to look at to see how the demand side of the equation is working,” said Geoff Clear, the head of Asia Commodities for Australia & New Zealand Banking Group Ltd. in an interview with Bloomberg Television in Singapore. “With that in mind we’ve seen stockpiles growing and we aren’t seeing signs that these builds are being tempered.”

Crude oil for May delivery fell as much as $1.03, or 2.1 percent, to $49.30 a barrel in electronic trading on the New York Mercantile Exchange. It was at $49.46 a barrel at 12:01 p.m. Singapore time. The contract rose 35 cents, or 0.7 percent, to settle at $50.33 a barrel on April 17. Prices are up 11 percent this year.

The May contract expires tomorrow. The more-active June futures were down 86 cents, or 1.6 percent, to $51.61 a barrel, at 12:03 p.m. Singapore time.

“The uncertain demand outlook is going to continue to dominate the outlook for crude,” said Toby Hassall, an analyst at Commodity Warrants Australia Ltd. in Sydney. “The fundamentals really haven’t shown any improvement.”

China Demand

Crude rose on April 17 on reports that oil refiners in China, the world’s second-largest crude consumer, increased their output last month. The country refined 29.4 million metric tons of crude, or about 6.92 million barrels a day, in March, the China Mainland Marketing Research Co. said in a statement April 17. That’s up 0.7 percent from a year earlier.

Still, China’s gross domestic product increased 6.1 percent in the first quarter, the slowest pace in 10 years, a sign that oil-demand growth could be tempered by the global recession.

“China’s GDP number was slightly weaker than expected last week,” said Commodity Warrants’ Hassall. “We are looking to China as well as India to underpin demand as a lot of the industrialized nations contract.”

U.S. fuel demand in the first quarter fell to the lowest for the period in 11 years, the American Petroleum Institute said in a monthly report on April 16. Deliveries of petroleum products, a measure of consumption, averaged 19.2 million barrels a day, 3.4 percent less than during the same period in 2008, the industry-funded API said.

Angola, Africa’s second-largest producer, will increase daily crude shipments, including the Palanca grade, by 7.3 percent in June as OPEC’s output cuts stall.

Angola Loadings

BP Plc, Total SA, Chevron Corp., Exxon Mobil Corp. and other companies are scheduled to load an average of 1.83 million barrels a day in June, compared with May’s 1.7 million barrels a day, according to loading programs released through today.

Angola’s output totaled 1.6 million barrels a day in March, according to a Bloomberg survey of analysts, traders and producers. That’s 103,000 barrels a day over their quota, set by the Organization of Petroleum Exporting Countries.

“It’s unlikely that you’ll get 100 percent compliance,” said Hassall. “Given the lift we’ve seen in oil prices there is a greater incentive to cheat on those quotas.”

Brent crude oil for June settlement fell as much as 90 cents, or 1.7 percent, to $52.45 a barrel on London’s ICE Futures Europe exchange. It was at $52.57 at 11:56 a.m. in Singapore. It rose 29 cents, or 0.5 percent, to $53.35 a barrel on April 17.

Hedge-fund managers and other large speculators decreased their net-long positions in New York crude-oil futures in the week ended April 14, according to U.S. Commodity Futures Trading Commission data.

Speculative long positions, or bets prices will rise, outnumbered short positions by 4,962 contracts on the New York Mercantile Exchange, the Washington-based commission said in its Commitments of Traders report. Net-long positions fell by 7,531 contracts, or 60 percent, from a week earlier.

To contact the reporters on this story: Christian Schmollinger in Singapore at christian.s@bloomberg.net;

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Malaysia’s Ringgit Declines on Stock Losses, Recovery Concern

By David Yong

April 20 (Bloomberg) -- Malaysia’s ringgit fell to the lowest level in more than two weeks as Asian stocks declined on concern that the deepening global recession will crimp corporate earnings and steer investors away from emerging-market assets.

The currency dropped for a second day on speculation disagreements among European Central Bank officials on how far to cut interest rates will delay a recovery in the 16-nation economy, sending the dollar higher. The MSCI Asia Pacific Index of regional shares fell by the most in more than a week and the Dollar Index rose to the highest in a month.

“Sentiment is not good on the ringgit as people are still a bit wary” that the equities market rally will fade, said D. Sivadass, a currency forwards trader at EON Bank Bhd. in Kuala Lumpur. “The market is also fixated on the developments in Europe, giving strength to the U.S. dollar.”

The ringgit fell 0.5 percent to 3.6335 per dollar as of 10:42 a.m. in Kuala Lumpur, according to data compiled by Bloomberg. The currency is up 0.2 percent this month.

ECB President Jean-Claude Trichet last week ruled out the prospect of lowering borrowing costs to zero from the current 1.25 percent. Greece’s George Provopoulos and Athanasios Orphanides of Cyprus wanted to keep open the option of deeper rate cuts.

Factory output in the euro area fell 18 percent in February, the biggest drop since records began in 1986, the European Union’s statistics office said April 16. Malaysia depends on the European Union for 12 percent of its exports.

Non-deliverable forwards signal traders are betting the ringgit will weaken 0.2 percent to 3.6425 in three months, compared with expectations for a rate of 3.6235 on April 17. Forwards are contracts in which assets are bought and sold at current prices for delivery at a future specified date.

To contact the reporter on this story: David Yong in Singapore at dyong@bloomberg.net.

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Australian Dollar to Advance Versus N.Z.’s, TD Securities Says

By Garfield Reynolds

April 20 (Bloomberg) -- Australia’s dollar may rise against New Zealand’s as the Reserve Bank of Australia is likely to leave interest rates unchanged next month while New Zealand policy makers will lower borrowing costs on April 30, TD Securities said today in a note to clients.

Investors may benefit by buying the Australian currency against New Zealand’s, targeting an advance to NZ$1.32, and exit the trade if it weakens to NZ$1.25, analysts led by London-based Stephen Koukoulas wrote in the note. Australia’s dollar traded at NZ$1.2676 as of 9:51 a.m. in Sydney.

To contact the reporter on this story: Garfield Reynolds in Sydney at greynolds1@bloomberg.net

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China Yuan Forwards Fall for Fifth Day as U.S. Currency Climbs

By John Liu

April 20 (Bloomberg) -- Yuan forwards fell for a fifth day, the longest losing streak in seven weeks, as a faltering rally in global equities helped shore up support for the dollar.

Premier Wen Jiabao said on April 18 that China must prepare for greater difficulties over a longer period of time even though the stimulus package has shown “better-than-expected” results in reviving economic growth. The People’s Bank of China fixed the reference rate for yuan spot trading weaker for a third day, following five days of gains.

“It seems directly correlated to risk appetite,” said Dwyfor Evans, a strategist at State Street Global Markets in Singapore. “We have seen appreciation pared back in the yuan’s NDFs on a more stable dollar in recent days.”

Twelve-month non-deliverable forwards contracts slid 0.1 percent to 6.7870 per dollar as of 10:25 a.m. in Shanghai, according to data compiled by Bloomberg. In the spot market, the currency traded at 6.8340, little changed from 6.8326 at the end of last week, according to the China Foreign Exchange Trade System. ICE’s Dollar Index, a gauge of strength in the greenback, was headed for its highest close in a month.

China has managed the yuan against a basket of currencies including the euro, the pound and the South Korean won since a dollar peg was scrapped in 2005. The yuan is allowed to trade by up to 0.5 percent against the dollar either side of the central parity rate, which was set at 6.8329 today.

Forwards are agreements in which assets are bought and sold at current prices for settlement at a later-specified time and date. Non-deliverable forwards are settled in dollars rather than the underlying asset.

To contact the reporters on this story: John Liu in Shanghai at jliu42@bloomberg.net.

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Korean Won Weakens as Importers Pay Bills; Bonds Little Changed

By Kim Kyoungwha

April 20 (Bloomberg) -- South Korea’s won weakened for the first time in three days on speculation importers are taking advantage of six straight weekly gains to pay bills. Bonds were little changed.

The currency rose 5.2 percent in the past month, paring this year’s loss to 6 percent, as overseas investors increased bets on higher-yielding assets amid signs a global recession is easing. Investors pumped more money into emerging-market shares in each of the six weeks through April 15, according to Cambridge, Massachusetts-based EPFR Global, a research company that tracks $11 trillion of funds.

“There are not a small amount of import deals coming in,” said Roh Sang Chil, a currency dealer with Kookmin Bank in Seoul. “But the won is supported as foreigners remained net buyers of stocks, supplying the market with foreign exchange.”

The won fell 0.8 percent to 1,342.75 per dollar as of 10:58 a.m. in Seoul, according to data compiled by Bloomberg. It touched a three-month high of 1,298.05 on April 10. The Kospi stock index fell 1.3 percent today and overseas investors bought more shares than they sold every day except three this month, according to Korea Exchange.

Investors are looking for progress in talks between South and North Korean officials after a missile test by the communist North strained relations this month, Kookmin’s Roh said. South Korea accepted a proposal from the North for talks at Gaeseong industrial complex tomorrow.

Bonds Little Changed

Local currency debt was little changed ahead of a government auction. The finance ministry is to sell 1 trillion won ($745 million) of 10-year bonds and the outcome of the sale will be posted on its Web site at 11:30 a.m. local time.

“The market is groping for direction and the outcome of the auction could provide an excuse to either consolidate after last week’s good run or extend gains,” said Ra Woo Sik, a fund manager with Industrial Bank of Korea in Seoul.

The benchmark five-year bond yield fell to 4.38 percent on April 17, the lowest in four weeks after the government’s auction last week drew stronger bids than expected.

The yield on the 4.75 percent note due in March 2014 traded little changed at 4.38 percent, according to data compiled by Bloomberg. The three-year yield was little changed at 3.72 percent.

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

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Taiwan’s Dollar Weakens as Stocks Retreat Cuts Investor Demand

By Bob Chen

April 20 (Bloomberg) -- Taiwan’s dollar slid to its lowest level in more than a week versus the U.S. currency on concern investor demand for emerging-market assets will cool as a global equities rally shows signs of stalling.

Seven of Asia’s 10 most-traded currencies outside Japan declined and the MSCI Asia-Pacific Index of stocks retreated from a three-month high. Taiwan may let mainland Chinese institutional investors invest up to 10 percent of their funds in Taiwan stocks, more than triple a 3 percent limit previously mooted, the Economic Daily News reported, citing unidentified government officials.

“The Taiwan dollar weakened because of the broad-based buying in the dollar; there’s talk that the recent rally is coming to an end,” said Daniel Soh, an economist at Forecast Pte in Singapore. “The momentum in the global equities market is getting weaker.”

Taiwan’s currency fell 0.2 percent to NT$33.886 per dollar as of 9:57 a.m. local time, according to Taipei Forex Inc. It touched NT$33.955, the weakest level since April 8.

The island will report March export orders, indicative of shipments in the following one to three months, on April 23. Overseas sales dropped for a seventh straight month in March, the longest slump in seven years. China, Taiwan’s top trade partner, reported last week that its economy expanded in the first quarter at the slowest pace in a decade.

To contact the reporters on this story: Bob Chen in Hong Kong at bchen45@bloomberg.net

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Australian, N.Z. Dollars Fall on ECB Split, Weak Producer Price

By Patricia Lui

April 20 (Bloomberg) -- The Australian and New Zealand dollars weakened on concern disagreements among European policy makers will exacerbate the global economic slump.

Losses in Australia’s dollar deepened after a report showed producer prices unexpectedly fell in the first quarter, increasing the scope for the Reserve Bank of Australia to extend interest-rate cuts. The producer price index contracted 0.4 percent in the three months ended March 31, compared with a forecast gain of 0.6 percent in a Bloomberg News survey.

“We were already seeing a weaker tone in the Aussie as it was due for some pullback after its recent rally,” said Amy Auster, head of foreign-exchange and international economics research at Australia & New Zealand Banking Group Ltd. in Melbourne. “The weaker-than-expected PPI underlines the fact that the RBA will need to cut rates again.”

Australia’s dollar fell to 71.67 U.S. cents at 12:35 p.m. in Sydney from 72.25 cents on April 17 in New York. It was at 70.84 yen from 71.64 yen. New Zealand’s currency slid to 56.66 U.S. cents from 56.80 cents. It bought 56.04 yen from 56.32 yen.

The euro declined to a one-month low against the U.S. dollar on concern policy disagreements within the ECB will undermine efforts to help the region’s economy recover.

The 16-nation currency slid to $1.2989 from $1.3044 in New York on April 17. It earlier reached $1.2967, the lowest level since March 17.

‘Due for Correction’

“The Aussie is already due for some downward correction and it’s not surprising we are seeing this today as there’s quite a bit of selling of the euro and buying of U.S. dollars this morning,” said Richard Grace, chief currency strategist at Commonwealth Bank of Australia in Sydney, using the currency’s nickname. “The market seems to think the Federal Reserve will be able to steer the U.S. economic recovery and inflation risks better than the ECB can.”

The RBA will release the minutes on its April policy meeting tomorrow while the statistics department will announce first quarter inflation numbers on April 22.

Both these events may potentially weigh on the Australian dollar in the next few days, ANZ’s Auster said, citing a trading range of 70.50 to 73.00 against the greenback.

Euro Weakens

“No one really knows whether the ‘green shoots’ represent the start of a real recovery, so doubts are lingering and we’re hovering around key levels for metals, equities and currencies,” said Adam Carr, senior economist at ICAP Australia Ltd. in Sydney. “The market is looking for a decisive move in either direction.”

Australian government bonds fell for a second day, pushing the 10-year yield up four basis points, or 0.04 percentage points, to 4.56 percent. The price of the 5.25 percent security due in March 2019 slid 0.299, or A$2.99 per A$1,000 face value, to 105.482, Bloomberg data show.

New Zealand’s two-year swap rate, a fixed payment made to receive floating rates, declined to 3.66 percent from 3.6750 percent on April 17.

To contact the reporter on this story: Patricia Lui in Singapore at plui4@bloomberg.net

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Euro Falls to 1-Month Low on Concern Europe’s Economy to Worsen

By Ron Harui

April 20 (Bloomberg) -- The euro weakened to a one-month low against the dollar and fell against the yen on concern the European economy will deteriorate as central bank officials disagree on the measures needed to combat the recession.

The yen strengthened versus all of the 16 most-active currencies as a decline in Asian stocks spurred investors to reduce holdings of higher-yielding assets. The Dollar Index approached the highest level in three weeks on prospects a U.S. report today will show a gauge of the economy’s direction over the next three to six months improved.

“Investors fear that European policy makers aren’t doing enough to safeguard the economy,” said Danica Hampton, a currency strategist at Bank of New Zealand Ltd. in Wellington. “Any sign that the euro zone economy is deteriorating will likely add to the downward pressure on the euro.”

The euro dropped to $1.3002 as of 12:07 p.m. in Tokyo from $1.3044 in New York on April 17. It earlier declined to $1.2967, the lowest level since March 17. Europe’s currency fell to 128.39 yen from 129.33 yen, after touching 128.17, the weakest since March 30.

The yen gained to 98.75 per dollar from 99.16 last week. It advanced to 55.93 versus the New Zealand dollar from 56.32, and climbed to 70.84 versus the Australian currency from 71.64.

Worsening Economy

The euro has weakened against 13 of the 16 most-active currencies this month on signs the recession in the 16-nation region is worsening. Germany’s ZEW Center for European Economic Research in Mannheim may say tomorrow its gauge of current conditions fell to minus 90 in April, the least since September 2003, from 89.4 in March, according to a Bloomberg News survey.

ECB governing council member Miguel Angel Fernandez Ordonez will speak in Madrid tomorrow, and vice-president Lucas Papademos will speak in Strasbourg, France on the same day.

“There are cleavages on the unwieldy decision-making ECB governing council,” said Sue Trinh, senior currency strategist at RBC Capital Markets in Sydney. “The market sees the apparent disunity as a reason to sell the euro.”

ECB council member Axel Weber said last week the bank shouldn’t cut rates below 1 percent, putting him at odds with policy makers who say borrowing costs can fall below that threshold. Council members George Provopoulos from Greece and Athanasios Orphanides of Cyprus have indicated they may support cutting the target rate below 1 percent and buying debt to pump money into the economy, a policy known as quantitative easing.

The ECB will lower its benchmark rate by a quarter- percentage point on May 7, according to a Bloomberg News survey of economists.

Yen Gains

The yen rose for a third day against the euro as concern the global recession will worsen helped push Asian stocks lower.

“Worries that Europe’s response to its recession is lagging behind other countries is causing risk aversion,” said Tsutomu Soma, a bond and currency dealer at Okasan Securities Co. in Tokyo. “The yen is being bought and may strengthen” to 128.27 per euro and 98.80 against the dollar today, he said.

Japan’s Nikkei 225 Stock Average fell 1 percent and the MSCI Asia-Pacific Index of regional shares slipped 0.6 percent.

The Dollar Index climbed for a fifth day, its longest run of gains since January, before the Conference Board releases its index of leading U.S. economic indicators today. The index fell 0.2 percent in March, after dropping 0.4 percent in February, according to a Bloomberg survey of economists.

President Barack Obama said yesterday that he’ll demand “accountability” from any U.S. banks that require additional taxpayer money following “stress tests” being conducted by regulators. The tests are being used to determine whether the companies have enough capital to cover losses over the next two years should the economic downturn worsen.

‘Fast and Comprehensive’

“The policies being taken by the Obama administration are fast and comprehensive and there are signs the recession there is waning,” said Masanobu Ishikawa, general manager of foreign exchange at Tokyo Forex & Ueda Harlow Ltd., Japan’s largest currency broker. “This is positive for the dollar.”

The Dollar Index, which the ICE uses to track the greenback against the euro, yen, pound, Canadian dollar, Swiss franc and Swedish krona, rose to 86.148 from 85.981.

Gains in the yen may be tempered after the JPMorgan Chase & Co. benchmark index of investor expectations for currency swings dropped to a six-month low of 14.4 percent on April 17.

Lower currency volatility indicates smaller exchange-rate fluctuations that can erode profit on so-called carry trades. This strategy involves borrowing funds in countries with lower interest costs, such as Japan, and investing them in those with higher rates, allowing investors to pocket the difference.

‘Volatility Spike’

“Big currency moves are behind us,” said Maxime Tessier, chief of foreign exchange at Montreal-based Caisse de Depot et Placement du Quebec, Canada’s biggest pension fund manager, with C$120 billion ($98.6 billion) in assets. “The volatility spike has to unwind itself over time. Selling volatility has been the winning trade so far this year and will continue to work well.”

The benchmark interest rate is 0.1 percent in Japan and as low as zero in the U.S., compared with 3 percent in Australia and in New Zealand.

To contact the reporter on this story: Ron Harui in Singapore at rharui@bloomberg.net.

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Swedish Riksbank May Cut Rate to Record Low to Escape Recession

By Johan Carlstrom

April 20 (Bloomberg) -- Sweden’s Riksbank will probably cut the benchmark interest rate to a record low tomorrow to help tug the economy out of its worst recession in more than 50 years.

The world’s oldest central bank may halve the seven-day repo rate to 0.5 percent, according to 10 of 17 economists in a Bloomberg survey. Six forecast a cut to 0.25 percent and one to 0.1 percent. The bank will give its decision tomorrow at 9:30 a.m. in Stockholm and will for the first time reveal how board members voted two weeks before the minutes are released.

The largest economy in the Nordic region will contract for the first time since 1992 this year as recessions in Europe and the U.S. crimp demand for Swedish exports, which make up half the country’s output. With some of the biggest employers planning job cuts and inflation slowing to a four year-low of 0.2 percent in March, the Riksbank has room to stimulate growth.

“The next step by the Riksbank will likely be to cut rates close to zero and signal that the repo rate will remain low for quite some time,” said Eva Christina Horwitz, a senior economist at Svenska Handelsbanken AB in Stockholm, in a client note. “Low inflation in March supports our view.”

There is a 75 percent to 80 percent chance policy makers will cut the key rate by a quarter of a percentage point, the bank said after its last meeting, when it halved the rate to 1 percent. The central bank of neighboring Norway expects to bring down its benchmark borrowing cost to 1 percent in the autumn after cutting it by half a point to 2 percent last month.

Job Cuts

The Swedish economy will shrink 4.2 percent this year after slipping into recession in the first quarter, the government predicted this month. Unemployment will rise to 8.9 percent in 2009, and peak at 11.7 percent in 2011, it said.

Companies including Sony Ericsson Mobile Communications Ltd., the mobile phone venture between Sony Corp. and Ericsson, Volvo AB, the world’s second-largest truck maker, and Electrolux AB, Europe’s largest maker of kitchen appliances, are planning to cut jobs in Sweden to weather the crisis.

The government last week said its forecasts for the economy depend on the Riksbank lowering its key rate to 0.25 percent this year and keeping the rate at that level next year.

“Room for further political stabilization measures is very limited,” Finance Minister Anders Borg said last week, putting further pressure on the central bank to cut rates. The budget will have a deficit of 2.7 percent of gross domestic product this year and 3.8 percent in 2010, swelling the national debt to 41.4 percent by the end of next year, Borg predicts.

The government is committed to spending 45 billion kronor ($5.4 billion), or 1.5 percent of GDP, this year on tax cuts, infrastructure investment and research to contain unemployment. This will rise to 60 billion kronor in 2010.

The Riksbank has pumped 400 billion kronor of loans denominated in dollars and kronor into the financial system since October to revive lending.

To contact the reporter on this story: Johan Carlstrom in Stockholm at jcarlstrom@bloomberg.net.

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Australia’s Producer Prices Unexpectedly Decline 0.4%

By Jacob Greber

April 20 (Bloomberg) -- Prices paid to Australian producers unexpectedly fell last quarter for the first time in almost six years, increasing the central bank’s scope to cut interest rates.

The producer price index declined 0.4 percent from the previous quarter, the Bureau of Statistics said in Sydney today. The median estimate of 15 economists surveyed by Bloomberg was for a 0.6 percent gain. The index rose 4 percent from a year earlier, slowing from 6.4 percent in the fourth quarter.

Wholesale inflation is cooling as the economy contracts amid a global recession that has cut prices for raw materials from copper to coal, reducing manufacturing costs. Reserve Bank of Australia Governor Glenn Stevens pared the benchmark rate to a 49-year low of 3 percent this month to revive domestic demand.

“Inflation is clearly not going to stand in the way of the Reserve Bank cutting rates further,” said Riki Polygenis, an economist at Australia & New Zealand Banking Group Ltd. in Melbourne. “Those decisions will be based more on what’s happening to demand in the economy.”

Today’s report is “consistent with a gradual easing in inflation pressures,” she added.

The Australian dollar traded at 71.64 U.S. cents at 12:25 p.m. in Sydney from 71.74 cents before the report was released, extending today’s slide. The two-year government bond yield fell 1 basis point, or 0.01 percentage point, to 2.91 percent.

Interest Rates

The Reserve Bank has slashed borrowing costs by 4.25 percentage points since early September. Investors are pricing in a 63 percent chance the bank will lower the overnight cash rate target by another quarter point on May 5, according to a Credit Suisse Group index based on swaps trading today.

Inflation pressures are easing across the globe. Wholesale prices in the U.S. tumbled 1.2 percent last month, and U.K. producer prices rose 2 percent, the smallest gain in 20 months. China’s producer prices dropped 6 percent in March.

With the Organization for Economic Cooperation and Development forecasting the steepest economic contraction in more than 50 years across its member nations, demand for resources has slowed, cutting prices for raw materials.

The Reuters/Jefferies CRB Index of 19 commodities fell 4 percent in the first quarter, extending last year’s 36 percent decline.

Australia’s economy shrank 0.5 percent in the fourth quarter, the first decline in eight years. The jobless rate jumped to 5.7 percent in March from 5.2 percent in February, the biggest gain since the economy was last in a recession in 1991.

Construction, Petroleum

Construction costs fell 1.6 percent in the first quarter and costs for petroleum refining dropped 10 percent, the producer prices report showed. In contrast, the cost of electricity, natural gas and water rose 2 percent last quarter from the previous three months.

A report this week may show the nation’s consumer-price inflation returned to the central bank’s 2 percent-to-3 percent target band for the first time in more than a year.

Consumer prices rose 2.8 percent in the first quarter from a year earlier, slowing from a 3.7 percent gain in the fourth quarter, according to the median estimate of 19 economists surveyed by Bloomberg. The report will be released on April 22.

“Deflation in the Australian context is still very unlikely,” said ANZ Bank’s Polygenis. “There is a big offset from the weaker Australian dollar.

The local currency tumbled 20 percent against its U.S. counterpart in 2008, making imports of machinery, gasoline and equipment more expensive. The Australian dollar has gained 2.5 percent so far this year.

To contact the reporter for this story: Jacob Greber in Sydney at jgreber@bloomberg.net

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Economists Split on Odds of First Pakistan Rate Cut Since 2002

By Khalid Qayum and Farhan Sharif

April 20 (Bloomberg) -- Economists are divided on whether Pakistan will lower interest rates for the first time since 2002 to stoke growth as price gains remain “stubbornly” high.

State Bank of Pakistan will cut its benchmark rate from a decade high of 15 percent, according to seven of 15 economists in a Bloomberg News survey. The rest expect the central bank to keep borrowing costs unchanged when it meets in Karachi today.

Governor Syed Salim Raza, who took over as head of the State Bank in January, says the battle against inflation has yet to be won. The International Monetary Fund, which provided Pakistan with a $7.6 billion bailout in November, last week said the central bank agreed it was “premature” to reduce rates even as economic growth slumps to an eight-year low.

“One major headache for policy makers remains the rather stubborn core inflation,” said Farhan Rizvi, an economist at JS Global Capital Ltd. in Karachi. “Moreover, being in an IMF program makes the task even more challenging as any rate cut would require a go ahead from the fund.”

Pakistan’s core inflation rate, which excludes volatile and controlled prices, dropped to 18.5 percent in March from 18.9 percent in February. That was less than the decline in the nation’s key consumer-price index, which fell to an 11-month low of 19.1 percent from 21.1 percent in the same period.

South Asia’s second-largest economy was forced to turn to the IMF for a rescue package in November to avoid defaulting on its debt, after the country’s foreign-exchange reserves shrunk 75 percent in a year to $3.5 billion and the current-account deficit widened to a record.

Taliban Insurgents

Pakistan’s economy has been deteriorating over the past two years as political tensions prevent the government from tackling slowing growth and worsening security. U.S. President Barack Obama’s administration is pushing Pakistan President Asif Ali Zardari’s government to fight Taliban guerrillas and other militants along the country’s border with Afghanistan.

International donors meeting in Tokyo last week pledged more than $5 billion to help Pakistan shore up its ailing finances and fight terrorism. The U.S. and Japan each pledged $1 billion at the conference.

“Whether growth returns in Pakistan with any vigor depends largely on the outlook for political stability and public security,” said Frederic Neumann, an economist at HSBC Holdings Plc in Hong Kong. “What Pakistan needs, in short, is more time and stability to put its house in order.”

Reviving Growth

Lowering the highest borrowing costs in Asia would help revive growth in Pakistan, according to economists including Khalid Iqbal Siddiqui from Invest & Finance Securities Ltd. in Karachi, who expects the central bank to lower its benchmark to 14.5 percent next week.

Governor Raza should have more room to cut interest rates as inflation slows. The central bank expects inflation to ease to 11 percent by June, the slowest pace since December 2007.

In its last policy statement in January, the central bank kept its benchmark lending rate unchanged. Policy makers last raised the rate by 2 percentage points on Nov. 12, the fourth increase in 2008, as part of conditions for the IMF loan.

“Certainly the country is nearer to the point where they can cut,” said Philip Wyatt, a senior economist at UBS AG in Hong Kong. “But inflation likely has to come down bit more significantly below the 20 percent level before they can cut rates without risking currency weakness.”

Pakistan’s rupee plunged 22 percent last year and the benchmark stock index tumbled 58 percent as investors withdrew funds from riskier emerging markets amid a downturn in the global economy.

The Washington-based IMF said in its report last week that Pakistan policy makers “saw the need to reassess interest rates down the road” in order to stimulate the economy. The lender expects growth of as little as 2.5 percent this fiscal year, compared with a 3.4 percent prediction in November.

“Economic activity has slowed much more sharply than anticipated under the IMF economic stabilization plan,” said Sayem Ali, an economist at Standard Chartered Bank in Karachi. “The policy focus now needs to shift to supporting growth.”

Contributor                   Key Rate

KASB Securities               Cut by 2 percentage points
Invest Capital                Cut by 1 percentage points
Arif Habib                    Cut by 1 percentage points
BMA Capital                   Cut by 0.5 percentage points
AKD Securities                Cut by 0.5 percentage points
Al Falah Securities           Cut by 0.5 percentage points
Invest & Finance              Cut by 0.5 percentage points
Invisor Securities            Unchanged
JS Global Capital             Unchanged
Foundation Securities         Unchanged
Elixir Securities             Unchanged
IGI-Finex Securities          Unchanged
UBS                           Unchanged
HSBC                          Unchanged
Standard Chartered            Unchanged

To contact the reporters on this story: Khalid Qayum in Islamabad at kqayum@bloomberg.net; Farhan Sharif in Karachi at fsharif2@bloomberg.net.

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