Gold Drops by Most in a Week in Asia as Rally Encourages Sales

By Glenys Sim

Jan. 7 (Bloomberg) -- Gold fell by the most in a week after its climb to a three-week high yesterday prompted some investors to sell the metal.

Holdings in the SPDR Gold Trust, the biggest exchange- traded fund backed by the metal, dropped yesterday for a second time this week to 1,126.48 metric tons. Bullion also fell as a pause in the dollar’s decline diminished the precious metal’s appeal as an alternative investment.

“A switch in investment activity and a slowing in the purchase of exchange-traded products suggest that the risk of liquidation has grown,” said Yingxi Yu, a commodities analyst at Barclays Capital. “An end to the dollar’s weakening trend could therefore be a major setback for gold.”

Gold for immediate delivery fell as much as 0.6 percent to $1,131.15 an ounce, and traded at $1,134.38 by 2:04 p.m. in Singapore. February-delivery bullion on the Comex division of the New York Mercantile Exchange lost 0.2 percent to $1,134.50.

Spot gold advanced to $1,140.78 an ounce yesterday, the highest level since Dec. 17, 2008. It climbed 24 percent last year as the dollar tumbled 4.2 percent against a basket of six major currencies.

The dollar index rose today, capping a rally in other precious metals as well. Platinum and palladium declined, after climbing to the highest levels in more than 16 months on speculation demand will increase as the global economy recovers from the worst recession since World War II.

Japanese and Korean auto companies including Toyota Motor Corp. and Hyundai Motor Co. boosted U.S. sales last month 26 percent, according to company statements. The U.S. is the world’s largest auto market and about half of platinum and palladium use is for catalytic converters to filter engine gases.

Industrial Uses

“Both metals have industrial uses, so as expectations for a global economic recovery grows, the outlook for demand also brightens,” said Steven Zhu, head trader at Shanghai Tonglian Futures Co.

Platinum for immediate delivery traded little changed at $1,559 an ounce at 2:07 p.m. in Singapore, after rising as much as 0.6 percent to $1,566 earlier, the highest level since Aug. 11, 2008. April-delivery futures on the Comex division of the New York Mercantile Exchange gained to $1,569.90 an ounce.

Immediate-delivery palladium slid 0.6 percent to $425.50 an ounce, after earlier reaching $431.23 an ounce, the highest price since July 17, 2008. The metal for March delivery touched $431.80 an ounce.

A weaker dollar and anticipation of the introduction of exchange traded funds linked to both metals also aided the recent rally, said Zhu. The U.S. Securities and Exchange Commission approved proposed rule changes on Dec. 22 to list and trade shares of the ETFS Platinum and Palladium Trusts.

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

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Atlas Plans to Sell Stake in Ridley Iron Ore Mine This Half

By Rebecca Keenan and Jesse Riseborough

Jan. 7 (Bloomberg) -- Atlas Iron Ltd., an Australian iron ore producer, expects to sell a stake in its A$3 billion ($2.8 billion) Ridley project by the end of the first half after lining up buyers from China, India, South Korea and Japan.

Atlas wants to sell 70 percent of Ridley, located in Western Australia, Chief Executive Officer David Flanagan said today in an interview. Goldman Sachs JBWere Pty is the adviser for the sale for Perth-based Atlas.

Steelmakers worldwide are increasing purchases of iron ore, used to feed furnaces, as the economic recovery fuels demand by carmakers and builders. The cash price for iron ore rose to the highest in more than a year as demand from China, the largest buyer, rose and India announced plans to levy duties on exports.

“Goldman Sachs have a got a nice group of people in the final stages now and as soon as we complete we will let the market know,” Flanagan said by phone. He didn’t give details.

Atlas shares rose 4.7 percent to A$2.23 at the 4:10 p.m. close in Sydney trading. The stock gained 121 percent last year.

The company today also said it received “strong interest” from steel mills seeking supplies from its Wodgina project. Talks are advancing and are not complete, Atlas said in the statement to the Australian stock exchange.

Wodgina Production

Atlas plans to start production from Wodgina this year at an initial rate of 2 million metric tons a year, it had said in November. The company produces about one million tons of iron ore a year from the Pardoo mine in the Pilbara. It plans to increase output to 12 million tons by 2012.

“Atlas notes that the market for iron ore is very strong, reflected in the spot price, and that the strength of demand is reflected in Atlas’ discussions,” the company said in the statement. The higher spot prices may be reflected in Atlas’ cargoes later, Flanagan said.

The company last year estimated the Ridley project, which will cost A$3 billion to build, could produce 15 million tons of ore concentrate over 30 years. A study had estimated average annual earnings before interest, tax, depreciation and amortization of A$535 million.

To contact the reporters on this story: Rebecca Keenan in Melbourne at rkeenan5@bloomberg.netJesse Riseborough in Melbourne at jriseborough@bloomberg.net

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Nikkei 225 Falls for First Time in Four Days as Yen Strengthens

By Kana Nishizawa and Satoshi Kawano

Jan. 7 (Bloomberg) -- Japan’s Nikkei 225 Stock Average fell for the first time in four days on concern the strengthening yen will crimp profits at makers of cars and electronics, and as brokerages cut investment ratings on Canon Inc. and Terumo Corp.

Toyota Motor Corp., the world’s biggest carmaker and which generates 31 percent of sales in North America, lost 1.3 percent after the yen gained against the dollar. Canon, which is the world’s largest camera maker and gets 79 percent of revenue abroad, sank 2.5 percent after Credit Suisse Group AG cut its rating. Sumitomo Mitsui Financial Group Inc., Japan’s No. 2 bank by market value, climbed 4.3 percent after saying it plans to sell as much as 889 billion yen ($9.6 billion) in shares.

“Investors are selling exporters as they become cautious of a re-strengthening of the yen,” said Hiroaki Hiwada, a strategist at Tokyo-based Toyo Securities Co. “In preparation for Mitsui Sumitomo’s share sale, foreign investors may be buying the yen.”

The Nikkei fell 0.5 percent to 10,681.66 at the 3 p.m. close of trading in Tokyo, reversing a 0.4 percent gain. The measure lost 0.8 percent in 20 minutes after 1:51 p.m. as the yen strengthened against the dollar.

The broader Topix index rose 0.1 percent to 931.85, with about four stocks advancing for every three that declined. Sumitomo Mitsui climbed 4.3 percent to 2,920 yen, the Topix’s biggest boost. It’s the first time since 1994 that the gauge increased on the first four business days of the year.

Yen Hurts Exporters

The yen strengthened to as much as 92.12 against the dollar this afternoon in Tokyo from 92.46 this morning, cutting the value of overseas sales at Japanese companies when converted into their home currency. It climbed to a 14-year high in November and averaged 93.59 in 2009, the highest annual level since currencies began trading freely in 1971.

The Topix climbed 5.6 percent last year, the lowest return among benchmark indexes of the world’s 40 largest stock markets, as a strong yen hurt exporters’ earnings and on concern the government wouldn’t be able to restore growth. Stocks in the index trade at an average of 1.1 times book value, compared with 2.3 times for the Standard & Poor’s 500 Index in the U.S. and 1.7 times for the Dow Jones Stoxx 600 Index in Europe.

Toyota lost 1.3 percent to 3,850 yen, and Honda Motor Co., Japan’s second-largest carmaker, sank 1.6 percent to 3,090 yen. Canon fell 2.5 percent to 3,930 yen after Credit Suisse cut its rating on the camera maker to “neutral” from “outperform.” Toyota, Canon and Honda were the biggest drags on the Topix.

Fanuc, Terumo Drop

Fanuc Ltd., a maker of industrial robots that gets almost 70 percent of revenue overseas, retreated 2.3 percent to 8,540 yen. Terumo Corp., Asia’s biggest maker of medical equipment, dropped 2.8 percent to 5,270 yen after Bank of America Corp.’s Merrill Lynch & Co. unit reduced its rating to “neutral” from “buy.” They were the largest drags on the Nikkei 225.

Japan Airlines Corp. fell the most in a week after Nikkei news said the carrier may take a 1.13 trillion-yen charge in the year ending March and file for bankruptcy. The stock dropped 9.5 percent to 76 yen, the steepest decline in the Nikkei 225.

The Nikkei 225 gained 13 percent in December, its steepest monthly gain since July 1995. The S&P 500 added 1.8 percent for the same month, while the Stoxx rose 6.2 percent.

“The market is overheating after the recent rally,” said Mitsushige Akino, who manages the equivalent of $450 million at Tokyo-based Ichiyoshi Investment Management Co.

To contact the reporters for this story: Kana Nishizawa in Tokyo at knishizawa5@bloomberg.net; Satoshi Kawano in Tokyo at skawano1@bloomberg.net.

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Asian Stocks Fall on Currency, China Growth Concerns; LG Drops

By Masaki Kondo and Jonathan Burgos

Jan. 7 (Bloomberg) -- Asian stocks fell, dragging the MSCI Asia Pacific Index lower for the first time in five days, as stronger currencies threatened export earnings and China took steps to curb lending growth.

LG Electronics Inc. tumbled 7.6 percent in Seoul on concern profit at the handset business may miss analyst estimates and after South Korea’s won appreciated against the dollar. Canon Inc., which gets 28 percent of its sales from the Americas, sank 2.5 percent after Credit Suisse Group AG cut its recommendation. China Citic Bank Corp. fell 3.4 percent in Shanghai after the central bank said it will target “moderate” loan growth in 2010.

The MSCI Asia Pacific Index sank 0.4 percent to 123.63 as of 6:33 p.m. in Tokyo. The gauge climbed 34 percent last year, the biggest annual gain since 2003, as central banks cut borrowing costs and governments boosted spending to drag their economies out of recession.

“Markets will struggle to go higher,” said Norman Villamin, Singapore-based head of investment analysis for Asia Pacific at Citigroup Private Bank. “We’re much more sensitive to valuations given last year’s gains and will focus more on selected stock picks.”

China’s Shanghai Composite Index retreated 1.9 percent, while Hong Kong’s Hang Seng Index declined 0.7 percent. The Kospi Index sank 1.3 percent in Seoul amid speculation the central bank will raise rates after a policy meeting tomorrow.

San Miguel

Japan’s Nikkei 225 Stock Average fell 0.5 percent. Banks were the biggest contributor to the Topix Index’s 0.1 percent gain, with a gauge of lenders rising 1.7 percent, amid optimism bank share sales are close to an end. After the stock market shut, the yen slumped versus the dollar as the finance minister said he would like the currency to fall “a bit more.”

The Philippine Stock Exchange Index jumped 1.3 percent, the most among benchmark gauges in Asia. San Miguel Corp., the nation’s largest food and drinks maker, climbed 7.5 percent after agreeing to a takeover plan by its directors.

Futures on the Standard & Poor’s 500 Index lost 0.3 percent. The stock gauge added 0.1 percent yesterday as minutes from the Federal Reserve’s last policy meeting showed central bankers considered more stimulus measures.

In Seoul, LG Electronics, the world’s No. 3 mobile-phone maker, dived 7.6 percent to 115,000 won, the biggest slump since Sept. 9, after saying today it aims to post global revenue of 59 trillion won ($52 billion) this year.

There are concerns about earnings growth at LG’s mobile- phone business, as the company has been late in introducing so- called smart phones, according to Han Eun Mee, an analyst at HI Investment & Securities Co.

Won Appreciation

Samsung Electronics Co., Asia’s biggest maker of semiconductors, flat screens and mobile phones, declined 3.3 percent to 813,000 won even after reporting fourth-quarter operating profit of about 3.7 trillion won, compared with a loss a year earlier.

The stock was the heaviest drag on the MSCI Asia Pacific Index as the stronger won threatened the value of overseas sales at South Korean companies when converted into their home currency. The won appreciated versus the dollar to as much as 1,129.42 today, a level not seen since September 2008.

Hyundai Motor Co., South Korea’s largest carmaker, dropped 4.5 percent to 106,000 yen.

The Bank of Korea will announce its monthly decision on interest rates on Jan. 8, after it kept borrowing costs on hold last month. Governor Lee Seong Tae said in his New Year speech the central bank will manage its benchmark interest rate to “help support” the economy, while monitoring for possible side effects of a loose monetary policy.

Signs Of Growth

“There seems to be investor speculation that Korea is set to join those increasing interest rates given the pace of its economic recovery,” said Chu Moon Sung, a fund manager at Shinhan BNP Paribas Asset Management Co. in Seoul, which manages about $28 billion in assets.

Reports in the past week showed South Korea’s exports surged 33.7 percent last month and November home-building permits rose 5.9 percent in Australia, where the central bank lifted the benchmark lending rate for a third month in December.

Australian retail sales increased 1.4 percent in November from the previous month, the statistics bureau said today. The data helped drive Harvey Norman Holdings Ltd., Australia’s No. 1 electronics retailer, up by 3.7 percent to A$3.95.

The MSCI Asia Pacific Index’s advance last year came amid expectations growth in the region, driven by China, will outperform the rest of the world. The gauge’s 2009 gain drove up its price-book value ratio to 1.61, the highest level since September 2008, according to data compiled by Bloomberg.

Yen Strength

In Tokyo, Canon, the world’s biggest digital-camera maker, slid 2.5 percent to 3,930 yen after Credit Suisse reduced its rating to “neutral” from “outperform.” Honda Motor Co., which gets 47 percent of its sales in North America, lost 1.6 percent to 3,090 yen.

Japanese exporters fell as the yen appreciated to as high as 92.11 versus the dollar. The yen depreciated to 92.87 per dollar following Finance Minister Naoto Kan’s remarks.

Kan, who replaced Hirohisa Fujii as Japan’s finance minister yesterday, said he will try to keep the yen at an appropriate level while considering various impacts on the economy that may be caused by currencies.

In Shanghai, China Citic Bank slid 3.4 percent to 7.67 yuan as an increase in rates on three-month bills for the first time in 19 weeks signaled tighter liquidity.

Chinese Lenders

China Minsheng Banking Corp., the nation’s first privately owned bank, lost 2.7 percent to 7.70 yuan. Bank of Communications Co. slid 1.4 percent to HK$9.30 in Hong Kong.

Policy makers need to support “relatively fast” economic growth while stabilizing prices and managing inflation expectations, the People’s Bank of China said yesterday after an annual work meeting. It reaffirmed a “moderately loose” monetary policy.

Material producers advanced after the London Metal Exchange Index, a measure of six metals including copper and zinc, rose 3 percent yesterday to the highest level since August 2008. The advance was the most since Nov. 16. Crude oil for February delivery surged to a 14-month high yesterday in New York, rising 1.7 percent.

Korea Zinc Co., the world’s second-biggest zinc refiner, jumped 3.2 percent to 211,000 won, while Alumina Ltd. rose 1.8 percent to A$1.96 in Sydney. Woodside Petroleum Ltd., Australia’s second-largest oil and gas producer, added 1 percent to A$48.90.

Higher Growth Estimates

“Commodities are continuing their climb as anticipation strengthens of growing demand from a global economic recovery,” said Mitsushige Akino, who manages about $450 million at Tokyo- based Ichiyoshi Investment Management Co.

The International Monetary Fund will probably raise its forecast for global growth later this month, John Lipsky, the IMF’s first deputy managing director, said in a Bloomberg Radio interview. The IMF forecast in October the global economy will expand 3.1 percent this year.

San Miguel jumped 7.5 percent to 72 pesos in Manila. Top Frontier Holdings Inc., part-owned by board members Roberto Ongpin and Inigo Zobel, plans to offer 75 pesos for each share in the foodmaker, San Miguel said yesterday.

To contact the reporter for this story: Masaki Kondo in Tokyo at mkondo3@bloomberg.net; Jonathan Burgos in Singapore at jburgos4@bloomberg.net.

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European, Asian Shares Decline; U.S. Index Futures Retreat

By Adria Cimino

Jan. 7 (Bloomberg) -- European and Asian stocks fell from the highest levels in more than 15 months after China, the driver of the global recovery, took steps to curb lending growth. U.S. index futures dropped.

Tate & Lyle Plc slid 5.7 percent after Credit Suisse Group AG downgraded the maker of the low-calorie sweetener Splenda. Lagardere SCA slipped 2.4 percent after Goldman Sachs Group Inc. recommended selling shares of France’s largest publisher. Continental AG, Europe’s second-biggest auto-parts maker, surged 7.6 percent after announcing a 1.1 billion-euro ($1.6 billion) share sale to help refinance debt.

Europe’s Dow Jones Stoxx 600 Index fell 0.4 percent to 256.83 at 8:22 a.m. in London, retreating from the highest close since October 2008. The measure jumped 28 percent last year, its biggest gain since 1999, boosted by record-low interest rates in Europe and the U.S. and about $12 trillion of commitments from governments worldwide to revive credit markets and boost growth.

The benchmark index for European shares is trading at about 59 times earnings, the highest level since 2003, according to data compiled by Bloomberg. The gauge has surged 63 percent since a 12-year low on March 9.

The MSCI Asia Pacific Index retreated 0.4 percent from a 16-month high today as the Shanghai Composite Index fell 1.9 percent, the most in two weeks. China’s central bank sold three- month bills at a higher interest rate for the first time in 19 weeks after saying its focus for 2010 is controlling the record expansion in lending and curbing price increases.

Fed Stimulus

U.S. stocks rose yesterday as higher energy and metal prices lifted commodity producers and some Federal Reserve policy makers said they would consider more stimulus measures, overshadowing declines in technology and telephone shares. Standard & Poor’s 500 Index futures lost 0.2 percent today.

Fed officials discussed whether the economy is strong enough to allow their $1.73 trillion of asset purchases to end in March and differed over the risk of inflation, according to minutes of their last meeting released yesterday.

A few policy makers said it “might become desirable at some point” to boost or extend securities purchases aimed at lowering mortgage rates, while one person sought a reduction, according to minutes of the Dec. 15-16 meeting of the Federal Open Market Committee. On inflation, some officials said slack in the economy will damp prices, and others saw risks from the central bank’s “extraordinary” stimulus.

“Whilst the general lack of fresh fundamental data could be weighing to an extent, arguably the rally should still have legs even if the Fed has come out with a rather bleak assessment of U.S. economic recovery,” Ben Potter, a research analyst at IG Markets in Melbourne, wrote in a note.

Tate, Lagardere

Tate & Lyle retreated 5.7 percent to 421.9 pence, the biggest intraday drop since July. Credit Suisse cut the shares to “neutral” from “outperform.”

Lagardere slid 2.4 percent to 28.05 euros after being downgraded to “sell” from “neutral” at Goldman Sachs and added to the firm’s “conviction sell” list.

Continental jumped 7.6 percent to 43.88 euros. A group of banks led by Deutsche Bank AG, Goldman Sachs Group Inc. and JPMorgan Chase & Co. agreed to underwrite the sale of 31 million new shares at 35 euros each, Continental said. The price is 14 percent less than the stock’s last closing price in Frankfurt.

Wolseley Plc gained 2.6 percent to 1,396 pence. The world’s biggest supplier of heating and plumbing gear was raised to “buy” from “neutral” at UBS AG, which cited possible “positive share price momentum” before the company’s strategic review in March.

J Sainsbury Plc added 1.5 percent to 322.6 pence. The U.K.’s third-biggest supermarket owner said third-quarter like- for-like sales excluding VAT and fuel rose 4.2 percent. Analysts had forecast a 3.5 percent increase, according to estimates compiled by Bloomberg.

To contact the reporter on this story: Adria Cimino in Paris at acimino1@bloomberg.net.

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Bed Bath & Beyond, Hot Topic, InfoSpace: U.S. Equity Preview

By Lu Wang

Jan. 7 (Bloomberg) -- Shares of the following companies may have unusual moves in U.S. trading. Stock symbols are in parentheses.

Bed Bath & Beyond Inc. (BBBY US): The largest U.S. home- furnishings retailer forecast fourth-quarter profit of at least 67 cents a share, topping the average estimate of 63 cents from analysts in a Bloomberg survey.

Christopher & Banks Corp. (CBK US): The Minnesota-based women’s clothing retailer posted earnings excluding some items of 19 cents a share in the third quarter, missing the average analyst estimate by 7.3 percent, according to Bloomberg data.

Hot Topic Inc. (HOTT US): The teen clothing and music retailer reduced its fourth-quarter earnings forecast as December sales fell more than analysts estimated.

InfoSpace Inc. (INSP US): The provider of services for mobile phones and Web sites said fourth-quarter revenue was $69 million at least, more than it previously forecast.

Tessera Technologies Inc. (TSRA US): The designer of packaging for computer chips projected first-quarter sales of $61 million at most, trailing the average estimate of $63.7 million from analysts in a Bloomberg survey.

Zumiez Inc. (ZUMZ US): The specialty sports-apparel retailer boosted its fourth-quarter profit forecast after sales unexpectedly rose last month.

To contact the reporter on this story: Lu Wang in New York at lwang8@bloomberg.net

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FX Markets Choppy As Sovereign Debt Concerns Counter Optimism For US Data

Daily Forex Fundamentals | Written by AC-Markets | Jan 06 10 10:51 GMT |

News and Events: Coming a day after yesterday's UK debt worries, European markets were given a fresh reminder of the fragile state of Greece's predicament as Reuters reported comments from ECB's Stark that the rest of the EU would not save Greece from its fiscal difficulties. These remarks have quickly been followed up by counter comments from Greece's Finance Minister Papaconstantinou; who strenuously denied that Greece needed a bailout, and added that Stark did not need to make the bailout comments at all. Despite this timely exercise in damage limitation from the Greek camp, it seems that lingering doubts about European sovereign debt never seem to settle for long before fresh headlines shake up the delicate balance of risk sentiment. Consequently, the USD (which tends to benefit from debt crisis headlines) and FX markets as a whole are left trading in a relatively choppy fashion as improving global data clashes with waves of risk aversion on unpredictable headlines. Credit ratings agencies are certainly being kept busy with ongoing issues in Greece and Dubai, the UK and Japan also toeing a fine line, and most recent news that Iceland has been downgraded to junk status by Fitch. The latest in development in the Icelandic saga is the refusal of President Olafur Grimsson to sign a bill that would obligate Iceland to repay UK and Dutch governments for depositor claims following the collapse of Landsbanki. The bill will now be put to a referendum, but with widespread opposition amongst the population, there is considerable risk that future IMF help is hampered by this vote, and indeed the likelihood of Iceland joining the EU seems far less probable than before. Against this backdrop of economic uncertainty, FX traders are also trying to reconcile analyst optimism for upcoming US data. Consensus for this Friday's Non-Farm Payrolls is for no change – which, if realized, would constitute the first non-negative change in payrolls since December 2007. Tonight's FOMC Minutes should give some further insight into whether market optimism is echoed by the voting members of the Fed, but at this juncture we feel it is unlikely the Fed will say anything drastically different from last meeting's minutes Today Key Issues: 10:00 EUR PPI, % m/m (y/y) Nov exp: 0.2 (-4.5) prev: 0.2 (-6.7) 10:00 EUR Industrial orders, % m/m Oct exp: -1.0 prev: 1.7 13:15 USD ADP private payrolls, chg, thous Dec exp: -75 prev: -169 15:00 USD ISM non-manufacturing index Dec exp: 50.5 prev: 48.7 19:00 USD FOMC minutes released 16-Dec The Risk Today: EurUsd Choppy and directionless trading prevails in EURUSD with the morning's plunge to 1.4284 lows now quickly reversed to put us firmly back in the ranges at 1.4375. Once again we are left eyeing topside resistance ahead of 1.4500, and beyond there the major hurdles at 1.4600 and 1.4685. If we look on the daily chart, there is a flag formation being carved out with downside support currently coming in around 1.4280 (coinciding with today's lows), and if breached we can expect a continuation of the downtrend that has been in play since 4th Dec (break f the 12-minth uptrend). It may be a difficult move lower however with support lying in wait at 1.4244 (200 day moving average), and range lows at 1.4210. GbpUsd Yesterday's bout of GBPUSD weakness breached the lower end of the prior 1.6050-1.6250 range, and the break below 1.6000 now leaves the pair vulnerable to a revisit of 1.5833 (Dec 30 lows). If we re-enter the range, the 200-day movig average at 1.6100 forms first area of good supply, and beyond there expect prior resistance levels to still be in play: 1.6248 (Dec 18 highs), followed by 1.6323 (100 day moving average), and above there the 1.6400 psychological barrier. UsdJpy After a quick visit to 91.26 lows yesterday (just above 91.10 support), USDJPY has been well bid back above the 92.00 level, and looks like we will remain rangebound between 93.22 (22 Dec high) and the 91.10 lows. A break below 91.10 would indicate a resumption of the larger downtrend that has been in play since mid 2007, but for now, look for bids ahead of 91.10, and plenty of offers around 93.00-20 zone to contain the pair. Only a daily close above the 93 handle would suggest a further move higher. UsdChf Range-trading prevails in USDCHF between 1.0280 and 1.0425, but the break above the 100-day moving average (1.0301 currently) does seem to favour further USD strength from here. Next levels to watch outside the range are 1.0508 key high and beyond there the 1.0700 major resistance (38.2% correction of the move from 1.1970 down to 0.9918). Near term support stands at 1.0320 ahead of 1.0220. EURUSD GBPUSD USDJPY USDCHF 1.4580 1.6400 95.00 1.0700 1.4500 1.6335 93.35 1.0625 1.4484 1.6236 93.20 1.0425 1.4375 1.6015 92.35 1.0335 1.4232 1.5945 91.10 1.0300 1.4210 1.5833 90.00 1.0220 1.4100 1.5710 89.10 1.0175 S: Strong, M: Minor, T: Trendline, K: Keylevel, P: Pivot ACM FOREX Disclaimer: This report has been prepared by AC Markets (thereof ACM) and is solely been published for informational purposes and is not to be construed as a solicitation or an offer to buy or sell any currency or any other financial instrument. Views expressed in this report may be subject to change without prior notice and may differ or be contrary to opinions expressed by Salesperson or Traders of ACM at any given time. ACM is under no obligation to update or keep current the information herein, the report should not be regarded by recipients as a substitute for the exercise of their own judgment.

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European Services Continue The Progress

Daily Forex Fundamentals | Written by ecPulse.com | Jan 06 10 10:41 GMT |

Following the improvement witnessed by the manufacturing sector in the euro zone and U.K., the services sector, the leading sector in Europe, completed the progress scenario that started since the second quarter of 2009. Today, PMI services final reading for December in the euro area climbed to 53.6 from 53.0 in November. Although the reading came below estimates, but it continued its rise above 50 level, providing further clues the economy is growing in the fourth quarter. Services in the 16-nation economy were lifted by the rise in the largest economy in the region. German services soared to 52.7 from 51.4 in November; Italian PMI spiked to 53.9 from 49.8 a month earlier. On the other hand, the reading slipped in France to 58.7 in from 60.9 in November. Yesterday, PMI manufacturing for December rose to 51.6 from 51.2 in November. Consequently, PMI composite spiked to 54.7 from 53.7. The European economy is gathering strength clearing the way for a recovery in 2010. In the third quarter of 2009, the economy grew 0.4% compared with 0.2% and 2.4% contractions recorded in the second and first quarters respectively, thanks to the monetary and fiscal measures adopted by the ECB and national European governments to revive the economy. Trichet and his economic team slashed the cost of borrowing to 1% and introduced 60 billion euros spent on purchasing euro-denominated bonds. In addition, they offered to lend banks as much money as they need at the current benchmark. It is reasonable to say that the strong interventions boosted the economy that posted very weak data in the first quarter of 2009. However, sooner or later the stimulus packages will be withdrawn and the economy will rely solely on itself. Thus, the euro area may witness volatility this year before reaching full recovery in 2011, according to the EU Commission. In the U.K., services tracked the progress in manufacturing; empowering the claims that the economy will emerge from recession in the fourth quarter. The British economy eased the pace of contraction in the third quarter to 0.2% from 0.6% contraction in the second quarter. Tomorrow, BoE members will meet to set the interest rate and the amount of the APF program. The borrowing cost and the quantity of APF may remain unchanged in January, before a possible change that might take place in February when releasing the new quarterly growth and inflation reports. All 9 MPC members at the BoE voted unanimously (9-0) for keeping both interest rate and APF unchanged from November. The benchmark was left at 0.5%, while the APF quantity stagnated at 200 billion pounds; however, some analysts are predicting another increase in the amount of the APF program to 215 billion pounds proposed by Miles in November. The British economy, although improved remarkably recently, it is still lagging behind the euro zone; therefore, the economy may need another boost to accelerate the recovery that is expected to be sluggish in 2010. Ecpulse disclaimer: The content of ecPulse.com and any page in the website contain information for investors/traders and is not a recommendation to buy or sell currencies, stocks, gold, silver & energies, nor an offer to buy or sell currencies, stocks, gold, silver & energies. The information provided reflects the writers' opinions that deemed reliable but is not guaranteed as to accuracy or completeness. ecPulse is not liable for any losses or damages, monetary or otherwise that result. I recommend that anyone trades currencies, stocks, gold, silver & energies should do so with caution and consult with a broker before doing so. Prior performance may not be indicative of future performance. Currencies, stocks gold, silver &energies presented should be considered speculative with a high degree of volatility and risk

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Forex Technical Analysis

Daily Forex Technicals | Written by DeltaStock Inc. | Jan 06 10 10:01 GMT |

EUR/USD Current level-1.4343 EUR/USD is in a downtrend, after peaking at1.5146 (Nov.25,2009). Technical indicators are neutral, and trading is situated between the 50- and 200-Day SMA, currently projected at 1.4793 and 1.4169. While 1.4257 is intact, the overall bias will remain neutral in the 1.4216-1.4500 range. Nevertheless we feel, that there is a chance for one last upswing to 1.4670 resistance, as the pair will try to gather momentum for the next leg downwards. The intraday bias is positive and a break above 1.4401 will set the focus on 1.4501, en route to 1.4670 Resistance Support intraday intraweek intraday intraweek 1.4401 1.4499 1.4335 1.4170 1.4499 1.5146 1.4216 1.3740 USD/JPY Current level - 92.04 The overall downtrend has been renewed with the recent break below 87.12. Trading is situated below the 50- and 200-day SMA, currently projected at 89.50 and 93.54. Yesterday's slide fell short of our target at 90.60 and the pair reversed at 91.25, initiating an uptrend for 92.57-70. The intraday bias is positive, well supported at 91.96, but we will expect a reversal below 92.70 to set the focus back on 88.90. Resistance Support intraday intraweek intraday intraweek 92.57 93.40 91.96 86.01 92.70 95.60 91.25 79.60 GBP/USD Current level- 1.6040 The pair is in a downtrend after peaking at 1.7042. Trading is situated between the 50- and 200-day SMA, currently projected at 1.6454 and 1.5258. Although the pair dipped to 1.5944 we continue to expect one more upswing to 1.6410, so stay tuned for a clear break above 1.6070 resistance area, that shall clear the road towards 1.6410. Intraday bias is neutral and while the pair holds below 1.6070, the outlook on the 1 h. chart will remain bearish. Resistance Support intraday intraweek intraday intraweek 1.6070 1.6410 1.5944 1.5706 1.6240 1.7042 1.5833 1.5352 DeltaStock Inc. - Online Forex & Securities Broker www.deltastock.com RISK DISCLAIMER: These analyses are for information purposes only. They DO NOT post a BUY or SELL recommendation for any of the financial instruments herein analyzed. The information is obtained from generally accessible data sources. The forecasts made are based on technical analysis. However, Delta Stock’s Analyst Dept. also takes into consideration a number of fundamental and macroeconomic factors, which we believe impact the price moves of the observed instruments. Delta Stock Inc. assumes no responsibility for errors, inaccuracies or omissions in these materials, nor shall it be liable for damages arising out of any person's reliance upon the information on this page. Delta Stock Inc. shall not be liable for any special, indirect, incidental, or consequential damages, including without limitation, losses or unrealized gains that may result. Any information is subject to change without notice.

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GMAC May Post $10 Billion Annual Loss After U.S. Takes Control

By Matt Townsend

Jan. 6 (Bloomberg) -- GMAC Inc., the auto and home lender that became majority-owned by the U.S. government last week after a third bailout, may post a loss of more than $10 billion for 2009 as more borrowers defaulted on mortgages.

GMAC, based in Detroit, said yesterday that it expects to report a fourth-quarter loss of about $5 billion. Both the quarterly and annual losses would be records for the primary lender for General Motors Co. and Chrysler Group LLC dealers.

The company received a $3.79 billion infusion from the Treasury Department on Dec. 30. The U.S. earmarked about $13.5 billion for GMAC in two previous capital infusions and now controls a 56 percent stake. If the government converts preferred shares to common equity, it would own more than 70 percent of GMAC, the lender said during a conference call.

“I think for the taxpayer it’s going to be a loss,” said Christopher Whalen, managing director of Torrance, California- based Institutional Risk Analytics. “Who is going to buy this? What is the compelling business model that wants us to have this company continue to exist?”

The most recent bailout allowed the lender to contribute $2.7 billion of capital to its Residential Capital LLC unit, which had $2 billion in mortgage assets written down in preparation for a sale. GMAC said it considered several options for ResCap, including bankruptcy. It now expects to sell some of the mortgage assets of ResCap, which ranked among the nation’s biggest subprime home lenders in 2006.

Nothing ‘Crazy’

“We’re not going to do anything crazy and give value away, but it’s an asset we’d like to figure out how to capitalize on its value,” Chief Executive Officer Michael Carpenter said while taking questions after an investor presentation yesterday.

GMAC said the fourth-quarter loss stems in part from a previously disclosed $3.8 billion pretax charge tied to revaluing “higher-risk mortgage loans.” The company said it expects delinquencies to peak next year and home prices may hit bottom in the first quarter of 2011.

The latest capital infusion and restructuring weren’t enough to stabilize ResCap and assure a return to profitability, according to Moody’s Investors Service. While the changes were positive, ResCap’s “liquidity position is tenuous, capital insufficient and franchise impaired,” Moody’s said in a statement on Dec. 31.

To contact the reporter on this story: Matt Townsend in New York at mtownsend9@bloomberg.net

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Indonesia Keeps Key Rate Unchanged for Fifth Month

By Aloysius Unditu and Novrida Manurung

Jan. 6 (Bloomberg) -- Indonesia’s central bank kept its benchmark interest rate unchanged for a fifth month, saying it isn’t concerned about inflation pressures in the first half.

Bank Indonesia maintained its reference rate at 6.5 percent, the lowest level since its introduction in July 2005, according to a statement in Jakarta today. All 18 economists in a Bloomberg News survey predicted the decision.

Inflation in Southeast Asia’s largest economy held near a decade low in December, giving the central bank more time before it joins other Asian policy makers in raising borrowing costs. Barclays Plc and HSBC Holdings Plc expect the threat of faster consumer-price gains this year may prompt Bank Indonesia to act next quarter.

“Still-subdued inflationary pressures have definitely left the central bank in the comfort zone, allowing it to watch what is happening to inflation and economic growth before embarking on any monetary tightening,” said Robert Prior-Wandesforde, senior Asia economist at HSBC in Singapore. “We continue to expect the earliest tightening to come only in the later part of the second quarter.”

Indonesia’s central bank halted cutting rates last August after slashing borrowing costs for nine straight months to shield the $514 billion economy from the worst global recession since the 1930s. The nation has fared better than its neighbors during the worldwide slump, relying less on exports and enjoying consumer confidence buoyed by the most stable political climate since the ouster of former dictator Suharto in 1998.

Bank Lending

Lower borrowing costs have benefited Indonesian companies such as PT Bank Mandiri, the nation’s largest lender by assets, which estimates net income increased to about 6 trillion rupiah ($645 million) in 2009, president director Agus Martowardojo said on Dec. 9. The Jakarta-based company had a profit of 5.3 trillion rupiah in 2008, according to Bloomberg data.

Lending by commercial banks may increase by between 17 percent and 20 percent this year, following a gain of 10.6 percent in 2009, the central bank said today.

Optimism that President Susilo Bambang Yudhoyono’s second term, which began on Oct. 20, will enable the country to achieve its economic potential helped the Jakarta Composite Index climb 87 percent in 2009, its biggest annual gain since 1993.

Indonesia’s rupiah, the best performing currency in the Asia Pacific region outside Japan, rose 16 percent last year. The currency’s recent strength was due to an inflow of capital and action would be taken on the rupiah’s gains when necessary, Bank Indonesia said today.

Currency Gains

The rupiah advanced 1.1 percent to 9,258 per dollar as of 4:25 p.m. in Jakarta, from 9,363 yesterday, according to data compiled by Bloomberg. It touched 9,245, the strongest level since Sept. 4, 2008.

Indonesia’s foreign reserves may increase to between $75 billion and $76 billion this year from $66.1 billion in December 2009, the central bank said. Reserves may rise to as much as $100 billion within a few years, it added.

Yudhoyono’s government wants to spend more than $150 billion over the next five years to improve roads and build ports and power plants, which may further improve growth in an economy that expanded 4.2 percent in the third quarter of 2009 from a year earlier. The economy may have grown 4.4 percent in the fourth quarter, the central bank said today.

Faster Growth

The economy is forecast to expand by as much as 5.5 percent this year, Finance Minister Sri Mulyani Indrawati said on Dec. 8. Gross domestic product grew 4.3 percent last year, the central bank said, adding that prospects for the economy were “improving.”

Indonesia’s consumer prices rose 2.78 percent in December from a year earlier, the central statistics agency said Jan. 4. That was close to the smallest gain since June 2000.

Bank Indonesia doesn’t foresee inflation pressures in the first half and the central bank is “optimistic” about reaching this year’s target, Senior Deputy Governor Darmin Nasution told reporters in Jakarta today. Consumer-price gains are expected to average 4 percent to 6 percent in 2010, he said.

“The benign inflation reading will allow Bank Indonesia to keep rates anchored for some more time to support credit growth and domestic demand,” Prakriti Sofat, a regional economist at Barclays in Singapore, wrote in a Jan. 4 report. “We continue to expect the first 25 basis-point hike in the second quarter of 2010, with the policy rate ending the year at 7.5 percent.”

Australia, Vietnam

The government will improve distribution and transportation systems as it aims to maintain inflation of “no more” than 5 percent this year, Indonesia’s Coordinating Minister for the Economy Hatta Rajasa said Dec. 1. Bank Indonesia expects 2010 inflation to range between 4 percent and 6 percent, it said in a statement published on its Web site in December.

Policy makers in Australia and Vietnam have already begun increasing interest rates to contain rising prices.

Australia’s central bank on Dec. 1 raised its benchmark rate by a quarter percentage point for an unprecedented third straight month as evidence mounts that the nation’s economy is strengthening. The State Bank of Vietnam increased its key rate to 8 percent from 7 percent effective Dec. 1, according to a Nov. 25 statement.

To contact the reporter on this story: Aloysius Unditu in Jakarta at aunditu@blomberg.net

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Europe Manufacturing, Services Expand Most in More Than 2 Years

By Simone Meier

Jan. 6 (Bloomberg) -- Europe’s services and manufacturing industries expanded at the fastest pace in more than two years in December, indicating the euro-area economy is gathering strength.

A composite index based on a survey of purchasing managers in both industries in the 16-nation euro region increased to 54.2 from 53.7 in November, London-based Markit Economics said today. That matched an initial estimate published on Dec. 16 and the highest since October 2007. A reading above 50 indicates expansion.

The euro-area economy is gaining momentum after emerging from the worst recession in more than six decades amid a worldwide recovery. Manufacturing in the U.S., the world’s largest economy, expanded at the fastest pace in more than three years in December, while Chinese manufacturing grew at the fastest pace in five years. The European Central Bank said last month that the region may expand only at a “moderate pace” and show an “uneven” recovery.

“Euro-region growth could show a positive surprise in the first half of the year,” said Stefan Bielmeier, an economist at Deutsche Bank AG in Frankfurt. “The ECB will probably start raising borrowing costs in the second half. We’re relatively optimistic about the outlook overall.”

The euro dropped against the dollar for a second day on speculation the European Union may be reluctant to help Greece as the country struggles to bolster its finances. The common currency was trading at $1.4358 at 9:05 a.m. in London, down 0.1 percent on the day after falling as much as 0.5 percent to $1.4284 earlier.

Euro-Area Manufacturing

An index of services rose to 53.6 in December from 53 in the previous month, Markit said. That was the highest since November 2007. A gauge of euro-area manufacturing increased to 51.6 from 51.2 in the previous month.

An index of the services industry in Germany, Europe’s largest economy, rose to 52.7 last month from 51.4 in November, Markit said today. An index of services for France fell to 58.7 from 60.9, while one for Italy increased to 53.9 from 49.8.

To contact the reporter on this story: Simone Meier in Dublin at smeier@bloombert.net

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U.K. Consumer Confidence Drops the Most in a Year

By Svenja O’Donnell

Jan. 6 (Bloomberg) -- U.K. consumer confidence fell in December by the most in more than a year as expectations for the economy deteriorated, Nationwide Building Society said.

The index of consumer sentiment declined five points from the previous month to 69, the biggest drop since November 2008, the customer-owned lender said in an e-mailed statement today. A measure of consumers’ economic expectations in the next six months fell eight points to 101.

With December marking the annual Christmas season peak for shopping, the report may signal a setback for retail spending as consumers brace for higher taxes to curb Britain’s record budget deficit. Prime Minister Gordon Brown is trying to revive the economy and restore support among voters in time for an election due by June.

“An element of caution may have begun to creep back into the minds of consumers,” Nationwide Chief Economist Martin Gahbauer said in the statement. “Lower expectations may foreshadow a more sluggish consumer outlook in 2010 as stimulus measures are withdrawn.”

The pound was little changed against the dollar today, trading at $1.6018 as of 10:03 a.m. in London. The yield on the two-year U.K. government bond rose 1 basis point to 1.316 percent.

A gauge of whether consumers think it’s a good time to make big purchases dropped to 106 last month from 107 in November, Nationwide said.

‘Surprising’ Drop

“The drop is slightly surprising,” David Page, an economist at Investec Securities, said today. “It may well be as people look forward to 2010, they are focusing on the issues that are still going to make it very difficult for households across the year. What concerns us and what may underlie this is the outlook for expenditure after Christmas.”

Consumer spending this year will reflect “continuing economic uncertainty,” Marks & Spencer Group Plc Chairman Stuart Rose said in a statement today. The U.K.’s largest clothing retailer reported a gain in holiday sales that some analysts said missed estimates, and it predicted that business conditions will “remain challenging” in 2010.

Chancellor of the Exchequer Alistair Darling said last month he will require higher tax contributions next year. This month, value-added tax returned to 17.5 percent from 15 percent, reversing a year-old measure. The Conservative opposition had a 10 percentage-point lead over Brown’s Labour Party in a YouGov Plc poll released Jan. 1.

Rainy Day Worries

“The looming VAT hike and other tax changes announced in the pre-budget report may have impacted on confidence in December, forcing people to review their expectations for the future,” Gahbauer said.

Greg Hodge, an analyst at London-based industry research firm Planet Retail Ltd. said on Bloomberg Television today that the confidence report was “bad news.”

“You have two types of people -- people that are looking to save for the rainy day are worried about the future, and people who sit on various mortgages who are still relatively cash-rich,” he said. “Those people seem to have overridden the negative people preparing for the rainy day.”

Unemployment growth is still slowing as the economy revives. A separate report today by KPMG and the Recruitment and Employment Federation showed that a measure of hiring for permanent jobs grew at the fastest pace since July 2007 in December, rising to 62.8 from 61.7 the previous month.

A U.K. index of service industries showed faster expansion in December, a survey by Markit Economics and the Chartered Institute of Purchasing and Supply said today.

Shop Prices

Meanwhile, prices of goods in U.K. shops advanced 2.2 percent in December from a year earlier after a 0.2 percent increase the previous month, the British Retail Consortium said in a separate report today. Food prices rose an annual 3.7 percent while non-food prices gained 1.4 percent.

The Bank of England will maintain its program of purchasing bonds with newly-created money at 200 billion pounds tomorrow, according to all 35 economists in a Bloomberg News survey. Policy makers will also keep the benchmark interest rate at a record low of 0.5 percent, 53 economists said.

To contact the reporter on this story: Svenja O’Donnell in London at sodonnell@bloomberg.net.

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Papaconstantinou Says Stark’s Greek Bailout Comment Unnecessary

By Judith Bogner and John Fraher

Jan. 6 (Bloomberg) -- Greek Finance Minister George Papaconstantinou said his government doesn’t need outside help to cut its budget deficit after a European Central Bank official earlier warned that such aid wouldn’t be forthcoming.

ECB Executive Board member Juergen Stark was quoted in Il Sole newspaper as saying that markets are “deluding themselves” if they think other European Union nations will help rescue Greece.

“Frankly we don’t need that clarification,” said Papaconstantinou in an interview with Bloomberg Television today. “We don’t expect to be bailed out by anybody as, I think, is perfectly clear we’re doing what needs to be done to bring the deficit down and control the public debt.”

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Greece Faces Credibility Test From EU Athens Swoop

By James G. Neuger

Jan. 6 (Bloomberg) -- Greece’s plan to cut the European Union’s widest budget deficit faces a first credibility test today when EU officials arrive in Athens to scrutinize the government’s taxing and spending proposals.

The three-day trip by aides to Monetary Commissioner Joaquin Almunia is an unusual step, said an EU official who asked not to be named, underscoring concern about a shortfall estimated at 12.7 percent of gross domestic product last year.

Greek bonds plunged in December as the country’s ballooning deficit spooked some investors, fanning speculation that fiscal woes could also engulf Spain, Ireland and other euro region nations. While Prime Minister George Papandreou has pledged to cut the deficit below the EU’s 3 percent limit by 2012, he’s struggling to convince economists he will follow through.

Cutting spending is “very difficult in Greece because you know that once the government tries to do that you very often get riots and people rising in the streets,” Philippe Gijsels, a strategist at Fortis Global Markets, said. “But it’s clear that they will have to tighten their belts and come up with a budget that’s believable by the rest of the world.”

The Brussels-based European Commission, the EU’s executive arm, won’t make its views public before Greece releases detailed plans later this month, EU spokeswoman Amelia Torres said. Talks between EU and Greek authorities are on a “technical level.”

Jitters

The European Central Bank will be represented on the fact- finding mission. Greece isn’t planning any announcements until tomorrow at the earliest because today is a holiday, the finance ministry said.

Investors’ jitters about Greece were highlighted today after Il Sole newspaper reported ECB Executive Board member Juergen Stark as saying markets are “deluding themselves” if they think the EU will bail out Greece. The euro fell as much as 0.5 percent to $1.4284 before recouping half its losses.

Papandreou, elected in October on a platform of higher wages and spending, was stung into acting on the deficit by a bond-market selloff and downgrades from the three main rating companies. In the two months to Dec. 21, the yield on 10-year Greek bonds surged 1.33 percentage points to 5.96 percent.

“Greece was really the problem child for markets,” said Guillaume Menuet, an economist at Bank of America Merrill Lynch in London. “We are only seeing evidence of clear commitments to fiscal consolidation in the last couple of months.”

Crackdown

The Greek government is now relying on one-time taxes, a crackdown on tax evasion and cuts in civil servant bonuses to pare the deficit to 8.7 percent of GDP in 2010, which has bought Papandreou some time with bond investors. Since Greece’s budget was passed on Dec. 24, the yield on 10-year bonds has slipped to 5.64 percent.

The Greek finance ministry yesterday forecast it will cut the deficit below the EU’s ceiling one year earlier than previously forecast. EU rules foresee possible fines for countries that flout budget limits, though no such penalty has been imposed.

Greece’s credit rating was cut last month by Standard & Poor’s, Moody’s Investors Service and Fitch Ratings. Greece sold bonds directly to selected investors last month and may conduct another private placement this month, Spyros Papanicolaou, head of the Public Debt Management Agency, said yesterday.

Greece’s ballooning deficit has prompted speculation from some investors that the rest of the EU would rescue the country from default if such a move were necessary. German Chancellor Angela Merkel fanned such talk when she said Dec. 10 that Europe has a “responsibility” to aid Greece overcome its crisis, though she stopped short of laying out a course of action.

Interpretation

The ECB’s Stark today indicated in his newspaper interview with Il Sole that those remarks shouldn’t be overinterpreted.

“The markets are deluding themselves when they think at a certain point the other member states will put their hands on their wallets to save Greece,” the paper cited him as saying.

While Greek 10-year yields at 5.64 percent remain the highest in the 16-nation euro region, it is still too early to contemplate the risk of Greece becoming the first country in the bloc to default on its debt, said Jacques Cailloux, chief euro- area economist at Royal Bank of Scotland Group Plc.

“Default is a long, long way away from the current situation,” Cailloux said on Bloomberg Television. “There’s too much at stake for the future of the euro to let one periphery country default and the political willingness at the core of the euro area is extremely strong and will support the periphery.”

To contact the reporter on this story: James G. Neuger in Brussels at jneuger@bloomberg.net

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Swiss Franc at 1.48 Per Euro Would See SNB Act, Commerzbank Says

By Justin Carrigan

Jan. 6 (Bloomberg) -- The franc’s advance to less than 1.50 per euro shows the Swiss National Bank’s resistance to the currency’s gains has shifted rather than disappeared, according to Commerzbank AG.

The franc appreciated to 1.4809 per euro on Jan. 4, its strongest level in nine months. It was at 1.4846 as of 8:09 a.m. in London today.

“The only thing that has changed is that the SNB’s pain threshold has been moved downwards with the lower level now located in the area around 1.45-1.46,” a Comerzbank team including Lutz Karpowitz in Frankfurt wrote in a report today.

“Moreover the speed of a possible appreciation of the franc now plays a more important role,” the analysts wrote. “Should the franc appreciate rapidly, with euro-franc quickly falling below the 1.48 mark, the SNB is likely to take action again.”

To contact the reporter on this story: Justin Carrigan in London at jcarrigan@bloomberg.net

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U.S. Two-Year Treasury Futures to Rally: Technical Analysis

By Wes Goodman

Jan. 6 (Bloomberg) -- Treasury two-year futures contracts are poised to rally in January as their slide to their worst month on record in December is likely to reverse, said DZ Bank AG, citing trading patterns.

The contract had a so-called bullish engulfing day on Jan. 4, said Andy Cossor, the Hong Kong-based chief market strategist for Asia for Frankfurt-based DZ Bank, Germany’s fifth-largest lender. The pattern occurs on a candlestick chart when a small solid box, which is created by a decline in price, is followed the next day by a large empty box, reflecting a gain. The second candlestick is bigger than, or “engulfs,” the first one.

Using the same chart, Cossor, drew a descending line connecting the highs of Dec. 18 and Dec. 31 and extrapolated it to today. The contract is above the line now, a second positive sign.

“The bullish engulfing day is normally a reversal pattern,” Cossor said. “The downtrend should stop and there should be further upside price action. The rally also broke above the downtrend line. The two things together make a bullish move in the market that much more likely.”

Two-year futures contracts for March delivery were little changed today at 108 11/32 as of 10:10 a.m. in Hong Kong. They climbed 9/32, or $2.81 per $1,000 face amount, in the past two days, the biggest gain in four weeks.

The contract fell 26/32 in December, the most since it began trading on Jan. 2, 2009.

In technical analysis, investors and analysts study charts of trading patterns and prices to predict changes in a security, commodity, currency or index.

To contact the reporter on this story: Wes Goodman in Singapore at wgoodman@bloomberg.net.

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Record Year for Muni Bond Sales Seen as N.Y. MTA Preps Offering

By Jeremy R. Cooke

Jan. 6 (Bloomberg) -- New York’s Metropolitan Transportation Authority, the largest mass-transit agency in the U.S., will be one of the first issuers to sell Build America Bonds in a year when such taxable offerings may push municipal issuance to a record $450 billion.

The “generous” 35 percent Treasury rebate on Build America interest costs may entice state and local borrowers to sell as much as $150 billion of the bonds in 2010, more than twice as much as last year, Municipal Market Advisors forecast this week. The MTA, operator of subways, buses, rail lines and river crossings, plans to sell $350 million of so-called BABs as soon as today.

The initial authorization to issue bonds created by the February 2009 economic stimulus expires at the end of this year. Build America sales have exceeded $64 billion in less than eight months after they began, data compiled by Bloomberg show.

“Because of the generous BAB subsidy, we are forecasting record municipal borrowing” this year, Matt Fabian, senior analyst at the Concord, Massachusetts-based research firm, said in a Jan. 4 report. “Many of the uncertainties in the municipal market for 2010 involve questions of how long the BAB program is extended and at what terms. Re-authorization for at least another two years is a near-certainty.”

Record Forecast

Fabian cited “gimmick financings to balance near-term budget gaps,” refinancing of tax-exempt debt from the past 10 years, more state endowment-supported public school bonds in Texas, and borrowing by California, the largest municipal issuer, as responsible for the record forecast.

The MTA postponed borrowing last month as officials recrafted a budget, resorting to service cuts and the phase-out of student discounts, after a drop in state aid and higher labor costs.

Banks led by New York-based JPMorgan Chase & Co. are to underwrite an offering of transportation revenue bonds, rated A2, or sixth-highest investment grade, by Moody’s Investors Service and comparable A rankings from Standard & Poor’s and Fitch Ratings.

Moody’s cut its outlook on the bonds, one of several types sold by the transportation agency, to negative from stable last month on concern that leaders in Albany may further reduce state-transit funding.

Revenue from the MTA’s bus, subway and commuter-rail networks, state and local government subsidies, dedicated taxes and operating surpluses from its toll bridges and tunnels, have been earmarked to pay off the debt.

Revenue Bonds

Transportation revenue bonds make up almost half of the MTA’s total $27.2 billion debt load, according to agency documents distributed last month.

Build America Bonds issued by the authority with a November 2039 maturity traded yesterday at an average yield of 6.2 percent, 159 basis points more than benchmark 30-year U.S. bonds, Bloomberg data show. When they were issued, the so-called spread to Treasuries was 180 basis points. A basis point is 0.01 percentage point.

Investors have been demanding 26 basis points more than comparable corporate bonds for the MTA securities, and the spread has ranged from 12 basis points to 37 basis points, based on a daily research note yesterday from JPMorgan strategists.

Yields on top-rated, tax-exempt bonds due in 30 years slid 2 basis points to 4.51 percent yesterday, a three-month low, according to a daily survey by Municipal Market Advisors.

The degree to which traditional long-term municipals perform better than Treasuries this year may diminish Build America sales, Fabian said, since it would narrow the cost advantage for the new alternative for public-works borrowing.

A taxable interest rate of 6.22 percent would translate to about 4.04 percent for the issuer after accounting for the 35 percent federal subsidy.

Following are descriptions of additional pending sales of municipal bonds in the U.S.

ILLINOIS, the state whose credit rating was cut twice in early December, plans to sell $3.47 billion in taxable general- obligation bonds this week to cover public employee pension fund contributions for fiscal 2010 and help address its budget gap. The notes will mature from 2011 through 2015 in equal amounts. Underwriters led by JPMorgan Chase, Goldman Sachs Group Inc. and Chicago-based Loop Capital Markets LLC will sell the debt to investors. Illinois was cut to A2 from A1 by Moody’s and to A+ from AA- by S&P. Fitch rates the fifth most-populous state A. (Updated Jan. 5)

NEW JERSEY TRANSPORTATION TRUST FUND AUTHORITY plans to borrow about $850 million this week to finance road, bridge, rail and bus projects in the most densely populated state. The offering, through banks led by Barclays Plc, will include a mix of zero-coupon, tax-exempt securities and taxable Build America Bonds, said Moody’s. Orders from retail buyers will be taken today, with institutional sales tomorrow, said Tom Vincz, a state treasury spokesman. The debt, backed by state appropriations, is rated A1 by Moody’s, A+ by Fitch and AA- by S&P. (Updated Jan. 6)

OHIO, the seventh most-populous state, will issue as much as $280 million of tax-exempt general obligation bonds as soon as today in a refinancing to provide savings for the current two-year budget. Underwriters led by BofA Merrill Lynch are handling the transaction, part of a plan to shift $736 million in debt payments to future fiscal years from the biennium ending June 30, 2011, without extending final maturities. The debt being refunded originally covered projects for schools, higher education and infrastructure. The state is rated AA+ by S&P, Aa2 by Moody’s and AA by Fitch. (Updated Jan. 6)

MARYLAND ECONOMIC DEVELOPMENT CORP., which issues tax- exempt bonds to encourage business in the state, plans to sell almost $260 million in debt this week as part of a marine- terminal concession with Ports America Chesapeake. The money raised will fund state transportation projects and an expansion of Seagirt Marine Terminal to make it big enough to handle some of the world’s largest cargo vessels. The Port of Baltimore’s container facility will be leased for 50 years to Ports America, controlled by Highstar Capital, a New York-based private-equity firm. The debt, secured by terminal revenue, received a provisional Baa3 rating from Moody’s. A group of underwriters led by Goldman Sachs will market the debt to investors. (Updated Jan. 5)

MIAMI-DADE COUNTY, the most populous county in the U.S. Southeast, will sell $600 million of bonds backed by revenue from Miami International Airport, the largest U.S. gateway to Latin America, the week of Jan. 11. As much as 30 percent of the issue will be taxable Build America Bonds. Sales to individual investors will occur Jan. 12, with sales to institutions the following day. Proceeds will be used to repay $375 million of commercial paper, with the rest used on the airport’s $6 billion expansion. Underwriting will be led by Citigroup Inc. S&P rates the bonds A-. (Added Dec. 17)

LOWER COLORADO RIVER AUTHORITY, which manages electricity generation and water use in the region around Texas’s Colorado River, intends to offer about $426 million of tax-exempt bonds as soon as this month through Barclays to refinance debt. They will mature from 2010 through 2020, according to preliminary offering documents. The bonds are rated A+ by Fitch, A1 by Moody’s and A by S&P. (Updated Dec. 30)

NEW JERSEY’S HIGHER EDUCATION STUDENT ASSISTANCE AUTHORITY plans to sell $338 million of fixed-rate, tax-exempt bonds backed by student loan revenue the week of Jan. 11. The proceeds will allow the authority to buy back and retire auction-rate securities and to fund loans that allow education borrowers to consolidate multiple borrowings into one regular payment. Banks led by BofA Merrill Lynch will handle the offering. Ratings on the deal are AA from S&P and Aa2 from Moody’s, and maturities will range from 2011 through 2037. (Updated Dec. 18)

PORT OF HOUSTON AUTHORITY, overseer of the busiest shipping port in the U.S. by foreign tonnage, plans to sell as much as $327.2 million of tax-exempt bonds backed by property taxes collected in Harris County, Texas. Underwriters led by BofA Merrill Lynch will handle the deal as soon as this month. The transaction will refinance debt that the port can buy back, either through call options or investor tenders. Interest on all except $40.5 million of the bonds can be excluded from calculations of the federal alternative minimum tax. The obligations that may be refinanced were issued in 1997, 1998, 2001, 2002, 2005, 2006 and 2008, preliminary sale documents show. (Updated Jan. 6)

To contact the reporter on this story: Jeremy R. Cooke in New York at jcooke8@bloomberg.net.

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