a-13-month-high

China May Raise Yuan Value by 5% to Cool Economy, Goldman’s O’Neill Says

by on January 24, 2010

By Zijing Wu Jan. 23 (Bloomberg) — China will probably let its currency appreciate a one-time 5 percent and hike interest rates to cool the economy and combat surging inflation pressures, Goldman Sachs Group Inc. Chief Economist Jim O’Neill said. The Chinese government may allow the yuan to have “a bigger one-off move than people talk about, at least 5 percent, maybe more,” O’Neill said in an interview today at the London School of Economics. “They may also consider having a wide band to let it move more frequently on the daily basis to stop speculative players.” China’s economy rebounded stronger than anticipated in the fourth quarter, and the inflation rate accelerated to a 13-month high of 1.9 percent in December, igniting speculation the government will abandon the yuan peg to avoid the economy from overheating. China has kept a lid on its currency since July 2008 after it strengthened 21 percent against the dollar over the previous three years. “Part of the idea of doing these things is to surprise people so we are not going to get any hints of it happening,” said O’Neill. “We’ll just wake up on an unpredictable day and see it happen.” Besides loosening controls on the exchange rate, Beijing will also hike interest rates soon, according to O’Neill. “It will definitely happen, and it could happen any day,” he said. China’s yuan traded at 6.8269 per dollar in the spot market as of 3 p.m. in London. To contact the reporters on this story: Zijing Wu in London zwu17@bloomberg.net ;

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China May Raise Yuan Value by 5% to Cool Economy, Goldman’s O’Neill Says

Most U.S. Stocks Drop on Concern Dubai May Default; Goldman, Alcoa Retreat

by on November 28, 2009

Bloomberg:

By Rita Nazareth Nov. 28 (Bloomberg) — Most U.S. stocks fell this week as speculation Dubai will default on its debt spurred concern that the recovery in the global financial system will stall, overshadowing fewer American jobless claims and more home sales. Morgan Stanley , Bank of America Corp. and Goldman Sachs Group Inc. lost more than 3.4 percent. They helped send financial institutions to the biggest drop among 10 industries in the Standard & Poor’s 500 Index after Dubai World, the state- controlled company with $59 billion of liabilities, said it’s seeking to delay debt payments. Alcoa Inc. slumped 3.6 percent as the Reuters/Jefferies CRB Index of commodities fell for the fourth time in five weeks. Among S&P 500 companies, 273 declined and 224 rose this week. The S&P 500 added less than 0.1 percent to 1,091.49 after climbing to a 13-month high on Nov. 25. The Dow Jones Industrial Average fell 8.24 points, or 0.1 percent, to 10,309.92. “Investors are selling into a vacuum,” said Jeffrey Saut , chief investment strategist at Raymond James & Associates in St. Petersburg, Florida, which manages $214 billion. “The collateral damage that will take place from the Dubai fallout is unknown. You’re not going to know until the pros get back next week.” The 0.01 percent gain in the S&P 500 was the smallest weekly move since August 1992, according to data compiled by Bloomberg. U.S. stock exchanges were shut Nov. 26 for Thanksgiving and closed three hours early the next day, when the fewest shares changed hands since Dec. 26. $90 Billion The S&P 500 fell 1.7 percent yesterday after Europe’s Dow Jones Stoxx 600 Index plunged the most since April while U.S. markets were closed for Thanksgiving. Dubai may owe more than the $80 billion to $90 billion in liabilities assumed by investors, UBS AG analysts said. The emirate, which borrowed $80 billion in a four-year construction boom to transform its economy into a regional tourism and financial hub, suffered the world’s steepest property slump in the worst global recession since World War II. An index of financial stocks in the S&P 500 lost 2.3 percent for the biggest weekly decline among 10 industries. Morgan Stanley dropped 5 percent to $30.51, while Bank of America retreated 3.9 percent to $15.47. Goldman Sachs lost 3.4 percent to $164.16. Metal producers fell as commodities slumped. The CRB index retreated 0.5 percent. Crude oil fell 0.9 percent to $76.05 a barrel in New York, while copper lost 0.3 percent to $3.1255 a pound. Alcoa , the largest U.S. aluminum producer, fell 3.6 percent to $12.66. Dow Chemical Co. , the nation’s biggest chemical maker, declined 1.3 percent to $27.56. Halliburton Co. , the world’s second-largest oilfield-services provider, lost 2.6 percent to $29.09. Fewer Jobless Claims The S&P 500 added 1.8 percent in the first three days of the week following better-than-estimated economic reports. The Labor Department said on Nov. 25 that 466,000 Americans filed for unemployment benefits in the week ended Nov. 21, the fewest since September 2008 and less than the 500,000 median forecast of economists. New-home sales increased to an annual pace of 430,000 in October, the Commerce Department reported the same day. The median estimate was 404,000, Bloomberg data show. Dubai’s attempt to reschedule its debt prompted investors to buy assets deemed safe and sell riskier ones. Treasury two- year notes rose, driving their yields down to 0.68 percent, the lowest level in 11 months. The Chicago Board Options Exchange Volatility Index, or VIX, which tends to rise when investors are less willing to take risks, surged 11 percent to 24.74. ‘Risk Aversion’ Telephone companies, health-care providers and utilities posted the biggest gains among 10 industries in the S&P 500. All three groups are considered defensive assets by some investors. “Risk aversion is warranted because of an environment where Dubai is surprising market participants,” said Jack Ablin , Chicago-based chief investment officer of Harris Private Bank, which oversees about $50 billion. “But the economic backdrop is very positive.” AT&T Inc. , the biggest U.S. phone company, rose 3.7 percent to $26.99, while drugmaker Bristol-Myers Squibb Co. added 3.8 percent to $25.38. Duke Energy Corp., the supplier of electricity in states including North Carolina, South Carolina and Ohio, advanced 2.9 percent to $16.69. To contact the reporter on this story: Rita Nazareth in Sao Paulo at rnazareth@bloomberg.net .

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Most U.S. Stocks Drop on Concern Dubai May Default; Goldman, Alcoa Retreat

Video: U.S. Stocks Rise on Home Sales and Jobless Claims Data: Video

November 25, 2009

Nov. 25 (Bloomberg) — Bloomberg’s Ellen Braitman reports on the performance of the U.S. equity market today. U.S. stocks gained, sending the Standard & Poor’s 500 Index to a 13-month high, as new home sales beat forecasts and jobless claims fell, suggesting the economic recovery is broadening. (Source: Bloomberg)

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Stocks, Commodities Fall on Trichet Remarks, Dell Earnings; Dollar Climbs

November 20, 2009

By Elizabeth Stanton Nov. 20 (Bloomberg) — Stocks and commodities fell after European Central Bank President Jean-Claude Trichet said policy makers will withdraw emergency cash gradually and Dell Inc.’s earnings trailed analysts’ estimates. The yen and dollar rose. The Standard & Poor’s 500 Index slipped 0.5 percent to 1,089.37 at 11:58 a.m. in New York as Dell tumbled the most this year to lead declines in technology shares. Europe’s Dow Jones Stoxx 600 Index and the MSCI Asia-Pacific Index dropped for the fourth straight day, the longest streaks in four months. Crude oil declined as the Dollar Index gained as much as 0.8 percent. “We live in a world where on a day-to-day basis all risk assets move in the same direction, and it’s the opposite direction from the dollar,” said John Kattar , who oversees $1.6 billion as chief investment officer at Eastern Investment Advisors in Boston. “There is a lot of good news built into stock prices, and stocks are more or less fairly valued given the fundamentals.” U.S. equities fell for a third straight day, with the S&P 500 poised for its first weekly decline since October. The Dow Jones Industrial Average lost 44.06 points, or 0.4 percent, to 10,288.28. Declines were limited today as J.M. Smucker Co. led gains in consumer staples companies after the maker of jams and Jif peanut butter reported better-than-estimated earnings. Rebound Stalls The S&P 500 rose as much as 64 percent from a 12-year low in March, closing at a 13-month high of 1,110.32 on Nov. 17. The deepest U.S. economic contraction in seven decades ended in the third quarter, when government incentives spurred consumers to spend more on homes and cars. Corporate profits, which have shrunk from year-earlier levels for a record nine straight quarters, are projected to rise in the current period, according to analyst estimates compiled by Bloomberg. Dell , the third-largest maker of personal computers, slid as much as 9.7 percent after reporting a 54 percent drop in profit. “In an economy that’s growing slowly, we’re finding some companies that are continuing to execute well and some that are faltering,” said Alan Gayle , senior investment strategist at Ridgeworth Capital Management in Richmond, Virginia. “The market wants to see companies that can deliver on their business model, and it’s pretty clear Dell’s business model isn’t as effective as it has been in years past.” Ridgeworth manages $60 billion. D.R. Horton Inc. tumbled 12 percent for the steepest loss in the S&P 500. The second-largest U.S. homebuilder by revenue reported a fourth-quarter loss of 73 cents per share, three times wider than the average estimate of analysts surveyed by Bloomberg. All 12 shares in an index of homebuilders retreated, with Pulte Homes Inc., Lennar Corp. and KB Home each slumping at least 4 percent. Smucker Rallies J. M. Smucker added 4.9 percent. Second-quarter earnings excluding some items were $1.22 a share, 18 percent higher than the average analyst estimate, as sales of Folgers coffee helped boost revenue by 52 percent. Per-share earnings topped the average analyst estimate at 80 percent of S&P 500 companies that have released third-quarter results, the biggest share for a full quarter in Bloomberg data going back to 1993. Still, combined profits are down 14 percent from the year-earlier period. Dillard’s Inc. added 9.1 percent to $15.58 after the department-store chain was raised to “buy” from “hold” and its share price estimate increased to $28 from $13.50 at Deutsche Bank AG, which said the company is positioned better than almost all investors estimate to increase earnings based on merchandising and cost control initiatives. Trichet’s Liquidity Concern European stocks slipped as Trichet said the ECB will remove liquidity in order to ensure the bank doesn’t fuel inflation. “Not all our liquidity measures will be needed to the same extent as in the past,” Trichet said at a conference in Frankfurt today. “Any non-standard measure whose continuation would pose a threat to the achievement of price stability must be undone promptly and unequivocally.” Trichet has already signaled the ECB is unlikely to renew its offer of 12-month loans to banks after the third installment in December. Council member Guy Quaden indicated this week that the bank may offer fewer three-month and six-month loans next year. At the same time, policy makers have stressed the exit from emergency lending measures doesn’t necessarily imply they will raise interest rates soon. “Stocks all over the world and all risk asset classes are being driven by this liquidity factor,” which also is reflected in U.S. dollar weakness, Eastern Investment Advisors’ Kattar said. Dollar Gains The Dollar Index, which gauges the dollar against a basket of six major currencies, rose 0.3 percent. It has climbed three out of the last four days after touching a 15-month low on Nov. 16. The U.S. currency gained against 15 of the world’s 16 major currencies. It was unchanged against the yen, which also rose against its 15 most-traded currencies. Europe’s Dow Jones Stoxx 600 Index lost 0.8 percent, led by real-estate and financial shares. Asian shares declined after Sony Corp. said it will take longer to reach its profitability targets. Sony slid 2.4 percent in Tokyo. Additional strength in the dollar “is the primary near- term risk to equities,” Myles Zyblock , a strategist at RBC Capital Markets in Toronto, wrote in a report today. Energy companies in the S&P 500 fell 1.2 percent as a group, the biggest decline among the benchmark’s 10 industry groups, as the dollar’s rebound spurred drop in the price of crude oil. Materials companies fell 1 percent as other dollar- denominated commodities including gold, silver, aluminum and nickel also retreated. Freeport-McMoRan Copper & Gold Inc. and Newmont Mining Corp. lost at least 1.4 percent. Treasury three-month bill rates turned negative yesterday for the first time since December as investors were willing to pay for the safety of the shortest-dated U.S. government assets. To contact the reporter on this story: Elizabeth Stanton in New York at estanton@bloomberg.net .

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U.S. Stocks Extend Global Rally on Retail Sales, APEC Pledge; Dollar Falls

November 16, 2009

By Sapna Maheshwari Nov. 16 (Bloomberg) — U.S. stocks added to a global rally, sending the Standard & Poor’s 500 Index to a 13-month high, after retail sales increased more than forecast and Asian government leaders pledged to maintain economic stimulus spending. The dollar fell, helping extend gains in commodities. Nordstrom Inc. advanced 2.4 percent as Goldman Sachs Group Inc. said the department-store chain will benefit from a recovery in spending by affluent customers. Polo Ralph Lauren Corp. and Saks Inc. rose as the U.S. government said retail sales grew 1.4 percent in October, topping the median economist estimate. Barrick Gold Corp. and Alcoa Inc. added at least 1.9 percent as gold reached a record and industrial metals gained. The S&P 500 increased 1.2 percent to 1,106.64 at 9:46 a.m. in New York. The Dow Jones Industrial Average added 96.59 points, or 0.9 percent, to 10,367.06. Europe’s Dow Jones Stoxx 600 Index rose 1.2 percent and the MSCI Asia-Pacific Index climbed 0.7 percent. “Any good news on the U.S. consumer will be taken very positively,” said Kevin Divney , chief investment officer at Beaconcrest Capital Management in Boston. “There’s more and more focus on it this time of year leading up to the holiday season. So I think any positive consumption there will be taken very, very seriously.” Alcoa Gains U.S. stocks have climbed for two straight weeks as the Group of 20 nations agreed to maintain economic stimulus efforts and profits at companies from Wal-Mart Stores Inc. to Walt Disney Co. beat analysts’ projections. The S&P 500 has rebounded 63 percent from a 12-year low in March as government stimulus measures and Federal Reserve interest rate cuts helped end a four-quarter contraction in the world’s largest economy. The 21-member Asia-Pacific Economic Cooperation group, which represents 54 percent of the global economy, said in Singapore that it will maintain stimulus measures until there is “durable” growth. They did not mention currency distortions, which U.S. companies say give China unfair trade advantages. “You have a world of policy leaders that think it’s too early to withdraw monetary stimulus,” said Craig Peckham , equity trading strategist at Jefferies & Co. in New York. The Dollar Index, a six-currency measure of the greenback’s strength, fell 0.4 percent to 75.005, adding to a two-week retreat. Nordstrom gained 2.4 percent to $34.81. The U.S. department-store chain with more than 100 namesake locations was raised to buy” from “neutral” at Goldman Sachs, which said the company “is a key beneficiary of a recovering high end consumer.” Commodities Gain Alcoa climbed 1.9 percent to $13.43 as base metal prices increased on the London Metal Exchange. Barrick Gold, the world’s largest producer of the precious metal, gained 2.1 percent to $43.77. Gold climbed to a record $1,133.50 an ounce as investors stepped up purchases of the precious metal on speculation that the dollar will extend a decline. Newmont Mining Corp. advanced 2.1 percent to $52.08. The largest U.S. gold producer said the sale of a 10 percent stake in its Indonesian venture will be completed today. Per-share earnings have topped estimates at 80 percent of S&P 500 companies that have released results, a record in Bloomberg data going back to 1993, even as profits slumped for a record ninth straight quarter. Dell Inc. rose 2 percent to $15.71. The personal-computer maker expanding into mobile phones was restarted “buy” at Goldman Sachs Group Inc., which said the company will be a “key beneficiary of the PC upgrade cycle.” To contact the reporter on this story: Sapna Maheshwari at smaheshwar11@bloomberg.net .

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Japanese Stocks Fall After Oil, Metal Prices Slump; Nippon Mining Declines

November 12, 2009

By Akiko Ikeda and Kotaro Tsunetomi Nov. 13 (Bloomberg) — Japanese stocks fell after crude-oil and metal prices slumped. Nippon Mining Holdings Inc. , Japan’s biggest copper producer and an oil refiner, sank 1.6 percent, after oil retreated 3 percent yesterday in New York to a four-week low and metals slid in London. AOC Holdings Inc. , an oil and gas explorer, dropped 1.6 percent. Nippon Sheet Glass Co., a glassmaker, slid 0.7 percent after the company reported a first- half loss. “Energy-related stocks should sag,” said Juichi Wako , a senior strategist at Tokyo-based Nomura Holdings Inc. The Nikkei 225 Stock Average fell 0.2 percent to 9,788.77 as of 9:12 a.m. in Tokyo. The broader Topix index dropped 0.2 percent to 865.73. Yesterday in New York, the Standard & Poor’s 500 Index slid 1 percent from a 13-month high on the previous day, dragged down by energy producers on bigger-than-estimated increase in oil stockpiles. Crude oil for December delivery fell 3 percent to $76.94 a barrel on the New York Mercantile Exchange yesterday, the lowest settlement since Oct. 14. The Energy Department report showed supplies of crude oil rose 1.76 million barrels to 337.7 million last week. Analysts surveyed by Bloomberg News forecast a 1 million-barrel gain. The London Metals Index , a measure of six metals including copper and zinc, dropped 0.8 percent yesterday, its steepest slump this week. To contact the reporters for this story: Akiko Ikeda in Tokyo at iakiko@bloomberg.net ; Kotaro Tsunetomi at ktsunetomi@bloomberg.net .

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Stocks in U.S. Fall as Drop in Energy Shares Overshadows Technology Rally

November 12, 2009

By Mary Childs Nov. 12 (Bloomberg) — U.S. stocks fell from a 13-month high as energy producers slumped following bigger-than-estimated growth in oil stockpiles, erasing an earlier advance triggered by Hewlett-Packard Co.’s takeover of 3Com Corp. Southwestern Energy Corp. and Range Resources Corp. slid more than 4 percent, leading declines in 39 of 40 energy companies in the Standard & Poor’s 500 Index as oil tumbled. The dollar strengthened against 15 of 16 major currencies, helping to extend declines in commodities. 3Com rallied 31 percent for its best gain since 2007 as Hewlett-Packard offered to purchase the maker of computer networking equipment for $2.7 billion. The S&P 500 slid 0.7 percent to 1,090.9 at 1:37 p.m. in New York after climbing to as high as 1,101.97 before the Energy Department’s report. The Dow Jones Industrial Average lost 62.43 points, or 0.6 percent, to 10,228.83. About four stocks retreated for each that rose on the New York Stock Exchange. “The fundamentals just aren’t quite there yet,” said Sarah Hunt , a money manager who helps oversee about $6.5 billion for Purchase, New York-based Alpine Mutual Funds. “You still have a lot of concerns about the demand side of the equation for energy stocks. We’re getting a bit of a pause. Every time we get these big bursts of enthusiasm they tend to be tempered by the fact that the economy still looks pretty bad.” The S&P 500, which closed at a 13-month high yesterday, failed to remain above the 1,100 level for a second straight day. The index has rallied 61 percent from a 12-year low in March, recovering almost half of its plunge from a record in October 2007. ‘Slow and Bumpy’ The rebound occurred as government stimulus measures and Federal Reserve interest rate cuts helped end a four-quarter contraction in the U.S. economy. The gains pushed the S&P 500 to 22 times reported earnings, the highest since 2002, according to weekly data compiled by Bloomberg. Asian shares and U.S. stock-index futures fell before the open of exchanges in New York after China’s Premier Wen Jiabao spurred concern that the global economic recovery will be slow. “The worst is over,” Wen said in speech televised from a forum in Beijing. “The global economy is starting to recover but a total recovery will be a slow and bumpy process.” Southwestern Energy, the only oil and natural-gas producer in the S&P 500 to advance last year, slid 4.7 percent to $42.61. Range Resources, the independent energy producer that operates mostly in the southwestern, Appalachian and Gulf Coast regions of the U.S., slid 4.1 percent to $49.10. Chevron Corp., the second-largest U.S. oil company, lost 1.3 percent to $77.51. Energy shares slumped 1.9 percent collectively, the steepest decline among 10 groups. Crude Slumps Oil for December delivery fell 2.4 percent to $77.39 a barrel in New York. Supplies of crude rose 1.76 million barrels to 337.7 million last week, the Energy Department report showed. Analysts surveyed by Bloomberg News forecast a 1 million-barrel gain on average. Refinery operations declined to the lowest level since September 2008, when units were shut in the aftermath of hurricanes Gustav and Ike. “With oil inventories increasing more than expected, it demonstrates that demand for oil is not strengthening, despite indications that the economy is showing signs of stabilization and growth,” said Tim Ghriskey , who helps oversee $2 billion as chief investment officer for Solaris Asset Management in Bedford Hills, New York. “It calls into question on a minor basis the strength of the economic recovery.” 3Com Takeover 3Com surged 31 percent to $7.48 after the Hewlett-Packard bid. H-P Chief Executive Officer Mark Hurd is seeking to add to the company’s $118 billion in annual sales after the sharpest slump in PC demand in history. Hewlett-Packard slid 0.5 percent to $49.77. Brocade Communications Systems Inc. dropped 13 percent to $8.04 after analysts downgraded ratings at Piper Jaffray Cos., ThinkEquity LLC and Lazard Capital Markets Ltd. The analysts cited a the loss of a potential partnership with Hewlett- Packard, which investors had speculated would buy Brocade. Wal-Mart Stores Inc. rose 1.1 percent to $53.56. The world’s largest retailer posted third-quarter profit of 84 cents a share, beating the 81-cent average analyst estimate in a Bloomberg survey. Dow Chemical Co. climbed 6.4 percent to $28.41 after it said cost cuts and rising sales after the acquisition of Rohm & Haas Co. will boost earnings more than analysts estimate. Eighty-one percent of S&P 500 companies that released results have exceeded the average analyst estimate for third quarter earnings per share, a record in Bloomberg data going back to 1993, even as profits slumped for a record ninth straight quarter. Gains Predicted Global equities will rise as much as 30 percent in the next six months on higher earnings and continued economic recovery, according to Burkhard Varnholt , Zurich-based chief investment officer at Bank Sarasin & Co., which manages about $80 billion. U.S. Treasury Secretary Timothy Geithner said there are “early signs” that the world is addressing imbalances in spending and savings that contributed to the global crisis. Asia is “leading the world” back to recovery, Geithner told reporters in a press briefing with counterparts from the Asia-Pacific Economic Cooperation group following a meeting in Singapore. American exports are also growing at a healthier rate, he said. China will probably let the yuan start rising against the dollar in early 2010 after the central bank signaled it may pursue a more flexible currency policy, said Calyon, the investment-banking arm of Credit Agricole SA. The exchange rate will be guided in a “proactive, controlled and gradual manner and based on international capital flows and movements in major currencies,” the People’s Bank of China said yesterday in a quarterly report. It omitted a pledge made three months earlier to keep the yuan “basically stable.” Dollar, Gold The dollar strengthened against 15 of the 16 most-traded counterparts tracked by Bloomberg, gaining 0.8 percent versus the euro and less than 0.1 percent against the British pound. The Dollar Index, which tracks the U.S. currency against six major trading partners, added 0.3 percent in its second day of gains after touching a 15-month low. Gold prices climbed to a record in New York, flirting with the longest rally in 27 years before declining as the dollar rebounded, curbing demand for the metal as an alternative asset. Aecom Technology Corp. rose 7.7 percent to $27.43 and climbed as much as 9.2 percent, the most intraday since June 29. The architectural and engineering company posted earnings excluding some items of 48 cents a share in the fourth quarter, beating the average analyst estimate by 3.5 percent, according to Bloomberg data. Tetra Tech Inc. dropped 4 percent to $10.64. The provider of engineering and technical services reported fourth-quarter earnings of 33 cents a share, and projected first-quarter earnings of between 28 and 30 cents a share, compared with the average analyst estimate of 30 cents in a Bloomberg survey. To contact the reporter on this story: Mary Childs in New York at mchilds4@bloomberg.net .

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U.S. Index Futures Decline; S&P 500 Poised to Retreat From 13-Month High

November 12, 2009

By Adam Haigh Nov. 12 (Bloomberg) — U.S. stock-index futures dropped, indicating the Standard & Poor’s 500 Index will retreat from a 13-month high, after Chinese Premier Wen Jiabao said the world faces a gradual and uneven recovery. Hewlett-Packard Co. slid 1.4 percent and 3Com Corp. surged 34 percent after the world’s largest personal-computer maker made a $2.7 billion offer for 3Com. Wal-Mart Stores Inc. is among companies due to report earnings today before the opening of equity markets. Futures on the S&P 500 index expiring next month retreated 0.3 percent to 1,093.3 at 11:18 a.m. in London. Dow Jones Industrial Average futures lost 0.2 percent to 10,236. Nasdaq- 100 Index futures declined 0.3 percent to 1,779. The S&P 500 has rebounded 62 percent from a 12-year low in March, recovering almost half of its plunge from a record in October 2007. The rally occurred as government stimulus measures and Federal Reserve interest rate cuts helped end a four-quarter contraction in the U.S. economy. That’s helped push the index to 22 times reported earnings, the highest since 2002, according to weekly data compiled by Bloomberg. “The worst is over,” Wen said in speech televised from a forum in Beijing. “The global economy is starting to recover but a total recovery will be a slow and bumpy process.” A Labor Department report due at 8:30 a.m. in Washington may show fewer Americans filed claims for unemployment benefits last week. Initial jobless claims probably dropped by 2,000 to 510,000 in the week ended Nov. 7., according to a survey of economists. Government stimulus measures such as the homebuyer tax credit are boosting consumer demand, helping to pull the economy out of its worst recession in seven decades. 3Com, Wal-Mart 3Com surged 34 percent to $7.653 in German trading after the Hewlett-Packard bid. Hewlett-Packard Chief Executive Officer Mark Hurd is seeking to add to the company’s $118 billion in annual sales after the sharpest slump in PC demand in history. The purchase of 3Com increases competition with Cisco Systems Inc., the world’s largest maker of computer- networking equipment, which is also expanding into Hewlett- Packard’s businesses. Hewlett-Packard slid 1.4 percent to $49.29 in Germany. Wal-Mart added 0.2 percent to $53.04 in Germany. The world’s largest retailer and Kohl’s Corp., the fourth-biggest U.S. department-store chain, are among companies scheduled to report earnings before the U.S. equity market opens. Green Mountain Coffee Roasters Inc . dropped 8.8 percent to $69.24 in German trading. The Waterbury, Vermont-based seller of Keurig single-cup coffee makers said it will probably earn 15 cents a share at most in the first quarter. That’s less than the 23-cent average of three analysts’ estimates compiled by Bloomberg. Eighty-three percent of S&P 500 companies that released results have exceeded the average analyst estimate for third quarter earnings per share, a record in Bloomberg data going back to 1993, even as profits slumped for a record ninth straight quarter. To contact the reporter on this story: Adam Haigh in London at ahaigh1@bloomberg.net .

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Warhol’s Dollar-Bill Work Fetches $43.8 Million, 114 Times Purchase Price

November 12, 2009

By Lindsay Pollock and Philip Boroff Nov. 12 (Bloomberg) — An Andy Warhol painting of 200 dollar bills was sold for $43.8 million at a New York art auction by London-based art collector Pauline Karpidas, more than 100 times what she paid in 1986. Five bidders vied for Warhol’s 1962 “200 One Dollar Bills” at the Sotheby’s sale last night and it went to an unidentified phone buyer. The 7 1/2-foot wide silkscreen canvas comprises repetitive images of one-dollar bills, reproduced in tones of black on grey, with a blue Treasury seal. Karpidas offered the work, according to two people familiar with the situation. She paid $385,000 for the painting at a 1986 Sotheby’s sale. “We’ve seen nothing like this recently,” said New York dealer Tony Shafrazi . “This is a masterpiece.” Competition for the Warhol painting was the highlight of the sale and underscored returning buying confidence to the art market, pummeled a year ago by the world financial crisis. The auction, which started three hours after the Standard & Poor’s 500 Index closed at a 13-month high, tallied $134.4 million, against the company’s high estimate of $97.7 million, with just two of the 54 lots unsold. On Tuesday, Christie’s International’s sale took $74.2 million as 85 percent of lots found buyers. Last night’s results prompted some dealers to proclaim the end of the market slump. “The art vacation is over,” said New York art dealer Jack Tilton , commenting on the Sotheby’s auction. “Art has come back more than stocks or housing.” Lowered Estimates Others, including art adviser Todd Levin , ascribed the high selling rates to the lowered estimates on lots. Sotheby’s total yesterday paled against the company’s May 2008 record tally of $362 million. “The auction houses got realistic quickly enough,” said Levin. “Estimates have come down 50 to 75 percent; expectations have been lowered to such a degree that everything looks rosy.” The fashion designer Valentino Garavani bought David Hockney’s painting “California Art Collector” for $7.9 million and the Jean Dubuffet sculpture “Clochepoche” for $1.1 million at yesterday’s auction, which he declared “bellissima,” Italian for “beautiful.” Michael Ovitz and hedge-fund manager Thomas Sandell were also at the sale. Another winner was Warhol’s radiant 1965 red and green “Self Portrait,” which sold for $6.1 million to London jeweler Laurence Graff , against a $1.5 million high estimate. The painting was a gift from Warhol to Cathy Naso, a former receptionist at the artist’s drug- and sex-addled Factory, who had owned the painting since 1967. She kept it in the closet for 42 years for safekeeping, according to Sotheby’s. Slow Start The sale got off to a slow start, with 20 lots from the estate of an Ohio couple. Mary Schiller Myers and Louis S. Myers’s collection tallied $24.5 million and included Alice Neel’s 1970 “Jackie Curtis and Rita Red,” depicting a striking pair of cross-dressers, which sold for an artist auction of $1.65 million, triple the high estimate. The sale also included four lots that Dutch financier Louis Reijtenbagh was selling anonymously. The collector settled lawsuits with banks earlier this year and sold $58.5 million of art at Sotheby’s evening Impressionist and modern sale last week. One of Reijtenbagh’s offerings, Jean-Paul Riopelle’s “Filets Frontiere,” estimated to sell for up to $1.2 million, was pulled before the sale, at the financier’s request. Dubuffet’s child-like painting of Paris, the 1961 “Trinite Champs-Elysees,” which Reijtenbach paid $5.2 million for at Sotheby’s in New York in May 2006, fetched an artist auction record of $6.1 million. “The auction speaks for itself,” said Chicago collector Stefan Edlis, after Sotheby’s sale. “Collectors are suddenly more willing to part with their money.” Estimates don’t include commissions. To contact the reporters on this story: Lindsay Pollock in New York at lindsaypollock@yahoo.com ; Philip Boroff in New York at pboroff@bloomberg.net .

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Asian Stocks Rise as Japan Machinery Orders Beat Estimates; STX Pan Gains

November 10, 2009

By Patrick Rial and Kotaro Tsunetomi Nov. 11 (Bloomberg) — Asian stocks rose, driving the MSCI Asia Pacific Index higher for a fourth day, after Japan’s machinery orders increased more than economists expected and shipping rates climbed. Mori Seiki Co. , a maker of precision lathes, advanced 1.9 percent as orders for Japanese machinery climbed 10.5 percent in September. STX Pan Ocean Co., South Korea’s biggest bulk carrier, climbed 3.2 percent in Seoul as the Baltic Dry Index posted its steepest jump in a month. Newcrest Mining Ltd. , Australia’s largest gold producer, gained 0.7 percent as bullion advanced. Daikin Industries Ltd., the world’s No. 2 air conditioner maker, jumped 3.2 percent after lifting its annual profit forecast. The MSCI Asia Pacific Index advanced 0.7 percent to 118.83 as of 9:54 a.m. in Tokyo, extending its four-day increase to 3.6 percent. South Korea’s Kospi climbed 0.5 percent, while Australia’s S&P/ASX 200 Index gained 0.6 percent. Japan’s Nikkei 225 Stock Average added 0.7 percent to 9,922.12. The 10.5 percent increase in September for machinery orders , an indicator of business investment in three to six months, beat economist predictions for a 4.1 percent increase. Asian investors are also awaiting data on industrial production, inflation and investments from China later this morning. Futures on the Standard & Poor’s 500 Index rose 0.3 percent. The gauge was little changed yesterday and the Dow Jones Industrial Average climbed to a 13-month high for a second day. Earnings from bond guarantor MBIA Inc., engineering company Fluor Corp. and the video-game publisher Electronic Arts Inc. disappointed investors, while American Express Co. and Bank of America Corp. rallied. Mori Seiki, Komatsu Mori Seiki gained 1.9 percent to 921 yen. Fanuc Ltd., the world’s largest maker of industrial robots, climbed 1.6 percent to 7,740 yen. Komatsu Ltd. , the world’s second-biggest maker of construction equipment, advanced 0.9 percent to 1875 yen after the stock was raised to “neutral” from “underperform” at Merrill Lynch & Co. “The bottom is probably behind us for capital spending,” said Masamichi Adachi , a senior economist at JPMorgan Chase & Co. in Tokyo. “The retrenchment phase is over and the corporate sector as a whole should gradually pick up in a self-sustained way.” STX Pan Ocean jumped 3.2 percent to 11,350 won. Kawasaki Kisen Kaisha Ltd., Japan’s third-biggest shipping line operator by sales, rose 1.5 percent to 330 yen. The Baltic Dry Index , a measure of shipping costs for commodities, surged 3.9 percent yesterday, a ninth consecutive gain and the steepest rally since Oct. 8. Gold Futures Newcrest added 0.7 percent to A$35.41. Gold futures in New York increased for an eighth-straight session today in after- hours trading, rising 0.5 percent to $1,107.60 an ounce. The MSCI Asia Pacific Index has climbed 68 percent from a more than five-year low on March 9, outpacing gains by the S&P 500 and Europe’s Dow Jones Stoxx 600 Index. Stocks in the benchmark are valued at 22 times estimated earnings, compared with 17 times for the S&P 500 and 15 times for the Stoxx. Daikin rose 3.2 percent to 3,270 yen after raising its full-year forecast for net income, saying it sees signs of recovery in demand in China. To contact the reporters for this story: Patrick Rial in Tokyo at prial@bloomberg.net ; Kotaro Tsunetomi at ktsunetomi@bloomberg.net .

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Most U.S. Stocks Retreat as MBIA, Fluor, Electronic Arts Slump on Earnings

November 10, 2009

By Mary Childs Nov. 10 (Bloomberg) — Most U.S. stocks fell following six straight gains for the Standard & Poor’s 500 Index as earnings disappointed investors at companies from MBIA Inc. and Fluor Corp. to Electronic Arts Inc. MBIA , the world’s largest bond guarantor, tumbled 27 percent after posting a $727.8 million loss on insured credit derivatives. Fluor sank 7.6 percent as the engineering firm cut its full-year profit forecast, while Electronic Arts sank 6.4 percent following its 11th straight quarterly loss. The Dow Jones Industrial Average climbed to a 13-month high for a second day as American Express Co. and Bank of America Corp. rallied. “The market seems to go back and forth daily based on who reports earnings and what they report, and today you had a couple of modestly disappointing earnings repots,” said Dean Gulis, part of a group that manages $2.5 billion for Loomis Sayles & Co. in Bloomfield Hills, Michigan. “To some extent you’re having a reaction to a pretty strong day yesterday.” Eight stocks dropped for every five that rose on the New York Stock Exchange. The S&P 500 slipped less than 0.1 percent to 1,093.01 at 4:06 p.m. in New York after rallying 2.2 percent yesterday. The Dow increased 20.03 points, or 0.2 percent, to 10,246.97 for its highest close since Oct. 3, 2008. The S&P 500 climbed as much as 0.3 percent in the first hour of trading today, bringing the gauge within 1.5 points of its one-year high on Oct. 19. The index hasn’t advanced for seven straight days since 2006. The S&P 500 is down 30 percent from its 2007 peak even after rebounding 62 percent from a 12- year low in March. ‘Gradual Improvements’ “To get further rallies from here, we’ll have to see continuation of gradual improvements with respect to growth, business activity and hopefully a continuing slowdown in the pace of layoffs,” said Christopher Sullivan , who oversees $1.4 billion as chief investment officer at United Nations Federal Credit Union in New York. Of 430 companies in the S&P 500 that reported quarterly earnings since Oct. 7, 83 percent exceeded estimates, according to data compiled by Bloomberg . Average earnings per share slumped 15 percent in the period, a ninth-straight quarter of declining profits. Retailers Macy’s Inc., Wal-Mart Stores Inc. and J.C. Penney Co. are among companies scheduled to release results this week. MBIA, Fluor MBIA slid 27 percent to $3.52, its steepest loss since April 2008. The insurer reported a net loss of $727.8 million, or $3.50 a share, in the third quarter on a drop in the value of securities the company backs through the credit derivatives market. The average estimate of three analysts surveyed by Bloomberg was for a loss of $1.09 a share. Fluor declined 7.6 percent to $44.38 for its biggest tumble since March. The largest publicly traded U.S. engineering firm lowered its full-year earnings forecast after posting third- quarter profit of 89 cents a share. Analysts surveyed by Bloomberg estimated earnings of 90 cents on average. Electronic Arts lost 6.4 percent to $18.29. The second- largest video-game publisher reported its second-quarter loss widened to $391 million, or $1.21 a share. Excluding some items, per-share profit of 6 cents missed the 10-cent average estimate of analysts in a survey. Exxon Mobil Corp., the largest U.S. energy company, slipped 0.3 percent to $72.61. Crude-oil futures fell 38 cents to $79.05 a barrel in New York as Tropical Depression Ida weakened, allowing workers to return to offshore platforms in the Gulf of Mexico. AIG, Bank of America American International Group Inc . climbed 3.9 percent to $37.59. The insurer bailed out by the U.S. will be able to repay its Federal Reserve credit line and “much or all” of the Treasury Department’s investment if financial markets stabilize, Moody’s Investors Service said. AIG owed more than $44 billion on the credit line as of last week and has tapped more than $40 billion from Treasury facilities. Bank of America gained 1.7 percent to $16.03. Chief Executive Officer Kenneth D. Lewis said the largest U.S. lender by assets expects to achieve 45 percent of its $7 billion in cost savings from acquiring Merrill this year, ahead of the 25 percent anticipated when the transaction was completed. American Express Co. climbed 1.6 percent to $39.68. The largest credit-card issuer by purchases said worldwide spending climbed 3 percent in October as rising equities may have emboldened affluent customers. Health Stocks Gain Health-care stocks in the S&P 500 climbed 0.5 percent as a group, the most among 10 industries. Senate Majority Leader Harry Reid told reporters he expects to bring legislation to overhaul the U.S. health-care system up for debate next week. He believes the Senate can pass the measure by the end of the year. Johnson & Johnson , Pfizer Inc. and Abbott Laboratories added at least 0.8 percent. Bristol-Myers Squibb Co. gained 1.3 percent to $23.34. The drugmaker agreed to license Alder Biopharmaceuticals Inc.’s rheumatoid arthritis treatment in a deal that may be worth more than $1 billion. FedEx Corp. added 1.1 percent to $82.13. The second- largest U.S. package-delivery company projected it will handle about 8 percent more shipments on its busiest day before the Christmas holiday amid “positive signs” for the economy. Monsanto Co. climbed 5.2 percent to $73.66, the most since July, after reconfirming its plan to double 2007 gross profit in 2012. The world’s largest seed producer increased its expectation for 2010 sales of two seeds by at least 14 percent and said it will advance nine biotech seeds in the pipeline by January. Beazer, Priceline Rally Beazer Homes USA Inc. rose 8.7 percent to $5.10 after posting its first quarterly profit in three years. The homebuilder said revenue for the fiscal fourth quarter fell to $376.3 million from $649.8 million a year earlier, beating the $334.7 million average analyst estimate. Priceline.com Inc. added 18 percent to $204.22 for the stock’s steepest advance since February 2008 and the biggest gain in the S&P 500. The online travel agency reported third- quarter sales and profit that topped analysts’ estimates, buoyed by the summer travel season. The dollar was little changed after slumping to a 15-month low against the currencies of major U.S. trading partners yesterday. Shares of U.S. companies with the most overseas sales are doing best this year on speculation the dollar’s slide is boosting earnings. Dollar’s Impact S&P 500 companies generating more than half of their revenue abroad have beaten those doing business only in the U.S. by 27 percentage points, according to data compiled by research firm Bespoke Investment Group LLC. The falling dollar makes American goods more competitive overseas and boosts revenue when foreign currencies are brought back to the U.S. The S&P 500 is now trading at about 17 times its members’ estimated earnings , according to Bloomberg data, compared with an average ratio of 14.9 since the data starts in 2006. Jeremy Grantham , the chief investment strategist at Boston-based Grantham Mayo Van Otterloo & Co., wrote last month that the “fair value” for the S&P 500 is around 860, or about 21 percent below today’s close. Billionaire investor Kenneth Fisher said the S&P 500 will probably exceed 1,300 as early as February because the economy continues to rebound from the worst recession since the 1930s. The index will add up to 25 percent from last week’s close in the next three months, said Fisher, 58, who oversees $35 billion as chairman of Woodside, California-based Fisher Investments Inc. “It’s just a reversal of excessive pessimism,” Fisher, ranked by Forbes magazine as the 289th-richest person in the U.S., said in an interview yesterday. “We still have a lot more bull market to go because we had such a huge bear market.” To contact the reporter on this story: Mary Childs in New York at mchilds4@bloomberg.net .

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German Investor Confidence Declines in November on Weaker Economic Outlook

November 10, 2009

By Jana Randow Nov. 10 (Bloomberg) — German investor confidence declined for a second month in November as the prospect of expiring government stimulus programs and rising unemployment tempered expectations for economic growth. The ZEW Center for European Economic Research in Mannheim said its index of investor and analyst expectations, which aims to predict developments six months ahead, dropped to 51.1 from 56 in October. The median forecast in a Bloomberg News survey of 39 economists was for a decline to 55. The benchmark DAX share index has eased 3.5 percent in the past month amid concern the recovery will slow next year when government stimulus measures peter out and higher joblessness constrains consumer spending. Exports may also falter if a rebound in global trade runs out of steam and the euro continues to appreciate, making European goods more expensive abroad. “Earlier enthusiasm is now gradually giving way to realism,” said Carsten Brzeski , senior economist at ING Belgium SA in Brussels. “However, this is no reason to worry. The outlook still looks good, even though the German economy is about to enter calmer waters.” ZEW’s gauge of the current economic situation rose to minus 65.6 from minus 72.2 in October. The DAX index and the euro fell after the report and the yield on German 10-year government bonds slipped 3 basis to 3.27 percent. ‘Small Steps’ “Investors are signaling that they don’t expect a strong growth push next year,” ZEW President Wolfgang Franz said in a statement. “The recovery is going to progress in small steps.” Germany emerged from its worst recession since World War II in the second quarter. The government, which is spending 85 billion euros ($127 billion) to stimulate growth, last month raised its outlook for the economy, forecasting expansion of about 1.2 percent in 2010 after a 5 percent contraction this year. German exports and industrial production increased more than economists forecast in September, reports showed yesterday. Business confidence rose to a 13-month high in October and the country’s manufacturing industry grew for the first time in 15 months. The recovery has helped push the DAX up 52 percent from its March trough, a trend matched across Europe’s stock markets. Jobless Risk “Industrial production is recovering and foreign demand is picking up, but the economy won’t take off,” said Jens Kramer , an economist at Norddeutsche Landesbank in Hanover. “The consequences of the recession for the labor market are yet to come and that puts private consumption at risk.” Metro AG, Germany’s largest retailer, said on Nov. 3 that third-quarter profit declined 61 percent as rising joblessness eroded consumer spending across Europe, and forecast no improvement for the rest of the year. Euro-area unemployment will surge to 10.9 percent in 2011 from 9.7 percent currently, according to the European Commission. That may encourage the European Central Bank to leave its benchmark interest rate at a record low of 1 percent until the second half of next year. The euro’s 20 percent gain against the dollar since mid- February to $1.50 may also dull export growth, a key driver of economic expansion. “The recovery of the German economy depends strongly on a pickup of foreign demand,” said Stefan Bielmeier , an economist at Deutsche Bank AG in Frankfurt. “The question is whether that recovery is sustainable yet. I’d be careful.” To contact the reporter on this story: Jana Randow in Frankfurt at jrandow@bloomberg.net

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Asian Stocks Rise, Extending U.S. Rally; Asahi Glass, James Hardie Advance

November 5, 2009

By Jonathan Burgos Nov. 6 (Bloomberg) — Asian stocks rose, extending a surge in the U.S., after unemployment claims and worker productivity beat estimates and companies from Asahi Glass Co. to Toyota Motor Corp. boosted forecasts for this year. Asahi Glass, Asia’s largest glassmaker, climbed 5.5 percent in Tokyo, and Toyota, the world’s biggest carmaker, added as much as 1.7 percent after they narrowed their forecast annual losses. James Hardie Industries NV , the top seller of home siding in the U.S., advanced 2.1 percent in Sydney. Pioneer Corp. surged 8 percent after the maker of car-navigation systems said it needs less funds than previously expected as earnings improve. “Investors are likely to buy into exporter shares with the improvements in the U.S. economic data,” said Juichi Wako , a senior strategist at Tokyo-based Nomura Holdings Inc. The MSCI Asia Pacific Index gained 0.50 percent to 115.26 as of 9:50 a.m. in Tokyo, trimming its loss this week to 1 percent. The gauge has slumped 4.8 percent from a 13-month high on Oct. 20 amid concerns the withdrawal of stimulus measures will cause the global recovery to falter. The index is still up 64 percent from a five-year low on March 9. Japan’s Nikkei 225 Stock Average advanced 1 percent to 9,814.95. Australia’s S&P/ASX 200 Index climbed 1.5 percent in Sydney. New Zealand’s NZX 50 Index added 0.5 percent in Wellington. To contact the reporter for this story: Jonathan Burgos in Singapore at jburgos4@bloomberg.net .

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German Business Confidence Rises to 13-Month High as Recovery Accelerates

October 23, 2009

By Christian Vits Oct. 23 (Bloomberg) — German business confidence rose to a 13-month high in October, improving the outlook for growth in Europe’s largest economy. The Ifo institute in Munich said its business climate index, based on a survey of 7,000 executives, rose to 91.9 from 91.3 in September. That’s the highest reading since September last year. Economists expected a gain to 92, according to the median of 40 forecasts in a Bloomberg News survey . The index reached a 26-year low of 82.2 in March. The government, which is spending 85 billion euros ($127 billion) to haul Germany out of its worst recession since World War II, last week raised its economic forecasts, predicting growth of 1.2 percent in 2010 after a contraction of 5 percent this year. A separate report today showed the country’s manufacturing industries expanded in October for the first time in 15 months. Rising unemployment, the euro’s increase against the dollar and the expiry of stimulus measures may temper the recovery next year. “Second-half growth data will be robust,” said Luigi Speranza , an economist at BNP Paribas in London. “But the outlook for 2010 remains fragile. Unemployment is likely to keep edging higher and wage growth lower, which should prevent a significant improvement in consumer demand.” Ifo’s gauge of the current situation increased to 87.3 from 87.1. An index of executives’ expectations advanced to 96.8, the highest since May 2008, from 95.7. U.K. Recession Data across Europe today showed some economies are recovering better than others. While French consumer spending rose in September for the first time in three months, the U.K. statistics office said gross domestic product unexpectedly dropped 0.4 percent in the third quarter, keeping its economy mired in recession. Germany’s manufacturing sector returned to growth in October after 14 months of contraction, a survey of purchasing managers by Markit Economics showed. Service industries expanded for a third month, the PMI report showed. “We’ve seen an improvement in expectations mainly in the manufacturing industry,” Ifo economist Gernot Nerb said in a Bloomberg Television interview. “To some extent a better export outlook has helped. In the longer run I think the exchange rate could cause problems.” Euro Strength The euro has appreciated 20 percent against the dollar since mid-February and reached a 14-month high of $1.50 this week, eroding export returns. It was little changed at $1.5030 after the Ifo report was released. Volkswagen AG , Europe’s biggest carmaker, predicts the worldwide automotive market won’t match pre-recession levels until 2013 at the earliest. “There are growing signs that the worst of the crisis may now be behind us, but it will take time for the markets to recover,” Chief Executive Officer Martin Winterkorn said on Oct. 8. In addition to the emergency stimulus measures, Chancellor Angela Merkel’s Christian Democrats are prepared to cut taxes by 20 billion euros after they form a coalition government with the Liberal Democrats, negotiator Steffen Kampeter said on Oct. 16. “The economy still is on a drip but will return to sustainable growth next year,” said Carsten Brzeski , an economist at ING Groep NV in Brussels, who expects overall output to expand by 2 percent in 2010. “We haven’t seen the election effect so far and the support measures taken are also designed to spur private investment.” ECB Rates The picture remains mixed. While German factory orders rose for a sixth month in August and industrial output gained, exports unexpectedly fell. Investor confidence declined for the first time in three months in October amid concerns the recovery could falter. The European Central Bank has cut its benchmark interest rate to a record low of 1 percent and is lending banks as much money as they want for up to a year in an effort to get credit flowing through the economy of the 16 nations sharing the euro. President Jean-Claude Trichet has said it’s too early to withdraw monetary policy stimulus. To contact the reporter on this story: Christian Vits in Frankfurt at cvits@bloomberg.net

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Gold Climbs to Another Record as Dollar, Outlook for Inflation Spur Demand

October 13, 2009

By Nicholas Larkin and Kim Kyoungwha Oct. 13 (Bloomberg) — Gold rose to a record in London and New York on speculation that a weakening dollar and faster inflation will boost the appeal of precious metals. Platinum and palladium climbed to the highest price in more than a year and silver advanced to its costliest since July 2008. Bullion, which usually moves inversely to the dollar, is on course for a ninth annual gain after the dollar dropped 6.6 percent this year against a basket of six currencies. Gold reached $1,066.55 an ounce in London, while futures climbed to $1,067.70 in New York, surpassing the previous highs on Oct. 8. “There’s lots of concern about the weakness in the U.S. dollar and it’s this that has been driving gold,” Peter Fertig , the owner of Quantitative Commodity Research Ltd. in Hainburg, Germany, said by phone. “The fear that central bank exit strategies will come too late to prevent inflation is giving support to gold.” Immediate-delivery bullion gained $9.33, or 0.9 percent, to $1,066.43 an ounce by 11:18 a.m. local time. Spot prices have advanced 21 percent this year. December gold futures were 0.9 percent higher at $1,067.40 an ounce on the New York Mercantile Exchange’s Comex division. The price of gold in the morning “fixing” in London, used by some mining companies to sell production, rose to a record $1,064.50 from $1,058.75 at the afternoon fixing yesterday. “As we start to see more evidence of economic recovery, we might see the momentum catalyst push gold higher,” said Darren Heathcote , head of trading at Investec Bank Ltd. in Sydney. President Barack Obama has increased U.S. marketable debt to a record as he borrows to reignite growth in the world’s biggest economy. That’s boosted speculation increased money supply will debase the currency and spur inflation. Federal Reserve The Federal Reserve has cut its main interest rate almost to zero and backed asset purchases and credit programs to combat the recession. Chairman Ben S. Bernanke is leading plans to buy mortgage-backed securities, federal agency debt and Treasuries. U.S. consumer prices will expand 1 percent this quarter and 1.9 percent and 1.8 percent in the following two quarters respectively, according to the median estimate of 66 economists surveyed by Bloomberg. Oil futures, used by some investors as an inflation guide, gained as much as 0.9 percent to $73.96 a barrel today in New York, after climbing 2.1 percent yesterday. The U.S. Dollar Index , which last week dropped to the lowest level in almost 14 months, was 0.2 percent lower today. Outperformed Gold Other precious metals have outperformed gold this year. Silver climbed 58 percent this year, while platinum, which advanced to a 13-month high today, is up 46 percent. Palladium, the best-performing precious metal in 2009, has jumped 79 percent and reached a 14-month high today. Gold holdings in the SPDR Gold Trust, the biggest exchange- traded fund backed by bullion, were unchanged for a third day at 1,109.31 metric tons yesterday, according to the company’s Web site. Assets in ETF Securities Ltd. ’s exchange-traded products added 0.3 percent to a record 8.441 million ounces yesterday, its Web site showed. “There is less obvious support for the current price from the fundamentals of supply and demand excluding investment,” Citigroup Inc. said in a report. “Mine supply has recently been sufficient to meet all fabrication demand. Excess demand for gold must therefore be supported by investors.” Gold will trade at $1,025 an ounce in the next three months, up from a previous forecast of $950, Citigroup said in the report, citing increased demand and a weakening dollar. The bank raised its 6-12 month estimate to $1,050, from $975. Precious Metals Among other precious metals for immediate delivery in London, silver rose 1.6 percent to $17.985 an ounce. An ounce of gold now buys about 59.3 ounces of silver in London, according to Bloomberg data. That’s down from a high of 83.6 ounces in October last year, which was the most since 1995. Palladium jumped as much as 2.1 percent to $336 an ounce, the highest price since Aug. 11, 2008, and was last at $333.90. Platinum added 1.5 percent to $1,361 an ounce, after earlier reaching $1,364, the highest price since Sept. 8, 2008. To contact the reporters on this story: Nicholas Larkin in London at nlarkin1@bloomberg.net ; Kyoungwha Kim in Singapore at Kkim19@bloomberg.net

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Stocks Climb Worldwide as Dollar, Treasuries Fall; Industrial Metals Gain

September 30, 2009

By Daniel Hauck Sept. 30 (Bloomberg) — Stocks rallied worldwide, with Europe’s benchmark index posting the best quarterly advance this decade, as Chinese manufacturing rose and the International Monetary Fund cut its estimate of bank writedowns. Metals gained and the dollar fell. The Dow Jones Stoxx 600 Index climbed 0.7 percent at 10:09 a.m. in London, extending its third-quarter surge to 19 percent. Futures on the Standard & Poor’s 500 Index gained 0.6 percent. The dollar declined against 14 of the 16 most-traded currencies tracked by Bloomberg. Copper rose the most since Sept. 16. The extra yield investors demand to own developing-nation bonds instead of U.S. Treasuries narrowed by the most in two weeks. Manufacturing in China expanded for a sixth month, according to an index compiled by HSBC Holdings Plc. The IMF cut its prediction for global writedowns by 15 percent to $3.4 trillion, citing improving credit markets and economic growth. U.K. consumer confidence had its biggest jump in 14 years this month, according to GfK NOP. “Asset prices are getting to the stage where they are pricing in a much more benign environment by the middle of next year,” said Gary Jenkins , a strategist at Evolution Securities in London. The Stoxx 600’s advance since June is the biggest since the final quarter of 1999, while the Standard & Poor’s 500 Index has gained 15 percent, the steepest increase since 1998. The MSCI World Index has gained 18 percent in the past three months after the Group of 20 nations committed $12 trillion to revive global growth and countries from Germany and France to Hong Kong and New Zealand exited recessions. Micron, Infineon Technology shares helped lead today’s advance in Europe and Asia after Micron Technology Inc., the biggest U.S. producer of computer-memory chips, reported a smaller-than-estimated loss. Infineon Technologies AG , Europe’s second-largest maker of semiconductors, climbed 6.5 percent in Frankfurt, while Micron added 1.8 percent in German trading. U.S. futures gained before reports on gross domestic product, employment and business activity that may show the worst U.S. recession since the Great Depression eased and the economy probably is now recovering. The S&P 500’s 57 percent rebound from its 12-year low on March 9 pushed valuations to 20.2 times the reported earnings of its companies last week, the highest level since 2004, according to data compiled by Bloomberg. Copper, Lead Copper for three-month delivery rallied as much as 2.7 percent to $6,134.75 a metric ton on the London Metals Exchange. Lead added 2.4 percent to $2,285 a ton, and zinc rose 2.1 percent to $1,925.75. Gold climbed for a third day, trading 0.5 percent higher at $997.80 an ounce in London. The pound had its biggest gain in a week against the dollar, rising 0.7 percent, and strengthened for a third day versus the euro after the U.K. consumer confidence report. Australia’s dollar climbed to a 13-month high against the U.S. currency, gaining 1.1 percent, on better-than-estimated retail sales. U.S. government bonds fell, with the yield on the 10-year Treasury rising three basis points to 3.32 percent, as demand for the safety of government debt waned. The yield on the German 10-year bund increased one basis point to 3.24 percent. Emerging-market yield spreads fell six basis points to 3.32 percentage points, the biggest one-day decline since Sept. 16, according to JPMorgan Chase & Co. ’s EMBI+ Index. Borrowing costs dropped nine basis points in Ukraine after the government said NAK Naftogaz Ukrainy, the state-run energy company that’s restructuring its debt, will make interest payments on its Eurobonds. The MSCI Emerging Markets Index added 0.3 percent, led by shares in India and China . The gauge extended its year-to-date rally to 61 percent, the biggest for the period since data for the measure began in 1988. To contact the reporters on this story: Daniel Hauck in London at dhauck1@bloomberg.net .

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New Zealand Unexpectedly Exits Recession; Currency Surges to 13-Month High

September 22, 2009

By Tracy Withers Sept. 23 (Bloomberg) — New Zealand’s economy has emerged from its worst recession in three decades, unexpectedly expanding for the first time in six quarters on rising consumer spending and exports of logs and dairy products. Gross domestic product increased 0.1 percent in the three months to June 30 following a 0.8 percent drop in the first quarter, Statistics New Zealand said in Wellington today. The median estimate in a Bloomberg survey of 12 economists was for a 0.2 percent contraction. New Zealand’s currency rose to a 13-month high as traders increased bets that Reserve Bank Governor Alan Bollard may raise interest rates sooner than he indicated earlier this month. Bollard, who expected a second-quarter contraction, said on Sept. 10 the benchmark interest rate needed to stay at a record-low 2.5 percent until late next year. “We see the scope for growth to add pressure to monetary policy expectations over the second half,” said Bernard Doyle , economist at Goldman Sachs JBWere Ltd. in Auckland. “We continue to believe the first rate hike will come mid-next year, but with a reasonable chance of an earlier move.” New Zealand’s dollar surged as high as 73.12 U.S. cents from 71.94 cents before the report was released. It bought 72.83 cents at 11:45 a.m. in Wellington. Bollard forecast the economy shrank 0.1 percent in the second quarter and would grow 0.1 percent in the three months through September. The Treasury Department said on Sept.7 that a “small” second-quarter contraction would mark the end of the recession. Annual Decline The economy shrank 2.1 percent from a year earlier. Gross domestic product began contracting early last year after Bollard raised interest rates in 2007 to counter a housing boom and consumer spending that was being fanned by excessive borrowing. An ensuing collapse in world trade and tight credit conditions stalled business confidence and demand for exports. The New Zealand dollar’s 28 percent gain against the U.S. dollar in the past six months also curbed overseas shipments, which make up a third of the economy, and a slump in international travel reduced tourist arrivals. As sales slumped, companies shut plants and fired workers, pushing up the jobless rate to a nine-year high of 6 percent in the three months ended June 30. Record-low interest rates, government spending and fewer New Zealanders heading overseas for higher-paid jobs has helped revive the housing market and consumer confidence. House Prices Second-quarter house prices rose for the first time in six quarters and have continued to gain, according to the government. Consumer confidence rose to an 18 month high in June, according to a Westpac Banking Corp./McDermott Miller Ltd. poll. Household spending , which makes up 60 percent of the economy, rose 0.4 percent in the second quarter, the first gain in six quarters, today’s report showed. Sales of food and other so-called non-durable goods gained 0.8 percent and spending on services increased, led by medical and health. Purchases of durable items such as cars, furniture and home appliances declined. Warehouse Group Ltd., the nation’s largest discount retailer, said on Sept. 11 that sales increased in the three months ended Aug. 2, the first quarterly gain since early 2008. Exports of goods and services increased 4.7 percent in the second quarter amid higher shipments of dairy products and lumber. Tourist spending in New Zealand declined. Import volumes slumped 3.8 percent. Business Investment Business investment increased 1.3 percent as companies spent more on software and on oil gas exploration, the statistics agency said. Plant and machinery investment fell. Inventories declined by a record amount as demand for exports was met through existing stock rather than production, the agency said. Curbing growth, residential building fell 2.6 percent in the quarter and government spending also shrank, led by education. Gross national expenditure, which excludes exports and imports, contracted 2.1 percent, today’s report showed. Output from primary industries rose 1.5 percent in the quarter, led by logging amid increased demand from China, the agency said. Mining output also gained as the Maari oil field reached full production. Farm output rose 0.5 percent. Output from goods-producing industries slipped, led by a 1.3 percent drop in manufacturing and a 1.9 percent decline in construction. Service industries output was unchanged as less government activity offset an increase in real-estate services. The GDP deflator, a measure of prices, rose 1.9 percent in the year ended June 30. To contact the reporter on this story: Tracy Withers in Wellington at twithers@bloomberg.net .

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