taiwan

Taiwan, China Say They Reach a Basic Agreement on Reducing Trade Tariffs

June 13, 2010

By Bloomberg News June 14 (Bloomberg) — China and Taiwan said they reached a basic agreement on tariff reductions in a third round of talks to boost economic and trade relations. “We are still working on details, but the basic agreement has been reached,” Tang Wei, head of Taiwan, Hong Kong and Macau affairs at China’s Ministry of Commerce, said late yesterday after talks in Beijing with Huang Chih-peng , director- general of Taiwan’s Bureau of Foreign Trade. An agreement would lower tariffs on more than 200 items exported from China to Taiwan including car parts, petrochemicals and machinery, the officials said. The exact items have yet to be decided, and Tang said he hoped that Taiwan would export textiles and car parts to China. An accord would allow service providers to compete in the two markets, he said. Taiwan President Ma Ying-jeou has been pushing for an accord to bolster export-dependent Taiwan’s economy after a Chinese trade agreement with the Association of Southeast Asian Nations began this year. Ma is also seeking better relations with the island’s biggest trading partner and No. 1 investment destination. Any accord “will boost market sentiment and confidence,” Tony Phoo , an economist at Standard Chartered Plc, said by phone in Taipei yesterday. Still, “the preferred-tariff treatment won’t happen at least for the next one to two years.” Cross-strait ties improved after President Ma took office in May 2008 and abandoned his predecessor’s pro-independence stance. Ma’s administration has said the Economic Cooperation Framework Agreement, or ECFA, may be signed this month. ‘Milestone’ “Signing the ECFA is a route that Taiwan must take and it is a milestone,” Liu Bih-rong , a professor of political science at Soochow University in Taipei, said by phone. “It signifies how the relationship between the two sides has recovered and more importantly, it will pave the way for more free-trade agreements and benefits.” Taiwan and China agreed in December to boost cooperation in fishing, agriculture and industrial goods at the fourth cross- strait talks as relations reached their warmest in 60 years. In November, they signed three memoranda of understanding to ease access to each other’s banking, securities and insurance industries. “Taiwan has abundant capital, advanced production technology, rich enterprise-management experience and international sales channels,” China’s Tang said in the opening remarks. “On the other hand, the mainland has very rich resources and a lot of labor and huge potential markets.” Trade Jumps Trade between the mainland and Taiwan increased 68 percent in the first four months of 2010 compared with same period last year, and Taiwan investment rose 45 percent, China’s Tang said today. An agreement would be in “both parties’ interests, so we have better resource allocation and cooperation,” Tang said. An agreement with China is “vital to Taiwan’s economy,” Chiang Pin-kung , chairman of the Taipei-based Straits Exchange Foundation, said in February. An agreement would help to ensure Taiwan can compete with regional rivals and may prompt other nations to agree to similar accords with the island, Chiang said. North Korea and Taiwan are the only two economies in the region that haven’t signed trade agreements with China and Asean, which groups Singapore, Thailand, Indonesia, Malaysia, Vietnam, Myanmar, Laos, Cambodia, the Philippines and Brunei. Taiwan has been unable to join the wave of bilateral and multilateral free-trade agreements in recent years because China regards the island as a rebellious province. Taiwan’s Democratic Progressive Party opposes the trade accord and on Dec. 20 rallied 100,000 people in Taichung city to protest Ma’s China policies. “Even if the opposition gains power in future, with such a framework it would be difficult for them to reverse the entire decision,” said Soochow University’s Liu. — Henry Sanderson in Beijing and Weiyi Lim in Taipei. Editors: Carey Sargent , Dick Schumacher . To contact Bloomberg News staff on this story: Henry Sanderson in Beijing at 86-10-6649-7548 or hsanderson@bloomberg.net

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Korea Will Curb Banks’ Currency Derivatives to Reduce Volatility of Won

June 13, 2010

By Eunkyung Seo and Frances Yoon June 13 (Bloomberg) — South Korea will tighten rules on holdings of currency derivatives at domestic and foreign banks to reduce volatility in capital flows and the won. Foreign bank branches will be required to trim holdings of foreign-exchange derivatives to 250 percent of equity capital and domestic banks to 50 percent under changes recommended to President Lee Myung Bak’s regulatory reform committee, the government and central bank said in a joint statement. South Korea joins developing nations including Taiwan, Brazil, Colombia and Russia that are tightening rules on capital flows to limit swings in their currencies. The won slumped 9.2 percent since April 1, more than double the decline in any of Asia’s other 10 most-used currencies. Banks will be immediately prohibited from increasing positions beyond the limit, will have three months to meet the ceiling and two years to cover existing positions. The ceiling on derivatives contracts to meet corporate settlements will drop to 100 percent from 125 percent. The new rules are to reduce systemic risks, which should serve as a safety net to avert a crisis, the government and central bank said in today’s statement. South Korea’s won slumped 3.6 percent to 1,246.10 to the dollar last week as government officials flagged the currency regulations. The government is concerned excessive investment in won forwards has caused volatility and increased short-term debt at the nation’s banks, said Frances Cheung , a senior strategist at Credit Agricole CIB in Hong Kong. ‘Avert Crisis’ The government aims to curtail won “volatility and avert a financial crisis,” Vice Finance Minister Yim Jong Yong said in an interview this week. The changes will respect the principles of an open economy and aren’t intended to deter foreign investment, he said. Forwards are agreements in which assets are bought and sold at current prices for future delivery. Banks often borrow foreign currencies to offset exposure to price swings on the contracts. South Korea is acting after it hosted the Group of 20 nations meeting in Busan on June 4, where countries said they will try to agree on new rules for capital flows by December 2012 to avoid a repeat of the global financial crisis. In January, Taiwan set a one-week deadline for money brought into the country to be invested or repatriated and in April it ordered a review of loans to flush out speculators. Herd Behavior Korean authorities stressed the policy isn’t aimed at setting a direction for the won, and they will take proper actions should the measures prompt herd behavior and shake the won. They pledged to supply foreign exchange should liquidity conditions suddenly worsen. Domestic banks will need to raise the ratio of mid- to long-term financing in foreign loan portfolios to 100 percent from 90 percent, while foreign banks will be asked to follow the rules on managing foreign-currency liquidity risk such as currency-specific management, an early warning system, crisis analysis and contingency funding plans. The won’s one-month implied volatility, a measure of exchange-rate swings used to price options, climbed 170 percent this quarter, the biggest jump among 47 global currencies. Nine of the 10 biggest increases are in Asia. The won also has the highest expected fluctuations at 25 percent, compared with 13 percent for the Indonesian rupiah and the Malaysian ringgit. Timing ‘Stinks’ “The timing stinks and could actually heighten volatility in the near-term,” Win Thin , senior currency strategist at Brown Brothers Harriman & Co., wrote in a June 10 report. Win, who says the government should have introduced the measures in April as the currency was declining, forecasts the won may drop to 1,292 by the first half of July. The regulations may ultimately lead to a shortage of dollars, he said. South Korea’s short-term external debt totaled $154.62 billion at the end of March, accounting for 57 percent of all overseas borrowings, Bank of Korea data show. At the end of 2008, short-term debt accounted for 75 percent of the total. “If the government is successful in tapering down volatility, it will probably be better for the wider economy,” said Joseph Lau , a Hong Kong-based Korea economist for Credit Suisse Group AG. Still, “anything offshore is out of the reach of authorities, and people can still take positions against the Korean won. There’s a limit to what they can do to reduce volatility.” Vulnerable South Korea is vulnerable to a surge in capital flows as a small, open economy, the finance ministry’s Yim said, noting that $65 billion was removed from the country in the four to five months after the 2008 collapse of Lehman Brothers Holdings Inc. Yim signaled continuing government intervention in the currency market, saying it will take “smoothing-operation” measures to stabilize the market and discourage herd behavior. Kim Yi Tae, director of the ministry’s foreign-exchange market division, said in an interview June 9 that the measures are not “capital controls as we’re not intending to levy transaction taxes.” JPMorgan Chase & Co. estimated total forward contracts at foreign-bank branches in South Korea would be limited to about $35 billion under the new rules, compared with a current level of about $40 billion to $60 billion, in a research report published June 10. “I don’t think the government is trying to roll back the market’s liberal or open measures from the last decade,” said Lau at Credit Suisse. Still, “if it is increasingly difficult for foreign banks to find profitable action in Korea they might move out.” Editors: Sandy Hendry, Jim McDonald To contact the reporters on this story: Frances Yoon in Seoul at fyoon2@bloomberg.net Eunkyung Seo in Seoul at eseo3@bloomberg.net

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Taiwan’s housing market enters bubble territory

June 11, 2010

Record-high house price increases in Taiwan are prompting fears of property bubble. House prices were up 19.97% (18.46% in real terms) during the year to end-Q1 2010, according to Sinyi Real Estate.

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Asian Stocks Rise to One-Week High on Signs of Recovery Bond Risk Drops

June 10, 2010

By Nicolas Johnson and Anna Kitanaka June 11 (Bloomberg) — Asian stocks rose to a one-week high on an increased estimate of technology spending and a measure of bond risk declined after the European Central Bank said it will extend measures to battle the region’s debt crisis. The MSCI Asia Pacific Index of equities climbed 1.3 percent to 112.51 at 2:04 p.m. in Tokyo. The cost of protecting Asia- Pacific corporate and government bonds from non-payment fell the most since May 25, according to traders of credit-default swaps. Standard & Poor’s 500 Index futures were little changed. The euro strengthened, heading for its first weekly gain in three. Computer-related companies led stocks higher after Acer Inc. , the world’s largest vendor of laptop computers, said May sales jumped 45 percent and Taiwan Semiconductor Manufacturing Co., the biggest maker of custom chips, said its optimistic about the chip industry and the global economy for the second half of 2010. Asian markets extended a worldwide rally after the ECB raised its economic growth forecast and said it will continue to offer unlimited cash and buy government bonds. “We’re very much on track in terms of Europe getting through its issues,” said Tim Schroeders , who helps manage about $1.1 billion at Pengana Capital Ltd. in Melbourne. “Overall the signs are encouraging. Investors generally are prepared to take more risk today.” Almost eight times as many stocks advanced as declined in the MSCI Asia Pacific Index, with information-technology companies rising the most among the measure’s 10 industry groups. Japan’s Nikkei 225 Stock Average jumped 1.8 percent, the biggest increase among equity gauges in Asia. Investor Optimism “People are now optimistic about the global economy,” said Juichi Wako , a senior strategist at Tokyo-based Nomura Holdings Inc. “Investors who had avoided risk assets have started buying them.” Acer climbed 3.1 percent to NT$79.2 in Taipei, its highest level in a week. Hon Hai Precision Industry Co. , the manufacturer for the Apple Inc.’s iPhone and iPad, increased 1.3 percent to NT$119, after saying May revenue rose 78 percent from a year earlier. Taiwan Semi gained 1.3 percent to NT$60.2. Chairman Morris Chang said he is upbeat about the chip industry and the global economy in the second half of this year. The chip market is “still very good,” he said yesterday. Global sales of microchips will rise 28 percent to $290.5 billion this year, boosted by demand in China and India, compared with a November forecast of 10 percent growth, the Semiconductor Industry Association said yesterday in the U.S. Growing Industry Tokyo Electron Ltd., the world’s second-largest maker of equipment to manufacture semiconductors, climbed 3.2 percent to 5,500 yen. Samsung Electronics Co. , Asia’s biggest chipmaker, advanced 2.5 percent to 792,000 won in Seoul. The S&P 500 surged 3 percent yesterday on reports of accelerating growth from China, Japan and Australia. S&P futures were little changed before a report today that may show sales at U.S. retailers rose in May at the slowest pace of the year. Purchases increased 0.2 percent following a 0.4 percent April gain, according to the median estimate of 76 economists surveyed by Bloomberg News. The Markit iTraxx Asia index of 50 investment-grade borrowers outside Japan fell 9 basis points to 142 basis points, on course for its biggest daily drop since May 27, according to Royal Bank of Scotland Group Plc and CMA DataVision in New York. The euro strengthened to $1.2106 and 110.85 yen, bringing its gain for the week against the dollar to 1.2 percent following two weeks of losses. Against the yen, it’s set to rise 0.9 percent, snapping a six-week decline that was the longest since the euro’s introduction in 1999. European Aid The ECB is buying state debt and pumping unlimited funds into the banking system to support the 16-nation currency. The MSCI World Index tumbled 8 percent and the euro weakened 15 percent against the dollar this year on concern countries from Greece to Spain will struggle to cut deficits and repay debt. Earlier this week, Federal Reserve Chairman Ben S. Bernanke said the U.S. central bank will act as needed to aid financial stability and economic growth after restarting emergency currency-swaps to help contain Europe’s debt crisis. “The panic scenario has been eliminated for now and the euro may grind higher,” said Phil Burke , chief dealer for foreign-exchange trading at JPMorgan Chase & Co. in Sydney. “There should be a slightly bullish bias short term.” Goldman Sachs Group Inc. yesterday reversed a forecast for the euro to rise, saying it will fall to a seven- year low of $1.15 as the concerns about sovereign debt and political uncertainty spur investors to sell the currency. Crude oil traded at $75.28, near a one-month high. Treasuries rose, trimming a weekly decline, before a U.S. report that economists said will show sales at retailers increased in May at the slowest pace of the year. To contact the reporters for this story: Nicolas Johnson in Tokyo at nicojohnson@bloomberg.net ; Anna Kitanaka in Tokyo at akitanaka@bloomberg.net .

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European Stocks Climb on Global Growth BHP, Mining Shares Jump

June 10, 2010

By Sarah Jones June 10 (Bloomberg) — European stocks rose for a second day, led by a rally in mining companies, as economic reports from China to Australia reassured investors the global recovery is intact. Shares of BP Plc pared some losses. BHP Billiton Ltd., the world’s largest mining company, and Rio Tinto Group jumped at least 3.2 percent after a report that Australia will announce “major changes” to its proposed mining tax. Daimler AG led automakers higher after the company forecast Mercedes-Benz sales will advance at twice the rate of the overall market in 2010. BP fell 6.7 percent, paring losses of as much as 12 percent, amid growing pressure over its failure to halt the worst oil spill in U.S. history. The benchmark Stoxx Europe 600 Index climbed 1.6 percent to 248.46. The gauge is still down 8.7 percent from this year’s high on April 15 amid continuing concern that European nations will struggle to fund their budget deficits. “We are still seeing global growth,” said Colin Mclean , who helps manage 650 million pounds ($944 million) at SVM Asset Management Ltd. in Edinburgh. “China has brought down its growth rate and the U.S. is still growing, which are powerful drivers for the global economy. BP has also rallied a bit from the U.S. close and we are seeing some institutions switch from Royal Dutch Shell Plc to BP.” ECB Meeting European Central Bank President Jean-Claude Trichet said interest rates in the 16-nation euro region are “appropriate,” indicating he sees no immediate need to cut borrowing costs any time soon. He made the comments at a press conference in Frankfurt today after the ECB left its benchmark rate at a record low of 1 percent. The ECB will extend its offerings of unlimited cash and keep buying government bonds for now as it tries to ease tensions in money markets and fight the European debt crisis, Trichet said. Germany’s highest constitutional court rejected an attempt by a lawmaker who sought an emergency order blocking the nation from participating in the euro-area rescue fund. The Bank of England kept its bond-stimulus program in place and left its benchmark interest rate at a record low to aid the economy as Prime Minister David Cameron prepares the biggest budget cuts since at least the early 1980s. Stocks climbed today after Australian jobs and Japan’s economic growth beat economist estimates, easing concern that Europe’s debt crisis will curb growth around the world. A separate report showed China’s exports jumped 48.5 percent in May from a year earlier, the biggest gain in more than six years. National benchmark indexes advanced in all of the 18 western European markets except Luxembourg. The U.K.’s FTSE 100 Index rose 0.9 percent. Germany’s DAX Index climbed 1.2 percent and France’s CAC 40 Index increased 2 percent. Spanish Bonds Spain’s IBEX Index surged 3.7 percent as demand for the nation’s government debt rose. Spain sold 3.9 billion euros ($4.7 billion) of a new 2013 note, with demand increasing as yields driven higher by the region’s debt crisis lured buyers. Investors bid to take up 2.1 times the amount of the securities on offer. That compared with a so-called bid-to-cover ratio of 1.8 when three-year notes were sold in April. Banco Santander SA , Spain’s largest lender, rallied 5.2 percent to 8.03 euros, its biggest gain in more than three weeks. Rudd Tax BHP climbed 3.2 percent to 1,875.5 pence after the Herald Sun newspaper reported that Australian Prime Minister Kevin Rudd may announce “major changes” to his proposed resources super profits tax. The Melbourne-based newspaper didn’t say where it got the information. Rio Tinto , the world’s third-largest mining company, climbed 3.7 percent to 3,262 pence. Xstrata Plc, which has shelved spending on A$6.6 billion ($5.6 billion) of Australian projects because of the planned mining tax, climbed 4.3 percent to 1,003 pence. Daimler rallied 3.1 percent to 43.26 euros after the world’s second-biggest luxury carmaker forecast Mercedes-Benz sales to double the rate of the overall market in 2010 on demand from China. “We want to grow at least 7 percent,” sales chief Joachim Schmidt said at a briefing with reporters June 8 at the carmaker’s headquarters in Stuttgart, Germany. “We’re well under way to achieve our goal.” Damaged Well BP slipped 6.7 percent to 365.5 pence. The shares earlier tumbled as much as 12 percent to 345.15 pence, its lowest level since 1997 before adjusting for dividends, following a 16 percent selloff in the company’s American depositary receipts yesterday. The cost to protect against a default on the energy company soared to a record and bond prices plummeted after an estimate its damaged well is leaking more oil than previously calculated. BP said today in a statement that it was not aware of any reason for recent share price movements and added that it is facing the Gulf of Mexico oil spill as a “strong company” that is generating cashflow. Lafarge SA , the world’s biggest cement maker, jumped 5.1 percent to 49.16 euros and Cie. de Saint-Gobain SA climbed 6.3 percent to 32.19 euros. Citigroup Inc. raised its recommendation for both companies to “buy” from “hold,” saying a recent selloff had “presented an opportunity for some shorter-term value trades.” ARM Holdings Plc , the U.K. designer of semiconductors used in Apple Inc.’s iPhone, rallied 5.9 percent to 290.1 pence. The shares earlier rose as much as 32 percent amid speculation that Apple may be looking to buy the company. Spokespeople for ARM and Apple didn’t immediately return calls seeking comment. Denied Speculation ARM , which has four to five chips in each handset of some smartphones, in April denied speculation that Apple may bid for the company. The shares also advanced as Taiwan Semiconductor Manufacturing Co., the world’s largest supplier of made-to-order chips, said sales rose 38 percent in May. Separately, the Semiconductor Industry Association today forecast global sales of microchips will rise 28 percent this year. That compares with a November forecast of 10 percent growth. CSR Plc, a maker of microchips used in Nokia Oyj mobile phones, climbed 1.2 percent to 399.5 pence. Infineon Technologies AG rallied 2.4 percent to 4.68 euros. Home Retail Group Plc lost 4.1 percent to 228.3 pence after the U.K. owner of Argos catalog stores and the Homebase home improvement chain said sales worsened in the first quarter as consumers pared spending on video games and televisions. Revenue at Argos outlets open at least a year declined 8.1 percent in 13 weeks through May 29. That compares with a 2.2 percent drop in last year’s second half. Same-store sales at Homebase fell 1.4 percent, after rising 2.6 percent in the second half. To contact the reporter on this story: Sarah Jones in London at sjones35@bloomberg.net .

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Stocks, Commodities Rally on Growth Outlook Euro Gains

June 10, 2010

By Nikolaj Gammeltoft and Claudia Carpenter June 10 (Bloomberg) — Stocks and commodities rallied after economic reports from China, Japan and Australia showed accelerating growth, while the euro strengthened for a third day and gold fell. BP Plc shares touched a 13-year low in London. The Standard & Poor’s 500 Index increased 2.3 percent to 1,079.77 at 11:32 a.m. in New York, while the MSCI Asia Pacific Index and the Stoxx Europe 600 Index rose more than 1 percent. The euro advanced 1 percent to $1.21, while the New Zealand dollar strengthened versus all 16 of its most-traded peers and Australia’s dollar rose against all but the so-called kiwi. Oil and copper rallied more than 1 percent. Ten-year Treasury yields increased 8 basis points to 3.26 percent. The biggest rise in Chinese exports in six years bolstered confidence that the world’s fastest-growing major economy will continue to fuel global growth. Japan’s economy extended at an annualized 5 percent rate in the first quarter. Demand for riskier assets was also stoked as the European Central Bank planned to extend offerings of unlimited cash and keep buying government bonds to fight the sovereign debt crisis. “China’s export numbers are looking better than expected and the European situation is beginning to stabilize so investors are less worried,” said Michael Holland , who oversees more than $4 billion as chairman of Holland & Co. in New York. “Plus the sell-off yesterday didn’t make a lot of economic sense so that set us up for a pop today.” Yesterday’s Losses Erased The S&P 500 fell 0.6 percent yesterday as a late-day slide wiped out an early 1.5 percent rally. Today’s gains came even as more Americans than anticipated filed applications for unemployment benefits last week, a sign firings remain elevated even as the economy is expanding. Initial jobless claims dropped by 3,000 to 456,000 in the week ended June 5, Labor Department figures showed. Economists surveyed by Bloomberg News projected 450,000 claims, according to the median forecast. Caterpillar Inc., Alcoa Inc. and American Express Co. climbed at least 3.7 percent to lead gains in all 30 stocks in the Dow Jones Industrial Average as the gauge rebounded above 10,000 after closing below for four straight days. BP Plc fell 5.4 percent 370.6 pence in London, paring losses of as much as 12 percent that dragged it to a 13-year low. The stock has tumbled almost 40 percent since the April 20 explosion at its Deepwater Horizon rig in the Gulf of Mexico, triggering the worst oil spill in U.S. history. Credit-default swaps insuring BP’s debt for five years surged 208 basis points to an all-time high 594, according to CMA DataVision. European Markets Eight shares rose for every one that fell on the Stoxx 600. Automakers were the biggest gainers among 19 industry groups on the European benchmark index. Daimler AG rallied 3.5 percent in Frankfurt after forecasting Mercedes-Benz sales will advance at twice the rate of the overall market on demand from China. Lafarge SA, the world’s biggest cement maker, gained 5.1 percent in Paris after Citigroup Inc. recommended buying the shares. Asian stocks rose the most in a week. Commonwealth Bank of Australia gained 1.3 percent in Sydney. Dentsu Inc., Japan’s biggest advertising agency, rose 2.6 percent in Tokyo. Developing-nation shares climbed for a third day, with the MSCI Emerging Markets Index advancing 1.4 percent. Benchmark indexes in Brazil, India, Taiwan, and the Czech Republic jumped more than 1.5 percent. Australian employers added workers in May for a third straight month, the statistics bureau said in Sydney today. The number of people employed gained 26,900 from April, compared with the median estimate of 23 economists surveyed by Bloomberg News of a 20,000 increase. Euro Strengthens The euro’s gain against the dollar brought it to a one-week high and the shared currency strengthened 1.1 percent to 110.61 yen. The 16-nation euro will survive Europe’s debt crisis, the head of China’s national pension fund said, according to a report by Reuters. Dai Xianglong , chairman of the National Council for Social Security Fund, also said China faces the risk of losses on its currency reserves because of growing debt in the U.S., according to the report. The ECB said it will continue buying state debt and pumping unlimited funds into the banking system as part of a strategy by European policy makers to stop the euro region from breaking apart. The euro extended its advance as Germany’s highest constitutional court rejected an attempt by a lawmaker to preliminarily block the nation from granting guarantees as part of its share in the euro-area rescue fund. ECB Moves “The ECB is addressing liquidity issues, there’s news that the German court has rejected efforts to block Germany from participating in the guarantees of the stabilization mechanism,” said Marc Chandler , global head of currency strategy at Brown Brothers Harriman & Co. in New York. “There are some rumors that China may move on its currency and that may also be helping the euro trade higher.” The dollar weakened against 14 of its 16 most-traded peers and the Dollar Index, which tracks the currency against six major trading partners, lost 0.9 percent to 87.092. Gold for immediate delivery dropped 0.8 percent to $1,223.30 an ounce, the third consecutive decline. Copper for delivery in three months rose 1.4 percent to $6,427.50 a metric ton on the London Metal Exchange. Crude oil for July delivery rose for a third day, adding 1.8 percent to $75.68 a barrel on the New York Mercantile Exchange. Spanish bonds rose as the government auctioned three-year notes, with demand higher than at an auction of similar-maturity securities in April. The yield on the 10-year bond fell 10 basis points to 4.47 percent, with the extra yield investors demand to hold the securities instead of benchmark German bunds narrowing 11 basis points to 194. The yield on the 10-year bund was 4 basis points higher at 2.6 percent. To contact the reporters for this story: Nikolaj Gammeltoft in New York at ngammeltoft@bloomberg.net ; Claudia Carpenter in London at ccarpenter2@bloomberg.net

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Honda Extends Shutdown of Car Factories in China as Worker Unrest Widens

June 9, 2010

By Bloomberg News June 10 (Bloomberg) — Honda Motor Co. , Japan’s second- largest automaker, said two car factories in China will remain closed today as its production in the country was disrupted by strikes for the second time in less than a month. The plants, in Guangzhou, Guangdong province, will be closed for a second day after employees at a parts supplier walked out this week demanding higher pay, Natsuno Asanuma, a spokeswoman at Honda in Tokyo, said yesterday. Another supplier in Guangdong stopped production yesterday because of a strike, said Gao Xia, a Honda spokeswoman in Beijing. Workers at Foshan Fengfu Autoparts Co. in Foshan, Guangdong, began striking June 7, a week after Honda raised wages 24 percent at a separate parts maker to end a walkout that shut down production at its four Chinese car-assembly factories. The disruptions reflect pressure for higher pay in southern China, where Foxconn Technology Group said this week it will more than double salaries for its lowest-paid plant workers. “The first strike at Honda was a breakthrough,” said Long Ke , a senior fellow at Fujitsu Research Institute in Tokyo. “Workers at other automakers may also make demands for higher pay, although it hasn’t surfaced yet.” Honda fell 2.8 percent to close at 2,621 yen in Tokyo trading yesterday, while the benchmark Nikkei 225 Stock Average declined 1 percent. Talks Continue Negotiations at Foshan Fengfu are continuing, said Kazuhito Anma, a spokesman for Yutaka Giken Co. , which owns 65 percent of the venture with Taiwan’s Full Wei Industrial Co. The factory employs about 440 workers and supplies exhaust parts for Honda’s Accord, Fit and Odyssey models. While the strike is ongoing, the factory has been “partially” operating since June 8, Anma said without elaborating. Hamamatsu, Japan-based Yutaka Giken is 70 percent owned by Honda, according to data compiled by Bloomberg. Honda Lock (Guangdong) Co., a joint venture in Zhongshan, Guangdong that supplies key systems, door handles and sensors for Honda’s Chinese carmaking ventures, halted production at 11 a.m. yesterday because of a strike, according to Honda’s Gao. Expansion of factories in Guangzhou by companies including Honda, Toyota Motor Corp. and Nissan Motor Co. has created a labor shortage, said Koji Endo , a Tokyo-based analyst at Advanced Research Japan. VW Plant A new plant to be built by Volkswagen AG , Europe’s largest carmaker, may further bolster workers’ bargaining power. The company will begin production at a new 300,000-capacity car factory in Foshan in 2013, Wolfsburg, Germany-based VW said in a statement yesterday. Nissan, Japan’s third-biggest carmaker, is spending 5 billion yuan ($732 million) to expand a plant in Guangzhou and aims to build as many as 600,000 vehicles a year there by 2012, compared with 430,000 currently, the company said in April. “We are telling our suppliers in China to speak to the labor unions so that we have a smooth operation there,” Nissan’s Chief Operating Officer Toshiyuki Shiga said yesterday in Yokohama, where the company is based. Toyota, Japan’s biggest automaker, builds Camry sedans and Yaris compacts at a plant in Guangzhou. — Takako Iwatani , Yuki Hagiwara , Naoko Fujimura , Tian Ying , Liza Lin . Editors: Ian Rowley , Terje Langeland To contact the reporter on this story: Takako Iwatani in Tokyo at tiwatani@bloomberg.net

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Honda China Output Disrupted by Second Strike at Supplier as Unrest Widens

June 8, 2010

By Takako Iwatani and Yuki Hagiwara June 9 (Bloomberg) — Honda Motor Co.’s production in China was halted by a strike for the second time in less than a month as workers at an affiliated parts supplier walked out demanding higher pay. Employees at Foshan Fengfu Autoparts Co. in Guangdong province stopped work on June 7, forcing Honda to suspend output at two of its China car plants today, said Yoshiyuki Kuroda , spokesman for Japan’s second-largest automaker. A Xinhua News Agency report that the strike has ended is incorrect, Kazuhito Anma, a Tokyo-based spokesman for Yutaka Giken Co. , which partly owns Foshan Fengu, said. The strike began a week after Honda raised wages by 24 percent at a wholly owned parts supplier to end a dispute that shut down production at its four car-assembly factories in China. The disruptions reflect growing pressure for higher pay in southern China, where Taiwanese electronics manufacturer Foxconn Technology Group said this week it will more than double salaries for its lowest-paid plant workers. “To keep good workers, the company has to raise pay,” said Koji Endo , a Tokyo-based analyst at Advanced Research Japan. There is a labor shortage in Guangzhou because companies including Honda, Toyota Motor Corp. and Nissan Motor Co. have expanded factories there, Endo said. Nissan is spending 5 billion yuan ($732 million) to expand its plant in Guangzhou and aims to build as many as 600,000 vehicles a year by 2012, from 430,000 units currently, the company said in April. Toyota makes the Camry sedan and Yaris compact at its plant in Guangzhou. “We are telling our suppliers in China to speak to the labor unions so that we have a smooth operation there,” Nissan Chief Operating Officer Toshiyuki Shiga said today in Yokohama. Yutaka Giken owns 65 percent of Foshan Fengfu, a venture with Taiwan’s Full Wei Industrial Co. that employs about 440 workers. The factory supplies exhaust parts for the Honda Accord, Fit and Odyssey models. Hamamatsu, Japan-based Yutaka Giken is Honda’s parts making subsidiary and is about 70 percent owned by Honda, according to data compiled by Bloomberg. Honda fell 2.8 percent to 2,621 yen in Tokyo, while the benchmark Nikkei 225 index declined 1 percent. To contact the reporter on this story: Takako Iwatani in Tokyo at tiwatani@bloomberg.net

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Asia Stocks, Metals Fall Euro, S&ampP 500 Futures Pare Losses

June 7, 2010

By James Poole and Candice Zachariahs June 7 (Bloomberg) — Asia stocks dropped the most in 15 months and commodities declined after a smaller-than-estimated increase in American jobs led to a rout in U.S. equities. The euro and Standard & Poor’s 500 Index futures pared losses. The MSCI Asia Pacific Index slid 3.3 percent to 109.73, the biggest decline since March 30, 2009, and the Stoxx Europe 600 lost 1.6 percent at 8:52 a.m. in London. Standard & Poor’s 500 Index futures decreased 0.6 percent after dropping as much as 1.3 percent. Oil fell 1.2 percent to $70.62 a barrel and copper dropped 2.8 percent. The Hungarian forint strengthened after depreciating 3.9 percent on June 4, while the euro pared losses to trade 0.2 weaker against the dollar. Investor sentiment deteriorated in Asia, catching up with U.S. markets after the government said private-sector employers added 41,000 jobs in May, below the 180,000 median forecast of 35 economists in a Bloomberg News survey.While stocks fell in Europe, the forint stabilized as Hungary’s government said June 5 that there’s no danger of default. The currency lost 7.3 percent last week on concern that Europe’s debt woes were spreading beyond countries participating in the euro. ““The market is groaning under the weight of excessive debt levels and there’s a lot of concern over the state of European banks,” said Greg Gibbs , a foreign-exchange strategist at Royal Bank of Scotland Group Plc in Sydney. “Hungary is just another straw being piled onto the camel’s back.” Stocks Plunge Only 54 of 983 stocks in the MSCI Asia index rose. The benchmark has slumped about 15 percent from its high this year on April 15 on growing concern over the European debt crisis and Chinese measures to curb property prices. The Nikkei 225 Stock Average sank 3.8 percent and Australia’s S&P/ASX 200 Index dropped 2.8 percent. The Kospi index lost 1.6 percent in Seoul and Taiwan’s Taiex index lost 2.5 percent. The S&P 500 dived 3.4 percent to a four-month low on Friday. Canon Inc. , a camera maker that gets 78 percent of its revenue outside Japan, slid 5.3 percent. KB Financial Group Inc. slumped 3.1 percent in Seoul, leading declines among financial companies. Melbourne-based BHP Billiton Ltd., the world’s largest mining company, declined 3.8 percent. Hon Hai Precision Industry Co. , the world’s largest contract electronics manufacturer, declined 5.6 percent, the most in more than four months, after the company announced the base wage for workers at a China factory will double following a spate of employee suicides. The euro dropped 0.6 percent to 109.39 versus the yen and touched a four-year low against the dollar. The yen gained against all 16 of its most-traded counterparts. Currencies “Markets have to price for lower growth than what they had previously,” said Richard Grace , chief currency strategist in Sydney at Commonwealth Bank of Australia. “The yen will probably maintain a bias toward strength.” Hungary’s government said June 5 that there’s no danger of default, a day after a spokesman for Prime Minister Viktor Orban said it’s not “an exaggeration at all” to speculate that the country may be unable to pay its debt. The Hungarian forint rose 0.5 percent against the common European currency. The forint traded at 287.89 per euro as of 9:15 a.m. in Budapest, versus 289.35 the previous trading day, according to data compiled by Bloomberg. Asian currencies fell, with the Malaysian ringgit set for its biggest decline in 12 years and the won sliding the most in two weeks, according to data compiled by Bloomberg. The ringgit dropped 1.8 percent to 3.3328, the most since June 1998. The won weakened 2.8 percent to 1,235.35 per dollar. “Disappointing U.S. non-farm payrolls and concerns about European debt refinancing are keeping the pressure on risk appetite and Asian currencies,” said Mirza Baig , a Singapore- based currency analyst at Deutsche Bank AG. Treasuries Rise Treasuries advanced, sending yields toward a one-year low. Traders cut bets for the Federal Reserve to raise interest rates this year, and economists reduced their yield forecasts. The yield on the U.S. 10-year note slid two basis points to 3.19 percent as of 8:14 a.m. in London, according to BGCantor Market Data. The 3.5 percent security due May 2020 rose 5/32, or $1.56 per $1,000 face amount, to 102 21/32. “Fear has taken over,” said Roger Bridges , who oversees $9.9 billion as head of debt at Tyndall Investment Management Ltd. in Sydney. “People are flying to the U.S.” Asian bond risk gauges jumped the most in almost two weeks. The Markit iTraxx Asia credit swap index of 50 investment-grade borrowers outside Japan rose 12 basis points to 148.5 points in Singapore, according to Deutsche Bank AG. That’s the most since May 25, prices from CMA DataVision in New York show. Japan’s and Australia’s benchmarks also climbed. “European sovereign fears were very much in focus again,” National Australia Bank Ltd. analysts led by Michael Bush wrote in a note to clients. Hungary’s government “later downplayed the comments as exaggerated, but the damage had been done.” Crude oil for July delivery has dropped 6.1 percent since closing at $74.61 a barrel on June 3, the biggest two-day decline since May 6. Copper, which entered a bear market last week, extended its decline to the lowest price in more than seven months on concern demand may weaken from the U.S., China and Europe. Aluminum, lead, zinc and nickel and tin also dropped. Three-month delivery copper slumped as much as 3.2 percent to $6,076.25 a metric ton in London and traded at $6,083 a ton. To contact the reporters for this story: Candice Zachariahs in Sdney at Czachariash2@bloomberg.net ; James Poole at jpoole4@bloomberg.net

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Asian Stocks, Euro Tumble on U.S. Jobs Report, Hungary Debt Bonds Rally

June 6, 2010

By James Poole and Candice Zachariahs June 7 (Bloomberg) — Asia stocks dropped the most in 15 months and the euro weakened to a four-year low after U.S. employment rose less than economists estimated and Hungarian leaders raised concerns about a potential default. Bonds rose. The MSCI Asia Pacific Index lost 3.3 percent to 109.73 at 1:30 p.m. in Tokyo and Standard & Poor’s 500 Stock Index futures decreased 0.7 percent following Friday’s 3.4 percent drop to a four-month low. The euro fell 0.6 percent against the dollar and oil plunged 2.1 percent to $70.02 a barrel, while the U.S. 10- year note yield declined three basis points to 3.17 percent. Investor sentiment deteriorated in Asia after the U.S. government reported that private-sector employers added 41,000 jobs in May, down from 218,000 in April and below the 180,000 median forecast of 35 economists in a Bloomberg News survey. The euro continued to depreciate. Hungary’s government said June 5 that there’s no danger of default, a day after a spokesman for Prime Minister Viktor Orban said it’s not “an exaggeration at all” to speculate that the country may be unable to pay its debt. “The euro is the clearest sell out of all this,” said Greg Gibbs , a foreign-exchange strategist at Royal Bank of Scotland Group Plc in Sydney. “The market is groaning under the weight of excessive debt levels and there’s a lot of concern over the state of European banks. Hungary is just another straw being piled onto the camel’s back.” Stocks Plunge Only 27 of 983 stocks in the MSCI Asia index rose. The benchmark has slumped about 15 percent from its high this year on April 15 on growing concern over the European debt crisis and Chinese measures to curb property prices. The Nikkei 225 Stock Average sank 3.5 percent in Tokyo, while Australia’s S&P/ASX 200 Index dropped 2.8 percent. The Kospi index lost 2.1 percent in Seoul and Taiwan’s Taiex index lost 2.9 percent. Canon Inc. , a camera maker that gets 78 percent of its revenue outside Japan, slid 4.9 percent. KB Financial Group Inc. slumped 3.3 percent in Seoul, leading declines among financial companies. Melbourne-based BHP Billiton Ltd., the world’s largest mining company, declined 3.5 percent. Hon Hai Precision Industry Co. , the world’s largest contract electronics manufacturer, declined 6.4 percent, the most in more than four months, after the company announced the base wage for workers at a China factory will double following a spate of employee suicides. The euro dropped 1.3 percent to 108.52, its weakest level since November 2001 versus the yen and touched a four-year low against the dollar. The yen gained against all 16 of its most- traded counterparts. Asian Currencies “Markets have to price for lower growth than what they had previously,” said Richard Grace , chief currency strategist in Sydney at Commonwealth Bank of Australia. “The yen will probably maintain a bias toward strength.” Asian currencies fell, with the Malaysian ringgit set for its biggest decline in 12 years and the won sliding the most in two weeks, according to data compiled by Bloomberg. The ringgit dropped 1.8 percent to 3.3350, the most since June 1998. The won weakened 3 percent to 1,237.15 per dollar. “Disappointing U.S. non-farm payrolls and concerns about European debt refinancing are keeping the pressure on risk appetite and Asian currencies,” said Mirza Baig , a Singapore- based currency analyst at Deutsche Bank AG. Treasuries advanced for a second day, sending yields toward a one-year low. Traders cut bets for the Federal Reserve to raise interest rates this year, and economists reduced their yield forecasts. “Fear has taken over,” said Roger Bridges , who oversees $9.9 billion as head of debt at Tyndall Investment Management Ltd. in Sydney. “People are flying to the U.S.” Bond Risk Asian bond risk gauges jumped the most in almost two weeks after Hungarian officials roiled global markets by comparing the nation’s finances to Greece. The Markit iTraxx Asia credit swap index of 50 investment- grade borrowers outside Japan rose 12 basis points to 148.5 points in Singapore, according to Deutsche Bank AG. That’s the most since May 25, prices from CMA DataVision in New York show. Japan’s and Australia’s benchmarks also climbed. “European sovereign fears were very much in focus again,” National Australia Bank Ltd. analysts led by Michael Bush wrote in a note to clients. Hungary’s government “later downplayed the comments as exaggerated, but the damage had been done.” Crude oil for July delivery has dropped 6.1 percent since closing at $74.61 a barrel on June 3, the biggest two-day decline since May 6. Copper, which entered a bear market last week, extended its decline to the lowest price in more than seven months on concern demand may weaken from the U.S., China and Europe. Aluminum, lead, zinc and nickel and tin also dropped. Three-month delivery copper slumped as much as 3.2 percent to $6,076.25 a metric ton in London and traded at $6,090 a ton. To contact the reporters for this story: Candice Zachariahs in Sdney at Czachariash2@bloomberg.net ; James Poole at jpoole4@bloomberg.net

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China, U.S. Blame Each Other for Severed Military Ties Amid Korea Tensions

June 5, 2010

By Daniel Ten Kate June 5 (Bloomberg) — The U.S. and China blamed each other for a freeze in military ties sparked this year by American plans to sell arms to Taiwan, highlighting a divide that’s hampering efforts to resolve tensions on the Korean peninsula. China’s reaction to the proposed sales “makes little sense” and threatens regional security, Defense Secretary Robert Gates said in Singapore at a meeting of defense officials from 28 countries. The deals “should come as no surprise” since they have been taking place for decades, he added. “It is not the Chinese side that has set obstacles to military-to-military ties,” General Ma Xiaotian, deputy chief of general staff of the People’s Liberation Army, told the IISS Shangri-La Dialogue after Gates spoke. “We do not regard U.S. arms sales to Taiwan as something normal.” The strained military ties come after China last month declined to endorse an international investigation that concluded North Korea was responsible for the sinking a South Korean warship in March, a finding that prompted Kim Jong Il ’s regime to threaten “all-out war.” South Korea referred the matter yesterday to the United Nations Security Council, where China has veto power. “There is a real cost to any absence of military-to- military relations,” Gates said. “They are essential to regional security.” Patriots, Blackhawks The weaponry Taiwan plans to buy includes advanced Lockheed Martin Corp. Patriot missiles valued at $2.8 billion, United Technologies Corp. UH-60 Blackhawk helicopters worth $3.1 billion, and Boeing Co. Harpoon missiles costing $37 million. Gates said the sales are “nothing new” and the U.S. doesn’t support independence for Taiwan, which China considers a renegade province that should be reunited by force if necessary. Gates said China’s military buildup was largely targeted at Taiwan, a statement Ma rejected. The general said that “functional exchanges” with U.S. officials were ongoing even as high-level visits were “temporarily suspended.” “We hope that through all these exchanges and through a certain period during which we can both calm down and engage in cool-headed discussion, we can resolve the problems and lay a foundation for our relationship to move on,” Ma said. “Only on this basis can China-U.S. relations, which are important to all, become more mature.” South China Sea Gates said today the South China Sea, stretching from Singapore to the Strait of Taiwan, is an “area of growing concern.” China told some international oil and gas companies to halt exploration in offshore areas that Vietnam considers part of its territory, a U.S. official told Congress last year. “We object to any effort to intimidate U.S. corporations or those of any nation engaged in legitimate economic activity,” Gates said today. Exxon Mobil Corp. and BP Plc are among companies that have halted projects in the sea because of China’s objections, according to U.S. government agencies. China, Vietnam, Malaysia, Brunei, the Philippines and Taiwan have claims to all or part of the oil-rich Spratly Islands in the South China Sea. Chinese Premier Wen Jiabao has refrained from condemning North Korea for the March 26 sinking of the Cheonan warship that killed 46 sailors, calling instead for measures to ease tensions in the region. China is North Korea’s largest trading partner and main political ally, having fought alongside the North and against the U.S. in the 1950-1953 Korean War. China’s preference is for six-party talks to be resumed to resolve “the latest incident” with North Korea, Ma said today, referring to discussions involving the two communist nations, South Korea, the U.S., Japan and Russia. North Korea Options Gates said the U.S. will conduct combined military exercises with South Korea and support action in the United Nations Security Council to pressure North Korea. “At the same time, we are assessing additional options to hold North Korea accountable,” he said in Singapore. Gates declined to elaborate on the options when asked later. South Korean President Lee Myung Bak , who yesterday warned North Korea it would “suffer the consequences” if officials didn’t apologize for the attack, told business leaders in Singapore today there was “no possibility of a full-scale war” between the neighbors. The U.S. is South Korea’s “staunchest ally,” Lee said yesterday, when he also called for China to support his government’s efforts to censure North Korea for the attack. The 28,500 U.S. troops in South Korea “are well prepared to deter aggression,” Lieutenant Colonel Angela Billings, a spokeswoman for U.S. forces in Korea, said last month. To contact the reporter on this story: Daniel Ten Kate in Singapore at dtenkate@bloomberg.net

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Stocks, Commodities Rally on U.S. Home, Car Sales Yen Weakens

June 3, 2010

By Akiko Ikeda and Masaki Kondo June 3 (Bloomberg) — Asian stocks rallied the most in six months, oil gained and the risk of corporate bond defaults fell as rising sales of U.S. homes and cars bolstered confidence in the global economy. The Japanese yen weakened for a second day. The MSCI Asia Pacific Index advanced 2.8 percent to 113.84 at 4 p.m. in Tokyo, the most since Nov. 30. The Stoxx Europe 600 increased 1.3 percent. Oil for July delivery climbed 1.9 percent to $74.23 a barrel after U.S. crude inventories declined. Standard & Poor’s 500 Index futures rose 0.5 percent. Asian stocks are recovering from the biggest drop in 19 months in May, as reports in the U.S. showed a recovery in consumer demand, ahead of data today that may show an improving job market. Japanese investors sought higher-yielding assets in the week ended May 28, buying a net 1.17 trillion yen ($12.7 billion) in overseas debt during the week ended May 28 and 276 billion yen in stocks abroad, Ministry of Finance data showed. “The data provides assurance that the U.S. economy is improving and that’s boosting investor sentiment,” said Yoshihiro Ito , a senior strategist at Okasan Asset Management Co., which oversees about $10 billion in Tokyo. “Technical indicators show that the recent declines are excessive and investors are hunting for bargains.” The MSCI Asia Pacific Index’s 14-day relative strength index , which measures how rapidly prices have risen or fallen, closed at 33 yesterday, near the 30 threshold some investors use as a signal to buy. The stock index dropped 10 percent in May. Canon, Nissan Japan’s Nikkei 225 Stock Average rallied 3.2 percent, Hong Kong’s Hang Seng Index jumped 1.7 percent, South Korea’s Kospi index climbed 1.9 percent and Taiwan’s 3Taiex index advanced 2.3 percent. An index of pending U.S. home resales rose 6 percent in April, the National Association of Realtors said, exceeding the median forecast of economists surveyed by Bloomberg News. U.S. companies created 70,000 jobs in May, according to a separate survey before the ADP Employer Services report today. The S&P 500 surged 2.6 percent, rebounding from a near three-month low. HSBC Holdings Plc, Europe’s biggest bank by market value, gained 1.9 percent after a government report showed Hong Kong’s home sales rose 8.7 percent in May from a year earlier. Wells Fargo & Co. advanced 3.4 percent yesterday in the U.S. after saying consumer credit began to improve last November. “We’re buying selected stocks,” said Terrace Chum , who helps manage $6 billion at MFC Global Investment Management in Hong Kong. “We’re still waiting for clearer signals whether there are still problems in Europe and we’re waiting to see whether the growth slowdown in China will be more serious.” Consumer Demand Canon Inc. , a camera maker that gets about 80 percent of its revenue outside Japan, gained 3.4 percent. Taiwan’s Hon Hai Precision Industry Co. , which assembles Apple Inc.’s iPhones, climbed 4.6 percent. Nissan Motor Co., Japan’s third-largest automaker, rose 4.8 percent after reporting a 24 percent increase in U.S. car sales in May from a year earlier. Toyota Motor Corp., the world’s biggest carmaker, climbed 3.6 percent after posting a 6.7 percent sales gain. Kia Motors Corp. , South Korea’s second- biggest automaker, advanced 3.2 percent after U.S. sales rose 21 percent last month. South Korea’s 2010 trade surplus will probably exceed the government’s earlier estimate of $20 billion as exports rise more than 20 percent, the Knowledge Economy Ministry said. Australia’s trade balance unexpectedly swung to an A$134 million surplus in April on coal and iron ore exports, government data showed. Copper for delivery in three months on the London Metal Exchange climbed as much as 1.4 percent to $6,760 a metric ton on global growth optimism. Nickel advanced as much as 2.8 percent to $20,200. Yen Weakened The yen weakened against all of its major counterparts as the search for a new prime minister in Japan and signs the U.S. economy is gaining traction tilted demand toward higher-yielding assets. The currency weakened 0.7 percent to 113.58 per euro and 0.3 percent to 92.35 per dollar, after dropping 1.3 percent yesterday. The euro rallied 0.4 percent to $1.2304. It touched $1.2111 on June 1, the lowest level since April 2006. “Once investors shift their attention back to the fundamentals, which are still signaling solid improvement, there is no strong reason to buy the yen,” said Morio Okayasu , chief analyst in Tokyo at FOREX.com Japan Co. “Underlying demand for higher-yielding assets outside Japan remains strong.” The yen also depreciated on speculation Prime Minister Yukio Hatoyama will be succeeded by Finance Minister Naoto Kan , who has called for the Bank of Japan to do more to fight deflation. “Kan, or whoever the successor is, won’t try to talk up the value of the yen,” said Kazumasa Yamaoka , a senior analyst in Tokyo at GCI Capital Co., an investment advisory company. Political Upheaval The South Korean won rose 1.5 percent to 1,197.65 per dollar. JPMorgan Chase & Co. yesterday raised the nation’s equities to “overweight” and said the won is one of the “most undervalued” emerging-market currencies. The cost of insuring Asia-Pacific bonds from non-payment dropped, according to traders of credit-default swaps. The Markit iTraxx Asia index of 50 investment-grade borrowers outside Japan declined 9 basis points to 136, according to Royal Bank of Scotland Group Plc. To contact the reporters on this story: Masaki Kondo in Tokyo at mkondo3@bloomberg.net ; Akiko Ikeda in Tokyo at iakiko@bloomberg.net .

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Hon Hai May Lift China Wages 20% After Spate of Suicides at Apple Supplier

May 27, 2010

By Janet Ong May 28 (Bloomberg) — Hon Hai Precision Industry Co ., the world’s largest contract manufacturer of electronics, is considering raising wages in China by 20 percent as the company faces a probe over suicides at its factories in the mainland. “This is not a plan we just came up with,” Edmund Ding , a spokesman for Hon Hai, said today in response to a report from Taiwan’s United Daily. “We have plans to raise the minimum wages and will be implementing them soon.” Ding declined to say when the change will be effective. The death toll of apparent suicides by Hon Hai Group workers has risen to 10 this year in the southern city of Shenzhen, prompting clients such as Apple Inc. and Hewlett- Packard Co. to begin probes on the supplier’s working conditions. Hon Hai Chairman Terry Gou on May 26 led media on a tour of the company’s Shenzhen factories and apologized for being unable to prevent the suicides. The Shenzhen police is investigating the suicides, said Li Ping, a spokesman for the Shenzhen municipal government. Wang Rong, communist party secretary of Shenzhen Municipal Committee, and other city officials such as the labor union officials went to the plant on May 26 to investigate, the government said in a statement on its website yesterday. To contact the reporter on this story: Janet Ong at jong3@bloomberg.net

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Europe Crisis Chokes Asia-Pacific Loan Market on Concern Exports to Slump

May 26, 2010

By Bloomberg News May 27 (Bloomberg) — Asia-Pacific companies are borrowing less for expansion on concern Europe’s debt crisis may cut export demand, hampering banks’ efforts to revive loan markets shuttered in the global credit freeze. Syndicated lending in Singapore plunged 72 percent to $1.8 billion this year from $6.5 billion in the same period of 2009, according to data compiled by Bloomberg. It slumped 17 percent in Australia and New Zealand to the lowest since 2004, and 18 percent in Indonesia to the least since 2006, the data show. “The low levels of deal volumes are because of a hesitation on the part of the corporates to take on fresh leverage,” Atul Sodhi , head of loan syndication for Credit Agricole CIB in the region, said in a telephone interview before the Asia-Pacific Loan Market Association ’s 12th annual conference in Beijing today. “Lack of demand is the issue here rather than supply” of credit, he said. While Asia has led a recovery from the deepest global recession since World War II, concern Europe’s debt woes will derail growth has jolted investors and pushed the MSCI Asia Pacific Index down 8.9 percent this year. “Downside risks have intensified,” Singapore’s trade ministry said May 20 after New York University professor Nouriel Roubini said fiscal problems may push Europe into a “double-dip” recession. “Most Asian corporates are exporting to Europe or the U.S. and demand conditions in these markets are not necessarily very buoyant, so the rationale to invest in big projects or developments is not so strong,” Sodhi said. Asian Exports About 60 percent of exports by companies in developing Asian nations end up in the U.S., Europe or Japan, according to the Asian Development Bank. The euro has lost 15 percent this year, making Asian goods more expensive for buyers in the 16 European nations that use the common currency. Australian business investment unexpectedly fell in the three months through March as manufacturing companies spent less on equipment and machinery, the Bureau of Statistics said in Sydney today. Capital spending dropped 0.2 percent from the previous quarter, when it climbed a revised 6.1 percent. The three-month London interbank offered rate for dollars, a benchmark for borrowing costs, fell to a record 0.2488 percent on Dec. 21 amid signs the world was emerging from recession. It advanced to 0.5378 percent yesterday, the highest since July 6, on concern about Europe and rising tensions between North Korea and South Korea. ‘Shuddering Halt’ “There’s a lot of liquidity in the Asian markets and that means pricing could come down,” Phil Lipton , HSBC Holdings Plc’s head of syndicated finance for Asia-Pacific debt capital markets, said at an APLMA discussion panel yesterday. “However, I think we could potentially reach a shuddering halt very soon if banks’ cost of borrowing continues to go up.” Should Europe’s debt crisis continue, the amount banks have to charge companies “will start to tick up sooner than we think,” Didier Leblanc , head of Asia-Pacific loan syndication at BNP Paribas SA, said at the panel. Syndicated lending in China has fallen 76 percent to $6.2 billion this year, Bloomberg data show, as the government stepped up efforts to curb credit expansion after a record surge in property prices. Hong Kong Lending more than tripled to $20.8 billion in Taiwan, helped by Taiwan High Speed Rail Corp.’s $12 billion state- supported loan in the local currency. It jumped more than six- fold in Hong Kong to $12.2 billion, bucking the regional trend, amid record borrowing by Chinese developers circumventing the crackdown at home and betting a revaluation of the yuan will cut repayment costs, according to Wilson Wan , head of leveraged and structured finance for Bank of China International. “Chinese banks have a limited foreign currency position in China so everyone is trying to borrow foreign currency because when they pay it back the yuan would have appreciated,” Wan said in a phone interview from Hong Kong. China has kept the yuan pegged to the U.S. dollar for 22 months to help exporters weather the global financial crisis, after allowing its currency to rise 21 percent in the previous three years. At the start of this month forward contracts were indicating investors were factoring in a 1.2 percent gain in the yuan over a year. Some companies “possibly believe that pricing is going to fall so they can wait a bit longer before raising funds,” HSBC’s Lipton said in a phone interview before the conference. “That’s quite a risky strategy. As we’ve seen with the Greece fallout, things can turn.” — Henry Sanderson and Shelley Smith . Editors: Will McSheehy , Ed Johnson To contact Bloomberg News staff on this story: Shelley Smith in Beijing via the Hong Kong newsroom at +852- 2977-6623 or ssmith118@bloomberg.net ; Henry Sanderson in Beijing at +86-10-6649-7548 or hsanderson@bloomberg.net .

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Asia Stocks Gain as China Rises Most in Seven Months on Policy Speculation

May 23, 2010

By James Regan and Shani Raja May 24 (Bloomberg) — Asia stocks rose, led by the biggest gain in China’s shares since November, on speculation Chinese policy makers will rein in efforts to cool the economy as Europe’s debt crisis threatens a global recovery. South Korea’s won hit an eight-month low on escalating tensions with the North. The Shanghai Composite Index jumped 3.1 percent to 2,664.65 and the MSCI Asia Pacific Index rose 0.5 percent as of 1:47 p.m. in Tokyo. Yuan forwards gained after President Hu Jintao pledged to work toward exchange-rate reform at the start of China-U.S. talks in Beijing. Standard & Poor’s 500 Index futures slid 0.2 percent, after the benchmark rallied 1.5 percent on May 21. China’s importance as an engine of global economic growth is increasing as austerity measures needed to repair public finances in Europe damp spending. Chinese lenders have this year been ordered three times to set aside more funds as reserves and National Development and Reform Commission official Xu Lianzhong , writing in today’s China Securities Journal, urged caution in introducing new curbs. “Any indication China will take a measured approach to controlling overheating in some sectors, rather than crushing economic activity generally, means people can start to check this big item off the ‘macro concerns’ list,” said Prasad Patkar , who helps manage about $1.7 billion in Sydney at Platypus Asset Management Ltd. More than 95 percent of the 911 stocks included in the Shanghai Composite Index advanced, while just three declined. Hong Kong’s Hang Seng Index climbed 0.6 percent and the city’s Hang Seng China Enterprises Index of mainland companies rose 2 percent, rebounding from a three-month low. Chinese Stocks China Vanke Co. , the nation’s largest listed property developer, jumped 4.5 percent in Shanghai. Beiqi Foton Motor Co. paced gains by automakers, rising 8.1 percent after the Shanghai Securities News reported the government will extend subsidies for trade-in vehicles to the end of this year. Benchmark stock indexes in Taiwan, South Korea and Singapore, economies that count China as their No. 1 export market, all rose today. Trading resumed in South Korea and Hong Kong after May 21 holidays, while Thailand’s financial markets reopened for the first time since May 19 following anti- government riots. The SET Index of shares dropped 2 percent. Yuan Forwards Twelve-month non-deliverable yuan forwards climbed 0.2 percent to 6.7498 per dollar in Hong Kong, reflecting bets the currency will strengthen 1.2 percent from the spot rate of 6.8275, according to data compiled by Bloomberg. China will “steadily advance the reform of the formation mechanism of the exchange rate,” President Hu said, echoing language in a May 10 central bank report. Treasury Secretary Timothy F. Geithner said allowing the yuan to reflect market forces is important to the Chinese economy. “The market wants to see something happen,” said Sean Callow , a currency strategist in Sydney at Westpac Banking Corp., Australia’s fourth-largest bank. “If there is nothing changed in the exchange-rate regime by early July, the Treasury will be under a lot of pressure.” South Korea’s won slid 1.4 percent from the close on May 20 to 1,210.90 per dollar, according to Seoul Money Brokerage Services. It earlier touched 1,220.75, the weakest level since Sept. 15. The government will seek United Nations Security Council action against North Korea and halt trade with its communist neighbor over the deadly torpedoing of one of its warships in March, which killed 46 sailors. North Korea shipping will also be banned from South Korean waters, President Lee Myung Bak said in Seoul today. North Korea last week threatened “all-out war” against any move to punish it, including any more UN sanctions. “When the news broke about the sinking of the ship, that it had been a north Korean torpedo, it was basically the start of this move from 1,180 to 1,240,” said Gerrard Katz , head of foreign-exchange trading at Standard Chartered Plc in Hong Kong. “There’s big concern about that in the market. Risk appetite is pretty weak.” To contact the reporter for this story: James Regan in Hong Kong Jregan19@bloomberg.net ;

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Stocks Drop, Euro Pares Gain, Treasuries Rise on Global Economic Concern

May 21, 2010

By Michael Patterson May 21 (Bloomberg) — Stocks fell for a seventh day, with Standard & Poor’s 500 Index futures falling beneath their low during the May 6 rout, and 30-year Treasury yields dropped to their lowest of the year on concern that Europe’s debt crisis will slow global economic expansion. The euro pared gains. The MSCI World Index of developed-nation shares retreated 0.4 percent at 7:59 a.m. in New York, heading for an almost eight-month low. Futures on the S&P 500 expiring in June slid as much as 1.2 percent to 1,057.6, following a 3.9 percent plunge in the U.S. benchmark index yesterday, and Dow Jones Industrial Average futures retreated below 10,000. The euro rose 0.4 percent to $1.2540, after climbing to $1.2672. The 30-year Treasury yield dropped to as low as 4.05 percent. The plunge in global equities this month wiped out $5.3 trillion of market value as Germany’s crackdown on speculation, plans for spending cuts by Europe’s most indebted nations and proposals to tighten U.S. finance industry regulation shook investor confidence. The German lower house of parliament approved the country’s share of a $1 trillion lending package to ease Europe’s debt woes, which Federal Reserve Governor Daniel Tarullo said yesterday may pose a threat to the global economy. “It’s a material risk that the problem is continuing to get bigger and to get worse,” Arnab Das , the head of global market research and strategy at Roubini Global Economics in London, said in an interview with Bloomberg Television. “As these budget cuts come through, the economies are potentially going to go sharply downward. The general tendency is going to be downward” for the euro, he said. Casualty Insurer The Stoxx 600 extended its slide this week to 6.2 percent. TrygVesta A/S, the Nordic region’s second-largest property and casualty insurer, tumbled 8.4 percent today in Copenhagen after reporting an unexpected first-quarter loss. Lanxess AG slipped 3 percent in Frankfurt after BofA Merrill Lynch Global Research downgraded the shares. The MSCI Asia Pacific Index slumped 1.2 percent. Honda Motor Co., which gets about 81 percent of its sales from overseas, declined 2.5 percent in Tokyo. Sonic Healthcare Ltd. , which provides medical tests, tumbled 20 percent in Sydney after saying earnings will be less than forecast. The retreat in U.S. futures indicated the S&P 500 may extend yesterday’s plunge, the worst since April 2009. The gauge fell to within 6 points of its low on May, when panic selling prompted calls for reform. The S&P 500 is now trading at about 15.5 times the reported earnings of its companies, the lowest level since July, according to Bloomberg data. Investors withdrew some $12 billion from U.S. and European equity funds in the week to May 19, according to research firm EPFR Global. Emerging Markets Fall The euro gained as much as 1.5 percent earlier today amid speculation investors betting on a decline were forced to buy the currency to cover their short positions. European Union President Herman Van Rompuy hosts a meeting of finance ministers in Brussels today to discuss reforms to economic governance. The yen declined 0.4 percent against the dollar after Japanese Finance Minister Naoto Kan said it’s undesirable for currencies to stray from “stable” levels. South Korea’s won forwards weakened for a third day, with three-month contracts falling 0.9 percent. President Lee Myung Bak convened a National Security Council meeting as North Korea threatened to sever all ties and reiterated its war threat after being accused of sinking one of the South’s warships. South Korea’s financial markets were closed today for a holiday. The MSCI Emerging Markets declined 0.5 percent. Benchmark indexes in Taiwan, Indonesia and Vietnam extended declines to more than 10 percent below recent highs after U.S. reports yesterday showed jobless claims unexpectedly rose and a gauge of leading economic indicators posted a surprise drop. Corporate Bonds The German 10-year bund yield slipped three basis points to 2.65 percent after business confidence in the nation unexpectedly fell this month. The extra yield investors demand to hold global corporate bonds rather than benchmark government debt widened 7 basis points to 184, the biggest difference since Dec. 14, according to Bank of America Merrill Lynch index data. Yields on 30-year Treasury bonds decline to the lowest level this year, dropped to 4.05 percent in New York. Crude oil for July delivery fell to $69.49 a barrel on the New York Mercantile Exchange. Nickel dropped 0.8 percent to $21,039 a metric ton on the London Metal Exchange. To contact the reporter on this story: Michael Patterson in London at mpatterson10@bloomberg.net .

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Stocks Drop, Euro Pares Gain, Treasuries Rise on Global Economic Concern

May 21, 2010

By Michael Patterson May 21 (Bloomberg) — Stocks fell for a seventh day, with Standard & Poor’s 500 Index futures falling beneath their low during the May 6 rout, and 30-year Treasury yields dropped to their lowest of the year on concern that Europe’s debt crisis will slow global economic expansion. The euro pared gains. The MSCI World Index of developed-nation shares retreated 0.4 percent at 7:59 a.m. in New York, heading for an almost eight-month low. Futures on the S&P 500 expiring in June slid as much as 1.2 percent to 1,057.6, following a 3.9 percent plunge in the U.S. benchmark index yesterday, and Dow Jones Industrial Average futures retreated below 10,000. The euro rose 0.4 percent to $1.2540, after climbing to $1.2672. The 30-year Treasury yield dropped to as low as 4.05 percent. The plunge in global equities this month wiped out $5.3 trillion of market value as Germany’s crackdown on speculation, plans for spending cuts by Europe’s most indebted nations and proposals to tighten U.S. finance industry regulation shook investor confidence. The German lower house of parliament approved the country’s share of a $1 trillion lending package to ease Europe’s debt woes, which Federal Reserve Governor Daniel Tarullo said yesterday may pose a threat to the global economy. “It’s a material risk that the problem is continuing to get bigger and to get worse,” Arnab Das , the head of global market research and strategy at Roubini Global Economics in London, said in an interview with Bloomberg Television. “As these budget cuts come through, the economies are potentially going to go sharply downward. The general tendency is going to be downward” for the euro, he said. Casualty Insurer The Stoxx 600 extended its slide this week to 6.2 percent. TrygVesta A/S, the Nordic region’s second-largest property and casualty insurer, tumbled 8.4 percent today in Copenhagen after reporting an unexpected first-quarter loss. Lanxess AG slipped 3 percent in Frankfurt after BofA Merrill Lynch Global Research downgraded the shares. The MSCI Asia Pacific Index slumped 1.2 percent. Honda Motor Co., which gets about 81 percent of its sales from overseas, declined 2.5 percent in Tokyo. Sonic Healthcare Ltd. , which provides medical tests, tumbled 20 percent in Sydney after saying earnings will be less than forecast. The retreat in U.S. futures indicated the S&P 500 may extend yesterday’s plunge, the worst since April 2009. The gauge fell to within 6 points of its low on May, when panic selling prompted calls for reform. The S&P 500 is now trading at about 15.5 times the reported earnings of its companies, the lowest level since July, according to Bloomberg data. Investors withdrew some $12 billion from U.S. and European equity funds in the week to May 19, according to research firm EPFR Global. Emerging Markets Fall The euro gained as much as 1.5 percent earlier today amid speculation investors betting on a decline were forced to buy the currency to cover their short positions. European Union President Herman Van Rompuy hosts a meeting of finance ministers in Brussels today to discuss reforms to economic governance. The yen declined 0.4 percent against the dollar after Japanese Finance Minister Naoto Kan said it’s undesirable for currencies to stray from “stable” levels. South Korea’s won forwards weakened for a third day, with three-month contracts falling 0.9 percent. President Lee Myung Bak convened a National Security Council meeting as North Korea threatened to sever all ties and reiterated its war threat after being accused of sinking one of the South’s warships. South Korea’s financial markets were closed today for a holiday. The MSCI Emerging Markets declined 0.5 percent. Benchmark indexes in Taiwan, Indonesia and Vietnam extended declines to more than 10 percent below recent highs after U.S. reports yesterday showed jobless claims unexpectedly rose and a gauge of leading economic indicators posted a surprise drop. Corporate Bonds The German 10-year bund yield slipped three basis points to 2.65 percent after business confidence in the nation unexpectedly fell this month. The extra yield investors demand to hold global corporate bonds rather than benchmark government debt widened 7 basis points to 184, the biggest difference since Dec. 14, according to Bank of America Merrill Lynch index data. Yields on 30-year Treasury bonds decline to the lowest level this year, dropped to 4.05 percent in New York. Crude oil for July delivery fell to $69.49 a barrel on the New York Mercantile Exchange. Nickel dropped 0.8 percent to $21,039 a metric ton on the London Metal Exchange. To contact the reporter on this story: Michael Patterson in London at mpatterson10@bloomberg.net .

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Taiwan Outpaces China as Growth Reaches Fastest Pace in More Than 30 Years

May 20, 2010

By Chinmei Sung and Weiyi Lim May 21 (Bloomberg) — Taiwan’s economy grew at the fastest pace in more than 30 years last quarter on surging sales of computer chips and display panels to China, as it heals ideological wounds with its neighbor in favor of trade ties. Gross domestic product rose 13.27 percent in the three months to March 31 from a year earlier, the most since 1978 and more than the median estimate in a Bloomberg News survey for an 11 percent gain, the statistics bureau said yesterday in Taipei. Taiwan, Singapore and Japan all reported yesterday that growth accelerated in the first quarter, boosted by a rebound in global trade. In Taiwan, which outpaced China’s 11.9 percent expansion, policy makers are weighing the risk of raising interest rates from a record low against fallout from the debt crisis sparked by Greece, after April export orders from Europe fell 11 percent from the previous month. “Taiwan benefited a lot from a rebound in the Chinese economy,” said Tony Phoo , an economist at Standard Chartered Plc in Taipei. “The economy is still prone to external uncertainty, with the Greek crisis already feeding into the export data.” The statistics bureau yesterday raised its 2010 GDP growth projection to 6.14 percent from 4.72 percent, and its annual inflation forecast to 1.4 percent from 1.27 percent. The Central Bank of the Republic of China (Taiwan) has kept its benchmark interest rate at 1.25 percent since March last year to help extract the island from its deepest recession on record. Trade Agreement President Ma Ying-jeou , who abandoned his predecessor’s pro-independence stance after taking office two years ago, has pushed for a trade agreement with China to prevent Taiwan from being “marginalized” after a Chinese accord with the 10-member Association of Southeast Asian Nations took effect this year. The proposal sparked opposition demonstrations amid concern China may boost its influence over Taiwan. The two have been ruled separately since Nationalist troops fled to the island after losing a civil war to Mao Zedong ’s Communists in 1949. Ma reiterated this week that the accord won’t harm the island’s “sovereignty.” He said a reduction in cross-strait tensions will encourage the mainland “in the long run” to remove the more than 1,000 missiles it has aimed at Taiwan. Exports to China, Taiwan’s biggest trading partner and No. 1 overseas investment destination, soared 62 percent in April from a year earlier, after an 82 percent gain in March. Record Revenue That helped Taiwan Semiconductor Manufacturing Co. , the island’s biggest company by market value, forecast revenue would rise this quarter to a record NT$100 billion ($3 billion) to NT$102 billion and allow it to expand its workforce. “We will recruit more than 3,000 engineers this year,” JH Tzeng , spokesman for Taiwan Semiconductor, said yesterday. The world’s largest custom chipmaker also plans to convert 2,400 contract positions to permanent during the year, he said. A separate report yesteerday showed export orders , an indication of shipments in the next one to three months, rose 35.15 percent in April, a seventh monthly increase. “The return of inflation will start to concern the central bank, and the CBC will need to take preemptive measures by starting to withdraw monetary stimulus before the economy gets overheated,” Liu Li-Gang , a Hong Kong-based economist at Australia and New Zealand Banking Group Ltd., said before the GDP release. “However, the uncertainty in Europe may delay a rate hike.” Central banks around the world are trying to gauge whether a 750-billion-euro ($925-billion) package of measures organized by the European Union and the International Monetary Fund to rescue the region’s debt-laden governments will stabilize financial markets. Asia’s Expansion In Singapore, GDP grew an annualized 38.6 percent from the previous three months in the first quarter, and Japan’s economy expanded at the fastest pace in three quarters in the period ended March 31, reports yesterday showed. “Our cargo business nearly tripled in the first quarter from a year earlier, as we benefited from robust export growth,” Bruce Chen , spokesman for China Airlines, Taiwan’s biggest airline company, said by phone yesterday. “Our passenger business also rose after we added new destinations.” Chinese visitors to Taiwan in the first quarter outnumbered Japanese for the first time on record as relaxed rules spurred travel to an island off limits to mainlanders for 60 years. The statistics bureau said yesterday that Chinese visitors tripled in the first quarter from a year earlier. The planned trade accord with China has attracted overseas investors, spurring Taiwan’s dollar in April to its biggest monthly advance since September. The currency reached NT$31.269 per U.S. dollar on April 27, the strongest since August 2008. The Taiwan dollar fell 0.2 percent to close at NT$32.175 against the U.S. currency yesterday, according to Taipei Forex Inc. To contact the reporters on this story: Chinmei Sung in Taipei at csung4@bloomberg.net . Weiyi Lim in Taipei at Wlim26@bloomberg.net

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Asia’s Export-Led Recovery Exposes Risk of Europe Slowdown, Currency Gains

May 20, 2010

By Shamim Adam May 21 (Bloomberg) — Asia’s growth is accelerating as companies ship more cars, computers and commodities overseas, highlighting the role of exports in the region’s recovery and the risk of a slowdown should Europe’s debt crisis worsen. Trade accounted for more than half the 4.9 percent annualized growth in Japan’s gross domestic product in the first quarter. Taiwan’s economy grew 13.3 percent from a year earlier, the fastest in three decades, and Singapore expanded at a 38.6 percent annualized rate, reports showed yesterday. Asia’s rebound is outpacing the rest of the world as companies from Nissan Motor Co. to Taiwan Semiconductor Manufacturing Co. increase exports and domestic spending strengthens. The recovery may slow as Europe’s debt woes hurt consumer and business confidence in advanced economies, and a weaker euro makes Asian goods more expensive. “We should expect a moderation in exports because of the negative impact from Europe and the currency appreciation against the euro can really affect sales,” said Sebastien Barbe , head of emerging-market research for Credit Agricole CIB in Hong Kong. “Asian exports to Europe are likely to decelerate but those to the U.S. and emerging markets will remain resilient.” An escalation of Europe’s crisis forced the European Union and the International Monetary Fund to offer as much as 750 billion euros ($925 billion) to countries in danger of financial instability. Fiscal woes may push Europe into a “double-dip” recession while growth in advanced nations will be “anemic,” New York University professor Nouriel Roubini said May 12. ‘Downside Risks’ Singapore’s exports gained for six straight months through April, prompting the government to raise its 2010 overseas sales projection yesterday. Taiwan’s exports jumped 52.5 percent in the first quarter from a year earlier. Taiwan Semiconductor, the world’s largest custom chipmaker, plans a record $4.8 billion in capital expenditure and may hire 3,000 workers this year. The cargo business of China Airlines Ltd., Taiwan’s biggest airline company, almost tripled in the first quarter from a year earlier as it benefited from “robust export growth,” spokesman Bruce Chen said yesterday. At the same time, Asian officials warned of the possible repercussions from Europe’s turmoil. “Developments in recent weeks suggest that downside risks have intensified,” the Singapore trade ministry said. “There is heightened market anxiety over the possibility of a sovereign debt default in Europe. While policy makers in the EU have introduced timely and forceful interventions to reduce the downside risk in the near term, significant uncertainties remain beyond the immediate horizon.” Currency Gains The economy of Organization for Economic Cooperation and Development members will have “mediocre” growth in the next two years, Secretary General Angel Gurria said May 19. Its leading indicator index for Asia was little changed in March from February, while the reading for China fell, suggesting signs of stagnation in some economies, according to data released May 10. Asia’s developing nations are more reliant on overseas shipments than the rest of the world, with 60 percent of their sales abroad ultimately destined for the U.S., Europe and Japan, according to the Asian Development Bank. The 10 Asian currencies tracked by Bloomberg, including the South Korean won and the dollar-pegged Chinese yuan, have risen between 12 percent and 21 percent against the euro this year. The MSCI Asia Pacific Index of stocks dropped to an eight-month low yesterday and has lost about 10 percent this month. Japan’s Finance Minister Naoto Kan said the recovery in the world’s second-largest economy is still not self-sustaining. The first-quarter expansion was the fastest in three quarters. U.S. Consumers Besides turmoil in Europe, Asian economies also face the risk of a slowdown in demand from the U.S. and China. Sales at U.S. electronics and appliance stores dropped in April even as Americans snapped up 1 million Apple Inc.’s iPad that month. “U.S. retail sales, which registered a second consecutive month of falling electronics sales, were an important reminder that the U.S. consumer may not be relied upon as a lasting driver of Asia’s trade,” said Frederic Neumann , a Hong Kong- based economist at HSBC Holdings Plc. “Leading indicators for a whole range of OECD economies have started to turn, suggesting that growth may begin to slow sequentially.” China’s Shanghai Composite Index has dropped 22 percent this year on concern government efforts to cool property speculation will slow the world’s third-largest economy. Asset Bubbles China and Hong Kong accounted for 44 percent of Taiwan’s exports in April, compared with about 10 percent each for the U.S. and Europe. For Singapore, 21.4 percent of overseas shipments went to China and Hong Kong so far this year, compared with 13.8 percent for European nations. Growth may also slow as Asian central banks start to withdraw monetary stimulus to stem inflation and asset bubbles. China has ordered banks to set aside more reserves three times this year, the Reserve Bank of India increased interest rates twice, and Malaysia boosted borrowing costs in March and May. Among Southeast Asian nations, Singapore and Malaysia’s export-dependent economies will be worst hit by any slowdown in European growth and demand, economists at Morgan Stanley said in a May 10 report. To contact the reporter on this story: Shamim Adam in Singapore at sadam2@bloomberg.net

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`Bubble’ in Taipei Home Prices Raises Risks for Investors After 29% Rally

May 19, 2010

By Weiyi Lim May 20 (Bloomberg) — Investors should sell Taipei property now, taking advantage of a 21-month rally in prices before the government acts to make real estate more affordable, according to the Taiwan Real Estate Research Center and the island’s largest real-estate brokerage. “Sell them now or at least in the second half of the year,” said Chin-Oh Chang , director of the Taiwan Real Estate Research Center at the National Chengchi University in Taipei. “The market is relatively unstable now.” Prices in Taiwan’s capital have risen 29 percent to a record since September 2008, when the collapse of Lehman Brothers Holdings Inc. deepened the global credit crisis. The gain has increased voter anger over prices and prompted the island’s central bank to pledge to prevent asset bubbles, triggering a 12 percent slump in construction shares from their high last month. Taipei is “an asset bubble,” Lee Jain-Ming, a researcher at Sinyi Realty Co. , told a Bloomberg Real Estate Forum in Taipei yesterday. The government may try to lower prices before municipal elections in December, he said. The Financial Supervisory Commission in March asked bankers to tighten lending procedures and ensure the quality of loans after banks on the island of 23 million people last year cut mortgage lending rates to the lowest since records began. The same month, Bank of Taiwan Governor Perng Fai-nan said he would impose “prudent” measures to prevent the emergence of asset bubbles. Market Risk In the past three months, state-owned Land Bank of Taiwan and Bank of Taiwan have raised mortgage rates and cut the amount of loans for buyers of luxury homes and property investors. Farglory Land Development Co. , the island’s largest construction company by value, has dropped 9.6 percent in 2010 after surging 196 percent last year, when average home prices in Taipei rose 20 percent. While the property market may still see increases in prices in the second half of the year, Chang said there are risks ahead of the elections, in which the ruling Nationalist party will try to defend its hold on Taipei and gain the mayoralty of both Kaohsiung and Tainan. “The government may take some action before the elections that may cool prices,” Chang said. “Don’t sell when prices are already low. Sell before that.” Goldman Sachs Group Inc. and Barclays Plc have also forecast the central bank will raise interest rates next month. Barclay’s Singapore-based economist Wai Ho Leong has predicted a 12.5 basis-point increase in rates at the central bank’s June meeting. A basis point is 0.01 percentage point. “The central bank may raise rates soon,” Lee said. “If the central bank raises rates by 12.5 basis points, prices may go down in the following two to three months.” To contact the reporter on this story: Weiyi Lim in Taipei at Wlim26@bloomberg.net

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Japan Economy Grows Less Than Estimated, Putting Pressure on Central Bank

May 19, 2010

By Keiko Ujikane May 20 (Bloomberg) — Japan’s economy grew less than forecast in the first quarter as an export-led recovery failed to stoke consumer spending, putting pressure on the central bank to do more to end deflation as it begins a two-day meeting. Gross domestic product rose an annualized 4.9 percent, less than the 5.5 percent median forecast in a Bloomberg survey of 21 economists, a Cabinet Office report showed in Tokyo. Export gains saw nominal GDP , which is unadjusted for price changes, increase 1.2 percent on a quarterly basis, the most in a decade. Stocks fell and Finance Minister Naoto Kan said he expects the Bank of Japan to support an economy that’s not yet in a self-sustained recovery. The comeback in world trade, spurred by China’s demand, is helping countries across Asia, with Singapore today reporting GDP jumped an annualized 38.6 percent and Taiwan forecast to say its expansion accelerated in the first quarter. “As long as demand from emerging economies remains strong, Japan’s economy will stay on a recovery track,” said Hiroaki Muto , a senior economist at Sumitomo Mitsui Asset Management Co. in Tokyo. The direction of overseas economies poses “a major risk factor,” he said after Europe’s debt crisis has deepened concern about the durability of global growth. Japan’s benchmark Nikkei 225 Stock Average dropped 1.2 percent to 10,064.93 at 1:51 p.m. in Tokyo, bringing its slide in the past month to 7.7 percent. Against the euro, the yen strengthened to 113.37. Its 11 percent climb versus the European currency in the past month threatens to make its exports to the region more costly. Nissan, Tokyo Electron In the first quarter, companies from Nissan Motor Co. to Tokyo Electron Ltd. reaped the benefits of the trade recovery as they forecast higher profits and spending. The rebound also did start feeding into wages and the labor market. Earnings rose for the first time in 22 months in March and the ratio of job openings to applicants advanced for a third month. Even with higher earnings, consumer spending contributed only 17 percent to the quarterly growth rate. Household outlays rose 0.3 percent in the first quarter, slowing from the previous period’s 0.7 percent gain, today’s report showed. “The data raises concern about the outlook for consumption” as fiscal stimulus efforts wear off, said Muto at Sumitomo Mitsui. “The improvement in wages is still lagging behind and failing to take over the role of locomotive.” Business spending gained 1 percent, less than the fourth quarter’s 1.3 percent. Housing investment climbed 0.3 percent, the first increase in five quarters. The 4.9 percent annualized growth rate followed a revised 4.2 percent expansion in the previous quarter, today’s report showed. Bring Inflation Back Tokyo Electron said last week that it would return to profit this fiscal year and more than double capital spending to 35 billion yen. Nissan, Japan’s third-largest automaker, forecast profit will more than triple this fiscal year as auto demand recovers in North America and sales grow in China. “The best thing Japan can do is to bring inflation back to their economy,” Huw McKay , a senior international economist at Westpac Banking Corp. in Sydney, said in a Bloomberg Television interview. Sustained nominal GDP growth will help stoke inflation expectations and start to narrow the nation’s fiscal deficit, he also said. Aeon Co. , Japan’s second-biggest retailer, said in April that it would cut prices of as many as 500 products. The Chiba- based company forecasts profit will rise as much as 22 percent this fiscal year as cost reductions offset weak consumer outlays. Price Declines Moderate Price declines in Japan did moderate last quarter, with the domestic demand deflator falling 1.9 percent, the smallest drop in a year, today’s report showed. From the previous three months, it rose for the first time in seven quarters. “This suggests Japan is passing through the worst phase of deflation, although it will take time until the nation fully overcomes it,” said Takahide Kiuchi , chief economist at Nomura Securities Co. in Tokyo. “Deflationary pressure is easing gradually.” Faster growth would provide some relief for Prime Minister Yukio Hatoyama , whose public support has tumbled ahead of an upper-house election to be held in July. Kan’s remarks in a press briefing in Tokyo today indicated the government will maintain pressure on the Bank of Japan to take more action. The central bank, which starts a two-day policy meeting today, will probably keep the benchmark interest rate at 0.1 percent, all 16 analysts said in a separate survey. ‘Cautious’ Kan Kan, who is also deputy prime minister, said that he expects the Bank of Japan to support the economy with “flexible and appropriate” policy and that officials must be “cautious” about calling the recovery self-sustaining. “The BOJ’s unlikely to change their policies as a result of the GDP report,” Kyohei Morita , chief economist at Barclays Capital in Tokyo, said before the report. “As long as deflation continues, the government’s going to continue demanding more from the BOJ to beat deflation.” Governor Masaaki Shirakawa ’s board pledged to help lenders provide credit at its previous meeting in April. The bank may announce an outline of the lending plan at this week’s meeting, according to six of 16 economists surveyed by Bloomberg. To contact the reporters on this story: Keiko Ujikane in Tokyo at kujikane@bloomberg.net

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Taiwan’s Economy May Have Expanded Most in 20 Years, Boosting Rates Case

May 18, 2010

By Chinmei Sung and Jay Wang May 19 (Bloomberg) — Taiwan’s economy may have expanded at the fastest pace in 20 years last quarter on surging exports to China, as Goldman Sachs Group Inc. and Barclays Plc forecast the central bank will raise interest rates next month. Gross domestic product surged 11 percent in the three months through March from a year earlier, the most since the fourth quarter of 1989, according to the median of 20 estimates in a Bloomberg News survey. The data is due at 4 p.m. tomorrow. Strengthening exports, which make up more than half of the economy , spurred companies including Taiwan Semiconductor Manufacturing Co. and Quanta Computer Inc. to boost investment and hire workers, driving the jobless rate to a 14-month low. The island’s rebound prompted the central bank to begin draining cash from the financial system to avert an asset bubble. “Taiwan is grappling with a very strong recovery that’s significant enough for policy makers to shift to a tightening stance,” said Wai Ho Leong , a Singapore-based economist at Barclays who forecasts a 12.5 basis-point increase in rates at the central bank’s June meeting. Shirla Sum and Enoch Fung of Goldman Sachs also predict a boost in borrowing costs. A basis point is 0.01 percentage point. Vice Economic Minister Lin Sheng-Chung said last month the government may raise its 2010 gross domestic product forecast from the current 4.72 percent as the economy accelerates. The Central Bank of the Republic of China (Taiwan) has kept its benchmark interest rate at a record-low 1.25 percent since March last year to encourage consumer spending and investment. The rebound and a planned trade accord with China have attracted overseas investors, spurring Taiwan’s dollar in April to its biggest monthly advance since September. The currency reached NT$31.269 per U.S. dollar on April 27, the strongest since August 2008. European Crisis Even so, Lucas Lee , an economist at Mega Securities Co. in Taipei, said the central bank is likely to keep borrowing costs unchanged due to concern that budget-deficit-reduction measures in Europe may undermine the global recovery. “It’s unclear how long and how big the deficit problem will last, so we certainly don’t expect the central bank to move rates next month,” said Lee. “Given Taiwan’s GDP growth will slow later in the year due to a base effect, we expect a tightening in the second half of next year.” President Ma Ying-jeou , who abandoned his predecessor’s pro-independence stance after taking office in May 2008, has been pushing for the trade agreement with China to prevent Taiwan from being “marginalized” after a Chinese accord with the 10-member Association of Southeast Asian Nations took effect this year. Opposition Protests The proposal sparked opposition demonstrations amid concern China may boost its influence over Taiwan. The two have been ruled separately since Nationalist troops fled to the island after losing a civil war to Mao Zedong ’s Communists in 1949. Exports to China, the island’s biggest trading partner and No. 1 overseas investment destination, soared 62 percent in April from a year earlier, after an 82 percent gain in March. That prompted Taiwan Semiconductor, the island’s biggest company by market value, to forecast revenue will rise this quarter to a record NT$100 billion ($3 billion) to NT$102 billion. It reported first-quarter net income of NT$33.7 billion, surpassing analysts’ estimates . Taiwan’s export orders, an indication of shipments in the next one to three months, advanced 36.1 percent in April, the seventh monthly increase, according to a Bloomberg News survey of 17 economists ahead of the data’s release tomorrow. Quanta Computer , which includes Apple Inc. and Acer Inc. among its customers, said in April that sales are expected to rise this quarter as companies upgrade to models running Microsoft Corp. ’s newest Windows operating system and Intel Corp. releases a new processor for laptops. Inflation Returns The recovery also brought an exit from deflation, with consumer prices rising 1.3 percent in April, a fourth consecutive increase. Crude-oil prices have risen about 20 percent in the past 12 months, boosting transport costs in Taiwan, which imports 99 percent of its energy. Central bank Governor Perng Fai-nan said two months ago the bank won’t sacrifice price stability for economic growth. Hiring by electronics companies and retailers, who are benefitting from rising numbers of Chinese tourists, helped drive down the unemployment rate to 5.64 percent in March, the seventh monthly decline after it surged to a record 6.04 percent in August. The number of workers taking unpaid leave fell to 1,486 as of the end of April after peaking at 238,975 in February last year, Premier Wu Den-yih told reporters last week, a sign of diminished slack in the economy. Chinese visitors to Taiwan in the first quarter outnumbered Japanese for the first time on record as relaxed rules spurred travel to an island off limits to mainlanders for 60 years. The government estimates the so-called Economic Cooperation Framework Agreement with China would increase GDP by 1.65 to 1.72 percentage points annually, spurring exports and creating more than 260,000 jobs. Exports would rise as much as 5 percent a year and imports by 7 percent, it says. To contact the reporters on this story: Chinmei Sung in Taipei at csung4@bloomberg.net . Jay Wang in Singapore at jwang298@bloomberg.net

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UBS Schools Private-Banking Rookies in Asia as Search for Talent Heats Up

May 7, 2010

By Joyce Koh May 7 (Bloomberg) — UBS AG , Switzerland’s biggest bank, is reviving an effort to recruit people without industry experience for its Asian private banking unit after a one-year hiatus, as competition for wealth managers heats up in the region. The Zurich-based bank is taking out ads in Singapore, Hong Kong and Taiwan newspapers tomorrow to invite applications for the UBS Wealth Management Associate Program, said Curdin Duschletta, head of UBS Business University for Asia-Pacific. Admissions will be similar to previous years, when the course took in 25 to 50 people, he said. “If we in the industry only go for the experienced ones, it wouldn’t work out,” Duschletta said in an interview. “We would just see people moving around; there would still be less advisers than there is wealth out there to be taken care of. If we don’t offer people the opportunity to enter the industry, we would bleed out.” UBS, the biggest wealth manager in Asia with about 163 billion Swiss francs ($146.5 billion) of assets as of Dec. 31, is reaching outside the industry to aid a plan to expand its workforce of 1,000 private bankers in the region by about 40 percent. The approach contrasts with that of rivals like Citigroup Inc. , who have said they want experienced bankers. “The breadth and sophistication of our full private banking service, as well as the client type we serve, require bankers who have had in excess of 10 years of finance industry experience, preferably across a variety of disciplines,” said Mark Morgan, global head of human resources at Citi Private Bank. Bankers Needed Citigroup’s private bank serves clients with at least $10 million of net assets. UBS typically requires 1 million francs, or $900,000, to open a private-banking account. The bank, together with rivals including Citigroup, Credit Suisse Group AG and Julius Baer Group Ltd., faces a tightening labor market as they vie for an estimated $7.4 trillion of private riches in Asia. The industry may need 900 additional wealth managers in the next five years to cope with growth, according to a September research note from UBS. UBS started the Wealth Management Associate Program in 2006 and suspended it last year. The course is “part of our effort to continue to develop talent, particularly in Asia-Pacific where the industry is growing rapidly,” said Kathryn Shih , the bank’s head of wealth management in the region. Applicants for the UBS course should have about five years of work experience, preferably in finance or banking, according to a copy of the ad that was obtained by Bloomberg News. Surpassing U.S. Since the course started in 2006, UBS has gotten “thousands” of applications each year, according to Duschletta. About 120 people have graduated from the program since its inception, and most are now junior private bankers at UBS. Although most applicants tend to be from the banking industry, UBS has trained a handful of private bankers who previously worked in industries ranging from music to real estate and media, Duschletta said. Asia-Pacific is forecast to surpass North America by 2013 as the world’s largest private banking market, according to a Capgemini SA and Merrill Lynch report. Wealthy people in the region will outnumber those in the U.S. and Europe by the end of next year, consulting firm Booz & Co. estimates. “We see a pick-up in the markets,” said Duschletta. “We see a pick-up in our business development. We have the capacity to train and invest in these people, and we also need them to help us generate the business growth.” Crisis Lessons UBS said last month its wealth management units had net new money inflows in the Asia-Pacific region even as rich clients withdrew about 15 billion francs worldwide in the first quarter. Citigroup plans to hire 40 private bankers and specialists across Asia-Pacific in coming months. Standard Chartered Plc will add 100 relationship managers over the next 12 months, with many in Asia. RBS Coutts Bank Ltd., which lost more than a third of its Singapore staff to rival BSI Bank, aims to hire about 200 people in Asia over the next five years. Bank of Singapore, the private banking arm of Oversea-Chinese Banking Corp. , is taking on 30 more employees. The global financial crisis, during which wealthy people sued their private banks in Singapore and Hong Kong over financial losses, convinced some executives of the need to only employ industry veterans. Clariden Leu, the private bank owned by Credit Suisse, said in October it plans to only hire people with at least 15 years of experience in Asia. The lesson wasn’t lost on UBS, Duschletta said. “We have gone through quite tough times,” he said. “Now when you talk to someone, you think about how the person would behave in a crisis. You wouldn’t have thought about this three years ago.” To contact the reporter on this story: Joyce Koh in Singapore at jkoh38@bloomberg.net

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Asian Stocks, Copper Drop on China Loan Curbs, Australia Tax; Euro Weakens

May 2, 2010

By James Regan May 3 (Bloomberg) — Asian stocks fell toward a one-month low, led by mining companies, and copper declined after China ordered banks to set aside more funds as reserves and Australia boosted taxes on commodities producers. The euro weakened as investors turned their focus to Portugal and Spain after European leaders agreed on a $146 billion rescue plan for Greece. The MSCI Asia Pacific excluding Japan Index slid 0.9 percent as of 10:30 a.m. in Hong Kong, with raw-materials and financials accounting for about half of the loss. BHP Billiton Ltd. dropped the most since February and copper touched a seven- week low. The euro fell 0.5 percent to $1.3224 and futures on the Standard & Poor’s 500 Index gained 0.1 percent.      “All governments will eventually have to be bailed out in the Western world; they are overly indebted,” Marc Faber , publisher of the Gloom, Boom & Doom report, said in a Bloomberg Television interview in Hong Kong. “They’ll all default or they’ll all print money but the outcome won’t be pretty, that I assure you.” Greece’s bailout from the European Union and the International Monetary Fund requires austerity measures that will curb economic growth and doesn’t address the stressed finances of euro-zone countries including Italy, Spain and Portugal. Investors are growing more skittish about the outlook for earnings after China raised bank reserve ratios for the third time this year and Australia announced a 40 percent tax on the profits of resource companies. The MSCI Asia Pacific excluding Japan Index declined to 423.97, near last month’s low of 423.47, and a measure of raw- materials producers dropped 1.9 percent. Benchmark stock gauges fell across regional markets that were open for trading, led by a 1.2 percent slide in Hong Kong’s Hang Seng Index . Markets are closed today in Japan, China, Thailand and the Philippines. Higher Taxes BHP , the world’s biggest mining company, slumped 2.5 percent to A$39.72 and Rio Tinto Ltd. , the third-largest, tumbled 3.3 percent to A$69.69. Australia’s new tax will start from 2012 and raise A$12 billion ($11.1 billion) in its first two years. BHP estimates the tax rate on its Australian earnings will increase to 57 percent in 2013 from 43 percent now. “The mining tax is disappointing because the goal posts are being moved out by a greedy government, which is never good for future investment,” said Prasad Patkar , who helps oversee about $1.9 billion at Platypus Asset Management in Sydney. Lending Restrictions Industrial & Commercial Bank of China Ltd., the world’s largest lender by market value, sank 1.6 percent to HK$5.68 and China Construction Bank Corp. fell 1.4 percent to HK$6.33. The reserve requirement for the nation’s biggest banks will increase by 50 basis points to 17 percent effective May 10, the People’s Bank of China said yesterday. Asia’s emerging-market currencies weakened and copper declined on concern monetary tightening will damp spending in the world’s third-largest economy. China, including Hong Kong, is the No. 1 export destination for Korea, Taiwan and Malaysia and the world’s largest copper user. The won slid 0.7 percent to 1,116.40 per dollar and copper for July delivery dropped as much as 1.5 percent to $3.3050 per pound. The euro fell versus 14 of its 16 major counterparts before European leaders meet on May 7 to discuss the timeline of parliamentary approval for loans to Greece and as Germany plans to debate the plan on the same day. Greece’s three-year financial lifeline requires the nation to cut its budget deficit below the European Union’s limit of 3 percent of gross domestic product by the end of 2014, a year later than originally planned. The shortfall was 13.6 percent last year, the region’s second-biggest, after Ireland. “It’s not necessarily good news for the euro in that it’s transferring risk from the periphery to the core,” said Greg Gibbs , a currency strategist at Royal Bank of Scotland Group Plc, in Sydney. “If the euro can’t gain upward momentum in the early days of this week, it’s really doomed.” To contact the reporter for this story: James Regan in Hong Kong Jregan19@bloomberg.net ;

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Stocks Rally on Waning Greek Debt Concern as Economic Growth Boosts Metals

April 26, 2010

By Darren Boey and Anna Kitanaka April 26 (Bloomberg) — Stocks climbed, led by the biggest gain in the Nikkei 225 Stock Average in seven weeks, and commodities rallied as economic reports pointed to faster growth and concerns about Greece’s debt abated. The yen weakened. The MSCI Asia Pacific Index increased 1.6 percent to 127.25 and the Stoxx Euro 600 rose 1 percent to 270.14 as of 4 p.m. in Tokyo. The Nikkei jumped 2.3 percent, the most since March 5. Standard & Poor’s 500 Index futures gained 0.1 percent. The yen fell to 125.96 per euro in Tokyo from 125.73 yen in New York on April 23. Oil in New York rose 0.4 percent to $85.42 a barrel, extending a 1.7 percent advance from April 23. Copper climbed 1.2 percent and rubber gained 1.6 percent. Investor sentiment improved after Greece moved toward securing a financial rescue package and a forecast for Toyota Motor Corp.’s results indicated it may post an unexpected operating profit versus an operating loss for the fiscal year. Sales of new U.S. homes surged 27 percent in March and orders for most durable goods climbed, reports on April 23 showed. “The economic data has certainly outperformed a lot of some people’s very skeptical expectations,” said Tim Leung , who helps manage about $1.5 billion at IG Investment Ltd. in Hong Kong. “There are good statistics coming out of the U.S. in terms of economic recovery. We are cautiously optimistic.” The Nikkei’s increase was the largest among benchmark gauges in the Asia-Pacific region. Hong Kong’s Hang Seng Index climbed 1.5 percent and Taiwan’s Taiex advanced 1.9 percent. Japanese Exporters Toyota Motor Corp. , the world’s largest carmaker, jumped 3.4 percent to 3,690 yen in Tokyo. The carmaker probably had operating profit of as much as 50 billion yen ($531 million) for the year ended March 31, Nikkei English News reported on April 24. The company on Feb. 4 forecast an operating loss of 20 billion yen. Toyota spokeswoman Ririko Takeuchi declined to comment. Japanese exporters also advanced as the dollar strengthened after U.S. sales of new homes gained faster than estimated, boosting optimism in an economic recovery. Canon Inc. , a camera maker that got 29 percent of its 2009 sales in the Americas, climbed 3.5 percent to 4,395 yen. In Seoul, LG Innotek Co., a South Korean maker of electronic parts, surged 9.6 percent to 159,500 won, set for the highest close since Sept. 7, after first-quarter profit more than doubled. Sales of new U.S. homes soared 27 percent in March, climbing the most in 47 years to a level that surpassed the highest forecast of economists surveyed by Bloomberg News. Orders for goods meant to last at least three years, excluding cars and aircraft, gained 2.8 percent. Weaker Yen The yen fell against all of its major counterparts after a report showed U.K. house prices rose for a ninth straight month and before data forecast to show the U.S. housing market is stabilizing. Japan’s currency sank 0.4 percent to 87.496 against the Australian dollar, the weakest since September 2008. The yen weakened to 94.27 per dollar from 93.97 yen in New York. “Data across the globe underscore the economy is recovering, which then boosts risk sentiment,” said Koichi Kurose , chief strategist in Tokyo at Resona Bank Ltd., a unit of Japan’s fourth-largest banking group. “Buoyant risk sentiment will encourage investors to sell the yen and re-invest in higher-yielding assets.” The pound climbed 0.8 percent to 145.61 yen, the highest level since Jan. 27, after London-based Hometrack Ltd. said today the average cost of a home in England and Wales increased 0.2 percent in April from the previous month. Sterling rose to $1.5447 from $1.5377 on April 23. Emerging Markets The S&P/Case-Shiller home-price index in the U.S. climbed 1.3 percent in February, the first increase since December 2006, a Bloomberg News survey of economists showed ahead of the data’s release tomorrow. Asian emerging-market currencies climbed as improving economic data globally boosted Asia’s trade outlook and increased demand for the region’s currencies. “The dollar is under pressure across the board,” said Gerrard Katz , Hong Kong-based head of foreign-exchange trading at Standard Chartered Plc. “Data continues to improve in general. Risk appetite trades are doing well at the moment.” The South Korean won climbed 0.5 percent to 1,103.80 per dollar and the Malaysian ringgit gained 0.4 percent to 3.1778. Twelve-month non-deliverable yuan forwards climbed 0.1 percent to 6.6068 per dollar, reflecting bets the currency will strengthen 3.3 percent from the spot rate of 6.827. China Stimulus Chinese officials this weekend pledged to extend their “proactive” fiscal measures and maintain a “relatively easy” monetary policy, saying the global economic recovery remains tentative. China will announce in August a new stimulus package of possibly 4 trillion yuan ($586 billion), the China Business newspaper reported on its Web site. Calls to Li Pumin , a spokesman for the National Development and Reform Commission, weren’t answered today. Copper rose for a second day as Greece moved toward securing an emergency aid package. Three-month copper on the London Metal Exchange advanced to $7,840 a metric ton. Greece’s Finance Minister George Papaconstantinou said money will be available “rather soon” and his country wouldn’t restructure its debt. He was speaking to reporters in Washington yesterday as he negotiated a three-year loan plan with the International Monetary Fund and European governments. Crude oil rose for a fifth day on speculation demand will increase as the world economy recovers from recession. “Data on the economic side, especially in the U.S., are getting much, much better than expected,” said Tetsu Emori , a commodity fund manager at Astmax Co. in Tokyo. “Ninety could be reachable, but over $90 to $95 would probably be difficult unless there are more strong factors on the fundamental side appearing.” Treasuries fell for a third day, the longest run of losses in two weeks, as the U.S. prepared to sell a record $129 billion of notes this week. The yield on the 10-year note rose one basis points to 3.82 percent, according to BGCantor Market Data. The Federal Reserve has kept its target rate in a range of zero to 0.25 percent since December 2008. Policy makers will complete their next meeting on April 28. To contact the reporter for this story: Darren Boey at dboey@bloomberg.net ; Anna Kitanaka in Tokyo at akitanaka@bloomberg.net .

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Prudential Has `Overwhelming’ Support for AIA Deal, Asia CEO Stowe Says

April 18, 2010

By Bei Hu and Kevin Crowley April 19 (Bloomberg) — Prudential Plc has “overwhelming” investor support for a $20 billion rights offering to finance the acquisition of American International Group Inc. ’s Asian life unit, the largest purchase in its 162-year history. “The investor feedback has been extremely positive,” said Barry Stowe , Hong Kong-based chief executive of Prudential Corporation Asia in an interview. “There’s a prospectus to be issued and a lot of conversations to be had. But I can tell you the support from shareholders has been overwhelming.” Prudential Chief Executive Officer Tidjane Thiam needs 75 percent of investors to support the rights offer to fund the $35.5 billion purchase of AIA Group Ltd. and will this month publish a prospectus which will include AIA’s accounts for the last three years. The insurer, currently traded in London, is planning a dual primary listing in Hong Kong giving Asian investors greater access to Prudential’s stock. Capital Research & Management Co., Prudential’s biggest investor, increased its holding in the insurer to 12.4 percent from 11.8 percent earlier this month, according to a regulatory filing. Legal & General Group Plc, the firm’s third-largest shareholder, last month reduced its stake to almost 4 percent from 4.5 percent. “We’re backing the rights issue as we want to stay in Prudential,” said Colin Mclean , who manages 650 million pounds ($1.01 billion) at SVM Asset Management in Edinburgh including Prudential shares. “A lot of investors think this deal is going to happen anyway, especially if Pru can get sovereign wealth funds in Asia to support it.” Mclean said he “remains skeptical” of the deal. “It’s an inexperience management team. They’re all new to their roles and paying a very high price.” 1+1=3 Among those showing support for the plan are Prudential’s largest shareholders as well as existing and potential investors in Asia, Stowe, 52, said an interview in Hong Kong on April 16. A wide variety of Asian investors, including sovereign wealth funds, have shown interest in buying into the company, whose Hong Kong stock exchange listing is expected before the rights issue, he added, declining to give more details. Spokesmen for Capital Research, BlackRock Inc., Legal & General and Norges Bank, Prudential’s biggest four investors, declined to comment. Investors have accepted the strategic rationale of the acquisition that would combine Prudential’s faster growing Asia business with AIA’s longer history and larger size, Stowe said. “Very rarely has been an opportunity in the marketplace to create a transaction where one plus one equals three.” Forty percent of global life-insurance premium growth will be in Asia in the next five years, consulting firm McKinsey & Co. estimated in a study. AIA Network AIA has 320,000 agents and about 23,500 employees in 15 Asian markets with 23 million customers, according to a March 1 statement. Prudential has life insurance and asset management operations in 13 Asian markets, where 410,000 agents and distribution partners serve more than 15 million customers, said a corporate brochure. The acquisition would raise Asia’s contribution to Prudential’s new business profit to 60 percent from 47 percent, Thiam told reporters on March 1. It would make Prudential a leader in Asian markets including Hong Kong, Singapore, Malaysia, Thailand, Indonesia, the Philippines and Vietnam. The combined business would continue to seek Asia growth faster than the market average, Stowe said, without giving a number. Prudential’s profit from new business in Asia expanded 12 percent last year to 713 million pounds. AIA’s profit from new business slumped 41 percent to $570 million in 2009. Regulators “People that look at AIA in the context of their 2009 results probably get a misleading view of the organization,” Stowe said. “While all of us had to deal with the impact of the financial crisis, you have to remember AIG, and therefore AIA, was at the center of the financial crisis. They were uniquely impacted by it.” AIG agreed to sell the Asian life insurance unit with 20 million customers as part of asset sales to help it repay a $182.3 billion U.S. government bailout. The sale of AIA is the biggest AIG divestiture since the bailout in 2008. The U.K. insurer won’t make a decision on whether to sell part of its China operations until discussions with the China Insurance Regulatory Commission and Prudential’s Chinese partner Citic Group have ended, said Stowe. “There’s no market that’s more strategically important for the future than China,” Stowe said. “We’ve discussed with the regulator a number of different mechanisms that you could use in order to combine the operating businesses.” Foreign Insurers China’s regulator doesn’t allow foreign insurers to hold two life licenses in the country at the same time. AIG, founded in Shanghai in 1919, is the only foreign insurer allowed to run 100 percent owned life insurance operations in China. Other foreign players, including Prudential, are restricted to owning no more than half of their local life ventures with Chinese partners. Foreign-invested insurers accounted for a combined 5 percent of China’s total life insurance premiums last year, according to CIRC data . AIA’s local business, the largest foreign player, had a less than 1 percent market share, twice that of Citic Prudential Life Insurance Co . Regulators in Hong Kong, Taiwan, China and Singapore may also restrict AIG’s subsidiaries from paying dividends, the New York-based insurer said in its annual report in February. Thiam and Stowe went on a three-day whirlwind tour of Asia immediately following the deal’s announcement on March 1 to persuade regulators to back the acquisition before meeting investors, Stowe said. “The reaction from all the regulators has been extremely positive, extremely supportive,” Stowe said, adding the discussions were making progress with regulators taking pragmatic views. Prudential appointed Rob Devey to manage the integration of AIA on April 14. To contact the reporter on this story: Bei Hu in Hong Kong at bhu5@bloomberg.net ; Kevin Crowley in London at kcrowley1@bloomberg.net

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Singapore Revalues Currency After Raising Estimates for Growth, Inflation

April 13, 2010

By Patricia Lui April 14 (Bloomberg) — Singapore unexpectedly revalued its currency, triggering the biggest gain in a year, after the government raised forecasts for economic growth and inflation. The Monetary Authority of Singapore said it will seek a “modest and gradual appreciation” in the local dollar and shift to a stronger range for currency fluctuations, the first such combined move in its 39-year history. The trade ministry said the economy will expand as much as 9 percent in 2010, compared with a previous outlook of 6.5 percent, after the fastest growth since at least 1975 in the first quarter. Currencies across Asia rallied as investors bet governments will switch to fighting inflation from stimulating growth, after oil, copper and aluminum prices jumped more than 60 percent in the past year. The decision adds to signs that China, which will probably report its fastest growth in three years tomorrow, will end the yuan’s 21-month-old peg to the dollar. “Singapore’s move might reflect policymakers’ belief that China is possibly close to moving on the yuan,” said Brian Jackson , an emerging-markets strategist at Royal Bank of Canada in Hong Kong. “It’s part of the broader trend across Asia that policymakers are moving toward a tighter stance as inflation is driven by stronger commodities prices.” Withdraw Stimulus Singapore’s dollar rose to the strongest level since August 2008, Malaysia’s ringgit advanced toward its highest in 23 months and the South Korean won approached an 18-month high. The Monetary Authority of Singapore, which uses the exchange rate rather than interest rates to conduct monetary policy, joins policy makers from India to China who have begun withdrawing monetary stimulus this year, seeking to check asset- price bubbles. China has twice ordered banks to raise the share of their assets held in reserve. India increased interest rates last month for the first time in almost two years. Australia’s central bank has boosted borrowing costs in five out of the past six meetings. “This opens up the rest of Asia to allow further appreciation of their currencies, with the Korean won, Malaysian ringgit, Indian rupee and Taiwan dollar to lead the charge,” said Bernard Yeung , Hong Kong-based head of currency trading for Asia at National Australia Bank Ltd. MAS Statement The MAS will “re-center the exchange-rate policy band at the prevailing level of the Singapore nominal effective exchange rate” and “shift the policy band from that of zero appreciation to one of modest and gradual appreciation,” according to a statement issued today following a semi-annual currency review. There will be no change to the width of the band. Singapore’s dollar rose as much as 1.1 percent to S$1.3777 against the greenback, according to data compiled by Bloomberg. It last traded at S$1.3785 as of 11:41 a.m. local time from S$1.3923 in New York yesterday. Penn Nee Chow , an economist at United Overseas Bank Ltd., Singapore’s second-largest lender by market value, was the only one of 13 economists who predicted today’s central bank move in a Bloomberg survey “It was a quite hawkish stance from the MAS,” said Chow . “According to our model, it looks to be a 0.6 percent appreciation of the Singapore dollar’s trade-weighted index.” Growth Accelerates Singapore’s gross domestic product rose an annualized 32.1 percent in the first quarter from the previous three months, after shrinking 2.8 percent in the October-to-December period, the trade ministry said today in its preliminary estimate. That was faster than the 18.4 percent median estimate of economists in a separate Bloomberg survey. “We’ve just seen the realization that Singapore is a great place to do business,” said Donald Gimbel , senior managing director at New York-based Carret Asset Management LLC, in an interview with Bloomberg Television. “We will gradually be adding to our position” in Singapore stocks. “Companies that are doing a lot of business in the People’s Republic of China, like Midas is a good example.” The benchmark Straits Times Index advanced to a 22-month high, rising as much 1 percent to 3,001.16. DBS Group Holdings Ltd., Southeast Asia’s biggest lender, climbed as much as 3.6 percent. Neptune Orient Lines Ltd., owner of Southeast Asia’s largest container line, surged as much as 7 percent. Midas Holdings Ltd., which designs and makes polyethylene pipes, was little changed, with shares up 25 percent this year. ‘Behind the Curve’ The government revised its inflation target for this year to between 2.5 percent and 3.5 percent, compared with an earlier projection of 2 percent to 3 percent. Consumer prices rose 1 percent in February from a year earlier, the fastest pace since March 2009, official data show. “Singapore’s GDP release represents the start of a series of strong Asian first-quarter numbers which will emphasize that central banks across the region have fallen significantly behind the curve,” said Robert Prior-Wandesforde , an economist at HSBC Holdings Plc in Singapore. With assistance by Lilian Karunungan , Haslinda Amin and Anna Kitanaka in Singapore, and Frances Yoon in Hong Kong. Editor: Simon Harvey , Sandy Hendry To contact the reporter on this story: Patricia Lui in Singapore at plui4@bloomberg.net

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Trade Deficit in U.S. Widens More Than Anticipated as Import Demand Grows

April 13, 2010

By Bob Willis April 13 (Bloomberg) — The trade deficit in the U.S. widened in February more than anticipated as imports climbed, adding to evidence of a rebound in economic growth. The gap increased 7.4 percent to $39.7 billion from a revised $37 billion the prior month, the Commerce Department said today in Washington. Imports climbed 1.7 percent as Americans bought more computers and televisions made abroad, while exports rose to the highest level since October 2008. The need to replenish depleted inventories and gains in consumer spending mean purchases of goods and services from overseas will keep growing in coming months. Exports will probably also advance as global growth accelerates, giving companies from Caterpillar Inc. to Dow Chemical Co. a boost. “The primary driver of the widening trade deficit is the American consumer who lately is feeling more confident and starting to spend again on foreign goods,” Chris Rupkey , chief financial economist at Bank of Tokyo-Mitsubishi UFJ Ltd. in New York, said before the report. “Overseas markets are seeing a resumption of growth as well.” The dollar extended losses against the yen after the report to trade at 92.82 yen to the dollar at 8:40 a.m. from 93.24 yen late yesterday. The dollar was at $1.3595 per euro from $1.3592 late yesterday. Import Prices Prices of goods imported into the U.S. rose less than anticipated in March, indicating few signs of building inflation pressures from abroad, another report showed. The 0.7 percent increase in the import-price index followed a revised 0.2 percent drop in February, Labor Department figures showed. Prices excluding petroleum fell 0.2 percent last month, the first decline since July 2009. The trade gap was projected to widen to $38.5 billion from an initially reported $37.3 billion in December, according to the median forecast in a Bloomberg News survey of 73 economists. Projections ranged from deficits of $35.8 billion to $41.6 billion. After eliminating the influence of prices, which are the numbers used to calculate gross domestic product, the trade deficit grew to $42.5 billion from $40.9 billion in January. The average for the first two months of the year is about the same as in the prior quarter, indicating trade will have little influence on growth figures. Consumer Goods Purchases of foreign-made goods increased to $182.9 billion as demand for consumer goods, including televisions, toys, pharmaceuticals and clothing climbed to the highest level since October 2008. With the economy generating 162,000 jobs in March, the most in three years, U.S. consumers are beginning to spend more freely after the first back-to-back annual declines in purchases since the 1930s. That spending will probably continue to drive import growth. U.S. companies are beginning to replenish inventories after last year’s record drawdown, also boosting demand for foreign- made goods and materials. Efforts to stabilize inventories accounted for two-thirds of the 5.6 percent growth rate in the fourth quarter of 2009. The number of barrels of imported crude oil fell in February to the lowest level since February 1999, today’s report showed. After adjusting the figures for seasonal variations, the value of oil imports climbed. Exports Rise Exports increased 0.2 percent to $143.2 billion, led by growing foreign demand for engines and semiconductors. An $821 billion drop in civilian-aircraft deliveries to buyers overseas, an often volatile category, limited the overall gain. Sales of U.S.-made goods are getting a boost from growing demand in China and other expanding economies. The U.S. surplus with newly industrialized countries, including Korea, Singapore and Taiwan, reached a record $2.2 billion as exports grew. The surplus with Brazil also climbed. A growing world energy market is also boosting sales of U.S. made chemicals and drilling equipment. Dow Chemical, the largest U.S. chemical maker, is benefiting from recovering growth in markets such as Brazil, where large discoveries of oil have been made. An 11 percent drop in the value of the dollar against a trade-weighted basket of currencies from the nation’s biggest trading partners from a five-year high reached in March 2009 is also helping spur foreign demand. Obama Goal President Barack Obama has said the U.S. needs to focus on expanding exports and investment rather than depend on consumer spending as in the past. He plans to increase government-backed export financing for small businesses by 50 percent, to $6 billion a year. Today’s report showed the trade gap with China decreased to $16.5 billion, the lowest since March 2009, from $18.3 billion in the prior month. Americans imported the fewest Chinese-made goods in almost a year. China reported April 11 that it posted a trade deficit of $7.24 billion in March, the first in six years. It still showed a $9.9 billion surplus with the U.S. China’s trade numbers were released three days after U.S. Treasury Secretary Timothy F. Geithner met in Beijing with Chinese Vice Premier Wang Qishan amid rising pressure from American lawmakers for action to allow its currency, the yuan, to gain in value and rein in a U.S. trade gap that was $227 billion last year. For Related News and Information: For news on U.S. trade: TNI US TRD For U.S. economy news: NI USECO For news on U.S. manufacturing: TNI US MAC Bloomberg stories on the job market: TNI US LABOR BN

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Rupiah Gains 5 Times More Than Yuan on Revaluation

April 13, 2010

By Bo Nielsen and Matthew Brown April 13 (Bloomberg) — The best currency to own when China lets the yuan appreciate won’t be the yuan, if history is any guide. It’s everything from South Korea’s won to Singapore’s dollar and Indonesia’s rupiah. The won rose five times as fast as China’s currency in the 12 months after officials in Beijing last relaxed the foreign- exchange regime in July 2005, data compiled by Bloomberg show. Singapore’s dollar climbed three times as much, the rupiah five times and Malaysia’s ringgit twice as fast. As President Barack Obama pressed Chinese President Hu Jintao in Washington today to let the yuan rise at a faster pace, traders are betting on a repeat of five years ago as an appreciating currency boosts China’s power to buy Malaysian palm oil to Indonesian coal and Indian copper. Revaluation may also enable Asian nations to do the same with their own currencies without damaging exports, while fueling U.S. trade as the global economy emerges from its deepest postwar recession. “A Chinese appreciation will kick off tightening in the whole Asian complex of currencies,” said Richard Benson , who oversees $14 billion of currency funds as an executive director at Millennium Asset Management in London and is backing the won and the ringgit to lead the gains. “These currencies are fundamentally cheap.” Hu’s View Obama reaffirmed to Hu his view that it’s “important” for China to move toward a “more market-oriented exchange rate,” Jeff Bader , senior director for Asia at the National Security Council, told reporters after the meeting on the sidelines of a two-day nuclear security summit in the U.S. capital. Hu told Obama that China’s actions must be “based on its own economic and social-development needs,” the official Xinhua News Agency reported today. Singapore will let its currency advance to keep inflation from accelerating after the economy grew more than anticipated in the first quarter, according to Goldman Sachs Group Inc. The rising cost of imports will also spur Taiwan to let its dollar appreciate, it said. Bank of Tokyo-Mitsubishi UFJ Ltd. said on April 8 the won and rupiah may climb about 13 percent against the yen as central banks from Indonesia to Taiwan raise interest rates and reduce currency intervention. Biggest Candidates “The heavily managed Asian currencies are the biggest candidates for appreciation once the yuan starts gaining,” said Thomas Stolper , a foreign-exchange analyst with Goldman Sachs in London. “Many of these countries are facing fiscal pressure and would like to see their currencies appreciate. A Chinese revaluation would give them the opportunity.” Twelve-month non-deliverable yuan forwards traded at 6.6370 per dollar in Hong Kong today, reflecting bets the yuan will climb 2.9 percent from the spot rate of 6.8265 according to data compiled by Bloomberg. The contracts touched 6.6055 on April 9, the strongest since Jan. 19. The Singapore and Taiwan dollars are the most managed currencies in the region, making them more likely to rise with a yuan revaluation, Stolper said. He added a “buy” recommendation on Taiwan’s dollar versus the greenback on March 31 and on the Singapore dollar April 1. While the yuan will appreciate between 5 percent and 8 percent a year, other currencies will gain more as investors target countries with less regulation in foreign-exchange markets, according to Jens Nordvig , a managing director of foreign-exchange research at Nomura International Plc. The firm is Asia’s biggest bank by assets. “You’ll see a surge in inflows as investors anticipate an 8 percent move in the yuan,” New York-based Nordvig said. “If you’re an investor, why not make the money now instead of waiting around for a year in China? You’ll see a more immediate impact in Korea, Taiwan, Malaysia and the Philippines.” Shielding Exporters South Korea’s won will surge 9.6 percent to 1,025 per dollar, the Singapore dollar 9.1 percent to 1.28 and the Taiwan dollar 5.3 percent to 30 per dollar by the end of March 2011, while the yuan appreciates 6.8 percent to 6.36 per dollar, according to Nomura. China’s currency won’t gain more than 4.9 percent to 6.49 in the next 12 months as the won jumps 6.7 percent and Taiwan’s dollar 5.2 percent, Goldman Sachs forecast. Chinese Premier Wen Jiabao ’s government has kept the yuan at 6.83 per dollar for the past 21 months to shield exporters from the global recession and a slump in world trade. The country allowed the yuan to appreciate 21 percent in the three years before that. Revaluation Probability It gained 1.4 percent versus the dollar in the year following the July 2005 revaluation. By comparison, Singapore’s dollar surged 4.3 percent, the rupiah 7 percent, the won 7.4 percent and Malaysia’s ringgit 3.3 percent, Bloomberg data show. Implied volatility from options trading monitored by Bloomberg shows a 77 percent probability that the yuan will strengthen to 6.7 per dollar by the end of 2010. Benefiting from a rise in the yuan is complicated by the restrictions on the movement and convertibility of the currency, forcing speculators to buy the non-deliverable forwards contracts based on future rates that are settled without an actual exchange of the two currencies. The rising cost of such contracts reduces potential profit should the People’s Bank of China allow a stronger yuan. “It’s very hard to make money betting on a move in the yuan by betting on the yuan,” said Benson. “Chinese forwards are very expensive.” ‘Not Much Room’ Many Asian currencies have already advanced in anticipation of a strengthening yuan. Indonesia’s rupiah strengthened beyond 9,000 against the dollar for the first time since July 2007 yesterday. Taiwan’s dollar traded at a 19-month high and the won at an 18-month high. “I’m not looking for much room from here,” said Thomas Harr , a senior currency strategist at Standard Chartered Plc in Singapore. The British bank makes most of its profit in Asia. Asian central banks have been at the forefront of global monetary tightening this year, with India and Malaysia increasing borrowing costs last month, while the U.S. Federal Reserve has kept its target rate for overnight loans between banks between zero and 0.25 percent. Asian nations “have the internal demand, and they have had some inflation problems, which is good,” said John Taylor , who holds Thai baht and Indonesian rupiah in the $7.5 billion of assets he helps oversee as chairman of FX Concepts Inc. in New York. “It means they have to keep their interest rates up or make them go higher, which is good for currency managers.” To contact the reporters on this story: Bo Nielsen in Copenhagen at bnielsen4@bloomberg.net ; Matthew Brown in London at mbrown42@bloomberg.net

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Emerging Currencies Overtake G-7 as Volatility Drops

April 12, 2010

By Ye Xie April 12 (Bloomberg) — Traders in currency options are showing that emerging economies have become safer relative to developed nations than at any time in almost two years. Three-month implied volatility for the seven biggest developing country currencies fell to 10 percent in March compared with 11.4 percent for industrialized nations, according to JPMorgan Chase & Co. indexes. The gap is the widest since July 2008. So far this year, eight of the 10 best-performing currencies are from emerging markets. The record U.S. budget deficit , Europe’s bailout of Greece and the prospect of a hung parliament in the U.K. are increasing the risk of losses in dollars, euros and pounds. In developing markets, the deficit fell to one-third the level of advanced nations this year and the economies are growing twice as fast as the U.S., the International Monetary Fund says. “The global perception of risk is changing,” said Jerome Booth , who helps manage $32 billion in emerging-market assets as the head of research at Ashmore Investment Management Ltd. in London. “Where you want to be is non-leveraged places, and that means anything in emerging-markets. This is a start of a trend. The rally in emerging-markets has barely started yet.” Global Recovery That’s a switch from three years ago, when record-low volatility was fueled by investors underestimating the risks of leverage. Now, volatility is declining in developing markets as countries from China to Brazil lead the global recovery, while swelling budget deficits in the U.K. and U.S. will weaken those nations’ currencies, Booth said. China’s imports surged 66 percent in March from a year earlier, causing the country’s first trade deficit since 2004. The rise in imports helps the global economic recovery, Huang Guohua , the head of the customs bureau’s statistics department, said on April 9. In Turkey, the lira climbed 6.8 percent against the euro this year to the strongest level since December 2008. Gross domestic product increased at an annual rate of 6 percent in the fourth quarter of 2009, lagging behind only China among the Group of 20 nations. Goldman Sachs Group Inc. forecasts the expansion may help Turkey’s $620-billion economy overtake Germany to become the third-biggest in Europe by 2050. The implied volatility for the lira is below that of the pound by the most since 2000. The lira was forecast to fluctuate at an annual rate of 10.6 percent in the next three months, as of March 30, 2.7 percentage points less than the pound, data compiled by Bloomberg show. “Dropping volatility says: ‘Buy, buy, buy,” said Sebastien Galy , a currency strategist at BNP Paribas SA in New York. U.K. Budget In the U.K., the pound is down 4.6 percent versus the dollar this year and has fallen against 14 of 16 most-traded currencies, including an 11 percent drop against the Mexican peso. National elections are raising the prospect that U.K. voters may fail to elect a governing majority for the first time since 1974. A weakened government may struggle to enact budget cuts with the nation’s debt set to almost double. The euro has lost 12 percent versus the Mexican peso this year as Europe weighed options to help Greece avoid default on its debt. European governments offered Greece a rescue package worth as much as 45 billion euros ($61 billion) yesterday at below-market interest rates. “Investors had a bit of a blasé attitude prior to the Greek situation,” said Robert Stewart , who oversees $74 billion as the head of currencies at JPMorgan Asset Management in London. “Investors are slowly awakening to the reality.” Hyper-Inflation Three decades ago, emerging-market currencies fluctuated the most amid debt crises and hyper-inflation. Mexico defaulted in 1982 while the Asian financial crisis that started in 1997 wiped out one third of the region’s economy. Now it’s developed countries that are dealing with the biggest debt. The administration of President Barack Obama predicts its budget deficit will swell to a record $1.6 trillion in the fiscal year ending Sept. 30. Moody’s Investors Service forecasts that the U.S. will spend more on debt service as a percentage of revenue this year than any other top-rated country except the U.K. Emerging nations are moving in the opposite direction. The budget deficit for developing countries will fall to 2.8 percent of their economies this year, from 4 percent in 2009, according to an IMF report in November. Industrialized governments’ budget gap will decline to 8.1 percent from 8.9 percent, the Washington-based fund said. Developing nations reduced their foreign debt to 26 percent of GDP last year from 41 percent in 1999, while advanced nations’ debt may surge to 106.7 percent of GDP this year from 78.2 percent in 2007, according to IMF data. Credit Crisis In July 2007, the JPMorgan Emerging Market Volatility Index fell to a record low of 5.8 percent as central banks made their interest-rate and currency moves more predictable. When credit markets froze later that year, the index began rising and hit a record 35.8 percent in October 2008, one month after Lehman Brothers Holdings Inc. collapsed. The JPMorgan G-7 Volatility Index , including the euro, the pound and the yen, reached 26.6 percent. Emerging-market volatility is falling again as the Mexican peso and the Malaysian ringgit gained 7.4 percent versus the dollar this year, the best performers in the world after the Costa Rican colon. Mexico’s government forecasts it will keep the budget deficit at 2.8 percent of GDP this year after lowering spending and increasing taxes even as the economy shrank 6.5 percent in 2009 in its worst recession since 1932. Mexican Peso The implied volatility of the Mexican peso was 1.39 percentage points below that of the euro as of April 1, the most since October 2008, according to Bloomberg data. Exports from Malaysia, South Korea and Taiwan are growing to feed demand in China, which is leading the global economic recovery. Overseas shipments from Malaysia rose 18.4 percent in February from a year earlier. The central bank has raised its growth forecast for Southeast Asia’s third-largest economy, predicting an expansion of as much as 5.5 percent this year, the fastest since 2007. Korea exports climbed 35.1 percent in March from a year earlier, while Taiwan’s surged 50.1 percent. Overlooking Risks? Investors may be overlooking the risks of developing- nations, said Harald Hild , a money manager at Quaesta Capital Optivest AG in Switzerland, which oversees about $1 billion. The South African rand, Colombian peso and Brazilian real have increased more than 20 percent in the past year against the dollar, making their exports more expensive. These countries are also “highly dependent” on the U.S. and may falter should America’s economic recovery stumble, he said. “It’s really amazing how strong the risk appetite is for emerging-market currencies,” said Hild, who has traded currency options for 16 years. “I’m not sure how long this will hold.” Countries from Chile to China may lure $722 billion in overseas investment this year, 66 percent more than in 2009, the Washington-based Institute of International Finance said in January. Developing-nation bond funds attracted $7 billion this year, pushing assets under management to a record $74.7 billion, according to Cambridge, Massachusetts-based research company EPFR Global. Falling volatility is making emerging-market currencies more attractive, especially to investors in carry trades, said Thanos Papasavvas , head of currency management at Investec Asset Management in London. In such trades, investors borrow in countries with low interest rates to buy financial assets in those with higher yields. “You’ll see the appreciation of emerging-market currencies versus developed-market currencies as a long-term, strategic trend,” said JPMorgan’s Stewart. “Investors will allocate more to emerging markets.” To contact the reporter on this story: Ye Xie in New York at yxie6@bloomberg.net

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Emerging Markets Overtake G-7 Currencies With Lowest Volatility Since 2008

April 12, 2010

By Ye Xie April 12 (Bloomberg) — Traders in currency options are showing that emerging economies have become safer relative to developed nations than at any time in almost two years. Three-month implied volatility for the seven biggest developing country currencies fell to 10 percent in March compared with 11.4 percent for industrialized nations, according to JPMorgan Chase & Co. indexes. The gap is the widest since July 2008. So far this year, eight of the 10 best-performing currencies are from emerging markets. The record U.S. budget deficit , Europe’s bailout of Greece and the prospect of a hung parliament in the U.K. are increasing the risk of losses in dollars, euros and pounds. In developing markets, the deficit fell to one-third the level of advanced nations this year and the economies are growing twice as fast as the U.S., the International Monetary Fund says. “The global perception of risk is changing,” said Jerome Booth , who helps manage $32 billion in emerging-market assets as the head of research at Ashmore Investment Management Ltd. in London. “Where you want to be is non-leveraged places, and that means anything in emerging-markets. This is a start of a trend. The rally in emerging-markets has barely started yet.” Global Recovery That’s a switch from three years ago, when record-low volatility was fueled by investors underestimating the risks of leverage. Now, volatility is declining in developing markets as countries from China to Brazil lead the global recovery, while swelling budget deficits in the U.K. and U.S. will weaken those nations’ currencies, Booth said. China’s imports surged 66 percent in March from a year earlier, causing the country’s first trade deficit since 2004. The rise in imports helps the global economic recovery, Huang Guohua , the head of the customs bureau’s statistics department, said on April 9. In Turkey, the lira climbed 6.8 percent against the euro this year to the strongest level since December 2008. Gross domestic product increased at an annual rate of 6 percent in the fourth quarter of 2009, lagging behind only China among the Group of 20 nations. Goldman Sachs Group Inc. forecasts the expansion may help Turkey’s $620-billion economy overtake Germany to become the third-biggest in Europe by 2050. The implied volatility for the lira is below that of the pound by the most since 2000. The lira was forecast to fluctuate at an annual rate of 10.6 percent in the next three months, as of March 30, 2.7 percentage points less than the pound, data compiled by Bloomberg show. “Dropping volatility says: ‘Buy, buy, buy,” said Sebastien Galy , a currency strategist at BNP Paribas SA in New York. U.K. Budget In the U.K., the pound is down 4.6 percent versus the dollar this year and has fallen against 14 of 16 most-traded currencies, including an 11 percent drop against the Mexican peso. National elections are raising the prospect that U.K. voters may fail to elect a governing majority for the first time since 1974. A weakened government may struggle to enact budget cuts with the nation’s debt set to almost double. The euro has lost 12 percent versus the Mexican peso this year as Europe weighed options to help Greece avoid default on its debt. European governments offered Greece a rescue package worth as much as 45 billion euros ($61 billion) yesterday at below-market interest rates. “Investors had a bit of a blasé attitude prior to the Greek situation,” said Robert Stewart , who oversees $74 billion as the head of currencies at JPMorgan Asset Management in London. “Investors are slowly awakening to the reality.” Hyper-Inflation Three decades ago, emerging-market currencies fluctuated the most amid debt crises and hyper-inflation. Mexico defaulted in 1982 while the Asian financial crisis that started in 1997 wiped out one third of the region’s economy. Now it’s developed countries that are dealing with the biggest debt. The administration of President Barack Obama predicts its budget deficit will swell to a record $1.6 trillion in the fiscal year ending Sept. 30. Moody’s Investors Service forecasts that the U.S. will spend more on debt service as a percentage of revenue this year than any other top-rated country except the U.K. Emerging nations are moving in the opposite direction. The budget deficit for developing countries will fall to 2.8 percent of their economies this year, from 4 percent in 2009, according to an IMF report in November. Industrialized governments’ budget gap will decline to 8.1 percent from 8.9 percent, the Washington-based fund said. Developing nations reduced their foreign debt to 26 percent of GDP last year from 41 percent in 1999, while advanced nations’ debt may surge to 106.7 percent of GDP this year from 78.2 percent in 2007, according to IMF data. Credit Crisis In July 2007, the JPMorgan Emerging Market Volatility Index fell to a record low of 5.8 percent as central banks made their interest-rate and currency moves more predictable. When credit markets froze later that year, the index began rising and hit a record 35.8 percent in October 2008, one month after Lehman Brothers Holdings Inc. collapsed. The JPMorgan G-7 Volatility Index , including the euro, the pound and the yen, reached 26.6 percent. Emerging-market volatility is falling again as the Mexican peso and the Malaysian ringgit gained 7.4 percent versus the dollar this year, the best performers in the world after the Costa Rican colon. Mexico’s government forecasts it will keep the budget deficit at 2.8 percent of GDP this year after lowering spending and increasing taxes even as the economy shrank 6.5 percent in 2009 in its worst recession since 1932. Mexican Peso The implied volatility of the Mexican peso was 1.39 percentage points below that of the euro as of April 1, the most since October 2008, according to Bloomberg data. Exports from Malaysia, South Korea and Taiwan are growing to feed demand in China, which is leading the global economic recovery. Overseas shipments from Malaysia rose 18.4 percent in February from a year earlier. The central bank has raised its growth forecast for Southeast Asia’s third-largest economy, predicting an expansion of as much as 5.5 percent this year, the fastest since 2007. Korea exports climbed 35.1 percent in March from a year earlier, while Taiwan’s surged 50.1 percent. Overlooking Risks? Investors may be overlooking the risks of developing- nations, said Harald Hild , a money manager at Quaesta Capital Optivest AG in Switzerland, which oversees about $1 billion. The South African rand, Colombian peso and Brazilian real have increased more than 20 percent in the past year against the dollar, making their exports more expensive. These countries are also “highly dependent” on the U.S. and may falter should America’s economic recovery stumble, he said. “It’s really amazing how strong the risk appetite is for emerging-market currencies,” said Hild, who has traded currency options for 16 years. “I’m not sure how long this will hold.” Countries from Chile to China may lure $722 billion in overseas investment this year, 66 percent more than in 2009, the Washington-based Institute of International Finance said in January. Developing-nation bond funds attracted $7 billion this year, pushing assets under management to a record $74.7 billion, according to Cambridge, Massachusetts-based research company EPFR Global. Falling volatility is making emerging-market currencies more attractive, especially to investors in carry trades, said Thanos Papasavvas , head of currency management at Investec Asset Management in London. In such trades, investors borrow in countries with low interest rates to buy financial assets in those with higher yields. “You’ll see the appreciation of emerging-market currencies versus developed-market currencies as a long-term, strategic trend,” said JPMorgan’s Stewart. “Investors will allocate more to emerging markets.” To contact the reporter on this story: Ye Xie in New York at yxie6@bloomberg.net

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Emerging Markets Overtake G7 Currencies With Lowest Volatility Since 2008

April 11, 2010

By Ye Xie April 12 (Bloomberg) — Traders in currency options are showing that emerging economies have become safer relative to developed nations than at any time in almost two years. Three-month implied volatility for the seven biggest developing country currencies fell to 10 percent in March compared with 11.4 percent for industrialized nations, according to JPMorgan Chase & Co. indexes. The gap is the widest since July 2008. So far this year, eight of the 10 best-performing currencies are from emerging markets. The record U.S. budget deficit , Europe’s bailout of Greece and the prospect of a hung parliament in the U.K. are increasing the risk of losses in dollars, euros and pounds. In developing markets, the deficit fell to one-third the level of advanced nations this year and the economies are growing twice as fast as the U.S., the International Monetary Fund says. “The global perception of risk is changing,” said Jerome Booth , who helps manage $32 billion in emerging-market assets as the head of research at Ashmore Investment Management Ltd. in London. “Where you want to be is non-leveraged places, and that means anything in emerging-markets. This is a start of a trend. The rally in emerging-markets has barely started yet.” Global Recovery That’s a switch from three years ago, when record-low volatility was fueled by investors underestimating the risks of leverage. Now, volatility is declining in developing markets as countries from China to Brazil lead the global recovery, while swelling budget deficits in the U.K. and U.S. will weaken those nations’ currencies, Booth said. China’s imports surged 66 percent in March from a year earlier, causing the country’s first trade deficit since 2004. The rise in imports helps the global economic recovery, Huang Guohua , the head of the customs bureau’s statistics department, said on April 9. In Turkey, the lira climbed 6.8 percent against the euro this year to the strongest level since December 2008. Gross domestic product increased at an annual rate of 6 percent in the fourth quarter of 2009, lagging behind only China among the Group of 20 nations. Goldman Sachs Group Inc. forecasts the expansion may help Turkey’s $620-billion economy overtake Germany to become the third-biggest in Europe by 2050. The implied volatility for the lira is below that of the pound by the most since 2000. The lira was forecast to fluctuate at an annual rate of 10.6 percent in the next three months, as of March 30, 2.7 percentage points less than the pound, data compiled by Bloomberg show. “Dropping volatility says: ‘Buy, buy, buy,” said Sebastien Galy , a currency strategist at BNP Paribas SA in New York. U.K. Budget In the U.K., the pound is down 4.6 percent versus the dollar this year and has fallen against 14 of 16 most-traded currencies, including an 11 percent drop against the Mexican peso. National elections are raising the prospect that U.K. voters may fail to elect a governing majority for the first time since 1974. A weakened government may struggle to enact budget cuts with the nation’s debt set to almost double. The euro has lost 12 percent versus the Mexican peso this year as Europe weighed options to help Greece avoid default on its debt. European governments offered Greece a rescue package worth as much as 45 billion euros ($61 billion) yesterday at below-market interest rates. “Investors had a bit of a blasé attitude prior to the Greek situation,” said Robert Stewart , who oversees $74 billion as the head of currencies at JPMorgan Asset Management in London. “Investors are slowly awakening to the reality.” Hyper-Inflation Three decades ago, emerging-market currencies fluctuated the most amid debt crises and hyper-inflation. Mexico defaulted in 1982 while the Asian financial crisis that started in 1997 wiped out one third of the region’s economy. Now it’s developed countries that are dealing with the biggest debt. The administration of President Barack Obama predicts its budget deficit will swell to a record $1.6 trillion in the fiscal year ending Sept. 30. Moody’s Investors Service forecasts that the U.S. will spend more on debt service as a percentage of revenue this year than any other top-rated country except the U.K. Emerging nations are moving in the opposite direction. The budget deficit for developing countries will fall to 2.8 percent of their economies this year, from 4 percent in 2009, according to an IMF report in November. Industrialized governments’ budget gap will decline to 8.1 percent from 8.9 percent, the Washington-based fund said. Developing nations reduced their foreign debt to 26 percent of GDP last year from 41 percent in 1999, while advanced nations’ debt may surge to 106.7 percent of GDP this year from 78.2 percent in 2007, according to IMF data. Credit Crisis In July 2007, the JPMorgan Emerging Market Volatility Index fell to a record low of 5.8 percent as central banks made their interest-rate and currency moves more predictable. When credit markets froze later that year, the index began rising and hit a record 35.8 percent in October 2008, one month after Lehman Brothers Holdings Inc. collapsed. The JPMorgan G-7 Volatility Index , including the euro, the pound and the yen, reached 26.6 percent. Emerging-market volatility is falling again as the Mexican peso and the Malaysian ringgit gained 7.4 percent versus the dollar this year, the best performers in the world after the Costa Rican colon. Mexico’s government forecasts it will keep the budget deficit at 2.8 percent of GDP this year after lowering spending and increasing taxes even as the economy shrank 6.5 percent in 2009 in its worst recession since 1932. Mexican Peso The implied volatility of the Mexican peso was 1.39 percentage points below that of the euro as of April 1, the most since October 2008, according to Bloomberg data. Exports from Malaysia, South Korea and Taiwan are growing to feed demand in China, which is leading the global economic recovery. Overseas shipments from Malaysia rose 18.4 percent in February from a year earlier. The central bank has raised its growth forecast for Southeast Asia’s third-largest economy, predicting an expansion of as much as 5.5 percent this year, the fastest since 2007. Korea exports climbed 35.1 percent in March from a year earlier, while Taiwan’s surged 50.1 percent. Overlooking Risks? Investors may be overlooking the risks of developing- nations, said Harald Hild , a money manager at Quaesta Capital Optivest AG in Switzerland, which oversees about $1 billion. The South African rand, Colombian peso and Brazilian real have increased more than 20 percent in the past year against the dollar, making their exports more expensive. These countries are also “highly dependent” on the U.S. and may falter should America’s economic recovery stumble, he said. “It’s really amazing how strong the risk appetite is for emerging-market currencies,” said Hild, who has traded currency options for 16 years. “I’m not sure how long this will hold.” Countries from Chile to China may lure $722 billion in overseas investment this year, 66 percent more than in 2009, the Washington-based Institute of International Finance said in January. Developing-nation bond funds attracted $7 billion this year, pushing assets under management to a record $74.7 billion, according to Cambridge, Massachusetts-based research company EPFR Global. Falling volatility is making emerging-market currencies more attractive, especially to investors in carry trades, said Thanos Papasavvas , head of currency management at Investec Asset Management in London. In such trades, investors borrow in countries with low interest rates to buy financial assets in those with higher yields. “You’ll see the appreciation of emerging-market currencies versus developed-market currencies as a long-term, strategic trend,” said JPMorgan’s Stewart. “Investors will allocate more to emerging markets.” To contact the reporter on this story: Ye Xie in New York at yxie6@bloomberg.net

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China Posts First Trade Deficit in Six Years in March on Surging Imports

April 9, 2010

By Bloomberg News April 10 (Bloomberg) — China posted its first trade deficit in six years in March even as the yuan stayed pegged to the dollar, aiding government efforts to play down the currency’s role in global economic imbalances. The shortfall was $7.24 billion, the official Xinhua News Agency reported today. That compared with a $7.6 billion surplus in February. Imports surged 66 percent from a year earlier and exports gained 24.3 percent. A trade deficit for a single month may not persuade the U.S. to ease pressure on China to scrap the 21-month-old peg amid calls in Congress for the nation to be branded a currency manipulator. A return to a surplus is likely as soon as this month after seasonal labor shortages hurt exporters of clothes, shoes and bags in March, the customs bureau said. “This is a temporary shortfall and we still believe that China will de-peg the yuan from the dollar in coming weeks,” Wang Qian , chief China economist with JPMorgan Chase & Co. in Hong Kong, said before the release. The Chinese central bank has held the currency at about 6.83 per dollar since July 2008. “The most important reason for the March deficit is China’s booming domestic demand,” Huang Guohua , the head of the customs bureau’s statistics department, told reporters in Beijing yesterday. First-quarter import growth was the most since records began in 1980 as the nation’s demand aids the “global economic recovery and rebalancing,” he said. Market-Based Currency U.S. Commerce Secretary Gary Locke said this week that the financial crisis made it “very clear” that a rebalancing of the global economy is needed. China should boost consumption and move to a market-based currency, he said in an interview with Bloomberg Television. In contrast, China’s commerce ministry said last month that a trade imbalance with the U.S., which swelled to $227 billion last year, is “not something that the exchange rate can resolve.” The median forecasts of 26 economists surveyed by Bloomberg News were for a 55.7 percent jump in imports and a 26.9 percent gain in exports. “The deficit is not sustainable,” Huang said yesterday, adding that the failure of some migrant workers to return to work immediately after a Chinese New Year holiday probably capped exports. Forecasting Smaller Surpluses Still, the first-quarter trade surplus was at least 70 percent less than a year earlier and smaller numbers are likely to continue as exports face headwinds including a fragile global recovery and protectionism, Huang said. Non-deliverable yuan forwards weakened yesterday as economists forecast a $390 million deficit for March. The contracts suggest that the yuan may gain 3.1 percent against the dollar in the next 12 months. On April 8, forwards rose by the most this year after the New York Times reported that the Chinese government is “very close” to announcing a change in currency policy, which may include a small, one-time jump in the yuan. Billionaire investor George Soros said yesterday that China and the U.S. have probably come to an agreement on the yuan after U.S. Treasury Secretary Timothy F. Geithner ’s unscheduled meeting in Beijing with Chinese Vice Premier Wang Qishan . “What the arrangement is, I’m not privy to, but I think there is an understanding and there will be flexibility on both sides,” Soros said in a Bloomberg Television interview. Paulson’s View Former U.S. Treasury Secretary Henry Paulson said today that a flexible currency would be in China’s interests, while some companies say they’re ready for a change. Hangzhou-based Wanxiang Group Co., the nation’s largest auto-parts maker, can cope with a gradual advance, though a quick appreciation would be “disruptive,” Chairman Lu Guanqiu said in a March 8 interview in Beijing. Rising commodity prices swelled import costs and purchases of crude oil played a big role in the trade deficit, Huang, the customs official, said. The volume of imports of “high-end vehicles” soared, he added. China’s trade surpluses with the European Union and the U.S. shrank and deficits with Taiwan, Japan, South Korea and south- east Asian nations widened “notably,” Huang said. Chinese officials have expressed caution about strengthening the yuan even after growth in the world’s third- largest economy quickened to 10.7 percent in the fourth quarter, stoking concern at inflation and asset-bubble risks. Central bank Governor Zhou Xiaochuan said in a March 23 interview that officials want to ensure the world isn’t in a “W-shaped recovery,” with a slowdown coming after the current rebound. Premier Wen Jiabao ’s government has said a stable yuan and the nation’s 4 trillion yuan ($586 billion) fiscal stimulus have contributed to the global recovery. — Li Yanping , Chinmei Sung , Kevin Hamlin , Jay Wang . Editors: Paul Panckhurst , Fergal O’Brien . To contact the reporter on this story: Chinmei Sung in Taipei at csung4@bloomberg.net .

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Geithner Visits Beijing Bearing `Olive Branch’ Ahead of Hu-Obama Meeting

April 7, 2010

By Rebecca Christie April 7 (Bloomberg) — U.S. Treasury Secretary Timothy F. Geithner embarked on a previously unscheduled trip to China as the world’s third-largest economy weighs letting its currency appreciate. Geithner left India for a meeting with Chinese Vice Premier Wang Qishan in Beijing tomorrow, Treasury spokesman Andrew Williams told reporters in Mumbai. The meeting will be closed to the press, and Geithner has no other scheduled events, he said. Geithner is facing demands from Congress to label China a currency manipulator for keeping the value of the yuan at about 6.8 to the dollar, which some U.S. lawmakers say gives unfair advantage to Chinese exporters. His trip comes four days after he postponed an April 15 deadline for a semiannual review of the currency policies of major U.S. trading partners. “The U.S. administration was understandably concerned that we were headed toward a very slippery slope,” said Stephen Roach , chairman of Morgan Stanley Asia Ltd, in a television interview. “If we had held to the April 15 deadline, and gone out with a currency manipulation verdict on China, that could have unleashed a very dangerous chain of events.” Wang is a member of the Central Leading Group on Financial and Economic Affairs, along with Premier Wen Jiabao, People’s Bank of China Governor Zhou Xiaochuan and economic adviser Liu He, according to China experts and non-governmental Web sites as of September. “The secretary and the vice premier have been working together to find an opportunity to meet in person for some time,” Williams said. He said the meeting was confirmed a day earlier. Balanced Economy On April 3, Geithner said meetings over the next three months will be “critical” to bringing policy changes that lead to a more balanced global economy. Yuan forwards traded near the highest level in 11 weeks on speculation the Chinese central bank will scrap a 21-month-old peg to the dollar as part of efforts to limit inflation. Roach said Geithner’s visit to Beijing is a “very encouraging” development that offers an “olive branch” to China ahead of a series of meetings. Chinese President Hu Jintao is scheduled to visit Washington next week for talks with President Barack Obama , and the U.S. and China also are headed toward their annual bilateral economic meetings in May. Weapons Sales U.S.-China relations are beginning to thaw after strains caused by U.S. weapons sales to Taiwan, Obama’s visit with the Dalai Lama in February and the shutdown of Google Inc.’s Internet search engine in mainland China. “It appears both sides have taken a step down,” said Marc Chandler , global head of currency strategy at Brown Brothers Harriman & Co. in New York. During a two-day visit to India this week, Geithner declined to elaborate about the U.S.-China relationship. He was asked about it on numerous occasions and answered by talking about efforts to smooth lopsided global flows of trade and investment. “Countries large and small, countries around the world, have a huge interest in making sure that growth in their countries comes more from domestic sources,” he said in an interview today on Bloomberg Television in Mumbai. “So that’s what’s at stake, that’s what we’re trying to generate support for around the world.” China’s economic rebound is stoking calls for an end to the currency restrictions. Exports have advanced for three straight months, industrial production climbed 20.7 percent in the first two months of 2010 from last year, and the Organization for Economic Cooperation and Development forecasts gross domestic product growth of about 10 percent, contributing one-third to the global expansion this year. Global Recovery Chinese Premier Wen Jiabao ’s government has been reluctant to end the currency peg on concern about the durability of the recovery in the world economy. Central bank Governor Zhou Xiaochuan said in a March 23 interview that officials want to ensure the world isn’t going through a “W-shaped recovery,” with a renewed slowdown coming after the current rebound. “The Congress wants big numbers but China’s going to give them a small number,” Roach said, predicting that China would only allow gradual appreciation of its currency. China has promoted greater use of the yuan as a unit of trade, while keeping limits on flows of capital in and out of the country and preventing the free conversion of the currency. Policy makers are considering allowing the yuan to trade against the Russian ruble, South Korean won and Malaysian ringgit to promote its use in trade, said an official at the China Foreign Exchange Trade System, a subsidiary of the central bank. Geithner, 48, said he anticipates China will oversee a bigger international role for its currency as part of a “necessary” adjustment as it implements a more market-based economy. “They’re becoming more open to the world, and with that, you’re going to see the currency take on a broader role internationally,” Geithner said in the Bloomberg Television interview. “That’s a healthy, necessary adjustment.” To contact the reporter on this story: Rebecca Christie in Mumbai at rchristie4@bloomberg.net ;

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U.S., European Stocks, Commodities Drop; Greek Bonds Slump on Default Risk

April 7, 2010

By Michael P. Regan and Whitney Kisling April 7 (Bloomberg) — U.S. and European stocks fell, led by energy producers as oil dropped, while the premium investors demand to hold Greek bonds widened to the most since 1998 on speculation the nation may default. Equities pared losses and Treasuries rallied as an auction of 10-year notes drew a yield of 3.9 percent. The Standard & Poor’s 500 Index fell 0.1 percent at 1:09 p.m. in New York, retreating from the highest level since September 2008. The MSCI World Index of 23 developed nations’ stocks slipped less than 0.1 percent. Oil dropped from an 18- month high on a bigger-than-forecast increase in inventories. Greece’s 10-year bond yields rose 0.19 percentage point to 7.18 percent and the yield premium to German debt widened to 4.06 percentage points, the most since before the euro was introduced in 1999. Greece is more likely to default than all the European Union’s members in eastern Europe, including three that needed International Monetary Fund-led bailouts, credit default swaps show. Investors may demand a yield of as much as 7.25 percent to buy Greek 10-year dollar-denominated bonds, according to Paris- based Axa Investment Managers, which oversees about $669 billion. “This issue with Greece is still hanging out there,” said Michael Mullaney , who helps manage $9 billion at Fiduciary Trust Co. in Boston. “The debt crisis that’s happening right now in Euroland is causing some consternation with investors.” S&P 500 energy companies snapped a seven-day stretch of gains, falling 0.6 percent as a group. Occidental Petroleum Corp. lost 1.7 percent and Exxon Mobil Corp. slipped 0.7 percent. The S&P 500 retreated from its highest level in 18 months as a 76 percent rally since March 2009 spurred concern equities have risen too far, too fast. ‘Short-Term Losses’ More than three-quarters of stocks in the S&P 500 were “overbought” as of the April 5 close, according to Bespoke Investment Group LLC, which identified shares that are at least one standard deviation above their 50-day moving average. That reading is the highest since the bull market began in March 2009 and indicates equities may see “short-term losses,” Harrison, New York-based Bespoke said in a note to clients. Crude oil slid 0.6 percent to $86.28 a barrel in New York trading. U.S. supplies rose 1.98 million barrels to 356.2 million in the week ended April 2, the Energy Department said today in a weekly report. Inventories were forecast to climb by 1.35 million barrels, according to the median of 14 analyst estimates in a Bloomberg News survey. The euro weakened 0.3 percent against the dollar, trading near its lowest level in almost two weeks, after a report showed the economy of the 16 nations sharing the currency failed to grow in the fourth quarter. The euro fell against 12 of 16 major counterparts. Dollar Greek Bonds Greece’s government plans to start marketing dollar- denominated bonds to U.S. investors this month. Credit-default swaps on five-year debt from Latvia, whose BB foreign-currency rating at S&P is four levels below investment-grade Greek debt, dropped below Greek default swaps yesterday. Greece is now more likely to default than all the EU’s eastern members, two of which are junk rated, CDS markets indicate. Latvia, Hungary and Romania needed IMF-led bailouts at the height of the global crisis to avert defaults. A technical team from the IMF is in Athens today, though the Greek government maintains there is no need for an international loan. Greek bonds declined yesterday on concern an EU-led rescue package may falter. “A default may be ultimately unavoidable,” said Stephen Jen , managing director at BlueGold Capital Management LLP. “It’s an increasingly difficult proposition for the creditors to expect full repayment.” The Stoxx Europe 600 Index slipped 0.3 percent as basic resources companies dropped. Declines were limited as Allied Irish Banks Plc surged 14 percent in Dublin after Royal Bank of Scotland Group Plc recommended buying the shares. Emerging Markets Emerging-market stocks bucked the trend, rising for a ninth day for their longest rally since October. The MSCI Emerging Markets Index increased 0.4 percent and has rallied 5.4 percent since March 25. The Taiwan dollar led gains in higher-yielding currencies, rising 0.3 percent against the U.S. currency, after the Federal Reserve indicated yesterday that U.S. interest rates will stay near record lows. Yuan forwards advanced on speculation China will let its currency appreciate. Fed minutes showed the U.S. is likely to keep rates on hold, nurturing the recovery in the world’s biggest economy, at the same time as Treasury Secretary Timothy F. Geithner prods China to revalue the yuan. Policy makers are considering allowing the yuan to trade against the ruble, the South Korean won and the Malaysian ringgit, according to an official at the China Foreign Exchange Trade System, as the nation diversifies its foreign reserves from the dollar. Among emerging markets, Pakistan’s Karachi 100 Index climbed 1 percent while Indonesia’s Jakarta Composite Index and the Stock Exchange of Thailand Index added 0.6 percent. The MSCI Asia Pacific Index rose 0.8 percent for a fifth day of gains, its longest winning streak since July, as the Bank of Japan said the recovery in the world’s second-largest economy is intact and Malaysia’s Prime Minister Najib Razak said growth may exceed forecasts this year. Mitsubishi UFJ Financial Group Inc. gained 2.7 percent in Tokyo. To contact the reporters for this story: Michael P. Regan in New York at mregan12@bloomberg.net ; Whitney Kisling in New York at wkisling@bloomberg.net .

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Fujitsu’s Ex-President Takes Legal Action Over Organized Crime Allegations

April 6, 2010

By Mariko Yasu, Mikako Nakajima and Jason Clenfield April 7 (Bloomberg) — Fujitsu Ltd. former President Kuniaki Nozoe started legal proceedings against his previous employer after he said the company forced him to resign using unfounded allegations of ties to organized crime. The company received a document from Nozoe on March 29 and its statutory auditing officers will meet to investigate his complaint as required by law, Fujitsu spokesman Etsuro Yamada said by phone from Tokyo, declining to elaborate. Nozoe will hold a press conference later today, according to his lawyer. The move escalates a dispute that started last month when the former executive at Japan’s biggest computer-services company asked Fujitsu to nullify his September resignation and reinstate him. The public spat reflects a breakdown of corporate governance, said Yoshihiro Ito, senior strategist at Okasan Asset Management Co. “Given what a huge corporation this is, it shakes people’s trust in the company,” said Tokyo-based Ito, who helps oversee $8 billion in assets. “If Fujitsu can continue to turn in better results, they’ll be able to win back investor trust.” Fujitsu said on March 6 it had asked Nozoe to resign because he had links to a company with an “unfavorable” reputation, more than five months after saying he quit for health reasons. Nozoe, 62, denies having ties to “antisocial forces,” or organized crime, his lawyer Kei Hata said in an interview last month. Fujitsu fell 1 percent to 619 yen as of the 11 a.m. trading break on the Tokyo Stock Exchange, while Japan’s benchmark Nikkei 225 Stock Average added 0.4 percent. The stock has gained 1 percent since Sept. 25 when Nozoe stepped down, underperforming the Nikkei’s 10 percent advance. Financial Compensation Nozoe will seek several hundred million yen in compensation, the Mainichi newspaper reported earlier today, citing an unidentified person familiar with the plan. Fujitsu has no knowledge of such a claim, Yasuhiko Yodo, a company spokesman said by phone. “Whatever happens next in court, doesn’t mean much to investors,” said Okasan Asset’s Ito. “The question is how the company performs. So you have a few people tied up in court; that’s not going to send shock waves through a company this size.”     Japanese law requires shareholder suits first be channeled through corporate auditors whose job it is to police company directors, Mitsuhiro Kamiya, a partner at Skadden, Arps, Slate, Meagher & Flom LLP in Tokyo, said in an interview. Shareholders can sue the executives directly if auditors don’t act within 60 days, he said. Auditors’ Action Unlikely      “Unless the former CEO can produce new evidence about which they’re not aware, it’s highly unlikely that the statutory auditors will take action against the directors,” Kamiya said. Fujitsu told Nozoe his links to a fund involved in the potential sale of Fujitsu subsidiary Nifty Corp. was improper because the fund had connections with “antisocial forces” or organized crime, Hata said last month, declining to identify the fund. Nozoe, who was sick at the time of his resignation in September, agreed to cite health reasons to avoid damaging the reputation of the company he headed, Fujitsu said in its March statement. The former president agreed to step down because he understood his actions put the company’s reputation at risk, not because of malpractice or illegal actions, according to the statement. Investors Weren’t Misled Last month, the Tokyo Stock Exchange ended a probe into the conflicting reasons given by Fujitsu and determined the company didn’t mislead investors enough to warrant a sanction. In January, Fujitsu named Masami Yamamoto president, to take over the role from Chairman Michiyoshi Mazuka who temporarily assumed the position after Nozoe’s resignation till the end of March. During Nozoe’s 15-month tenure, the company pushed forward with the sale of its hard-disk-drive business to Toshiba Corp. and agreed to outsource some chip production to Taiwan Semiconductor Manufacturing Co., the world’s largest custom-chip maker, to cut spending. The company also sought to strengthen its operations in Europe by making Maarssen, Netherlands-based Fujitsu Siemens Computers Holding BV a fully owned subsidiary. Fujitsu swung to a profit in the third quarter after the company sold money-losing hardware businesses . Net income was 4.1 billion yen ($46 million) in the three months ended Dec. 31, compared with a 40.8 billion yen loss a year earlier, the Tokyo- based company said on Jan. 29. The company forecasts annual net income of 95 billion yen and operating profit at 90 billion yen on sales projected at 4.75 trillion yen. To contact the reporter on this story: Mariko Yasu in Tokyo at myasu@bloomberg.net .

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Stocks, Commodities Rise, Treasuries Drop on Economic Data

April 5, 2010

By Whitney Kisling and Matthew Brown April 5 (Bloomberg) — Stocks and commodities rose, while the dollar and Treasuries fell, as growth in American jobs and service industries boosted optimism the world’s largest economy is strengthening. Treasury yields were the highest since June. The Standard & Poor’s 500 Index climbed 0.7 percent to 1,186.75 at 11:08 a.m. in New York, above its highest close since September 2008. The MSCI Asia Pacific Index rose to the highest level in more than 19 months, driven by Japan. Oil and copper rose to at least 17-month highs. The dollar fell against 11 of 16 major counterparts and the yield on the benchmark 10- year Treasury note increased 5 basis points to 3.99 percent. U.S. payrolls gained last month by the most in three years, a “solid report” indicating “the economy is now creating jobs,” Treasury Secretary Timothy F. Geithner said in a Bloomberg Television interview. Industry reports today showed that pending home sales unexpectedly increased and the Institute for Supply Management’s index of service industries topped economists’ estimates. “Overall, we are seeing positive signs about the global economy,” said Hiroaki Muto , a senior economist at Sumitomo Mitsui Asset Management Co., which manages $111 billion. “While developing nations are leading global growth, they are waiting for the U.S. to rebound. Recent reports are suggesting that the U.S. labor market and consumer spending are improving.” Markets in Europe, Australia, Hong Kong, China, Taiwan and New Zealand were shut for holidays. Apple Inc. rose 0.5 percent to $237.21 after saying it sold more than 300,000 iPads on the device’s first day of availability over the weekend. Energy Rally Exxon Mobil Corp. and Schlumberger Ltd. paced gains in 39 of 40 energy stocks in the S&P 500 as crude oil climbed as much as 2 percent to a 17-month high of $86.57 a barrel in New York. Brazil’s Bovespa index of equities increased 0.6 percent as Petroleo Brasileiro SA and OGX Petroleo & Gas Participacoes SA advanced. Canada’s S&P/TSX Composite Index rose 0.4 percent as Suncor Energy Inc. and Barrick Gold Corp. gained. Oil prices have established a floor of $75 a barrel and there is no need for OPEC to increase production, Venezuelan Oil Minister Rafael Ramirez said April 2. The Organization of Petroleum Exporting Countries pumps about 40 percent of the world’s oil and slashed output in January 2009 to prevent a glut. The group left its production targets unchanged when ministers met in Vienna on March 17. Venezuela, the group’s sixth-largest producer, is seeking a price band between $80 and $100 a barrel, Ramirez told reporters in Caracas on April 2. Copper, Hogs Copper for May delivery advanced as much as 1.2 percent to $3.6265 a pound in New York, the highest level since Aug. 1, 2008. Hog futures rose, extending a rally to the highest price since in almost 13 years. Hog futures for June settlement gained 1.6 cents, or 1.9 percent, to 84.975 cents a pound on the Chicago Mercantile Exchange, the highest for a most-active contract since May 12, 1997. A benchmark indicator of U.S. corporate credit risk fell to the lowest in more than two weeks. The Markit CDX North America Investment Grade Index Series 14, which investors use to hedge against losses on corporate debt or to speculate on creditworthiness, declined 1.1 basis point to a mid-price of 84 basis points as of 7:51 a.m. in New York, according to Markit Group Ltd. The index dropped to its lowest since March 18, when it was 83.98 basis points, CMA DataVision prices show. Shares of Canon Inc. , which gets 28 percent of its revenue in the Americas, climbed 2.5 percent in Tokyo. Toyota Motor Corp. , which derives 31 percent of its revenue in North America, increased 1.1 percent. ‘Growth Optimism’ Former Federal Reserve chairman Alan Greenspan said yesterday on ABC’s “This Week” that the chances the U.S. economy will retrench after recovering from the worst recession since the 1930s “have fallen very significantly in the last two months.” “There is increasing growth optimism now given that the job situation in the U.S. is getting a little more relaxed,” said Roger Groebli , Singapore-based head of financial-market analysis at LG Capital Management, part of the group that oversees $84 billion. “Exporters will benefit from that.” Samsung, Hynix Climb Samsung Electronics Co. rose 1.5 percent after Maeil Business Newspaper said the company will add a new semiconductor chip line. Asia’s biggest chipmaker also rose after the price of the benchmark DDR2 dynamic random access memory, or DRAM, chip rose on April 2, ending a four-day decline, according to Dramexchange Technology Inc. Hynix Semiconductor Inc. , the world’s second-largest computer-memory chipmaker, advanced 3.4 percent. Malaysia’s FTSE Bursa Malaysia KLCI Index rose 0.4 percent, advancing for a 10th day, the longest winning streak in 16 years. CIMB Group Holdings Bhd. , Malaysia’s second-biggest bank, climbed 1.1 percent to a record. The company said the size of its initial share sale for its dual listing on the Thai exchange has been raised to as much as 50 million shares from 35 million. Indonesia’s benchmark stock index, Asia’s best-performing major market this year, climbed to a record on expectations the central bank will keep interest rates at a record low tomorrow, helping to boost the economy. The Jakarta Composite index jumped 2 percent to 2,887.246, above its previous record close of 2,830.26 on Jan. 9, 2008. The measure has climbed 14 percent this year as the central bank raised its economic growth forecast and Standard & Poor’s upgraded the nation’s sovereign debt ratings. Yen, Pound The dollar fell the most against the Canadian and British currencies, losing 0.8 percent and 0.6 percent respectively. The yen snapped four days of losses against the dollar, on speculation Japanese exporters bought the nation’s currency after it touched a seven-month low. The pound gained versus all major counterparts after polls eased concerns that political turmoil will derail the nation’s economic recovery. The pound rallied after a YouGov Plc poll for the Sunday Times showed that the opposition Conservative Party holds a 10 percent lead over Prime Minister Gordon Brown’s Labour party, before elections that are likely to be held next month. The Conservatives have 39 percent of the vote, while Labour had 29 percent and the Liberal Democrats 20 percent, the survey showed, reducing the likelihood that they will fail to win the parliamentary majority that some think is necessary to tackle the U.K.’s budget deficit, the largest in the Group of 20 nations. The pound strengthened 0.6 percent to $1.5293. ‘Heading Toward Stabilization’ A survey for the Sunday Express newspaper by Canadian pollsters Angus Reid put the Conservatives at 38 percent, 11 points ahead of Labour’s 27 percent, with the Liberal Democrats at 20 percent. “The polls seem to suggest that the U.K. political situation is gradually heading toward stabilization,” said Toshiya Yamauchi , senior currency analyst in Tokyo at online currency trading company Ueda Harlow Ltd. “Signs of political stabilization, combined by waning expectations for additional quantitative monetary measures amid the plethora of positive data, will support the currency.” To contact the reporters for this story: Whitney Kisling in New York at wkisling@bloomberg.net ; Matthew Brown in London at mbrown42@bloomberg.net .

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Stocks, Commodities Rise as Jobs Report in U.S. Boosts Recovery Optimism

April 5, 2010

By Whitney Kisling and Matthew Brown April 5 (Bloomberg) — Stocks and commodities rose, while the dollar and Treasuries fell, as growth in American jobs and service industries boosted optimism the world’s largest economy is strengthening. Treasury yields were the highest since June. The Standard & Poor’s 500 Index climbed 0.7 percent to 1,186.75 at 11:08 a.m. in New York, above its highest close since September 2008. The MSCI Asia Pacific Index rose to the highest level in more than 19 months, driven by Japan. Oil and copper rose to at least 17-month highs. The dollar fell against 11 of 16 major counterparts and the yield on the benchmark 10- year Treasury note increased 5 basis points to 3.99 percent. U.S. payrolls gained last month by the most in three years, a “solid report” indicating “the economy is now creating jobs,” Treasury Secretary Timothy F. Geithner said in a Bloomberg Television interview. Industry reports today showed that pending home sales unexpectedly increased and the Institute for Supply Management’s index of service industries topped economists’ estimates. “Overall, we are seeing positive signs about the global economy,” said Hiroaki Muto , a senior economist at Sumitomo Mitsui Asset Management Co., which manages $111 billion. “While developing nations are leading global growth, they are waiting for the U.S. to rebound. Recent reports are suggesting that the U.S. labor market and consumer spending are improving.” Markets in Europe, Australia, Hong Kong, China, Taiwan and New Zealand were shut for holidays. Apple Inc. rose 0.5 percent to $237.21 after saying it sold more than 300,000 iPads on the device’s first day of availability over the weekend. Energy Rally Exxon Mobil Corp. and Schlumberger Ltd. paced gains in 39 of 40 energy stocks in the S&P 500 as crude oil climbed as much as 2 percent to a 17-month high of $86.57 a barrel in New York. Brazil’s Bovespa index of equities increased 0.6 percent as Petroleo Brasileiro SA and OGX Petroleo & Gas Participacoes SA advanced. Canada’s S&P/TSX Composite Index rose 0.4 percent as Suncor Energy Inc. and Barrick Gold Corp. gained. Oil prices have established a floor of $75 a barrel and there is no need for OPEC to increase production, Venezuelan Oil Minister Rafael Ramirez said April 2. The Organization of Petroleum Exporting Countries pumps about 40 percent of the world’s oil and slashed output in January 2009 to prevent a glut. The group left its production targets unchanged when ministers met in Vienna on March 17. Venezuela, the group’s sixth-largest producer, is seeking a price band between $80 and $100 a barrel, Ramirez told reporters in Caracas on April 2. Copper, Hogs Copper for May delivery advanced as much as 1.2 percent to $3.6265 a pound in New York, the highest level since Aug. 1, 2008. Hog futures rose, extending a rally to the highest price since in almost 13 years. Hog futures for June settlement gained 1.6 cents, or 1.9 percent, to 84.975 cents a pound on the Chicago Mercantile Exchange, the highest for a most-active contract since May 12, 1997. A benchmark indicator of U.S. corporate credit risk fell to the lowest in more than two weeks. The Markit CDX North America Investment Grade Index Series 14, which investors use to hedge against losses on corporate debt or to speculate on creditworthiness, declined 1.1 basis point to a mid-price of 84 basis points as of 7:51 a.m. in New York, according to Markit Group Ltd. The index dropped to its lowest since March 18, when it was 83.98 basis points, CMA DataVision prices show. Shares of Canon Inc. , which gets 28 percent of its revenue in the Americas, climbed 2.5 percent in Tokyo. Toyota Motor Corp. , which derives 31 percent of its revenue in North America, increased 1.1 percent. ‘Growth Optimism’ Former Federal Reserve chairman Alan Greenspan said yesterday on ABC’s “This Week” that the chances the U.S. economy will retrench after recovering from the worst recession since the 1930s “have fallen very significantly in the last two months.” “There is increasing growth optimism now given that the job situation in the U.S. is getting a little more relaxed,” said Roger Groebli , Singapore-based head of financial-market analysis at LG Capital Management, part of the group that oversees $84 billion. “Exporters will benefit from that.” Samsung, Hynix Climb Samsung Electronics Co. rose 1.5 percent after Maeil Business Newspaper said the company will add a new semiconductor chip line. Asia’s biggest chipmaker also rose after the price of the benchmark DDR2 dynamic random access memory, or DRAM, chip rose on April 2, ending a four-day decline, according to Dramexchange Technology Inc. Hynix Semiconductor Inc. , the world’s second-largest computer-memory chipmaker, advanced 3.4 percent. Malaysia’s FTSE Bursa Malaysia KLCI Index rose 0.4 percent, advancing for a 10th day, the longest winning streak in 16 years. CIMB Group Holdings Bhd. , Malaysia’s second-biggest bank, climbed 1.1 percent to a record. The company said the size of its initial share sale for its dual listing on the Thai exchange has been raised to as much as 50 million shares from 35 million. Indonesia’s benchmark stock index, Asia’s best-performing major market this year, climbed to a record on expectations the central bank will keep interest rates at a record low tomorrow, helping to boost the economy. The Jakarta Composite index jumped 2 percent to 2,887.246, above its previous record close of 2,830.26 on Jan. 9, 2008. The measure has climbed 14 percent this year as the central bank raised its economic growth forecast and Standard & Poor’s upgraded the nation’s sovereign debt ratings. Yen, Pound The dollar fell the most against the Canadian and British currencies, losing 0.8 percent and 0.6 percent respectively. The yen snapped four days of losses against the dollar, on speculation Japanese exporters bought the nation’s currency after it touched a seven-month low. The pound gained versus all major counterparts after polls eased concerns that political turmoil will derail the nation’s economic recovery. The pound rallied after a YouGov Plc poll for the Sunday Times showed that the opposition Conservative Party holds a 10 percent lead over Prime Minister Gordon Brown’s Labour party, before elections that are likely to be held next month. The Conservatives have 39 percent of the vote, while Labour had 29 percent and the Liberal Democrats 20 percent, the survey showed, reducing the likelihood that they will fail to win the parliamentary majority that some think is necessary to tackle the U.K.’s budget deficit, the largest in the Group of 20 nations. The pound strengthened 0.6 percent to $1.5293. ‘Heading Toward Stabilization’ A survey for the Sunday Express newspaper by Canadian pollsters Angus Reid put the Conservatives at 38 percent, 11 points ahead of Labour’s 27 percent, with the Liberal Democrats at 20 percent. “The polls seem to suggest that the U.K. political situation is gradually heading toward stabilization,” said Toshiya Yamauchi , senior currency analyst in Tokyo at online currency trading company Ueda Harlow Ltd. “Signs of political stabilization, combined by waning expectations for additional quantitative monetary measures amid the plethora of positive data, will support the currency.” To contact the reporters for this story: Whitney Kisling in New York at wkisling@bloomberg.net ; Matthew Brown in London at mbrown42@bloomberg.net .

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Stocks, Commodities Advance as U.S. Employment Report Boosts Recovery View

April 5, 2010

By Rocky Swift and Matthew Brown April 5 (Bloomberg) — Asian stocks, U.S. equity index futures and commodities rose as growth in American jobs boosted investor optimism that demand in the world’s largest economy is recovering. The MSCI Asia Pacific Index rose to the highest level in more than 19 months, driven by gains in Japan. Markets in Europe, Australia, Hong Kong, China, Taiwan and New Zealand were shut for holidays. Oil advanced, while copper moved to a 20- month high. Malaysia’s ringgit rose to the strongest since July 2008 against the dollar after the government said exports increased for a third-straight month. U.S. payrolls gained last month by the most in three years, a “solid report” indicating “the economy is now creating jobs,” Treasury Secretary Timothy F. Geithner said in a Bloomberg Television interview. A private report today may show U.S. service industries expanded for a third month. “Overall, we are seeing positive signs about the global economy,” said Hiroaki Muto , a senior economist at Sumitomo Mitsui Asset Management Co., which manages $111 billion. “While developing nations are leading global growth, they are waiting for the U.S. to rebound. Recent reports are suggesting that the U.S. labor market and consumer spending are improving.” Standard & Poor’s 500 futures increased 0.3 percent to 1177.3 as of 8:43 a.m. in New York. The MSCI Asia Pacific Index rose to 126.94, the highest since Aug. 12 2008. Japan’s Nikkei 225 Stock Average climbed 0.5 percent. Apple’s iPad Apple Inc. was little changed in pre-market New York trading after the company probably sold more than twice as many iPads in its debut weekend than some analysts had estimated. Initial sales may have reached 700,000 units, Piper Jaffray & Co.’s Gene Munster said in an interview yesterday. The Minneapolis-based analyst had predicted sales of 200,000 to 300,000, while Sanford C. Bernstein & Co.’s Toni Sacconaghi had projected 300,000 to 400,000. Apple said it sold more than 300,000 iPads on the device’s first day of availability over the weekend. Canon Inc. , which gets 28 percent of its revenue in the Americas, climbed 2.5 percent. Toyota Motor Corp. , which derives 31 percent of its revenue in North America, increased 1.1 percent. Former Federal Reserve chairman Alan Greenspan said yesterday on ABC’s “This Week” that the chances the U.S. economy will retrench after recovering from the worst recession since the 1930s “have fallen very significantly in the last two months.” ‘Increasing Optimism’ “There is increasing growth optimism now given that the job situation in the U.S. is getting a little more relaxed,” said Roger Groebli , Singapore-based head of financial-market analysis at LG Capital Management, part of the group that oversees $84 billion. “Exporters will benefit from that.” Samsung Electronics Co. rose 1.5 percent after Maeil Business Newspaper said the company will add a new semiconductor chip line. Asia’s biggest chipmaker also rose after the price of the benchmark DDR2 dynamic random access memory, or DRAM, chip rose on April 2, ending a four-day decline, according to Dramexchange Technology Inc. Hynix Semiconductor Inc. , the world’s second-largest computer-memory chipmaker, advanced 3.4 percent. Malaysia’s ringgit climbed to its strongest level since July 2008 after the government said exports increased 18.4 percent in February from a year earlier. “The economic recovery theme is attracting foreigners to ringgit assets,” said Tan Voon Ching , a foreign-exchange trader at OSK Investment Bank Bhd. in Kuala Lumpur. “There’s a lot of confidence in the economic outlook for this year.” Ringgit Gains The ringgit strengthened 0.6 percent to 3.2301 per dollar. The won added 0.3 percent to 1,123.05 per dollar in Seoul, according to data compiled by Bloomberg. It reached 1,122.15 on April 2, the strongest level since Jan. 19. Malaysia’s FTSE Bursa Malaysia KLCI Index rose 0.4 percent, advancing for a 10th day, the longest winning streak in 16 years. CIMB Group Holdings Bhd. , Malaysia’s second-biggest bank, climbed 1.1 percent to a record. The company said the size of its initial share sale for its dual listing on the Thai exchange has been raised to as much as 50 million shares from 35 million. Indonesia’s benchmark stock index, Asia’s best-performing major market this year, climbed to a record on expectations the central bank will keep interest rates at a record low tomorrow, helping to boost the economy. Jakarta Rally PT Astra International , the nation’s largest auto retailer, surged 4.9 percent. PT Bank Central Asia advanced 5.5 percent, the most in more than two weeks, leading gains among banks. The central bank will keep its key interest rate at 6.5 percent tomorrow after inflation slowed to 3.43 percent in March, according to 16 out of 17 economists in a Bloomberg News survey. The Jakarta Composite index jumped 2 percent to 2,887.246, above its previous record close of 2,830.26 on Jan. 9, 2008. The measure has climbed 14 percent this year as the central bank raised its economic growth forecast and Standard & Poor’s upgraded the nation’s sovereign debt ratings. The yen snapped four days of losses against the dollar, on speculation Japanese exporters bought the nation’s currency after it touched a seven-month low. The pound gained versus all major counterparts after polls eased concerns that political turmoil will derail the nation’s economic recovery. Pound Strengthens The pound rallied after a YouGov Plc poll for the Sunday Times showed that the opposition Conservative Party holds a 10 percent lead over Prime Minister Gordon Brown’s Labour party, before elections that are likely to be held next month. The Conservatives have 39 percent of the vote, while Labour had 29 percent and the Liberal Democrats 20 percent, the survey showed, reducing the likelihood that they will fail to win the parliamentary majority that some think is necessary to tackle the U.K.’s budget deficit, the largest in the Group of 20 nations. The pound strengthened 0.4 percent to $1.5264. A survey for the Sunday Express newspaper by Canadian pollsters Angus Reid put the Conservatives at 38 percent, 11 points ahead of Labour’s 27 percent, with the Liberal Democrats at 20 percent. “The polls seem to suggest that the U.K. political situation is gradually heading toward stabilization,” said Toshiya Yamauchi , senior currency analyst in Tokyo at online currency trading company Ueda Harlow Ltd. “Signs of political stabilization, combined by waning expectations for additional quantitative monetary measures amid the plethora of positive data, will support the currency.” Oil Advances Crude oil for May delivery rose as much as 1.2 percent to $85.89 a barrel in after-hours electronic trading on the New York Mercantile Exchange, the highest since Oct. 9, 2008. It pared gains to trade at $85.62. Oil prices have established a floor of $75 a barrel and there is no need for OPEC to increase production, Venezuelan Oil Minister Rafael Ramirez said April 2. The Organization of Petroleum Exporting Countries pumps about 40 percent of the world’s oil and slashed output in January 2009 to prevent a glut. The group left its production targets unchanged when ministers met in Vienna on March 17. Venezuela, the group’s sixth-largest producer, is seeking a price band between $80 and $100 a barrel, Ramirez told reporters in Caracas on April 2. Copper for May delivery advanced as much as 1.2 percent to $3.6265 a pound in New York, the highest level since Aug. 1, 2008. To contact the reporters for this story: Matthew Brown in London at mbrown42@bloomberg.net ; Rocky Swift in Tokyo at rswift5@bloomberg.net

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Asia Stocks, Commodities Rise as U.S. Employment Data Lifts Recovery View

April 4, 2010

By Rocky Swift and Yoshiaki Nohara April 5 (Bloomberg) — Asian stocks and commodities rose as U.S. economic reports boosted investor optimism that demand in the world’s largest economy is recovering. The MSCI Asia Pacific Index climbed 0.2 percent to 126.74 as of 12:18 p.m. in Tokyo, driven by gains in Japan as markets in Australia, Hong Kong, China, Taiwan and New Zealand are closed for holidays. Asian bond risk fell while copper prices climbed to a 20-month high. Malaysia’s ringgit rose to the strongest since July 2008 after the government said exports increased for a third-straight month. Futures for the Standard & Poor’s 500 Stock Index increased 0.4 percent. U.S. payrolls rose last month by the most in three years, a “solid report” indicating “the economy is now creating jobs,” Treasury Secretary Timothy F. Geithner said in a Bloomberg Television interview. A private report today may show U.S. service industries expanded for a third month. “Overall, we are seeing positive signs about the global economy,” said Hiroaki Muto , a senior economist at Sumitomo Mitsui Asset Management Co., which manages $111 billion. “While developing nations are leading global growth, they are waiting for the U.S. to rebound. Recent reports are suggesting that the U.S. labor market and consumer spending are improving.” Japan’s Nikkei 225 Stock Average climbed 0.5 percent, led by exporters on optimism the weaker yen will boost the value of overseas sales. The currency weakened to as low as 94.79 per dollar, the lowest level since Aug. 24. Growth Optimism Canon Inc. , which gets 28 percent of its revenue in the Americas, climbed 2.4 percent to 4,505 yen. Toyota Motor Corp. , which derives 31 percent of its revenue in North America, increased 1.3 percent to 3,825 yen. Toshiba Corp. , Japan’s biggest memory-chip maker, gained 0.6 percent to 507 yen after the Nikkan Kogyo newspaper reported the company will double annual production capacity of electric- vehicle motors. Former Federal Reserve chairman Alan Greenspan said yesterday on ABC’s “This Week” the chances the economy will retrench after recovering from the worst recession since the 1930s “have fallen very significantly in the last two months.” “There is increasing growth optimism now given that the job situation in the U.S. is getting a little more relaxed,” said Roger Groebli , Singapore-based head of financial-market analysis at LG Capital Management, part of the group that oversees $84 billion. “Exporters will benefit from that.” Chip Prices Samsung Electronics Co. rose 1.3 percent to 868,000 won after Maeil Business Newspaper said the company will add a new semiconductor chip line. Asia’s biggest chipmaker also rose after the price of the benchmark DDR2 dynamic random access memory, or DRAM, chip rose on April 2, ending a four-day decline, according to Dramexchange Technology Inc. Hynix Semiconductor Inc. , the world’s second-largest computer-memory chipmaker, advanced 0.5 percent to 28,300 won. Malaysia’s ringgit climbed to its strongest level since July 2008 after the government said exports increased 18.4 percent in February from a year earlier. “The economic recovery theme is attracting foreigners to ringgit assets,” said Tan Voon Ching, a foreign-exchange trader at OSK Investment Bank Bhd. in Kuala Lumpur. “There’s a lot of confidence in the economic outlook for this year.” The ringgit strengthened as much as 0.5 percent to 3.2318. The won traded at 1,125.70 per dollar in Seoul, according to data compiled by Bloomberg. It reached 1,122.15 on April 2, the highest level since Jan. 19. CIMB Listing South Korea’s Kospi Index slipped 0.3 percent. Malaysia’s FTSE Bursa Malaysia KLCI Index rose 0.4 percent, advancing for a 10th day, set for the longest winning streak in almost 16 years. CIMB Group Holdings Bhd. , Malaysia’s second-biggest bank, climbed 1.5 percent to a record. The company said the size of its initial share sale for its dual listing on the Thai exchange has been raised to as much as 50 million shares from 35 million. The yen rose, ending four days of losses against the dollar, on speculation Japanese exporters bought the nation’s currency after it touched a seven-month low. The pound gained versus all major counterparts after polls eased concerns that political turmoil will derail the nation’s economic recovery. The yen climbed to 94.40 per dollar in Tokyo from 94.61 in New York on April 2. It advanced to 127.70 per euro from 127.75. The dollar declined to $1.3527 per euro from $1.3504 last week. Pound Gains The pound rallied after a YouGov Plc poll for the Sunday Times showed that David Cameron’s Conservatives had support rating of 39 percent, while Labour had 29 percent and the Liberal Democrats 20 percent. A survey for the Sunday Express newspaper by Canadian pollsters Angus Reid put the Conservatives at 38 percent, 11 points ahead of Labour’s 27 percent, with the Liberal Democrats at 20 percent. “The polls seem to suggest that the U.K. political situation is gradually heading toward stabilization,” said Toshiya Yamauchi , senior currency analyst in Tokyo at online currency trading company Ueda Harlow Ltd. “Signs of political stabilization, combined by waning expectations for additional quantitative monetary measures amid the plethora of positive data, will support the currency.” Crude oil for May delivery rose as much as 1.2 percent to $85.89 a barrel in after-hours electronic trading on the New York Mercantile Exchange, the highest since Oct. 9, 2008. It was trading at $85.66 in Tokyo. OPEC Production “Economic data indexes are getting better and that is supporting crude oil prices,” said Ken Hasegawa, energy trading manager at broker Newedge in Tokyo. “Still, we need time to see quite a strong economic recovery” and prices may struggle above $87 without further evidence of growth, he said. Oil prices have established a floor of $75 a barrel and there is no need for OPEC to increase production, Venezuelan Oil Minister Rafael Ramirez said April 2. The Organization of Petroleum Exporting Countries pumps about 40 percent of the world’s oil and slashed output in January 2009 to prevent a glut. The group left its production targets unchanged when ministers met in Vienna on March 17. Venezuela, the group’s sixth-largest producer, is seeking a price band between $80 and $100 a barrel, Ramirez told reporters in Caracas on April 2. Copper for May delivery advanced as much as 1.1 percent to $3.6235 a pound in New York, the highest level for the most active contract since Aug. 1, 2008, and traded at $3.6145 a pound at in Singapore. The cost of protecting corporate and sovereign bonds from non-payment fell in Asia and Japan, according to traders of credit-default swaps. The Markit iTraxx Japan index dropped 5 basis points to 91 basis points, according to Morgan Stanley. A close of 91 basis points would be the lowest since June 6, 2008, according to prices from CMA DataVision in New York. The Markit iTraxx Asia index of 50 investment-grade borrowers outside Japan dropped 2 basis points to 94.5 basis points, Royal Bank of Scotland Group Plc prices show. To contact the reporters for this story: Rocky Swift in Tokyo at rswift5@bloomberg.net ; Yoshiaki Nohara in Tokyo at ynohara1@bloomberg.net .

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S&P 500 Rises to 18-Month High as U.S. Stocks Rally a Fifth Straight Week

April 3, 2010

By Elizabeth Stanton April 3 (Bloomberg) — U.S. stocks rose for a fifth straight week, sending the Standard & Poor’s 500 Index and the Dow Jones Industrial Average to their highest closes in 18 months, amid fresh signs the economy is recovering. Energy companies led the advance as crude oil exceeded $84 a barrel for the first time since October 2008. Commodity producers rallied as a decline in the value of the U.S. dollar lifted prices for gold, copper and aluminum. 3M Co., the maker of 55,000 products from Post-It Notes to respiratory masks, gained after Morgan Stanley said an improved profit forecast from Danaher Corp. was a positive sign. The S&P 500 rose 1 percent to 1,178.10, completing its longest streak of weekly gains in almost a year. The Dow increased 76.71 points, or 0.7 percent, to 10,927.07. While stock exchanges were closed yesterday for Good Friday, futures on the S&P 500 rose 0.3 percent to 1,177.30 after Labor Department data showed employers added the most jobs since 2007 in March. “To stay at these levels or move higher you’re going to need to see continuing evidence the economy is gaining momentum and continuing to improve,” said Robert Schaeffer , a money manager at Becker Capital Management Inc. in Portland, Oregon. ‘Solid Report’ Payrolls rose by 162,000 last month, less than anticipated, after a revised 14,000 decrease in February that was smaller than initially estimated, figures from the U.S. Labor Department in Washington showed yesterday. The March increase included 48,000 temporary workers hired by the government to help conduct the 2010 census. The unemployment rate held at 9.7 percent. “It’s a good, solid report,” Treasury Secretary Timothy F. Geithner said in a Bloomberg Television interview in New York. “It shows we’re getting stronger, and the economy is now creating jobs.” Employers eliminated 8.32 million jobs in the U.S. from January 2008 through October 2009, Labor Department data show. Since then, 117,000 positions have been created. The S&P 500 rallied 4.9 percent during the first quarter, the biggest advance to start a year since 1998, after U.S. gross domestic product expanded at the fastest pace in six years. Shares in Japan, Sweden, Russia and Switzerland did best during the period among the 20 largest stock markets, with benchmarks rising at least 5 percent. Spain, China, Taiwan and Hong Kong did worst, falling 2.9 percent or more. This week’s advance extended the S&P 500’s rebound from a 12-year low in March 2009 to 74 percent. Birinyi Associates Inc., which recommended buying stocks a year ago, raised its year-end forecast for the benchmark to 1,325 because of rallies by General Electric Co., Citigroup Inc. and Microsoft Corp. Jet Engines, Software GE, the world’s biggest maker of jet engines, power-plant turbines and locomotives, and Microsoft, the world’s biggest software company, are among the 10 largest U.S. companies by market value. Citigroup, the bank 27 percent owned by the U.S. government, is the most active stock on the New York Stock Exchange this year by number of shares traded. Birinyi’s 2010 S&P 500 projection compares with the 1,243 average estimate of 13 strategists surveyed by Bloomberg. Expectations for a 30 percent increase in S&P 500 profits in the first quarter, according to Bloomberg data, were boosted by bigger-than-forecast increases in gauges of manufacturing activity and consumer confidence. S&P 500 profits increased in the fourth quarter after a record nine-quarter slump. Alcoa Inc., traditionally the first Dow company to release results each quarter, is scheduled to report on April 12. Topping Estimates The Institute for Supply Management’s factory index, released April 1, climbed to 59.6, exceeding the most optimistic forecast in a Bloomberg News survey of 77 economists. The Conference Board said on March 30 that its consumer confidence index increased to 52.5 from 46.4. Energy companies in the S&P 500 rose 3.8 percent as a group, the most among the index’s 10 industries. Eight of the 10 biggest advances in the index were by fuel producers. Pioneer Natural Resources Co. rose 12 percent to $59.15. Denbury Resources Inc. gained 11 percent to $17.34. Rowan Cos. climbed 11 percent to $29.93. Freeport-McMoRan Copper & Gold Inc., Newmont Mining Corp. and Alcoa Inc. led gains among commodity producers. The Dollar Index, which measures the U.S. currency against the euro, yen, pound, Canadian dollar, Swedish krona and Swiss franc, fell 1.1 percent. That pushed copper to a 20-month high and aluminum to the highest since January. Gold futures rose as high as $1,129.10, the highest since March 18. Craftsman Tools 3M advanced 3.5 percent to $83.85. Scott Davis of Morgan Stanley predicted on March 30 that the shares would rise during the next month. Danaher, the maker of dental X-ray machines and Craftsman tools, raised its first-quarter profit forecast to at least 90 cents a share from no more than 82 cents. SAIC Inc. fell 9.6 percent to $17.42 for biggest drop in the S&P 500. The defense contractor specializing in computer services reduced its full-year earnings forecast after fourth- quarter profit missed analysts’ estimates . Ford Motor Co. slid 8.9 percent to $12.63. A health-care trust for United Auto Workers retirees announced plans to raise about $1.78 billion from the sale of warrants to buy the automaker’s stock. To contact the reporter on this story: Elizabeth Stanton in New York at estanton@bloomberg.net .

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S&P 500 Rises to 18-Month High as U.S. Stocks Rally a Fifth Straight Week

April 3, 2010

By Elizabeth Stanton April 3 (Bloomberg) — U.S. stocks rose for a fifth straight week, sending the Standard & Poor’s 500 Index and the Dow Jones Industrial Average to their highest closes in 18 months, amid fresh signs the economy is recovering. Energy companies led the advance as crude oil exceeded $84 a barrel for the first time since October 2008. Commodity producers rallied as a decline in the value of the U.S. dollar lifted prices for gold, copper and aluminum. 3M Co., the maker of 55,000 products from Post-It Notes to respiratory masks, gained after Morgan Stanley said an improved profit forecast from Danaher Corp. was a positive sign. The S&P 500 rose 1 percent to 1,178.10, completing its longest streak of weekly gains in almost a year. The Dow increased 76.71 points, or 0.7 percent, to 10,927.07. While stock exchanges were closed yesterday for Good Friday, futures on the S&P 500 rose 0.3 percent to 1,177.30 after Labor Department data showed employers added the most jobs since 2007 in March. “To stay at these levels or move higher you’re going to need to see continuing evidence the economy is gaining momentum and continuing to improve,” said Robert Schaeffer , a money manager at Becker Capital Management Inc. in Portland, Oregon. ‘Solid Report’ Payrolls rose by 162,000 last month, less than anticipated, after a revised 14,000 decrease in February that was smaller than initially estimated, figures from the U.S. Labor Department in Washington showed yesterday. The March increase included 48,000 temporary workers hired by the government to help conduct the 2010 census. The unemployment rate held at 9.7 percent. “It’s a good, solid report,” Treasury Secretary Timothy F. Geithner said in a Bloomberg Television interview in New York. “It shows we’re getting stronger, and the economy is now creating jobs.” Employers eliminated 8.32 million jobs in the U.S. from January 2008 through October 2009, Labor Department data show. Since then, 117,000 positions have been created. The S&P 500 rallied 4.9 percent during the first quarter, the biggest advance to start a year since 1998, after U.S. gross domestic product expanded at the fastest pace in six years. Shares in Japan, Sweden, Russia and Switzerland did best during the period among the 20 largest stock markets, with benchmarks rising at least 5 percent. Spain, China, Taiwan and Hong Kong did worst, falling 2.9 percent or more. This week’s advance extended the S&P 500’s rebound from a 12-year low in March 2009 to 74 percent. Birinyi Associates Inc., which recommended buying stocks a year ago, raised its year-end forecast for the benchmark to 1,325 because of rallies by General Electric Co., Citigroup Inc. and Microsoft Corp. Jet Engines, Software GE, the world’s biggest maker of jet engines, power-plant turbines and locomotives, and Microsoft, the world’s biggest software company, are among the 10 largest U.S. companies by market value. Citigroup, the bank 27 percent owned by the U.S. government, is the most active stock on the New York Stock Exchange this year by number of shares traded. Birinyi’s 2010 S&P 500 projection compares with the 1,243 average estimate of 13 strategists surveyed by Bloomberg. Expectations for a 30 percent increase in S&P 500 profits in the first quarter, according to Bloomberg data, were boosted by bigger-than-forecast increases in gauges of manufacturing activity and consumer confidence. S&P 500 profits increased in the fourth quarter after a record nine-quarter slump. Alcoa Inc., traditionally the first Dow company to release results each quarter, is scheduled to report on April 12. Topping Estimates The Institute for Supply Management’s factory index, released April 1, climbed to 59.6, exceeding the most optimistic forecast in a Bloomberg News survey of 77 economists. The Conference Board said on March 30 that its consumer confidence index increased to 52.5 from 46.4. Energy companies in the S&P 500 rose 3.8 percent as a group, the most among the index’s 10 industries. Eight of the 10 biggest advances in the index were by fuel producers. Pioneer Natural Resources Co. rose 12 percent to $59.15. Denbury Resources Inc. gained 11 percent to $17.34. Rowan Cos. climbed 11 percent to $29.93. Freeport-McMoRan Copper & Gold Inc., Newmont Mining Corp. and Alcoa Inc. led gains among commodity producers. The Dollar Index, which measures the U.S. currency against the euro, yen, pound, Canadian dollar, Swedish krona and Swiss franc, fell 1.1 percent. That pushed copper to a 20-month high and aluminum to the highest since January. Gold futures rose as high as $1,129.10, the highest since March 18. Craftsman Tools 3M advanced 3.5 percent to $83.85. Scott Davis of Morgan Stanley predicted on March 30 that the shares would rise during the next month. Danaher, the maker of dental X-ray machines and Craftsman tools, raised its first-quarter profit forecast to at least 90 cents a share from no more than 82 cents. SAIC Inc. fell 9.6 percent to $17.42 for biggest drop in the S&P 500. The defense contractor specializing in computer services reduced its full-year earnings forecast after fourth- quarter profit missed analysts’ estimates . Ford Motor Co. slid 8.9 percent to $12.63. A health-care trust for United Auto Workers retirees announced plans to raise about $1.78 billion from the sale of warrants to buy the automaker’s stock. To contact the reporter on this story: Elizabeth Stanton in New York at estanton@bloomberg.net .

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Obama, Hu Washington Talks May Let China Avoid Currency Manipulator Brand

April 2, 2010

By Bloomberg News April 2 (Bloomberg) — President Barack Obama urged China to help balance global growth as strategists said President Hu Jintao ’s decision to visit Washington this month increases the likelihood his nation will escape being branded a currency manipulator by the U.S. Ties between the two countries may be mending after a year marked by disagreements over the yuan’s value, U.S. arms sales to Taiwan and Google Inc.’s decision to pull out of China. In an hour-long call yesterday, Obama sought Hu’s support for Group of 20 pledges to sustain the global economic recovery and for cooperation to help stop Iran from developing nuclear weapons. Obama “emphasized the importance of the United States and China along with other major economies implementing the G-20 commitments designed to produce balanced and sustainable growth,” the White House said late yesterday in a statement. Hu’s presence at this month’s nuclear summit improves the chances China won’t be labelled a manipulator when the U.S. Treasury releases its biannual report on exchange rates, said China International Capital Corp., a Beijing-based investment bank that’s part-owned by Morgan Stanley. U.S. Treasury Secretary Timothy F. Geithner is under congressional pressure to make such a ruling after China kept the value of the yuan unchanged against the dollar for almost two years. Critics say that gives Chinese exporters an unfair advantage. The Treasury is scheduled to release its report April 15. The New York Times reported today that it may now delay publication. Treasury spokeswoman Natalie Wyeth declined to comment. Rhetoric Shift “In the past few weeks, rhetoric has turned sour from both sides, but this development is one of the initial signs” relations are thawing, Hao Hong , Beijing-based global equity strategist at CICC, said in an e-mailed response to queries. Yuan forwards posted their biggest weekly gain in almost three months on mounting speculation China will loosen its grip on the currency after data showed an economic recovery is gathering pace. Twelve-month non-deliverable forwards advanced 0.2 percent to 6.6491 per dollar as of 5:30 p.m. in Hong Kong, reflecting bets the currency will strengthen 2.7 percent from the spot rate of 6.8256, according to Bloomberg data. New York University professor Nouriel Roubini said last week the U.S. and China are on a “collision course” over the Chinese currency and investors are underestimating the disruptions for global financial markets. Avoiding the manipulator tag may give China further scope to let the yuan gain to ease inflation pressures in its economy. China’s Growth “The latest development should make it more likely for Beijing to start moving away from the renminbi’s current de facto peg within the next few months, if not weeks,” Qu Hongbin , chief China economist at HSBC Holdings Plc in Hong Kong, wrote in a report yesterday. “Since China is growing much faster than most of its trading partners, keeping the de facto peg for too long will only invite more protectionism.” The Treasury hasn’t labelled any country a currency manipulator since 1994. Five U.S. senators, including Charles Schumer , a New York Democrat, and South Carolina Republican Lindsey Graham , last month introduced legislation to make it easier for the U.S. to declare foreign-exchange misalignments and take corrective action. Any delay in the report would not be rare given Democratic and Republican Treasury departments historically have released it at their convenience. In January 1999, President Bill Clinton ’s Treasury even published a compendium of those that had been due in 1997 and 1998 and President George W. Bush ’s administration also repeatedly missed the deadline. Asset Bubbles China’s central bank said today that asset bubbles are emerging in parts of the world and in certain industries that may burst unless supported by real economic recovery. Chinese growth in the fourth quarter reached 10.7 percent. Rapid asset-price increases in major markets since 2009 have been pushed by “ultra-loose” monetary policies by governments around the world and “don’t mean real economies have recovered or will recover strongly,” the People’s Bank of China said in a report posted on its Web site today. China pegged the yuan at about 8.3 per dollar from 1995 until July 2005, when the government shifted policy and allowed some fluctuation by managing its exchange rate against an undisclosed basket of currencies . After a 21 percent gain in the currency that hurt its exporters, China in July 2008 began restraining the yuan’s value. If China doesn’t change tack it may face broader pressure to do so after French President Nicolas Sarkozy and U.K. Prime Minister Gordon Brown this week joined Obama in saying the G-20 should take currencies into account in efforts to deliver balanced global growth. G-20 finance ministers and central bankers are also scheduled to meet in Washington this month before a June summit of leaders in Toronto. — Chua Kong Ho and Simon Kennedy . Editors: Brendan Murray , James Hertling To contact Bloomberg News staff for this story: Chua Kong Ho in Shanghai at +86-21-6104-7011 or Kchua6@bloomberg.net ; Simon Kennedy in Paris at +33-1-5530-6290 or skennedy4@bloomberg.net

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Asian Stocks, Currencies Advance on Japan, U.S. Growth; Bond Risk Declines

April 1, 2010

By Masaki Kondo and Sandy Hendry April 2 (Bloomberg) — Asian stocks climbed to an 11-week high, emerging-market currencies rallied and bond risk fell on optimism economic growth will recover in Japan and the U.S., the world’s two largest economies. The MSCI Asia Pacific Index advanced 0.4 percent to 126.70 as of 11:54 a.m. in Tokyo, headed for its highest close since Jan. 15. Hyundai Motor Co. , South Korea’s largest automaker, climbed 4.6 percent to a record after sales gained in the U.S. and China. The Malaysian ringgit and the Taiwan dollar both strengthened 0.2 percent and rubber prices increased. Evidence of an export-led recovery may prompt the Bank of Japan to raise its assessment of the world’s second-largest economy next week, three people familiar with the matter said. A report later today will show the U.S. added the most jobs in three years, according to a Bloomberg News survey of economists. “The global macroeconomic recovery is behind the current uptrend in equities,” said Tomomi Yamashita , a Tokyo-based fund manager at Shinkin Asset Management Co., which oversees the equivalent of $3.8 billion. “That trend is unlikely to change though the market is getting overheated.” Japan’s Nikkei 225 Stock Average rose 0.4 percent, taking its climb this week to 2.7 percent. South Korea’s Kospi index gained 0.3 percent, heading for its highest close in 21 months. Markets in Australia, Hong Kong, New Zealand, Singapore, India, the Philippines and Indonesia are closed today for holidays. Futures on the S&P 500 index declined 0.2 percent. Car Sales Toyota Motor Corp. advanced 1.2 percent to 3,765 yen and was the leading mover on the MSCI Asia Pacific Index, after reporting a 41 percent increase in U.S. sales in March. Japanese and South Korean automakers boosted combined sales 29 percent to 522,775, according to Autodata Corp. Their market share rose to 49 percent from 47.1 percent a year earlier, the Woodcliff Lake, New Jersey-based research firm said. Malaysia’s FTSE Bursa Malaysia KLCI Index increased 0.3 percent, advancing for a ninth day. EON Capital Bhd. , a Malaysian banking group, rose 1.6 percent to the highest in more than two years after Hong Leong Bank Bhd. said it raised its takeover offer. The ringgit strengthened to 3.2485 per dollar, reaching the highest level in 20 months, before a government report that may show exports rose 25 percent in February from a year earlier, according to the median estimate of economists in a Bloomberg News survey. South Korea’s won rose 0.1 percent to 1,124.8 after a government report yesterday showed exports rose 35.1 percent in March. The Taiwan dollar climbed to NT$31.73. “With good data in the U.S., investors’ appetite for riskier assets may increase,” said Akira Banno , a treasury adviser at Bank of Tokyo-Mitsubishi UFJ Bhd. in Kuala Lumpur. Default Risk The Markit iTraxx Japan Series 13 index decreased 8.5 basis points to 98.5 basis points, according to Morgan Stanley. Credit-default swap indexes are benchmarks for protecting bonds against default and traders use them to speculate on credit quality. The decline drop suggests improving perceptions of creditworthiness. The dollar traded near a seven-month high against the yen. The U.S. currency was at 93.78 yen from 93.82 yen in New York yesterday, when it touched 94.04 yen, the highest since Aug. 28. It traded at $1.3572 per euro from $1.3589. Government data yesterday showed the average number of jobless claims in the past month fell to the lowest level since 2008. Today’s Labor Department payrolls report will show employers added 184,000 jobs in March, the most in three years, according to the median estimate in a survey of economists. Japan’s bonds declined, paring a weekly gain. The Bank of Japan’s board may stop saying the expansion will “remain moderate” in coming months at the April 6-7 meeting because demand from emerging markets is spurring exports, according to one of the people, who spoke on condition of anonymity. The yield on the benchmark 10-year bond rose one basis point to 1.365 percent. Rubber climbed as much as 1.6 percent to a 19-month high of 318.3 yen a kilogram ($3,394 a metric ton) after car sales growth in the U.S. and Japan prompted speculation tire demand will increase. To contact the reporters for this story: Masaki Kondo in Tokyo at mkondo3@bloomberg.net .

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Carlyle’s Plan to Sell Taiwan’s Kbro Said to Have Stalled Over Media Rules

April 1, 2010

By Cathy Chan and Tim Culpan April 2 (Bloomberg) — Carlyle Group’s planned sale of a $1 billion stake in Kbro Co. to Taiwan Mobile Co. may be delayed until the government eases restrictions on state ownership of media companies, two people involved with the discussions said. Taiwan Mobile, which the government partially owns through Fubon Financial Holding Co., may extend the June 30 deadline to buy control of the cable-television operator, the people said, asking not to be identified because of confidentiality agreements. Neither side expected the restrictions to obstruct the deal when negotiations began last year, the people said. The rules hamper Taiwan Mobile’s plans to pass China Network Systems Inc. and Taiwan Broadband Communications to become the largest operator in a market where more than 80 percent of homes tune in to cable TV. The National Communications Commission is in talks with the Cabinet to allow government-related entities to indirectly own as much as 10 percent of media companies, Commissioner Lee Ta-sung said. “Under the current situation, they’re not allowed to merge because of the restrictions,” Lee said in a phone interview yesterday. “We’ve submitted our concept and proposal, and are now negotiating with the Cabinet.” Dorothy Lee , a Hong Kong-based spokeswoman at Carlyle, declined to comment. Josephine Juan, deputy spokeswoman at Taiwan Mobile, said the company plans to continue pursuing the acquisition. Washington-based Carlyle, the world’s second-largest buyout firm, bought control of Eastern Multimedia, which includes the cable TV unit that was renamed Kbro, for $1.5 billion in 2006. Waiting for Legislature Lee declined to say when he expects the rule to be amended because it would require approval from the Cabinet and legislature. The island’s second-largest phone carrier has gained 7 percent in Taipei trading since Sept. 16, when the company said it agreed to buy unlisted Kbro with 589 million Taiwan Mobile shares, giving it a 15.5 percent stake, and NT$440 million ($13.8 million) in cash. The benchmark Taiex index has added 7.2 percent over the same period. “It’s key to our future because it allows the convergence of telecom, cable and content,” said Taiwan Mobile’s Juan. “The problem is that the Taipei government owns a stake in Fubon.” Acquiring Kbro would boost cable TV to as much as 30 percent of Taiwan Mobile’s revenue, she said. Taipei City Government owns 14 percent of Fubon after Taipei Bank, in which it held a 44 percent stake, was acquired by the financial holding company in 2002. Fubon owns Taiwan Mobile shares through units including Fubon Securities Co., Fubon Life Insurance Co. and Fubon Insurance Co., according to the phone company’s Web site . Unintentional Owner “They didn’t mean to buy a media stake,” Commissioner Lee said of the Taipei City government’s ownership. “Most cases are due to indirect investment” by a government entity, he said. “This is why the NCC is trying to resolve this issue by allowing 10 percent indirect investment, to avoid such accidental cases,” he said. Taiwan introduced curbs on government and political party ownership of the media in December 2003, when then-President Chen Shui-bian sought to force the opposition Kuomintang to relinquish its interests in media operators. Fubon is 14 percent owned by the Taipei city government, data compiled by Bloomberg shows. To contact the reporter responsible for this story: Cathy Chan in Hong Kong at kchan14@bloomberg.net ; Tim Culpan in Taipei at tculpan1@bloomberg.net

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U.S. Stocks Fall as Jobs, Purchasing Data Signal Slower Growth

March 31, 2010

By Rita Nazareth March 31 (Bloomberg) — U.S. stocks fell, trimming a fourth-straight quarterly advance, as private reports showed employers unexpectedly cut jobs this month and business activity grew less than forecast. Cisco Systems Inc. , Microsoft Corp. and DuPont Co. led the Dow Jones Industrial Average lower as ADP Employer Services said companies cut 23,000 jobs, compared with a gain of 40,000 forecast on average by economists in a Bloomberg survey. Ford Motor Co. slid on the UAW retiree fund’s plan to raise $1.78 billion by selling warrants to buy Ford stock. Chevron Corp. led energy shares higher as oil topped $83 a barrel and President Barack Obama said he’ll allow drilling off the East Coast. The Standard & Poor’s 500 Index decreased 0.3 percent to 1,169.43 at 4:09 p.m. in New York. The measure climbed 4.9 percent since Dec. 31, the biggest first-quarter rally since 1998. The Dow fell 50.79 points, or 0.5 percent, to 10,856.63 after closing at an 18-month high yesterday. The Russell 2000 Index of small companies lost 0.8 percent. “We’ve had a nice quarter and some people are taking money off the table,” said Michael Nasto , the senior trader at U.S. Global Investors Inc., which manages about $2.5 billion in San Antonio. “Investors are also cautious ahead of the jobs report on Friday, especially after the ADP number today. People are also positioning ahead of some tech earnings reports.” Jobs Concern The S&P 500 snapped a three-day streak of gains as the ADP report spurred concern that the job market is not rebounding as strongly as many economists have predicted. The index fell to its low of the day after Institute for Supply Management-Chicago Inc. said its business barometer fell to 58.8 from 62.6 in February. Readings greater than 50 signal expansion. The median economist estimate in a survey was 61. The Labor Department’s nonfarm jobs report on April 2 is forecast to show employers added 180,000 jobs in March, the most in three years, according to the median estimate in a survey of economists. “The ADP numbers disappointed investors,” said Peter Jankovskis , who helps manage about $1.8 billion as co-chief investment officer at Oakbrook Investments in Lisle, Illinois. “Jobs are key to turn consumer spending into something sustainable. Investors in the stock market will be in a wait- and-see mode.” The S&P 500 has rallied for the past year on speculation the economy is recovering from the worst contraction since the Great Depression. The index is up 73 percent from a 12-year low in March 2009, while still down 25 percent from its 2007 record. Ford Slumps Ford shares had the second-biggest decline in the S&P 500, slumping 5.4 percent to $12.57. A health-care trust for United Auto Workers retirees from Ford expects to raise about $1.78 billion from the sale of warrants to buy the automaker’s stock, the company said. The offering was priced at $5 a warrant through a modified Dutch auction yesterday, Ford said in a statement today. Some traders speculated that selling all the warrants now might signal that the stock has reached its peak. Ford has surged 898 percent since Nov. 19, 2008, compared with a 45 percent gain for the S&P 500. “Valuation has to become an issue sooner or later,” said Joseph Saluzzi , co head of equity trading at Chatham, New Jersey-based Themis Trading LLC. “The stock had a pretty big run. It wouldn’t be illogical to pull back a little bit. That wouldn’t shock me at all.” Technology companies helped lead the S&P 500 lower, falling 0.6 percent collectively. Cisco and Microsoft dropped 2.3 percent and 1.6 percent respectively. Research In Motion Research In Motion Ltd. fell 1.3 percent to $73.97 in regular trading. After the close, the maker of the BlackBerry reported fourth-quarter revenue of $4.08 billion, missing the average analyst estimate by 5.3 percent. The shares lost 5.7 percent in extended trading. SAIC Inc. had the biggest decline in the S&P 500, dropping 6.7 percent to $17.70. The defense contractor specializing in computer services reduced its full-year earnings forecast after fourth-quarter profit missed analysts’ estimates. Boeing Co. fell 1.3 percent to $72.61. The world’s second- largest commercial-plane maker said it expects to recognize an income tax cost of about $150 million as a result of new legislation reshaping the U.S. health-care system. AutoNation Inc. sank 4.7 percent to $18.08. The biggest U.S. new car dealer seeks to extend $1.14 billion of loans to delay maturities and increase available cash. Rite Aid Corp. tumbled 11 percent to $1.50. The third- largest U.S. drugstore chain forecast a full-year loss that was wider than analysts predicted after profit on generic drugs decreased. Missed Estimates Chiquita Brands International Inc. declined 4.7 percent to $15.73. The seller of bananas and other produce said it expects first-quarter results will be “substantially lower” than a year earlier. Separately, the company announced a joint venture with Groupe Danone SA to market fruit-based drinks. Energy shares had the biggest gain in the S&P 500, rising 0.4 percent. Crude oil surged to an 17-month high of $83.76 a barrel in New York as the dollar declined against the euro, bolstering investor demand for commodities. Chevron Corp. climbed 0.7 percent and contributed the most to the advance in energy shares. Denbury Resources Inc., which explores for oil and gas primarily in the U.S. Gulf Coast region, advanced 2.4 percent. Drilling Plan Obama said today he will allow oil and natural-gas drilling off the U.S. East Coast and cancel development in Bristol Bay, Alaska. The president proposed permitting exploration in the Atlantic Ocean from Delaware south and, if a congressional moratorium is lifted, in the Gulf of Mexico 125 miles off the west coast of Florida. Mortgage insurers gained after the Washington-based Mortgage Insurance Companies of America said borrowers who caught up on their overdue mortgages outnumbered people who became newly delinquent on insured home loans for the first time in almost four years. Genworth Financial Inc. and MGIC Investment Corp. gained more than 5 percent. JDS Uniphase Corp. had the second-biggest gain in the S&P 500, climbing 4.4 percent to $12.52. The maker of phone equipment had its share-price estimate boosted to $18 from $15 by Thomas Weisel Partners LLC. ArQule Inc. soared 63 percent to $5.72. The maker of cancer therapies said its ARQ 197 drug showed positive results in treating patients with advanced, refractory non-small cell lung cancer. More Gains Predicted The S&P 500 may climb to the 1,220 level after sliding as much as 50 points, according to an indicator of market breadth, said Peter Beuttell, a technical analyst at MTS Research. The S&P 500 gained 5.9 percent in March, its best monthly rally since July. April usually marks one of the two best months for equity markets, according to Bespoke Investment Group. The Dow gained 1.32 percent on average during the past 100 years, tying December for the best-performing month. For the S&P 500, April saw the most gains of any other month for the past three years. “The trend is still positive,” said Michael Strauss , who helps oversee about $25 billion at Commonfund in Wilton, Connecticut. “There’s nervousness today because of the ADP data. There’s also some caution in the air because of the strength of the rally. However, fundamentals are pretty solid.” Shares in Japan, Sweden, Russia and Switzerland did best during the first quarter among the 20 biggest stock markets, with benchmark indexes rising at least 5 percent. Spain, China, Taiwan and Hong Kong did worst, falling 2.9 percent or more. To contact the reporter on this story: Rita Nazareth in Sao Paulo at rnazareth@bloomberg.net .

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U.S. Stocks Fall as Jobs, Purchasing Data Signal Slower Growth

March 31, 2010

By Rita Nazareth March 31 (Bloomberg) — U.S. stocks fell, trimming a fourth-straight quarterly advance, as private reports showed employers unexpectedly cut jobs this month and business activity grew less than forecast. Cisco Systems Inc. , Microsoft Corp. and DuPont Co. led the Dow Jones Industrial Average lower as ADP Employer Services said companies cut 23,000 jobs, compared with a gain of 40,000 forecast on average by economists in a Bloomberg survey. Ford Motor Co. slid on the UAW retiree fund’s plan to raise $1.78 billion by selling warrants to buy Ford stock. Chevron Corp. led energy shares higher as oil topped $83 a barrel and President Barack Obama said he’ll allow drilling off the East Coast. The Standard & Poor’s 500 Index decreased 0.3 percent to 1,169.43 at 4:09 p.m. in New York. The measure climbed 4.9 percent since Dec. 31, the biggest first-quarter rally since 1998. The Dow fell 50.79 points, or 0.5 percent, to 10,856.63 after closing at an 18-month high yesterday. The Russell 2000 Index of small companies lost 0.8 percent. “We’ve had a nice quarter and some people are taking money off the table,” said Michael Nasto , the senior trader at U.S. Global Investors Inc., which manages about $2.5 billion in San Antonio. “Investors are also cautious ahead of the jobs report on Friday, especially after the ADP number today. People are also positioning ahead of some tech earnings reports.” Jobs Concern The S&P 500 snapped a three-day streak of gains as the ADP report spurred concern that the job market is not rebounding as strongly as many economists have predicted. The index fell to its low of the day after Institute for Supply Management-Chicago Inc. said its business barometer fell to 58.8 from 62.6 in February. Readings greater than 50 signal expansion. The median economist estimate in a survey was 61. The Labor Department’s nonfarm jobs report on April 2 is forecast to show employers added 180,000 jobs in March, the most in three years, according to the median estimate in a survey of economists. “The ADP numbers disappointed investors,” said Peter Jankovskis , who helps manage about $1.8 billion as co-chief investment officer at Oakbrook Investments in Lisle, Illinois. “Jobs are key to turn consumer spending into something sustainable. Investors in the stock market will be in a wait- and-see mode.” The S&P 500 has rallied for the past year on speculation the economy is recovering from the worst contraction since the Great Depression. The index is up 73 percent from a 12-year low in March 2009, while still down 25 percent from its 2007 record. Ford Slumps Ford shares had the second-biggest decline in the S&P 500, slumping 5.4 percent to $12.57. A health-care trust for United Auto Workers retirees from Ford expects to raise about $1.78 billion from the sale of warrants to buy the automaker’s stock, the company said. The offering was priced at $5 a warrant through a modified Dutch auction yesterday, Ford said in a statement today. Some traders speculated that selling all the warrants now might signal that the stock has reached its peak. Ford has surged 898 percent since Nov. 19, 2008, compared with a 45 percent gain for the S&P 500. “Valuation has to become an issue sooner or later,” said Joseph Saluzzi , co head of equity trading at Chatham, New Jersey-based Themis Trading LLC. “The stock had a pretty big run. It wouldn’t be illogical to pull back a little bit. That wouldn’t shock me at all.” Technology companies helped lead the S&P 500 lower, falling 0.6 percent collectively. Cisco and Microsoft dropped 2.3 percent and 1.6 percent respectively. Research In Motion Research In Motion Ltd. fell 1.3 percent to $73.97 in regular trading. After the close, the maker of the BlackBerry reported fourth-quarter revenue of $4.08 billion, missing the average analyst estimate by 5.3 percent. The shares lost 5.7 percent in extended trading. SAIC Inc. had the biggest decline in the S&P 500, dropping 6.7 percent to $17.70. The defense contractor specializing in computer services reduced its full-year earnings forecast after fourth-quarter profit missed analysts’ estimates. Boeing Co. fell 1.3 percent to $72.61. The world’s second- largest commercial-plane maker said it expects to recognize an income tax cost of about $150 million as a result of new legislation reshaping the U.S. health-care system. AutoNation Inc. sank 4.7 percent to $18.08. The biggest U.S. new car dealer seeks to extend $1.14 billion of loans to delay maturities and increase available cash. Rite Aid Corp. tumbled 11 percent to $1.50. The third- largest U.S. drugstore chain forecast a full-year loss that was wider than analysts predicted after profit on generic drugs decreased. Missed Estimates Chiquita Brands International Inc. declined 4.7 percent to $15.73. The seller of bananas and other produce said it expects first-quarter results will be “substantially lower” than a year earlier. Separately, the company announced a joint venture with Groupe Danone SA to market fruit-based drinks. Energy shares had the biggest gain in the S&P 500, rising 0.4 percent. Crude oil surged to an 17-month high of $83.76 a barrel in New York as the dollar declined against the euro, bolstering investor demand for commodities. Chevron Corp. climbed 0.7 percent and contributed the most to the advance in energy shares. Denbury Resources Inc., which explores for oil and gas primarily in the U.S. Gulf Coast region, advanced 2.4 percent. Drilling Plan Obama said today he will allow oil and natural-gas drilling off the U.S. East Coast and cancel development in Bristol Bay, Alaska. The president proposed permitting exploration in the Atlantic Ocean from Delaware south and, if a congressional moratorium is lifted, in the Gulf of Mexico 125 miles off the west coast of Florida. Mortgage insurers gained after the Washington-based Mortgage Insurance Companies of America said borrowers who caught up on their overdue mortgages outnumbered people who became newly delinquent on insured home loans for the first time in almost four years. Genworth Financial Inc. and MGIC Investment Corp. gained more than 5 percent. JDS Uniphase Corp. had the second-biggest gain in the S&P 500, climbing 4.4 percent to $12.52. The maker of phone equipment had its share-price estimate boosted to $18 from $15 by Thomas Weisel Partners LLC. ArQule Inc. soared 63 percent to $5.72. The maker of cancer therapies said its ARQ 197 drug showed positive results in treating patients with advanced, refractory non-small cell lung cancer. More Gains Predicted The S&P 500 may climb to the 1,220 level after sliding as much as 50 points, according to an indicator of market breadth, said Peter Beuttell, a technical analyst at MTS Research. The S&P 500 gained 5.9 percent in March, its best monthly rally since July. April usually marks one of the two best months for equity markets, according to Bespoke Investment Group. The Dow gained 1.32 percent on average during the past 100 years, tying December for the best-performing month. For the S&P 500, April saw the most gains of any other month for the past three years. “The trend is still positive,” said Michael Strauss , who helps oversee about $25 billion at Commonfund in Wilton, Connecticut. “There’s nervousness today because of the ADP data. There’s also some caution in the air because of the strength of the rally. However, fundamentals are pretty solid.” Shares in Japan, Sweden, Russia and Switzerland did best during the first quarter among the 20 biggest stock markets, with benchmark indexes rising at least 5 percent. Spain, China, Taiwan and Hong Kong did worst, falling 2.9 percent or more. To contact the reporter on this story: Rita Nazareth in Sao Paulo at rnazareth@bloomberg.net .

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Stocks, Dollar Drop, Treasuries Gain on Jobs, Purchasing Data

March 31, 2010

By Michael P. Regan March 31 (Bloomberg) — Stocks and the dollar fell while Treasuries advanced as reports showed American employers unexpectedly cut jobs and growth in business activity trailed estimates. Gold rose and oil rallied to a 17-month high. The Standard & Poor’s 500 Index dropped 0.3 percent at 4:14 a.m. in New York, trimming a fourth-straight quarterly advance. The Stoxx Europe 600 Index lost 0.1 percent. The yield on the 10-year Treasury note fell 3 basis points to 3.83 percent. Gold for June delivery rallied 0.8 percent to $1,114.50 an ounce, while the Dollar Index slipped 0.5 percent to 81.069. The Swiss franc rallied as the nation’s leading economic indicators climbed to the highest since November 2007. U.S. companies cut an estimated 23,000 jobs this month, ADP Employer Services said, compared with a median economist estimate for an increase of 40,000 in a Bloomberg News survey. The data spurred concern economists are too optimistic about the rebound in employment two days before a Labor Department report forecast to show the biggest growth in jobs in three years. “The ADP report caused jitters,” said E. William Stone , who oversees $102 billion as chief investment strategist at PNC Wealth Management in Philadelphia. “Our view is that the recovery is sustainable, but I don’t think you can officially call it right now. When you get a question out there about the future recovery, you’re going to see market jitters.” The S&P 500 trimmed gains on the final day of the quarter. The benchmark index climbed 4.9 percent since Dec. 31, its best first-quarter rally since 1998. The index fell to its low of the session today after the Institute for Supply Management-Chicago Inc. said its business barometer fell to 58.8 from 62.6 in February, trailing the median economist estimates of 61. Dow Retreats From High Cisco Systems Inc., Microsoft Corp. and DuPont Co. led the Dow Jones Industrial Average down from an 18-month high. Ford Motor Co. slid 5.4 percent on the UAW retiree fund’s plan to raise $1.78 billion by selling warrants to buy Ford stock. Chevron Corp. led energy producers higher as oil topped $83 a barrel and President Barack Obama said he will allow drilling off the East Coast. A benchmark indicator of U.S. corporate credit risk rose after the ADP report. The Markit CDX North America Investment Grade Index Series 14, which investors use to hedge against losses on corporate debt or to speculate on creditworthiness, rose 1.9 basis point to a mid-price of 88.2 basis points as of 3:10 p.m. in New York, according to Markit Group Ltd. The index, which typically increases as investor confidence deteriorates and falls as it improves, has dropped 3.3 basis points in March, the second straight monthly decline, Markit and CMA DataVision prices show. European Stocks Banks led European shares lower, with BNP Paribas tumbling 2.5 percent in Paris after WestLB AG cut its recommendation on the shares. Ireland’s benchmark ISEQ Index gained 0.9 percent, trimming a 1.5 percent advance after the U.S. jobs report. The rally came as the National Asset Management Agency announced details of its plan to revive the financial system. Bank of Ireland Plc jumped 24 percent in Dublin after saying it expects to avoid state control by raising most of its 2.7 billion-euro target for capital from private investors. Irish Banks The dollar declined against 11 of 16 major currencies, led by a 1.3 percent loss versus the South African rand. The Swiss franc rose against all 16 major counterparts except the rand, climbing 1.9 percent against the Japanese yen, 1.2 percent versus the U.S. dollar and 0.5 percent against the euro. The Zurich-based KOF research institute said its monthly aggregate of indicators that aims to predict the economy’s direction about six months ahead increased to 1.93 from a revised 1.9 in February. The franc rose even after Swiss National Bank Governing Board member Jean-Pierre Danthine said the bank will stop “any excessive appreciation.” The MSCI Asia Pacific Index fell 0.6 percent, the steepest retreat since March 4. Greek bonds fell, with the yield on the 10-year bond rising 9 basis points to 6.53 percent. The yield premium investors demand to hold Greek 10-year bonds instead of benchmark German bunds increased 11 basis points to 344 basis points, the highest since Feb. 25. The seven-year note, the first security sold by Greece since the European Union and International Monetary crafted a possible aid package last week, extended declines in its second day of trading. The yield climbed to 6.37 percent, from 6 percent when the security was issued on March 29, according to Royal Bank of Scotland Group Plc prices on Bloomberg. Greece Borrowing Needs Greece needs to borrow 11.6 billion euros ($15.6 billion) before the end of May after April funding was “taken care of,” Petros Christodoulou , director general of the Public Debt Management Agency, said in a Bloomberg Television interview. Greece plans to sell a global bond in dollars in the next two months. Moody’s Investors Service downgraded the deposit and debt ratings of five of the nine Moody’s-rated Greek banks due to a weakening in their stand-alone financial strength and anticipated additional pressures stemming from the country’s economic prospects in the foreseeable future. Precious metals rallied, with gold capping a sixth straight quarterly gain. Platinum advanced 1.4 percent to $1,641.50 an ounce in London and palladium added 1.8 percent to $480 an ounce. Crude oil rose 1.7 percent to $83.76 a barrel in New York trading, the highest settlement since Oct. 9, 2008. A weaker dollar tends to lift prices of dollar-denominated currencies. Soybeans tumbled the most in three months and corn dropped to the lowest price since October after the U.S. reported larger inventories than analysts expected. Wheat reached a five-month low as planting topped forecasts. Shares in Japan, Sweden, Russia and Switzerland did best during the first quarter among the 20 biggest stock markets, with benchmark indexes rising at least 5 percent. Spain, China, Taiwan and Hong Kong did worst, falling 2.9 percent or more. To contact the reporter for this story: Michael P. Regan in New York at mregan12@bloomberg.net .

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Stocks, Dollar Drop, Treasuries Gain on Jobs, Purchasing Data

March 31, 2010

By Michael P. Regan March 31 (Bloomberg) — Stocks and the dollar fell while Treasuries advanced as reports showed American employers unexpectedly cut jobs and growth in business activity trailed estimates. Gold rose and oil rallied to a 17-month high. The Standard & Poor’s 500 Index dropped 0.3 percent at 4:14 a.m. in New York, trimming a fourth-straight quarterly advance. The Stoxx Europe 600 Index lost 0.1 percent. The yield on the 10-year Treasury note fell 3 basis points to 3.83 percent. Gold for June delivery rallied 0.8 percent to $1,114.50 an ounce, while the Dollar Index slipped 0.5 percent to 81.069. The Swiss franc rallied as the nation’s leading economic indicators climbed to the highest since November 2007. U.S. companies cut an estimated 23,000 jobs this month, ADP Employer Services said, compared with a median economist estimate for an increase of 40,000 in a Bloomberg News survey. The data spurred concern economists are too optimistic about the rebound in employment two days before a Labor Department report forecast to show the biggest growth in jobs in three years. “The ADP report caused jitters,” said E. William Stone , who oversees $102 billion as chief investment strategist at PNC Wealth Management in Philadelphia. “Our view is that the recovery is sustainable, but I don’t think you can officially call it right now. When you get a question out there about the future recovery, you’re going to see market jitters.” The S&P 500 trimmed gains on the final day of the quarter. The benchmark index climbed 4.9 percent since Dec. 31, its best first-quarter rally since 1998. The index fell to its low of the session today after the Institute for Supply Management-Chicago Inc. said its business barometer fell to 58.8 from 62.6 in February, trailing the median economist estimates of 61. Dow Retreats From High Cisco Systems Inc., Microsoft Corp. and DuPont Co. led the Dow Jones Industrial Average down from an 18-month high. Ford Motor Co. slid 5.4 percent on the UAW retiree fund’s plan to raise $1.78 billion by selling warrants to buy Ford stock. Chevron Corp. led energy producers higher as oil topped $83 a barrel and President Barack Obama said he will allow drilling off the East Coast. A benchmark indicator of U.S. corporate credit risk rose after the ADP report. The Markit CDX North America Investment Grade Index Series 14, which investors use to hedge against losses on corporate debt or to speculate on creditworthiness, rose 1.9 basis point to a mid-price of 88.2 basis points as of 3:10 p.m. in New York, according to Markit Group Ltd. The index, which typically increases as investor confidence deteriorates and falls as it improves, has dropped 3.3 basis points in March, the second straight monthly decline, Markit and CMA DataVision prices show. European Stocks Banks led European shares lower, with BNP Paribas tumbling 2.5 percent in Paris after WestLB AG cut its recommendation on the shares. Ireland’s benchmark ISEQ Index gained 0.9 percent, trimming a 1.5 percent advance after the U.S. jobs report. The rally came as the National Asset Management Agency announced details of its plan to revive the financial system. Bank of Ireland Plc jumped 24 percent in Dublin after saying it expects to avoid state control by raising most of its 2.7 billion-euro target for capital from private investors. Irish Banks The dollar declined against 11 of 16 major currencies, led by a 1.3 percent loss versus the South African rand. The Swiss franc rose against all 16 major counterparts except the rand, climbing 1.9 percent against the Japanese yen, 1.2 percent versus the U.S. dollar and 0.5 percent against the euro. The Zurich-based KOF research institute said its monthly aggregate of indicators that aims to predict the economy’s direction about six months ahead increased to 1.93 from a revised 1.9 in February. The franc rose even after Swiss National Bank Governing Board member Jean-Pierre Danthine said the bank will stop “any excessive appreciation.” The MSCI Asia Pacific Index fell 0.6 percent, the steepest retreat since March 4. Greek bonds fell, with the yield on the 10-year bond rising 9 basis points to 6.53 percent. The yield premium investors demand to hold Greek 10-year bonds instead of benchmark German bunds increased 11 basis points to 344 basis points, the highest since Feb. 25. The seven-year note, the first security sold by Greece since the European Union and International Monetary crafted a possible aid package last week, extended declines in its second day of trading. The yield climbed to 6.37 percent, from 6 percent when the security was issued on March 29, according to Royal Bank of Scotland Group Plc prices on Bloomberg. Greece Borrowing Needs Greece needs to borrow 11.6 billion euros ($15.6 billion) before the end of May after April funding was “taken care of,” Petros Christodoulou , director general of the Public Debt Management Agency, said in a Bloomberg Television interview. Greece plans to sell a global bond in dollars in the next two months. Moody’s Investors Service downgraded the deposit and debt ratings of five of the nine Moody’s-rated Greek banks due to a weakening in their stand-alone financial strength and anticipated additional pressures stemming from the country’s economic prospects in the foreseeable future. Precious metals rallied, with gold capping a sixth straight quarterly gain. Platinum advanced 1.4 percent to $1,641.50 an ounce in London and palladium added 1.8 percent to $480 an ounce. Crude oil rose 1.7 percent to $83.76 a barrel in New York trading, the highest settlement since Oct. 9, 2008. A weaker dollar tends to lift prices of dollar-denominated currencies. Soybeans tumbled the most in three months and corn dropped to the lowest price since October after the U.S. reported larger inventories than analysts expected. Wheat reached a five-month low as planting topped forecasts. Shares in Japan, Sweden, Russia and Switzerland did best during the first quarter among the 20 biggest stock markets, with benchmark indexes rising at least 5 percent. Spain, China, Taiwan and Hong Kong did worst, falling 2.9 percent or more. To contact the reporter for this story: Michael P. Regan in New York at mregan12@bloomberg.net .

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