January 25, 2010

Top Stories: Stocks

Jan. 25 (Bloomberg) -- The following are the day's top stories
on stocks:

Asian Stocks Fall for Sixth Day on Bank Capital Raising, Profit Concerns
Asian stocks fell for a sixth day, the longest streak since
July, on concern Chinese banks need more capital and that
profit growth won't be enough to justify equity valuations.
Bank of China Ltd. lost 2.3 percent in Hong Kong on plans to
raise $5.86 billion from selling convertible bonds. Honda Motor
Co., which receives 42 percent of its sales from North America,
declined 1.7 percent on speculation U.S. measures to restrict
risk-taking at banks will derail the global recovery. BHP
Billiton Ltd., the world's largest mining company, sank 1.1
percent in Sydney as copper futures declined in London today.
The MSCI Asia Pacific Index lost 0.8 percent to 121.40 as of
4:45 p.m. in Tokyo. The index sank 4.2 percent in the past six
days on U.S. President Barack Obama's bank proposal and growing
concern China will take steps to rein in growth. Companies on
the gauge are priced at 1.6 times book value, near the highest
level since September 2008. ``Asian markets are correcting over
concerns the trajectory of growth is insufficient to justify
some valuations,'' said Tim Schroeders, who helps manage $1.1
billion at Pengana Capital Ltd. in Melbourne.

India Hit by Record Low `Buys' as Subbarao Poised to Raise Interest
Rates
Investment strategists are cutting recommendations on India
at a record pace after the country's stocks surpassed China as
the most expensive major emerging market for the first time
since 2006. The Bombay Stock Exchange Sensitive Index is valued
at 20 times estimated profits, higher than China for the first
time since November 2006 and the second-most expensive among
the 25 biggest markets after Japan, according to monthly data
compiled by Bloomberg. Even after the Sensex sank 4 percent
last week, the most in almost three months, its stocks trade
within 6.1 percent of analysts' average 12-month price
estimates. Rising valuations prompted analysts to cut ``buy''
ratings on Indian equities to a record low. Goldman Sachs Group
Inc. said the Reserve Bank of India plans its first interest
rate increase since 2006 this week to curb inflation. The last
eight times wholesale price increases climbed above their
long-term average, the Sensex posted average losses of 5.6
percent, Bloomberg data show. ``There are better opportunities
in other emerging markets,'' said Roger Groebli, the
Singapore-based head of financial market analysis at LGT
Capital Management, part of a group that oversees about $84
billion. India ``will be an underperformer for the first
quarter,'' he said.

VIX Options Show Bets on U.S. Stock Market Retreat Rising to 19-Month
High
Traders are piling into bets that the biggest sell-off in
U.S. shares since March will increase stock market volatility,
pushing call options on the VIX Index to the highest level in
19 months. Outstanding contracts speculating on an advance in
the Chicago Board Options Exchange Volatility Index climbed to
three times the number of wagers for a drop, the highest ratio
since June 2008, data compiled by Bloomberg show. The VIX,
which measures the cost of using options as insurance against
declines in the Standard & Poor's 500 Index, moves opposite to
equities more than 80 percent of the time. Investors are
doubling down after some of last week's most- traded options
rose 75 percent on Jan. 22. They're speculating President
Barack Obama's proposals to limit risk-taking by banks and
signs China will rein in growth will extend the S&P 500's drop
after it fell 5.1 percent in the last three days. ``There is
higher probability that we will see moves to the downside,''
said Tim Freeman, head of U.S. equity derivatives sales at
Capstone Global Markets LLC in New York. ``The changes that are
being proposed to the banking industry, the political
motivations and the policies that are being considered are game
changers and they will move this market in a big way.''

U.S. Stocks Fall Most Since October Amid Curbs on Bank Speculation,
China
U.S. stocks declined for a second week, sending the
Standard & Poor's 500 Index to the biggest drop since October,
as banks plunged on a White House proposal to limit financial
risk and China moved to cool economic growth. JPMorgan Chase &
Co. and Morgan Stanley slumped more than 8 percent as President
Barack Obama called for limiting speculation to prevent another
financial crisis. Exxon Mobil Corp. lost 4.4 percent and Alcoa
Inc. tumbled 14 percent on concern Chinese demand for
commodities will slow. The S&P 500 erased its 2010 gain,
retreating 3.9 percent to 1,091.76 for the week after closing
at a 15-month high on Jan. 19. The Dow Jones Industrial Average
fell 436.67 points, or 4.1 percent, to 10,172.98. The Nasdaq
Composite Index decreased 3.6 percent to 2,205.29. ``It's a
one-two punch,'' Ralph Fogel, head of investment strategy at
Fogel Neale Partners in New York, said of the curbs on Chinese
growth and Wall Street firms. ``In the end it's going to have
the same impact -- less flow of money into the marketplace.''

Decline in U.S. Stocks Pays Options Traders 75% Profit on Volatility
Bets
The biggest sell-off in the Standard & Poor's 500 Index
since March is rewarding options traders who bet on a surge in
volatility with gains of 75 percent. ``It's been a nice shift
for some people,'' said Justin Golden, a strategist at New
York-based Macro Risk Advisors LLC, which advises institutions
on equity derivatives. ``Before this week, the long options
community had been very frustrated. Volatility has been on a
downward path.'' Traders who buy options that gain in value
when the VIX rises are usually betting equities will retreat
because the volatility gauge moves in the opposite direction of
the S&P 500 more than 80 percent of the time. Financial and
technology stocks led the market lower yesterday as some
Democrats said they will oppose Ben S. Bernanke for another
term as head of the Federal Reserve and results at Google Inc.,
the Mountain View, California, owner of the world's most
popular search engine, disappointed investors. Wagers that the
Chicago Board Options Exchange Volatility Index would jump 46
percent to 32.5 were the most-active contract on Jan. 20 and
21, according to data compiled by Bloomberg. An increase to
that level corresponded with a decline of about 3 percent in
the Standard & Poor's 500 Index, said Randy Frederick, the
Austin, Texas-based director of trading and derivatives at
Charles Schwab & Co.

Canada Stocks Fall as Banks Slip on Concern Over Obama Plan; Barrick
Rises
Canadian stocks fell for a third day, completing their
biggest weekly drop since October, on concern that proposed
U.S. bank regulations will affect Canada's financial
institutions and that higher interest rates in China will slow
growth. Royal Bank of Canada, the country's largest bank,
dropped 2.4 percent a day after U.S. President Barack Obama
proposed limits on risk-taking. Nexen Inc., the energy company
that operates in Canada, Europe and Africa, decreased 4 percent
as crude oil futures sank to a one-month low. Teck Resources
Ltd., which sells coal to steel mills in China, declined 2.4
percent. ``Canada has been hit by a couple things: The
uncertainty caused by the Obama administration on its financial
plan and also, of course, we're relying so heavily on China,
there is a consideration there when rumors start heading around
they're going to stop aggressive lending practices,'' said Greg
Eckel, a money manager at Morgan Meighen & Associates Ltd. in
Toronto, which manages about C$900 million ($853.1 million).
The Standard & Poor's/TSX Composite Index tumbled 125.67
points, or 1.1 percent, to 11,343.67, its lowest close since
Nov. 6. For the week, the index lost 2.9 percent.

Global Stocks `Vulnerable to Correction' After Rally, Investor Rogers
Says
Global equities are ``vulnerable to correction'' after
rallying from their March lows and as governments around the
world withdraw stimulus measures, said investor Jim Rogers,
author of ``A Bull in China.'' The MSCI World Index climbed 67
percent from a more than 13-year low on March 9 as governments
boosted spending and central banks cut borrowing costs to pull
the global economy out of its worst recession since World War
II. The gauge has fallen 4.9 percent from a 16-month high on
Jan. 14. ``We're overdue for a correction'' said Rogers,
chairman of Rogers Holdings, said in an interview in Hong Kong.
``Stock markets around the world have been going up for the
past 10 months.'' The steepest stock market rally since the
1930s pushed worldwide valuations to six-year highs, helped by
more than $8 trillion in global spending to end the recession.
The MSCI World Index of 23 developed countries trades at more
than 28 times annual profit of its companies, near the highest
level since 2002.

European Stocks Retreat for Fourth Straight Day; U.S. Index Futures
Climb
European stocks fell for a fourth day, the longest losing
streak in two months, after U.S. shares plunged the most since
October and Ericsson AB reporting disappointing earnings. Asian
equities declined and U.S. index futures rose. Ericsson, the
world's biggest maker of wireless networks, sank the most since
November after fourth-quarter profit missed analysts'
estimates. Royal Philips Electronics NV, Europe's biggest
consumer-electronics maker, climbed 4.6 percent after posting a
third straight quarterly profit. The Dow Jones Stoxx 600 Index
lost 0.3 percent to 249.21 at 8:41 a.m. in London for the
longest stretch of declines since Nov. 20. The benchmark index
for European equities erased all of its gains for the year last
week after U.S. President Barack Obama called for a limit on
risk-taking by banks and concern mounted that China will take
measures to stem economic growth. ``The optimistic consensus at
the start of the year has been called into question,'' said
Matthieu Giuliani, a fund manager at Palatine Asset Management
in Paris, which oversees $5.7 billion. ``Growth has been weak.
We don't see a jumpstart in companies' sales figures. We need
to see a stronger rebound in economic data.''

Dubai Index Drops Most in Month on Obama Bank Plan, Oil; Leads Gulf
Lower
Dubai's index lost the most in a month, leading Gulf
markets lower, after U.S. stocks fell on a White House proposal
to limit financial risk and as China moved to cool economic
growth. Oil closed at a one-month low. Shuaa Capital PSC, the
United Arab Emirates' biggest investment bank, slumped to the
lowest level since May. United Development Co., the Qatari
developer building man-made islands off the Qatari coast,
retreated to the lowest in almost two months. The DFM General
Index fell 5 percent, the most since Dec. 9, to 1,570.09.
Qatar's gauge lost 1.6 percent. Crude closed down 2 percent at
$74.54 a barrel on Jan. 22. ``Friday's declining oil prices and
U.S. equities have had an impact, the Gulf always overreacts to
U.S. equities downside,'' said Mohamed Abu Ghoush, head of
equity brokerage at Al-Ahli Bank in Doha, Qatar. ``Markets are
still waiting for the 2009 results.'' Dubai's index has dropped
or gained more than 5 percent 16 times in the past 12 months,
that compares with twice for Abu Dhabi's measure, according to
data compiled by Bloomberg.

U.K. Stocks Cheapest on Record Versus European Peers: Chart of the Day
U.K. stocks are trading at the cheapest level on record
relative to their European peers, a sign to investors they are
worth buying even after the biggest rally in more than two
decades, according to top-ranked strategist James Montier. A
measure of valuing stocks, as used by Yale Professor of
Economics Robert Shiller, shows U.K. stocks are trading at 12.4
times earnings, compared with 17.9 for the rest of Europe.
That's the widest gap since at least 1973, according to data
from Morgan Stanley and Datastream. The CHART OF THE DAY
compares Shiller's price-to-earnings ratios for Datastream's
baskets of U.K. and other European stocks. The benchmark FTSE
100 Index has surged 51 percent from its low in March last
year, the biggest 10-month gain since 1987, raising concern
that prices have exceeded forecasts for earnings growth.
``Investors should react by remembering that valuation
matters,'' said Montier, a strategist at Grantham Mayo Van
Otterloo & Co. in London. ``The U.K. does look a little bit
cheaper.''

Japanese Stocks Decline for Second Day on Obama Proposal, Earnings
Concern
Japanese stocks fell for a second day on concern a plan by
U.S. President Barack Obama to limit risk-taking at banks will
crimp profits and as earnings reports further eroded confidence
in a global economic recovery. Kyowa Hakko Kirin Co. declined
4.3 percent, the steepest drop in the Nikkei 225 Stock Average,
after the drugmaker said profit missed its forecast. Mitsui
Chemicals Inc. sank 4.2 percent after the Nikkei newspaper said
its sales dropped. Toyota Motor Corp., the world's largest
carmaker, lost 2.1 percent after saying it's checking whether
to expand a recall. ``The fact that people are selling so much
shows the insecurity they have about the likelihood of Obama's
plan proceeding,'' said Masaru Hamasaki, chief strategist at
Tokyo- based Toyota Asset Management Co., which oversees the
equivalent of $14 billion. The Nikkei 225 fell 0.7 percent to
10,512.69 at 3 p.m. in Tokyo, its lowest close since Dec. 25.
The broader Topix index dropped 0.7 percent to 934.59, with
more than twice as many stocks declining as advancing.

Japan Price-to-Assets Makes Companies Cheapest Among International
Stocks
Not even the slowest economic growth in the industrialized
world or deflation can keep Byron Wien, David Herro and John
Alkire away from Japanese equities. Wien, the Blackstone Group
LP adviser who predicted last year's rallies in stocks and oil,
says Japan shares are his favorites. Harris Associates LP's
Herro, Morningstar Inc.'s international manager of the decade,
says stocks at the cheapest ever relative to assets will gain
even if the economy stagnates. Alkire of Morgan Stanley Asset &
Investment Management is betting low debt levels will spur an
advance that beats the U.S. Japan, the world's second-biggest
equity market, added 3.7 percent this year as measured by the
Topix index through last week, the most among the world's 10
largest economies. Overseas investors pumped almost $13 billion
into Japan during the two weeks ended Jan. 15, the most since
2004. Companies trade for an average 1.2 times book value,
almost half the valuation for the Standard & Poor's 500 Index,
according to data compiled by Bloomberg. ``My best investment
idea is Japan,'' said Wien, 76, a former market strategist at
Morgan Stanley and at hedge fund Pequot Capital Management Inc.
who predicted the end of the technology bubble in 2000. ``The
Japanese market looks relatively attractive assuming the
earnings come through, which I think they will.''

Hong Kong's Hang Seng Index Drops for Fourth Day; Completes 10%
Correction
Hong Kong stocks fell for a fourth day, dragging the
benchmark Hang Seng Index down more than 10 percent from its
high in November and giving the developed world its first
so-called correction of the year. Bank of China, the nation's
third-biggest lender, slipped 3.1 percent, extending its
decline since reaching a two-year high on Nov. 17 to 23
percent. Bank of Communications Co., China's fourth-largest
lender, dropped 2.6 percent. Angang Steel Co. and Maanshan Iron
& Steel Co. both fell on concern costs for Chinese steelmakers
will escalate due to rising iron ore prices. Petroleum stocks
declined as oil retreated today. Energy stocks have been among
the worst performers since November. The Hang Seng Index slid
0.6 percent to 20,598.55 at the close of trading in Hong Kong,
its lowest closing level since Oct. 5. The measure has tumbled
10.2 percent since closing at a high of 22,943.98 on Nov. 16.
Shares in Hong Kong have retreated more than three times as
fast as the MSCI World Index of 23 developed markets this year
as investors sold the city's banks and energy producers on
speculation China will rein in economic growth. Today's decline
marked the first 10 percent retreat in the developed world
since Greece's Athens Stock Exchange General Index lost 30
percent starting in October.

Top Stories: Bonds

Treasury Rally on Borrowed Time as Options Anticipate Fed Prone to
Tighten
January's surprise rally in Treasuries may prove fleeting,
as options traders bet on bigger price swings in bonds and
waning volatility in stocks for the first time since 2006.
Barclays Capital indexes show interest-rate volatility rose
from a six-month low in November on speculation borrowing costs
will increase as the improving economy allows the Federal
Reserve to remove the unprecedented cash it pumped into the
financial system. At the same time, confidence in the outlook
for profits helped push the Chicago Board Options Exchange
Volatility Index to an almost two-year low this month. The
correlation was negative in 2006, the last time policy makers
were increasing the target rate for overnight loans between
banks. Yields on 10-year Treasuries increased 0.75 percentage
point in the first half of that year, sparking a loss of 3.9
percent, according to Bank of America Merrill Lynch indexes,
while the Standard & Poor's 500 Index rose 1.8 percent. Fed
officials meet this week to discuss monetary policy. ``We've
probably seen the great secular bull low in yields,'' said
Mitchell Stapley, who helps oversee $13 billion of debt as
chief fixed-income officer for Fifth Third Asset Management in
Grand Rapids, Michigan. ``Earnings don't seem to be a concern
on anyone's plate right now. The level of rates, what happens
in the housing market, that's on the forefront of people's
minds and why we are getting fixed-income volatility spikes
that haven't made it over to the equity markets.''

Corporate Bond Sales Cut in Half by Widening Yield Spreads: Credit
Markets
Corporate bond sales are falling and borrowing costs are
increasing for the first time in eight weeks amid investor
concerns about the pace of the economic recovery. Bond sales
worldwide fell 52 percent last week to $48 billion from $99.8
billion in the previous period, according to data compiled by
Bloomberg. So-called yield spreads widened for the first time
since the five days ended Nov. 27, based on Bank of America
Merrill Lynch's Global Broad Market Corporate Index. Reports
showed U.S. retail sales and housing starts unexpectedly
declined in December, while German investor confidence dropped
more than economists estimated this month. President Barack
Obama's plan to limit the size of banks raised investor
concerns that earnings growth may be curbed. Dallas- based
Energy Transfer Equity LP, which controls the third- largest
U.S. pipeline partnership, pulled a $1.75 billion high- yield
offering and Vietnam delayed a sale to this week. ``The market
feels as though it had lost sight of reality, with the
indiscriminate buying of risk while ignoring the economic
fundamentals,'' said Simon Ballard, the head of European credit
strategy at RBC Capital Markets in London. ``The wider
macroeconomic picture and a couple of recent events have made
investors sit back a bit and take stock.''

Treasuries Decline Before This Week's Growth Report, Three Debt Auctions
Treasuries fell, pushing yields up from a one-month low, on
speculation a U.S. report this week will show the world's
largest economy expanded in the last quarter of 2009 at the
fastest pace in almost four years. Bonds due in 30 years also
dropped as traders bet Federal Reserve Chairman Ben S. Bernanke
will win confirmation for a second term to pursue policies for
spurring the U.S. economy. The Treasury Department prepared to
auction a record-tying $118 billion of two-, five-and
seven-year notes starting tomorrow. ``The GDP figure will be a
good number,'' said Kazuaki Oh'e, a bond salesman in Tokyo at
Canadian Imperial Bank of Commerce, the nation's fifth-largest
lender. ``It's not good for long-term bonds because of
inflation fears. If the markets rise, that's a good time to set
a short position before the auctions.'' A so-called short is a
bet prices will fall. The benchmark 10-year note yield
increased two basis points to 3.63 percent as of 6:29 a.m. in
London, according to data compiled by Bloomberg. The 3.375
percent security due in November 2019 fell 5/32, or $1.56 per
$1,000 face amount, to 97 30/32. Yields declined to 3.58
percent on Jan. 22, the lowest level since Dec. 21.

U.S. Consumer's Demise May Be Offset by China, India, Nomura's Sheard
Says
Developing countries led by China and India will supplant
the American consumer as the source of ``natural growth'' for
the global economy, according to Paul Sheard of Nomura
Securities International Inc. There will be ``less exuberant
and robust consumption than we had in the past few years'' in
the U.S. because the American household will continue to
``tighten its belt,'' New-York based Sheard, global chief
economist at Nomura, said in a Bloomberg Television interview
in Hong Kong today. ``There are other parts of the world,
though, that can take up some of that slack,'' such as China
and India, he said. U.S. consumer spending, which accounts for
about 70 percent of its economy, probably dropped 0.6 percent
last year, according to the median estimate of 59 analysts
surveyed this month by Bloomberg News. The jobless rate held at
10 percent in December as discouraged workers stopped looking
for work. ``There is a legacy of all that debt, and if you
like, overconsumption that built up in the U.S. in the few
years riding up to the crisis,'' said Sheard, referring to the
collapse of the nation's housing market.

Treasury Asks Dealers About Impact of Fewer Fed Purchases of Mortgage
Debt
The U.S. Treasury Department asked bond dealers about the
potential market impact from the end of the Federal Reserve's
mortgage-backed securities purchase program, according to a
survey the department released in Washington today. The agenda
for Jan. 28 meetings shows the Treasury's effort to watch for
market disruptions and manage record borrowing. The U.S. is
braced for a second consecutive year of $1 trillion-plus budget
deficits amid debate over the federal debt limit, which stands
at $12.4 trillion and could be breached within weeks unless
lawmakers approve an increase. If Congress raises the debt
limit by $1.9 trillion, as the Senate is considering, the
Treasury would have room to borrow until early 2011, an
administration official said today. Meanwhile, debt managers
are asking whether the market expects turmoil from the end of
the Fed program, on track to happen three months after the
Treasury ended its own MBS purchases. ``The Federal Reserve has
frequently stated that its purchases of agency mortgage-backed
securities and agency debt will be executed by the end of the
first quarter of 2010,'' the Treasury told the dealers in
today's survey.

Sell Fannie Mae Mortgage Securities on Prepayment Risk, Declaration Says
Investors should bet against some Fannie Mae and Freddie
Mac securities because of the prepayment risk for those trading
above par, said Jim Shallcross, who oversees $12 billion at
Declaration Management & Research LLC. The government-supported
companies are set to buy delinquent mortgages out of the
securities at a faster pace, paying down the bonds at face
value, the 49-year-old director of portfolio management said in
a telephone interview. ``Right now, I think you're playing with
fire'' owning the securities, said Shallcross, who made $117
million for investors in two distressed-asset funds closed last
month. Securities to ``short'' with contracts to sell them in
future months include 30-year Fannie Mae mortgage bonds with
coupons of 5.5 percent, 6 percent or 6.5 percent, said
Shallcross, who is based in McLean, Virginia.

Bernanke Will Win Senate Reconfirmation, Republican Leader McConnell
Says
Ben S. Bernanke will keep his job as Federal Reserve
chairman, the White House and the Senate's senior Republican
predicted two days after wavering support among some Democrats
helped drive stock prices lower. President Barack Obama ``is
very confident that the chairman will be confirmed,'' David
Axelrod, a senior White House adviser, said on CNN's ``State of
the Union'' program. Senate Republican leader Mitch McConnell
said on NBC's ``Meet the Press'' that Bernanke will have
``bipartisan support in the Senate'' even as a number of his
party are opposed. The assurances followed declarations of
support for Bernanke from the top two Democrats in the Senate,
Nevada's Harry Reid and Richard Durbin of Illinois, who earlier
said they were undecided. John McCain, the Republican 2008
presidential nominee, and John Cornyn, who runs the party's
senate campaign committee this year, are against him. Online
traders yesterday raised the odds of approval to 92 percent
from as low as 65 percent on Jan. 22. ``We've dodged the bullet
on this one,'' said Greg Valliere, chief policy strategist at
Potomac Research Group in Washington. ``People were aghast by
what happened in the markets on Friday, and do they really want
to get angry letters from constituents who have lost money in
the stock market because of the Bernanke vote?''

Mexico Debt to Post Best Rally Since 2006 as Economic Rebound Takes Hold
Mexico's benchmark local bonds are poised for the biggest
annual rally in four years after underperforming regional debt
in 2009 as the economy recovers and the peso gains, Stone
Harbor Investment Partners said. The yield on Mexico's 10
percent peso bond due in December 2024 may plunge about 40
basis points, or 0.40 percentage point, in 2010, to 7.80
percent, said Pablo Cisilino, who manages $11.5 billion in
emerging-market assets at Stone Harbor in New York. That would
be the biggest one-year drop since 2006. Mexican domestic debt
returned 7.7 percent last year, less than the 10 percent return
posted by Latin American local bonds on average, according to
JPMorgan Chase & Co.'s ELMI+ index. The region's second-largest
economy will grow 2.95 percent in 2010 after contracting 7
percent last year, the most since 1932, the median forecast of
19 economists in a Bloomberg survey shows. ``People were too
pessimistic on the growth outlook for Mexico and very
pessimistic about the peso,'' Cisilino said. ``Things are
changing. They're starting to come around.''

U.K. Index-Linked Bond Sale to Attract `Spooked' Buyers, Threadneedle
Says
Britain's accelerating inflation is likely to spur
investors into buying 30-year index-linked bonds at a sale this
week, according to Threadneedle Asset Management. The Treasury
plans to sell an undisclosed amount of inflation-protected
bonds due in 2040 through banks as early as today, according to
the U.K. Debt Management Office. Consumer prices climbed 2.9
percent from a year earlier, 1 percentage point more than in
November, the Office for National Statistics said on Jan. 19,
the first time since May that the rate has exceeded the Bank of
England's 2 percent target. Inflation is accelerating after
policy makers printed as much as 200 billion pounds ($323
billion) to buy bonds as part of their so-called quantitative
easing policy, designed to drive down borrowing costs and lift
the economy out of the recession. ``Some investors must have
been spooked by the recent inflation data,'' said Sam Hill, a
money manager in London at Threadneedle, which oversees $94
billion. ``All evidence suggests there will be strong interest
for this bond, especially from long-term investors such as
pension funds.''

German Bunds Rise; Greek Auction This Week Stirs Peripheral Risk
Aversion
German government bonds rose as investors sought the safest
securities amid concern Greece may struggle to sell debt this
week, stirring concern about budget- financing problems for
other nations that use the euro. The gains pushed the yield on
the 10-year bund down to within two basis points of the lowest
since Dec. 21, while the two-year note yield remained within
three basis points of the lowest since Sept. 8. Greece's
national debt agency said Friday it had hired six banks to sell
at least 3 billion euros ($4.2 billion) of five-year bonds.
``Bunds gained as uncertainty in market sentiment remains
high,'' said Sean Maloney, an interest-rate strategist at
Nomura International Plc in London. ``Concern about Greece and
potential contagion effects continue to plague the euro area,
and this week's five-year syndication deal may prove to be
make- or-break for non-core markets.'' The yield on the 10-year
bund, Europe's benchmark government security, fel1 1 basis
point to 3.21 percent as of 7:39 a.m. in London. The 3.25
percent security maturing January 2020 rose 0.06, or 60 euro
cents per 1,000-euro ($1,415) face amount, to 100.35. The
two-year note yield was unchanged at 1.11 percent.

Saudi Arabia to Spend More on Boosting Economy, Keep Interest Rates Low
Saudi Arabia, the Arab world's largest economy, is in no
rush to raise interest rates and will keep plowing its oil
revenue into kick-starting growth. Central bank Governor
Muhammad al-Jasser said in a Jan. 23 interview he's not
planning to raise interest rates because inflation isn't a
concern and demand isn't strong enough to require higher
borrowing costs. Finance Minister Ibrahim al- Assaf told an
investors' conference in Riyadh yesterday that a ``continuous
stimulus'' is needed even as the economy rebounds from last
year's stagnation. Saudi Arabia's economy will grow more than 4
percent in 2010 after expanding less than 0.2 percent last
year, the finance minister said. Gross domestic product
increased 4.3 percent in 2008. The kingdom, the world's largest
oil exporter, last year announced that it would spend $400
billion on infrastructure over a five-year period to bolster
the economy, the largest stimulus package in the Group of 20
nations. The country is allocating almost $70 billion to
investments this year, a 16 percent increase on 2009. Rising
oil prices, which have rebounded to around $75 a barrel from
less than $35 in February, are also likely to boost growth this
year.

Corporate Bond Risk Increases in Europe, Credit-Default Swap Prices Show
The cost of insuring against losses on European corporate
bonds rose, according to traders of credit-default swaps.
Contracts on the Markit iTraxx Crossover Index of 50 companies
with mostly high-yield credit ratings climbed 7 basis points to
455, according to JPMorgan Chase & Co. prices at 7:25 a.m. in
London. The index is a benchmark for the cost of protecting
bonds against default and an increase signals deterioration in
perceptions of credit quality. The Markit iTraxx Europe Index
of 125 companies with investment-grade ratings rose 2 basis
point to 83.25, JPMorgan prices show. A basis point on a
credit-default swap contract protecting 10 million euros ($14.1
million) of debt from default for five years is equivalent to
1,000 euros a year.

Japan's 10-Year Bond Futures Fall as Stocks Pare Loss, Debt Supply Rises
Japanese 10-year bond futures fell after local stocks pared
losses, drawing investors away from lower-yielding government
debt. Benchmark 10-year yields also climbed on speculation
Prime Minister Yukio Hatoyama's administration will issue more
debt to pay for stimulus measures as falling prices and
unemployment threaten the economic recovery. Japan's national
debt will likely reach 973 trillion yen ($10.8 trillion) in the
fiscal year ending March 2011, according to budget-related
documents on the Finance Ministry's Web site. ``The JGB market
is being led by futures, which is following equities,'' said
Keiko Onogi, a strategist in Tokyo at Daiwa Securities SMBC Co.
``Since the equity market seems to be heading up, that's been
weighing on futures.'' Ten-year bond futures for March delivery
declined 0.15 to 139.08 at the 3 p.m. afternoon close in Tokyo.

Indian Bonds Decline Most in a Week Before Central Bank's Policy Meeting
India's 10-year bonds fell the most in almost a week on
speculation the central bank will act to curb money supply at
its policy meeting on Jan. 29 to slow inflation. Yields rose as
the Reserve Bank of India will probably ask banks to set aside
a greater proportion of their deposits as reserves, a Bloomberg
survey showed. The central bank will raise the cash reserve
ratio by 50 basis points to 5.5 percent, a median of estimates
by 16 economists showed. ``Investors are paring their positions
because bond prices have rallied a quite a bit over the past
week,'' said S. Srikumar, chief of fixed-income at state-owned
Corporation Bank. ``There will be an element of caution in the
run up to the policy meeting.'' The yield on the 6.35 percent
note due January 2020 rose two basis points to 7.57 percent as
of 10:32 a.m. in Mumbai, according to the central bank's
trading system. The price fell 0.13, or 13 paise per 100 rupee
face amount, to 91.58.

Top Stories: Currencies

Jan. 25 (Bloomberg) -- The following are the day's top stories
on currencies:

Yen Declines on Speculation Bank of Japan is Prepared to Enact More
Easing
The yen fell against the dollar and the euro amid
speculation Bank of Japan policy makers are prepared to
increase purchases of government debt to safeguard the recovery
and limit the currency's strength. Japan's currency snapped
seven days of gains against the euro after people with
knowledge of the matter said the central bank may also expand
an emergency-loan program for banks as it seeks to stave off
deflation. The yen and the dollar dropped against
higher-yielding currencies on speculation Federal Reserve
Chairman Ben S. Bernanke will win lawmakers' support for a
second term. The dollar declined before a report that may show
sales of existing U.S. homes dropped last month. ``There's
still this whole debate about whether Japan will accept a
strong yen and I think it won't,'' said Sonja Marten, a
currency strategist at DZ Bank AG in Frankfurt. ``They will
intervene if they feel the yen starts to accelerate too much.''
The yen depreciated to 127.39 per euro at 8:26 a.m. in London
from 126.98 in New York last week. It weakened to 90.06 per
dollar, from 89.82. It traded at 89.79 on Jan. 22, its
strongest level since Dec. 18. The dollar was at $1.4141 per
euro from $1.4139, after appreciating to $1.4029 on Jan. 21,
its best level since July.

China May Raise Value of Yuan 5% in One-Time Move, Goldman's O'Neill
Says
China will probably let its currency appreciate by at least
5 percent in a one-time move and raise interest rates to cool
the economy and curb inflationary pressures, Goldman Sachs
Group Inc. Chief Economist Jim O'Neill said. The Chinese
government may allow the yuan to have ``a bigger one-off move
than people talk about, at least 5 percent, maybe more,''
O'Neill said in an interview today at the London School of
Economics. ``They may also consider having a wide band to let
it move more frequently on the daily basis to stop speculative
players.'' China's economy rebounded stronger than anticipated
in the fourth quarter, and the inflation rate accelerated to a
13-month high of 1.9 percent in December, igniting speculation
the government will abandon the yuan peg to avoid the economy
from overheating. China has kept a lid on its currency since
July 2008 after it strengthened 21 percent against the dollar
over the previous three years. ``Part of the idea of doing
these things is to surprise people so we are not going to get
any hints of it happening,'' said O'Neill. ``We'll just wake up
on an unpredictable day and see it happen.''

Pound Perceived as Diminished Currency No Matter Who Wins in U.K.
Election
No matter who prevails in this year's election between U.K.
Prime Minister Gordon Brown and opposition leader David
Cameron, the loser will be the pound because the next
government may not have enough support in parliament to rein in
the Group of 20's biggest budget deficit. Strategists cut
forecasts on sterling versus the dollar by as much as 2 percent
this month to the lowest since June. The currency will be
weighed down by polls that point to the first parliamentary
stalemate in a generation, growth that lags behind the four
biggest industrialized economies and a fiscal shortfall that
has ballooned to almost 13 percent of gross domestic product,
double what it was a year ago, the strategists said. SJS
Markets Ltd., last year's second-most accurate forecaster on
the pound versus the dollar, sees the U.K. currency falling 1.3
percent by Dec. 31. BNP Paribas SA says the pound will wipe out
all of last year's 11 percent gain, its best since 2006. The
last time a U.K. election failed to produce a clear winner was
in 1974. The currency fell 28 percent in the next two years as
the government's failure to fund its deficit led to an
International Monetary Fund bailout. ``If you end up with
political paralysis in the U.K., that would be the worst of
both worlds, where no one governs and everybody is fighting
each other,'' said Sebastien Galy, a New York-based senior
foreign-exchange strategist at BNP, which sees the pound
sinking to $1.40 this year. ``It's not a happy time when you
have to go through fiscal restraint as it makes nobody happy,
and if you do it with a weak majority or weak type of
coalition, it's not easy to sustain.''

Argentine Peso Rally Ending as Fernandez Seeks Cash, Morgan Stanley Says
The four-month rally in the Argentine peso is poised to end
because the government will seek a weaker exchange rate to
boost payments of profits from central bank foreign reserves,
Morgan Stanley said. The devaluation incentive will lead the
bank to break the longest peso rally since early 2007 and push
the currency down 9.5 percent to 4.2 per dollar by year-end,
said Daniel Volberg, a Morgan Stanley economist in New York. A
drop that big would increase the peso value of the nation's $48
billion of international currency reserves and result in about
$5 billion being handed over to the government, he said. ``That
would significantly boost Argentina's financing,'' Volberg said
in a telephone interview. Argentina's financing needs will
climb to $11.4 billion this year from $10.7 billion in 2009,
according to estimates by Credit Suisse Group AG. President
Cristina Fernandez de Kirchner is seeking to restructure $20
billion of defaulted debt that creditors held out of a 2005
restructuring in a bid to regain access to international
markets. To help finance payments, she also proposed taking
$6.6 billion of central bank reserves, a plan that central bank
President Martin Redrado has opposed.

Brazil's Real May Gain Versus Yen on Rate Increase, Mitsubishi UFJ Says
Brazil's real may strengthen against the yen and dollar as
a V-shaped recovery in the nation's economy this year prompts
the central bank to raise interest rates, according to
Mitsubishi UFJ Securities. Brazil's central bank will increase
its benchmark interest rate from 8.75 percent as growth is
likely to ``accelerate to the mid-5 percent level this year
from a little over 0 percent in 2009,'' Hiroyuki Omiya, a New
York-based executive director at Mitsubishi UFJ Securities,
said in an interview in Tokyo last week. ``Brazil has a phobia
of inflation due to its deep-seated memories of
hyperinflation,'' Omiya said. The central bank should reverse
half of the 5 percentage points in rate cuts it enacted during
the financial crisis, he said. Brazil's inflation is currently
below the government's target range of 4.5 percent plus or
minus 2 percentage points. The real advanced against all of its
16 major counterparts in 2009, climbing 33 percent against the
dollar and gaining 36 percent versus the yen, according to
Bloomberg data. ``We are getting more inquiries from Japanese
investors about real-based exchange rates,'' Omiya said.

Economy in U.S. Probably Expanded by Most in Four Years on Factory
Pickup
The U.S. economy probably grew in the closing months of
2009 at the fastest pace in almost four years as factories
stepped up production and companies purchased new equipment,
economists said before reports this week. Gross domestic
product expanded at a 4.6 percent pace from October through
December, more than double the prior quarter's growth rate and
the strongest since the first three months of 2006, according
to the median estimate of 74 economists surveyed by Bloomberg
News. Other reports may show orders for durable goods increased
and home sales declined. Manufacturers such as Intel Corp. are
leading the recovery as growing demand and dwindling
inventories prompt companies to speed up assembly lines. Slower
consumer spending after the third-quarter's ``cash for
clunkers'' rebound is a reminder that 10 percent unemployment
is causing Americans to hold back, one reason why the Federal
Reserve may keep interest rates low. ``Inventories are going to
be responsible for at least half of the growth, if not more,''
said Joshua Shapiro, chief U.S. economist at Maria Fiorini
Ramirez Inc. in New York. ``There's been an enormous amount of
government stimulus that will be fading as we go through the
year, so it's unclear how much the economy can do on its own.''

Canadian Currency Touches Weakest Level in a Month as Risk Appetite
Fades
The Canadian currency weakened the most since October as
uncertainty over U.S. banking regulations, China's monetary
policy and Greece's finances dulled investors' appetite for
higher-yielding assets. Canada's dollar fell against most of
its major counterparts as stocks tumbled and crude oil, the
nation's biggest export, dropped. The Bank of Canada kept
interest rates at a record low and repeated concern that the
currency's strength is hampering the nation's economy. Gross
domestic product grew in November for a third month, a report
is forecast to show next week. ``Quite simply, the market was
extremely long Canada,'' said Michael O'Neill, managing
director at Knightsbridge Foreign Exchange Inc. in Toronto. A
long position is a bet a currency will appreciate. ``The fact
there was a bit of risk aversion coming back into the market
because of the Obama tax on banks, plus
will-China-keep-tightening, that all put Canada in a bit of a
negative light.'' The Canadian currency, nicknamed the loonie,
depreciated 2.7 percent, the most since the five days ended
Oct. 30, to C$1.0578 per U.S. dollar yesterday in Toronto,
compared with C$1.0291 on Jan. 15. It gained 16 percent last
year. One Canadian dollar buys 94.54 U.S. cents.

Peru's 30% Currency Futures Tax on Foreigners to Dry Up Trading, RBS
Says
Peru's tax on foreign investors' profits from short-term
currency futures will dry up trading in the sol, RBS Securities
Inc. said. The 30 percent tax on contracts maturing up to 60
days, which takes effect today, is part of changes to a decree
issued last month that included a capital gains tax on stocks.
``This new legislation will be negative in as much as it dries
up market activity and directs interest away towards currencies
that still enjoy less interference,'' Flavia Cattan- Naslausky,
a currency strategist at RBS in Stamford, Connecticut, wrote in
a report today. The sol dropped 0.1 percent to 2.8525 per
dollar at 3:50 p.m. New York time from 2.8495 yesterday. The
currency has strengthened 1.2 percent this year after an 8.5
percent jump last year, its biggest annual advance since its
creation in the 1990s. RBS forecasts the sol will slide to 2.9
by year-end.

ECB Has `Steady Hand' Approach on Liquidity Withdrawal, Nowotny Tells
FT
The European Central Bank will operate a ``steady-hand
approach'' in its move to gradually withdraw extraordinary
liquidity measures, and there is no need for banks to be
nervous, European Central Bank Governing Council member Ewald
Nowotny said in an interview with the Financial Times. The ECB
sees neither ``an inflation or deflation perspective,'' and the
central bank doesn't see ``a risk of bubbles emerging in the
eurozone,'' he said. A pick-up in western European export
markets is helping central and eastern European economies to
recover faster than expected and some may profit in an
``over-proportional way'' due to their competitive advantages,
he said, the FT reported.

South African Central bank Set to Keep Interest Rates on Hold: This Week
South Africa's central bank will probably leave its
benchmark interest rate unchanged tomorrow as a recovery in
Africa's largest economy gathers pace and inflationary
pressures abate. The bank will keep the rate at 7 percent,
according to 20 of 22 economists surveyed by Bloomberg. The
decision will be announced soon after 3 p.m. in Pretoria. The
Reserve Bank reduced the key rate by 5 percentage points in the
nine months through August after the economy fell into its
first recession in 17 years. Growth resumed in the three months
through September, with gross domestic product expanding an
annualized 0.9 percent as manufacturing recovered. ``The
central bank probably feels it has responded enough'' to the
recession, said Kevin Lings, an economist at Stanlib Asset
Management in Johannesburg. ``We are already at the bottom of
the interest rate cycle.''

Russian Ruble Weakens to 2010 Low Against Dollar as Oil Falls Below $75
The ruble declined to its weakest level against the dollar
this year and fell the most in almost a month versus the euro
as oil, Russia's biggest export, traded below $75 a barrel. The
Russian currency depreciated 0.9 percent to 30.1398 per dollar
by 10:29 a.m. in Moscow, the weakest since Dec. 30. It fell 1.1
percent, the biggest drop since Dec. 29, to 42.6350 per euro.
Oil traded near a one-month low as expectations of
interest-rate increases in China dented investor confidence in
the strength of the global economic recovery. Crude for March
delivery was little changed at $74.57 in New York after
dropping 2 percent on Jan. 22, the lowest settlement since Dec.
22. The movements against the dollar and the euro left the
ruble at 35.7898 against the central bank's target currency
basket, which is used to manage swings that hurt Russian
exporters.

Hungary to Pace Interest Rate Cuts to Ward Off Forint Risk, Survey Shows
Hungary's central bank may slow the pace of interest rate
cuts this year as the European Union's most indebted eastern
member balances policy to address currency risks against the
deepest recession in almost two decades. The Magyar Nemzeti
Bank will lower the benchmark two-week deposit rate three
quarters of a point to 5.5 percent by the second quarter,
according to the median estimate of 10 economists in a
Bloomberg survey. Policy makers will cut the rate a quarter
point to a record low 6 percent at today's meeting, 16 of 19
economists said in a separate survey estimate. Three expect a
half-point reduction. Hungary is emerging from its worst
economic crisis in 18 years, which culminated in a 7.5 percent
annual contraction in the second quarter and forced the country
to turn to international donors for a $30 billion loan. At the
same time, government debt will this year swell to 79.8 percent
of gross domestic product, more than double that in neighboring
Romania and Slovakia, restricting the scope for interest rate
cuts as investors demand higher returns to compensate for
credit risks. ``This has been a quite aggressive rate-cut
cycle,'' Bartosz Pawlowski, an emerging-market strategist at
BNP Paribas SA in London, said in a telephone interview. ``What
the central bank is doing is a fine balancing act between what
the economy calls for and what investors require in risk
premium due to the country's very high level of indebtedness.''

Australian, New Zealand Dollars Gain on Speculation Bernanke to Keep Job
Australia and New Zealand's dollars gained the most in
about three weeks versus the yen as demand for riskier assets
rose on speculation Federal Reserve Chairman Ben S. Bernanke
will be confirmed for a second term. The so-called Aussie also
rose before a Jan. 27 report economists said will show annual
inflation accelerated in the fourth quarter, boosting prospects
the central bank will raise interest rates next month. U.S.
President Barack Obama received assurances from Senate leaders
that Bernanke will be confirmed, an administration official
said. ``Risk has bounced a little on Bernanke's potential
reappointment looking more likely,'' said Tony Allen, head of
currency trading at ANZ National Bank Ltd. in Wellington.
Australia's currency rose 1 percent, the most since Jan. 6, to
81.70 yen as of 3:51 p.m. in Sydney. It gained 0.7 percent to
90.68 U.S. cents from New York's closing level on Jan. 22. New
Zealand's dollar climbed 1.2 percent, the most since Dec. 29,
to 64.50 yen. It added 0.9 percent to 71.59 U.S. cents.

Top Stories: Commodities

Jan. 25 (Bloomberg) -- The following are the day's top stories
on commodities:

Platinum Overtaking Gold as Metal of Choice With Rebounding Sales of
Cars
Even after a record 57 percent rally last year, platinum is
cheap relative to gold, signaling more gains as demand grows
from carmakers and exchange-traded funds. An ounce of platinum
buys 1.42 ounces of gold, down 42 percent from the record 2.43
ounces in 2001 and 23 percent less than the 10-year average,
data compiled by Bloomberg show. Automakers, the biggest
buyers, will expand output 20 percent this year, said Evan
Smith, who helps manage $2 billion at U.S. Global Investors.
Hedge funds raised their bets 163 percent in 2009, about twice
gold's increase. ETF Securities Ltd. funds lifted holdings to a
record 594,465 ounces. ``We are long platinum and short gold,''
said Jonathan Barratt, the Sydney-based managing director with
Commodity Broking Services Pty, who predicted platinum's rally
in September. ``Gold remains under pressure. As inflation moves
lower and the dollar goes higher, gold isn't as solid.'' Bank
of America-Merrill Lynch strategist Michael Widmer raised his
forecast for this year by 35 percent to an average of $1,750
and predicted $2,000 for 2011. Standard Chartered Plc forecast
platinum will be one of the year's best commodities. Prices may
jump 55 percent to a record $2,400 by mid-year, said Joerg Ceh,
head of commodity trading at Landesbank Baden- Wuerttemberg in
Stuttgart, Germany's biggest state-owned lender.

Copper Declines as Asia Stocks Drop, Concern Obama Plan Will Curb
Trading
Copper fell as Asian stocks dropped for a sixth day on
concern U.S. President Barack Obama's plan to limit the size of
financial institutions may curb trading. Aluminum was little
changed and zinc increased. Three-month copper on the London
Metal Exchange fell as much as 1 percent to $7,318 a metric ton
and traded at $7,355 at 3:40 p.m. in Singapore. The price
declined as China may take further steps to slow growth after
its economy expanded 10.7 percent in the fourth quarter. China
and the U.S. are the world's two biggest users. China's
government has already moved to rein in record lending that
contributed to copper more than doubling last year. The central
bank said last week it will limit credit expansion in 2010 as
the prospect of resurgent inflation and asset bubbles grows.
Copper is often taken as an indicator for the world economy as
it is used in construction and automobiles. ``Both the U.S. and
China introduced policies that may derail the global economic
recovery,'' Tan Wentao, an analyst at HNA Topwin Futures Co.,
said from Shanghai today.

Chinese Steelmakers Face Iron Ore Price Squeeze as ArcelorMittal Revives
Chinese steelmakers, the world's largest buyers of iron
ore, face escalating costs for the steelmaking ingredient as
global rivals ArcelorMittal and Posco increase output to feed
resurgent demand in developed economies. Contract prices may
climb 31 percent to the second-highest on record for the year
starting April 1, according to the mean estimate of 17 analysts
surveyed by Bloomberg. That compares with the 14 percent gain
forecast in October. Nomura Inc. and Bank of America Merrill
Lynch expect a 50 percent jump. The demand revival will benefit
BHP Billiton Ltd., Rio Tinto Group and Vale SA, the three
largest suppliers of iron ore. The global recession forced
miners to slash prices by 33 percent in 2009, the first
reduction in seven years. ``The big mills in China have been
driving the price, but now capacity outside China is picking
up,'' Colin Hamilton, a Macquarie Securities Group analyst in
London, said by phone. ``There is pressure on producers to
deliver into Europe and elsewhere, which is exacerbating the
tightness.''

Gold Snaps Three-Day Decline as Sliding Dollar May Revive Investor
Demand
Gold climbed for the first time in four days on speculation
the dollar's decline will revive demand for the precious metal
as an alternative asset. The dollar is poised to weaken before
a report today economists said will show sales of existing U.S.
homes fell in December. Asian stocks slid for a sixth day after
uncertainty over Ben S. Bernanke's confirmation for another
term as head of the U.S. Federal Reserve weighed on financial
shares. ``I'm bullish on gold'' this week, said Gavin Wendt,
senior resource analyst at Mine Life Pty in Syndey. ``In an
economic environment full of uncertainty with respect to the
outlook for U.S. economic growth, gold remains the one constant
whose luster in not only untarnished, but in fact greatly
enhanced.'' Gold for immediate delivery rose 0.6 percent to
$1,099.10 an ounce at 1:42 p.m. in Singapore. The metal, which
touched an all-time high of $1,226.56 last month, slumped to a
one-month low of $1,081.95 an ounce on Jan. 22.

Copper May Reach $10,000 This Year on Chinese Demand, HFZ Capital Says
Copper may rise to a record $10,000 a metric ton this year,
driven by industrial demand in China and rising commodity
investments to hedge inflation, said Shen Haihua, an investment
manager at HFZ Capital Management Ltd. Refined copper
consumption in China, the world's largest user, may rise 8
percent to 6.99 million metric tons in 2010 from last year, as
the economy accelerates, Shen said at a forum in Shanghai
today. Hong Kong-based HFZ Capital was set up in 2008 by RK
Capital Management LLP. Copper in 2009 had its biggest annual
increase in more than two decades as China boosted imports to a
record on stimulus spending, state stockpiling and a lack of
scrap. Economic growth accelerated to the quickest pace since
2007 in the fourth quarter, capping Premier Wen Jiabao's
success in shielding the nation from the first global recession
since World War II. China's net imports of refined copper may
be 2.19 million tons this year, down 30 percent from a year
ago, Shen said. The amount is still ``enough to be a key reason
to drive copper to $10,000'' amid an inflationary global
environment, he said. Shen said the contract may trade in a
range between $6,000 and $10,000 a ton.

Steel Prices in China Drop the Most in Four Months on Record Inventories
Steel prices in China, the world's biggest producer of the
metal, dropped the most in four months last week as inventories
piled up and concerns grew that the government may curb
lending. Inventories of steel products, including holdings by
traders, producers and end users, are estimated to exceed 50
million metric tons, setting a record, said Ma Haitian, an
analyst with Beijing Antaike Information Development Co. That's
compared with an estimated 18 million tons a year ago, he said.
``Some may trim their inventories at discounted prices to
collect money before the Chinese New Year'' holiday in
February, Ma said. ``Speculation of interest rate hikes and
other tightening measures also added to concerns about capital
availability in the market.'' China's growth rate in the fourth
quarter accelerated at the fastest pace since 2007, as the
nation's $586 billion stimulus spending and record lending
stoked car and property sales. That's raised concerns the
government may increase interest rates or take other measures
to curb inflation and limit asset bubbles.

South Korea's Lee Seeks Singh Help for $12 Billion Posco India Steel
Plant
South Korea's President Lee Myung Bak will ask the Indian
government for support to clear the way for Posco's $12 billion
steel project in the South Asian country that's been delayed
for about three years. Lee, who will attend India's Republic
Day celebrations on Jan. 26, is seeking Prime Minister Manmohan
Singh's ``continued interest and support'' for the project, he
said in a written interview with the Times of India newspaper,
according to a Korean-language transcript issued by Lee's
office yesterday. Posco's project in the eastern state of
Orissa, potentially the single-biggest overseas investment in
India, was announced in 2005 and is delayed pending mining
permits and land clearance. Plans by ArcelorMittal, the world's
largest steelmaker, to build a pair of $10 billion plants in
Orissa and neighboring Jharkhand have also been stalled because
of land purchases. ``The India project is crucial for Posco as
it will provide cheap raw materials to the steelmaker and
expand Posco's output substantially,'' said James Ha, an
analyst at KTB Securities Co.

Corn Rises on Signs Recent Price Slump Boosting U.S. Sales; Soybeans
Gain
Corn advanced on speculation recent declines are attracting
investors and importers as export sales jumped from the U.S.,
the world's biggest shipper. Wheat and soybeans also gained.
Corn climbed as much as 1 percent to $3.6825 a bushel in
after-hours trading on the Chicago Board of Trade, after losing
12 percent this year through Jan. 22. Futures for
March-delivery were at $3.6725 a bushel, up 0.6 percent at 2
p.m. in Singapore. U.S. exporters sold 1.61 million metric tons
of corn in the week ended Jan. 14, up from 327,286 tons a week
earlier, the U.S. Department of Agriculture said in a report
released Jan. 22. ``Corn demand has started to improve with the
USDA indicating big export sales,'' Luke Mathews, an
agricultural commodity strategist at Commonwealth Bank of
Australia, said in a report published today.

Chinalco to Step Up Pace of Overseas Resource Acquisition and
Exploration
Aluminum Corp. of China, the country's largest maker of the
metal, will speed up overseas resource acquisition and
exploration this year as one of its key objectives for 2010,
Chairman Xiong Weiping said. Chinalco, as the Beijing-based
company is known, will ``utilize all its resources and
energy,'' to speed up acquisitions, Xiong said in a speech to
staff posted on the company's Web site today. It also wants to
expand output of other metals, Xiong said. Chinese companies
spent more than $30 billion buying up mines and oil deposits
globally last year, taking advantage of the global recession to
add resources to feed domestic economic growth. Chinalco's
offer to invest $19.5 billion in Rio Tinto Group was rebuffed
last year by the world's second-largest iron ore exporter.
Chinalco posted a profit in the second half, recovering from a
loss in August, the company said in the statement today,
without giving a figure. Sales rose to 142 billion yuan ($21
billion) in 2009, it said. That's 10 percent higher than last
year's 128.7 billion yuan.

OPEC Ignores Production Quotas as Investors Purchase Oil: Chart of the
Day
OPEC members likely will keep increasing production in the
months ahead without triggering a price drop as investors pour
money into commodity markets. The CHART OF THE DAY shows that
output by the Organization of Petroleum Exporting Countries
grew 4.7 percent to 28.965 million barrels a day in the last
nine months of 2009 as oil rose 60 percent to $79.36 a barrel.
The sliding dollar has prompted investors to purchase raw
materials such as oil because they offered better returns than
stocks or bonds. ``Oil has become a financial asset, fulfilling
the role once played by precious metals, treasuries and
currencies, which leaves OPEC out of the loop,'' said Michael
Fitzpatrick, vice president of energy at MF Global in New York.
``They will continue to pump additional oil and reap the
benefits.'' Speculative net-long positions, or the difference
between orders to buy and sell oil futures, rose 25 percent to
a record 135,669 contracts in the week ended Jan. 12, according
to a report from the U.S. Commodity Futures Trading Commission.
A long position is a bet that prices will rise.

Cattle in Australia Feedlots Increase on Dry Weather, Falling Grain
Prices
Cattle numbers in feedlots in Australia, the world's
second-largest beef exporter, rose 3.7 percent in the December
quarter as pastures wilted on dry weather, and grain and cattle
prices fell in southern states. The herd in feedlots gained to
770,223 at the end of December compared with 743,052 three
months earlier, the Australian Lot Feeders Association said in
a statement. Difficult trading conditions may curb further
increases in the ``short-term,'' said Jim Cudmore, president of
the group. Dry weather last year dried pastures and drove
cattle prices lower as farmers reduced grass-fed herds. New
South Wales, the second-largest feedlot state, was 82 percent
drought- affected, Primary Industries Minister Steve Whan said
in a Jan. 12 statement. Feedlot numbers also gained as grain
prices declined 6 percent on average during the December
quarter compared with the previous three months, the industry
group said. Cattle numbers on feed rose in New South Wales,
Victoria, South Australia and Western Australia. Numbers fell
1.8 percent in Queensland to 431,695, the statement said.

China to Increase Sugar Output to 17 Million Tons by 2015 to Meet Demand
China, the world's third-biggest producer of sugar, plans
to raise output to 17 million metric tons by 2015, the Ministry
of Agriculture said. The country will boost the area planted to
sugar cane to 26 million mu (1.73 million hectares) and sugar
beet to 3 million mu, the ministry said in a conference in
Nanning on Jan. 22. Sugar cane output will rise to 130 million
tons and beet 8.5 million tons, the ministry said. Production
may fall to 12 million tons in the 2009-2010 season from 12.43
million tons a year earlier, the China Sugar Association said
in November. Local prices have risen despite the government
selling stockpiles, illustrating that the market remains tight,
Yang Yunsheng, vice chairman of the Yunnan Sugar Association,
said Jan. 22.

Raw, Refined Sugar May Rise This Week in New York, London, Survey Shows
Raw-sugar futures and refined-sugar contracts may climb
this week on signs that a global supply shortfall will widen,
according to a survey. Six out of 10 traders, analysts and
brokers surveyed last week forecast that raw sugar traded in
New York would advance. Four predicted a drop. Raw sugar gained
4.2 percent to 28.78 cents a pound last week. Five of 10
respondents said white sugar traded in London would gain, and
three said the price would retreat. Two forecast it would be
little changed. White, or refined, sugar climbed 3.2 percent to
$747 a metric ton last week. Seven of 10 said refined sugar's
premium over raw sweetener would widen, two said it would
narrow and one said the gap would be little changed.

Indian Temple Trust to Deposit Excess Gold in Banks, Economic Times Says
Tirumala Tirupati Devasthanams, India's largest temple
trust, may deposit its excess gold with state-run banks this
year, the Economic Times reported, citing government, bank and
temple officials it didn't identify. The trust deposits gold
each time the quantity offered by devotees reaches 500
kilograms (1,102 pounds), the report said. Last year, 500
kilograms was placed with Indian Overseas Bank at 1.6 percent
annual interest for three years, the report said. The trust has
received quotes on rates offered by four-five banks for placing
bullion in interest-bearing deposit plans. The State Bank of
India and Corporation Bank were among lenders that offered such
plans in the past, the report said. About 50,000 devotees place
their offerings, including gold jewelry and coins, every day at
the feet of the presiding deity in Tirupati, the report said.
As much as 800 kilograms of gold is donated to the trust
annually, the report said.

January 22, 2010

Top Stories: Bonds

Jan. 22 (Bloomberg) -- The following are the day's top stories
on bonds:

Corporate Spreads Widen, Boosting Yield for Morgan Stanley: Credit Markets
The rally in corporate bonds that drove U.S. borrowing
costs to two-year lows is sputtering after President Barack
Obama unveiled plans to rein in trading by banks and concerns
about the economy grew. The extra yield investors demand on
corporate bonds instead of Treasuries widened to 272 basis
points from the low this year of 266 basis points, or 2.66
percentage points, on Jan. 14, according to the Bank of America
Merrill Lynch U.S. Corporate & High Yield Master Index. The
last time spreads widened this fast was in November, when Dubai
said state-controlled companies would reschedule debt payments,
roiling world markets. Morgan Stanley boosted yields on a $4
billion bond sale yesterday as Obama's proposal to curb
risk-taking on Wall Street threatened to limit profits as U.S.
banks recover from $1.13 trillion in writedowns and credit
losses. Energy Transfer Equity LP canceled $1.75 billion of
notes, citing ``market conditions over the past several days''
after government reports showed an unexpected drop in jobs.
``There's some allocation out of risk-seeking assets into
risk-averting or risk-free assets,'' Chris Ahrens, head of
interest-rate strategy at UBS AG in Stamford, Connecticut, said
in an interview yesterday. ``Markets are obviously all reacting
to what Obama has to say.''

Kokusai, Pimco Shun U.S. Bonds After Forecasting Dollar Losses, Low Rates
Kokusai Global Sovereign Open, the world's second-largest
actively run bond fund, is betting against the dollar in 2010.
Bill Gross, who runs the biggest at Pacific Investment
Management Co., is scooping up debt in Germany and other
developed markets outside the U.S. They're shunning Treasuries
as the Federal Reserve's record low interest rates reduce
demand for the currency and make yields in other nations more
attractive. China, which cut Treasury holdings by the most in
five months in November, may pare purchases further on concern
the dollar will fall, said Liu Yuhui, an economist at a
government-backed research body. ``The U.S., Europe, U.K. and
Japan will all hold rates this year,'' said Masataka Horii, 43,
one of four investors for the $45.7 billion Kokusai fund in
Tokyo. ``The U.S. will keep its policy rate, even though the
market has priced in a rate hike. That will make the U.S.
dollar go lower.''

Vietnam Delays $1 Billion Debt Sale Pricing Until Next Week, Investors Say
Vietnam's government delayed the pricing of a $1 billion
sale of 10-year dollar bonds until early next week because of
volatility in global markets, three investors briefed by
bankers arranging the sale said. The fund managers, who asked
not to be identified, said they had been sent a message by
underwriters. Barclays Capital Plc, Citigroup Inc. and Deutsche
Bank AG are managing the sale. Citigroup spokesman James
Griffiths and Deutsche Bank spokesman Mark Bennewith declined
to comment. Timothy Cuffe, a Hong Kong spokesman at Barclays,
couldn't be contacted. The planned sale comes as
emerging-market bonds are headed for a weekly loss, during the
busiest start to a year for borrowing by developing nations
since 2005, on concern monetary tightening in China will cool
demand for high-yielding assets. Vietnam's central bank said on
Jan. 19 that the Finance Ministry would determine an
appropriate time for the issuance ``as long as the interest
rate for the 10-year bonds doesn't exceed 7 percent per year.''
``Recent issues by Poland and Indonesia have had to give some
concessions to make them more appealing to investors,'' Felix
Dornaus, an emerging-market bond manager in Vienna at Erste
Sparinvest KAG, which oversees 27 billion euros ($38 billion)
said before the delay.

Treasuries Head for Third Weekly Gain After Obama Bank Plan Lowers Stocks
Treasuries headed for a third weekly gain as speculation
that President Barack Obama's bank- regulation plans will crimp
economic growth weakened equities and added to demand for
fixed-income securities. The yield on the 10-year note reached
its lowest in a month amid speculation that China will seek to
cool its economic growth. Efforts by the Obama administration
to curb risk-taking at banks are ``great news for bonds,''
Societe Generale SA analysts said in a report today. ``The
Obama plan came out of the blue, hitting shares, and that's
been supportive for bonds,'' said Orlando Green, a fixed-
income strategist at Calyon, the investment-banking unit of
Credit Agricole SA. ``Earnings news has been patchy and
appetite for bonds has been elevated.'' The 10-year note yield
rose less than 1 basis point to 3.60 percent as of 6:30 a.m. in
New York, paring the weekly advance to 8 basis points,
according to BGCantor Market data. It earlier slid to 3.58
percent. The 3.375 percent security due in November 2019 fell
2/32, or 63 cents per $1,000 face amount, to 98 5/32. The Dow
Jones Stoxx 600 Index slid 0.8 percent, its third consecutive
decline.

Obama Bank Restrictions May Fail to Shield U.S. Financial System From Risk
President Barack Obama's proposal to impose limits on
commercial banks may win him support on Main Street and shake
up Wall Street without doing much to make the financial system
safer overall. The plan, which is still lacking in details and
must be approved by Congress, aims to make the banks more
secure by forcing them to minimize the trading they do on their
own account and give up their stakes in hedge funds and private
equity firms. ``It's the right direction,'' said Henry Kaufman,
president of Henry Kaufman & Co. in New York and a former vice
chairman of Salomon Inc. The danger is that such risky
activities could simply migrate to big non-bank financial
institutions, leaving the system as a whole no better off.
Banks also might try to make up for the loss of profits from
proprietary trading by lending more to risky borrowers such as
real estate developers, threatening the federal safety net,
said Martin Baily, a former White House economist now with the
Brookings Institution in Washington. ``Beware of unintended
consequences,'' said Robert Litan, vice president of research
and policy at the Kansas City-based Kauffman Foundation, a
group that promotes entrepreneurship, and a former Clinton
administration budget official. ``This could have perverse
effects on risk-taking.''

Medium-Grade Municipal Bond Yields Decline to Lowest Level in Three Months
Lower-rated state and local government bonds rose more than
top-rated benchmarks, pushing an index of yields on
medium-quality debt to a three-month low, as municipal issuers
raised more than $6 billion this week. The weekly Bond Buyer 25
index of 30-year securities backed by dedicated revenue sources
with an average A+ rating, Standard & Poor's fifth-highest,
slid 2 basis points, or 0.02 percentage point, to 4.91 percent,
the lowest since Oct. 22. The three largest fixed-rate
municipal deals this week, led by the county-owned airport
system that serves Las Vegas, included almost $2 billion in
bonds rated less than AAA, according to data compiled by
Bloomberg. ``Investors continue to find more value in the A and
AA categories, as the scarcity of AAA paper leads to
unfulfilled demand,'' Janney Montgomery Scott LLC fixed-income
strategists led by Alan Schankel and Guy LeBas said in a Jan.
21 note.

`Volcker Rule' Marks Vindication of Former Fed Chief's Push for Regulation
Paul Volcker didn't lose confidence when the Obama
administration initially cast aside his argument to separate
banking from trading in its plan for a new financial-regulatory
system. ``I'm sure he'll recognize the wisdom of my view sooner
or later,'' Volcker said an interview with Bloomberg Television
last April, referring to Lawrence Summers, President Barack
Obama's chief economic adviser. Volcker was vindicated
yesterday when Obama proposed limiting trading activities of
financial institutions to prevent another crisis, adopting
recommendations of the 82- year-old former Federal Reserve
chairman. Obama called it the ``Volcker Rule.'' ``This
represents somewhat of a shift from the positions of those in
the administration in favor of deregulation,'' said Joseph
Stiglitz, a Nobel laureate and frequent critic of the
administration. ``Volcker has been pushing for this for a year,
and it was one of my biggest disappointments that his idea
wasn't picked up by decision-makers until now.''

Bank Plan's Impact Rests on How U.S. Regulators Define Proprietary Trades
President Obama's plan to curb risk- taking by banks hinges
on how rigidly regulators define proprietary trading at firms
such as Goldman Sachs Group Inc. and JPMorgan Chase & Co.
Goldman Sachs, which generated at least 76 percent of 2009
revenue from trading and principal investments, gets the
``great majority'' of transactions from customers, according to
Chief Financial Officer David Viniar. About ``10-ish percent''
of the New York-based firm's revenue comes from ``walled-off
proprietary business that has nothing to do with clients,'' he
said on a conference call yesterday. The plan to curb
proprietary trading at banks is among proposals that Obama said
yesterday will strengthen the U.S. financial system and help
prevent a repeat of the credit crisis. Other restrictions would
prohibit banks from investing in hedge funds and private
companies and put new limits on banks' borrowings, according to
the White House. JPMorgan, Goldman Sachs, Citigroup Inc. and
Bank of America Corp. tumbled more than 4 percent in New York
trading, leading the S&P 500 Financials Index down 3 percent,
its biggest decline since October. All the banks are based in
New York except for Bank of America, which is in Charlotte,
North Carolina.

Greece Must Stick With Euro to Address Fiscal Problems, Provopoulos Says
Greece should remain in the euro region where its problems
``will be unequivocally easier to solve,'' rather than allowing
a new currency to devalue, pushing up inflation and interest
rates, the central bank governor said. A new currency would not
be like ``waving a magic wand,'' George Provopoulos said in an
article for the Financial Times. A weakened currency could
increase the cost of imports, stoking inflation, and boost the
cost of servicing public debt. Concern that Greece's government
will struggle to tame the European Union's biggest budget
deficit this week pushed the yield premium investors demand to
hold the nation's debt instead of German bunds to the highest
since the euro's debut in 1999. Finance Minister George
Papaconstantinou said yesterday that Greece won't need a rescue
package to reduce its debt. ``It will be immensely less costly
for Greece to eradicate its problems from within the euro
zone,'' Provopoulos wrote. ``Greece will not be tempted by
these short-term options, but will undertake the necessary,
bold adjustments.''

German Government Bonds Advance; 10-Year Bund Yields Least Since Dec. 21
German government bonds rose after U.S. President Barack
Obama's proposed bank regulations fueled a slide in global
equity markets, prompting increased demand for the perceived
safety of government debt. The gains drove the yield on the
10-year bund to 3.19 percent, the lowest since Dec. 21, while
the 2-year note yield dropped to the lowest since Sept. 8.
Obama proposed yesterday to limit the size of banks and
prohibit them from investing in hedge funds and private-equity
funds as a way to reduce risk- taking. ``Obama's comments have
sparked a `risk-off' mentality into most asset classes, which
is positive for bonds,'' said Charles Diebel, head of European
rate strategy at Nomura International Plc in London. ``There's
a lot of mystery and myth surrounding the plan. Uncertainty
makes investors cautious and weighs on equities, while bonds
are benefiting from flight-to-quality flows.'' The yield on the
bund, Europe's benchmark government security, fel1 3 basis
points to 3.19 percent as of 8:17 a.m. in London. The 3.25
percent security maturing January 2020 rose 0.13, or 1.30 euro
per 1,000-euro ($1,414) face amount, to 100.49. The two-year
note yield dropped 2 basis points to 1.10 percent.

Bank Default Swaps Jump on Obama Trading Curbs, China Inflation Concerns
The cost of insuring against losses on European bank bonds
rose on concern China will raise interest rates to cool
economic growth and trading curbs proposed by President Barack
Obama may dent the U.S. recovery. The Markit iTraxx Financial
Index of credit-default swaps on 25 European banks and insurers
jumped as much as 5.25 basis points to 89, the highest since
September. The index is up from a 20-month low of 63.25 basis
points Jan. 11. China's stronger-than-expected economic rebound
in the fourth quarter fueled speculation the central bank will
have to raise interest rates to keep inflation in check. U.S.
stocks tumbled, erasing 2010's gains, after President Barack
Obama proposed regulations limiting the kind of risk taking
that's blamed for causing the worst global recession in
decades. ``After the crises of 2008, banks needed to show
humility and restraint, and have failed to do so
spectacularly,'' said Gary Jenkins, London-based head of credit
strategy at Evolution Securities Ltd. ``Thus they are now in
danger of losing any control over the debate of what the
industry should look like and how it should be regulated.''

Gazprombank's Below-Market Mortgage Bond Swap Offer `Doesn't Make Sense'
OAO Gazprombank is proposing to convert 91.8 million euros
($129 million) of mortgage-backed securities at a below-market
exchange rate in a deal London- based brokerage Brains Inc.
says would mean losses for senior creditors. The lending unit
of Russia's biggest company and natural gas export monopoly is
seeking to convert the notes at 34.7 rubles per euro, said Igor
Rusanov, head of structured and syndicated finance at
Gazprombank in Moscow. The average rate in the past year has
been 44.1 rubles per euro, data compiled by Bloomberg show.
``It doesn't make sense for any senior euro note-holder to
approve such a proposal,'' said Shammi Malik, head of asset-
backed securities trading at Brains Inc. Malik has been in the
European securitization market for more than 20 years and was
previously head of asset-backed securities trading at Societe
Generale SA. ``Senior bondholders would be losing circa 20
percent of the principal of the notes under the proposed
redenomination and receive a substantially less liquid
security,'' he said. Brains traded some of the notes on behalf
of clients in November, said Malik.

Japanese Bonds Advance Most in One Week as Stronger Yen Sends Stocks Lower
Japan's 10-year bonds rose the most in a week as the yen's
gain to a one-month high versus the dollar damped the outlook
for exporter earnings, boosting demand for the safety of
government debt. Ten-year bond futures gained for the first
time in four days after U.S. President Barack Obama yesterday
proposed limiting risk-taking at banks to avoid a repetition of
the global financial crisis. Bonds also advanced as Japanese
stocks fell the most in two months with the Nikkei 225 Stock
Average erasing almost all of this year's advance. ``Obama's
remarks will continue to weigh on stocks until details of his
proposal become clear,'' said Daisuke Uno, chief strategist in
Tokyo at Sumitomo Mitsui Banking Corp., a unit of Japan's
third-largest banking group. ``External factors are positive
for Japan's bonds.'' The yield on the 1.3 percent bond maturing
in December 2019 declined 1.5 basis points to 1.325 percent as
of 4:05 p.m. in Tokyo at Japan Bond Trading Co., the nation's
largest interdealer debt broker. That was the biggest drop in
yield since Jan. 15. The price rose 0.131 yen to 99.781 yen.
The yield was up half a basis point this week.

Japan's Five-Year Notes to Benefit as Banks Invest Excess Cash, RBS Says
Japanese banks will increase purchases of the nation's
government bonds as declining demand for loans leaves them with
excess cash to invest, according to RBS Securities Japan Ltd.
Five-year notes will benefit as surplus funds in the financial
system supplied by the Bank of Japan move into bonds, capping
any gain in yields, RuiXue Xu, a rates strategist in Tokyo at
RBS Securities, wrote in a report dated yesterday. Yields
dropped to their lowest level in two weeks after a report by
the central bank yesterday showed loans fell the most in more
than five years as companies cut spending. ``Money will likely
firstly flow into the short and intermediate sectors and then
expand to the longer end, as was the case in 2002-2003 JGB
bubble period,'' Xu wrote. Five-year bonds ``will likely be the
first sector on the curve'' to benefit ``most from such
buying,'' the report said. The yield on the five-year note due
December 2014 fell 2.5 basis points, or 0.025 percentage point,
to 0.495 percent as of the 11:05 a.m. morning close in Tokyo at
Japan Bond Trading Co., the nation's largest interdealer debt
broker. Two-year yields were unchanged at 0.155 percent.

For the complete stories summarized here, and for more of
the day's top news, see TOP <Go>.

Top Stories: Stocks

Top Stories: Stocks
2010-01-22 12:48:02.975 GMT


Jan. 22 (Bloomberg) -- The following are the day's top stories
on stocks:

European, Asian Stocks Decline; Deutsche Bank, UBS, ICAP Shares Lead Drop
European and Asian stocks retreated after U.S. President
Barack Obama called for a limit on risk- taking at banks and as
speculation grew that China will increase measures to slow
economic growth. U.S. index futures fell. Deutsche Bank AG,
Germany's largest lender, and UBS AG, Switzerland's biggest
bank by assets, slid more than 5 percent. ICAP Plc, London
Stock Exchange Group Plc and Deutsche Boerse AG dropped more
than 3 percent on concern Obama's proposals will reduce trading
volumes. Europe's Dow Jones Stoxx 600 Index declined for a
third day, slipping 1.4 percent to 249.29 at 12:00 p.m. in
London. The measure has retreated 2.8 percent this week,
erasing this year's advance. The gauge has surged 58 percent
since March, boosted by record-low interest rates in the U.S.
and Europe and about $12 trillion committed by governments
worldwide to thaw credit markets and revive economic growth.
The Obama plan ``poses a question on the long-term evolution of
the financial industry,'' said Guillaume Duchesne, a
Luxembourg-based equity strategist at Fortis Private Banking,
which oversees about $117 billion. ``Profitability will be
constrained with stricter regulation. That doesn't favor the
industry.''

France's Top Fund Manager Lalevee Bets on Growth Stocks for 2010 Returns
Sebastien Lalevee, manager of France's two best-performing
domestic equity funds in 2009, says he will continue his
success this year by investing in faster- growing companies and
those that get sales in emerging markets. The Financiere
Arbevel Pluvalca France fund returned 66 percent last year,
beating the benchmark SBF 120 Index's 24 percent advance and
all comparable funds, according to data compiled by Bloomberg.
The Pluvalca France Small Caps fund, also managed by Lalevee,
jumped 63 percent. Lalevee, 38, benefited in 2009 from
companies most tied to economic growth, including Paris-based
chemical company Rhodia SA and Bull SA, France's largest
computer maker. For this year, the Pluvalca France fund, which
can invest as much as 25 percent of assets outside France, has
been buying shares of Copenhagen- based brewer Carlsberg A/S to
profit from its expansion in emerging markets and Neubiberg,
Germany-based Infineon Technologies AG, Europe's second-largest
semiconductor maker. ``In periods of economic instability, such
as today, we favor growth shares,'' Lalevee, who left his
analyst position at Citigroup Inc. in 2008, said in an
interview. ``Last year, it was about industry picking. Today
it's about choosing high- quality growth stocks in each
industry.''

Asian Stocks Fall for Fifth Day on China Tightening Concern; Toyota Drops
Asian stocks fell for a fifth day, dragging the MSCI Asia
Pacific Index to its biggest weekly drop since June, amid
concern China will take more steps to curb price increases in
an economy that has led the global recovery. Jiangxi Copper Co.
and Aluminum Corp. of China Ltd. slumped more than 1 percent in
Hong Kong after they were downgraded by Goldman Sachs Group
Inc., which cited increasing risks from inflation. BHP Billiton
Ltd., the world's largest mining company, sank 2.3 percent on
speculation Australia will raise taxes on resource projects.
Toyota Motor Corp., which gets 32 percent of revenue in North
America, fell 3.2 percent after the yen rose to a one-month
high versus the dollar. The MSCI Asia Pacific Index fell 1.3
percent to 122.27 as of 5:04 p.m. in Tokyo. The gauge has
slumped 3.5 percent in the past five days, the most since the
week ended June 19. China said yesterday that fourth-quarter
gross domestic product grew 10.7 percent from a year ago, while
the World Bank said developing Asian economies face the risk of
asset bubbles. ``There are some worries about the extent of
tightening in China,'' said Shane Oliver, head of investment
strategy in Sydney at AMP Capital Investors, which oversees
about $90 billion globally. ``I don't think they're seeking to
crunch their economy, but obviously the market worries that
that will be the case.''

U.S. Stock-Index Futures Retreat; Shares of Freeport, Google, Amex Drop
U.S. stock-index futures fell, with the Standard & Poor's
500 Index poised to post a second weekly decline, as Goldman
Sachs Group Inc. cut its stance on U.S. steel stocks and Google
Inc. shares fell. Freeport-McMoRan Copper & Gold Inc. retreated
in early New York trading after the Goldman Sachs downgrade.
Google declined after reporting fourth-quarter sales growth
that failed to top the most optimistic of analysts' estimates.
Schlumberger Ltd. retreated as the company said net income
dropped to $795 million from $1.15 billion in the fourth
quarter. Futures on the S&P 500 expiring in March lost 0.2
percent to 1,109.1 as of 12:26 p.m. in London. The index has
slipped 1.7 percent so far this week. Dow Jones Industrial
Average futures retreated 0.3 percent to 10,308 today and
Nasdaq-100 Index futures added less than 0.1 percent to
1,841.25. ``There are good arguments for both sides of the
story but I wouldn't be too aggressive regarding the portfolio
beta right now,'' said Markus Steinbeis, head of equity
portfolio management at the German unit of Pioneer Investments,
which oversees about $221 billion globally. ``We have seen a
strong rally and now we have a correction. The question is to
know if it's going to be a small one or a bigger one.''

Brazilian Stock-Index Futures Sink on Global Growth Concern; Real Declines
Brazilian stock-index futures dropped as commodity prices
sank amid concern higher interest rates in China and proposed
U.S. banking reforms will slow the global economic recovery.
Vale SA, the world's biggest iron-ore miner, may drop as
nickel, zinc and copper decline. Petroleo Brasileiro SA,
Brazil's state-controlled oil company, may fall as oil slips
below $76 a barrel. Bovespa stock-index futures fell 0.6
percent to 66,200 at 7:37 a.m. New York time. The Bovespa stock
index fell yesterday, completing the biggest two-day drop since
October, after China's growth boosted concern the nation will
move to cool its economy, weakening demand for Brazil's
exports. Crude oil is poised for its second weekly decline.
Higher- than-expected economic growth in China, the world's
largest metals user and second-biggest energy consumer, fueled
concern the world's fastest-growing major economy will raise
borrowing costs to keep its economy from overheating. U.S.
President Barack Obama yesterday proposed to limit the size of
banks and prohibit them from speculative investing to reduce
risk-taking.

NYSE, Nasdaq Shares Slide After Obama Proposes Proprietary Trading Limit
NYSE Euronext and Nasdaq OMX Group Inc., the owners of the
two largest U.S. stock exchanges, tumbled after President
Barack Obama called for restricting trading activities at
financial institutions. Obama's proposals would prohibit banks
from running proprietary trading operations or investing in
hedge funds and private equity funds. Banks run proprietary
trading desks for their own monetary benefit, not for their
clients. The plan is subject to approval by Congress. The
exchanges depend on trading-related fees for the majority of
their sales. NYSE gets almost two-thirds of its revenue from
fees paid by equities and derivatives traders, according to its
most recent quarterly filing. Investors are concerned that the
limit on trading would hurt exchanges' profits, analysts said.
``Proprietary trading by large financial institutions is a big
part of exchange liquidity,'' said Jamie Selway, founder and
managing director of White Cap Trading LLC, a New York-based
trading firm.

Bovespa's Slump Spurs Brazil's M. Dias Branco to Postpone Share Offering
Brazilian stocks' biggest drop in two months prompted M.
Dias Branco SA, the country's largest maker of cookies and
pasta, to postpone a 600 million reais ($333 million) share
offering. The Fortaleza-based company asked Brazil's securities
regulator to suspend the sale for 60 days, citing ``current
market conditions,'' according to a filing yesterday. Five
other Brazilian companies have share sales planned during the
next two weeks, according to data compiled by Bloomberg.
Emerging-market stocks erased their 2010 gains and Brazil's
Bovespa fell the most among indexes for the 20 largest equity
markets yesterday on concern demand for exports may wane as
China takes steps to cool the economy. M. Dias shares fell for
the first time in four days, dropping 1.4 percent to 41.99
reais, while the benchmark Bovespa index sank 2.8 percent, the
biggest retreat since Nov. 12. ``Brazil is probably the number
one country penalized by what is happening in China because
exports are so important,'' said Uri Landesman, who helps
oversee about $3 billion at ING Investment Management in New
York. ``I'm not surprised to hear about this story, but I think
it's premature'' to postpone the sale, he said.

U.K.' FTSE 100 Falls as Shares of Barclays, LSE, ICAP Drop on Obama Plan
U.K. stocks dropped for a third day, with the benchmark
FTSE 100 Index heading for a second weekly retreat, after U.S.
President Barack Obama called for a limit on risk-taking at
banks. Barclays Plc, ICAP Plc and London Stock Exchange Group
Plc sank more than 5 percent amid concern proposals from Obama
to prohibit U.S. banks from running proprietary trading
operations may lower transaction volumes and hamper the
economic recovery. The FTSE 100 slipped 62.52, or 1.2 percent,
to 5,272.58 at 12:24 p.m. in London, extending its biggest
two-day slump since March. The gauge, which has fallen 2.5
percent so far this year, is still 51 percent higher since
March as more than $12 trillion committed by governments around
the world boosted equity markets. The FTSE All-Share Index
declined 1.1 percent today and Ireland's ISEQ Index slipped 0.6
percent. ``We may not see a huge sell off in the next few days,
but there is a consensus that markets have every chance of
sliding down the hill in the next few months,'' said David
Buik, a markets analyst at BGC Partners in London. ``Regulation
needs to be tidied up on money funds, finance companies and
primary brokerage. Until this regulation issue is sorted out
the President and Congress will run amok and the market may
continue to sell.''

German Stocks Extend Weekly Drop as Deutsche Bank, Deutsche Boerse Retreat
German stocks dropped, with the benchmark DAX Index headed
for a second straight weekly loss, after U.S. President Barack
Obama proposed limits to banks' size and trading. Deutsche Bank
AG, Commerzbank AG and Deutsche Boerse AG paced declines.
Deutsche Lufthansa AG slumped 5.3 percent as the company said
some analyst estimates for 2010 are ``high.'' Daimler AG fell
2.9 percent after Goldman Sachs Group Inc. downgraded the
world's second-biggest maker of luxury cars. The DAX slid 0.7
percent to 5,708.42 as of 12:02 p.m. in Frankfurt, poised for a
third day of declines in the longest losing streak since Dec.
9. The gauge's rally since March 2009 has slowed this year amid
concern the withdrawal of stimulus measures from the U.S. to
China will hamper the global economic recovery. The broader
HDAX Index also fell 0.7 percent today. ``The world is moving
toward higher taxes and more regulation, particularly in the
financial sector,'' a group of analysts at Sal. Oppenheim Jr. &
Cie KGaA, led by Matthias Joerss, wrote in a note to clients
today. ``Government will demand a bigger say in lots of things.
Obviously, it is negative for banks, particularly broad
integrated banks, and stock exchanges.''

Swiss Stocks Fall for Third Day; Credit Suisse, UBS Drop on Obama Proposal
Swiss stocks fell for a third day, led by Credit Suisse
Group AG and UBS AG, after U.S. President Barack Obama
announced plans to curb risk-taking by banks. The Swiss Market
Index lost 0.8 percent to 6,526.19 as of 11:16 a.m. in Zurich,
heading for a weekly drop of 0.7 percent and paring the rally
since March 9 to 51 percent. The broader Swiss Performance
Index slipped 0.7 percent to 5,641.81 today. Concern the U.S.
government's move to regulate banks will cut profits in the
industry is adding to woes that China is trying to curb lending
to cool economic growth. Credit Suisse, Switzerland's biggest
bank by market value, tumbled 4.6 percent to 48.01 Swiss
francs, a fourth consecutive day of losses. UBS, the largest by
assets, dropped 3.9 percent to 14.93 francs.

China Stock Fund Outflows Rise to 18-Week High on Lending Curbs, EPFR Says
Investors pulled $348 million from China equity funds last
week, the biggest outflow in 18 weeks, on concern China's moves
to cool its economy will slow growth, according to EPFR Global.
Chinese stocks fell since the government this month started
tightening monetary policy to curb record loan growth and
prevent bubbles in the nation's property and stock markets. The
Shanghai Composite Index has fallen 3.6 percent this year,
while the Hang Seng China Enterprises Index, which tracks Hong
Kong-traded Chinese companies, is down 6.5 percent, the worst-
performing Asian gauge this year. ``Risk appetite remains on a
very short leash,'' Cameron Brandt, senior analyst at
Cambridge, Massachusetts-based funds tracker EPFR Global, said
in an e-mailed statement. Outflows were the highest since
September, according to EPFR. The Shanghai Composite Index
entered a bear market in August, slumping 22 percent, on
concern a slowdown in lending growth would derail the economic
recovery.

ICAP, LSE, Deutsche Boerse Drop in Europe on Obama's Plan to Curb Trading
ICAP Plc, London Stock Exchange Group Plc and Deutsche
Boerse AG dropped in Europe after U.S. President Barack Obama
announced plans to restrict some trading activities by
financial institutions. The proposals would prohibit banks from
running proprietary trading operations or investing in hedge
funds and private equity funds. Banks operate so-called prop
desks for their own monetary benefit, not for their clients.
The plan is subject to approval by Congress. Bourses in Europe
and the U.S., including NYSE Euronext and Nasdaq OMX Group
Inc., depend on trading- related fees for the majority of their
sales. ``Given the lack of clarity over whether these proposals
will be implemented, and if so, in what form and over what
timeframe, we see risks that uncertainty will hang over the
market-structure stocks,'' BofA Merrill Lynch Global Research
analysts Philip Middleton and Martin Price wrote in a report to
clients. ``There will be more noise on this front between now
and November as U.S. politicians lobby for popular support
ahead of midterm elections.'' London-based ICAP, the world's
biggest broker of trades between banks, tumbled 6.3 percent to
399 pence as of 9:19 a.m. local time, while LSE fell 2.2
percent to 679.5 pence. Deutsche Boerse, the operator of the
Frankfurt stock exchange, slid 3.5 percent to 50.76 euros.

Nikkei 225 Slumps Most in Two Months on U.S. Bank Proposal, China Concerns
Japan's Nikkei 225 Stock Average slumped the most since
November after the U.S. proposed to reduce risk-taking at banks
and concern mounted that China will raise interest rates to
curb inflation. Inpex Corp., Japan's largest oil explorer, and
Nippon Mining Holdings Inc. lost more than 3 percent after a
U.S. proposal to ban banks from investing in hedge funds
spurred a slump in oil, metals and the dollar. Toyota Motor
Corp., which gets 31 percent of its sales in North America,
fell 3.2 percent. Shin-Etsu Chemical Co. sank 6 percent after
its earnings forecast missed analysts' estimates. ``The U.S.
proposal, as it is now, would discourage people from investing
in higher-risk assets such as stocks and commodities, causing
these markets to shrink,'' said Ayako Sera, a market strategist
at Tokyo-based Sumitomo Trust & Banking Co., which manages the
equivalent of $300 billion. ``People like us in the financial
industry feel opposed to the proposal.'' The Nikkei 225 fell
2.6 percent to close at 10,590.55 in Tokyo, almost erasing this
year's gain. The broader Topix index slid 1.6 percent to
940.94, with six times as many stocks declining as advancing.
Both gauges lost the most since Nov. 27.

Australia Stocks Fall Most in Two Months on Mining Tax Concern; BHP Drops
Australian stocks fell, dragging the benchmark index down
the most in two months, on concern the government may raise
taxes on mining projects and as commodity prices slumped. Rio
Tinto Group, the world's third-biggest mining company sank 3.5
percent after the Sydney Morning Herald reported the government
proposal, without saying where it got the information. BHP
Billiton Ltd., the biggest, declined 2.3 percent as metals
traded in London fell for a second day and oil was poised to
decline for a second week. Newcrest Mining Ltd., Australia's
largest gold producer, slipped 2.4 percent. ``It does look like
we're going through some sort of a correction,'' said Shane
Oliver, head of investment strategy in Sydney at AMP Capital
Investors, which oversees about $90 billion globally. ``The
report about the tax review is weighing on resources stocks.''
Australia's S&P/ASX 200 Index fell 1.6 percent to 4,750.60 at
the close of trading in Sydney, its steepest drop since Nov.
27. The gauge, which declined 3 percent this week, has rallied
51 percent from a five-year low on March 6 as government
stimulus measures helped the country skirt a recession.

China's Stocks Cap Biggest Weekly Loss in More Than a Month; Miners Slump
China's stocks fell, driving the benchmark index to its
biggest weekly loss in more than a month, on concern the
government will raise interest rates to cool the world's
fastest-growing major economy. Jiangxi Copper Co. and Baoshan
Iron & Steel Co., the nation's largest producers of the metals,
declined more than 2 percent after Goldman Sachs Group Inc. cut
its recommendation on the stocks. Industrial & Commercial Bank
of China Ltd. led gains by banks as funds increased holdings
after recent declines made the stocks cheaper relative to the
broader market. The Shanghai Composite Index fell 30.28, or 1
percent, to 3,128.59 at the close. The gauge lost 3 percent
this week, its biggest retreat since the period to Dec. 18. The
CSI 300 Index, measuring exchanges in Shanghai and Shenzhen,
declined 1.2 percent to 3,366.20. ``We're avoiding metals
producers because government tightening will slow down
fixed-asset investment,'' said Wang Zheng, a fund manager at
Jingxi Investment Management Co.

For the complete stories summarized here, and for more of
the day's top news, see TOP <Go>.

-0- Jan/22/2010 12:48 GMT
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