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
ä

Top Stories: Currencies

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

Dollar Falls Against Yen on Concern Obama Bank Plan Will Hurt U.S. Assets
The dollar fell against the euro, snapping six days of
gains, on concern that a U.S. proposal to rein in trading by
financial institutions will discourage investors from buying
assets in the world's largest economy. The currency dropped
from the strongest level since July against the 16-nation euro.
Japan's yen headed for a second weekly gain versus its 16 major
counterparts as stocks slumped across the world, boosting
demand for the currency as a refuge. The pound fell for a
second day against the euro after a report showed U.K. retail
sales in December grew less than forecast. The U.S.
``announcement has been deemed to be dollar negative, and it
has fallen across the board,'' said Stuart Bennett, a
London-based strategist at Calyon, the investment- banking arm
of Credit Agricole SA. ``The kneejerk reaction is that it's
going to hurt the biggest banks' earnings. It has hurt equities
and took the dollar along.'' The dollar depreciated to $1.4111
per euro as of 7 a.m. in New York from $1.4084 yesterday, when
it appreciated to $1.4029, the strongest level since July 30.
It's still up 1.9 percent this week. The dollar was at 90.10
yen, from 90.43 yesterday after declining to 89.79 earlier, the
weakest level since Dec. 18.

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.''

Kan Faces First Test of Weak-Yen Stance as Currency Breaks 90 Per Dollar
Japanese Finance Minister Naoto Kan faces the first test of
his favor for a weaker yen after it rose past the range he said
businesses see as ``appropriate.'' Kan said on his first day as
finance chief on Jan. 7 that he wants the currency to weaken
``a bit more'' after it fell from a 14-year high of 84.83 per
dollar in November. He said manufacturers think a range of 90
to the mid-90s is desirable. ``That was his personal view and
it looks like he spoke rashly,'' said Junko Nishioka, chief
economist at RBS Securities Japan Ltd. in Tokyo. ``The
government is concerned about abrupt movements in the yen
rather than a certain level,'' though it may ``resume its
verbal intervention'' if it returns toward the 14-year high,
she said. Stocks fell the most in two months on concern that a
stronger yen will erode profits of exporters, who led Japan's
recovery from its worst postwar recession. The government is
unlikely to break from its six years of staying out of currency
markets and may instead ask the Bank of Japan to ease monetary
policy, said Kyohei Morita, chief economist at Barclays
Capital.

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.''

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.

Obama Is Seen as Anti-Business by 77% of U.S. Investors, Global Poll Says
U.S. investors overwhelmingly see President Barack Obama as
anti-business and question his ability to manage a financial
crisis, according to a Bloomberg survey. The global quarterly
poll of investors and analysts who are Bloomberg subscribers
finds that 77 percent of U.S. respondents believe Obama is too
anti-business and four-out-of-five are only somewhat confident
or not confident of his ability to handle a financial
emergency. The poll also finds a decline in Obama's overall
favorability rating one year after taking office. He is viewed
favorably by 27 percent of U.S. investors. In an October poll,
32 percent in the U.S. held a positive impression. ``Investors
no longer feel they can trust their instincts to take risks,''
said poll respondent David Young, a managing director for a
broker dealer in New York. Young cited Obama's efforts to trim
bonuses and earnings, make health care his top priority over
jobs and plans to tax ``the rich or advantaged.''

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.''

Brazil's Consumer Prices Rose More-Than-Expected 0.52% Through Mid-January
Brazil's mid-month inflation quickened to the fastest pace
in eight months, prompting traders to raise bets the central
bank will increase interest rates as soon as March. Consumer
prices, as measured by government's benchmark IPCA-15 index,
jumped 0.52 percent. Economists expected a 0.45 percent rise,
according to the median of 27 forecasts in Bloomberg survey.
Yields on interest rate-futures maturing in January 2011, the
most traded on the Sao Paulo BM&F, rose 4 basis points to 10.42
percent at 6:20 a.m. New York time. Traders expect policy
makers to start raising the benchmark interest rate as early as
March to keep inflation in check, according to Bloomberg
estimates based on interest-rate futures.

British Pound Drops Versus Euro After Retail Sales Rise Less Than Forecast
The pound fell against the euro after a report showed U.K.
retail sales grew less than forecast last month and Britain's
main opposition party said it supported a U.S. proposal to rein
in banks' risk-taking. The currency's second straight drop
trimmed its advance against the euro this year to 1.7 percent.
December retail sales rose 0.3 percent from November, the
Office for National Statistics said today, below the 1.1
percent gain forecast by economists. George Osborne, the
Conservative Party's Treasury spokesman, said he wants to see
an international agreement to separate retail banking from
proprietary trading in the wake of President Barack Obama's
plan for U.S. banks. ``The pound's weakness today is down to
retail sales,'' said Simon Derrick, chief currency strategist
in London at BNY Mellon Corp. ``George Osborne's backing of the
Obama bank plan isn't helping either.'' The pound weakened 0.2
percent to 87.1 pence per euro as of 11:11 a.m. in London. It
traded at $1.6234 from $1.6196 yesterday and at 146.56 yen from
146.45 yen.

Euro May Rally 3% Against Dollar as It Finds `Support': Technical Analysis
The euro may rebound more than 3 percent from an almost
six-month low after finding support near $1.40, JPMorgan Chase
& Co. said, citing trading patterns. Europe's single currency
may climb to $1.4550 over the next few weeks after yesterday
falling as low as $1.4029, the least since July 30, the bank
said. The $1.40 level is also near the 38.2 percent Fibonacci
retracement of the euro's rise from its 2008 low of $1.2330 to
last year's high of $1.5144. ``The decline has now entered into
really good support in the $1.40 zone -- the range lows that we
saw back in late July,'' said Niall O'Connor, a technical
analyst in New York at JPMorgan. ``We could be vulnerable to a
bounce in the euro.'' The euro, which has fallen 1.5 percent
against the dollar this year, traded at $1.4095 as of 10:17
a.m. in Tokyo from $1.4084 in New York yesterday.

Ruble Weakens, Headed for First Weekly Drop in 2010, as Oil Trades at $76
The ruble declined for a sixth day against the dollar as
oil, Russia's chief export, traded near $76 a barrel. The
Russian currency retreated as much as 0.4 percent to 29.7650
per dollar, and traded down 0.1 percent at 29.7588 of 10:27
a.m. in Moscow. The ruble dropped to 0.7 percent this week, its
first decline in 2010. Crude traded at $76.32 a barrel, poised
for a second weekly decline. Oil fell 2 percent to $76.08
yesterday after a U.S. government report showed refineries in
the biggest energy consumer cut processing in response to lower
fuel demand. The ruble slid 0.6 percent to 42.0746 against the
euro. The movements against the dollar and the euro left the
ruble at 35.2971 against the central bank's target currency
basket, which is used to manage swings that hurt Russian
exporters.

Aussie Dollar `Extraordinarily Overvalued,' Morgan Stanley's Hull Says
Investors should sell the Australian dollar and buy the
U.K. pound, betting that moves by China to slow its economic
growth will also dent the so-called Aussie, Morgan Stanley
said. ``The Aussie dollar has become extraordinarily
overvalued,'' Stephen Hull, a currency strategist at Morgan
Stanley, said today in London. ``What we've seen in the last
few weeks is China start to tighten.'' The pound is 35 percent
undervalued against the Australian dollar, according to Morgan
Stanley estimates, Hull said. Sterling may strengthen because
the Bank of England will pause its asset-purchase program next
month and investors will become more confident that the country
will be able to reduce its budget deficit after the next
election, he said. ``The pound is cheap because of public
finances,'' Hull said. ``If polls start to improve and we know
the Conservatives are likely to win, we know they are going to
be very aggressive in cutting public expenditure,'' he said.
``The foreign-exchange market will move well ahead of the
election.''

Rand Gains, Pares Weekly Decline, on Bets 7 Percent Rate to Be Maintained
South Africa's rand gained, paring its biggest weekly
decline in nine, on bets the nation's central bank will keep
its benchmark interest rate unchanged when it meets next week,
preserving the currency's yield advantage. The rand advanced
much as 0.4 percent to 7.5400 per dollar and traded 0.3 percent
stronger at 7.5480 by 10:31 a.m. in Johannesburg, from a close
of 7.5725 yesterday. The move pared the currency's slide this
past week to 2.1 percent, the steepest weekly drop since the
five days ended Nov. 20. The South African Reserve Bank is
likely to keep its 7 percent rate unchanged on Jan. 26,
according 14 of 15 estimates from economists polled by
Bloomberg. That compares with main rates of 0.25 percent in the
U.S., 0.1 percent in Japan and 1 percent in the euro region.
``There's still a lot of speculative investment in favor of
high-yield, emerging-market currencies,'' said Brigid Taylor, a
senior currency trader at Rand Merchant Bank in Johannesburg.
``The fact that the market expects the central bank to continue
targeting inflation by keeping rates unchanged is a positive
for the rand.''

Australian, New Zealand Dollars Advance After China Central Bank Comments
The Australian and New Zealand dollars rose, paring their
biggest weekly loss this year, after China's central bank
reaffirmed its moderately loose monetary policy, boosting
demand for higher-yielding assets. The two currencies advanced
for the first time in four days against the greenback as
Chinese central bank Governor Zhou Xiaochuan said policy makers
will focus on flexibility, supporting economic growth and
controlling inflation expectations. Both currencies still
headed for the worst week since November versus the yen on a
U.S. proposal to limit bank risk-taking and concern China will
do more to cool its economy. The Chinese central bank comments
``should alleviate some of the market's concern on China's
policy front,'' said David Forrester, a currency economist at
Barclays Capital in Singapore. ``The Aussie has been oversold
and is a good buy on dips against the dollar and more so
against the yen and Swiss franc where quantitative easing
programs are still in place.'' Australia's currency
strengthened 0.7 percent to 90.61 U.S. cents as of 6:21 p.m. in
Sydney, paring this week's decline to 1.8 percent. It gained
0.6 percent to 81.84 yen, having fallen 2.4 percent this week.

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
ä

FW: (BN) Top Stories: Commodities

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

Sugar May Advance 20% in First Half on Supply Gap, Top Thai Exporter Says
Sugar futures may climb 20 percent by June, extending the
rally to the highest level since November 1980, as global
demand exceeds supply, said Thai Sugar Trading Corp., the
country's top exporter. Prices could increase to 35 cents a
pound by mid-year, Piromsak Sasunee, the general manager, said
in an interview. Raw sugar for March delivery, the most active
contract, ended at 29.26 cents a pound in New York yesterday.
India, China, Indonesia, Pakistan, Egypt and Russia are among
nations planning to buy sugar to cool domestic prices,
straining supplies forecast by broker Czarnikow Group Ltd. to
lag behind demand by 13.5 million tons in the 2009-2010 season.
Sugar had its biggest annual gain since 1974 last year because
of rains and drought in Brazil and India, the largest growers.
``The market remains bullish,'' Piromsak said in Bangkok
yesterday. ``The price is on an upward trend. India will be a
key factor driving the market this year.'' Thailand is the
world's second-biggest exporter.

Copper Slumps to One-Month Low as Metals Drop on Chinese Lending Concerns
Copper dropped to a one-month low and was set for its worst
week in six as industrial metals fell on concern China will
take more steps to slow growth and after U.S. President Barack
Obama proposed to cut bank risk-taking. Copper for three-month
delivery on the London Metal Exchange fell as much as 1.1
percent to $7,194 a metric ton, the lowest price since Dec. 24.
The metal gained 0.7 percent earlier as its discount to
Shanghai increased, spurring Chinese buying. The contract
traded at $7,265 a ton at 2:24 p.m., down 2.2 percent this
week, the most since the week ended Dec. 11. China's record
bank lending and $586 billion stimulus spending drove raw
material demand and helped prices more than double last year.
Imports by China climbed for a second month in December to
244,013 tons, extending a rebound from an 11-month low, the
customs office said yesterday. ``Metals are pressured by
concerns about China's tightening,'' said Chen Jian, an analyst
at Minmetals Haiqin Futures Co.

Commodities Have Further to Advance This Year, Hermes Fund's O'Shea Says
Commodities, as measured by the S&P GSCI Light Energy
Index, may gain as much as another 10 percent this year, led by
oil, sugar and coffee, according to Colin O'Shea, head of
commodities at Hermes Fund Managers Ltd. The index, which
Hermes uses as a benchmark, advanced 15 percent last year,
buoyed by Chinese demand for oil, copper and other commodities.
The gauge has a 36 percent weighting in energy, 30 percent in
agriculture and almost 18 percent in industrial metals, based
on data from Jan. 21. ``Last year, we had very strong demand
from emerging markets, particularly from China,'' said O'Shea,
who forecast a gain of 5 percent to 10 percent in the index and
manages 1.2 billion pounds ($2 billion) across three funds.
``Will demand continue? We believe so, albeit at a lower
rate.'' China's economy, the world's largest copper consumer
and second-biggest oil user, accelerated to the fastest pace
since 2007 in the fourth quarter, the statistics bureau
reported yesterday. The World Bank on Jan. 20 raised its
forecast for 2010 global growth to 2.7 percent, compared with
an estimate in June of 2 percent.

India's Commodity Futures Turnover May Rise 43% to Record, Regulator Says
Turnover on commodity exchanges in India, the world's
biggest gold consumer, may rise 43 percent to a record this
year on higher prices and volumes, the industry regulator said.
Commodities worth 75 trillion rupees ($1.63 trillion) may trade
on India's 22 exchanges in the year ending March 31, up from
52.5 trillion rupees a year ago, B.C. Khatua, chairman of the
Forward Markets Commission, said in an interview in Mumbai. The
forecast compares with his June estimate for a gain of more
than 20 percent. Copper, sugar and lead prices doubled last
year, helping raw materials post the biggest annual gain in
four decades, as Chinese demand compensated for the slump in
the world economy. Commodity bourses in China, closed to
foreigners like those in India, clocked a record turnover of
$19 trillion in 2009. ``Given the limitations on international
players, and the corporates are not there in a big way, the
growth has been pretty satisfactory,'' Khatua said. ``In the
current year the growth is somewhere around 45-50 percent.
That's pretty good.''

Oil Advances on Inflation Outlook as Dollar Link Fades: Chart of the Day
Crude oil prices will move in tandem with investor
expectations for higher inflation as last year's inverse link
to the U.S. dollar fades, Morgan Stanley said. The CHART OF THE
DAY plots oil, the euro-dollar exchange rate and expected
inflation -- measured as the spread between nominal and
inflation-linked 10-year Treasuries, or TIPS. All three moved
together until the middle of December, when crude rose even as
the euro weakened versus the dollar, a currency move that has
typically been bearish for oil. ``The TIPS market is signaling
that the market is starting to price in higher inflation
expectations, and we think this will become an increasingly
important driver of oil prices going forward,'' Morgan Stanley
analysts Hussein Allidina and Seth Kleinman said in a report.
The New York-based bank said it expects the dollar to
strengthen 10 percent versus other developed-market currencies
this year, a move that won't hold back a rally in crude. Last
year, oil futures surged 78 percent in New York as the dollar
fell to a one-year low against the euro in November.

Gold May Rise in London as Weaker Dollar and Three-Week Low Spur Purchases
Gold, little changed in London today, may climb as a weaker
dollar and the metal's drop to a three-week low prompt
investors to buy. The dollar slid as much as 0.5 percent
against the euro on concern a U.S. proposal to curb financial
institutions' risk trading will deter investors from buying
assets in the world's largest economy. Bullion, which yesterday
fell to the lowest price since Dec. 30, usually moves inversely
to the greenback. ``Yesterday we had a lot of pressure on gold,
and overnight we've seen some physical demand,'' said Afshin
Nabavi, a senior vice president at bullion refiner MKS Finance
SA in Geneva. ``The physical market thinks these prices are
fantastic to buy at. The dollar is also a little bit lower.''
Gold for immediate delivery added $1.05, or 0.1 percent, to
$1,095 an ounce at 8:57 a.m. local time. The metal is down 3.2
percent this week, headed for its biggest slide in six weeks.
Bullion for February delivery was 0.8 percent lower at
$1,094.60 on the New York Mercantile Exchange's Comex division.

Rubber Drops Most in Four Months as Obama Plan Spurs Yen Rally, Stock Sale
Rubber slumped by the most in four months on concern that
investor demand will weaken after a U.S. proposal to restrict
risk-trading spurred a rally in the yen and a sell-off in
global stocks. Futures in Tokyo tumbled as much as 5.8 percent,
the most in intraday trading since Sept. 14. President Barack
Obama called for limits on the trading activities of banks as a
way to prevent another financial crisis. The yen rose to a
one-month high against the dollar and Japan's Nikkei 225 Stock
Average lost 2.6 percent, erasing most of this year's advance.
``Investors were cutting holdings of risk assets because of the
proposed restrictions on U.S. financial institutions,''
Kazuhiko Saito, an analyst at Tokyo-based broker Fujitomi Co.,
said today by phone. ``Rubber was dragged down by losses in the
equities and metals markets.'' Rubber for June delivery lost as
much as 17.5 yen to 285.1 yen per kilogram ($3,158 a metric
ton) before settling at 289.3 yen on the Tokyo Commodity
Exchange. It fell 3.0 percent this week, the worst performance
since the week ended Dec. 11. Prices have still gained 4.8
percent this month.

Chinese Steel Demand Growth to Continue on Demand from Builders, CISA Says
Steel demand in China, the largest consumer of the metal,
will continue to grow, a research department at the China Iron
& Steel Association said today. ``Industries including housing,
automakers, shipbuilding and machinery will continue to grow
fast,'' which will support steel demand, the association known
as CISA said today in a research report on its Web site. The
State Council recently approved a combined 882 billion yuan
($129 billion) investment in subway projects in 22 cities, it
said. China's growth rate accelerated 10.7 percent in the
fourth quarter, the fastest pace since 2007, as the nation's
$586 billion stimulus spending and record lending stoked car
and property sales. China's crude steel output rose 14 percent
to a record 568 million metric tons last year. The country,
which surpassed the U.S. as the world's largest auto market in
2009, may continue to see a ``hefty'' rise in demand this year,
the China Securities Journal reported Dec. 17, citing Baoshan
Iron & Steel Co. General Manager Ma Guoqiang. Baoshan, the
listed unit of China's biggest steelmaker, controls half of
domestic market for automobile sheets.

Soybean Cash Premiums Widen in the U.S. on Increased Purchasing by China
Cash premiums for soybeans shipped to export terminals near
New Orleans widened against Chicago futures after U.S.
exporters reported new sales to China, the biggest global buyer
and consumer. The so-called spot-basis bid, or premium, for
soybeans delivered this month rose to 60 cents to 63 cents a
bushel above March futures on the Chicago Board of Trade
yesterday from 55 cents to 62 cents on Jan. 20, government data
show. Bids for soybeans delivered in the second half of
February jumped to 54 cents to 58 cents from 47 cents to 55
cents on Jan. 20. The cash premium ``is firmer for soybeans''
because of increased export demand, said Charlie Sernatinger, a
Fortis Clearing Americas LLC vice president in Chicago. ``The
Chinese continue to pick away at business, a cargo at a time.''
China bought 230,000 metric tons (8.5 million bushels) from
U.S. exporters, including 55,000 tons for delivery by Aug. 31
and the rest in the marketing year that begins on Sept. 1, the
Department of Agriculture said yesterday. China's imports rose
14 percent to almost 42.6 million tons last year, a record.

Furukawa-Sky Expects 11% Jump in Aluminum Sales as Japan's Demand Recovers
Furukawa-Sky Aluminum Corp., Japan's biggest processor,
forecasts sales will climb 11 percent in the next fiscal year
as the nation's economy recovers from its worst postwar
recession. Sales will probably rise to 407,000 metric tons in
the year beginning April 1 from 368,000 tons this year, when
the economic slump slashed demand by 9.6 percent, Katsuyasu
Niibori, general manager at the company's corporate planning
department, said in an interview in Tokyo. Reviving demand in
Japan, Asia's biggest aluminum user after China, may support
the global price, which rallied 45 percent last year.
Furukawa-Sky supplies 30 percent of the nation's flat-rolled
products for autos, cans and construction. The Tokyo-based
company, along with rivals such as Kobe Steel Ltd., benefitted
from government rebates and tax cuts that boosted sales of
fuel-efficient vehicles. ``We expect sales next fiscal year
will return to the level in 2008-2009,'' Niibori said
yesterday. ``The recovery in domestic demand will probably
continue, although it will take more time for sales to reach
the peak volume in 2006-2007.''

Orange Juice May Rise as January Freeze in Florida Cuts Crop: Chart of Day
Orange-juice futures may rise as much as 28 percent in the
first half of this year because of crop losses from a January
freeze in Florida, said James Cordier, the founder of
OptionSellers.com. The CHART OF THE DAY shows annual crop
output in Florida, the world's second-biggest orange grower,
compared with Cordier's forecasts for a drop in production and
a price rally. Futures also may get a boost from an increase in
consumer spending, he said. ``Orange juice is extremely
undervalued,'' Cordier said in a telephone interview from
Tampa, Florida. ``If there's still optimism about the economy,
if that continues through the first and second quarter, orange
juice could easily trade to $1.75'' a pound, he said. That
would mark the highest price since May 2007. The 2010 harvest
may shrink to 128 million boxes because of freeze damage,
Cordier said. On Jan. 12, the U.S. Department of Agriculture
affirmed an estimate of 135 million boxes, already the lowest
in three years. The projection didn't reflect the impact of the
cold spell. A box of oranges weighs 90 pounds, or 41 kilograms.

Rice Prices Unlikely to Ease Until at Least March, According to UN Agency
Rice prices are unlikely to fall before March as major
exporters restrict overseas sales amid lower supplies,
according to the United Nations' Food and Agriculture
Organization. ``Prices are unlikely to subside before newly
harvested crops reach the market in March/April,'' the FAO said
in an e- mailed statement. Rice exports dropped in China,
Pakistan, Thailand and the United States and government curbs
in India and Egypt also restrained the availability in 2009, it
said. Rough rice has advanced 22 percent on the Chicago Board
of Trade from last year's low as the Philippines, the biggest
buyer, accelerated purchases to secure supplies after storms
destroyed at least 1.3 million metric tons of the crop. Concern
India may become a net importer after a drought also lifted
prices. Production last year totaled 678 million tons, a
decline of 2 percent from a year earlier, it added.

Gold May Fall Next Week as Rebounding Dollar Curbs Demand, Survey Shows
Gold may decline as a rebounding dollar curbs demand for
the metal as an alternative investment, a survey showed. Twelve
of 17 traders, investors and analysts surveyed by Bloomberg, or
71 percent, said bullion would fall next week. Four forecast
higher prices and one was neutral. Gold for delivery in
February was down 2.9 percent for this week at $1,097.70 an
ounce at noon in New York yesterday. Bullion is little changed
this year, erasing a gain of as much as 6.1 percent, as the
U.S. Dollar Index, a six-currency gauge of the strength of the
greenback, rebounded from a drop of as much as 1.6 percent. The
metal fell for the sixth time in seven weeks last week.
``Dollar strength is being accompanied by increased risk
aversion and weaker equities,'' said Walter de Wet, an analyst
at Standard Bank Ltd. ``We now find it difficult to see major
upside for the metal in coming weeks.''

Rusal Said to Raise $2.2 Billion in First Russian Company IPO in Hong Kong
United Co. Rusal Ltd., the world's largest aluminum
producer, raised HK$17.4 billion ($2.2 billion) in the first
initial public offering by a Russian company in Hong Kong, said
three people familiar with the sale. The company, controlled by
billionaire Oleg Deripaska, priced 1.61 billion new shares, or
a 10.6 percent stake, at HK$10.80 each, said the people, who
declined to be identified before a public announcement. The
final pricing gives Rusal a market value of $21 billion, about
12 percent less than Aluminum Corp. of China Ltd., the nation's
largest producer of the metal. Rusal offered the shares at
HK$9.10 to HK$12.50. The offering, delayed by regulators at
least twice on concern about Rusal's borrowings, comes less
than two months after the Moscow-based company completed
Russia's biggest corporate debt restructuring. Deripaska, also
chief executive officer, persuaded Hong Kong billionaire Li
Ka-shing, Malaysia's Robert Kuok and New York hedge fund
Paulson & Co. Inc. to invest. ``Thanks to the SFC these
professional investors got it a lot cheaper than they would
have otherwise,'' said Hong Kong- based Ben Collett, head of
equities at broker Louis Capital Markets (Hong Kong) Ltd.,
before the final pricing. ``Looking to the future, I suspect
the quality of these listings will decline, ironically, as the
confidence increases.''

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

-0- Jan/22/2010 9:41 GMT
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Top News

 

 

(BN) Top Stories: Stocks

+-----------------------------------------------------------------------
-------+

Top Stories: Stocks
2009-12-17 09:19:37.502 GMT

Dec. 17 (Bloomberg) -- The following are the day's top stories on
stocks:

Stocks in U.S. Erase Advance as Bond Yields Rise on Interest-Rate
Concern
U.S. stocks erased most of their advance after yields on 10-year
Treasury notes rose on concern the Federal Reserve is preparing
investors for higher interest rates next year. Metal producers, energy
companies and financial institutions in the Standard & Poor's 500 Index
advanced more than 0.4 percent, the steepest gains among 10 industries.
Intel Corp. retreated 2.1 percent, leading the Dow Jones Industrial
Average's decline, after U.S. regulators accused the world's largest
computer-chip maker of illegally stifling competition. The Standard &
Poor's 500 Index added 0.1 percent to 1,109.18 at 4 p.m. in New York,
almost wiping out all of a 0.8 percent. The Dow average lost
10.88 points, or 0.1 percent, to 10,441.12. The yield on 10-year notes
touched 3.60 percent. ``When you see materials, financials and energy
leading, it means the market fears higher prices and inflation,'' said
Joseph Veranth, chief investment officer at Dana Investment Advisors in
Brookfield, Wisconsin, which manages $2.8 billion. In the S&P 500,
``Market participants are going to the sectors that will perform well
in that environment.''

Tudor Jones Turns Away Investors as Hedge-Fund Industry Outflows Persist
In a year when investors pulled an estimated $118 billion from
hedge funds through November, Paul Tudor Jones was one of at least six
managers who decided it was time to turn away cash. BVI Global Fund
Ltd., Jones's biggest, stopped taking new investments after bringing in
$1.3 billion from March to July, according to a person with knowledge
of the matter. Brookside Capital Partners LP and Woodbine Capital
Advisors LP also have closed or restricted inflows, said people
familiar with the firms, who asked not to be named because the funds
are private.
Institutions and wealthy individuals have sought out managers with
consistent long-term gains, especially those with funds previously
closed to new investors. After firms such as D.E.
Shaw & Co. and Polygon Investment Partners LLP froze or limited
redemptions, investors also gravitated to funds that avoided such steps
or eased restrictions quickly. ``Those managers that honored their
agreements and treated their investors as partners during the last 18
months of economic difficulties are being rewarded with additional
money this year,'' said Debra Pipines, founder of New York-based
Asperion Group LLC, which raises capital for hedge funds.

TPG's Kraton IPO Sells Below Purchase Price as Private-Equity Deals
Falter
TPG sold a stake in Kraton Performance Polymers Inc. in an initial
public offering for less than it paid to buy the chemical maker, as
investors extracted the third price cut from a private equity-led IPO
in two days. The maker of polymers used in adhesives and lubricants
raised $139 million at $13.50 a share yesterday, after buyers rejected
an offer of much as
$18 each, Bloomberg data show. The IPO price was a penny lower than
what TPG and JPMorgan Chase & Co.'s buyout arm spent on average for
Kraton, a Dec. 2 filing showed. A day earlier, Carlyle Group and
Goldman Sachs Group Inc. accepted 21 percent less than they sought for
Cobalt International Energy Inc., an oil explorer with no revenue or
profits, while investors extracted concessions from Blackstone Group LP
for its IPO of Team Health Holdings Inc. While owners have used the
biggest rally in the Standard & Poor's 500 Index since the Great
Depression to unload $12 billion in stock since September, companies
from AEI to HealthPort Inc. that were backed by private-equity funds
have postponed initial offerings.
Investors are demanding better terms as leveraged-buyout firms count
on IPOs to exit some of the $2 trillion in LBOs they made since the
start of 2004. ``The pendulum has swung toward the public-market
investors,'' said Giri Cherukuri, who helps manage $1.7 billion at
Oakbrook Investments in Lisle, Illinois.
``These private- equity firms ended up paying very high prices because
of cheap capital, and now they want to get any money they can out of
it. They just need money, so investors are taking advantage of their
position as buyers of capital.''

U.S. Treasury Delays Sale of Citigroup Stake as Shares Priced at
Discount
Citigroup Inc., the last of the four largest U.S. banks to seek
funds to exit a taxpayer bailout, raised $17 billion by selling stock
for a price so low that the U.S. delayed plans to shrink its one-third
stake in the lender. Citigroup sold 5.4 billion shares at $3.15 apiece,
less than the $3.25 the government paid when it acquired its stake in
September. The New York-based bank said the Treasury won't sell any of
its shares for at least 90 days. Investors demanded a bigger discount
from Citigroup than Bank of America Corp. or Wells Fargo & Co., which
together raised more than $31 billion this month to exit the Troubled
Asset Relief Program. Wells Fargo, which trumped Citigroup's bid to buy
Wachovia Corp. last year, leapfrogged its rival by completing a $12.25
billion share sale Dec. 15. JPMorgan Chase & Co. repaid $25 billion in
June. ``The market cast its vote and they're low down on the ballot,''
said Douglas Ciocca, a managing director at Renaissance Financial
Corp. in Leawood, Kansas. ``Citigroup needs to show steps to reinstall
the quality of the brand.''

Greenspan Says S&P 500 Rally Cuts Stimulus Needs as Household Wealth
Rises
The biggest stock market advance in seven decades is reducing the
need for additional government stimulus measures, according to former
Federal Reserve Chairman Alan Greenspan.
The Standard & Poor's 500 Index's 64 percent jump since March made
Americans richer by restoring $5.4 trillion to U.S.
equities and helped spur a 1.3 percent increase in retail sales last
month, data compiled by Bloomberg and the Commerce Department show.
``The stimulus is only a third spent, and its order of magnitude is not
large enough to compare with the strength and power of the remarkable
global equity increase that's occurred since early March,'' Greenspan,
83, said in a telephone interview yesterday from Washington. ``Capital
gains have proved a far greater stimulus than one can attribute to the
$787 billion program that has been only partially spent.''
Increasing spending beyond the $11.6 trillion already pledged may also
be unnecessary because higher stocks will help boost profits and make
loans easier to come by, Greenspan said.
Earnings among S&P 500 companies are forecast to rise 65 percent in
the fourth quarter, ending the longest series of declines since World
War II, data compiled by Bloomberg show.

European, Asian Shares Drop as Banks Fall; U.S. Stock-Index Futures Slip
European stocks fell for the first time in six days as the Federal
Reserve signaled it will remove most emergency measures and Standard &
Poor's cut its rating for Greece. Asian shares and U.S. futures
dropped. National Bank of Greece SA led European lenders lower. Bank of
Ireland Plc and Allied Irish Banks Plc declined at least 2.7 percent.
Westpac Banking Corp., Australia's second-largest bank by market value,
slid 1.1 percent in Sydney. Shire Plc retreated 1.8 percent after UBS
cut its recommendation on the shares. The Dow Jones Stoxx 600 Index
decreased 0.2 percent to 249.76 at 9:08 a.m. in London, snapping its
longest winning streak since September. The benchmark gauge for
European equities has rallied 58 percent since March 9, leaving it
valued at 56 times its companies'
reported earnings, near the highest level since 2003, weekly data
compiled by Bloomberg show. U.S. stocks erased most of their advance
yesterday after the Fed's policy statement.
Standard & Poor's 500 Index futures retreated 0.2 percent today, while
the MSCI Asia Pacific Index slid 0.8 percent.

FTSE 100 Drops as Fed Signals Stimulus Removal; Barclays, Antofagasta
Fall
U.K. stocks dropped, led by financial and raw-material shares,
after the Federal Reserve signaled it will remove more emergency
measures. Barclays Plc and Antofagasta Plc slid at least 1.2 percent
after a Fed statement yesterday said deterioration in the labor market
is abating, paving the way for it to rein in stimulus packages. JJB
Sports Plc, the unprofitable U.K. sporting goods retailer, sank 5.4
percent after reporting a slump in sales. The benchmark FTSE 100 Index
slid 27.04, or 0.5 percent, to 5,293.22 as of 8:21 a.m. in London. The
index has rebounded 51 percent since March and is heading for its
biggest annual gain since 1997 as central banks cut interest rates to
record lows and governments worldwide committed about $12 trillion to
revive the economy. The FTSE All-Share Index lost 0.5 percent today and
Ireland's ISEQ Index fell 0.7 percent. Barclays, Britain's
second-largest bank, slid
1.2 percent to 288.55 pence. Antofagasta declined 2 percent to
925 pence.

DAX Index Snaps Five-Day Advance as Bayer, Infineon Technologies Decline
German stocks dropped for the first time in six days, falling from
the highest level since September 2008, as the Federal Reserve signaled
it will remove most of its emergency aid and Standard & Poor's
downgraded Greece. The benchmark DAX Index declined 0.4 percent to
5,877.90 as of 9:46 a.m. in Frankfurt. The measure has rallied 60
percent since March 6 as Europe's largest economy exited recession,
fueled by government spending and a recovery in exports. The broader
HDAX Index also slipped 0.4 percent today. The Fed, after concluding a
two-day meeting yesterday, said most of its lending programs would
expire as scheduled Feb. 1 because of ``improvements in the functioning
of financial markets.'' Greece's credit rating was cut by Standard &
Poor's and the company threatened to take further action unless Prime
Minister George Papandreou tackles the European Union's largest budget
deficit. Germany said today it will sell 343 billion euros ($494
billion) of debt next year, according to the country's Federal Finance
Agency.

Asian Stocks Decline, Led by Financial Companies, on Interest-Rate
Concern
Asian stocks fell, led by financial companies, on expectations the
U.S. Federal Reserve will raise interest rates next year and after Hong
Kong's central bank said the city is at risk of ``sharp corrections''
in asset prices. Westpac Banking Corp. dropped 1.1 percent in Sydney
and China Overseas Land & Investment Ltd. lost 2.1 percent in Hong
Kong. National Australia Bank Ltd. tumbled 4.7 percent after saying it
will sell stock to fund the purchase of AXA Asia Pacific Holdings Ltd.
FAW Car Co.'s 4.5 percent plunge led declines in Shanghai on concern a
flood of share sales will divert funds from existing equities. Rio
Tinto Group, the second-biggest producer of iron ore, advanced 1.2
percent as the Fed said the economy is improving. The MSCI Asia Pacific
Index dropped 0.9 percent to 118.53 as of 3:12 p.m. in Tokyo, erasing
an earlier 0.1 percent advance. The gauge has climbed 32 percent this
year on signs government spending and lower interest rates bolstered
economies. ``With the improving economic data, investors are looking at
the possibility that the stimulus packages will be pulled out earlier
than expected and that interest rate increases would follow,'' said
Marvin Fausto, who helps manage
$9.56 billion as chief investment officer at Banco de Oro Unibank Inc.
in Manila, the nation's largest bank by assets.
``An early exit and increase in interest rates can throw the ongoing
recovery off track.''

Japan Stocks Drop, Reversing Gains; Banks Lead Declines, Developers Fall
Japanese stocks fell as banks slid on investor concerns that
yesterday's gains were excessive. Commodity producers rose on higher
prices for oil and metals. Sumitomo Mitsui Financial Group Inc.,
Japan's second- biggest lender by market value, declined 1.5 percent
after a 14 percent surge yesterday after the Nikkei newspaper reported
banks will be given at least 10 years to implement stricter capital
rules. Mitsubishi UFJ Financial Group Inc., Japan's No. 1, lost 1.3
percent.
Mitsubishi Estate Co., a property developer, slumped 2.7 percent as
foreclosure auctions increased. Inpex Corp., Japan's largest energy
exploration company, advanced 3.6 percent after crude oil climbed the
most in a month. ``Yesterday's gains were excessive,'' said Takeshi
Osawa, a senior fund manager in Tokyo at Norinchukin Zenkyoren Asset
Management Co. ``It's difficult for long-position investors to keep
buying bank stocks without seeing growth strategies.'' The Nikkei 225
Stock Average fell
0.1 percent in the last seconds of trading to close at 10,163.80 in
Tokyo. It rose as much as 0.8 percent during the day. The broader Topix
index dropped 0.2 percent to 896.28 after changing directions at least
nine times in the afternoon session.

China Stocks Are World's Worst Performer as Shares Decline on IPO
Concerns
China's stocks fell, making the benchmark index the world's worst
performer, on concern a flood of new share sales will divert funds from
existing equities and faster global economic growth will spur
interest-rate increases. Auto companies FAW Car Co. and Chongqing
Changan Automobile Co. led declines among consumer-discretionary stocks
on the prospect investors will sell this year's best-performing shares
to take part in initial public offerings. Shanghai Bailian Group Co.,
the listed unit of the biggest retailer, slid 4.2 percent on concern
that higher borrowing costs may damp consumer spending as growth
accelerates. ``Money is drying up and the pace of new share sales
hasn't shown any sign of slowing down,'' said Wu Kan, a Shanghai-based
fund manager at Dazhong Insurance Co., which manages about $285
million. ``The weak sentiment will carry on.'' The Shanghai Composite
Index dropped 76.14, or 2.3 percent, to 3,179.08 at the close, the
lowest since Nov. 27.
The index's three-day losing streak is the longest since the period
ended Sept. 29. It was also the world's worst performing index today
out of the 90 measures tracked by Bloomberg.

Stay `Constructive' on Stocks in 2010 as Economies Strengthen, Mowat
Says
Investors should ``stay constructive'' on stocks next year as the
global economy recovers and other asset classes become more costly,
according to JPMorgan Chase & Co. Technology and bank shares may be the
best bets because of rising demand and improving financial markets,
Adrian Mowat, JPMorgan's chief Asian and emerging markets strategist,
said in a Bloomberg Television interview from Hong Kong. The global
recovery also means bond yields will rise and the attraction of gold
will lessen, he also said. ``The outlook for equities next year is
going to be very good, both in developed and emerging markets,'' Mowat
said. ``It's going to be a story about growth next year. It's also a
story where other asset classes are quite expensive.'' The MSCI AC
World Index, tracking both developed and developing markets, has gained
31 percent this year, rebounding from last year's record 44 percent
slump. Only six of the 90 benchmark stock indexes tracked by Bloomberg
worldwide have retreated this year.

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

-0- Dec/17/2009 9:19 GMT

(BN) Top Stories: Bonds

+-----------------------------------------------------------------------
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Top Stories: Bonds
2009-12-17 09:23:46.340 GMT

Dec. 17 (Bloomberg) -- The following are the day's top stories on
bonds:

Treasuries Rise as Greece Rating Cut, Stock Losses Spur Demand for
Safety
Treasuries rose, pushing the yield spread between two- and 10-year
notes to the widest in more than three decades, after Standard & Poor's
cut Greece's debt rating and the Federal Reserve signaled interest
rates will stay low. Yields fell from near a four-month high after S&P
said it would take further action unless Prime Minister George
Papandreou tackles the European Union's largest budget deficit,
spurring demand for the relative safety of U.S. debt. Federal Reserve
policy makers yesterday reiterated a pledge to keep interest rates
``exceptionally low'' for an ``extended period.'' ``The short-end of
the Treasury market is a place to be,'' said David Schnautz, an
interest-rate strategist in Frankfurt at Commerzbank AG. ``The Fed
pledged to keep rates low, and people are looking for the safest place
to park their money as liquidity is drying up into the year end.
There's still a lot of risk out there, and Greece is a good example for
that.''
Ten-year yields fell 3 basis points to 3.56 percent as of 8:15 a.m. in
London, according to data compiled by Bloomberg. The
3.375 percent security due November 2019 rose 7/32, or $2.19 per
$1,000 face amount, to 98 14/32. The yield climbed as high as 3.62
percent on Dec. 15, the most since Aug. 13, from the record low of 2.04
percent on Dec. 18, 2008.

California's Bonds Fail on Wall Street Advice Bill Lockyer Couldn't
Refuse
For California Treasurer Bill Lockyer, the offer from Goldman
Sachs Group Inc., JPMorgan Chase & Co. and Citigroup Inc. was too good
to refuse. If California was willing to forgo competitive bidding for a
$4.5 billion bond offering, the banks promised more orders from
individuals and a lower bill to the taxpayers. The firms insisted that
by negotiating with them, the state would benefit from its special
relationship with the Wall Street troika and wind up with what two
underwriters called a salutary ``buzz'' to boost demand for the debt.
When the October offering failed to sell as planned, California was
forced to accept 8 percent less money than it needed and to pay as much
as $123 million more in interest than the banks said was sufficient for
the market. And the threesome made $12.4 million on the deal,
contributing to record bonuses in the securities industry a year after
getting a total of $80 billion in a federal bailout. ``Just because
someone earns a big wad of money doesn't mean that they can do what
they say they can do,'' said Marilyn Cohen, who watched the sale unfold
from Los Angeles as president of Envision Capital Management, which
oversees $250 million in bonds for individuals. ``And shame on the
state if they were drinking that Kool-Aid.''

Fed Signals Markets Return to Health While Extending Low Rates for
Economy
Federal Reserve officials declared financial markets healthy
enough to remove most emergency aid without going as far on their
support for the U.S. economy. The Fed, after concluding a two-day
meeting yesterday, said most of its lending programs would expire as
scheduled Feb. 1 because of ``improvements in the functioning of
financial markets.''
Policy makers said the labor market is stabilizing yet kept a pledge
to keep interest rates ``exceptionally low'' for an ``extended
period.'' The statement reinforced economists'
forecasts that the Fed will wait from six months to a year before
raising borrowing costs. By confirming plans to end its aid to bond
dealers, short-term debt markets and money-market mutual funds, the Fed
signaled it sees a waning in the ``unusual and exigent'' conditions
that prompted creation of the programs in 2008. ``The nastiness of the
storm has dissipated,'' said Paul Ballew, a former Fed economist who's
now a senior vice president at Nationwide Mutual Insurance Co.
in Columbus, Ohio. ``Concern about the financial market has passed,
but they're looking at weak labor markets and sluggishness in the real
economy.''

LCH.Clearnet Begins Backing Interest-Rate Swaps for Banks, Their
Clients
LCH.Clearnet Ltd., Europe's largest clearinghouse, began
guaranteeing trades today between banks and their clients in the $342
trillion interest-rate swaps market. The London-based clearinghouse's
SwapClear Client Clearing Service is the first to back trades between
banks and hedge funds, asset managers and pension funds. SwapClear has
been guaranteeing interest-rate swaps between banks since 1999 and
accounts for more than half that market. About $146 trillion in
notional interest swaps between banks and clients that isn't cleared
could be processed by its new service, LCH.Clearnet said in an emailed
statement. Regulators in the U.S. and Europe are pushing the financial
industry to improve the over-the-counter derivatives market structure
after last year's bankruptcy of Lehman Brothers Holdings Inc., one of
the largest OTC dealers, froze trading and cost investors hundreds of
millions of dollars. Clearing interest swaps may generate $190 million
in annual revenue by 2013, according to Morgan Stanley. ``It's a very
significant market event to get clearing extended out to a wider
audience,'' Chris Willcox, global head of rates trading at JPMorgan
Chase & Co. in London, said in a telephone interview. ``At the core of
the offering is the robust and tested default management process, which
has been through the flames and proven itself to be successful,''
Willcox said.

Peru Poised to Win More Debt Upgrades, Credit Suisse, Societe Generale
Say
Peru is poised to receive more credit-rating increases after
Moody's Investors Service moved it to investment grade because the
country is posting above- average growth while keeping its budget
deficit under control, said Credit Suisse Group AG and Societe Generale
SA. Moody's raised Peru's foreign debt rating one level to Baa3, the
lowest investment-grade level, from Ba1 late yesterday, more than a
year after Standard & Poor's and Fitch Ratings made identical moves.
Moody's said Peru was able to prevent the global recession from sending
the local economy into a ``hard landing'' by bolstering government
spending. ``It sets up a trajectory for more upgrades,'' Igor Arsenin,
an emerging-market strategist at Credit Suisse in New York, said in a
telephone interview. ``The fundamentals look clean when compared with
other investment-grade countries. It reminds everybody of the positive
momentum in Peru.'' The Andean nation's credit-default swaps trade
almost on a par with Israel and Poland, countries that are rated at
least four levels higher by Moody's. It costs 1.21 percentage points to
protect Peru's debt against default for five years, compared with 1.20
points for Israel and Poland, according to CMA Datavision. Peru's cost
was 1.92 points six months ago.

Auction-Rate Investors Get Rematch After First Five Fraud Suits
Dismissed
Auction-rate securities investors who sued banks including
Citigroup Inc. and UBS AG to recoup billions of dollars in losses went
0 for 5 as their first cases were thrown out. Now some are gearing up
for a rematch over part of the $149 billion in securities that remain
outstanding. In three of the class actions, judges allowed the
investors to refile their complaints after finding the initial suits
failed to prove they lost money or satisfy a 1995 federal
securities-fraud law designed to discourage frivolous stock-loss suits.
Citigroup, UBS and Raymond James Financial Inc. have again asked that
the cases be tossed out. ``The private litigation has run into a brick
wall,'' said James Cox, a law professor at Duke University in Durham,
North Carolina. The legal bar for bringing such lawsuits has been too
high for auction-rate investors to surmount, he said. Those investors
may need a change in federal law if the 1995 act proves too big an
obstacle for genuine claims, said Elizabeth Warren, who chairs the
congressional oversight panel monitoring the Troubled Asset Relief
Program. She suggested the idea for a Consumer Financial Protection
Agency.

U.S. Treasury Delays Sale of Citigroup Stake as Shares Priced at
Discount
Citigroup Inc., the last of the four largest U.S. banks to seek
funds to exit a taxpayer bailout, raised $17 billion by selling stock
for a price so low that the U.S. delayed plans to shrink its one-third
stake in the lender. Citigroup sold 5.4 billion shares at $3.15 apiece,
less than the $3.25 the government paid when it acquired its stake in
September. The New York-based bank said the Treasury won't sell any of
its shares for at least 90 days. Investors demanded a bigger discount
from Citigroup than Bank of America Corp. or Wells Fargo & Co., which
together raised more than $31 billion this month to exit the Troubled
Asset Relief Program. Wells Fargo, which trumped Citigroup's bid to buy
Wachovia Corp. last year, leapfrogged its rival by completing a $12.25
billion share sale Dec. 15. JPMorgan Chase & Co. repaid $25 billion in
June. ``The market cast its vote and they're low down on the ballot,''
said Douglas Ciocca, a managing director at Renaissance Financial
Corp. in Leawood, Kansas. ``Citigroup needs to show steps to reinstall
the quality of the brand.''

Greek Government Bonds Decline After S&P Signals It May Add to Rating
Cut
Greek bonds fell after Standard & Poor's cut the country's credit
rating and threatened to take further action unless Prime Minister
George Papandreou tackles the European Union's largest budget deficit.
The euro also slid against the dollar and the yen after S&P said in a
statement yesterday it lowered the rating by one level to BBB+ from A-.
Fitch Ratings cut Greece's debt to the same level on Dec. 8. The yield
on the benchmark 10-year Greek government bond has increased 52 basis
points this month to 5.51 percent, the highest among the 16 euro-region
countries. Papandreou pledged on Dec. 14 to implement ``radical''
measures to fix the budget. ``The market is telling you that there's
concern at the implementation of the plans,'' said Steven Major, global
head of fixed-income research at HSBC Holdings Plc in London. ``There's
a lot of positive talk from Greek officials going round, but the market
needs to see some action.'' The yield on Greece's 10-year bond rose 7
basis points to 5.8 percent as of 7:47 a.m. in London.
The 6 percent security maturing in July 2019 dropped 0.5, or 5 euros
per 1,000-euro ($1,441) face amount, to 102.99. The euro weakened 0.9
percent versus both the dollar and the yen.

Germany Plans to Issue Record Amount of Debt Next Year as Deficit Swells
Germany will sell a record amount of debt next year as rising
unemployment costs and weak tax revenue swell the budget deficit. Sales
of government securities will rise to 343 billion euros ($494 billion)
from 329 billion euros this year and 213 billion euros in 2008, the
Federal Finance Agency said today in a statement. The planned issuance
includes 207 billion euros of bonds and 136 billion euros of
money-market instruments, or securities that mature within 12 months.
Chancellor Angela Merkel's draft budget shows net federal borrowing
surging to 86 billion euros in 2010, from 37 billion euros this year.
Finance Minister Wolfgang Schaeuble has said the public-sector deficit
at federal, state and municipal levels will increase to 6 percent of
gross domestic product next year, the biggest since the inception of
the euro in 1999.
The Federal Finance Agency, which holds bond sales on the government's
behalf, said it may sell 3-4 billion euros of index-linked bonds each
quarter. It will also sell 30-year bonds, first issued in 2008, four
times next year.

Corporate Bond Risk Increases in Europe, Credit-Default Swap Prices Show
The cost of insuring European corporate bonds against default
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 478,
according to JPMorgan Chase & Co. prices at 7:32 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 1 basis point to 80.5, JPMorgan prices show. A basis point
on a credit-default swap contract protecting 10 million euros ($14.4
million) of debt from default for five years is equivalent to 1,000
euros a year.

NAB to Buy Axa Asia's Australia, N.Z. Units for $4.2 Billion, Trumping
AMP
National Australia Bank Ltd. bid A$13.3 billion ($12
billion) for Axa Asia Pacific Holdings Ltd., scuttling AMP Ltd.'s
joint offer with French insurer Axa SA and winning approval from the
wealth manager's independent directors. The bank offered A$6.43 a share
for Axa Asia Pacific, beating the
A$6.22 bid by AMP and Axa SA, which owns 54 percent of Axa Asia
Pacific. The deal is conditional on Axa SA's agreement to buy Axa Asia
Pacific's units in eight Asian countries, according to a statement
today. The deal leaves AMP, Australia's second-largest asset manager,
empty-handed after what it called its ``best and final'' bid was
rejected today. National Australia Bank is paying A$4.6 billion for Axa
Asia Pacific operations in Australia and New Zealand, adding to assets
acquired in its purchase of Aviva Plc's local units in June.
``It will be a lot of work over the next three years digesting this,''
said Prasad Patkar, who helps manage $1.6 billion at Platypus Asset
Management in Sydney. The bank may underperform its rivals as it
integrates the units, he said.

Japan's Bonds Gain a Third Day on Speculation Interest Rates Will Stay
Low
Japan's bonds rose for a third day, the longest winning streak in
a month, after the Federal Reserve's pledge to keep interest rates low
backed speculation the Bank of Japan will hold borrowing costs near
zero next year. Ten-year yields fell to the lowest level in a week as
economists forecast Japan's central bank will leave its benchmark rate
at 0.1 percent at the end of a two-day policy meeting tomorrow. The
Ministry of Finance sold 2.6 trillion yen ($29 billion) in two-year
government notes today. ``The gloomy picture of future deflation will
mean the BOJ will have to stick to lower rates, so bonds are a safe
place to be,'' said Takashi Nishimura, an analyst in Tokyo at
Mitsubishi UFJ Securities Co., a unit of Japan's largest bank by
assets. The yield on the 1.3 percent bond due December 2019 fell one
basis point, or 0.01 percentage point, to 1.245 percent as of 4:23 p.m.
in Tokyo at Japan Bond Trading Co., the nation's largest interdealer
debt broker. The price rose 0.089 yen to 100.488. Yields earlier
declined to
1.24 percent, the lowest since Dec. 10.

Philippine Bonds Rise as Central Bank May Signal Rates to Stay Low Today
Philippine seven-year bonds gained on speculation the central bank
will today signal borrowing costs will remain at a record low to spur
growth. The peso declined. Bangko Sentral ng Pilipinas will hold the
rate it pays lenders for overnight deposits unchanged at 4 percent for
a fourth straight meeting when it announces the decision at 4 p.m.
local time, according to all 16 economists surveyed by Bloomberg News.
Gross domestic product increased 0.8 percent in the third and second
quarters, near the least in a decade. ``Bond yields will benefit if
Bangko Sentral keeps interest rates low for a period of time,''
said Angeline Sia, a fixed- income trader in Manila at BPI Asset
Management, which oversees 440 billion pesos ($9.5 billion). ``Growth
is still quite weak and the government's spending is constrained
because of the widening budget deficit.
The central bank may have to bear the burden of boosting economic
growth.'' The yield on the 7 percent note due January
2016 dropped five basis points to 7 percent as of 9:42 a.m. in Manila,
according to quotes from Tradition Financial Services.
A basis point is 0.01 percentage point.

Philippine Dollar Bond Demand to Rise on Fed's Rate Policy, Tetangco
Says
The Philippines may see a rise in investor demand for its dollar
bonds after the Federal Reserve reiterated U.S. interest rates will
stay low for ``an extended period,'' central bank Governor Amando
Tetangco said today. The Fed's comments should cap U.S. Treasury yields
and ``see some increase in risk appetite toward emerging-market dollar
bonds,'' including the Philippines, Tetangco said in a mobile phone
message. The Philippines last week sought clearance from the U.S.
Securities and Exchange Commission to sell $3 billion of overseas debt.
Officials said previously the nation was looking at selling
euro- and yen-denominated securities in 2010 and to continue tapping
the dollar bond market. The Philippines raised $3.25 billion from three
U.S. currency note offerings this year.
Developing economies including the Philippines ``will take advantage
of opportunities the current low interest-rate environment presents,''
Tetangco said. ``There is appetite for emerging-market debt as was seen
in the way recent bond issuances were received,'' he said.

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

-0- Dec/17/2009 9:23 GMT