European Retail Sales Fell Fourth Month in September (Update1)

By Jurjen van de Pol

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"Sept. 29 (Bloomberg) -- European retail sales fell for a fourth month in September as higher consumer prices and the worsening credit squeeze sapped confidence, the Bloomberg purchasing managers index showed."

"The measure of sales in the euro area fell to 46.2 from 47.7 in August. A reading below 50 indicates contraction. The index is based on a survey of more than 1,000 executives compiled for Bloomberg News by Markit Economics."

"Banks have become more reluctant to lend as the U.S. financial turmoil spreads, undermining global economic growth and pushing confidence among executives and consumers in the euro region to the lowest since the slump in the wake of the Sept. 11 attacks in 2001. At the same time, inflation remains close to a 16-year high, lowering consumers' purchasing power."

"``Consumer spending will remain very subdued,'' said Gilles Moec, an economist at Bank of America Corp. in London. ``There's a risk of another negative quarter'' after the region's economy contracted in the three months through June."

"Retail sales dropped in Germany and Italy, two of the three largest economies in the 15-nation euro region. French shops sold more for a third month. European retailers are firing workers at the fastest pace in almost three years, the report showed."

"Fiat SpA, Italy's largest manufacturer, suffered a 23 percent decline in Italian car sales in August. Gruppo Coin SpA, Italy's largest department-store chain, said second-quarter profit fell 75 percent after consumer confidence sagged to near a 15-year low."

Slower Growth

"The Italian government last week cut its 2008 economic growth forecast to 0.1 percent, the slowest pace in five years, and less than a June estimate of 0.5 percent. Unemployment in Italy probably rose for a fifth quarter in the three months through June, a report will show today, according to the medium forecast of 15 economists in a Bloomberg News survey."

"``We expect consumer spending to contract again in the third quarter, reflecting the impact of a weaker labor market and of the July oil-price peak,'' said Paolo Pizzoli, an economist at ING Wholesale Banking in Milan."

"Today's report showed that retailers' gross margins continued to fall as shops needed to offer greater discounts to attract customers, Markit Economics said. Inflation in the euro zone reached 3.8 percent in August, almost twice the European Central Bank's 2 percent target."

Shedding Workers

"The declining profit margins and weak economic conditions are forcing European retailers to cut staff. German department store owner Arcandor AG announced plans to eliminate at least a fifth of jobs at the headquarters of its Karstadt unit, Germany's largest department-store chain, and lowered its profit forecast for 2009."

"Retail sales in Europe's largest economy fell for the fourth month. More than a third of German retailers didn't meet sales targets for September and some companies saw consumer demand falling faster than expected, the report showed."

The German economy contracted 0.5 percent in the second quarter and may not recover in the third as investments falter and consumer spending slumps. The threat of job losses may further undermine consumer sentiment and spending.

French retailers seem to be coping with the global slowdown as sales expanded in September and consumer confidence in Europe's second-largest economy unexpectedly rose for the first time in more than a year as the retreat in fuel prices left people with more to spend. Crude oil prices have fallen almost 30 percent since the peak of $147.27 a barrel on July 11.

Gucci Sales

"PPR SA's, the owner of luxury clothes maker Gucci Group, last week confirmed sales and profit will increase this year. Chief Executive Officer Francois-Henri Pinault said a slowdown of ``one or two years'' is in store following four years of luxury-goods expansion."

The gains may be short lived as the spreading credit crunch threatens to further choke economic growth.

"``The strength of the global financial crisis will have consequences on economic growth and employment in France,'' President Nicolas Sarkozy told ministers on Sept. 26 at the weekly Cabinet meeting in Paris."

"For the Bloomberg retail indicator, Markit Economics recruited a panel of companies in Germany, France and Italy, which together make up around 80 percent of total euro-area retail sales by value. The panel includes large chain retailers as well as smaller stores."

To contact the reporter on this story: Jurjen van de Pol in Amsterdam jvandepol@bloomberg.net

"Last Updated: September 29, 2008 05:19 EDT"





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"Gold Declines in London as Dollar Strengthens, Crude Oil Drops "

By Marianne Stigset

Sept. 29 (Bloomberg) -- Gold fell in London as a stronger dollar and a drop in crude oil reduced the appeal of the precious metal as an alternative investment. Palladium also fell.

"The dollar rose to one-week highs against the euro and the pound after U.S. leaders agreed on a $700 billion plan to revive credit markets. Gold has had a correlation of 0.67 to the euro- dollar exchange rate this year, up from 0.58 last year. A figure of 1 would mean they move in lockstep. Oil fell in New York on concern the economic slowdown will curb demand for energy."

"``The major driver there is the oil price and the dollar that is just running,'' Manqoba Madinane, a commodity analyst at Standard Bank Group Ltd., said from Johannesburg. ``Market risk indicators have been adjusted downwards,'' reducing demand for gold as a haven."

"Gold for immediate delivery fell $2.03, or 0.2 percent, to $876.72 an ounce as of 10:56 a.m. in London. Futures for December dropped $7.10, or 0.8 percent, to $881.40 in electronic trading on the Comex division of the New York Mercantile Exchange."

"Macquarie Group Ltd. cut its estimates for most industrial and precious metals because of ``the global financial crisis and near-term concerns about the Chinese construction sector,'' it said in a report today."

"Gold will average $891.70 an ounce this year, 5.7 percent less than previously expected, and $960 next year, 8.6 percent less than earlier estimated. Silver, platinum and palladium forecasts for this year and next were also cut, Macquarie said."

"Gold rose to $876.5 an ounce in the morning ``fixing'' in London, used by some mining companies to sell production, from $869 at the previous afternoon fixing."

`Bullish' for Gold

"The U.S. bailout plan will probably weaken the dollar and boost gold, said Frank Holmes, chief executive officer of U.S. Global Investors Inc."

"``This is one of the most bullish factors for gold,'' Holmes said today at the London Bullion Market Association conference in Kyoto, Japan. ``You're going to have debasement of the currency.''"

"Gold is expected to rise to a record in the next six months as turmoil in financial markets boosts investment demand, Paul Walker, chief executive officer of London-based research company GFMS Ltd., said in a Kyoto interview."

"Demand for bullion as a safe haven is growing in markets including India, the world's largest gold user, he said."

"Gold may rise for a third straight week as investors seek a haven from credit-market turmoil, a Bloomberg survey showed."

"Investment in the SPDR Gold Trust, the biggest exchange- traded fund backed by bullion, gained 18 percent since Sept. 15 after the bankruptcy of investment bank Lehman Brothers Holdings Inc. and the U.S. takeover of insurer American International Group Inc., and mortgage-financiers Fannie Mae and Freddie Mac."

Speculative Positions

"Hedge-fund managers and other large speculators increased their net-long position in New York gold futures in the week ended Sep. 23, according to U.S. Commodity Futures Trading Commission data."

"Speculative long positions, or bets prices will rise, outnumbered short positions by 121,016 contracts on the Comex division of the New York Mercantile Exchange, the Washington- based commission said in its Commitments of Traders report."

"Among other metals for immediate delivery, silver dropped 31.5 cents, or 2.4 percent, to $12.99 an ounce, palladium fell $3, or 1.3 percent, to $223 an ounce and platinum slipped $8.50, or 0.8 percent, to $1,114.50 an ounce."

To contact the reporter on this story: Marianne Stigset in Oslo at mstigset@bloomberg.net

"Last Updated: September 29, 2008 06:30 EDT"





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European Bonds Soar; Government Rescues Spur Safe-Asset Demand

"Sept. 29 (Bloomberg) -- European bonds rose, sending the yield on the German two-year note to the lowest level in 5 1/2 months, as government rescues of Fortis and Hypo Real Estate Holding AG fueled concern the credit crisis is spreading."

"The difference in yield between two-year notes and 10-year German bunds widened to the most since March as investors bought safer, shorter-dated maturities amid a slump in stocks worldwide. Bunds yielded the least relative to similar maturity French and Italian securities since the euro's debut in 1999."

"``The major headlines are now being made by European banks, which is a clear signal the problems are right around the corner,'' said Kornelius Purps, a fixed-income strategist in Munich at Unicredit Markets and Investment Banking, a unit of Italy's largest lender. Stock-market declines ``are causing a severe safe-haven bid.''"

"The yield on the two-year note dropped as much as 24 basis points to 3.42 percent, the lowest since April 15, and was at 3.46 percent by 3:54 p.m. in London. It slipped 34 basis points last week, the biggest weekly decline since the aftermath of the Sept. 11, 2001, attacks on the U.S. The 4 percent note due September 2010 increased 0.36, or 3.6 euros per 1,000-euro ($1,439) face amount, to 100.99 today."

"The yield on the bund, the euro region's benchmark government security, fell 18 basis points to 3.98 percent. Yields move inversely to bond prices."

Fortis Rescue

"Purps recommended investors ``sacrifice'' returns and seek safety in shorter-dated notes. Two-year yields may drop to 3.3 percent this week, he said. Euro-region inflation is running at 3.8 percent."

"Fortis is the largest European firm to be bailed out in the crisis that drove Lehman Brothers Holdings Inc. into bankruptcy two weeks ago. Governments in Belgium, the Netherlands and Luxembourg threw an 11.2 billion-euro ($16.3 billion) lifeline to the lender after the stock slid 35 percent last week."

"``The news is a big blow to euro-area sentiment, and is seen as the first major European casualty of the financial contagion,'' Ciaran O'Hagan, a fixed-income strategist in Paris at Societe Generale SA, wrote in a client note."

"Hypo Real Estate, Germany's second-biggest commercial- property lender, received a 35-billion euro loan guarantee to fend off insolvency. The rescuers of the bank will pay the guaranteed cash in two allotments of 14 billion euros and 21 billion euros, a government official said, speaking on conditions of anonymity. Bradford & Bingley Plc, the U.K.'s biggest lender to landlords, was seized by the government today as funding dried up."

Rate Expectations

"The spread between the two-year note and the bund widened 7 basis points to 57 basis points today. The Dow Jones Stoxx 600 Index declined 4.2 percent and the MSCI Asia Pacific Index retreated 2.7 percent. The Standard & Poor's 500 Index fell 3.3 percent, headed for the biggest decline in a week."

"Investors bought two-year notes, more sensitive to the rate outlook, as they increased bets the European Central Bank will cut interest rates in an effort to revive the economy. The implied yield on the March Euribor futures contract slid 17 basis points to 4.5 percent, the lowest level since May 14."

"The odds of a quarter-percentage point reduction in the ECB's main rate almost doubled to 42 percent, from 22 percent on Sept. 26 and 13 percent a week ago, according to a Credit Suisse Group index. Policy makers meet to review rates on Oct. 2."

Investors also sought the safest assets before U.S. lawmakers vote on President George W. Bush's proposed $700 billion bank-rescue package for banks.

Extra Liquidity

Bonds stayed higher as the Bloomberg purchasing managers index showed European retail sales slipped for a fourth month in September.

The ECB said it lent banks 120 billion euros for 38 days in a special auction to ease tensions in the euro-region banking system and the Federal Reserve increased the size of its dollar swap line to central banks around the world to $620 billion.

"The yield difference between the Italian 10-year bond and the bund widened 18 basis points to 90 basis points, the biggest spread since the introduction of the euro in 1999. The 10-year French bond yielded 31 basis points more than the bund."

"European debt outperformed U.S. Treasuries this quarter amid speculation the bailout plan will add to the U.S. government's fiscal burden. Bonds in the euro region handed investors a 3.4 percent return since the end of June, compared with 2.2 percent by their U.S. counterparts, according to Merrill Lynch & Co.'s EMU Direct and Treasury Master indexes."

"Italy and Belgium sold 8.2 billion euros of bonds today. Italy sold 6.75 billion euros of notes maturing between 2011 and 2018, and Belgium auctioned 1.4 billion euros of bonds due in 2011 and 2014."

"``That's a lot of supply and it may weigh on the market,'' said Wilson Chin, a fixed-income strategist in Amsterdam at ING Bank NV. Today, the ``main driver is risk aversion and concern about the ongoing volatility in the markets.'' The two-year yield will reach 3.7 percent by year-end, Chin said."

To contact the reporter on this story: Lukanyo Mnyanda in London at lmnyanda@bloomberg.net





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"Indian Rupee Falls to 5-Year Low as Funds, Importers Buy Dollar "

By Anoop Agrawal

Sept. 29 (Bloomberg) -- India's rupee slumped to a five- year low as stock declines spurred fund outflows and a $700 billion U.S. bank rescue plan helped bolster the dollar.

"The currency was headed for its biggest monthly loss in 16 years as credit-market losses, evidenced by the rescue of Belgium's Fortis and the nationalization of Bradford & Bingley Plc in the U.K., prompted investors to favor safer bets than emerging markets. The benchmark stock index fell to the lowest since April 2007 as global funds cut their holdings."

"``Its almost like a panic situation as there are no dollars available and demand from overseas funds is strong,'' said V. Rajagopal, chief currency trader at Kotak Mahindra Bank Ltd. in Mumbai ``We may see an accelerated fall in the rupee.''"

"The rupee declined to as much as 47.115 per dollar, the lowest since June 2003 before trading at 47.015 as of 3:02 p.m. in Mumbai. The currency may fall to 47.25 in the near term, Rajagopal said."

"Overseas investors have sold $9.2 billion more of local equities this year than they bought, according to data from the Securities & Exchange Board of India. They bought a record $17.2 billion in stocks last year, powering the rupee's best annual gain in at least 34 years."

"The Bombay Stock Exchange Sensitive Index, or Sensex, is set for its first annual decline since 2001. It dropped 4 percent today, the most in two months."

Lower Growth

"Morgan Stanley cut its forecast for India's 2009 economic growth to 6.4 percent from 6.9 percent, saying the credit squeeze will crimp consumption and business spending. It said Southeast Asia's economies will grow at a slower pace than earlier forecast as a global credit crunch hurts international trade and capital flows."

"The governments of Belgium, the Netherlands and Luxembourg bailed out Fortis to restore confidence in the company after its shares fell 35 percent last week. Bradford & Bingley was seized by the U.K. government after tighter credit markets starved the lender of capital. Washington Mutual Inc. last week became the biggest bank to fail in U.S. history."

"``The deterioration in market conditions in the last two weeks, some 14 months since the subprime crisis first began, indicates a bottom is likely still some way off,'' Morgan Stanley economists Chetan Ahya, Deyi Tan and Shweta Singh wrote in a note published today. ``We expect the growth cycle to bottom in the first half of 2009.''"

Oil Imports

"The rupee is the second-worst performer this year among the 10 most-active Asian currencies excluding the yen. It fell today by the most since Sept. 16 on speculation importers including Indian Oil Corp. Ltd., the nation's largest refiner, boosted dollar purchases to take advantage of a dip in oil prices."

"``Importers have significantly increased dollar purchase considering its shortage,'' said Parthasarathi Mukherjee, president of treasury at Axis Bank Ltd. ``That will pressure the rupee further down.''"

The price of crude oil for November delivery fell 2.8 percent to $103.86 a barrel on the New York Mercantile Exchange. The cost of the commodity has risen more than 9 percent this year.

"India, Asia's third largest-economy paid an average $8 billion a month this year for oil imports, up from $5.5 billion in 2007, Bloomberg data show."

To contact the reporter on this story: Anoop Agrawal in Mumbai at aagrawal8@bloomberg.net.

"Last Updated: September 29, 2008 06:02 EDT"





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"Corn, Soybeans Dip as Dollar Gain Reduces Appeal for U.S. Crops "

By Jae Hur

"Sept. 29 (Bloomberg) -- Corn and soybeans fell for a third day as the dollar rose to a one-week high against the euro on a U.S. government-led $700 billion financial rescue package, reducing demand for U.S. supplies."

President George W. Bush and congressional leaders said they reached an agreement on the bank-rescue plan designed to revive moribund credit markets. Corn has lost 34 percent from its record in June and soybeans have fallen 31 percent from a peak in July.

"``The imminent passing of the U.S. rescue package is boosting the dollar and this is contributing to the weakness in grains prices today,'' said Toby Hassall, an analyst at Commodity Warrants Australia in Sydney."

"Corn for December delivery fell as much as 13 cents, or 2.4 percent, to $5.30 a bushel in after-hours electronic trading on the Chicago Board of Trade and was at $5.31 by 2:21 p.m. Singapore time."

"Soybeans for November delivery lost as much as 28.5 cents, or 2.5 percent, to $11.355 a bushel and last traded at $11.37 by 2:21 p.m. Singapore time. Corn declined 2.7 percent and soybeans fell 1.6 percent Sept. 26 as the U.S. economy slowed, signaling reduced demand for grain and oilseeds."

"The U.S. economy's expansion rate of 2.8 percent was less than an estimate of 3.3 percent last month, Commerce Department data showed Sept. 26. Personal consumption, trade and business investment contributed less to the gross domestic product than the prior estimate."

Washington Mutual was the latest casualty in a financial crisis that caused investment bank Lehman Brothers Holdings Inc. to fail and led to rescues of Merrill Lynch & Co. and Bear Stearns Cos.

Freight Index

"``Although the bank rescue plan may go some way to allaying fears of a collapse in the U.S. economy, Friday's weak GDP number along with a collapsing Baltic Dry Index are indications that commodity demand prospects are not strong,'' Hassall said."

"The Baltic Dry Index, a measure of shipping costs for commodities, declined the most on record amid a pricing dispute over iron ore between Chinese steelmakers and Brazil's Cia. Vale do Rio Doce. The index lost 10 percent to 3,746 points Sept. 26, according to the Baltic Exchange in London. The gauge has fallen 45 percent this month to its lowest since August 2006."

"Wheat for December delivery dropped as much as 1.7 percent to $7.04 a bushel and traded at $7.065 by 2:25 p.m. in Singapore. The contract was down 0.3 percent last week, the fifth straight weekly decline. Futures have fallen 48 percent from a record $13.495 on Feb. 27."

"``Favorable weather for wheat planting continues,'' Mike Tannura, a meteorologist for T-Storm weather, said yesterday in an e-mailed note. ``Next week should not bee too wet. Weekend rain in Argentina was helpful for some wheat, but more is needed with not much foreseen.''"

To contact the reporter for this story: Jae Hur in Singapore at jhur1@bloomberg.net

"Last Updated: September 29, 2008 03:38 EDT"





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Japan's Retail Sales Slows as Consumers Cut Spending (Update1)

By Toru Fujioka

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Sept. 29 (Bloomberg) -- Growth in Japan's retail sales slowed in August as higher prices of daily necessities discouraged consumers from spending.

"Sales climbed 0.7 percent from a year earlier after rising a revised 2 percent in July, the Trade Ministry said in Tokyo today. The median estimate of 18 economists surveyed by Bloomberg was for a 0.2 percent gain."

The fastest inflation in a decade is forcing consumers to tighten their purse strings as costlier food and gasoline leave them less to spend amid sluggish wage growth. Some economists say the world's second-largest economy is already in a recession and the slowdown may deepen as consumers cut back.

"``It's hard to imagine households spending at a time when inflation is outpacing wage growth,'' said Noriaki Matsuoka, an economist at Daiwa Asset Management Co. in Tokyo. ``The weak power of household spending will remain a drag on the flagging economy.''"

The yen traded at 106.72 per dollar at 10:35 a.m. in Tokyo from 106.20 before the report was published.

"Sales of fuel dropped for the first time in 15 months in August, when regular gasoline prices rose to a record 185 yen a liter ($6.60 a gallon), the ministry said."

"``It seems as though consumers can't keep up with gasoline prices,'' said Shinichiro Kobayashi, director of the statistics bureau at the Trade Ministry. ``If you extract the effect of higher consumer prices, real spending may be falling.''"

Closing Outlets

"Sales at department stores and supermarkets fell last month. Isetan Mitsukoshi Holdings Ltd., Japan's largest department- store operator, said last week it will close unprofitable outlets next year, as sales slump."

"``A recession, inflation and low stock prices have weakened consumer sentiment, causing sales to stall in many areas and for many products,'' the Japan Department Stores Association said in a release."

"Household spending probably dropped for a sixth month in August, according to the median estimate of economists surveyed by Bloomberg News. The statistics bureau will release the data tomorrow. Consumer prices gained 2.4 percent in August. Wages rose 0.3 percent in July, the slowest pace this year."

To contact the reporter on this story: Toru Fujioka in Tokyo at tfujioka1@bloomberg.net

"Last Updated: September 28, 2008 21:38 EDT"





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N.Z. Annual Trade Deficit Narrows to NZ$4.28 Billion (Update2)

By Tracy Withers

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Sept. 29 (Bloomberg) -- New Zealand's annual trade deficit narrowed for a third straight month in August as a falling currency and record oil shipments buoyed exports.

"The gap narrowed to NZ$4.28 billion ($2.9 billion) in the 12 months ended Aug. 31 from NZ$4.48 billion in the year through May, Statistics New Zealand said in Wellington today. The median estimate in a Bloomberg survey of eight analysts was for a NZ$4.43 billion shortfall."

"New Zealand's dollar has slumped 15 percent against the U.S. currency the past six months, buoying exports and helping to narrow the trade gap. Rising prices bolstered shipments of oil, which is now New Zealand's third-largest export after dairy and meat following the commencement of production at the Tui field in July last year."

"``There are early signs that the exchange rate is helping, particularly for categories outside dairy, meat and oil,'' said Nick Tuffley, chief economist at ASB Bank Ltd. in Auckland. ``We still have a substantial commodity price story going on.''"

The New Zealand dollar bought 68.45 U.S. cents at 11:35 a.m. in Wellington from 68.37 cents immediately before the report.

"The currency fell for a sixth straight month on a trade- weighted basis, the statistics agency said."

Exports rose 34 percent in August from a year earlier to NZ$3.57 billion. Economists expected a 22 percent gain.

Imports Rise

"Sales of milk powder, butter and cheese, which make up almost one-fifth of overseas shipments, increased 78 percent from a year earlier. The increase reflected both price and volume gains, the agency said."

"Exports of crude oil more than doubled to a record NZ$343 million. Meat, log and fruit shipments also rose."

Imports rose 20 percent to NZ$4.32 billion in August from a year earlier. Economists expected a 16 percent gain.

"The figures aren't adjusted for inflation and reflect higher prices for imports as well as actual shipments. Fuel imports rose 66 percent as prices increased from a year earlier, the statistics agency said."

"Machinery imports increased and there were also NZ$160 million of aircraft delivered in the month, the agency said."

"Economists monitor the rolling, 12-month trade balance because of volatility in the month-on-month figures, which aren't seasonally adjusted. In August, there was a NZ$750 million trade deficit compared with an NZ$947 million gap a year earlier. Economists expected a NZ$926 million deficit."

To contact the reporter on this story: Tracy Withers in Wellington at twithers@bloomberg.net

"Last Updated: September 28, 2008 18:49 EDT"





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Money-Market Rates Jump as Bank Rescues Stoke Lending Concern

By Gavin Finch and Lukanyo Mnyanda

"Sept. 29 (Bloomberg) -- The cost of borrowing in euros for three months rose to a record after government-led bailouts of banks heightened concern that more in Europe will fail, prompting financial institutions to hoard cash."

"The London interbank offered rate, or Libor, that banks charge each other for such loans climbed 8 basis points to 5.22 percent today, the largest jump since June, the British Bankers' Association said. The dollar rate increased 12 basis points to 3.88 percent, the highest level since Jan. 18. The Libor-OIS spread, a gauge of the scarcity of cash, rose to a record."

"Money-market rates climbed even after U.S. lawmakers agreed on a $700 billion plan to remove tainted assets from the balance sheets of financial institutions. In Europe, four banks required state assistance and the ECB made additional emergency funds available to lenders through year-end. The Federal Reserve said later it more than doubled the size of its dollar swap line with foreign central banks to $620 billion."

"``The root of the banking story is in the money markets, which are still in awful shape,'' said Padhraic Garvey, the Amsterdam-based head of investment-grade debt strategy at ING Bank NV. ``Banks are dealing with central banks for liquidity purposes, but are very careful about dealing with one another in this environment, which effectively means that the interbank wholesale- money market is not working.''"

Banks Fail

"The U.K. Treasury seized Bradford & Bingley Plc, Britain's biggest lender to landlords, while governments in Belgium, the Netherlands and Luxembourg extended an 11.2 billion-euro ($16.2 billion) lifeline to Fortis, Belgium's largest financial-services firm. Hypo Real Estate Holding AG, Germany's second-biggest commercial-property lender, received a 35 billion-euro loan guarantee from the state, and Iceland agreed to buy 75 percent of Glitnir Bank hf, the nation's third-largest lender."

"Funding constraints are being exacerbated as companies try to settle trades and buttress balance sheets over the quarter-end, balking at lending for more than a day. While the Libor for dollars overnight has fallen 387 basis points to 2.57 percent since rising to a record 6.44 percent Sept. 16, the three-month rate has increased 100 basis points to 3.88 percent."

"``Tensions remain elevated and liquidity is drying up,'' said Patrick Jacq, a fixed-income strategist at BNP Paribas SA in Paris. ``After Fortis, this situation will persist as people worry that there will be more victims. Confidence has not been restored yet and that's a prerequisite before rates come down.''"

Libor-OIS Spread

"The Libor-OIS spread, the difference between the three-month dollar rate and the overnight indexed swap rate, jumped to a record 225 basis points today, after breaching 200 for the first time on Sept. 25. It averaged 8 basis points in the 12 months to July 31, 2007, before the credit squeeze began."

The world's largest central banks are injecting liquidity into money markets as $586 billion in writedowns and losses tied to the U.S. mortgage market prompt banks to stockpile cash to meet their own funding needs.

"The ECB loaned banks an extra 120 billion euros today for 38 days, after receiving bids for almost 142 billion euros. ``The special term-refinancing operation will be renewed at least until beyond the end of the year,'' the central bank said in a statement. The ECB also lent banks $30 billion for one day in a separate operation."

"Libor, set by 16 banks including Citigroup Inc. and UBS AG in a daily survey by the BBA, is used to calculate rates on $360 trillion of financial products worldwide, ranging from home loans to credit derivatives."

"Bills, Stocks"

"Cash deposits at central banks are soaring as financial institutions seek a haven for their money. Banks deposited a record 28.1 billion euros with the ECB on Sept. 26, up from 55 million euros two weeks ago. It's the first time that institutions have lodged more than 1 billion euros for seven consecutive days."

Treasury bills rose and stocks declined as investors shunned all but the safest securities. Rates on three-month bills fell 45 basis points to 0.41 percent. The Standard & Poor's 500 Index of stocks slid 3.1 percent.

"The difference between what banks and the U.S. Treasury pay to borrow money for three months, the so-called TED spread, rose to a record 355 basis points today. It was 110 basis points a month ago."

"Singapore's three-month interbank offered rate for U.S. dollars, or Sibor, increased for a third day, adding 1 basis point to an eight-month high of 3.79 percent, according to the Association of Banks in Singapore. In Hong Kong, the three-month Hibor rose 9 basis points to 3.49 percent, the Association of Banks in Hong Kong said."

To contact the reporters on this story: Gavin Finch in London at gfinch@bloomberg.net; Lukanyo Mnyanda in London at lmnyanda@bloomberg.net

"Last Updated: September 29, 2008 10:45 EDT"





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European Bond Risk Rises as Credit Crisis Prompts Bank Bailouts

By Neil Unmack

Sept. 29 (Bloomberg) -- The cost of protecting European corporate bonds from default rose after governments in the region stepped in to bail out banks as the worldwide credit crisis deepened.

"The Markit iTraxx Europe index of 125 companies with investment-grade ratings rose 9 basis points to 125, according to JPMorgan Chase & Co. prices at 11:05 a.m. in London. The Markit iTraxx Financial index of 25 European banks and insurers climbed 13.5 basis points to 134, CMA Datavision prices show."

"Fortis became the largest European financial-services firm forced into a government rescue after Belgium, the Netherlands and Luxembourg agreed to inject 11.2 billion euros ($16.1 billion) for minority stakes, while the U.K. seized Bradford & Bingley Plc, the country's biggest lender to landlords. The European Central Bank said today it will lend additional funds to banks through ``special'' auctions to ease money-market tensions."

"``There is more systemic risk in the banking system, though ultimately bailouts are happening,'' said Roger Appleyard, the London-based head of credit research at Royal Bank of Canada, that nation's largest lender. ``So equities are falling sharply, but the credit-default swaps markets are reasonably stable.''"

"Contracts on Fortis fell 250 basis points to 416.7 after the bailout, according to CMA prices. Under the agreement, Fortis will sell the Dutch banking operations of ABN Amro Holding NV it purchased last year. Default swaps on ABN rose 33 basis points to 173, CMA prices show."

High-Yield Credits

"Contracts on the Markit iTraxx Crossover Index of 50 companies with mostly high-risk, high-yield credit ratings fell 6 basis points to 585, JPMorgan prices show."

Trading began today for Markit's iTraxx Series 10 credit- default swap indexes. New indexes are created every six months as companies with different risk premiums are included.

"Credit-default swaps, contracts conceived to protect bondholders against default, pay the buyer face value in exchange for the underlying securities or the cash equivalent should a company fail to adhere to its debt agreements. An increases indicates a deterioration in the perception of credit quality and a decline signals the opposite."

"A basis point on a credit-default swap contract protecting 10 million euros of debt from default for five years is equivalent to 1,000 euros a year."

To contact the reporter on this story: Neil Unmack in London nunmack@bloomberg.net;

"Last Updated: September 29, 2008 06:13 EDT"





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"Wal-Mart's Seiyu Will Cut 350 Jobs, Close 20 Stores (Update1) "

By Maki Shiraki and Mari Murayama

"Sept. 29 (Bloomberg) -- Seiyu Ltd., the Japanese retailer bought by Wal-Mart Stores Inc., said it will cut approximately 350 jobs and close about 20 stores out of its total 390 outlets to boost profitability."

"The Tokyo-based subsidiary will also renovate 100 stores over a two-year period, it said in a statement in Tokyo today. The job cuts would make operations ``more efficient,'' the company said in a separate press release."

"Wal-Mart, the world's biggest retailer, this year took full ownership of Seiyu after its five-year investment failed to return the Japanese chain to profit. Seiyu has lost sales as larger rivals Aeon Co. and Seven & I Holdings Co. gain share amid Japan's slowing retail sales growth."

"Seiyu in February posted a loss of 20.9 billion yen ($197 million) for 2007, double its forecast, because of asset writedowns. Sales had declined 0.9 percent to 952 billion yen from a year earlier."

"Sales at Japan's department stores and supermarkets fell last month. Isetan Mitsukoshi Holdings Ltd., the nation's largest department-store operator, has said it will close unprofitable outlets next year as sales slump."

"Household spending probably dropped for a sixth month in August, according to the median estimate of economists surveyed by Bloomberg News. Consumer prices gained 2.4 percent in August. Wages rose 0.3 percent in July, the slowest pace this year."

Retail sales climbed 0.7 percent from a year earlier after rising a revised 2 percent in July. The median estimate of 18 economists surveyed by Bloomberg was for a 0.2 percent gain.

The fastest inflation in a decade is forcing consumers to tighten their purse strings as costlier food and gasoline leave them less to spend on non-essentials. Some economists say the world's second-largest economy is already in a recession and the slowdown may deepen as consumers cut back and exports wane.

To contact the reporter on this story: Mari Murayama in Tokyo at mmurayama@bloomberg.net

"Last Updated: September 29, 2008 05:43 EDT"





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"Oil, Metals, Crops Fall on Concern U.S. Bailout Plan May Fail "

By Grant Smith

"Sept. 29 (Bloomberg) -- Commodities fell, led by oil, copper and lead, on concern the U.S. plan to spend $700 billion propping up America's banks won't unlock credit markets and avert a slowdown in the world's largest economy."

"Crude oil slumped more than $6, while declines of more than 2 percent among copper, lead, corn, silver and rice, led the S&P Goldman Sachs Commodity Index to a 3.2 percent decline. Negotiations between U.S. Treasury Secretary Henry Paulson and leaders in Congress to push through an agreement didn't stop borrowing costs soaring in Europe, where bank failures caused the single currency to plummet."

"``The fear is that the rescue package is not enough to stop the economy falling into a full-blown recession,'' said Eugen Weinberg, a commodity analyst at Commerzbank AG in Frankfurt. ``And as people fear that problems outside the U.S. might be even worse, we see the euro weaken and remove support for commodities.''"

"Crude oil for November delivery declined as much as $6.08, or 5.7 percent, to $100.81 a barrel in electronic trading on the New York Mercantile Exchange. The contract was at $101.08 a barrel at 2:14 p.m. in London."

Stronger Dollar

"The euro fell as much as 2.1 percent to $1.4302 and traded at $1.4381, compared with $1.4614 on Sept. 26. A stronger dollar makes commodities more expensive for buyers outside the U.S., potentially weakening demand."

"Silver for immediate delivery declined 3.7 percent to $12.81 an ounce. Lead for delivery in three months declined 2.7 percent to $1,960 a ton."

"U.S. lawmakers are reviewing a tentative agreement to revive credit markets through the bailout package, which may be voted on by the House tomorrow, House Speaker Nancy Pelosi said. President George W. Bush said in a speech Sept. 27 that the package was needed to prevent a ``deep and painful recession.''"

"Corn for December delivery fell as much as 17 cents, or 3.1 percent, to $5.26 a bushel in after-hours electronic trading on the Chicago Board of Trade and was at $5.27 by 2:03 p.m. London time."

"Soybeans for November delivery lost as much as 33.5 cents, or 2.9 percent, to $11.305 a bushel and last traded at $11.3675 by 2:02 p.m. London time."

"Rice futures for November delivery fell 30.5 cents, or 1.5 percent, to $19.58 per 100 pounds on the Chicago Board of Trade."

"``Even if the Troubled Asset Rescue Plan is passed, that doesn't necessarily mean there aren't any obstacles on the road to economic recovery,'' said David Moore, a commodity strategist at Commonwealth Bank of Australia in Sydney. ``There are worries about the outlook for the international economy.''"

"U.S. fuel demand averaged 19.5 million barrels a day during the past four weeks, the lowest since October 2003, the Energy Department said in a Sept. 24 report. New home sales in the U.S. fell in August to a 17-year low and orders for durable goods dropped more than forecast, government reports showed Sept. 25."

To contact the reporters on this story: Grant Smith in London at gsmith52@bloomberg.net

"Last Updated: September 29, 2008 09:16 EDT"





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U.K. Stocks Decline After Government Seizes Bradford & Bingley

By Sarah Jones

"Sept. 29 (Bloomberg) -- U.K. stocks retreated, led by banks as the government seized Bradford & Bingley Plc, Britain's biggest lender to landlords, after the credit crisis shut off funding."

Royal Bank of Scotland Group Plc and HBOS Plc slumped at least 8.7 percent. Man Group Plc dropped after the hedge-fund manager said earnings will be lower than a year earlier.

"The benchmark FTSE 100 index declined 97.56, or 1.9 percent, to 4,990.91 at 8:33 a.m. in London as all but 12 stocks retreated. The FTSE All-Share Index dropped 1.9 percent and Ireland's ISEQ Index fell 4.5 percent to the lowest since 1997."

The U.K. government seized the lender after the credit crisis shut off funding and competitors refused to buy mortgage loans that customers are struggling to repay. The shares were suspended this morning.

"Spain's Banco Santander SA will pay 612 million pounds ($1.1 billion), including a transfer of 208 million pounds of capital, to buy Bradford & Bingley's branches and deposits."

"Royal Bank of Scotland, the U.K.'s second-biggest bank by market value, fell 8.7 percent to 190 pence. HBOS, the mortgage bank being acquired by Lloyds TSB Group Plc, declined 9.1 percent to 157.60 pence."

"Man Group tumbled 5.8 percent to 352 pence. The largest publicly traded hedge-fund manager said first-half earnings per share will be 5 percent lower than a year earlier after a drop in performance fees from its largest fund, AHL Diversified Plc."

"Assets under management fell to $70.3 billion from $74.6 billion. Net performance fees will be 40 percent lower than a year earlier after AHL ceded gains, the company said."

To contact the reporter on this story: Sarah Jones in Copenhagen at sjones35@bloomberg.net;

"Last Updated: September 29, 2008 03:40 EDT"





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"French Stocks: Alstom, Dexia, EADS, Renault, TF1 and Umanis "

By Alexis Xydias

"Sept. 29 (Bloomberg) -- France's CAC 40 Index lost 135.38, or 3.3 percent, to 4,028 as of 9:48 a.m. in Paris, extending last week's 3.7 percent decline. The SBF 120 Index slipped 3.1 percent today."

The following shares rose or fell in the local market. Stock symbols are in parentheses.

"Alstom SA (ALO FP), whose power stations generate a fifth of the world's electricity, fell 3.23 euros, or 5.5 percent, to 55.38, a fifth decline. German rival Siemens AG may face a ``certain slowdown'' in the growth of its orders in the coming months as the economy falters, Siemens' Chief Executive Officer Peter Loescher told Les Echos in an interview."

"BNP Paribas SA (BNP FP) fell 3.12 euros, or 4.6 percent, to 65.14. Societe Generale SA (GLE FP) slipped 4.54 euros, or 7 percent, to 60.50. Credit Agricole SA (ACA FP) lost 1.27 euros, or 8.8 percent, to 13.13. France's three largest traded banks fell with financial shares across Europe after Fortis of Belgium had to be bailed out by governments and the U.K. seized Bradford & Bingley Plc, the latest casualties of strained money markets and falling investor confidence."

"Dexia SA (DX FP), the world's biggest lender to local governments, tumbled 2.25 euros, or 22 percent, to 7.82 euros. The bank may announce it will raise capital from its largest shareholders to bolster its finances, Le Figaro reported, citing unidentified people."

Dexia spokeswoman Ulrike Pommee declined to comment on the report when contacted by Bloomberg News.

"European Aeronautic, Defence &Space Co. (EAD FP), Airbus's parent company, added 9 cents, or 0.7 percent, to 13.17 euros. The planemaker is poised to sign a 280-aircraft order with Chinese airlines before the Lunar New Year in January 2009, Airbus Chief Commercial Officer John Leahy said."

"Renault SA (RNO FP) dropped 72 cents, or 1.5 percent, to 46.61 euros, following last week's 7.4 percent retreat. France's second-largest carmaker was cut to ``underperform'' from ``outperform'' by analysts at Credit Suisse Group AG, who said the company will fail to meet targets as key products and markets disappoint."

"Societe Francaise Television 1 (TFI FP), owner of France's most-watched TV channel, declined 29 cents, or 2.3 percent, to 12.58 euros, a fourth straight loss. The stock was cut to ``sell'' from ``neutral'' at Goldman, Sachs & Co. The brokerage reviewed its recommendations on Europe's media industry to reflect ``worsening cyclical outlook and greater debt concerns,'' it wrote in a report distributed to investors today."

"Umanis SA (UMS FP) plummeted 5 cents, or 10 percent, to 43 cents, the steepest decline since January 2005. The computer consulting company said first-half profit fell to 701,000 euros ($1 million) from 1.07 million euros a year earlier."

To contact the reporter on this story: Alexis Xydias in London at axydias@bloomberg.net.

"Last Updated: September 29, 2008 04:09 EDT"





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Brazil Lending Growth to Slow as Credit Crunch Widens (Update2)

By Telma Marotto

Sept. 26 (Bloomberg) -- Brazilian bank lending growth may slow as the spreading global credit crunch increases the expense of raising capital while the local central bank increases borrowing costs.

"Lending continued to rise in August before the rout on Wall Street, expanding 2.3 percent from the previous month to 1.11 trillion reais ($598.9 billion), the central bank said today. Lending may rise 24 percent this year, according to a survey of 26 banks by the Brazilian Banks Federation -- slower than the 27.8 percent growth rate for 2007, which was the biggest increase in 12 years. Economists estimate the rate will fall in 2009 to 19.3 percent, which would be slowest pace since 2003."

"``The picture is much more worrisome than some people are painting,'' said Fernando Meibak, founder of Sao Paulo-based Sunrise Investments, an alternative investments broker. ``A violent constraint of credit will hit Brazilian economic activity in an intense way.'' Meibak, who worked in the banking industry for more than 30 years, is the former chief executive officer of HSBC Investments in Brazil."

"Lending in Brazil expanded more than 20 percent annually since 2004, a year after President Luiz Inacio Lula da Silva took his post pledging to stimulate economic growth, create jobs and fight inflation. The increase was driven by a decline in the benchmark lending rate to 13.75 percent from 25 percent when he took office. Job creation and higher wages also contributed to credit expansion."

"Loans grew 31.8 percent for the 12 months ending in August, representing 38 percent of the country's gross domestic product, compared with 37.2 percent in July and 32.8 percent in the same month last year. The increase in auto loans eased while corporate lending was pushed by companies seeking working capital, the central bank said."

Less Lending in September

"``Lending rose last month pushed by companies which are getting loans for working capital, or investments and other plans,'' said Altamir Lopes, head of the central bank's economic research department, told reporters in Brasilia. ``Loans for individuals are slowing as they may have reached a limit.''"

"The U.S. financial turmoil is reducing loans on offer in September, Lopes said. External funding for corporate loans dropped 2.6 percent in the Sept. 1-Sept. 15 period compared to last month, because of the lower supply of credit abroad, Lopes said."

"The price larger Brazilian companies are paying to raise money has risen to about 2 percent a year above the local interbank rate, up from 0.4 percent six months ago, Meibak said, as a result of the collapse of the U.S. subprime-mortgage market last year, which caused financial institutions around the world to post $523 billion in losses and writedowns on assets."

`Putting on the Brakes'

"In an attempt to compensate for the effects of the U.S. credit crunch, the central bank on Sept. 24 delayed the introduction of higher rates for mandatory deposits from leasing companies by two months and raised the threshold on exemptions for cash, time and savings deposits. The measures will add 13.2 billion reais ($7.16 billion) to the financial system, the central bank said."

"``The central bank is probably receiving signs that the banks are putting on the brakes more than it expected,'' said Andre Caminada, partner at Victoire Finance Capital in Sao Paulo, which manages about $130 million in assets."

Auto Loans

"Auto loans were one of the main drivers pushing bank lending higher. At Banco Itau Holding Financeira SA, Brazil's second-biggest non-government bank by assets, this segment grew 62 percent in the second quarter, while at bigger rival Banco Bradesco SA it expanded 49 percent."

"This type of credit may slow as car sales cool. Domestic vehicle sales -- which expanded 33 percent in July -- grew 4 percent in August, the slowest pace in almost two years. The drop shows that government measures to cool the economy and lower inflation from a 3-year high of 6.4 percent are starting to take hold. Central bankers raised the benchmark lending rate four times since April to 13.75 percent from a record low of 11.25 percent."

"The average annual interest rate Brazilian banks charge customers rose to 40.1 percent from 39.4 percent in July, the central bank said. The default rate on personal loans increased to 7.5 percent from 7.3 percent in the previous month."

To contact the reporters on this story: Telma Marotto in Sao Paulo at tmarotto1@bloomberg.net

"Last Updated: September 26, 2008 13:38 EDT"





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European Sentiment Drops to Lowest Since 2001 Attacks (Update1)

By Fergal O'Brien

Sept. 29 (Bloomberg) -- European confidence in the economic outlook fell to the lowest since the slump in the wake of the Sept. 11 terrorist attacks after a global credit squeeze claimed U.S. and European institutions and sent stocks plummeting.

"An index of executive and consumer sentiment dropped to 87.7 in September from 88.5 in August, the European Commission in Brussels said today. That is the lowest since the index fell to 86.6 in November 2001. Economists had forecast the indicator would drop to 87.3 this month, according to the median estimate of 33 economists surveyed by Bloomberg News."

"Tightening credit is threatening to undermine European economic growth by shutting off funding for companies and households. The yearlong global credit squeeze, which has intensified since the commission survey was taken, pushed the U.S. to put together a $700 billion bank-rescue package and prompted European governments to step in and help Bradford & Bingley Plc, Fortis and Hypo Real Estate Holding AG."

"``Everybody's focused on what's been happening in Washington, but now people should take stock that the crisis is hitting Europe,'' said Aurelio Maccario, chief euro-area economist at Unicredit MIB in Milan. ``We are hitting the bottom of the economic cycle, but the recovery, contrary to what the European Central Bank thinks, will be slow and shallow.''"

"The euro plunged as much as 2.1 percent to $1.4308 against the dollar, the most in more than seven years, after the bailout of Fortis, and was at $1.4342 as of 10:55 a.m. in London. The Dow Jones Stoxx 600 Index fell 3.2 percent."

Stagnating Economy

"Europe's economy may stagnate for the remainder of this year after shrinking in the second quarter, the commission forecast earlier this month. September retail sales fell for a fourth straight month, the Bloomberg purchasing managers index showed today."

Euro-area manufacturing and services contracted for a fourth month in September and national surveys last week showed business confidence declined in the region's three biggest economies. Ireland last week became the first euro-area economy to slide into a recession and the commission has forecast that Germany and Spain will soon follow.

"Renault SA, France's second-largest carmaker, this month said it will cut 4,000 jobs in the country to make up for soaring raw-material costs and flagging European auto markets."

"In Europe's financial industry, governments in Belgium, the Netherlands and Luxembourg threw an 11.2 billion-euro ($16.3 billion) lifeline to Fortis and the U.K. Treasury seized Bradford & Bingley Plc, Britain's biggest lender to landlords."

Interest Rates

"Even as growth cools, the ECB is resisting lowering interest rates as it seeks to cool inflation. Policy makers will hold the benchmark rate at a seven-year high of 4.25 percent at a meeting in Frankfurt on Oct. 2, according to all 58 economists in a Bloomberg survey."

"``While the ECB seems certain to acknowledge the heightened downside risks to the euro-zone growth outlook stemming from the financial-sector crisis,'' the central bank is ``unlikely to indicate that an interest-rate cut is likely in the near term,'' said Howard Archer, chief European economist at Global Insight Inc. in London."

"While it has left interest rates on hold, the ECB has worked with other central banks to improve liquidity in the banking system. The ECB said today it will offer banks money for 38 days."

Ryanair Forecast

"Within the index, a gauge of confidence among euro-area manufacturers fell to minus 12 this month from minus 9 in August. Sentiment in the services and construction industries also declined, while consumer confidence was unchanged."

"The decline in energy prices in the last two months may provide some relief for Europe's businesses and consumers. Ryanair Holdings Plc, Europe's biggest discount carrier, said on Sept. 18 it will break even this fiscal year following the recent decline in oil. It had previously given guidance for a result between breakeven and a 60 million-euro loss."

"Crude oil was at $105 a barrel today, down more than 28 percent from its July 11 record of $147.27. The decline has prompted companies and consumers to scale back their predictions for price growth in the euro area. A gauge of company selling- price expectations fell to 12 in September from 17 in August, while consumers' outlook for prices dropped to 17 from 22."

"``The one consolation is that consumer inflation expectations fell sharply for a second month running,'' said Jennifer McKeown, an economist at Capital Economics in London. ``While the ECB will be fairly hawkish this week, such evidence should ensure that its tone softens soon, allowing interest rates to fall to 3 percent next year.''"

"The confidence survey was conducted in the first two weeks of September and the index may not reflect changes in sentiment from ``significant recent events,'' the commission said."

To contact the reporter on this story: Fergal O'Brien in Dublin at fobrien@bloomberg.net.

"Last Updated: September 29, 2008 06:10 EDT"





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"Southeast Asia, India Growth Forecasts Cut by Morgan Stanley "

By Stephanie Phang

"Sept. 29 (Bloomberg) -- India's and Southeast Asia's economies will grow at a slower pace than earlier forecast as a global credit crunch hurts international trade and capital flows, Morgan Stanley said."

"Southeast Asian economies will probably expand 5.4 percent this year, down from a previous estimate of 5.6 percent, the Morgan Stanley economists said. Growth may cool to 4.1 percent next year, less than an earlier prediction of 5.1 percent."

"``The deterioration in market conditions in the last two weeks, some 14 months since the subprime crisis first began, indicates a bottom is likely still some way off,'' Morgan Stanley economists Chetan Ahya, Deyi Tan and Shweta Singh wrote in a note published today. ``We expect the growth cycle to bottom in the first half of 2009.''"

"Asian policy makers are predicting a deepening slowdown in their economies as demand from the U.S., Europe and Japan weakens amid turmoil in global financial markets. Singapore will probably slip into a recession this quarter for the first time since 2002, DBS Group Holdings Ltd. and United Overseas Bank Ltd. said last week."

"Morgan Stanley cut its forecast for India's 2009 economic growth to 6.4 percent from 6.9 percent, saying the credit squeeze will crimp consumption and business spending."

"``In line with the deterioration in the global capital market environment, capital inflows into India have declined over the last six months,'' economists Ahya and Tanvee Gupta said in the report."

"In Southeast Asia, capital inflows are slowing, commodity exports are easing and domestic demand is faltering, Morgan Stanley said. Singapore's property projects have cooled, and Thailand and Malaysia lack the political stability needed to implement measures to spur economic growth, they said."

The global credit crunch triggered by a housing slump in the U.S. led Lehman Brothers Holdings Inc. to file for bankruptcy and forced the sale of Merrill Lynch & Co. to Bank of America Corp. this month.

To contact the reporter on this story: Stephanie Phang in Singapore at sphang@bloomberg.net

"Last Updated: September 28, 2008 23:41 EDT"





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Japan's 10-Year Government Bonds Fall as Rescue Plan Nears Vote

Sept. 29 (Bloomberg) -- Japan's bonds fell after President George W. Bush and congressional leaders said they reached an agreement on a $700 billion plan to revive credit markets.

Ten-year yields reached the highest in a week after Senate Majority Leader Harry Reid said the House of Representatives may consider the plan today and the Senate will vote by Oct. 1. The Bank of Japan added 1.9 trillion yen ($17.9 billion) to the financial system today to help ease a global credit crunch.

"``The market is reacting to the U.S. rescue plan,'' said Tatsuo Ichikawa, a senior strategist in Tokyo at RBS Securities Japan Ltd., one of the 24 primary dealers required to bid at government auctions. ``It is an important first step to see the injection of public money into financial institutions.''"

"Yields on 1.5 percent government bonds due September 2018 rose 2.5 basis points to 1.485 percent at 4:48 p.m. in Tokyo at Japan Bond Trading Co., the nation's largest interdealer debt broker. The price fell 0.218 yen to 100.130 yen. The yield earlier touched 1.5 percent, the highest since Sept. 23."

Five-year yields added half a basis point to 1.1 percent. A basis point is 0.01 percentage point. Ten-year bond futures for December delivery lost 0.20 to 137.00 at the close in Tokyo.

"The U.S. rescue plan would give Treasury Secretary Henry Paulson an immediate $250 billion to buy bad loans from financial companies, with the rest to be doled out in stages. The scheme would also expand the Federal Reserve's power to manage short-term interest rates."

"``I am confident this legislation gives us the flexibility to unclog our financial markets,'' Paulson said in a statement after congressional leaders released a draft of the bill. The measure will ``increase the ability of our financial institutions to deliver the credit that will help create jobs.''"

Rate Cut Odds

"The decline in bonds was limited before a Bank of Japan survey this week, which will probably show sentiment among large manufacturers declined to the lowest in five years. The report is likely to add to speculation the central bank will reduce interest rates this year to boost the faltering economy."

"``The Bank of Japan will examine cutting interest rates should the possibility of deterioration increase,'' said Eiji Dohke, chief strategist at UBS Securities Japan Ltd. in Tokyo."

"The Tankan index of manufacturer confidence fell to minus 2 points in September, from 5 in June, according to the median estimate of 28 economists surveyed by Bloomberg News before the Oct. 1 report."

"There is a 3 percent chance the Japanese central bank will lower borrowing costs to 0.25 percent from 0.5 percent by year- end, according to calculations by JPMorgan Chase & Co. using overnight interest-rate swaps."

"The BOJ had pumped about 15 trillion yen into the system over the past two weeks, the most in at least six years."

`Increase Liquidity'

"``The BOJ has to increase liquidity,'' said Alessio Caldarera, a bond strategist at BNP Paribas Securities Japan Ltd. in Tokyo. ``If the U.S. plan is approved, they may scale back the injection as the problem is not locally originated.''"

"Japan's overnight call loan rate fell to 0.4 percent after the operation at 12:50 p.m. in Tokyo, from 0.525 percent on Sept. 26, according to Tokyo Tanshi Co."

Demand for bonds also fell on concern a higher inflation rate will erode the value of the fixed interest debt pays.

"A government report on Sept. 26 showed Japan's inflation exceeded 2 percent for a second consecutive month. Core consumer prices, excluding fresh food, rose 2.4 percent in August from a year earlier, the same pace as July."

"Japanese 10-year yields are likely to rise to 1.54 percent by Dec. 31, according to a Bloomberg News survey of economists and analysts. The estimate puts a heavier weighting on more recent forecasts."

To contact the reporter on this story: Theresa Barraclough in Tokyo at tbarraclough@bloomberg.net.





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European Bond Risk Rises as Credit Crisis Prompts Bank Bailouts

Sept. 29 (Bloomberg) -- The cost of protecting European corporate bonds from default rose after governments in the region stepped in to bail out banks as the worldwide credit crisis deepened.

"The Markit iTraxx Europe index of 125 companies with investment-grade ratings rose 5 basis points to 121, according to JPMorgan Chase & Co. prices at 2:22 p.m. in London. The Markit iTraxx Financial index of 25 European banks and insurers climbed 14.5 basis points to 135, CMA Datavision prices show."

"``The crisis is coming to Europe, and the banking system is not well prepared,'' said Philip Gisdakis, a Munich-based credit analyst at UniCredit SpA. ``It's coming at a time when sentiment is already weak and capital is low.''"

"Fortis became the largest European financial-services firm forced into a government rescue after Belgium, the Netherlands and Luxembourg agreed to inject 11.2 billion euros ($16.1 billion) for minority stakes, while the U.K. seized Bradford & Bingley Plc, the country's biggest lender to landlords. The European Central Bank said today it will lend additional funds to banks through ``special'' auctions to ease money-market tensions."

"Contracts on Fortis fell 246 basis points to 421 after the bailout, according to CMA prices. Under the agreement, Fortis will sell the Dutch banking operations of ABN Amro Holding NV it purchased last year. Contracts on ABN rose 33 basis points to 173, CMA prices show."

"Default swaps on Dexia SA, the world's biggest lender to local governments, rose 46 basis points to 506 after Le Figaro said it may soon announce a plan to raise capital to reassure markets, CMA data show. Royal Bank of Scotland Group Plc, the U.K.'s second-largest bank, increased 68 basis points to 293, according to CMA prices."

High-Yield Credits

"Contracts on the Markit iTraxx Crossover Index of 50 companies with mostly high-risk, high-yield credit ratings fell 9 basis points to 582, JPMorgan prices show."

"``There is more systemic risk in the banking system, though ultimately bailouts are happening,'' said Roger Appleyard, the London-based head of credit research at Royal Bank of Canada, that nation's largest lender. ``So equities are falling sharply, but the credit-default swaps markets are reasonably stable.''"

"Credit-default swaps on Iceland government debt rose 176 basis points to a record 571 after the government said it will buy a 75 percent stake in Glitnir Bank hf, the nation's third- biggest lender, according to CMA."

North American Risk

"Contracts on the Markit CDX North America Investment Grade Index of 125 companies in the U.S. and Canada fell 1.5 basis points to 162 basis points, according to broker Phoenix Partners Group."

"Citigroup Inc., the biggest U.S. bank by assets, agreed to buy the banking operations of Wachovia Corp., the Charlotte, North Carolina-based lender beset by mortgage losses. The U.S. House of Representatives today will debate a $700 billion plan backed by the Bush administration to revive the financial system, heading toward passing the legislation in Congress this week."

Trading began today for Markit's iTraxx Series 10 credit- default swap indexes. New indexes are created every six months as companies with different risk premiums are included.

"Credit-default swaps, contracts conceived to protect bondholders against default, pay the buyer face value in exchange for the underlying securities or the cash equivalent should a company fail to adhere to its debt agreements. An increase indicates a deterioration in the perception of credit quality and a decline signals the opposite."

"A basis point on a credit-default swap contract protecting 10 million euros of debt from default for five years is equivalent to 1,000 euros a year."

To contact the reporter on this story: Neil Unmack in London nunmack@bloomberg.net;





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Junk Bond Spreads Are Distressed for First Time in Six Years

By Alan Goldstein and Bryan Keogh

Sept. 27 (Bloomberg) -- Yields on speculative-grade bonds rose to distressed levels for the first time since 2002 as the turmoil sweeping Wall Street led investors to shun all but the safest government bonds.

"Investors demand 10.25 percentage points more in yield to own junk-rated securities than Treasuries, according to Merrill Lynch & Co.'s U.S. High Yield Master II index. Bonds that trade at a so-called spread of 10 percentage points or more are considered distressed."

"The last time spreads were so wide was in the aftermath of Enron Corp.'s collapse earlier this decade. Now, a slowing economy and failures of some of the largest U.S. financial institutions are driving investors away. Distressed bonds default within one year 22 percent of the time, compared with 1 percent for non-distressed junk bonds, according to Fridson Investment Advisors in New York."

"``Any credit perceived as exhibiting a higher level of default risk is at risk of significant price depreciation,'' Peter Acciavatti, a credit strategist at JPMorgan Chase & Co. in New York, wrote in a report yesterday. Acciavatti was the top- ranked high-yield strategist in Institutional Investor magazine's annual poll."

"High-yield spreads have climbed 1.89 percentage point this month, the steepest monthly rise since September 2001, as the government seized the two largest U.S. mortgage-finance companies, Fannie Mae and Freddie Mac; Lehman Brothers Holdings Inc. was forced to file for bankruptcy; Merrill Lynch agreed to sell itself to Bank of America Corp.; American International Group Inc., the nation's biggest insurer, was taken over by the Treasury; and Washington Mutual Inc. was seized by regulators in the biggest U.S. bank failure in history."

Rescue Plan

Congressional leaders pressed toward a deal on a $700 billion financial rescue plan proposed by Treasury Secretary Henry Paulson. President George W. Bush said yesterday any disagreements would be resolved.

"High-yield, high-risk, or junk, bonds are rated below Baa3 by Moody's Investors Service and BBB- by Standard & Poor's."

"Financial industry failures are causing ``massive'' amounts of debt to be downgraded, S&P said in a report yesterday."

"``Although credit-quality erosion can be expected during cyclical downturns, the enormity of debt amounts affected is disconcerting,'' Diane Vazza, the head of S&P's fixed income research group in New York, said in a statement."

Default Rate

"The default rate among high-yield, high-risk, non-financial borrowers may rise to 23.2 percent by 2010, the highest since 1981, S&P said in a report Sept. 25. The ``worst-case scenario'' estimate suggests 353 junk-rated borrowers outside the financial sector may default in the next two years, S&P said."

"Spreads on junk bonds widened 38 basis points yesterday, according to the Merrill high-yield index. A basis point is 0.01 percentage point."

"Yields over benchmark rates on investment-grade bonds also widened yesterday, climbing 23 basis points to a record 459 basis points, according to Merrill's U.S. Corporate Master index."

"High-yield new issuance this month has fallen to $845 million, from $5.9 billion in the same month last year, according to data compiled by Bloomberg. Since Aug. 1, seven issuers have tapped the high-yield market."

To contact the reporters on this story: Alan Goldstein in New York at agoldstein5@bloomberg.net; Bryan Keogh in New York at bkeogh4@bloomberg.net

"Last Updated: September 27, 2008 00:01 EDT"





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Copper Goes From First to Worst as Economies Slow (Update3)

By Millie Munshi

Enlarge Image/Details

"Sept. 29 (Bloomberg) -- Copper, the best-performing industrial metal in 2007, may end this year as a loser for the first time since 2001."

"The metal, used for electrical wire and water pipes, may drop 11 percent to $2.75 a pound in New York by Dec. 31 as demand from the housing industry declines, said Michael Pento, who helps oversee $1.5 billion at Delta Global Advisors in Holmdel, New Jersey. Copper gained about 30 percent annually on average for the past six years as mines from Chile to Australia struggled to keep pace with consumption in Asia."

"Builders use about 400 pounds of copper in a typical U.S. home, so prices may fall more than other industrial metals because the housing market is collapsing. Sales of new U.S. homes fell to a 17-year low last month, the Commerce Department said Sept. 25. Copper dropped 3.2 percent to $3.0745 a pound on the Comex division of the New York Mercantile Exchange last week, making it the biggest loser on the Reuters/Jefferies CRB Index of 19 commodities for the first time since December."

"``People realize that our worst fears about the economy are true, and there's going to be very little demand'' for copper, said William O'Neill, a partner at Logic Advisors in Upper Saddle River, New Jersey. ``For gold, and other commodities, people are focusing on this `flight to a safe haven' idea in our financial crisis.''"

Copper Turnaround

"Copper rallied 26 percent in the first quarter, more than any other metal on the CRB index, and reached a record $4.2605 on May 5. The price fell 32 percent since then as U.S. growth faltered and prospects for a rebound were eroded by the failure of banks saddled with subprime mortgage loans. Copper will average $3.28 next year, $2.875 in 2010 and continue its slide through 2012, according to 12 analysts surveyed by Bloomberg."

"Copper futures for December delivery plunged 5.5 percent to $2.9065 today in New York, the first time the metal has fallen below $3 this year. The metal is down 14 percent in September, poised for its worst month since June 1996, and is headed for its biggest quarterly decline ever."

"Aluminum fell 2 percent to $2,441 a metric ton on the London Metal Exchange, while zinc slid 4.4 percent to $1,692 a ton. Platinum declined 2.9 percent to $1,090 an ounce in London over-the-counter trading."

"Economists expect U.S. growth to slow to 1.5 percent next year from 1.7 percent in 2008, according to surveys compiled by Bloomberg."

Financial Bailout

"Government proposals to rescue financial institutions helped gold, not copper. Treasury Secretary Henry Paulson introduced a $700 billion bailout plan on Sept. 19, seeking to revive credit markets through the government purchase of troubled financial assets. The U.S. House of Representatives today voted down the proposal backed by the Bush administration and congressional leaders of both parties."

"Gold gained 20 percent since Sept. 11, including a 0.7 percent gain today, as investors sought alternatives to equities and bet the bank rescue will both increase government borrowing and inflation. Economists estimate consumer prices will rise 4.5 percent this year, the fastest since 1990."

"The price of gold gained 2.8 percent last week to $888.50 an ounce, and silver surged 8.2 percent to $13.503 an ounce."

"``The fact that we need a bailout is pretty indicative of the fact that the economy isn't sound,'' said Pento, who correctly forecast rallies in gold and oil after Paulson made his proposal. ``Base metals are not my favorite play. I'm using this opportunity to accumulate precious metals and energy.''"

Metals Outlook

"Philip Roberts, the chief European technical strategist at Barclays Capital in London, said copper may drop 11 percent on the London Metal Exchange to $6,000 a metric ton ($2.72 a pound) by the end of the year, and gold may top $1,000 in the next month or two. Logic Advisor's O'Neill forecast copper at $2.90 a pound in the next two months."

"As copper fell last week and the MSCI World Index of stocks dropped 2.8 percent, the CRB rose 1.4 percent, the first gain since Aug. 22, led by sugar, crude oil, cocoa and soybeans."

"Copper last had an annual decline in 2001, when a U.S. recession cut demand from manufacturers and stockpiles monitored by the LME were heading to a record high. LME inventories jumped 81 percent since the start of May and reached a 19-month high of 209,800 tons on Sept. 19."

"The government's attempt to cleanse banks of bad mortgages won't stem the slide in home prices, said Robert Toll, chief executive officer of Toll Brothers Inc., the world's largest luxury homebuilder."

"Toll reported its fourth straight quarterly loss this month as builders grappled with the worst housing decline since the Great Depression. While new construction stalled, sales are falling even faster, leaving 10.9 months of supply compared with 10.3 months in July, government data show."

"Rescue, Revival"

Not everyone expects copper to drop.

"Tim Mercer, the chief investment officer at Hong Kong-based hedge fund Musashi Capital Ltd., said the rescue plan may revive copper along with other commodities because the government's cash infusion is ``potentially enormously inflationary.''"

"Investors buy raw materials as a hedge when the dollar weakens and inflation increases, Mercer said. The CRB index surged to its highest ever on July 3 as the U.S. currency sank toward a record low against the euro. When the dollar rebounded 12 percent in the next 10 weeks, the CRB dropped 25 percent."

"Paulson's plan also may help copper by freeing up credit markets and setting the stage for a revival of investment and economic growth, said Donald Selkin, chief market strategist at National Securities Corp. in New York."

Gold Versus Copper

"``If they do what they say they're going to do, and we don't have this credit issue hanging over everyone's head, that means business can expand,'' Selkin said. ``No, it won't put a bottom in for housing, but it could stabilize commercial demand for copper.'' Gold is still a ``better bet'' than copper, he said."

"Gold will gain as the bailout plan weakens the dollar and fuels inflation, said Brian Hicks, who helps manage $1.5 billion at U.S. Global Investors in San Antonio. The U.S. Dollar Index has dropped 1.4 percent since Sept. 18, the day before Paulson introduced the plan."

"``If I had to allocate new money, it would be more on the gold front and not toward any of the base metals,'' Hicks said. ``We've seen copper demand come down, and that will probably continue. Some of the reasons to be bearish on copper are the reasons to like gold. We're at a point where gold will outperform.''"

To contact the reporter on this story: Millie Munshi in New York at mmunshi@bloomberg.net.

"Last Updated: September 29, 2008 17:58 EDT"





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European Options Index Rises to 8-Month High After Bailouts

By Gareth Gore

"Sept. 29 (Bloomberg) -- The benchmark index for European options rallied to an eight-month high after Belgium, the Netherlands and Luxembourg agreed to bail out lender Fortis and the U.K. seized Bradford & Bingley Plc."

"The VStoxx Index rose as much as 4.9 percent to 40.23, the highest since Jan. 23, when it closed at 40.25. The gauge was up 2.4 percent at 39.31 as of 10:40 a.m. in Frankfurt. The index measures the cost of using options as insurance against declines in the Dow Jones Euro Stoxx 50 Index, which plummeted a much as 3.5 percent today."

"Fortis, the largest Belgian financial-services firm, received a rescue after a 35 percent slump in its share price last week. Bradford & Bingley, the U.K.'s biggest lender to landlords, was seized by the government after the credit crisis shut off funding and competitors refused to buy mortgage loans that customers are struggling to repay."

"``We generally have to assume that average levels of volatility will be higher as we get the uncertainty driven by the financial-market turmoil,'' said Bernd Meyer, head of pan- European equity strategy at Deutsche Bank AG in London. ``We may see higher volatility for a little longer not least because other indicators of investors' bearishness are still not too high. Investors can become even more bearish.''"

"A poll by the American Association of Individual Investors indicates 45.74 percent of those surveyed in the weekly survey released on Sept. 25 were ``bearish,'' compared with this year's high of 59.15 percent in March. Meyer said he is surprised the gauge, which tracks investor sentiment on the stock market for the next six months, isn't more bearish."

"Today's most-active options contracts were puts expiring in October with a strike level of 2,800 points, 11 percent below the index's close Sep. 26. European-style puts give the buyer the right to sell at a pre-agreed price on a specific date."

For Related News: Most-read derivatives news: {MNI DRV} Options news: {NI OPTIONS}

To contact the reporter on this story: Gareth Gore in Madrid ggore1@bloomberg.net

"Last Updated: September 29, 2008 05:04 EDT"





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"Asian Currencies Fall; Won, Indian Rupee Drop to Five-Year Lows "

By Anil Varma and Aaron Pan

"Sept. 29 (Bloomberg) -- Asian currencies fell, with South Korea's won and India's rupee both dropping to five-year lows, after U.S. lawmakers agreed on a $700 billion rescue package for financial companies, stoking demand for the dollar."

"The won and the rupee are Asia's worst-performing currencies this year, tumbling as a global economic slump and credit-market losses prompt overseas funds to favor safer bets than emerging-market assets. European governments bailed out Fortis, Belgium's largest financial-services company, and U.K. mortgage provider Bradford & Bingley Plc was nationalized, spurring investors to shun risk."

"``The dollar is being buoyed on the back of the bailout plan and that's undermining the won,'' said Emmanuel Ng, an economist at Oversea-Chinese Banking Corp. in Singapore. ``Risk aversion remains at elevated levels and market sentiment will remain cautious.''"

"The won slid 2.4 percent to 1,188.80 versus the dollar at the 3 p.m. local close, according to Seoul Money Brokerage Services Ltd. The currency touched 1,199.90, the weakest level since December 2003, before paring declines on speculation the government used its foreign-exchange reserves to buy won."

"``History shows that the 1,200 level is pretty crucial,'' said Katie Dean, a senior economist at Australia & New Zealand Banking Group Ltd. in Melbourne. ``When we see that sort of sharp turn in the won it normally is associated with government intervention, so I suspect that's what happened.''"

"The won's decline is overdone and the government is ready to intervene to combat its decline, a finance ministry official said today."

No Respite

"India's rupee reached 47.115 per dollar, the weakest since June 2003, before trading at 47.01, down 1 percent from late in Mumbai on Sept. 26. U.S. lawmakers may vote this week on a $700 billion bank rescue plan that would let the U.S. Treasury begin purchasing distressed debt securities from financial companies."

"``There won't be any respite for the rupee in the near term,'' said Parthasarathi Mukherjee, president of treasury at Axis Bank Ltd. ``We may see an accelerated fall in the rupee.''"

"Overseas investors have sold $9.2 billion more Indian equities this year than they bought, according to data from the Securities & Exchange Board of India. They purchased a record $17.2 billion in stocks last year, which helped the rupee complete its best annual gain in at least 34 years."

Dollar Positive

"Seven of the 10 most-active Asian currencies excluding the yen declined, according to data compiled by Bloomberg. The Philippine peso fell on speculation the U.S. bank rescue plan will help sustain growth in the world's biggest economy."

"``The dollar is stronger as the U.S. bailout plan nears approval,'' said Rafael Algarra, treasurer at Security Bank Corp. in Manila. ``It is positive for the dollar, at least in the short-term, as it restores confidence in the U.S. economy.''"

"The peso declined 0.5 percent to 46.975 per dollar, the lowest since Sept. 18, before trading at 46.970, according to Tullett Prebon Plc."

"Indonesia's rupiah fell the most in two weeks on speculation the deepening credit crisis is deterring investors. The bailout of Fortis and nationalization of Bradford & Bingley Plc, Britain's biggest lender to landlords, comes after Washington Mutual Inc. last week became the biggest U.S. bank to fail in history."

"``These kind of news typically hurt risk assets like Indonesia,'' said Euben Paracuelles, a Singapore-based economist at Royal Bank of Scotland Group Plc, the U.K.'s second-biggest bank. ``People are staying on the sidelines given that they're still waiting on the news of the potential bailout that's coming from the U.S.''"

"The rupiah declined 0.6 percent to 9,440 per dollar at 3:30 p.m. in Jakarta, according to data compiled by Bloomberg. It earlier fell as low as 9,463, the weakest since Sept. 17."

"Elsewhere, the Singapore dollar fell 0.4 percent to S$1.4336 per U.S. dollar and the Thai baht slid 0.3 percent to 34.04. The Malaysian ringgit weakened 0.3 percent to 3.4470. Vietnam's dong was unchanged at 16,600."

To contact the reporter on this story: Anil Varma in Mumbai at avarma3@bloomberg.net; Aaron Pan in Hong Kong at Apan8@bloomberg.net.

"Last Updated: September 29, 2008 05:39 EDT"





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Pound Slumps the Most Versus Dollar in 16 Years on Bank Seizure

By Agnes Lovasz

"Sept. 29 (Bloomberg) -- The pound tumbled against the dollar by the most in 16 years after the U.K. government seized Bradford & Bingley Plc, Britain's biggest lender to landlords, as the credit crisis deepened in Europe."

"The pound also dropped versus the euro as a report showed U.K. mortgage approvals fell in August to the lowest level since at least 1999 as the global credit squeeze caused banks to curb lending. The British currency was today's worst performer among its 16 major counterparts after the Belgian and German governments stepped in to rescue Fortis and Hypo Real Estate Holding AG, respectively."

"``Sterling always tumbles when we have bad news on banks,'' said Hans-Guenter Redeker, London-based global head of currency strategy at BNP Paribas SA, France's biggest lender. ``Banks are de-leveraging and the U.K. economic numbers are coming in very badly. The pound isn't going to perform in this environment.''"

"The British currency fell as much as 2.6 percent to $1.7959, the biggest intraday drop since September 1992, from $1.8445 at the end of last week, and slipped to 79.67 pence, from 79.23 pence."

"The pound will slip to $1.74 in coming months and to $1.65 in a year, Redeker predicted."

"Banco Santander SA, Spain's biggest lender, will pay 612 million pounds ($1.1 billion) for Bradford & Bingley's 197 branches and 20 billion pounds of deposits, the bank said today. Bradford & Bingley became the second U.K. bank, after Northern Rock Plc, to be nationalized this year as survivors of the global credit crunch balk at swallowing all the risks facing weaker competitors."

`Very Risky'

"``You've got Bradford & Bingley in the U.K., so the problems are not limited to the U.S., and that's weighing on sterling '' said Paul Robinson, a currency strategist in London at Barclays Capital and a former Bank of England economist. ``The world seems very risky.''"

"The U.K. currency may fall to $1.80 in coming weeks, before rallying in three months to $1.88, Robinson said. Against the euro it will hold near 80 pence in the next three months, he predicted."

"Lenders approved 32,000 loans for house purchase, down from 33,000 in July, the lowest since comparable data began nine years ago, the Bank of England said today. The value of those loans fell to 143 million pounds, the lowest since April 1993."

Property Values

"A separate report from Hometrack Ltd. showed U.K. house prices fell by the most in at least seven years in September. The average cost of a residential property in England and Wales slipped 6.2 percent in the year, the London-based research company said today. That's the biggest annual drop since the index started in 2001."

"The credit crunch has starved the housing market of loans and threatened to push the U.K. economy into a recession. In an attempt to stimulate growth, the Bank of England will lower its benchmark interest rate as soon as next month, Citigroup Inc. said on Sept. 26, revising an earlier prediction for no reduction until next year. Policy makers next meet to review rates Oct. 9."

"U.K. government bonds gained as investors sought the safest securities. The yield on the 10-year gilt dropped 10 basis points to 4.44 percent, the lowest level since Sept. 18. The 5 percent security due March 2018 rose 0.81, or 8.1 pounds per 1,000-pound face amount, to 104.26."

"The yield on the two-year note slipped 16 basis points to 4.08 percent, the lowest level since April 16. Bond yields move inversely to prices."

President George W. Bush and Congressional leaders agreed on a $700 billion plan to revive credit markets by purchasing tainted assets from banks.

"U.S. lawmakers reached agreement yesterday as House Republican leaders backed away from opposition to the proposal after it included plans to create insurance for mortgage-backed securities. The House and Senate are scheduled to vote on the bill early this week, although it wasn't clear last night that it has sufficient votes to pass the House."

To contact the reporter on this story: Agnes Lovasz in London at alovasz@bloomberg.net

"Last Updated: September 29, 2008 09:44 EDT"





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"Australia, Japan Pump In Cash to Combat Credit Freeze (Update2) "

By David Yong and Garfield Reynolds

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Sept. 29 (Bloomberg) -- Japan and Australia's central banks added more than $20 billion to money markets as agreement on a $700 billion plan to revive the U.S. financial system failed to bring down interbank lending rates.

"Singapore's benchmark rate for three-month U.S. dollar loans rose one basis point to 3.79 percent, the most in eight months. Australian funding costs held near a six-month high as banks kept a record amount of cash at the central bank. Short- term rates for loans between banks jumped in Hong Kong and Japan as Belgium and the U.K. rescued their biggest lenders."

"``When you have a global credit crisis, there's definitely counterparty risk involved in funding activities,'' said Thomas Harr, a senior currency strategist at Standard Chartered Plc in Singapore. ``If the bailout package is approved, it could help the situation somewhat as banks may become less scared of lending to each other.''"

Money-market rates are signaling banks' reluctance to lend to each other as U.S. lawmakers may vote on an emergency bill by Oct. 1 to give the Treasury as much as $700 billion to buy tainted mortgage debt from banks to unfreeze credit markets.

"Global banks chalked up $555.9 billion of writedowns tied to the collapse of U.S. subprime mortgage market, sending Lehman Brothers Holdings Inc. into the biggest bankruptcy and making Washington Mutual Inc. the largest bank failure in U.S. history. Fortis received a $16.3 billion bailout from the governments of Belgium, Netherlands and Luxembourg and the U.K. government may nationalize mortgage lender Bradford & Bingley Plc."

"Singapore's three-month interbank offered rate for U.S. dollars, or Sibor, rose 1 basis point, or 0.01 percentage point 3.79 percent, the highest since Jan. 22, according to the Association of Banks in Singapore. In Hong Kong, the three-monthHibor jumped 9 basis points to 3.49 percent, the Association of Banks in Hong Kong said. The cost reached 3.8 percent on Sept. 25, the most since December 2007."

"``Rates may still stay higher than normal because questions remain,'' said Song Seng Wun, an economist at CIMB-GK Securities Ltd. in Singapore. ``It's really now the devil in the details in the bailout package.''"

Cash Injection

"The Bank of Japan injected 1.9 trillion yen ($17.9 billion) today. It has added about 15 trillion yen to the system the past two weeks, the most in at least six years."

"Japan's overnight call loan rate stood at 0.41 percent as of 3:10 p.m. in Tokyo, from 0.525 percent on Sept. 26, according to Tokyo Tanshi Co."

"The Reserve Bank of Australia added A$2.72 billion ($2.3 billion) and has pumped in more than A$2 billion a day on average since Sept. 15, more than twice the level for the first half of this year."

"In Australia, banks had a record A$10.7 billion sitting in exchange-settlement accounts today at the Reserve Bank of Australia after the cash injection. Those accounts are on-call deposits that earn interest at 0.25 percentage point below the central bank's overnight cash target rate of 7 percent."

"``The interbank lending market has pretty much dried up so everyone is holding onto their own money,'' Joshua Williamson, a senior strategist at TD Securities Ltd. in Sydney, said in a telephone interview. ``Australia's banks are taking a wait-and- see approach toward the U.S. bailout.''"

Borrowing Costs

"Borrowing costs among Australian lenders were little changed today, holding near the highest since Bear Stearns Cos. collapsed six months ago, according to a gauge that measures the availability of funds in the market."

"The difference between the rate Australian banks charge each other for three-month loans and the overnight indexed swap rate stood at 90.50 basis points, or 0.9050 percentage point, at 2:12 p.m. in Sydney, from 91 basis points on Sept. 26, when it climbed as high as 98.5 basis points, Bloomberg data show. The gap has averaged 45 basis points this year."

"The Reserve Bank sold A$1.55 billion of term deposits, after offering A$2 billion of them, paying 6.95 percent on A$750 million of seven-day deposits and 7.02 percent on A$800 million of 14-day deposits, according to its Web Site."

To contact the reporters on this story: David Yong in Singapore at dyong@bloomberg.net; Garfield Reynolds in Sydney at greynolds1@bloomberg.net

"Last Updated: September 29, 2008 02:30 EDT"





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"Italian Stocks Update: Fondiaria-Sai, Seat Pagine, UniCredit "

By Francesca Cinelli

"Sept. 29 (Bloomberg) -- Italy's S&P/MIB Index declined the most in 1 1/2 week, losing 708, or 2.6 percent, to 26,446. Futures expiring in December dropped 820, or 3 percent, to 26,630."

The following were among the most active stocks on the Italian market today. Share symbols are in parentheses.

"Benetton Group SpA (BEN IM), Italy's largest clothes maker, fell to the lowest in about 2 1/2 months, losing 42.2 cents, or 6 percent, to 6.66 euros. The company said Chief Financial Officer Emilio Foa resigned. ``This event is certainly not welcome as Foa has been instrumental for Benetton to win back the market's trust and was well respected in his role,'' Francesca Di Pasquantonio, an analyst at Deutsche Bank, wrote in a report."

"Eni SpA (ENI IM), Italy's largest oil company, retreated 52.8 cents, or 2.7 percent, to 18.77 euros. Citigroup Inc. cut its price estimate on the stock to 26 euros from 30 euros after lowering its oil price forecast through 2009-2010 to 90 dollars a barrel."

"Fondiaria-Sai SpA (FSA IM) lost 73 cents, or 4.2 percent, to 16.59 euros. Italy's second-biggest insurer has 37 million euros of ``direct exposure'' to bankrupt Lehman Brothers Holdings Inc., Milano Finanza reported, citing Fausto Marchionni, chief executive officer of the insurer. ``The risk is quite negligible,'' Marco Cavalleri, an analyst at Banca Akros, wrote in a report. ``However it might be a reason for disappointment today'' since it wasn't previously disclosed."

"Mediaset SpA (MS IM), the television company controlled by Prime Minister Silvio Berlusconi, declined 6.5 cents, or 1.5 percent, to 4.42 euros. Goldman Sachs and Cheuvreux cut their price estimates on the stock to 5.18 euros from 5.7 euros and to 4 euros from 4.1 euros respectively. Goldman Sachs also lowered its price estimate on Seat Pagine Gialle SpA (PG IM), Italy's largest publisher of phone directories, to 8 cents from 10 cents."

"Seat shares sank to the lowest in about two months, losing 0.45 cents, or 5.7 percent, to 7.4 cents."

"Parmalat SpA (PLT IM), Italy's biggest food company, rose 2.6 cents, or 1.6 percent, to 1.66 euros on renewed speculation the company may become a target. ``Parmalat could be the focal point of financial shareholders (given the fragmented shareholder structure and in view of the potential re-leverage), and even more so once the lawsuits in the US have been resolved,'' Euromobiliare Sim analysts wrote."

"Saipem SpA (SPM IM), Europe's largest oil-field services contractor by market value, dropped 69 cents, or 3.1 percent, to 21.8 euros as crude oil fell in New York before a vote on a $700 billion U.S. bank-rescue plan amid concern the measures won't prevent an economic slowdown."

"Tenaris SA (TEN IM), the world's biggest maker of seamless steel tubes for pipelines, fell for a fifth session, losing 44.8 cents, or 3.1 percent, to 14.12 euros"

"Telecom Italia SpA (TIT IM), Italy's biggest phone company, slid 1.1 cents, or 1 percent, to 1.11 euros. Russian billionaire Vladimir Yevtushenkov's AFK Sistema is interested in buying a stake in Telecom Italia, La Stampa reported, without saying how it got the information."

HSBC lowered its price estimate on the stock to 1 euro from 1.1 euros.

"Tod's SpA (TOD IM), the Italian luxury-goods maker known for its rubber-studded Driving Shoe, declined 68 cents, or 1.8 percent, to 36.45 euros. The company wants to improve earnings by boosting sales and reducing costs, Chief Executive Officer Diego Della Valle told la Repubblica in an interview."

"UniCredit SpA (UCG IM), Italy's biggest bank, slumped to the lowest in 5 1/2 years, losing 18.9 cents, or 5.7 percent, to 3.13 euros. Merrill Lynch cut its price estimate to 4 euros from 5.4 euros."

"The lender plans to put 1.5 billion euros of securities into a structured investment vehicle to be jointly owned with a partner, Il Sole 24 Ore reported."

"Financial stocks retreated in Europe after Belgium, the Netherlands and Luxembourg bailed out Fortis, the U.K. seized Bradford & Bingley Plc and concern grew that a U.S. rescue plan won't prevent more bank failures."

To contact the reporter on this story: Francesca Cinelli in Milan at fcinelli@bloomberg.net

"Last Updated: September 29, 2008 04:21 EDT"





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"U.S. Two-Year Notes Gain as Bailout Plan Stumbles, WaMu Fails "

By Dakin Campbell

Sept. 26 (Bloomberg) -- Treasury two-year notes rose for a fifth week as investors sought the safest assets after a U.S. financial-market rescue stalled and Washington Mutual Inc. was seized by regulators.

Two-year debt extended its longest weekly winning streak since February as Washington Mutual became the biggest bank to fail in U.S. history. The Federal Reserve and European central banks said they conducted another round of coordinated action to ease money-market pressures. Lawmakers failed to reach a deal on Treasury Secretary Henry Paulson's $700 billion plan to support the banking system.

"``The fear bid is in the Treasury market and remains in the Treasury market and will not be alleviated in the short run unless we get this bailout,'' said Mark MacQueen, partner and portfolio manager in Austin, Texas, at Sage Advisory Services Ltd., which oversees $6.5 billion."

"The yield on the two-year note dropped 6 basis points, or 0.06 percentage point, to 2.10 percent at 5 p.m. in New York, according to BGCantor Market Data. The 2 percent security due in September 2010 increased 1/8, or $1.25 per $1,000 face amount, to 99 25/32. The yield has fallen 7 basis points this week and about 29 basis points in five weeks."

Ten-year note yields were little changed at 3.85 percent. They gained 4 basis points for the week.

"Treasuries pared gains as stocks rose late in the day amid growing confidence a rescue deal will be reached by the start of next week. The Standard & Poor's 500 index rose 0.3 percent. House Republicans said they will rejoin talks, and leaders of both parties vowed to keep Congress in session until a deal is reached."

`People Are Encouraged'

Former Fed Chairman Alan Greenspan urged lawmakers to back ``extensive'' measures to tackle the worst financial crisis since the 1930s.

Increased optimism late in the day helped push rates on the three-month Treasury bill up 9 basis points to 0.84 percent. They rose the most in a week yesterday amid speculation Paulson's plan would be approved by Congress. The rates plunged to an all-time low of 0.02 percent last week.

"``People are encouraged that something is going to happen,'' said Charles Comiskey, co-head of U.S. Treasury trading in New York at HSBC Securities USA Inc., one of the 18 primary dealers that trade with the U.S. central bank."

"The U.S. economy expanded at an annual rate of 2.8 percent in the second quarter, down from a preliminary estimate of 3.3 percent issued last month, a Commerce Department report showed. The Reuters/University of Michigan final index of consumer sentiment declined to 70.3 this month, lower than forecast."

`System at Risk'

"Price swings caused by the uncertainty surrounding Paulson's rescue program pushed Merrill Lynch & Co.'s MOVE index, which measures volatility on Treasury options, to 176.30 yesterday, the most since reaching an all-time high of 178.80 in January."

"Negotiations on the rescue hit a snag yesterday when House Republicans offered instead a plan calling for Wall Street firms to purchase insurance on mortgage-backed securities, and advocating tax cuts and looser regulations."

"``This is a very serious problem that goes to the heart of our financial system,'' said E. Craig Coats Jr., who co-heads fixed income at Keefe, Bruyette & Woods Inc. in New York. ``They're putting the whole system at risk.''"

"More than 150 U.S. economists, including three Nobel Prize winners, urged Congress to hold off on passing the $700 billion plan until it can be studied more closely."

JPMorgan Chase & Co. agreed to pay $1.9 billion for the deposits of Washington Mutual.

Libor Near High

"Yields on financial firms' debt have soared as investors balk at buying higher-yielding assets amid market turmoil. Morgan Stanley's 3.875 percent securities due in January 2009 yielded 32.7 percent yesterday, versus 4.07 percent two weeks ago. Goldman Sachs Group Inc.'s 6.65 percent securities due in May 2009 yielded 7.05 percent yesterday, up from 4.13 percent on Sept. 11."

"Banks have all but stopped lending to each other as they address funding needs at the end of the quarter. The European Central Bank, Swiss National Bank and Bank of England began auctioning $74 billion in one-week funding. The Fed assisted by providing the ECB and SNB with access to $13 billion more of its currency, boosting the amount of dollars it makes available to counterparts to $290 billion."

"The three-month London interbank offered rate, or Libor, that banks charge each other for dollar loans fell 1 basis point to 3.76 percent, near the highest since January. It jumped yesterday by the most since 1999."

`Increased Stress'

"The difference between what banks and the Treasury pay to borrow money for three months, the so-called TED spread, widened to 2.92 percentage points from 2.33 percentage points a week ago. The spread touched 3.13 percentage points on Sept. 18, the most since Bloomberg began compiling the data in 1984."

"If Congress fails to reach a deal by Sept. 29, ``the markets could come under increased stress,'' said Michael Pond, an interest-rate strategist in New York at primary dealer Barclays Capital Inc."

"Treasuries returned 0.24 percent this month through yesterday, putting them on course for the worst four-week performance since they lost 1.2 percent in May, according to Merrill Lynch & Co.'s Treasury Master Index. Treasuries have still outperformed benchmark notes issued by Fannie Mae and Freddie Mac, which were taken over by the government on Sept. 7 and have returned 0.16 percent in September."

To contact the reporter on this story: Dakin Campbell in New York at dcampbell27@bloomberg.net

"Last Updated: September 26, 2008 17:18 EDT"





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Treasuries Soar as House Rejects $700 Billion Bank-Bailout Plan

By Dakin Campbell and Sandra Hernandez

Sept. 29 (Bloomberg) -- Treasuries gained the most in two weeks as the House of Representatives voted down the Bush administration's $700 billion plan to rescue banks.

Investors piled into a government debt market that was already rising amid bailouts of financial institutions in the U.S. and Europe and as money markets remained locked. The rally was fueled by the biggest decline in the Standard & Poor's 500 Index since 1987.

"``This has got to be viewed as a historical turning point,'' said Jonathan Lewis, founding principal of Samson Capital Advisors LLC in New York, which manages $4.4 billion in fixed income. ``The capital markets view this no vote as a very significant negative for the financial system and the economy. Congress should look at today's price action accordingly.''"

"Two-year note yields plummeted 39 basis points, or 0.39 percentage point, to 1.71 percent at 4:26 p.m. in New York, according to BGCantor Market Data. They touched 1.63 percent. The 2 percent security maturing in September 2010 gained 3/4, or $7.50 per $1,000 face amount, to 100 18/32. Ten-year yields dropped 24 basis points to 3.61 percent."

"The decline in two-year yields was the most since Sept. 15, when Lehman Brothers Holdings Inc. declared bankruptcy and Bank of America Corp. announced it would buy Merrill Lynch & Co."

"``I would not be surprised to see the two-year go to 1.35 percent or 1.40 percent if more people believe this is not going to pass,'' said Ajay Rajadhyaksha, the head of fixed-income strategy in New York at Barclays Capital Inc."

Three-Month Bills

"Rates on three-month bills declined 55 basis points to 0.29 percent, the biggest drop since Sept. 17, when they tumbled 65 basis points and touched 0.02 percent, the lowest since World War II. The Treasury sold $26 billion of three-month bills at a high discount rate of 1.1 percent."

"The House rejected the financial-rescue plan aimed at restoring confidence in the nation's banking system, dealing a blow to the efforts of the White House and congressional leaders to contain a lending crisis. Rajadhyaksha said the package will likely be passed eventually."

"The gains extended to Europe, where yields on the 10-year German bund dropped 19 basis points and U.K. 10-year gilts fell 16 basis points. The yield on the 10-year Japanese government note advanced 2 basis points."

"Yields indicate banks are still reluctant to lend. The three-month London interbank offered rate, or Libor, for dollars climbed 12 basis points to 3.88 percent, the highest level since Jan. 18 and up from 2.81 percent a month ago."

TED Spread

"The difference between what banks and the Treasury pay to borrow for three months, the so-called TED spread, widened to 3.59 percentage points, the most since Bloomberg began compiling the data in 1984, from 1.10 percentage points a month ago. The average over the past five years is 0.56 percentage points."

"In an effort to jump-start short-term lending markets and ease the worst banking crisis since the Great Depression, the Federal Reserve flooded banks with cash. It increased its existing currency swaps with foreign central banks today to $620 billion from $290 billion to make more dollars available worldwide."

"``Liquidity is the lifeblood of the banking system, and the credit markets are the circulatory system,'' said Jeffrey Caughron, an associate partner in Oklahoma City at Baker Group, which advises community banks on investing more than $20 billion in assets. ``The hope and expectation was this bill would restore the confidence that's necessary to unclog the system.''"

"President George W. Bush will consult with lawmakers about the next step, White House spokesman Tony Fratto said."

Rate Bets

"A measure of volatility in the Treasury market reached the highest in a decade as the credit crunch continued to roil markets. Merrill Lynch & Co.'s MOVE index, which measures volatility on Treasury options, reached 183.6 on Sept. 26, the highest reading since October 1998."

"Futures on the Chicago Board of Trade show a 100 percent probability the Fed will lower its 2 percent target for overnight bank lending by at least a quarter-percentage point at its meeting on Oct. 29, compared with a 34 percent likelihood a week ago. The odds of a half-percentage point cut are 72 percent, compared with no chance a week ago."

"Stocks plunged, with the S&P 500 falling 7.3 percent. The Dow Jones Stoxx 600 Index of European shares dropped 5.5 percent."

"``If you're getting next to no return on financial assets, the relative attractiveness of Treasuries, especially when they are massively under-held, just increases,'' said Maxwell Bublitz, who oversees $3.5 billion in fixed-income assets as the chief strategist at San Francisco-based SCM Advisors LLC. Bublitz said he owns Treasuries and has not sold in the past few weeks."

Bank Bailouts

"Citigroup Inc. agreed to take over Wachovia Corp. for about $2.2 billion with Federal Deposit Insurance Corp. support. Banco Santander SA, Spain's biggest lender, will pay 612 million pounds ($1.1 billion) to buy the branches and deposits of Britain's biggest lender, Bradford & Bingley Plc, the U.K. Treasury said today in a Regulatory News Service statement. Fortis received a $16.3 billion bailout from Belgium, the Netherlands and Luxembourg. It's the largest European firm to be rescued in the global financial crisis."

"U.S. government securities returned 2.2 percent since the end of June, according to Merrill Lynch & Co.'s U.S. Treasury Master index, recouping a second-quarter loss as credit markets crumbled."

`Hard to Sustain'

"Investors are more bearish on U.S. government securities than any time in the past three years, according to an index from Jersey City, New Jersey-based Ried, Thunberg & Co. The measure of money manager sentiment toward Treasuries through the end of December fell to 40 for the seven days ended Sept. 26, from 45 the week before. Readings below 50 indicate investors expect bonds to decline."

"Yields on two-year Treasuries fell within about 10 basis points of their 50 basis-point loss on Sept. 15, the most since just after the September 2001 terrorist attacks."

"``I would think it's going to be hard to sustain those kinds of levels in the front end of the curve as the supply kicks up and invariably some other measures are conjured to try to remedy this,'' said Robert Tipp, chief investment strategist for fixed income in Newark, New Jersey, at Prudential Investment Management, which oversees more than $200 billion of bonds."

To contact the reporters on this story: Dakin Campbell in New York at dcampbell27@bloomberg.net; Sandra Hernandez in New York at shernandez4@bloomberg.net

"Last Updated: September 29, 2008 16:33 EDT"





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U.K. Mortgage Approvals Fell to Lowest Since 1999 (Update2)

By Jennifer Ryan

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Sept. 29 (Bloomberg) -- U.K. mortgage approvals slid in August to the lowest since at least 1999 as the global credit squeeze prompted banks and building societies to curtail loans.

"Lenders approved 32,000 loans for house purchase, down from 33,000 in July, the lowest since comparable data began nine years ago, the Bank of England said. The value of those loans fell to 143 million pounds ($258 million), the lowest since April 1993."

The worst house-price slump in at least a quarter century and a tightening global credit squeeze threaten to push the economy into its first recession since 1991 and led the government to seize mortgage lender Bradford & Bingley Plc today. Central bank policy maker Kate Barker said last week that market turmoil may constrain bank lending ``for a considerable period.''

"``The reading is very low, and consistent with a further decline in house prices,'' said Alan Clarke, economist at BNP Paribas SA. ``With credit conditions likely to tighten further, the supply of credit will deteriorate.''"

"The pound dropped the most in 15 years against the dollar after the government's action on Bradford & Bingley, the country's biggest lender to landlords. The pound dropped as much as 2.3 percent and traded at $1.8009 as of 11:27 a.m. in London."

"Economists had forecast that U.K. lenders would approve 30,000 new home loans last month, according to the median of 27 estimates in a Bloomberg News survey."

Joint Action

"During the past month, the Bank of England joined a coordinated effort by world central banks to increase the availability of dollars and ease money-market strains. The bank auctioned $10 billion in overnight funds and 40 billion pounds in three-month loans today."

"For lenders facing global financial-market turmoil, ``the adjustment is proving highly painful and it is clear that lending by U.K. banks will be very constrained, relative to the past few years, for a considerable period,'' Barker said on Sept. 25."

Former Bank of England policy maker Willem Buiter said in an interview on Bloomberg Television today that the government should establish a ``toxic asset dump'' for banks to offload their loans as the crisis threatens the U.K.'s financial system.

"U.K. house prices fell an annual 6.2 percent in September, Hometrack, a London-based property research group that has been following property prices since 2001, said today. Prices fell by the most in a quarter century in August from a year earlier, HBOS Plc, whose survey began in 1983, said Sept. 4."

"Households, which have a record 1.4 trillion pounds of debt, added to their unsecured borrowings, today's report showed. Net consumer credit, which includes credit cards, personal loans and overdrafts, rose by 1.2 billion pounds."

"Bank of England policy makers voted to keep the key interest rate at 5 percent this month as inflation quickened to 4.7 percent, more than double the target. The economy's growth rate stalled in the second quarter. The bank will make its next interest-rate decision on Oct. 9."

To contact the reporter on this story: Jennifer Ryan in London at Jryan13@bloomberg.net

"Last Updated: September 29, 2008 06:41 EDT"





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"Pound, Euro Tumble Against Dollar as Governments Bail Out Banks "

By Kim-Mai Cutler and Andrew MacAskill

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Sept. 29 (Bloomberg) -- The British pound fell the most against the dollar in 15 years and the euro weakened after European governments bailed out banks and investors lost confidence in the region's financial institutions.

"The currencies also declined versus the Japanese yen after Belgium, the Netherlands and Luxembourg threw an 11.2 billion- euro ($16.3 billion) lifeline to Fortis, the largest Belgian financial-services firm, and the U.K. Treasury seized Bradford & Bingley Plc, the nation's biggest lender to landlords. The dollar rose the most in eight weeks against the euro after President George W. Bush and Congressional leaders agreed on a $700 billion plan to revive credit markets."

"``It is not just American bad news out there,'' said Paul Robinson, a currency strategist in London at Barclays Capital and a former Bank of England economist. ``The dollar is appreciating against sterling and the euro as the U.K. and the euro zone are showing weakness.''"

"The British currency slid as much as 2.6 percent to $1.7959, from $1.8445 at the end of last week, the biggest intraday decline since June 4, 1993. It was at $1.8017 as of 6:24 a.m. in New York, the lowest level since Sept. 19. The euro fell as much as 2.1 percent to $1.4302 and traded at $1.4353, from $1.4614. It weakened to 152.47 yen, from 154.94 yen at the end of last week."

The pound fell as Bradford & Bingley became the third major British bank to run into trouble since global credit markets seized up last year. Northern Rock Plc was nationalized in February and HBOS Plc sold itself to Lloyds TSB Group Plc on Sept. 18.

Crisis Fallout

"The euro weakened after the governments of Belgium, the Netherlands and Luxembourg bailed out Fortis to restore confidence in the company following a 35 percent drop in its share price last week. Fortis came under pressure because of speculation the bank would struggle to replenish capital depleted by the 24.2 billion-euro takeover of ABN Amro Holding NV units last year and credit writedowns."

The rescues underline how fallout from the crisis that drove Lehman Brothers Holdings Inc. into bankruptcy and prompted the U.S. government to prepare a $700 billion bailout package is spreading around the world. European governments have yet to produce a corresponding response to the crisis.

"``The bailout will clearly undermine investor confidence in the euro and euro-zone assets,'' Lee Hardman, a London-based currency strategist for Bank of Tokyo-Mitsubishi, wrote in a report. ``It appears that both U.K. and European authorities still remain reactive rather than proactive in their response to dealing with the financial crisis.''"

`Dollar on Front Foot'

"Hypo Real Estate, Germany's second-biggest commercial- property lender, also received a 35 billion-euro loan guarantee to fend of insolvency. Dexia SA fell as much as 33 percent in Brussels trading after Le Figaro said the company, the world's biggest lender to local governments, may soon announce a plan to raise capital in a bid to reassure markets."

"``The growing negative events in the euro-zone are shifting the balance very swiftly to the dollar on the front foot,'' said Simon Derrick, the chief currency strategist at Bank of New York Mellon Corp. in London. ``There are massive questions about how they are going to fund these nationalizations.''"

"European confidence in the economic outlook fell to the lowest since the slump in the wake of the Sept. 11 terrorist attacks. An index of executive and consumer sentiment dropped to 87.7 in September from 88.5 in August, the European Commission in Brussels said today. That is the lowest since the index fell to 86.6 in November 2001. Economists had forecast the indicator would drop to 87.3 this month, according to the median estimate of 33 economists surveyed by Bloomberg News."

ECB Rate Bets

"Traders raised bets the ECB will lower borrowing costs to revive the 15-nation economy. The implied yield on the Euribor futures contract expiring in March fell 14 basis points to 4.51 percent today from 4.665 percent on Sept. 26. Policy makers will still keep the benchmark rate at 4.25 percent when they meet on Oct. 2, according to a Bloomberg News survey of 58 economists."

U.S. lawmakers reached agreement yesterday on the bank- bailout plan as House Republican leaders backed away from opposition to the proposal after it included plans to create insurance for mortgage-backed securities. The House and Senate are scheduled to vote on the bill early this week.

"``We are now in a environment where the dollar should be well-supported,'' said Daragh Maher, deputy head of currency strategy in London at Calyon, the investment-banking arm of France's Credit Agricole SA. ``Last week, we had sufficient wobbles about whether the plan would be passed. As it looks to be introduced, it should play as a dollar positive.''"

"Implied volatility on one-month euro-dollar options rose to near an eight-year high of 15.1375 percent. On Sept. 18, it increased to 15.5525 percent, the same level that triggered the Group of Seven nations to buy euros in 2000 to halt the 27 percent slide from its 1999 debut."

To contact the reporters on this story: Kim-Mai Cutler in London at kcutler@bloomberg.net; Andrew MacAskill in London at amacaskill@bloomberg.net

"Last Updated: September 29, 2008 06:27 EDT"





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Europe Stocks Post Steepest Drop in Eight Months; Fortis Falls

By Adria Cimino

"Sept. 29 (Bloomberg) -- European stocks tumbled the most in eight months, sending the Dow Jones Stoxx 600 Index to the lowest level since January 2005, after bank bailouts accelerated and the $700 billion plan to rescue American financial institutions failed to unlock money markets."

"Anglo Irish Bank Corp. Plc, Dexia SA and Deutsche Postbank AG plunged more than 20 percent after the governments of Belgium, the Netherlands and Luxembourg were forced to rescue Fortis and the U.K. seized Bradford & Bingley Plc. Hypo Real Estate Holding AG slid 74 percent as the German government and a group of private banks provided a 35 billion-euro ($50 billion) guarantee for the commercial-property lender."

"Europe's Stoxx 600 fell 5.5 percent to 251.43, the steepest decline since Jan. 21. The gauge is down 31 percent this year as banks worldwide racked up more than $590 billion in credit losses and writedowns, pushing the global economy toward a recession."

"``There's more pain to come,'' said Andy Lynch, who manages about $3 billion at Schroder Investment Management Ltd. in London. ``People knew the bailout was going to happen. Now it's back to the same-old, same-old of capital writedowns and weekend bailouts. Earnings estimates for next year still are too high.''"

"Credit losses at UBS AG, along with profit declines at technology companies such as Ericsson AB, helped send earnings lower at 153 of the 332 members of the Stoxx 600 tracked by Bloomberg that reported quarterly results since the beginning of July. More than 40 percent of the Stoxx 600's companies trailed Wall Street's estimates, Bloomberg data show."

"National benchmark indexes fell in all of the 18 western European markets. The U.K.'s FTSE 100 sank 5.3 percent, while France's CAC 40 lost 5 percent. Germany's DAX slid 4.2 percent as Commerzbank AG and Siemens AG declined."

Money-Market Rates

"The cost of borrowing in euros for three months soared to a record after the bailouts deepened concern more financial institutions will collapse, prompting banks to hoard cash. The London interbank offered rate, or Libor, climbed 8 basis points to 5.22 percent today, the largest jump since June, the British Bankers' Association said."

The pound fell the most against the dollar in 12 years and the euro weakened.

"U.S. lawmakers reached agreement yesterday as House Republican leaders backed away from opposition to the bank rescue proposal after it included plans to create insurance for mortgage-backed securities. The House and Senate are scheduled to vote on the bill early this week, although it wasn't clear last night that it has sufficient votes to pass the House."

Economic Confidence

"European confidence in the economic outlook fell to the lowest since the slump in the wake of the Sept. 11 terrorist attacks. An index of executive and consumer sentiment dropped to 87.7 in September from 88.5 in August, the European Commission in Brussels said."

"Anglo Irish, the nation's the third-biggest lender, fell 46 percent to 2.30 euros. Deutsche Postbank, Germany's biggest bank by clients, retreated 24 percent to 26.94 euros. Dexia tumbled 30 percent to 7.07 euros as the world's biggest lender to local governments scheduled a second board meeting to discuss the financial market crisis."

`Not Over'

"Fortis lost 24 percent to 3.97 euros after the company received a bailout of 11.2 billion euros. Belgium will buy 49 percent of Fortis's Belgian banking unit for 4.7 billion euros, while the Netherlands will pay 4 billion euros for a similar stake in the Dutch banking business, the governments said. Luxembourg will provide a 2.5 billion-euro loan convertible into 49 percent of Fortis's banking division in that country."

"``The banking crisis is not over,'' said Jacques Porta, who helps manage $180 million at Ofivalmo Patrimoine in Paris. ``Look at Fortis today, we are not sure other banks in Europe are not going to have the same problems. The problem is even if we have the good news with the Paulson plan, investors think it is not enough to stop all this mess.''"

"Bradford & Bingley, the U.K.'s largest lender to landlords, was seized by the government after the credit crisis shut off funding and competitors refused to buy mortgage loans that customers are struggling to repay. The stock was suspended from trading."

"Banco Santander SA, Spain's biggest lender, will pay 612 million pounds ($1.1 billion) to buy Bradford & Bingley branches and deposits, the U.K. Treasury said today. Santander shares declined 4.2 percent to 10.46 euros."

Hypo Real Estate

Hypo Real Estate slumped 74 percent to 3.52 euros. The German government and a group of private banks will provide a guarantee to rescue the bank from insolvency. The country's second-largest commercial-property lender earlier said it expects to scrap a 2008 dividend payment after securing a ``multi-billion-euro'' credit line to shield itself from turmoil on financial markets.

Commerzbank sank 24 percent to 10.95 euros even as Germany's second-biggest bank by assets said its funding is secure.

"Citigroup Inc., the largest U.S. bank by assets, agreed to buy the banking operations of Wachovia Corp. in a transaction the Federal Deposit Insurance Corp. helped arrange. Citigroup will absorb as much as $42 billion of losses on Wachovia's $312 billion pool of loans, the FDIC said."

"Iceland agreed to buy 75 percent of Glitnir Bank hf for 600 million euros in a government bailout of the nation's third-biggest bank, as the global credit crisis extends to the Atlantic island. The stock was suspended from trading."

Commodities Fall

"Basic-resource shares retreated as metal prices dropped in London. BHP Billiton Ltd., the world's biggest mining company, lost 10 percent to 1,232 pence. Rio Tinto Group, the second- largest iron-ore exporter, decreased 11 percent to 3,310 pence. Copper, lead, nickel and tin prices sank."

"Renault SA, France's second-biggest carmaker, fell 7 percent to 44.02 euros after Credit Suisse Group AG downgraded the shares to ``underperform'' from ``outperform.''"

"Siemens AG lost 2.8 percent to 64.91 euros. Europe's largest engineering company may face a ``certain slowdown'' in the growth of its orders in the coming months as the economy falters, Les Echos reported, citing CEO Peter Loescher."

"Akzo Nobel NV tumbled 7.8 percent to 32.75 euros. The world's biggest maker of paints postponed a plan to repurchase 1.6 billion euros of its stock, as debt repayments loom."

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

"Last Updated: September 29, 2008 13:16 EDT"





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Europe Stocks May Trail U.S. Shares on Slower Profits (Update2)

By Michael Patterson and Alexis Xydias

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"Sept. 29 (Bloomberg) -- European stocks may fall further than U.S. equities as profits decline and mortgage-related losses push the region's economy toward a recession, some of the world's biggest investors say."

"Even after plunging 34 percent from its 2007 peak through last week, the Dow Jones Stoxx 600 Index may be a worse bet than the Standard & Poor's 500 Index, which dropped 22 percent, the investors say. Earnings decreased at just 34 percent of companies in the S&P 500 that posted results since the start of July, compared with 46 percent in the European gauge, according to data compiled by Bloomberg. Analysts expect profits in Europe to rally 12.7 percent in 2009, about half the pace predicted in the U.S."

"Fortis Investments, Standard Life Investments and MFS Investment Management, which oversee about $765 billion, say those expectations for Europe are too optimistic because the region's economy will contract. Profit disappointments and more asset writedowns at banks may burn investors lured to shares in the Stoxx 600 by the lowest prices relative to dividends in at least six years, according to Bloomberg data."

"``We don't trust current earnings expectations,'' said Joost Van Leenders, the Amsterdam-based investment specialist for asset allocation at Fortis, which oversees about $305 billion. Europe is his biggest ``underweight'' position in equities. ``If expectations and real profits come down further, it would not be good for stocks.''"

Bear Market

"The Stoxx 600 dropped 5.5 percent today, the steepest tumble in eight months, after bank bailouts accelerated and the U.S. government's $700 billion plan to rescue financial institutions failed to unlock money markets. The S&P 500 lost 4.2 percent at 12:25 p.m. New York time."

"The dividend yield on the Stoxx 600 rose to 4.56 percent last week, the highest since at least January 2002 and 0.39 percentage point above the payout on the region's benchmark government bond, Germany's 10-year bund, Bloomberg data show. When the Stoxx 600's yield topped bunds in 2003, it marked the end of the three-year bear market spurred by the bursting of the Internet bubble."

"This time may be different because profits are falling and investors haven't tempered expectations enough to reflect the credit crisis's drag on earnings, according to Andrew Milligan, head of global strategy at Standard Life."

`Shoot First'

"Credit losses at Zurich-based UBS AG, along with profit declines at technology companies such as Stockholm-based Ericsson AB, helped send earnings lower at 153 of the 332 members of the Stoxx 600 tracked by Bloomberg that reported quarterly results since the beginning of July."

"More than 40 percent of the Stoxx 600's companies trailed Wall Street's estimates, Bloomberg data show, exacerbating a 27 percent slide in the Stoxx 600 this year. In the S&P 500, only 29 percent trailed expectations."

"``When companies come out with statements and it disappoints the markets, the share-price reaction can still be violent,'' said Milligan, who helps oversee about $260 billion at Standard Life in Edinburgh. He's holding fewer European equities than are represented in benchmark indexes. ``Investors shoot first and ask questions later.''"

"The reluctance by the European Central Bank to reduce interest rates may worsen the region's economic downturn and curb profits, said James Swanson, who helps manage about $200 billion as the chief investment strategist at MFS."

Bank Rescues

"Europe's economy contracted last quarter for the first time since the introduction of the euro almost a decade ago, yet the ECB held its benchmark interest rate at a seven-year high of 4.25 percent this month. ECB President Jean-Claude Trichet said Sept. 10 that controlling inflation remains his primary focus."

"``The thing that complicates Europe and makes me less favorable toward it than the U.S. is the notion of maintaining high rates there,'' Swanson said. ``That's putting sand in the gears of their economy.''"

"Treasury Secretary Henry Paulson and congressional Democrats yesterday hammered out a consensus on a bank-rescue plan after the housing slump and freeze in debt markets caused the bankruptcy of Lehman Brothers Holdings Inc. and government seizure of American International Group Inc., both based in New York."

"Separately, Belgium, the Netherlands and Luxembourg invested 11.2 billion euros ($16.3 billion) in Brussels and Amsterdam- based Fortis, Belgium's largest financial-services firm, to restore confidence in the bank. Bingley, England-based Bradford & Bingley Plc, Britain's biggest lender to landlords, was seized by the U.K. government after the credit crisis shut off funding."

`Lower Level'

"Charles Dautresme, a strategist at Axa Investment Managers, says European banks may add to the $231 billion of writedowns and credit losses they've reported since the beginning of 2007."

"``Europe wasn't as aggressive as the U.S.'' in writing down the value of mortgage-related assets, Dautresme said in an interview from Paris, where Axa oversees about $770 billion. ``There's also a need for recapitalization, and each time it's done at a lower level.''"

"American financial companies have reported $299 billion of losses, Bloomberg data show."

"Investors pulled money from European stocks at a record pace over the past 18 months, according to Mislav Matejka, JPMorgan Chase & Co.'s London-based equity strategist. He says the region's stocks are poised to outperform the U.S. as cheap valuations lure investors back."

`Still Too High'

"The Stoxx 600's dividend yield, which topped the bund payout since the end of August, has only been higher during seven other weekly periods since January 2002, Bloomberg data show. In March 2003, it coincided with the start of a 43 percent rally over the next year."

"The Stoxx 600 climbed 14 percent in 12 months when it happened in June 2005, and gained an average of 6.5 percent in a month after occurrences in March and July of this year, only to fall back."

Van Leenders of Fortis says some valuation metrics may prove to be false buy signals because they don't account for the ``rapid'' deterioration in earnings prospects sparked by the credit crisis.

"``We are hesitant to step in on the basis of this argument because of the profit outlook,'' he said. ``Expectations are still too high.''"

To contact the reporters on this story: Michael Patterson in London at mpatterson10@bloomberg.net; Alexis Xydias in London at axydias@bloomberg.net.

"Last Updated: September 29, 2008 12:40 EDT"





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Industrial Companies Can Thank Banks for Lower Rates (Update4)

By Pierre Paulden

"Sept. 29 (Bloomberg) -- The same credit crunch gripping banks, brokers and insurers is providing industrial companies with the lowest short-term borrowing costs in almost four years."

"Yields on commercial paper due in 30 days sold by manufacturers and retailers fell to an average 2.14 percent last week, while those for financial borrowers rose to 3.15 percent. The spread between the two widened as much as 1.45 percentage points, the most since the Federal Reserve began compiling the data in 1997. Banks historically issued short-term IOUs at yields about 0.02 percentage point less than industrials, Fed data show."

"Money-market funds that gorged on the debt of financial companies are now pouring cash into Treasury bills and corporations which avoided the troubled mortgage bonds that contributed to the failures of New York-based Lehman Brothers Holdings Inc. and Washington Mutual Inc. of Seattle. Yields on 30-day non-financial commercial paper dropped to 1.86 percent on Sept. 24, the lowest since November 2004."

"``Investors afraid of owning financials are buying industrials as a haven,'' said Ira Jersey, an interest-rate strategist at Credit Suisse Holdings USA Inc. in New York."

"Lower short-term rates are proving irresistible to companies that haven't relied on borrowing, or leverage, to pump up profits."

`Good Demand'

"Microsoft Corp., the world's biggest software maker, last week added a $2 billion commercial paper program and said it may sell as much as $6 billion in debt. Standard & Poor's assigned Redmond, Washington-based Microsoft a AAA rating, making it the first company to get the highest possible grade in a decade."

"``I would think there would be good demand'' for the debt because Microsoft isn't a financial company, said Jill King, a senior manager at Horizon Cash Management in Chicago, who oversees $2.5 billion in fixed-income assets."

"Companies sell commercial paper, which matures in nine months or less, to help pay for day-to-day expenses such as payroll and rent. The market slumped $61 billion, or 3.5 percent, to a seasonally adjusted $1.7 trillion in the week ended Sept. 24, Fed data show. The peak came in July 2007, just before the subprime mortgage market collapsed, when $2.22 trillion of the debt was outstanding."

"The U.S. House of Representatives today rejected a $700 billion financial-rescue plan intended to restore confidence in the nation's banking system, dealing a blow to government efforts to contain a lending crisis. The Standard & Poor's 500 Index retreated as much as 7.6 percent. The index fell 91.78 points to 1,121.23 as of 3:24 p.m. in New York."

Failures Accelerate

"Yields on all top-rated issuers rose 43 basis points to 3.72 percent, the highest since Jan. 22, as governments globally propped up banks including Bradford & Bingley Plc, the U.K.'s biggest lender to landlords."

"The greatest demand is for debt with the shortest maturities. Commercial paper maturing in four days or less ballooned to an average of $164 billion a day in the week ended Sept. 26, from $87 billion at the start of the month. Daily sales of debt due in 21 to 40 days fell 35 percent to $10 billion."

"Even though top-rated issuers of commercial paper are getting lower rates, investors are demanding second-tier, or lower-graded borrowers, pay 4.9 percent for overnight debt and 5.5 percent for 30-day loans, according to Fed data."

"Companies with investment-grade credit ratings sold $24.3 billion of bonds this month, compared with $110.9 billion for the same period last year, according to data compiled by Bloomberg."

Run on Funds

"Money funds have been dumping debt sold by financial companies as the pace of failures accelerated in the past month. The government seized Washington-based Fannie Mae and McLean, Virginia-based Freddie Mac, the two biggest mortgage finance companies, and took control of New York-based American International Group Inc., the largest U.S. insurer."

Lehman went bankrupt and Washington Mutual was seized by regulators in the biggest bank failure in U.S. history.

"Reserve Primary Fund, the oldest U.S. money fund, became the first in 14 years to see its net asset value fall below $1 a share because of holdings of Lehman debt."

"A run on money funds began after Reserve Primary fell to $0.97 a share. Investors pulled a record $120.5 billion from the funds in the week ended Sept. 23, according to the Money Fund Report, a newsletter based in Westborough, Massachusetts."

"Money funds reacted by selling financial company debt and putting the money in the shortest-term government and industrial company securities. Three-month Treasury bill rates fell to 0.02 percent on Sept. 17, the lowest since Franklin. D. Roosevelt was president."

"``Even with withdrawals there is more than $3 trillion in money market mutual funds that has to find a home,'' Credit Suisse's Jersey said."

General Electric

"General Electric Co., the world's biggest provider of aircraft leasing, jet engines, power-plant turbines, medical imaging machines and locomotives, is having no problems accessing the short-term debt market even though about half of its business comes from lending, Chief Financial Officer Keith Sherin said on a conference call with investors Sept. 25."

"``Even in the last 10 days where you've had some significant disruptive days, we continue to see a flight to quality,'' Sherin said."

"Fairfield, Connecticut-based GE is obtaining funding 25 basis points, or 0.25 percentage point, below interbank lending rates and the average maturity of its commercial paper is 61 days, he said. That works out to be 2.31 percent based on the 2.56 percent overnight London interbank offered rate on Sept. 25. The average 60-day rate for top-rated financial companies is 2.82 percent, according to Fed data."

"Still, the company's General Electric Capital Corp. financing unit plans to reduce commercial paper outstanding to between 10 percent and 15 percent of total debt, or about $10 billion, according to Sherin."

To contact the reporter on this story: Pierre Paulden in New York at ppaulden@bloomberg.net

"Last Updated: September 29, 2008 15:29 EDT"





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Treasuries Are Dead Money With Yields Below Inflation (Update3)

By Sandra Hernandez

Sept. 29 (Bloomberg) -- The rally in U.S. Treasuries may be running out of steam after yields fell to the lowest since Franklin D. Roosevelt was president.

Renewed concern about the stability of the banking system sparked a run on Treasuries that drove bill rates down to 0.02 percent. Concern is so widespread that investors are buying 30- year bonds even though their yields are the furthest below inflation since at least 1980.

"``It's like the Mark Twain quote, `I am more concerned with the return of my money than the return on my money,''' said James Evans, a senior vice president at New York-based Brown Brothers Harriman & Co. who helps oversee $15 billion in fixed- income assets."

"The problem for bond investors now is that yields are at or below where economists and strategists expect them to end the year. The weighted average of 53 forecasts in a Bloomberg survey is for 10-year note yields to finish 2008 little changed from 3.85 percent last week, while two-year yields may rise to 2.33 percent as prices of the securities fall."

"Ten-year notes yielded dropped to 3.71 percent and two-year rates to 1.88 percent as of 9:51 a.m. in New York, according to BGCantor Market Data."

"Even if demand for government debt persists, keeping two- year yields where they were last week, investors would realize an annualized rate of return of only 2.1 percent. The consumer price index is rising at a 5.4 percent rate."

Bearish Sentiment

"``The only reason to like Treasuries at this point is as a place to hide,'' said Stewart Taylor, a senior trader who helps oversee $6 billion in investment-grade debt at Boston-based Eaton Vance Management. ``The story of the Treasury market is you're willing to accept less than the inflation rate, meaning you're locking in losses, essentially.''"

"Investors are more bearish on Treasuries than anytime in the past three years. Jersey City, New Jersey-based Ried, Thunberg & Co.'s index measuring the sentiment of money managers overseeing $1.29 trillion toward 10-year notes tumbled to 40 in its Sept. 29 survey from 45 a week earlier. Readings below 50 indicate investors expect bonds to fall by year-end."

"The index is the lowest since April 22, 2005. The following quarter, 10-year notes lost 2.24 percent, according to Merrill Lynch & Co.'s Treasury Master Index."

Wall Street Turmoil

"Investors trying to call the top in Treasuries have been burned this year, as the collapse of Bear Stearns Cos. in March pushed 10-year yields down to 3.31 percent even as bond bears said rising oil and commodity prices would spark faster inflation. And at the start of August, fed funds futures on the Chicago Board of Trade suggested traders expected the Fed to raise interest rates by year-end. Now, bets are skewed to a cut."

"The bankruptcy of Lehman Brothers Holdings Inc., the government's takeover of insurer American International Group Inc., losses at money-market mutual funds and the failure of savings and loan Washington Mutual Inc. created unprecedented demand for all but the safest of government assets this month."

The U.S. House of Representatives today will debate a $700 billion plan backed by the Bush administration to revive the financial system. The House is expected to vote about noon Washington time today and then send the measure to the Senate.

Investors were so risk-averse in the past two weeks that they were willing to accept almost nothing in exchange for the assurance they'd get their principal back.

Money Market Guarantee

"Three-month bill rates fell to 0.02 percent on Sept. 17, the lowest since reaching 0.01 percent in January 1940, four months after Adolf Hitler's invasion of Poland triggered the Second World War."

"To revive confidence in the financial system, Treasury Secretary Henry Paulson on Sept. 19 announced a program to insure money-market funds for the next year along with a $700 billion plan to buy troubled mortgage and other assets from financial institutions."

"The money-market guaranty program ``doesn't necessarily reverse the direction in terms of suddenly bringing a lot more confidence back into the system for investors who have no risk tolerance to begin with,'' said Ajay Rajadyaksha, the head of fixed-income strategy in New York at Barclays Capital Inc."

Barclays is advising clients to bet on a rise in yields of longer-term debt such as 10- and 30-year bonds because the government is likely to sell more securities to finance Paulson's bailout plan.

Thirty-Year Bonds

"The Troubled Asset Relief Program, or TARP, would push funding needs to $1.5 trillion in 2009 and 2010, according to Merrill Lynch economists Drew Matus and David Rosenberg in New York."

"``We're certainly worried about supply,'' said Eaton Vance's Taylor. He said he would likely have taken a ``significant'' short position -- a bet that Treasury prices would fall -- if he judged the securities only against economic growth and trading patterns. Instead, Taylor owns Treasuries, just a smaller percentage than contained in the benchmark index he uses to measure performance."

"Treasury 30-year bond yields are about 0.98 percentage point less than the rate of inflation. Since 1980, they have averaged 3.97 percentage points more than the rate of price increases."

"In another sign that investors are putting safety above returns, two-year note yields have averaged 18 basis points below the Federal Reserve's target rate for overnight loans between banks this year, compared with an average of 25 basis points above the rate over the last decade."

Just Wanting Treasuries

"``I think we all understand that buying two-year notes below two percent is probably not a good long-term investment, but it's just more safe haven buying than anything else,'' said John Hendricks, a senior vice president at Hartford Investment Management in Hartford, Connecticut. ``People just want to be in Treasuries right now.''"

"The $868.9 million Inflation Plus Fund Hendricks manages had 95 percent of its holdings in Treasury-Inflation Protected Securities as of June 30, according to the firm's Web site, and outperformed 96 percent of its peers last year, according to Bloomberg data."

To contact the reporter on this story: Sandra Hernandez in New York at shernandez4@bloomberg.net

"Last Updated: September 29, 2008 09:58 EDT"





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"U.S. Stock-Index Futures Retreat; Citigroup, Wachovia Slump "

By Patrick Rial and Ian C. Sayson

Sept. 29 (Bloomberg) -- U.S. stock-index futures dropped as bank bailouts accelerated and a $700 billion plan from Congress to rescue the financial industry failed to unlock money markets.

"Citigroup Inc. lost 4 percent and JPMorgan Chase & Co. decreased 6.2 percent after the bailout of Belgium's Fortis and seizure of U.K. mortgage lender Bradford & Bingley prompted banks to hoard cash. Wachovia Corp., under pressure to seek a buyer, retreated 16 percent on concern suitors may wait to see whether regulators will seize the bank. Exxon Mobil Corp. and Freeport-McMoRan Copper & Gold Inc. fell as much as 2.6 percent after commodities retreated on speculation the credit crisis will exacerbate the global economic slowdown."

"S&P 500 futures expiring in December sank 18, or 1.5 percent, to 1,196.50 at 10:26 a.m. in London. Dow Jones Industrial Average futures slipped 151, or 1.4 percent, to 10,996. Nasdaq-100 Index futures declined 25.50, or 1.5 percent, to 1,649.25."

"``Investors are worried what will happen next, once the bailout is implemented,'' said Jonathan Ravelas, a strategist at Banco de Oro Unibank Inc. in Manila, which has more than $6 billion in trust assets under management. ``Investors who think this cleanup will take time are reducing their holdings.''"

The S&P 500 is down more than 22 percent from its 2007 record as $554 billion in credit losses and writedowns caused the failures of firms including Bear Stearns Cos. and Lehman Brothers Holdings Inc. The crisis that began with subprime mortgage-linked assets has spread into the economy as jobless claims climbed to the highest since 2001 and consumer confidence plunged.

"U.S. stocks tumbled the most in four months last week, with the S&P 500 losing 3.3 percent, on concern Congress wouldn't pass the rescue plan."

`Stalled' Economy

U.S. political leaders said yesterday they have reached an agreement that will allow the Treasury to purchase troubled assets from banks. It will also limit executive compensation at some participating financial institutions as well as provide guarantees to protect the government from excess losses.

"The plan ``will not jump-start lending, as house prices appear likely to keep falling for some time,'' Ian Morris, chief U.S. economist at HSBC, wrote in a Sept. 26 note to clients. ``The forces of deleveraging are overwhelming, and so the credit crunch will remain over the next few quarters. As a result, the economy would be virtually stalled over the next year.''"

"Investor Marc Faber, who predicted the 1987 ``Black Monday'' crash, said last week the rescue package may require as much as $5 trillion."

Citigroup Slides

Citigroup lost 81 cents to $19.34 in Germany. JPMorgan slid $2.99 to $45.25.

"Belgium, the Netherlands and Luxembourg invested 11.2 billion euros ($16.3 billion) in Brussels and Amsterdam-based Fortis, Belgium's largest financial-services firm, to restore confidence in the bank. Bingley, England-based Bradford & Bingley, Britain's biggest lender to landlords, was seized by the U.K. government after the credit crisis shut off funding."

"Rates on three-month loans in euros were about 5.20 percent as of 8 a.m. in London, up from 5.14 percent Sept. 26, according to Patrick Jacq, a fixed-income strategist in Paris at BNP Paribas SA, France's biggest bank. Singapore's benchmark rate for three-month U.S. dollar loans rose to the highest level in eight months today. Australian funding costs held near a six-month high."

Wachovia Takeover?

"Wachovia declined $1.60 to $8.40 in Germany. The Wall Street Journal reported the Charlotte, North Carolina-based bank was in advanced takeover talks with Wells Fargo & Co. Citigroup also may make a bid, the paper reported. Suitors may wait to see whether regulators will seize the bank, then buy the best assets and let the government sort out the rest, according to analysts at Goldman Sachs Group Inc. and Egan- Jones Ratings Co."

"Exxon, the biggest U.S. oil company, slipped $1.38 to $79.27 in Germany. Freeport-McMoRan, the world's second-largest copper producer, lost $1.66 to $62.16."

To contact the reporter for this story: Patrick Rial in Tokyo at prial@bloomberg.net; Ian C. Sayson in Manila at isayson@bloomberg.net.

"Last Updated: September 29, 2008 05:36 EDT"





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Dollar Intervention Risk `Meaningful' on Volatility (Update3)

By Ye Xie

Sept. 29 (Bloomberg) -- A growing number of currency traders and strategists are starting to speculate that finance ministers from the world's biggest economies will join to support the dollar.

"Volatility in currencies is the highest since 2000, when the so-called Group of Seven nations last intervened in the foreign-exchange market. The dollar weakened 2.5 percent on a trade-weighted basis in the past two weeks as the turmoil on Wall Street intensified. It had the biggest one-day drop against the euro since 2001 a week ago."

"While the dollar strengthened 9 percent from its record low against the euro on July 15, wider price swings threaten to undermine confidence in the U.S. currency just as government borrowing rises and U.S. lawmakers prepare to vote on Treasury Secretary Henry Paulson's plan to bail out the nation's banks. The greenback is still down 23 percent since 2005."

"``We're getting closer to the right conditions for authorities to step in and prop up the dollar,'' said Maxime Tessier, who manages $151 billion as head of foreign exchange in Montreal at Caisse de Depot et Placement. ``The nightmare scenario will be a wholesale loss of confidence in the dollar.''"

The dollar rose to $1.4337 per euro at 8:26 a.m. in London from $1.4614 on Sept. 26 after weakening 2.7 percent in the previous two weeks. The broader U.S. Dollar Index was at 78.202.

"Even a hint that finance ministers might influence exchange rates may be enough to set a floor under the currency after efforts by the Federal Reserve, European Central Bank and Bank of Japan failed to revive investor confidence by injecting more than $1 trillion into the world financial system."

`Extraordinary Interventions'

"``The central banks of the world have embarked on all sorts of extraordinary interventions,'' said Stephen Jen, the global head of currency research at Morgan Stanley in London. ``Currency joint intervention would be the least surprising. And it would probably be the cheapest.''"

"Morgan Stanley's intervention watch index suggests an 18 percent chance that policy makers will step into the market to influence exchange rates. Any reading above 10 percent suggests the risk is ``meaningful,'' or elevated, according to the New York-based firm."

"The index, based on interest rates, trading patterns and investor positions, is accurate 78 percent of the time. The index is at the same level as when the G-7 intervened in 2000."

"Finance ministers from the G-7 are more concerned about rapid swings in exchange rates than the absolute level of currencies because volatility complicates the assessment of economies, interferes with monetary policy and gives companies little time to adjust by cutting costs."

`Sharp Fluctuations'

"Sadia SA, Brazil's second-biggest food company, posted a 760 million-real ($410 million) loss last week related to foreign-exchange hedges after the nation's currency tumbled 26 percent from a nine-year high on Aug. 1."

"The G-7, which includes the U.S., Japan, Germany, Britain, France, Italy and Canada, warned in April against the implications of ``sharp fluctuations in major currencies,'' the first time since 2004 that the group used such language. Shoichi Nakagawa, Japan's new finance minister, reiterated that view on Sept. 26, saying ``sharp fluctuations in the foreign exchange market aren't good.''"

"Implied volatility on one-month euro-dollar options rose to an eight-year high of 15.55 percent on Sept. 18, the same level that triggered the G-7 to buy euros in 2000 to halt the 27 percent slide from its 1999 debut. Volatility gained to 14.93 percent from 14.51 percent last week, up from this year's low of 8.02 percent on Aug. 1."

U.S. Growth

"Weakness in the dollar hasn't become so disruptive to suggest imminent intervention, said Ken Jakubzak, who manages the KML Currency Program in Chicago for KMJ Capital LLC, which has $100 million under management."

The currency is 3 percent stronger than its record low in March on a trade-weighted basis. Some investors say the currency may rally as the economies outside the U.S. slow.

"Growth in the euro-zone will decelerate to 1.35 percent this year from 2.63 percent in 2007, according the median estimate of economists surveyed by Bloomberg. Japan's economy may expand 1 percent, compared with 2.08 percent, while the U.S. economy will likely grow 1.7 percent, the surveys showed."

"The dollar will rally to $1.43 by year-end and to $1.40 by the end of the first quarter, according to the median estimate of more than 40 economists and strategists surveyed by Bloomberg."

"``Should the bailout plan succeed in stabilizing the markets, the sentiment will shift to be more constructive for the dollar,'' said Jakubzak, who expects the dollar to rise to $1.30 by year-end. ``What happens in the U.S. will also happen in the other places in the world.''"

Paulson Plan

"U.S. lawmakers are reviewing a tentative agreement to revive credit markets by authorizing a $700 billion plan to buy troubled assets from financial institutions. ``The deal is done,'' said Senator Judd Gregg, a New Hampshire Republican, a ranking member of the Budget Committee. The House and Senate may vote Sept. 29 on it, he said."

"Dollar bears say the U.S. budget and trade deficits and negative real interest rates make a sustained dollar rally unlikely. Paulson's plan to buy devalued securities from banks would drive U.S. government debt above 70 percent of gross domestic product, the most since 1954, based on economist estimates and details of the bailout."

"Barclays, TD"

"If the Treasury spends the entire amount next year, it would drive next year's budget deficit to $1 trillion or more from about $500 billion now. Michael Feroli, an economist at JPMorgan Chase & Co. in New York, estimated the combination of the Paulson plan, additional government expenditures, and a slower economy, may swell the deficit to $1.5 trillion, or 10 percent of GDP."

"The currency will drop to $1.57 per euro by year-end, according to London-based Barclays Plc, the world's third- largest foreign exchange trader. Toronto-based TD Securities, a unit of Canada's second-biggest bank by assets, said it will weaken below $1.60 in the next few months."

"``Authorities don't want excessive dollar weakness to feed the sell-America mentality,'' said Chris Turner, head of foreign exchange strategies in London at ING Groep NV, the largest Dutch financial-services company. ``We are not there yet, but the risk is there. People I speak to are worried about a budget explosion.''"

"The government depends on foreign money to finance the budget deficit because investors outside the U.S. own 56 percent of the $4.8 trillion in marketable Treasuries outstanding, up from 42 percent five years ago, according to data compiled by the government."

`Been Crushed'

"While the G-7 decided against intervening in April when the dollar fell below $1.60 per euro for the first time, tolerance for a weaker currency may be limited because of the turmoil sweeping the financial system. The next meeting is scheduled for Oct. 10 in Washington."

"In the past month, the government took over Washington- based Fannie Mae and McLean, Virginia-based Freddie Mac, the two biggest mortgage finance companies, as well as New York-based American International Group Inc., the largest U.S. insurer. New York-based Lehman Brothers Holdings Inc. went bankrupt and Washington Mutual Inc. of Seattle was seized by regulators in the biggest bank failure in U.S. history."

"``At the end of the day, the financial sector is our flagship,'' Kenneth Rogoff, a professor of economics at Harvard University, and a former chief economist at the International Monetary Fund, said in an interview on Bloomberg Radio Sept. 19. ``It has been crushed, and that's going to have a big impact on international capital flows. That's going to affect the positions of the dollar in the global financial system.''"

To contact the reporter on this story: Ye Xie in New York at yxie6@bloomberg.net

"Last Updated: September 29, 2008 03:56 EDT"





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"Wal-Mart's Seiyu Will Cut 350 Jobs, Close 20 Stores (Update2) "

By Maki Shiraki and Mari Murayama

"Sept. 29 (Bloomberg) -- Seiyu Ltd., the Japanese retailer bought by Wal-Mart Stores Inc., said it will cut approximately 350 jobs and close about 20 stores out of its total 390 outlets to boost profitability."

"The Tokyo-based subsidiary will also renovate 100 stores over a two-year period, it said in a statement in Tokyo today. The job cuts would make operations ``more efficient,'' the company said in a separate press release."

"Wal-Mart, the world's biggest retailer, this year took full ownership of Seiyu after its five-year investment failed to return the Japanese chain to profit. Seiyu has lost sales as larger rivals Aeon Co. and Seven & I Holdings Co. gain market share amid Japan's slowing retail sales growth."

"``It's inevitable that Seiyu will try to stop the bleeding,'' Koichiro Ogawa, a Tokyo-based analyst at CSK Group, said in a phone interview today. ``The business environment is very severe.''"

"While the company closes stores, it remains ``committed to look for opportunities to grow,'' Seiyu spokesman Ryo Kanayama told reporters in Tokyo today. The company may expand its store network through acquisitions, he added, declining to provide further details."

"Since Wal-Mart became Seiyu's biggest shareholder with the purchase of a 34 percent stake in 2003, the Japanese retailer has closed 35 stores while opening 33."

"Seiyu in February posted a loss of 20.9 billion yen ($197 million) for 2007, double its forecast, because of asset writedowns. Sales had declined 0.9 percent to 952 billion yen from a year earlier."

Japan's Retail Sales

"Sales at Japan's department stores and supermarkets fell last month. Isetan Mitsukoshi Holdings Ltd., the nation's largest department-store operator, has said it will close unprofitable outlets next year as sales slump."

"Household spending probably dropped for a sixth month in August, according to the median estimate of economists surveyed by Bloomberg News. Consumer prices gained 2.4 percent in August. Wages rose 0.3 percent in July, the slowest pace this year."

Retail sales climbed 0.7 percent from a year earlier after rising a revised 2 percent in July. The median estimate of 18 economists surveyed by Bloomberg was for a 0.2 percent gain.

The fastest inflation in a decade is forcing consumers to tighten their purse strings as costlier food and gasoline leave them less to spend on non-essentials. Some economists say the world's second-largest economy is already in a recession and the slowdown may deepen as consumers cut back and exports wane.

To contact the reporter on this story: Mari Murayama in Tokyo at mmurayama@bloomberg.net

"Last Updated: September 29, 2008 06:30 EDT"





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"Stocks in Europe, Asia, U.S. Index Futures Fall on Bank Concern "

By Adria Cimino

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"Sept. 29 (Bloomberg) -- Stocks in Europe and Asia and U.S. index futures fell after Belgium, the Netherlands and Luxembourg bailed out Fortis, the U.K. seized Bradford & Bingley Plc and concern grew a U.S. rescue plan won't prevent more bank failures."

"Fortis, the largest Belgian financial-services firm, received a rescue after a 35 percent slump last week. Westpac Banking Corp., Australia's third-biggest bank, slid 3.5 percent and Royal Bank of Scotland Group Plc retreated 3.6 percent. Hypo Real Estate Holding AG sank 57 percent after saying it expects no 2008 dividend."

"Europe's Dow Jones Stoxx 600 Index decreased 3.43, or 1.3 percent, to 262.49 at 8:21 a.m. in London. Futures on the Standard & Poor's 500 Index dropped 1.2 percent following the measure's steepest weekly slump since May. The MSCI Asia Pacific Index slid 2.4 percent today."

"``There's more pain to come,'' said Andy Lynch, who manages about $3 billion at Schroder Investment Management Ltd. in London. ``People knew the bailout was going to happen. Now it's back to the same-old, same-old of capital writedowns and weekend bailouts. Earnings estimates for next year still are too high.''"

"Credit losses at UBS, along with profit declines at technology companies such as Ericsson AB, helped send earnings lower at 153 of the 332 members of the Stoxx 600 tracked by Bloomberg that reported quarterly results since the beginning of July. More than 40 percent of the Stoxx 600's companies trailed Wall Street's estimates, Bloomberg data show."

"The MSCI World Index has fallen 22 percent this year as banks worldwide racked up more than $557 billion in credit losses and writedowns, pushing the global economy toward a recession."

Agreement

"U.S. lawmakers reached agreement yesterday as House Republican leaders backed away from opposition to the bank rescue proposal after it included plans to create insurance for mortgage-backed securities. The House and Senate are scheduled to vote on the bill early this week, although it wasn't clear last night that it has sufficient votes to pass the House."

"Fortis added 4.6 percent to 5.44 euros after the company received a bailout of 11.2 billion euros ($16.3 billion). Belgium will buy 49 percent of Fortis's Belgian banking unit for 4.7 billion euros, while the Netherlands will pay 4 billion euros for a similar stake in the Dutch banking business, the governments said. Luxembourg will provide a 2.5 billion-euro loan convertible into 49 percent of Fortis's banking division in that country."

"Westpac fell 3.5 percent to A$23.15. Royal Bank of Scotland, the U.K.'s second-biggest bank, fell 3.6 percent to 200.5 pence."

Bradford & Bingley

"Bradford & Bingley, the U.K.'s largest lender to landlords, was seized by the government after the credit crisis shut off funding and competitors refused to buy mortgage loans that customers are struggling to repay."

"Banco Santander SA, Spain's biggest lender, will pay 612 million pounds ($1.1 billion), including a transfer of 208 million pounds of capital, to buy Bradford & Bingley branches and deposits, the U.K. Treasury said today. The stock was suspended before the market opened. Santander shares declined 1.6 percent to 10.75 euros."

"Hypo Real Estate, Germany's second-largest commercial- property lender, slumped 57 percent to 5.75 euros. The bank said it expects to scrap a 2008 dividend payment after securing a ``multi-billion-euro'' credit line to shield itself from turmoil on financial markets."

"Renault SA, France's second-biggest carmaker, slipped 1.5 percent to 46.60 euros after Credit Suisse Group AG cut its recommendation on the shares to ``underperform'' from ``outperform.''"

"Bayerische Motoren Werke AG, the world's largest maker of luxury autos, gained 1.6 percent to 28.68 euros as Credit Suisse upgraded the shares to ``outperform'' from ``underperform.''"

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

"Last Updated: September 29, 2008 03:23 EDT"





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"Thai Banks May Gain From Global Credit Crunch, Citigroup Says "

By Anuchit Nguyen

"Sept. 29 (Bloomberg) -- Bangkok Bank Pcl, Thailand's biggest lender, and the nation's other large banks may benefit from the global credit crunch on rising demand for their loans from overseas companies, Citigroup Inc. said."

"``High credit costs push the private sector back to Thai banks,'' Suchart Techaposai, the head of research at Citigroup in Bangkok, said in a report today. Global companies with operations in Thailand now get between 100 billion baht ($2.9 billion) and 120 billion baht of funding overseas, the note said."

"Money-market rates around the world soared as banks are becoming more hesitant to lend to each other after failures such as Lehman Brothers Holdings Inc. and Washington Mutual Inc. and the U.S. government took over insurer American International Group Inc. The three-month London interbank offered rate, or Libor, that banks charge each other for dollar loans jumped 29 basis points to 3.77 percent on Sept. 25, the most since 1999, according to Bloomberg data."

"Thai banks' deposits may also rise on a ``flight to liquidity,'' Suchart wrote. An increase in loan demand and bank deposits will widen large Thai banks' net interest margins and therefore bolster their earnings outlook, he said."

To contact the reporters for this story: Anuchit Nguyen in Bangkok at anguyen@bloomberg.net

"Last Updated: September 29, 2008 02:31 EDT"





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"Copper, Nickel Falls in London on Speculation Growth Will Slow "

By Claudia Carpenter

"Sept. 29 (Bloomberg) -- Copper fell, wiping out this year's gain, and nickel dropped for a third day on speculation economies worldwide will slow and curb demand for industrial metals."

"Citigroup Inc. cut its 2009 nickel forecast by 40 percent and Macquarie Group Ltd. lowered forecasts for most industrial metals, citing in part ``the global financial crisis.'' Equities fell after Belgium bank Fortis was bailed out, the U.K. seized mortgage bank Bradford & Bingley Plc and speculation mounted the U.S. bailout package won't stop more bank failures."

"``The package doesn't seem very well supported by industry otherwise we would have seen a bounce in equities,'' said James Roberts, a broker at Sucden (U.K.) Ltd. ``With Fortis in trouble along with Bradford & Bingley, there remains a lot of uncertainty. Metals will struggle to rally.''"

"Copper for delivery in three months declined $150, or 2.1 percent, to $6,625 a metric ton as of 9:26 a.m. on the London Metal Exchange and earlier fell to $6,610, the lowest since Dec. 21. Prices are down 12 percent this month and 22 percent in the third quarter, the biggest quarterly drop since 1996. Nickel fell as much as $250, or 1.5 percent, to $16,750 a ton."

"The dollar rose to a one-week high against the euro, curbing the appeal of metals as an alternative investment. The U.K.'s FTSE 100 stock index fell 2.6 percent and Japan's Nikkei 225 average declined 1.3 percent."

Global Surplus

"Nickel's price may average $6 a pound ($13,230 a ton) next year, down from an earlier estimate of $10 a pound, Citigroup analysts Alan Heap and Alex Tonks wrote today in a report. A global surplus will widen by almost five times in the next two years, according to the report."

"The aluminum price estimate for 2008 was reduced 2 percent to 129.9 cents a pound ($2,864 a ton), while the 2009 forecast was lowered 7 percent to 130 cents a pound, Sydney-based Macquarie said in an e-mailed report. Aluminum for delivery in three months dropped $16.75, or 0.7 percent, to $2,473.25 a ton on the LME."

Macquarie's copper forecast for 2008 was cut 7 percent to 356.6 cents a pound and for 2009 by 8 percent to 300 cents a pound.

"Stockpiles of nickel used to make stainless steel climbed 1,254 tons, or 2.3 percent, to 55,596 tons, the highest since June 1999, according to the LME's daily warehouse report."

"Lead declined $59, or 3 percent, to $1,901 a ton and zinc decreased $50 to $1,720 a ton. Tin for delivery in three months dropped $305 to $17,800 a ton."

To contact the reporter on this story: Claudia Carpenter in London at ccarpenter2@bloomberg.net or ccarpenter2@bloomberg.net

"Last Updated: September 29, 2008 05:00 EDT"





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"European, U.S. Stock-Index Futures Fall; Asian Shares Retreat "

By Adria Cimino

Sept. 29 (Bloomberg) -- European and U.S. stock futures fell after the evaporation of investor confidence spurred a $16.3 billion bailout of Fortis and concern grew a U.S. rescue plan won't prevent more bank failures. Asian shares declined.

"Fortis, the largest Belgian financial-services firm, will be active after receiving a rescue from Belgium, the Netherlands and Luxembourg. Bradford & Bingley Plc, Britain's biggest lender to landlords, was seized by the government today. Hypo Real Estate Holding AG will probably drop after scrapping its 2008 dividend."

"Futures on the Dow Jones Euro Stoxx 50 Index, a benchmark for the euro region, decreased 40, or 1.3 percent, to 3,143 at 7:44 a.m. in London. Futures on the Standard & Poor's 500 Index lost 1.2 percent."

"``There's more pain to come,'' said Andy Lynch, who manages about $3 billion at Schroder Investment Management Ltd. in London. ``People knew the bailout was going to happen. Now it's back to the same-old same-old of capital writedowns and weekend bailouts. Earnings estimates for next year still are too high.''"

"Credit losses at UBS, along with profit declines at technology companies such as Ericsson AB, helped send earnings lower at 153 of the 332 members of the Stoxx 600 tracked by Bloomberg that reported quarterly results since the beginning of July. More than 40 percent of the Stoxx 600's companies trailed Wall Street's estimates, Bloomberg data show."

"U.S. lawmakers reached agreement yesterday as House Republican leaders backed away from opposition to the bank rescue proposal after it included plans to create insurance for mortgage-backed securities. The House and Senate are scheduled to vote on the bill early this week, although it wasn't clear last night that it has sufficient votes to pass the House."

Credit Losses

"U.S. stocks retreated on Sept. 26, driving the S&P 500 to its steepest weekly slump since May, as talks on the bailout plan stalled. The MSCI Asia Pacific Index slid 2.1 percent today."

"The Stoxx 600 has fallen 27 percent this year as banks worldwide racked up more than $557 billion in credit losses and writedowns, pushing the global economy toward a recession."

"Fortis received the 11.2 billion euros ($16.3 billion) bailout after the shares fell 35 percent last week. Belgium will buy 49 percent of Fortis's Belgian banking unit for 4.7 billion euros, while the Netherlands will pay 4 billion euros for a similar stake in the Dutch banking business, the governments said. Luxembourg will provide a 2.5 billion-euro loan convertible into 49 percent of Fortis's banking division in that country."

Bradford & Bingley

Bradford & Bingley may be taken over by another bank or nationalized today under a U.K. government-backed plan to protect 21 billion pounds ($39 billion) of customer deposits.

"Chancellor of the Exchequer Alistair Darling will announce details of the plan before 8 a.m. today, his office said late yesterday."

"Hypo Real Estate, Germany's second-biggest commercial- property lender, will scrap a 2008 dividend payment after securing a ``multi-billion-euro'' credit line to shield itself from turmoil on financial markets."

"Renault SA, France's second-largest carmaker, may slip. Credit Suisse Group AG cut its recommendation on the shares to ``underperform'' from ``outperform.''"

"Bayerische Motoren Werke AG, the world's biggest maker of luxury autos, may gain after Credit Suisse upgraded the shares to ``outperform'' from ``underperform.''"

"BASF SE, the largest chemicals company, and Air Liquide SA, the biggest maker of industrial gases, might slip. Merrill Lynch & Co. cut its recommendation on European chemical makers to ``underweight'' from ``neutral,'' advising clients to lock in gains after the industry outperformed others. Stoxx 600 chemical makers have posted the third-best performance this year after pharmaceutical companies and food and beverage producers."

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

"Last Updated: September 29, 2008 02:55 EDT"





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"European Stocks Decline; Fortis, Dexia, Hypo Real Estate Drop "

By Adria Cimino

Sept. 29 (Bloomberg) -- European stocks tumbled to the lowest since January 2005 after bank bailouts accelerated and the $700 billion plan to rescue American financial institutions failed to unlock money markets.

"Fortis lost 19 percent and Dexia SA sank 27 percent as the governments of Belgium, the Netherlands and Luxembourg were forced to rescue Fortis and the U.K. seized Bradford & Bingley Plc. Hypo Real Estate Holding AG slid 73 percent after the German government and a group of private banks provided a 35 billion- euro ($50 billion) guarantee for the commercial-property lender."

"The Dow Jones Stoxx 600 Index fell 4.3 percent to 254.46 at 2:58 p.m. in London. The gauge is down 30 percent this year as banks worldwide racked up more than $554 billion in credit losses and writedowns, pushing the global economy toward a recession."

"``There's more pain to come,'' said Andy Lynch, who manages about $3 billion at Schroder Investment Management Ltd. in London. ``People knew the bailout was going to happen. Now it's back to the same-old, same-old of capital writedowns and weekend bailouts. Earnings estimates for next year still are too high.''"

"Credit losses at UBS AG, along with profit declines at technology companies such as Ericsson AB, helped send earnings lower at 153 of the 332 members of the Stoxx 600 tracked by Bloomberg that reported quarterly results since the beginning of July. More than 40 percent of the Stoxx 600's companies trailed Wall Street's estimates, Bloomberg data show."

"National benchmark indexes fell in all of the 18 western European markets. The U.K.'s FTSE 100 sank 3.8 percent, while France's CAC 40 lost 3.7 percent. Germany's DAX slid 3.2 percent as Commerzbank AG and Siemens AG also declined."

Money-Market Rates

"The cost of borrowing in euros for three months soared to a record after the bailouts deepened concern more financial institutions will collapse, prompting banks to hoard cash. The London interbank offered rate, or Libor, climbed 8 basis points to 5.22 percent today, the largest jump since June, the British Bankers' Association said."

The pound fell the most against the dollar in 15 years and the euro weakened.

"The VStoxx benchmark index for European options, which measures the cost of using options as insurance against declines in the Euro Stoxx 50 Index, rallied to an eight-month high."

"U.S. lawmakers reached agreement yesterday as House Republican leaders backed away from opposition to the bank rescue proposal after it included plans to create insurance for mortgage-backed securities. The House and Senate are scheduled to vote on the bill early this week, although it wasn't clear last night that it has sufficient votes to pass the House."

Economic Confidence

"European confidence in the economic outlook fell to the lowest since the slump in the wake of the Sept. 11 terrorist attacks. An index of executive and consumer sentiment dropped to 87.7 in September from 88.5 in August, the European Commission in Brussels said."

"Fortis lost 19 percent to 4.20 euros after the company received a bailout of 11.2 billion euros. Belgium will buy 49 percent of Fortis's Belgian banking unit for 4.7 billion euros, while the Netherlands will pay 4 billion euros for a similar stake in the Dutch banking business, the governments said. Luxembourg will provide a 2.5 billion-euro loan convertible into 49 percent of Fortis's banking division in that country."

"``The banking crisis is not over,'' said Jacques Porta, who helps manage $180 million at Ofivalmo Patrimoine in Paris. ``Look at Fortis today, we are not sure other banks in Europe are not going to have the same problems. The problem is even if we have the good news with the Paulson plan, investors think it is not enough to stop all this mess.''"

Dexia Tumbles

"Dexia plunged 27 percent to 7.37 euros. The company may soon announce a plan to raise capital in a bid to reassure markets, Le Figaro newspaper, said without citing anyone. Dexia spokeswoman Ulrike Pommee told Bloomberg News the bank held a board meeting last night to discuss Fortis and the financial crisis. She declined to comment on the report the bank may raise capital."

"Bradford & Bingley, the U.K.'s largest lender to landlords, was seized by the government after the credit crisis shut off funding and competitors refused to buy mortgage loans that customers are struggling to repay. The stock was suspended from trading."

"Banco Santander SA, Spain's biggest lender, will pay 612 million pounds ($1.1 billion) to buy Bradford & Bingley branches and deposits, the U.K. Treasury said today. Santander shares declined 2.6 percent to 10.64 euros."

Hypo Real Estate

Hypo Real Estate slumped 73 percent to 3.63 euros. The German government and a group of private banks will provide a guarantee to rescue the bank from insolvency. The country's second-largest commercial-property lender earlier said it expects to scrap a 2008 dividend payment after securing a ``multi- billion-euro'' credit line to shield itself from turmoil on financial markets.

Commerzbank sank 17 percent to 11.92 euros even as Germany's second-biggest bank by assets said its funding is secure.

"Citigroup Inc., the largest U.S. bank by assets, agreed to buy the banking operations of Wachovia Corp. in a transaction the Federal Deposit Insurance Corp. helped arrange. Citigroup will absorb as much as $42 billion of losses on Wachovia's $312 billion pool of loans, the FDIC said."

"Iceland agreed to buy 75 percent of Glitnir Bank hf for 600 million euros in a government bailout of the nation's third- biggest bank, as the global credit crisis extends to the Atlantic island. The stock was suspended from trading."

Metal Prices

"Basic-resource shares retreated as metal prices dropped in London. BHP Billiton Ltd., the world's biggest mining company, lost 6.9 percent to 1,275 pence. Rio Tinto Group, the second- largest iron-ore exporter, decreased 6.7 percent to 3,458 pence. Copper, lead, nickel and tin prices sank."

"Renault SA, France's second-biggest carmaker, fell 3.7 percent to 45.58 euros after Credit Suisse Group AG downgraded the shares to ``underperform'' from ``outperform.''"

"Siemens AG lost 2.8 percent to 64.89 euros. Europe's largest engineering company may face a ``certain slowdown'' in the growth of its orders in the coming months as the economy falters, Les Echos reported, citing CEO Peter Loescher."

"Akzo Nobel NV tumbled 7.4 percent to 32.88 euros. The world's biggest maker of paints postponed a plan to repurchase 1.6 billion euros of its stock, as debt repayments loom."

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

"Last Updated: September 29, 2008 10:03 EDT"





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"Hungarian Central Bank to Keep Key Rate Unchanged, Survey Shows "

By Balazs Penz

Sept. 29 (Bloomberg) -- Hungary's central bank will leave its benchmark interest rate unchanged at a three-year high as concerns about a pickup in inflation fuel demands for higher wages.

"The Magyar Nemzeti Bank in Budapest will leave the two-week deposit rate at 8.5 percent, the second-highest in the European Union after Romania, according to all 19 analysts in a Bloomberg survey. The decision will be announced at 2 p.m. local time today."

"Rate setters are wary that trade unions will push for bigger salaries, even after the average monthly gross wage in June jumped 9.7 percent. The boost in incomes underscores expectations that the inflation rate may rise again after falling to an 11-month low of 6.5 percent. The global financial crisis will also make policy makers more cautious about any changes in rates after Poland, the Czech Republic and Romania left rates untouched last week."

"``No wonder they won't cut in this environment,'' said Daniel Bebesy, an economist at Budapest Investment Management. ``This favorable domestic inflation outlook is completely overruled by the nervousness, the near-collapse state of international markets.''"

The forint has lost 2 percent to the euro and the yield on the benchmark five-year bond rose 56.5 basis points in the past month. One basis point is 0.01 percentage point.

Inflation Outlook

"The central bank expects to reach its target of 3 percent inflation in the second quarter of 2010. In its latest economic forecast released last month, the bank predicted the rate will average 6.3 percent this year and 4.1 percent in 2009. Consumer prices in August were 6.5 percent higher than a year earlier."

"Declining oil prices may help policy makers reach their target earlier than the forecast, central bank President Andras Simor said in an interview on Sept. 17. Before reducing rates, rate setters need more evidence that oil prices won't rise again and inflation expectations can be cooled, he added."

"Downside ``risks after one month seem to be materializing and therefore we see a deflationary effect,'' he said. Upside ``risks, we aren't going to see if they are going to materialize for a while. We are going to have to move very cautiously and step by step.''"

"Monetary Council members voted 11-1 to keep the rate unchanged last month, with one ballot cast for reducing the benchmark to 8.25 percent. The term of one member has since expired and Bela Kadar won't be replaced as Simor seeks to reduce the size of the council."

`Either Direction'

"Policy makers last month said they are open to either an interest rate cut or an increase, depending on the movement of commodity prices, minutes from the meeting show. Previously, the council had emphasized its readiness to lift borrowing costs to curb inflation."

"``The majority of council members was of the opinion that the current uncertainty of commodity prices, which have a strong effect on the inflation outlook, warrants a wait and see strategy, maintaining the possibility of an interest rate step in either direction,'' according to the minutes, released on Sept. 19."

"The six-month forward rate was at 8.42 percent on Sept. 26, compared with 8.32 percent a week earlier, a sign that investors have scaled back rate-cut expectations. The three-month money market rate rose 8.66 percent on Sept. 19, the highest since July."

"The central bank needs ``unequivocal'' evidence that inflation is slowing before lowering the benchmark rate, policy maker Gabor Oblath said in an interview on Sept. 9."

"``Right now, a wait-and-see attitude is called for because we have to see that there is an unequivocal start to disinflation,'' he said. ``There are positive signs, but these are not unequivocal yet.''"

To contact the reporter on this story: Zoltan Simon in Budapest at zsimon@bloomberg.net

"Last Updated: September 29, 2008 02:54 EDT"





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"Russian Stocks Fall, Led by Sberbank, PIK, After Bank Bailouts "

By William Mauldin

"Sept. 29 (Bloomberg) -- Russia's Micex Index dropped the most since regulators closed local stock markets on Sept. 16, led by OAO Sberbank, on concern more European banks will fail with repercussions for borrowing rates and liquidity in the country."

"Bank of Moscow also led banking stocks lower. PIK Group, a Moscow-focused apartment builder, and Sistema-Hals, billionaire Vladimir Yevtushenkov's property company, sank to record lows on speculation demand for property may decrease. OAO Polyus Gold climbed after offering to buy a majority stake of KazakhGold Group Ltd."

"The Micex fell 5.5 percent to 1,019.61 at 5:44 p.m. in Moscow, poised for a third day of declines. The dollar- denominated RTS Index slipped 5.8 percent to 1,210.97. Russian indexes, dominated by energy producers, also suffered from declines in oil prices."

"Fortis, the largest Belgian financial-services firm, received an 11.2 billion euro($16.3 billion) rescue from three governments while the U.K. seized Bradford & Bingley Plc, the U.K.'s biggest lender to landlords."

"In Russia, the MosPrime lending rate among top-tier banks climbed 1.66 percentage points to 7.79 percent, the highest in more than a week. The ruble fell the most against the dollar in three weeks and dropped against the central bank's currency basket as crude oil tumbled and the credit crisis spread."

"``The crisis is far from over and European banks are not immune,'' said Sebastien de Prinsac, head of international sales at Trust Investment Bank in Moscow. ``Nervousness is still quite present in the market.''"

Sberbank Sinks

"Prime Minister Vladimir Putin said the central bank should make loans available to banks without collateral, while companies may borrow from the state development bank to pay off foreign debts, Interfax reported. Russia pledged more than $100 billion in emergency funding after closing the market for two days this month as stocks plunged."

"The RTS has fallen 47 percent so far this quarter, the second-worst among 88 national indexes tracked by Bloomberg. Foreign investors pulled $56.7 billion from Russia between Aug. 8 and Sept. 19 as troops entered neighboring Georgia, according to BNP Paribas SA."

Stocks have also been weighed down after the government sparked concern it would increase control on business and as the global financial crisis deepened to cause banks into nationalization or bankruptcy.

"Sberbank, Russia's biggest bank, tumbled 7 percent to 40.74 rubles on the Micex Stock Exchange, the lowest since Sept. 17. Bank of Moscow, part-owned by the Moscow government, dropped 8.5 percent to 780 rubles. VTB Group fell 0.24 kopek, or 4.5 percent, to 5.03 kopeks."

Property Stocks

"PIK, the Russian developer scheduled to report first-half earnings tomorrow, dropped $1.70, or 20 percent, to $6.75 in London, a record low. Sistema-Hals sank 13 cents, or 12 percent, to $1. JPMorgan Chase & Co. said investors should ``steer clear'' of Russian real-estate stocks because the companies will be ``hardest hit'' in the event of a global economic recession."

"``When people own more than one apartment, they are likely to sell one in times of financial difficulty,'' wrote JPMorgan strategists including Peter Westin in Moscow in a report today. ``This could bring pressure to bear on currently high property prices.''"

"OAO Lukoil, Russia's second-biggest oil producer, retreated 60 rubles, or 3.8 percent, to 1,503.02 rubles, a third day of declines. Crude oil dropped $5.55, or 5.2 percent, to $101.34 a barrel in New York on concern a U.S. plan to spend $700 billion propping up America's banks will fail to unlock credit markets and avert an economic slowdown there."

"Polyus Gold shares jumped 147 rubles, or 22 percent, to 823.99 rubles. Polyus is offering KazakhGold shareholders $7.95 a share in cash plus 0.298 Polyus share, KazakhGold said in a statement distributed by the Regulatory News Service today."

To contact the reporter on this story: William Mauldin in Moscow at wmauldin1@bloomberg.net.

"Last Updated: September 29, 2008 10:10 EDT"





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Corporate Bond Risk Falls on Agreement Over U.S. Bank Rescue

"Sept. 29 (Bloomberg) -- The risk of companies in the Asia- Pacific region defaulting on debt fell as President George W. Bush and U.S. congressional leaders agreed on a $700 billion bank-rescue package, according to credit-default swap traders."

"The Markit iTraxx Japan index Series 10 of credit-default swaps was quoted at 157 basis points at 12:47 p.m. in Tokyo, Barclays Capital prices show. The Series 9 benchmark fell 5 basis points to 154 basis points. Series 10 benchmarks for Japan, Australia and Asia started trading today for the first time."

"The U.S. agreement over the weekend ``is not just positive for credit markets, it's extremely positive,'' said David Verschoor, a Hong Kong-based credit trader at BNP Paribas SA. ``People are very nervous. Now, with passage of the plan in sight, investors are less skittish.''"

"Bush and House Majority Leader Steny Hoyer yesterday predicted the measure would pass, giving the U.S. Treasury power to buy distressed mortgage-related assets from financial companies in a bid to stem the global credit slump and prevent bank failures. The House may consider the plan today and the Senate will vote by Oct. 1, lawmakers said."

"The Markit iTraxx Australia was at 185 basis points for Series 10 contracts at 2:00 p.m. in Sydney, Citigroup Inc. prices show. The nation's Series 9 index, tied to debt of 25 companies including Qantas Airways Ltd. and National Australia Bank Ltd., fell 3 basis points to 181. A basis point, or 0.01 percentage point, is worth $1,000 on a swap that protects $10 million of debt from default."

"Asia's benchmark index for 20 high-risk, high-yield borrowers was quoted at 590 basis points at 11:48 a.m. in Hong Kong, while the investment-grade index was at 195 basis points, Barclays prices show. The region's investment-grade Series 9 gauge was 9 basis points lower at 185."

"CapitaLand, SK Energy"

"Contracts on CapitaLand Ltd., Singapore's biggest developer by sales, traded at 400 basis points, and SK Energy Co., South Korea's biggest refiner, was at 255 basis points, according to Barclays. The companies are the two new entrants to the Markit iTraxx Asia ex-Japan Series 10 investment-grade index."

"Markit Group Ltd., based in London, creates new series of benchmark credit-default swap indexes every six months, adding or dropping constituent companies depending on ratings or how actively the contracts are traded."

"Mark Bayley, director of credit at ABN Amro Holding NV in Sydney, said credit spreads may widen again later this week after details of bank rescue packages in Europe and the U.S. are worked out and analyzed."

`Very Scared'

"``Let the market see the details and not the headlines, and I think they will be scared, very scared,'' Bayley wrote in a research note today."

"Bradford & Bingley Plc, the biggest lender to landlords in the U.K., may be taken over today by another bank or nationalized under a government-backed plan. Fortis, the largest Belgian financial-services firm, got an 11.2 billion-euro ($16.3 billion) rescue from Belgium, the Netherlands and Luxembourg after investors lost confidence in the bank last week."

"The Markit CDX North America Investment Grade Index, a credit-default swap index tied to the bonds of 125 companies in the U.S. and Canada, rose 2.5 basis points to 163.5 basis points on Sept. 26, Phoenix Partners Group prices show."

Credit-default swap indexes are benchmarks for protecting bonds against default and traders use them to speculate on changes in credit quality. The swaps pay the buyer face value in exchange for the underlying securities if a borrower fails to adhere to its debt agreements.

To contact the reporter for this story: Patricia Kuo in Hong Kong at pkuo2@bloomberg.net





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U.K. House Prices Fall the Most Since at Least 2001 (Update1)

By Brian Swint

"Sept. 29 (Bloomberg) -- U.K. house prices fell by the most in at least seven years in September as the global financial crisis choked off mortgage lending, Hometrack Ltd. said."

"The average cost of a residential property in England and Wales slipped 6.2 percent from a year earlier to 165,300 pounds ($304,000), the London-based research company said today. That's the biggest annual drop since the index started in 2001. Prices fell 1 percent from August."

"Credit markets have seized up after banks' concerns about losses led them to hoard cash, making it more expensive for potential homebuyers to find mortgages. That's pushed the U.K. into its worst property slump since the early 1990s and led the government today to seize Bradford & Bingley Plc, the country's biggest provider of home loans to landlords."

"``Weak demand continues to put a downward pressure on house prices,'' said Richard Donnell, director of research at Hometrack, in a statement. ``It is very hard to identify the mechanisms by which the current cycle of weak confidence, declining sales volumes and falling house prices can be reversed in the near future.''"

"The number of homes changing hands may fall to the lowest level since the 1960s this year, Donnell said. In London, prices have dropped 7.1 percent in the past year, the report said. Rightmove Plc, the most-used property Web site in Britain, said last week the property market is ``on its knees.''"

Mortgage Approvals

"Buyers are now clinching an average discount of 9 percent from the asking price of a home, the Royal Institution of Chartered Surveyors said in a report today."

"U.K. mortgage approvals dropped to 32,000 in August, the lowest level since comparable records began nine years ago, Bank of England data showed today. The value of loans fell to 143 million pounds, the lowest since April 1993."

"Prospects for mortgage lending are deteriorating after the collapse of Lehman Brothers Holding Inc. derailed financial markets, sending lending rates higher. The cost of borrowing pounds for three months jumped to the highest since December on Sept. 25."

"Bradford & Bingley was seized after the crisis shut off funding and competitors refused to buy mortgage loans that customers are struggling to repay. Banco Santander SA, Spain's biggest lender, will pay 612 million pounds ($1.1 billion) for the bank's 197 branches and 20 billion pounds of deposits."

"Britain entered a recession in July, forecasts by the European Commission and the Confederation of British Industry, the country's biggest business lobby, show. Bank of England Governor Mervyn King said in August that economic output will be ``broadly flat'' for a few quarters."

"Slowing growth may force policy makers in November to reduce their benchmark interest rate from the current 5 percent, the median forecast of 52 economists in a Bloomberg survey showed. The next decision is Oct. 9."

To contact the reporter on this story: Brian Swint in London at bswint@bloomberg.net.

"Last Updated: September 29, 2008 04:56 EDT"





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"Eletrobras, Perdigao, Petrobras, Sadia: Latin Equity Preview "

By William Freebairn and James Attwood

"Sept. 29 (Bloomberg) -- The following companies may have unusual price changes today in Latin America trading. Stock symbols are in parentheses, and share prices are from the previous close. Preferred shares are usually the most-traded class of stock in Brazil."

"The MSCI Latin America Index fell 1.9 percent Sept. 26 to 3,383.95."

Brazil

"Centrais Eletricas Brasileiras SA (ELET6 BS): Latin America's largest utility said it received authorization from the Securities and Exchange Commission to list and trade shares on the New York Stock Exchange. The company plans to list American depositary receipts representing voting and non-voting shares on Oct. 31, it said in a regulatory filing Sept. 26. Eletrobras, as the company is known, rose 1.6 percent to 23.65 reais."

"Perdigao SA (PRGA3 BS): Brazil's biggest food company said it has no leveraged operations in derivatives markets. All its currency operations are exclusively to protect the company's positions, Perdigao said Sept. 26 in a statement to securities regulators after other Brazilian companies reported currency losses. Perdigao fell 5.7 percent to 36.29 reais."

"Petroleo Brasileiro SA (PETR4 BS): Brazil's state-controlled oil company said a Santos Basin block may hold about 150 million barrels of recoverable oil, the second successful well disclosed in the area in four months. The oil discovered in the offshore BM-S-40 is a light grade of crude, Petrobras, as the company is known, said in a statement on its Web site Sept. 26. Petrobras fell 1.7 percent to 35.43 reais."

"Redecard SA (RDCD3 BS): The Brazilian credit- and debit-card processing company faces low risks ``in the medium term'' from proposed legislation regulating the industry, Banco Fator Corretora analysts wrote in a research report e-mailed Sept. 26. Redecard fell 5.4 percent to 23.65 reais."

"Sadia SA (SDIA4 BS): Brazil's second-largest food company had its credit rating cut by Moody's Investors Service after Sadia said it lost 760 million reais ($416 million) from currency transactions. Sadia's ratings were cut to Ba3, three levels below investment grade, from Ba2, Moody's said in a statement e-mailed Sept. 26. Sadia was cut to ``underperform'' from ``outperform'' at Banco Fator Corredora Sept. 26. Sadia fell 35 percent to 6 reais."

Mexico

"Empresas ICA SAB (ICA MM): Mexico's biggest construction company has had lower growth because of delays in government spending on roads, bridges and energy projects this year, IXE Grupo Financiero analysts Patricio Rivera and Carlos Gonzalez wrote in a research report sent to clients Sept. 26. ICA fell 3.3 percent to 32.79 pesos."

To contact the reporters on this story: William Freebairn in Mexico City at wfreebairn@bloomberg.net; James Attwood in Santiago at jattwood3@bloomberg.net

"Last Updated: September 29, 2008 00:01 EDT"





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"German Stocks Slump; Hypo Real Estate, Commerzbank Lead Decline "

By Aaron Kirchfeld

Sept. 29 (Bloomberg) -- German stocks dropped for a second day after the government and banks bailed out Hypo Real Estate Holding AG with a 35 billion-euro ($50 billion) guarantee.

"Hypo Real Estate, the country's second-biggest commercial- property lender, slumped the most since its initial public offering in 2003 after receiving emergency funding and saying it plans to scrap its 2008 dividend. Commerzbank AG retreated 17 percent, while Deutsche Bank AG slipped 7.3 percent."

"``This is a shock,'' said Manfred Jakob, a Frankfurt-based analyst at SEB AG who is reviewing his recommendation of the stock. ``The government's involvement shows how vehement the market crisis is. There's simply no short-term financing.''"

"The DAX Index fell 163.73, or 2.7 percent, to 5,899.77 as of 2:10 p.m. in Frankfurt. DAX futures expiring in December declined 2.9 percent. The HDAX Index of the country's 110 biggest companies slid 3 percent."

"The benchmark for German equities is down 27 percent this year as credit losses and asset writedowns at financial firms worldwide topped $550 billion, pushing the global economy toward a recession."

"Banks across Europe also fell today after Belgium, the Netherlands and Luxembourg bailed out Fortis, the U.K. seized Bradford & Bingley Plc and concern grew a U.S. rescue plan won't prevent more failures in the industry."

"Munich-based Hypo Real Estate declined 9.30 euros, or 69 percent, to 4.19. The rescuers of the bank will pay the guarantee in two allotments, of 14 billion euros and 21 billion euros, a government official said."

Banks Slump

WestLB AG downgraded the stock to ``hold'' from ``buy.''

"Commerzbank, the owner of Eurohypo AG, retreated 2.41 euros, or 17 percent, to 12, even after saying the funding for the entire company and all units is secure."

"Deutsche Bank, Germany's largest bank by assets, declined 3.49 euros, or 7.3 percent, to 50.90."

"Aareal Bank retreated 4.84 euros, or 38 percent, to 7.81, even after the commercial-property lender said it has ``a solid funding position.''"

"Munich Re slipped 2.89 euros, or 2.6 percent, to 109.36. The world's biggest reinsurer may seek to buy some of American International Group Inc.'s Asian assets, the reinsurer's Chief Executive Officer Nikolaus von Bomhard said."

"ThyssenKrupp AG sank 1.60 euros, or 6.9 percent, to 21.70 as Citigroup cut its share-price estimate for Germany's largest steelmaker 26 percent to 37 euros. Smaller rival Salzgitter AG retreated 6.14 euros, or 8 percent, to 71.11 after the brokerage lowered its projection 28 percent to 145 euros."

The following stocks also rose or fell in German markets. Symbols are in parentheses.

"Arcandor AG (ARO GY) dropped 7 cents, or 3.7 percent, to 1.84 euros. Germany's biggest department-store owner said it will raise 58.9 million euros by selling new shares and retain its stake in travel unit Thomas Cook Group Plc."

"C.A.T. Oil AG (O2C GY) sank 31 cents, or 8.3 percent, to 3.43 euros after Goldman Sachs Group Inc. lowered its share-price estimate for the Austrian oil-services company operating in Russia and Kazakhstan 29 percent to 7.80 euros."

"Koenig & Bauer AG (SKB GY) declined 25 cents, or 2 percent, to 12 euros. The world's third-largest maker of printing presses plans to cut jobs because of a slowdown in orders for sheet-fed presses, Sueddeutsche Zeitung reported, citing no one."

"Krones AG (KRN GY) fell 3.69 euros, or 9.6 percent, to 34.76 after Citigroup cut its share-price estimate for the maker of bottling and packaging equipment 18 percent to 51 euros."

"Premiere AG (PRE GY) slipped 37 cents, or 3.4 percent, to 9.99 euros after Goldman reduced its share-price estimate for the German television company partly owned by News Corp. 7.6 percent to 12.82 euros."

"ProSiebenSat.1 Media AG (PSM GY) lost 23 cents, or 4.5 percent, to 4.87 euros after Goldman cut its recommendation for Germany's largest private broadcaster to ``neutral'' from ``buy.''"

"Siemens AG (SIE GY) declined 1.56 euros, or 2.3 percent, to 65.23. Europe's biggest engineering company may face a ``certain slowdown'' in the growth of its orders in the coming months as the economy falters, Les Echos said, citing CEO Peter Loescher."

"Volkswagen AG (VOW GY) gained 10.99 euros, or 4.3 percent, to 268.78. Europe's largest carmaker intends to present a seventh-generation Golf car in 2012, Automotive News Europe reported, citing design chief Walter de Silva."

"Audi, Volkswagen's luxury-car brand, wants to step up U.S. spending to boost sales in the world's largest automobile market, Handelsblatt reported, citing sales chief Peter Schwarzenbauer."

To contact the reporter on this story: Aaron Kirchfeld in Frankfurt at akirchfeld@bloomberg.net.

"Last Updated: September 29, 2008 08:18 EDT"





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U.K. August Lending to Individuals: Summary (Table)

By Mark Evans

Sept. 29 (Bloomberg) -- Following is a summary of lending to individuals for August from the Bank of England in London:


=============================================================================
Aug. July June May April
2008 2008 2008 2008 2008
=============================================================================
"Total Net Lending to Individuals 1,379 4,049 3,732 4,943 6,622"

"Mortgage Lending 143 2,998 2,563 3,690 5,604"
" Total Value of Approvals 13,612 14,554 16,455 18,056 22,283"
No. of Applications (000's) 32 33 35 40 55

"Consumer Credit 1,236 1,051 1,169 1,253 1,018"
------------- Growth rates -----------------
Total Net Lending to Individuals
1 month 0.1% 0.3% 0.3% 0.3% 0.5%
3 month annualized 2.6% 3.6% 4.3% 5.6% 6.8%
12 month 6.2% 6.9% 7.4% 8.0% 8.4%
=============================================================================
Aug. July June May April
2008 2008 2008 2008 2008
=============================================================================
Mortgage Lending
1 month 0.0% 0.2% 0.2% 0.3% 0.5%
3 month annualized 1.9% 3.1% 4.0% 5.3% 6.5%
12 month 6.0% 6.9% 7.5% 8.1% 8.7%

Consumer Credit
1 month 0.5% 0.5% 0.5% 0.5% 0.4%
3 month annualized 6.1% 6.2% 6.1% 6.9% 8.1%
12 month 6.8% 6.9% 6.9% 7.0% 6.8%
=============================================================================
Note: All levels (except approvals 000's) are in millions of pounds.


To contact the reporter on this story: Mark Evans in London at mevans8@bloomberg.net

"Last Updated: September 29, 2008 04:29 EDT"





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"Brazil, Peru, Argentina: Latin America Bond, Currency Preview "

By Drew Benson

Sept. 29 (Bloomberg) -- The following events and economic reports may influence trading in Latin American local bonds and currencies today. Bond yields and exchange rates are from the previous day's session.

"Brazil: The broadest measure of inflation likely quickened to 0.07 percent in September after prices declined 0.32 percent the previous month, according to the median forecast of 16 economists in a Bloomberg News survey. The Rio de Janeiro-based Getulio Vargas Foundation is slated to release the indicator at 7 a.m. New York time."

The real slid 1.3 percent to 1.8445 per dollar.

"The yield on the zero-coupon, real-denominated bond due in January 2010 fell 5 basis points, or 0.05 percentage point, to 14.75 percent, according to Banco Votorantim."

"Peru: The central bank sold $1.58 billion in dollars this month to shore up the sol. It also ``postponed debt prepayments due to all this volatility in the exchange rate, because our income is in soles and our obligations are in foreign currency,'' Peru's Finance Minister Luis Valdivieso said Sept. 26."

The sol slid 0.2 percent to 2.9625 per dollar.

"The yield on the benchmark 8.6 percent sol-denominated bond due in August 2017 slid 2 basis points to 8.45 percent, according to the local unit of Citicorp."

"Argentina: Supermarket sales, which rose 29.8 percent in July from the prior year, will be released for August by the National Statistics Agency at 3 p.m. New York time."

The peso fell 0.1 percent to 3.1159 per dollar.

"The yield on Argentina's inflation-linked peso bonds due in December 2033 rose 5 basis points to 10.616 percent, according to Citigroup Inc.'s local unit."

To contact the reporter on this story: Drew Benson in Buenos Aires at Abenson9@bloomberg.net.

"Last Updated: September 29, 2008 00:00 EDT"





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"Platinum Falls as Dollar's Gain, Growth Concern, Erodes Demand "

By Jae Hur

"Sept. 29 (Bloomberg) -- Platinum dropped as the dollar rose to a one-week high against the euro, reducing the appeal of the metal as an alternative investment, and on concern that the slowing global economy may cut demand from the auto sector."

"The metal fell 1.1 percent last week, capping a fourth- straight weekly decline. The dollar advanced after congressional leaders and President George W. Bush agreed on a $700 billion package to revive credit markets by purchasing distressed debt from banks."

"``Platinum has been under pressure from concerns over slowing economic growth which will reduce car sales in the U.S., Europe and elsewhere,'' said Shuji Sugata, research manager at Mitsubishi Corp. Futures & Securities Ltd. in Tokyo. The dollar's strength has also put pressure on platinum, he said."

"Immediate-delivery platinum lost as much as $25.50, or 2.3 percent, to $1,097.50 an ounce, the lowest since Sept. 19, and traded at $1,114 as of 5:38 p.m. in Tokyo. The precious metal, used in car exhaust systems and jewelry, fell 5.3 percent on Sept. 26, the biggest daily decline since Sept. 16."

"Palladium for immediate delivery was down 2.4 percent at $220.50 an ounce after losing 5.6 percent Sept. 26 and 4.2 percent for the week. The metal earlier dropped as much as 3.3 percent to $218.50, the lowest since Sept. 11."

"Platinum for August delivery fell as much as 145 yen, or 3.8 percent, to 3,661 yen a gram ($1,073 an ounce) and closed at 3,757 yen on the Tokyo Commodity Exchange."

"``The yen's drop against the dollar limited the decline in Tokyo futures,'' Sugata said. A weaker Japanese currency boosts the value of yen-based futures for commodities which trade globally in dollars."

Dollar Gains

"The U.S. currency gained as much as 2.1 percent to $1.4308 per euro, the highest since Sept. 19, before trading at $1.4354 at 5:58 p.m. in Tokyo. It rose as high as 106.96 yen and last traded at 106.15 yen."

"Precious metals including platinum attract less investment when the dollar advances because they become more expensive in foreign currency terms, reducing global demand."

"Platinum consumption by automakers accounts for more than 60 percent of global demand for the metal, according to Johnson Matthey Plc, which makes about a third of the world's automobile catalysts."

To contact the reporter for this story: Jae Hur in Singapore at jhur1@bloomberg.net

"Last Updated: September 29, 2008 05:02 EDT"





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U.S. Consumer Spending Likely Rose 0.2% in August on Car Sales

By Bob Willis

Enlarge Image/Details

"Sept. 29 (Bloomberg) -- Consumer spending in the U.S. probably rose in August as carmakers boosted incentives to shore up sales in the face of rising unemployment and slumping confidence, economists said ahead of a report today."

"The 0.2 percent increase in purchases would follow a 0.2 percent rise in July, according to the median forecast of 64 economists surveyed by Bloomberg News. The average gain was 0.3 percent a month during the last official recession, in 2001. Today's report may also show inflation accelerating on higher commodity costs that have since receded."

"Demand from consumers is faltering as the boost from tax rebates fades, job losses mount, home equity evaporates and a credit crunch toppled some of the nation's largest financial companies. Steeper discounts at General Motors Corp. stirred some demand for cars, helping pull auto sales from 15-year lows."

"``Consumers are under pressure from just about every conceivable angle at this point,'' said Russell Price, a senior economist at H&R Block Financial Advisors in Detroit. ``Spending is likely to turn negative at some point over the next few months.''"

The Commerce Department's report is due at 8:30 a.m. in Washington. Spending estimates in the Bloomberg survey ranged from a gain of 0.5 percent to a drop of 0.2 percent.

"The survey also projects incomes rose 0.2 percent in August, according to economists' estimates, after dropping 0.7 percent the prior month when the flow of rebate checks dropped off after peaking the prior two months."

Inflation Signs

"The income and spending report is also likely to show inflation is eroding American's purchasing power. The price gauge tied to spending patterns probably rose 4.5 percent in the year ended August, holding at the fastest rate in 17 years for a second month, according to the survey median."

"The measure that excludes food and energy costs, the one tracked by the Federal Reserve, probably rose 2.4 percent from a year earlier, matching the prior month and the most since February 2007, the survey showed."

Concern over both slower growth and rising prices led Fed policy makers on Sept. 16 to hold the benchmark interest rate at 2 percent.

Fed Chairman Ben S. Bernanke told lawmakers at a hearing last week that the economy faces ``grave threats'' to financial stability and warned the credit crisis is hurting business spending. He added that the outlook for consumer spending is ``sluggish at best.''

Auto Industry Woes

"Purchases of big-ticket items remain weak. Sales of autos and light trucks edged up in August to a 13.7 million rate from the prior month's 12.5 million annual pace, which was the lowest since 1993, according to Bloomberg calculations based on industry data. Sales may drop again in coming months as financial market turmoil constrains credit."

"``The auto industry is the smallest it's been in years in terms of sales'' and the U.S. economy is ``lackluster,'' General Motor Corp.'s Vice Chairman Bob Lutz said Aug. 28 in Joliet, Illinois. ``Nobody is quite sure when it's going to turn around.''"

"Economists surveyed by Bloomberg in the first week of September forecast consumer spending in the third quarter will be flat, the weakest since 1991, following a 1.2 percent pace in the second quarter."

"Economists forecast overall economic growth of 1.2 percent in the July-to-September period, from 2.8 percent in the second quarter, according to the Bloomberg survey."


==================================
Personal Spending Forecasts MOM%
==================================

Date of Release 09/29
Observation Period Aug.
----------------------------------
Median 0.2%
Average 0.2%
High Forecast 0.5%
Low Forecast -0.2%
Number of Participants 64
Previous 0.2%
----------------------------------
4CAST Ltd. 0.0%
Action Economics 0.2%
Aletti Gestielle SGR 0.3%
Argus Research Corp. -0.2%
Banc of America Securitie 0.2%
Bank of Tokyo- Mitsubishi 0.4%
Bantleon Bank AG 0.3%
Barclays Capital 0.3%
BBVA 0.5%
BMO Capital Markets 0.3%
BNP Paribas 0.1%
Calyon 0.1%
CIBC World Markets 0.1%
Commerzbank AG 0.2%
Credit Suisse 0.4%
Daiwa Securities America 0.3%
Danske Bank 0.2%
DekaBank 0.2%
Desjardins Group 0.1%
Deutsche Bank Securities 0.2%
Dresdner Kleinwort 0.2%
DZ Bank 0.2%
First Trust Advisors 0.3%
Fortis 0.1%
Global Insight 0.1%
H&R Block Financial Advis 0.2%
Helaba 0.2%
HSBC Markets 0.1%
IDEAglobal 0.3%
Informa Global Markets 0.0%
ING Financial Markets 0.2%
Insight Economics 0.3%
Intesa-SanPaulo 0.2%
J.P. Morgan Chase 0.2%
Janney Montgomery Scott L 0.1%
JPMorgan Private Client 0.0%
Landesbank Berlin 0.2%
Landesbank BW 0.3%
Lehman Brothers 0.3%
Lloyds TSB 0.2%
Maria Fiorini Ramirez Inc 0.2%
Merk Investments 0.0%
Merrill Lynch 0.1%
Moody's Economy.com 0.1%
Morgan Stanley & Co. 0.3%
National City Corporation 0.1%
Natixis 0.2%
Newedge 0.2%
Nomura Securities Intl. 0.1%
PNC Bank 0.3%
RBS Greenwich Capital 0.2%
"Ried, Thunberg & Co. 0.3%"
Schneider Trading Associa 0.0%
Scotia Capital -0.2%
Societe Generale 0.2%
Stone & McCarthy Research 0.3%
TD Securities 0.2%
Thomson Financial/IFR 0.0%
University of Maryland 0.2%
Wachovia Corp. 0.1%
Wells Fargo & Co. 0.2%
WestLB AG 0.2%
Westpac Banking Co. 0.1%
Wrightson Associates 0.3%
==================================


To contact the reporter on this story: Bob Willis in Washington at bwillis@bloomberg.net

"Last Updated: September 29, 2008 00:01 EDT"





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