China’s Industrial Production Surges as Trade Rebounds in Asia

Dec. 12 (Bloomberg) -- China’s industrial production jumped, exports fell the least in 13 months and imports surged in November as rebounding trade with Asian nations underscored the region’s role in leading the world recovery.

Factory output climbed 19.2 percent from a year earlier, the statistics bureau said in Beijing yesterday. Exports slid 1.2 percent, the smallest drop in 13 months, and imports surged 26.7 percent, a separate report showed.

China’s exports to Southeast Asian nations including Indonesia, Malaysia and Singapore rose 21 percent in November and imports from those countries jumped 45 percent. Growth in Asia may accelerate to 5.75 percent next year, almost twice the likely pace of the expansion of the world economy, the International Monetary Fund says.

“China’s recovery is well on track and emerging Asian economies are the first beneficiaries,” said Xing Ziqiang, an economist at China International Capital Corp. in Beijing. “Improving exports will continue to boost China’s industrial output growth in the coming months.”

Asian stocks rose after the data.

The Shanghai Composite Index fell 0.2 percent, trimming this year’s gain to 78.4 percent, on concern that monetary policy may tighten. Asset bubbles could threaten the recovery and policy makers are on alert for inflation after yesterday’s data showed that consumer prices rose 0.6 percent from a year earlier, the first increase in 10 months.

Sinopec, BMW

China’s gross domestic product will expand 9.3 percent next year, according to a Bloomberg News survey of economists, after growth accelerated to 8.9 percent in the past quarter on record lending, a $586 billion, two-year stimulus package and subsidies for consumer purchases.

China Petroleum & Chemical Corp., or Sinopec, the country’s biggest refiner, said this month that it plans to expand the capacity of its second-biggest oil-processing plant by a third to meet rising demand. Bayerische Motoren Werke AG, the world’s largest maker of luxury cars, said last month that it will build a new factory in China to tap an auto market set to overtake the U.S. as the world’s largest this year.

China’s industrial-output growth was higher than the 18.2 percent median estimate in a Bloomberg News survey of 25 economists. Steel product output reached a record.

Retail sales climbed 15.8 percent, compared with 16.2 percent in October, according to the statistics bureau. Producer prices fell 2.1 percent.

‘Robust’ Momentum

Urban fixed-asset investment gained 32.1 percent in the January-to-November period from a year earlier after climbing 33.1 percent through October, yesterday’s data showed.

Peng Wensheng, a Hong Kong-based economist with Barclays Capital, said “underlying momentum” in the economy “remained robust despite some moderation in investment and sales.”

New loans topped forecasts, at 294.8 billion yuan, and M2, the broadest measure of money supply, grew a record 29.7 percent.

In the trade figures, exports to the U.S. fell 1.7 percent from a year earlier, the smallest decline since shipments began to tumble in November 2008. Exports to Taiwan climbed 13.5 percent, while those to India rose 26 percent.

Overall, imports climbed the most in 16 months because of rising commodity prices, the boost to domestic demand from stimulus policies and the low base in November 2008. The trade surplus narrowed to $19.1 billion.

“The first quarter will be the peak for China’s economy: everything will be firing on all cylinders,” said Dariusz Kowalczyk, chief investment strategist at SJS Markets Ltd. in Hong Kong.

China will contribute about 94 percent of an estimated 4.9 percent expansion in Asia excluding Japan this year and almost 70 percent of a 7.9 percent expansion next year, according to Kowalczyk. China’s imports will surge as much as 40 percent in the first quarter of 2010, he forecasts.

This year’s record expansion of credit has prompted plans by lenders including Bank of China Ltd. to replenish capital. The government this week adjusted its stimulus policies to curb property speculation, while extending subsidies for rural purchases of consumer goods and pledging a “moderately loose” monetary policy in 2010.

--Li Yanping, Kevin Hamlin, Zhang Dingmin. Editors: Paul Panckhurst, Russell Ward.

Asian Currencies Post Weekly Drop on Default Risk, Led by Won

Dec. 12 (Bloomberg) -- Asian currencies fell this week, led by the South Korean won and India’s rupee, as concern about the pace of a global economic recovery and the risk of debt defaults deterred investment in emerging-market assets.

State-run Dubai World met with creditors to restructure $26 billion of borrowings and Fitch Ratings downgraded its credit rating for Greece. Federal Reserve Chairman Ben S. Bernanke said Dec. 7 the U.S. economy faces “formidable headwinds” that will keep expansion to a “moderate” pace.

“Risk has been progressively pared into the year-end,” said Emmanuel Ng, a currency economist at Oversea-Chinese Banking Corp. in Singapore. “Concerns about Dubai and the European economies will have a sporadic effect on risk appetite and Asian currencies.”

The won slid 1 percent this week to 1,164.05 per dollar this week, according to data compiled by Bloomberg. The Indian rupee weakened 0.5 percent to 46.53 and the Singapore dollar dropped 0.6 percent to S$1.3892.

The Bloomberg-JPMorgan Asia Dollar Index, which tracks the region’s 10-most traded currencies against the greenback excluding the yen, fell 0.2 percent in the week.

State holding company Dubai World said on Dec. 1 it began “constructive” talks with banks to restructure $26 billion of debt, while Moody’s Investors Service slashed the credit ratings for six Dubai government-related firms, saying “no meaningful” support should be assumed for companies if the government hasn’t guaranteed them.

China’s exports slid 1.2 percent in November from a year earlier, the customs bureau said on its Web site yesterday, after falling 13.8 percent in October. The central bank has held the yuan at about 6.83 to the dollar for the past 17 months to shield exporters from the global economic slump.

India Curbs

India’s rupee, the best-performing Asian currency this quarter, may retreat in the coming weeks after the nation tightened rules on overseas borrowing that were eased during the credit crisis, Standard Chartered Plc said.

The U.K. bank, which gets most of its profit in emerging markets, is reviewing its short-term “overweight” rupee rating, according to Mumbai-based strategist Priyanka Chakravarty. The currency will still strengthen by the end of 2010 as India’s economic growth attracts investment, Chakravarty said.

Korean Growth

South Korea’s won halted a four-day losing streak yesterday after the central bank raised its 2010 economic growth forecast, saying a global recovery is helping boost exports.

Gross domestic product will increase 4.6 percent next year after gaining 0.2 percent this year, the central bank said yesterday. In July, the central bank estimated the economy would contract 1.6 percent in 2009, before expanding 3.6 percent next year.

The won will “be one of the Asian currencies that’ll benefit the most from the recovery of risk appetite and the normalization of global economic growth in the next six months,” said Sebastien Barbe, a Hong Kong-based strategist at Calyon.

The Bank of Korea kept its benchmark interest rate at a record-low 2 percent on Dec. 10 and signaled increases are planned. The won has strengthened 8.2 percent this year, the second-best performer among Asia’s 10-most active currencies excluding the yen.

Malaysia’s ringgit traded near a one-month low as the FTSE Bursa Malaysia KLCI Index lost 0.8 percent this week. The ringgit weakened 0.5 percent to 3.3995 per dollar in Kuala Lumpur, according to data compiled by Bloomberg. It reached 3.4125 on Dec. 9, the weakest level since Nov. 6.

Dubai Concerns

“Dubai concerns affected the market a bit this week and people are not so sure about the outcome” of the debt talks, said Mohd Zaki Talib, a currency trader at RHB Bank Bhd. in Kuala Lumpur. “China’s data could be positive for the ringgit because of the growing importance to Asia’s economies.”

Reports in the past week showed Malaysia’s manufacturing and overseas sales increased in October for the first time in at least a year. China today announced a 19.2 percent increase in industrial output for November, the fastest growth in more than two years.

Elsewhere in Asian trading, the Indonesian rupiah fell 0.3 percent to 9,443 versus the greenback this week and the Philippine peso dropped 0.3 percent to 46.13. The Taiwan dollar weakened 0.3 percent to NT$32.278 while the Thai baht was little changed at 33.10. The yuan traded at 6.8277 from 6.8270 at the end of last week.

Australia’s Jobs Boom Gives RBA Green Light on Rates Australia’s Jobs Boom Gives RBA Green Light on Rates

Dec. 11 (Bloomberg) -- The biggest three-month surge in Australian employment in three years is increasing pressure on central bank Governor Glenn Stevens to resume an unprecedented round of interest-rate increases early next year.

Employers added 99,500 workers in the three months to Nov. 30, the most since the third quarter of 2006, pushing down the jobless rate to 5.7 percent and confounding the median forecast of 22 economists surveyed by Bloomberg for a 5.9 percent rate.

Australian unemployment has peaked and will fall as miners including BHP Billiton Ltd. take on more workers to increase iron-ore production amid a surge in China’s demand for steel, say economists. The jobs surge also adds to global evidence of an economic rebound from the deepest recession since World War II, including last month’s drop in the U.S. jobless rate.

“Australia has lived up to its reputation as the wonder from down under,” and is now the “strongest economy in the developed world,” said Craig James, a senior economist at Commonwealth Bank of Australia in Sydney. “The Reserve Bank will continue to lift rates over 2010.”

The Australian dollar traded at 91.66 U.S. cents at 10:07 a.m. in Sydney yesterday from 91.05 cents just before the report was released.

Rate Bets

Investors are betting there is a 76 percent chance of a quarter-point increase in the benchmark lending rate to 4 percent at the central bank’s next meeting on Feb. 2, according to Bloomberg calculations based on interbank futures on the Sydney Futures Exchange at 10 a.m. It stood at 48 percent just before yesterday’s report. Rates are near zero in the U.S. and Japan.

Governor Stevens boosted the overnight cash rate target by a quarter-percentage point on Dec. 1 to 3.75 percent, becoming the only policy maker in the world to raise borrowing costs three times since the height of the global financial crisis.

He also increased the rate last month and in October, citing a rebound in business confidence and demand for iron ore that will boost gross domestic growth above 3 percent next year in Australia, one of few economies including China and India to skirt the global recession.

Stevens has been clear “that interest rates won’t stay at emergency levels forever -- Australians understood that,” Deputy Prime Minister Julia Gillard told the Australian Broadcasting Corp. today.

Chevron Gas

Chevron Corp. said on Dec. 5 it has signed a deal with Japan’s Tokyo Electric Power Co. to supply liquefied natural gas from its Wheatstone venture in Western Australia. The project, estimated to be worth $82 billion, is forecast to generate 6,500 jobs during construction.

It is in addition to the $39 billion Chevron-led Gorgon gas venture, also in Western Australia, which is forecast to create another 10,000 jobs when construction starts early next year. Qantas Airways Ltd.’s low-cost carrier Jetstar is also taking on more workers.

The number of full-time jobs in Australia gained 30,800 in November and part-time employment increased 300, yesterday’s report showed. The median estimate of 22 economists surveyed by Bloomberg was for an increase of 5,000 jobs in November.

“The labor market is now in a fully fledged recovery,” said Felicity Emmett, a senior economist at RBS Group Australia Ltd. in Sydney. “It seems increasingly likely that the jobless rate has peaked below 6 percent.”

Advertisements for job vacancies jumped in November by the most since May 2007, a survey by Australia & New Zealand Banking Group Ltd. showed this week.

‘Back to Capacity’

The number of people employed gained 31,200 in November after rising 27,200 in October, yesterday’s report showed. Employers also added 41,100 workers in September.

The labor market in “the mining sector is pretty much back to capacity,” Governor Stevens told economists in Sydney on Dec. 8. “There are a lot of other countries in the world who would like to have that problem.”

Unemployment in the U.S. fell to 10 percent in November from 10.2 percent in October, which was the highest in 26 years. The jobless rate among European Union countries was 9.8 percent in October, the highest level in more than a decade, and 7.8 percent in the three months through September in the U.K.

“We suspect there is a strong element of catch-up in recent employment figures after Australian business confidence turned rapidly more positive around mid-year,” said Anthony Thompson, at Westpac Banking Corp., who added unemployment has peaked.

Cash Handouts

Sentiment among businesses surged last month to the highest level since May 2002, a survey by National Australia Bank Ltd. showed on Dec. 8.

Rising consumer demand after Prime Minister Kevin Rudd’s government distributed more than A$20 billion ($18 billion) in cash to households is also prompting airlines and retailers to boost hiring.

Jetstar plans to hire 300 workers as it adds 700,000 new seats to existing routes with four extra Airbus 320 planes, the Australian Financial Review said yesterday, citing Chief Executive Officer Bruce Buchanan.

Michael Luscombe, chief executive officer of Australia’s largest retailer, Woolworths Ltd., told Bloomberg in an Oct. 20 interview the company will hire another 6,000 workers.

Bank of Korea Raises 2010 GDP Growth Forecast to Bank of Korea Raises 2010 GDP Growth Forecast to 4.6%

Dec. 11 (Bloomberg) -- South Korea’s economy will expand next year at a faster pace than previously forecast as a pickup in the global economy boosts demand for the nation’s goods, the Bank of Korea said today.

Gross domestic product will increase 4.6 percent in 2010, after gaining 0.2 percent this year, the central bank said in its economic outlook for 2010 in Seoul today. In July, the central bank estimated the economy would contract 1.6 percent in 2009, before expanding 3.6 percent next year. In 2011, the economy will expand 4.8 percent, it said.

Governor Lee Seong Tae left the seven-day repurchase rate at a record-low 2 percent yesterday, while saying the central bank shouldn’t wait too long before gradually raising interest rates provided the recovery maintains momentum. The benchmark Kospi stock index has climbed 47 percent this year as investors bet on the expansion continuing.

“The central bank’s forecast is line with the government’s as well as other economic research,” said Go You Sun, an economist at Daewoo Securities Co. in Seoul. “The global economy will be better next year and will help South Korea’s exports. A forecast for faster economic growth justifies a rate increase by the central bank.” Go expects the Bank of Korea will raise borrowing costs as early as February 2010.

The won fell 0.3 percent to 1,165.42 per dollar yesterday, according to data compiled by Bloomberg, and touched 1,166.95, the weakest level this month.

Increased Spending

President Lee Myung Bak’s administration increased spending to support consumer purchases and cushion the economy from the worst global recession since World War II. The central bank cut the benchmark interest rate by 3.25 percentage points between October 2008 and February, the most aggressive easing since it began setting a policy rate a decade ago.

“Our economy in the future will post bigger growth as momentum strengthens thanks to a recovery in the global economy and an improvement in consumption,” the central bank said today. “The private sector is likely to lead economic growth as policy impacts weaken,” it said. Still, there are a number of “uncertainties,” including a possible delay in the global recovery.

South Korea’s economy expanded 3.2 percent in the third quarter, the fastest pace in seven years as companies including Samsung Electronics Co. and Hyundai Motor Co. reported rising quarterly profits. The Finance Ministry said yesterday the economy would expand 5 percent next year.

Manufacturers’ Confidence

Still, industrial production unexpectedly dropped 3.8 percent in October from September and inflation remained below the central bank’s target of between 2.5 percent and 3.5 percent for a sixth month in November. Manufacturers’ confidence slipped to the lowest level in four months and consumer confidence dropped for the first time in eight months in November.

Goods exports will rise 9.3 percent next year, after decreasing 0.1 percent in 2009, the central bank said today. South Korea’s overseas shipments make up about 50 percent of the $929 billion economy.

Private consumption will probably gain 0.3 percent this year and rise 3.6 percent next year. Corporate investment on facilities will increase 11.4 percent in 2010, reversing a 9.6 percent drop this year, the bank estimates.

Consumer-price inflation will average 2.8 percent this year and next, the central bank said. The core inflation rate, which excludes fresh food and oil, will rise 3.6 percent this year before slowing to 2.5 percent in 2010, it predicted.

The nation will post a current account surplus of $43 billion this year, more than the $29 billion estimated in July, the bank said. The surplus is likely to shrink to $17 billion in 2010, it forecast.

The International Monetary Fund this week raised its 2010 economic growth forecast to 4.5 percent.

Australian, N.Z. Dollars Strengthen on Job Gains, Central Bank

Dec. 10 (Bloomberg) -- The Australian dollar gained for a second day after a report showed employers last month added more than six times the number of jobs forecast by economists. New Zealand’s currency rose on prospects for higher interest rates.

The so-called Aussie advanced the most in a week after the statistics bureau said employers increased jobs for the third month in November, unexpectedly pushing down the unemployment rate to 5.7 percent. The New Zealand dollar climbed for a second day after the central bank said it will raise the benchmark interest rate sooner than it previously indicated as a stronger housing market leads the economy out of recession.

“Quite clearly unemployment has peaked at 5.8 percent and we think this is further testament to the momentum in the Australian economy and validates the RBA’s tightening cycle,” said Patrick Bennett, a foreign-exchange strategist at Societe Generale SA in Hong Kong. “The RBA will continue their steady process of taking this accommodation back at a gradual pace -- we are still at accommodative settings of monetary policy.”

Australia’s currency climbed 0.9 percent, the most since Dec. 1, to 91.65 U.S. cents as of 12:20 p.m. in Sydney from 90.86 in New York yesterday. It rose 1.4 percent to 80.96 yen.

New Zealand’s dollar gained to 72.47 U.S. cents from 71.89 cents yesterday, when it jumped 1.7 percent. The currency advanced 1.4 percent to 64.01 yen. The kiwi touched NZ$1.2579 against the Australian dollar, the strongest since Nov. 20, before trading at NZ$1.2648, from NZ$1.2639 yesterday.

Australian Jobs

The number of people employed in Australia rose 31,200 from October, the statistics bureau said in Sydney. The median estimate of economists surveyed by Bloomberg was for an increase of 5,000.

The Australian dollar may end the year at 92.50 U.S. cents while New Zealand’s currency may climb to 73 cents, Bennett said.

“If the economy continues to recover, conditions may support beginning to remove monetary stimulus around the middle of 2010,” New Zealand central bank Governor Alan Bollard said in a statement in Wellington today, after leaving the official cash rate at 2.5 percent.

New Zealand’s economy will expand 1.9 percent in the first quarter of 2010 from a year earlier, the bank said in new forecasts published today. That’s better than the 1.3 percent pace predicted in September. Annual growth will accelerate to 4.2 percent by the first quarter of 2011, the bank said. Annual consumer price inflation is expected to remain below 2 percent till early 2011, it said.

‘Tightening Cycle’

“New Zealand as well as the global environment have continued to rebound and that’s necessitated a shift in the timing of the tightening cycle,” said Imre Speizer, a market strategist in Wellington at Westpac Banking Corp. “The statement was quite a bit more hawkish than expected.”

Benchmark interest rates are 3.75 percent in Australia and 2.5 percent in New Zealand, compared with 0.1 percent in Japan and as low as zero in the U.S., attracting investors to the South Pacific nations’ higher-yielding assets. The risk in such trades is that currency market moves will erase profits.

New Zealand’s two-year swap rate, a fixed payment made to receive floating rates, rose to 4.59 percent from 4.54 yesterday.

Australian government bonds fell a second day. The yield on 10-year notes rose seven basis points, or 0.07 percentage point, to 5.52 percent, according to data compiled by Bloomberg. The price of the 5.25 percent security due March 2019 fell 0.504, or A$5.04 per A$1,000 face amount, to 89.056.

Australian Dollar Carry Trade ‘In Vogue,’ RBA’s Debelle Says

Dec. 10 (Bloomberg) -- The Australian dollar carry trade, in which investors borrow Japanese yen, Swiss francs and U.S. dollars to invest in higher yielding assets, is helping stoke the nation’s currency, central bank official Guy Debelle said.

“The Australian dollar carry trade now again appears to be back in vogue,” the Reserve Bank assistant governor said in Sydney today. “The Australian interest-rate differential remains relatively high compared to most other major currency pairs.”

Australia is the only central bank in the world to raise its benchmark interest rate three times this year as the Bank of Japan, U.S. Federal Reserve and European Central Bank kept their rates at or close to record lows. Carry trade returns between the Australian dollar and Japanese yen have returned almost 30 percent this year, Debelle said.

The Australian dollar, the second-best performer behind the Brazilian real among the 16 most-traded currencies in the world, has jumped more than 32 percent this year. It traded at 91.60 U.S. cents at 12:08 p.m. in Sydney today.

Banks including National Australia Bank Ltd., Royal Bank of Scotland Group Plc. and Societe Generale SA predict Australia’s currency will reach parity with the U.S. dollar by the first quarter of next year, according to Bloomberg data.

Reserve Bank of Australia Governor Glenn Stevens raised the overnight cash rate target for an unprecedented third straight month last week to 3.75 percent. By contrast, the U.S. Fed funds rate is close to zero, and the ECB’s benchmark is at a record low of 1 percent.

Economic Help

“The movement in the exchange rate has once again proven to be an important means of assisting the Australian economy adjust to changes in the global economic environment,” Debelle told a conference organized by Westpac Banking Corp. today. “As on earlier occasions, the economy has proven to be resilient to these swings.”

Employment soared for a third straight month in November as companies added six times as many jobs as economists estimated, boosting the nation’s currency, a government report showed today.

The number of people employed gained 31,200 from October, the statistics bureau said. The median estimate of 22 economists surveyed by Bloomberg was for an increase of 5,000. The jobless rate fell to 5.7 percent from 5.8 percent.

Australia’s economy is one of the few including China and India to skirt this year’s global recession, boosted by Prime Minister Kevin Rudd’s A$42 billion ($38 billion) stimulus package. Gross domestic product expanded 1 percent in the first half of this year.

Looking Good

Stevens, who predicts economic growth will accelerate above 3 percent next year, said this week he didn’t expect the economy at the start of 2009 to be “looking as good as it does” now.

“I thought things would turn out rather worse than they have,” Stevens said on Dec. 8. “But who’s complaining? Not me.”

Much of the demand for jobs in Australia is being driven by resources companies including Chevron Corp., which last week signed a deal with Japan’s Tokyo Electric Power Co. to supply liquefied natural gas from its Wheatstone field in Western Australia. The project is forecast to generate 6,500 jobs during construction.

“The Australian dollar is often described as a ‘commodity currency’, meaning there has been a historically strong relationship between the Australian dollar and the terms of trade and commodity prices,” Debelle said today.

“As a result, the Australian dollar has been particularly sensitive to the large and rapid changes in expectations for world growth that have occurred over the past 18 months.”

Debelle also said current account figures show “there have been large net inflows of foreign capital into Australia since the start of the year as the home bias of global investors has eased.”

Australian Consumer Confidence Falls 3.8% in December

Dec. 9 (Bloomberg) -- Australian consumer confidence fell in December after central bank Governor Glenn Stevens increased borrowing costs for an unprecedented third straight month.

The sentiment index dropped 3.8 percent to 113.8 points, according to a Westpac Banking Corp. and Melbourne Institute survey of 1,200 consumers conducted between Nov. 30 and Dec. 6 and released today in Sydney.

Falling consumer confidence may give Governor Stevens scope to keep the benchmark lending rate unchanged at 3.75 percent when his board next meets in February, after quarter percentage point increases in October, November and this month. A report tomorrow may show Australia’s unemployment rate rose in November to 5.9 percent from 5.8 percent, say analysts surveyed by Bloomberg News.

“This is a surprisingly modest fall in the index given recent developments on interest rates,” said Bill Evans, chief economist at Westpac Bank in Sydney. “We must be getting close to levels of the variable mortgage rate where households become much more sensitive than is currently the case.”

The Australian dollar traded at 90.27 U.S. cents as of 10:34 a.m. in Sydney from 90.23 cents before the report was released.

Stevens this month became the only central bank chief in the world to raise borrowing costs three times this year, citing a surge in consumer and business confidence as well as rising demand from China for exports such as iron ore and coal.

Business confidence jumped in November to the highest level in more than seven years, according to a National Australia Bank Ltd. survey published on Dec. 8.

Looking Good

“At the beginning of the year I would not have expected the economy be looking as good as it does” now, Stevens said late yesterday in Sydney. “I thought things would turn out rather worse than they have. But who’s complaining? Not me.”

Investors are betting there is a 42 percent chance of an interest-rate increase at the central bank’s next meeting in February, according to Bloomberg calculations based on interbank futures on the Sydney Futures Exchange late yesterday.

All of the five components of the index fell in December, led by an 8.9 percent drop in sentiment among households with a mortgage, today’s report said.

Assessments of whether now is a good time to buy major household items declined “only 2.3 percent,” Evans said.

“Retailers should derive considerable comfort from the relatively modest fall,” he said.

Japan Economy Grows 1.3%, Less Than First Estimated

Dec. 9 (Bloomberg) -- Japan’s economy expanded less than a third of the pace initially reported in the three months to September as companies slashed spending.

Gross domestic product rose at an annual 1.3 percent pace, slower than the 4.8 percent reported in preliminary figures last month, the Cabinet Office said today in Tokyo. The revision was deeper than the predictions of all but one of the 17 economists surveyed by Bloomberg News.

Stocks fell after the report underscored concern about the sustainability of a recovery that is under threat from deflation and a rising yen. Prime Minister Yukio Hatoyama unveiled a 7.2 trillion yen ($81 billion) stimulus package yesterday, the first for his Cabinet, to prop up the recovery.

“These numbers were weak,” Masamichi Adachi, senior economist at JPMorgan Chase & Co. in Tokyo. “The stimulus will have a positive effect on the economy. But it’s not, in any way, enough to offset how steeply third quarter GDP was revised.”

The yen traded at 88.41 per dollar at 10:46 a.m. in Tokyo from 88.40 before the report. The currency has weakened since climbing to a 14-year high of 84.83 per dollar on Nov. 27. The Nikkei 225 Stock Average slid 1.3 percent led by Honda Motor Co. and Mizuho Financial Group Inc.

Today’s report added to evidence that falling prices are taking hold in the economy. In nominal terms the economy shrank 0.9 percent last quarter, compared with the government’s initial prediction for a 0.1 percent contraction. The GDP deflator, the broadest indicator of price declines, slid 0.5 percent. The gauge has only risen twice in the past decade.

Investment by companies drove the downward revision in last quarter’s growth. Capital spending fell 2.8 percent in the three months through September from the previous quarter. That compares with the 1.6 percent increase reported last month.

Slower Growth

The economy expanded 0.3 percent in the third quarter from the previous three months, the Cabinet Office said, slower than the 1.2 percent first reported. The cuts in both quarterly and annualized growth were the biggest since the survey was introduced in 2002, the government said.

“Japan’s economy isn’t in good shape and the outlook is cloudy,” said Yuuki Sakurai, chief executive officer of Fukoku Capital Management Inc. in Tokyo. “In the case of Japan, a crisis happens once in five years, not once in 100 years, so companies get scared of increasing business investment.”

Consumer spending, which makes up about 60 percent of the economy, climbed 0.9 percent, compared with a 0.7 percent gain initially reported. Exports increased 6.5 percent from the previous quarter, compared with the 6.4 percent first published.

Some exporters are scaling back their spending plans as the yen’s rise to a 14-year high threatens their profits and market share.

Toyota Motor Corp., Japan’s biggest automaker, aims to cut capital investment by 70 billion yen from its initial plans for the year ending March, the most among major companies, a Nikkei Inc. survey showed on Nov. 30.

Sony Corp., forecasting its first consecutive annual loss since its listing in 1958, said last month that it will eliminate 250 jobs at its information devices unit to reduce costs. The company will close down a factory in Miyagi Prefecture making magnetic heads and transfer some of its touch- panel production to China.

Falling Prices

Falling prices have been squeezing profit at home, prompting the government to declare last month that the country is back in deflation and push the Bank of Japan to do more to spur the economy. The central bank released a 10 trillion yen credit program last week, a move that Deputy Prime Minister Naoto Kan said yesterday had a “considerable impact” on weakening the yen.

“Even though companies are trying to secure profits by reducing costs, they continue to struggle to increase sales amid deflation,” said Hiromichi Shirakawa, chief Japan economist at Credit Suisse Group AG in Tokyo. “While the nation may fall into an economic lull early next year, it will take time before employment returns to a full-fledged recovery, even as the government’s job measures serve as a safety net.”

Yesterday’s stimulus includes employment subsidies, loan guarantees and incentives to buy energy-efficient products. Japan has compiled four spending packages since September 2008 totaling more than 29 trillion yen.

Avert Recession

Hiroshi Miyazaki, chief economist at Shinkin Asset Management Co. in Tokyo, said Hatoyama’s plan will probably ensure Japan averts another recession next year while failing to combat deflation.

Demand from Asia will be enough to sustain the export-led recovery, according to economist Ryutaro Kono.

“The likelihood of a double-dip recession may be limited thanks largely to the solid recovery in China and the other emerging economies of Asia,” said Kono, chief economist at BNP Paribas in Tokyo.

Exports fell at the slowest pace in a year in October, the Finance Ministry said yesterday.

Some companies are expanding in China to benefit from rising demand in the world’s fastest-growing major economy. Suzuki Motor Corp., Japan’s third-largest motorcycle maker, said on Dec. 1 that it will start operating a motorcycle factory in China in the first half of 2010 after a one-year delay.

Volkswagen to Hire 1,300 Workers at India Factory, Add Polo Car

Dec. 8 (Bloomberg) -- Volkswagen AG plans to double the number of workers at its new factory in India to 2,500 by the end of next year as Europe’s biggest carmaker aims to take on Suzuki Motor Corp. and Nissan Motor Co.

The plant, located in Chakan near the western city of Pune, employs about 1,200 people, Ulrich Proske, finance chief of VW’s Indian unit, said in an interview. The 580 million-euro ($860 million) factory started building the Skoda unit’s Fabia hatchback in May and will begin making VW’s Polo this week.

“We’re taking advantage of the momentum in India,” Proske said yesterday by telephone. The Indian automotive market will grow to 2.2 million cars and sport-utility vehicles by 2014 from 1.4 million this year, he predicted.

Volkswagen, already the largest overseas carmaker in China, is boosting its presence in India after auto sales in the world’s two most populous nations withstood the global recession. The Polo subcompact will compete with models built by Maruti Suzuki India Ltd., maker of half the cars sold in the nation, as well as models from Ford Motor Co., Honda Motor Co. and Nissan.

Wolfsburg, Germany-based Volkswagen, which sold about 16,000 vehicles in India from January through October, is targeting more than 100,000 deliveries a year in the “long term,” said Proske, declining to specify a timeframe. VW plans to expand its Indian distribution network to 120 dealers by 2012 from 14 last year.

‘Long Way’

“There’s a huge appetite for mobility, especially among the growing number of middle-class people,” the executive said. “There’s still a long way for us to go.”

Volkswagen is introducing a hatchback Polo first at the Chakan plant and will add a version with a trunk in mid-2010. Hatchbacks account for more than 70 percent of all cars delivered in India. Honda, Japan’s second-largest automaker, started selling the Jazz hatchback in India in June.

Yokohama, Japan-based Nissan plans to introduce a small car in India by the middle of next year and is setting up a factory with initial capacity of 200,000 vehicles a year in Chennai. Dearborn, Michigan-based Ford said in September that it will sell its first small car for India, the Figo, in 2010.

Asia will be key to a 10-year goal of increasing Volkswagen-brand deliveries by 80 percent to 6.6 million vehicles in 2018, Chief Executive Officer Martin Winterkorn said in April. Volkswagen has a goal of overtaking Toyota City, Japan-based Toyota Motor Corp., the world’s biggest carmaker, in global deliveries and profit margins by 2018.

Up! City Car

The German company is also considering making the Up! city car at Chakan, Proske said. A final decision hasn’t been made, he said. Volkswagen plans to build the Up! at its plant in Bratislava, Slovakia, starting in 2011.

Volkswagen also assembles Jettas, Passats and Audi A4 and A6 models at a Skoda factory in Aurangabad in western India, where it employs 1,000 people.

Foreign investors including VW will face “difficulties” expanding in India unless the government takes steps to improve infrastructure, as airports and harbors operate at capacity while roads and the electricity grid must be overhauled, Proske said. Transport and power-supply restrictions probably cost India at least 1 percentage point in gross domestic product growth each year, Proske said.

Bruno, Former Albany Leader, Convicted of Corruption

ALBANY — Joseph L. Bruno, the former Senate majority leader who, until his retirement a year ago, was one of the most powerful figures in New York politics, was found guilty on Monday of concealing hundreds of thousands of dollars in payments from a businessman who sought help from the Legislature.
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The conviction marked a humiliating fall for Mr. Bruno, a Korean War veteran and a former boxer, whose jovial manner masked the iron hand he used to rule the Senate with almost untrammeled authority for nearly 14 years. His retirement came amid a federal corruption investigation.

The verdict also blackened the already tarnished reputation of Albany’s political establishment, casting a harsh light on the ways lawmakers blend official and personal business and raising questions about why it took a federal prosecution to uncover Mr. Bruno’s conduct.

After deliberating for nearly seven days, the jury of seven women and five men in Mr. Bruno’s trial found him guilty of two felony counts of mail fraud. The jury found Mr. Bruno not guilty on five counts of mail or wire fraud and could not reach a verdict on another count.

Mr. Bruno, 80, is scheduled to be sentenced on March 31 and faces up to 20 years and a $250,000 fine on each felony count. But Judge Gary L. Sharpe has broad discretion in sentencing, and Mr. Bruno’s defense was expected to appeal.

“I am very, very disappointed in the verdict,” Mr. Bruno told reporters on the steps of the federal courthouse here. “The legal process is going to continue. In my mind and in my heart, it is not over until it’s over. And I think it’s far from over. Thank you all, have a good night and merry Christmas.”

The jury entered the courtroom at 4:16 p.m. and as the verdict on first counts were revealed — not guilty on the first and second, no verdict reached on the third — the mood among Bruno supporters in the courtroom grew almost euphoric.

But as Judge Sharpe read out a guilty verdict on the fourth count, the mood turned. Mr. Bruno’s normally upright frame sagged. “We established at this trial that Bruno exploited his office by concealing the nature and source of substantial payments that he received from parties that benefited from his official actions,” Andrew T. Baxter, the acting United States attorney for the northern district of New York, said in a statement.

The federal statute under which Mr. Bruno was charged, which makes it a crime for officials to use wires or the mail to deprive constituents of their “honest services” by concealing conflicts of interest, are set to be reviewed by the Supreme Court and could be struck down in whole or in part, potentially aiding any appeal.

“We await Round 2,” said Kris Thompson, a Bruno aide.

Jurors acquitted Mr. Bruno on all the counts concerning his work for Wright Investors’ Service, a Connecticut-based investment company that paid Mr. Bruno $1.3 million dollars to solicit pension fund investments from labor unions that had interests before the Senate. They also acquitted him of an array of charges involving other companies that paid Mr. Bruno consulting fees while seeking grants, contracts, or legislative action from state officials.

But they appeared to be more troubled by evidence concerning Mr. Bruno’s relationship with Jared E. Abbruzzese, an Albany-area entrepreneur who sought the Senate leader’s help for an array of ventures, from a nanotechnology company seeking state money to telecommunications firms seeking investment capital.

Jurors convicted Mr. Bruno on one count involving $200,000 that consulting firms run by Mr. Abbruzzese paid Mr. Bruno in 2004. They also convicted him on one count involving a horse-breeding partnership that Mr. Bruno and Mr. Abbruzzese dissolved in 2005, with Mr. Abbruzzese forgiving Mr. Bruno $40,000 in debt and paying him $40,000 for a horse that prosecutors said was virtually worthless.

Those payments, jurors found, were little more than gifts that Mr. Abbruzzese awarded to Mr. Bruno in exchange for hundreds of thousands of dollars in state grants that Mr. Bruno had previously obtained for one of Mr. Abbruzzese’s companies, Evident Technologies.

The verdict capped a month-long trial that captivated the state political establishment and laid bare the unseemly side of New York’s Legislature, where most lawmakers have second jobs in the private sector but are required to disclose very little about what they are paid to do.

“The prosecutors and agents involved in this case take no pleasure from what the trial revealed about the culture of the New York State Senate,” Mr. Baxter said in his statement.

It is not known exactly how much Mr. Bruno has spent on legal bills, but it is believed to be well into seven figures. His legal team included Abbe D. Lowell, a prominent Washington lawyer who defended the lobbyist Jack Abramoff, and William J. Dreyer, a highly regarded Albany defense lawyer.

Prosecutors called more than 70 witnesses and presented a trove of more than 200 e-mail messages, as well as handwritten notes, calendar entries and memoranda, many culled from the historically secretive Senate.

The trial also delved into Mr. Bruno’s private business, which spanned work for more than a dozen companies during more than a decade and a half, earning Mr. Bruno roughly $3.2 million in fees.

He earned the bulk of that money from Wright, while failing, prosecutors said, to fully disclose his ties to the firm. Mr. Bruno resigned from Wright in December 2007, shortly after The New York Times disclosed Wright’s ties to a host of Albany-area labor unions.

Mr. Bruno did not take the stand in his own defense, and his lawyers instead presented only seven witnesses, including friends and former business associates, to bolster his case. Characterizing Mr. Bruno as a victim of overzealous prosecutors, his lawyers portrayed him as a devoted public servant who tried to faithfully adhere to the law, routinely seeking the advice of Senate ethics lawyers.

The official benefits Mr. Bruno delivered for those who did business with his clients, his lawyers argued, were indistinguishable from the legislative action and earmarks he sought for all his constituents, and were driven by a sincere desire to create jobs and help working people.

Jurors refused to answer questions as they left the courthouse flanked by federal marshals.

Mr. Bruno’s own remarks to reporters were uncharacteristically short. Clearly dejected, Mr. Bruno stood in the cold showing little of his trademark brio until a young woman yelled out “I love you, Joe!” as he walked toward a waiting Mercedes-Benz sedan.

“Thank you very much,” he replied.

U.S. Risks ‘Losing’ Sri Lanka as Ally, Senate Committee Says

Dec. 8 (Bloomberg) -- The U.S. risks losing Sri Lanka as an ally unless it changes its relationship after Western criticism of human rights abuses prompted the country to seek closer ties with China, Myanmar and Iran, a Senate committee said.

The U.S. “cannot afford to ‘lose’ Sri Lanka,” the Committee on Foreign Relations said in a report. Relations won’t change overnight and the U.S. won’t ignore its concerns about the South Asian island nation’s political and humanitarian record, it said.

While the U.S., China and India share an interest in securing maritime trade routes in the Indian Ocean, the U.S. “has invested relatively few economic and security resources in Sri Lanka, preferring to focus instead on the political environment,” the committee said. Sri Lanka’s strategic importance to U.S. interests “has been neglected as a result.”

President Mahinda Rajapaksa’s government defeated the Liberation Tigers of Tamil Eelam in May, ending its 26-year fight for a separate Tamil homeland in the country of 20 million people. Sri Lanka has called on western nations to help it rebuild after the war and stop raising the issues of human rights abuses and the speed of settling more than 280,000 mainly Tamil refugees held in transit camps in the north when the conflict ended.

Trade, Security

The U.S. should move to expand trade and security cooperation, which could help bring about political changes and promote reconciliation between the Tamil and Sinhalese communities, the Senate committee said. Tamils make up almost 12 percent of Sri Lanka’s population and Sinhalese account for 74 percent, according to a 2001 census.

Sri Lanka considers its relationship with the U.S. to be “on a downward trajectory” after the war and criticisms of the delay in resettling displaced people “have fallen on deaf ears,” the committee said.

“This growing rift in U.S.-Sri Lankan relations can be seen in Colombo’s realignment toward non-Western countries, who offer an alternative model of development that places greater value on security over freedoms,” it said.

Sri Lanka needs to promote reconciliation, share its plans for reconstruction and resettlement in the north with the public, protect and guarantee the freedom of movement of displaced people and allow a free and fair press, the committee said.

“Though the war is over, a culture of fear and paranoia permeates society, especially for journalists, which further erodes Sri Lanka’s standing in the international community and hampers its prospects for genuine peace,” it said.

Military Training

The Obama administration should promote the reconciliation programs, expand U.S. economic assistance to the Sinhalese- majority south as well as Tamil areas in the north and east. The U.S. Congress should authorize a resumption of training of Sri Lankan military officials to help ensure human rights concerns are considered in future operations, the committee recommended.

The State Department in October released a congressionally mandated report listing accounts of army shelling of civilians and killings carried out by the LTTE in the final weeks of the war. Sri Lanka’s government has ordered an investigation into the allegations while saying the report is “unsubstantiated.”

The U.S. has been the leading donor of food and humanitarian assistance in 2009, providing more than $43 million, the Senate committee said. The Treasury Department abstained from joining a $2.6 billion International Monetary Fund loan to the country this year because of humanitarian concerns.

Rebuilding after the conflict is helping the island’s $41 billion economy. The central bank forecasts it will grow as much as 6 percent next year after expanding about 3.5 percent in 2009.

The end to the war that killed about 90,000 people has helped push the benchmark Colombo All-share index up almost 90 percent this year.

The government says it plans to complete the settlement of about 112,000 civilians still in camps by the end of January. The program was delayed because security needed to be ensured in the north where more than 1.5 million mines have to be cleared, according to the army.

OPG doubles interim revenues

OPG Power Ventures, which is developing gas and coal-fired power plants in India, almost doubled interim revenues to £5.7m, writes David Blackwell.

Pre-tax profits for the six months to September 30 also rose from £2m to £3.5m.
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Arvind Gupta, the managing director who owns 62 per cent of the equity, said the results were driven by improved electricity prices and by the output of its second plant, which came on stream in October.

The company joined Aim in May 2008, raising £65m at 60p a share.

It was one of the last companies to join Aim before the market started shrinking. In the past 18 months, more than 500 companies have left, reducing the total number quoted at the end of November to 1,323.

The shares have recovered from a low of 20p a year ago to close up ½p at 79p.

The company said that the recovery had restored its faith in Aim, where it has 20 institutional shareholders who would be key to any future fundraising needs.

Treasury Said to Link Citigroup Stake Sale to TARP Payback Plan

Dec. 7 (Bloomberg) -- The U.S. Treasury Department aims to hold off on selling its 34 percent stake in Citigroup Inc. until the bank and regulators agree on a broader plan to repay all obligations remaining from last year’s $45 billion government bailout, a person close to the department said.

Treasury officials are concerned that a sale now of its 7.7 billion shares in the New York-based bank may weaken investor demand should Citigroup subsequently be required to raise capital as a condition of exiting the bailout program, said the person, who declined to be identified because the government hasn’t publicly discussed the plans.

Citigroup executives have pressed Treasury for at least three months to sell the stake as a first step toward leaving the bailout program, according to people familiar with the matter. They want to escape government-imposed pay limits that may make the company vulnerable to employee-poaching by unfettered rivals. Bank of America Corp., the only other large U.S. bank under pay limits, last week announced a plan to exit the program.

“This should be well thought-out for the benefit of all constituencies, and in this case that includes shareholders, the government and the taxpayers,” said Dennis Santiago, chief executive officer of analysis firm Institutional Risk Analytics in Torrance, California. “Just because Bank of America goes doesn’t mean you have to rush Citigroup.”

Taxpayer Reimbursement

The government is trying to wind down bailout programs extended as financial markets convulsed late last year. Treasury Secretary Timothy Geithner said in a Dec. 4 interview that most taxpayer money injected into banks through the Troubled Asset Relief Program will eventually be recovered.

While holding off on a sale of its Citigroup stake, the Treasury has pushed regulators behind the scenes to accelerate discussions with all large banks about their plans to exit TARP, the person close to the department said.

In November, the Federal Reserve asked nine of the biggest U.S. banks to submit plans to repay the government’s capital injections. In testimony last week before the Senate Banking Committee in Washington, Federal Reserve Chairman Ben S. Bernanke said Bank of America got approval to exit TARP only after regulators “felt it was safe and reasonable and appropriate.”

Charlotte, North Carolina-based Bank of America, the biggest U.S. lender, agreed to raise at least $18.8 billion of capital, according to a Dec. 2 press release. It said later that it had raised $19.3 billion.

Free to Sell

JPMorgan Chase & Co., Goldman Sachs Group Inc. and Morgan Stanley, all based in New York, repaid their bailout funds in June. San Francisco-based Wells Fargo & Co., which still has $25 billion of TARP money, isn’t subject to pay limits because it never needed a second helping of bailout funds, as Citigroup and Bank of America did.

In October, Citigroup CEO Vikram Pandit, 52, said he was “focused on repaying TARP as soon as possible.” He said, “We’re going to do so in consultation with the government and our regulators.” At least twice since September, he has said the Treasury is free to sell its shares at any time.

The Treasury got the shares in September, when $25 billion of the bailout funds were converted into common stock. The shares are now worth $31.2 billion, based on a Dec. 4 closing price of $4.06, giving Treasury a paper profit of more than $6 billion.

Kuwait, Singapore

A government of Kuwait investment fund that got about 900 million shares in a related preferred-stock conversion said yesterday that it had sold the stake for $4.1 billion, reaping a $1.1 billion profit. In September, a Singapore government fund that got about 2.1 billion shares in the conversion said it had used open-market sales to reduce the stake to less than 1.14 billion shares.

The U.S. government doesn’t want to be viewed as trying to time the market, so part of Citigroup’s TARP exit plan would include a formal process for disposing of the common stake, the person said. Even if Treasury sold now at a profit, it might be second-guessed later if the shares rose further, the person close to the department said.

“We don’t comment on individual banks but are committed to maximizing returns on bank investments and restoring stability at the least possible cost to taxpayer,” Treasury spokesman Andrew Williams said.

Citigroup spokesman Jon Diat declined to comment on the Treasury’s plans or the bank’s timeline for repaying TARP funds.

Asset Guarantees

Citigroup’s discussions with banking regulators over a TARP exit may gain momentum now that Bank of America’s plan is set and regulators focus on Citigroup, the person close to Treasury said. The bank’s regulators, which include the Federal Reserve, Office of the Comptroller of the Currency and the Federal Deposit Insurance Corp., haven’t commented on when the bank might be allowed to exit.

Citigroup still has $20 billion in bailout funds along with guarantees from the Treasury, FDIC and Federal Reserve on $301 billion of devalued securities, mortgages, auto loans, commercial real estate and other assets. Citigroup paid $7 billion in advance for the guarantees, which last five to 10 years, depending on the type of underlying assets.

The lender’s exit plan may be more complicated than Bank of America’s because the government must decide how to handle the Treasury’s common stake and what to do about the asset guarantees, the person close to the department said.

Obama’s Climate Push Plays Catch-Up With Corporate Lobbyists

Dec. 7 (Bloomberg) -- Now that U.S. President Barack Obama has given fresh impetus to climate-change negotiations in Copenhagen, corporate leaders supporting an agreement to control greenhouse-gas emissions are pressing anew for action.

Two weeks of talks among 192 nations open today in the Danish capital, and Obama’s decision to show up on the final day helps ensure “an ambitious outcome,” United Nations climate chief Yvo de Boer told reporters in Copenhagen yesterday.

The International Energy Agency, a trade group for the U.S. and 27 more oil-consuming nations, and companies from Allianz SE to Coca-Cola Co. say envoys can agree to halt the growth of emissions within 10 years and keep global temperatures from rising by more than 2 degrees Celsius (3.6 degrees Fahrenheit).

“We need a signal at Copenhagen to cap emissions by 2020 and a 2-degree scenario,” Fatih Birol, chief economist for the agency, said in a phone interview. “All the measures we suggest will bring energy security, because we’ll use less oil” and more clean energy, said Birol, who plans to visit Copenhagen for the second of the two weeks of talks.

World leaders already have said the talks will fail to reach the original goal of completing a treaty, a deadline moved to next year. While Obama and de Boer didn’t specify how much can be achieved in Copenhagen, company executives and lobbyists say they want quantifiable goals that have been sought for years by environmentalists and scientific groups.

GE, HSBC, Nike

Supporters of the temperature and 2020 targets include 850 business leaders who signed this year what’s called the Copenhagen communiqué, a project by the University of Cambridge in the U.K. Signatories include General Electric Co. Chief Executive Officer Jeffrey Immelt, Coca-Cola CEO Muhtar Kent, BP Plc CEO Tony Hayward, HSBC Holdings Plc Chairman Stephen Green, Nestle SA CEO Paul Bulcke and Nike Inc. CEO Mark Parker.

Executives from many of these companies are joining the 15,000 delegates who will come to the city’s Bella convention center today for talks through Dec. 18.

White House press secretary Robert Gibbs announced on Dec. 4 that Obama will show up for the conclusion of the talks, when most of the 100 or so heads of government will arrive and help guide final decisions. Earlier Obama had planned to stop by on Dec. 9. “There is progress toward a meaningful Copenhagen accord,” Gibbs said.

Obama found after speaking with UK Prime Minister Gordon Brown and other leaders that there’s an “emerging consensus” to provide $10 billion a year by 2012 to help poor countries deal with global warming.

‘Fair Share’

“The United States will pay its fair share of that amount and other countries will make substantial commitments as well,” Gibbs said in the statement. The administration also believes longer-term financing should be considered in Denmark, he said.

Negotiators in the Danish capital must provide companies with the certainty they need to make annual investments that may rise to trillions of dollars, said John Hawksworth, chief of macroeconomics at PricewaterhouseCoopers in London. Businesses need to know the scale of planned carbon cuts in order to gauge how expensive tradable carbon allowances will become, he said.

“The fundamental thing is to come up with a deal on the intermediate targets for 2020,” Hawksworth said in a telephone interview. “Once you’ve got the price on carbon, that sends the signal that businesses need in order to make the long-term investments in low carbon technologies and processes.”

Allianz, Europe’s largest insurer, supports the 2-degree limit as well as financing for developing countries to adapt to climate change, said Nick Tewes, a spokesman. By limiting the risks associated with climate change, the insurer will also minimize its potential claims, he said.

U.S. Chamber’s Opposition

Those on the other side of the issue also will be in Copenhagen, including representatives of the Washington-based U.S. Chamber of Commerce, the biggest U.S. business-lobbying organization. The group has questioned mandatory emissions cuts as part of an international accord and is calling for an emphasis on clean-energy technology.

The Chamber is fighting against U.S. legislation, which passed the House and is stalled in the Senate, to require a cut in greenhouse-gas pollution. It would cap emissions and set up a market to trade pollution allowances.

The Paris-based IEA estimates that efforts to keep warming to less than 2 degrees since industrialization will add $10.5 trillion to the investment needed by 2030 to upgrade power stations, pipelines and refineries. The IEA also backs keeping the concentration of heat-trapping carbon dioxide to 450 parts per million, compared with about 385 now.

Greenpeace, Corporate Link

Amsterdam-based Greenpeace has called for an increase of no more than 2 degrees for at least seven years, said Kaisa Kosonen, a climate adviser for the environmental group. Greenpeace calls for global emissions to peak by 2015, five years earlier than the corporations.

Enel SpA, Italy’s largest utility, wants competitors around the world to accept CO2 regulations similar to those the Rome- based company already faces in the European Union.

“In order to get these targets, for 2 degrees of 450 parts per million, and emissions cuts, you need private investors like us,” said Simone Mori, head of regulation and environment at Enel, who may travel to Copenhagen.

The two-degree target has been a goal for the 27-nation European Union since 1996. In July, major greenhouse-gas polluters including the U.S., China, India and Japan signed up to the target, which has also been discussed in the UN negotiations as a possible long-term “shared vision.”

The move marked the first time developing nations had set such a target to fight climate change.

Opponent Inhofe

The talk of momentum doesn’t sway one of the U.S. Congress’s biggest climate-change skeptics, Republican Senator James Inhofe of Oklahoma, who also will come to Copenhagen. He says the meeting is doomed, even with Obama’s entourage attending on the last day.

“No amount of lofty rhetoric or promises of future commitments can save it,” Inhofe said in a statement. That’s in part because legislation pending in the Senate to cap emissions “is dying on the vine.”

Yen's Biggest Decline in Decade No Anomaly With Options Fading

Dec. 7 (Bloomberg) -- Options traders are growing less bullish on the yen after efforts by Japanese officials to boost the world’s second-biggest economy and a U.S. jobs report led to the currency’s biggest weekly decline in a decade.

Japan’s currency plunged 2.5 percent against the dollar and 1.3 percent versus the euro on Dec. 4 after America’s Labor Department said employers cut the fewest jobs since the recession began. The yen sank 4.5 percent versus the greenback for the week, the most since February 1999 and retreating from a 14-year high. Traders sold yen and bought dollars on speculation interest rates in the U.S. will increase before June.

“The improving U.S. jobs market suggests the Federal Reserve won’t stand pat on interest rates longer than the Bank of Japan,” said Kazutoshi Yasuda, general manager of the markets department in Tokyo at FX Prime Corp., a unit of Itochu Corp. Increased U.S. borrowing costs would lead traders to favor using yen to finance higher-yielding investments, leading to more losses for the Japanese currency, he said.

Options showed declining bets that the yen will rise. The odds for a gain to 84.5 yen per dollar by the end of March from 90.56 last week fell to 38 percent from 80 percent on Nov. 30, data compiled by Bloomberg show. Chances of a decline to 92 versus the dollar by Dec. 31 reached 63 percent. Options grant buyers the right to purchase or sell an asset at a predetermined price.

Weekly Tumble

The yen tumbled 3.6 percent versus the euro to 134.54 last week, the sharpest slide since the week ended April 3. The yen’s biggest drop during the week came after the U.S. Labor Department said payrolls dropped by 11,000 last month, the smallest decrease since the recession began in December 2007.

“What the job numbers do is firm up expectations that the Fed interest-rate hike is coming,” said Camilla Sutton, a strategist in Toronto at Bank of Nova Scotia, the nation’s third-largest lender. “That should be a strong-dollar story.”

Federal-funds futures contracts on the Chicago Board of Trade show a 43.3 percent probability that the U.S. central bank will lift its target rate for overnight bank borrowing to 0.5 percent by June from a range of zero to 0.25 percent now, up from 12.6 percent a month ago.

UBS AG expects the Fed to set its key rate at the top end of its 0.25 percent range in April and follow with a quarter- point increase in June. The jobs report and last week’s gains “suggest the greenback is finally turning,” Mansoor Mohi-uddin, the Zurich-based bank’s global head of currency strategy, wrote in a note to clients.

Best Performer

The yen was the best performer against the dollar among the 16 most-traded currencies the past four years, Bloomberg data show. It surged to 84.83 on Nov. 27, the strongest since July 1995, from 124.13 in June 2007. The yen tends to advance amid financial turmoil because Japan’s trade surplus reduces reliance on foreign capital.

Record low U.S. interest rates have kept the dollar under pressure at the expense of the yen, making the greenback the favorite for so-called carry trades, where investors raise funds in countries with low borrowing costs and use the proceeds to invest in countries with higher returns.

Benchmark rates of as low as zero in the U.S. and 0.1 percent in Japan compare with 3.75 in Australia and 2.5 percent in New Zealand.

The London interbank offered rate, or Libor, for three- month loans in the U.S. currency has been below the equivalent yen rate since Aug. 24. In the decade before then, the dollar rate averaged 2.94 percentage points more than the yen rate.

‘Extreme’ Positioning

Contracts betting the yen would climb against the dollar rose to 51,710 on Nov. 27, the most since May 2008, according to data from the Commodities Futures Trading Commission in Washington based on contracts at the Chicago Mercantile Exchange. As recently as June, there more contracts betting on a decline in the yen than a gain.

Such “extreme” positioning may suggest that the decline in the yen represents traders unwinding “long” positions rather than an outright bet on the currency’s depreciation, Marc Chandler, the global head of currency strategy at Brown Brothers Harriman & Co. in New York, said in a note to clients on Dec. 4.

The median estimate of more than 30 strategists surveyed by Bloomberg is for the yen to end March at 92 to the dollar and 136 to the euro.

‘Urgent Steps’

Fujio Mitarai, head of Japan’s largest business lobby, called on the government to take “urgent steps” on Nov. 27 to curb gains in the yen, which make Japanese exports less competitive and threaten corporate profits. The same day, Finance Minister Hirohisa Fujii said in Tokyo the nation will “do what is necessary” and he may contact U.S. and European officials to act.

Exports make up about 12 percent of Japan’s economy, compared with 6 percent in the U.S. The nation’s gross domestic product is forecast to shrink 5.7 percent this year, according to the median estimate of 14 economists surveyed by Bloomberg. That compares with a contraction of 2.4 percent in the U.S.

The Bank of Japan announced an emergency 10 trillion yen ($113 billion) credit program on Dec. 1 to combat falling prices and the stronger yen. The spread between dollar- and yen-based Libor narrowed to 2.72 basis points on Dec. 4 from as much as 7.25 basis points on Sept. 8.

Stimulus Plan

“The BOJ’s action worked,” said Masato Mori, senior manager of the business and marketing department at NTT SmartTrade Inc. a unit of Nippon Telegraph & Telephone Corp. “Stopping the yen’s advance will require additional spending from the government.”

A stimulus plan worth as much as 4 trillion yen ($45.4 billion) may be agreed upon today, Chief Cabinet Secretary Hirofumi Hirano said last week. The government planned to announce the measures on Dec. 4 before disagreements between Prime Minister Yukio Hatoyama’s ruling Democratic Party of Japan and coalition partners, who want a larger package, caused a delay.

Bonds to be issued in the fiscal year starting April 1 may reach 146.2 trillion yen compared with a revised 132.3 trillion yen this year, according to Citigroup Global Markets Japan Inc.

“There is probably enough in the policy action in Japan by the government and the BOJ to argue for further upside on cross- yen currencies near term,” said Greg Gibbs, a foreign-exchange strategist at Royal Bank of Scotland Group Plc in Sydney.

Dow, Eli Lilly, Ford, Office Depot, Sprint: U.S. Equity Preview

Dec. 6 (Bloomberg) -- Shares of the following companies may have unusual moves in U.S. trading tomorrow. Stock symbols are in parentheses.

Acer Inc. (ASIYF:US): The world’s second-largest personal computer maker after Hewlett-Packard Co. may rise as it works to double its profit margins and expand in emerging markets, Barron’s reported.

American Movil SAB (AMX:US): The largest mobile-phone company in Latin America may rise to the high $50s in the next year as wireless-phone use in emerging markets expands, Barron’s reported, citing analysts.

Dow Chemical Co. (DOW:US): The largest U.S. chemicals maker may rise to $40 or higher in the next two years as its Rohm & Haas Co. purchase and its expansion in emerging markets boost earnings, Barron’s reported.

Eli Lilly & Co. (LLY:US): The Indianapolis-based drugmaker won approval from the U.S. Food and Drug Administration to broaden use of its top-selling antipsychotic medicine, Zyprexa, to teenagers with schizophrenia or bipolar disorder.

Ford Motor Co. (F:US): The automaker said it intends to sell as much as $1 billion of shares, according to a filing with regulators.

Office Depot Inc. (ODP:US): The second-largest office- supply retailer said it reached a proposed settlement with the staff of the U.S. Securities and Exchange Commission to resolve a previously disclosed SEC inquiry that commenced in July 2007 and a formal investigation disclosed in January 2008.

Sprint Nextel Corp. (S:US): The third-largest U.S. wireless carrier may rise as much as 50 percent on its purchase of Virgin Mobile USA Inc. and as the number of its prepaid subscriptions increases, Barron’s reported, without citing anyone.