Хронология из DJN Market Talk

 

By Shobhana Chandra

 

Feb. 1 (Bloomberg) -- The jobless rate in the U.S. probably jumped in January to the highest level in 16 years as slumping sales forced employers to slash staff, economists project reports this week will show.

Unemployment climbed to 7.5 percent, and payrolls fell by 530,000, the 13th consecutive decrease, according to the median estimate in a Bloomberg News survey ahead of Labor Department figures Feb. 6. Other reports may show manufacturing, services and housing shrank further, signaling more firings ahead.

Plunging demand and frozen credit are causing companies from Caterpillar Inc. to General Motors Corp. to pare jobs and output to prevent unsold goods from piling up. Concern that the recession will deepen after the economy contracted at the fastest pace in 26 years last quarter is prompting President Barack Obama to push for quick passage of his stimulus plan.

“The labor market will look terrible for a while,” said Sung Won Sohn, a professor of economics and finance at California State University Channel Islands, in Camarillo, California. “If the downward momentum is not arrested, the consequences could be disastrous. Policy makers need to act quickly.”

The jobless rate in December reached 7.2 percent. Employers cut 524,000 workers from payrolls that month, bringing total job losses in 2008 to 2.6 million, the most since 1945.

This week’s report may also show manufacturers cut 143,000 jobs following a reduction of 149,000 in December that was the biggest since 2001, according to the Bloomberg survey.

Factory Slump

The Institute for Supply Management’s factory index, due tomorrow, fell to 32.5 in January, the lowest level since 1980, from a reading of 32.9 the prior month, according to the survey median. A reading of 50 is the dividing line between growth and contraction.

The Tempe, Arizona-based group’s gauge for service industries, which make up about 90 percent of the economy, probably fell to 39 from 40.1. That report is due Feb. 4.

Caterpillar, the world’s largest maker of bulldozers and excavators, said on Jan. 30 that it will dismiss 2,110 factory workers, adding to the 20,000 job losses it announced on Jan. 26.

“Depending on business conditions, more layoffs and separations may be required as the year unfolds,” the Peoria, Illinois-based company said in a statement.

Businesses also are slashing spending on new equipment. Factory orders fell 3 percent in December, the fifth consecutive decline, economists forecast ahead of a Commerce Department report Feb. 5.

Auto Cutbacks

Automakers including GM, Chrysler LLC, Ford Motor Co. and Toyota Motor Corp. are scaling back North American output. GM, which already closed most of its 22 plants in North America in January, said it’ll eliminate shifts in the second quarter at plants in Ohio and Michigan and cut about 2,000 jobs.

The economy contracted at a 3.8 percent annual rate last quarter as consumer spending continued to slide. The slump caused unsold goods to pile up, indicating more cutbacks are in the offing.

The economy is “a continuing disaster” for families, Obama said on Jan. 30 as he signed executive orders to strengthen unions and put Vice President Joe Biden in charge of a task force on the middle class.

“The recession is deepening and the urgency of our economic crisis is growing,” said Obama, who is pressing to boost spending on infrastructure projects and lower taxes to create and save jobs. The House passed an $819 billion stimulus plan last week, shifting attention to the Senate.

Fed Action

The Federal Reserve last week left the benchmark interest rate as low as zero and said it was prepared to expand steps to revive lending. Policy makers also warned that inflation may recede too quickly and that downside risks to growth “are significant.”

One major drag is housing, now in its fourth year of a slump as home values fall and foreclosures surge. The National Association of Realtors’ index of pending home sales was unchanged in December following a string of three consecutive declines, according to the median forecast ahead of a report due Feb. 3.

A day earlier, Commerce figures may show spending on construction projects fell for the third consecutive month, economists said.

Also on Feb. 2, Commerce may report consumer spending dropped in December and incomes also declined as the job market deteriorated.

 

 

 

 

 

 

To contact the reporter on this story:

Shobhana Chandra in Washington at schandra1@bloomberg.net

 

 

 

NEW YORK (CNNMoney.com) -- The price of gold continued to climb Friday after a bout of grim economic news increased the precious metal's safe-haven appeal.

Gold for April delivery was up $20, or 2.2%, to $926.5 an ounce on the New York Mercantile Exchange. The rally extended on gold's $16 dollar advance in the previous session.

"It's continued safe haven jitters," said Jon Nadler, senior analyst at Kitco Bullion Dealers in Montreal. "With the stock markets looking as poor as they are, investors are saying: where do I park my money?"

Stock prices fell for the second day in a row Friday after the government said the nation's economy suffered its sharpest decline in 26 years during the last three months of 2008.

Gross domestic product, the broadest measure of economic activity, declined at an annual rate of 3.8% in the fourth quarter, adjusted for inflation.

While the drop in GDP was less severe than the 5.5% decline economists were expecting, it was still the largest fall since the first quarter of 1982, when the economy suffered a 6.4% decline.

Friday's report comes one day after the government released dour reports on the labor market, durable goods orders and housing.

As the recession drags on, and the economic outlook remains cloudy, many investors are turning to hard assets, such as precious metals, as an alternative to more risky bets in the stock market.

At the same time, gold's strength has drawn the attention of some large investment funds, Nadler said. The rally "encourages a lot of the sidelined money to get in," he said.

Gold holdings in the SPDR Gold Trust (SPDR), the biggest exchange-traded fund backed by gold, expanded to a record level. Gold ETFs are funds that store gold in a trust and allow investors to buy and sell shares of that trust on the New York Stock Exchange.

Meanwhile, the run-up is also attracting "retail investors" seeking to cash in on gold's luster, according to Ashraf Laidi, a gold and currency strategist at CMC World Markets in London.

With gold prices comfortably above $900 an ounce, "retail investors worldwide begin to chase the headline-grabbing trend (+$900) and drive the metal further up," Liadi said in a research note.

Carlos Sanchez, a precious metals analyst at New York-based specialty commodities firm CPM Group, said he thinks gold is poised to go above $1,000 soon.

"If we continue to see bad economic conditions and deterioration in the financial markets, I think we could see that next month," Sanchez said in reference to the $1,000 mark.

Gold surged above $1,000 for the first time in history last March as investors sought shelter from volatile financial markets. But demand for the metal at such lofty prices proved unsustainable. It tumbled to $720 an ounce in October amid a broad selloff in the commodities markets and a prolonged dollar rally.

The U.S. dollar continued to rally against the euro Friday after a European Union report showed euro-zone inflation fell to a near-10 year low and unemployment in the region rose to a two-year high.

A stronger dollar normally pressures the price of gold since it is indicative of rising inflation. But with inflation gauges at multi-year lows, the dollar appears to be "decoupling" from gold.

This divergence from the normal trend occurred earlier in the week "as both dollars and gold were sought as safe-haven," Nadler said.

 

 

 

 

 

 

By Pham-Duy Nguyen

 

Jan. 30 (Bloomberg) -- Gold rose, capping a third straight monthly gain, as investors sought an alternative to holding cash. Silver also increased.

While gold is traded in dollars, the price in euros is up 15 percent this month and 5.9 percent in U.K. pounds as central banks lower interest rates and governments spend trillions of dollars to revive economies. Investment in the SPDR Gold Trust, the biggest exchange-traded fund backed by bullion, reached a record 843.6 metric tons yesterday.

“Central banks are going to start printing money and it’s not an ideal place for investors to be,” said Joel Crane, a metals strategist at Deutsche Bank AG in New York. “People don’t have faith in currencies at the moment. There is still an underlying faith that gold will go higher.”

Gold futures for April delivery rose $21.90, or 2.4 percent, to $928.40 an ounce on the New York Mercantile Exchange’s Comex division. The metal is up 5 percent this month.

Silver futures for March delivery climbed 42 cents, or 3.5 percent, to $12.565 an ounce. The price jumped 11 percent in January, also a third straight monthly gain. The metal slumped 24 percent in 2008 while gold gained 5.5 percent.

The U.S. economy shrank 3.8 percent in the fourth quarter, the steepest drop since 1982, as consumer spending slowed, the Commerce Department said today. The economy may contract 1.5 percent this year, the median estimate of economists surveyed by Bloomberg.

“The economic climate remains highly constructive for gold,” said William O’Neill, a partner at Logic Advisors in Upper Saddle River, New Jersey.

Stimulus Pending

A stimulus plan valued at more than $800 billion is pending in the U.S. Senate, after passing the House of Representatives earlier this week. The government has spent $350 billion under the Troubled Asset Relief Program to help financial companies.

The Federal Reserve kept its benchmark interest rate at as low as zero this week and said it was prepared to buy long-term Treasuries to revive credit markets. The Fed’s assets have grown by $1 trillion over the past year under credit programs ranging from $416 billion in term loans to banks to purchases of $350 billion in commercial paper issued by U.S. corporations.

Gold will rise in the longer term, “based on a growing distrust of all paper currencies,” said Adrian Day, president of Adrian Day Asset Management in Annapolis, Maryland. “People are turning to the one true money, which can’t be created by governments and holds its value.”

Gold has more than tripled since 2000, gaining for eight straight years. The metal reached a record $1,033.90 on March 17.

 

To contact the reporter on this story:

Pham-Duy Nguyen in Seattle at pnguyen@bloomberg.net.

 

 

 

 

 

 

 

By Daniel Kruger

 

Jan. 31 (Bloomberg) -- Treasuries fell for a second week after the U.S. sold $78 billion of notes, the start of what’s forecast to be a record amount of debt this year to pay for a burgeoning budget deficit and fiscal stimulus programs.

The difference between yields on notes maturing in 2 and 10 years widened after the Federal Reserve failed to provide a timetable for possible purchases of longer-term Treasuries as a way to lower consumer borrowing costs. The U.S. will announce next week the amount of 3-, 10- and 30-year debt it will sell in February, a total estimated at $69 billion to $75 billion.

“In the long term, you’re going to see Treasury yields rise as we deal with the mother of all supply challenges,” said Kevin Flanagan, a Purchase, New York-based fixed-income strategist for Morgan Stanley’s individual-investor clients.

The yield on the 30-year bond climbed 28 basis points, or 0.28 percentage point, to 3.60 percent this week, according to BGCantor Market Data. The price of the 4.5 percent security due in May 2038 tumbled 5 3/4, or $57.50 per $1,000 face amount, to 116 7/32. The yield had its biggest two-week increase since January 1982, when the central bank under then-Chairman Paul Volcker raised its target rate to 15 percent to stem surging inflation.

The benchmark 10-year note’s yield increased 23 basis points to 2.85 percent.

Government debt dropped 3.09 percent in January, the biggest monthly loss since April 2004, according to Merrill Lynch & Co.’s U.S. Treasury Master index.

$2.5 Trillion

The U.S. will probably borrow $2.5 trillion this fiscal year ending Sept. 30, almost triple the $892 billion in notes and bonds sold the prior 12 months, according to Goldman Sachs Group Inc., one of the 17 primary dealers required to bid at Treasury auctions.

Yields climbed for the week even as the Standard & Poor’s 500 Index fell 8.6 percent for the worst January performance in its history. Reports showed U.S. gross domestic product shrank 3.8 percent in the fourth quarter, the most in 26 years, and new-home sales fell in December to the lowest annual pace since at least 1963.

The U.S. economy will contract 1.5 percent this year, according to a Bloomberg survey of economists.

“The economic troubles are deep,” said Christoph Kind, head of asset allocation in Frankfurt at Frankfurt-Trust, which oversees about $23.2 billion. “We are still a long way away from recovery, and I would rather stay with safe assets. Any optimism we saw recently is based on hopes and experience that at some point things have to turn around. But we don’t have any concrete evidence yet to back that up.”

Quarterly Refunding

The government will sell $75 billion of debt in the week starting Feb. 8 at its quarterly refunding, according to a forecast by George Goncalves, the New York-based chief Treasury and agency strategist at Morgan Stanley, another primary dealer.

Wrightson ICAP, a research firm specializing in U.S. government finance, estimates the Treasury will sell $32 billion in three-year notes, $22 billion in 10-year notes and $15 billion in 30-year bonds.

This week the U.S. auctioned $8 billion in 20-year Treasury Inflation Protected Securities, or TIPS, a record $40 billion in two-year notes and a record $30 billion in five-year notes.

“I wouldn’t call this week’s auctions very successful,” said Chris Ahrens, an interest-rate strategist at primary dealer UBS Securities LLC in Greenwich, Connecticut.

Corporate Bonds

The yield on two-year notes is about two basis point higher than the 0.925 percent at the Jan. 27 auction of the securities, while the five-year yield is five basis points higher than the 1.82 percent the note drew at yesterday’s sale. The 30-year yield rose 28 basis points for the week.

Yields suggest there is a revival in credit markets even as the International Monetary Fund predicts world growth will stagnate this year.

The so-called TED spread, which measures the difference between what banks and the U.S. government pay for three-month loans, was 0.96 percentage point yesterday, near the lowest since August. It was as high as 4.64 percentage points in October, following the collapse of Lehman Brothers Holdings Inc. the month before.

More than 75 U.S. companies sold a total of about $138 billion of bonds this month, the most since May and a 33 percent increase from this time last year, according to data compiled by Bloomberg. Even high-yield, high-risk junk debt had the best start to a year since 2001, returning 5.7 percent this month, Merrill’s indexes show. The bonds are rated below Baa3 by Moody’s and BBB-by Standard & Poor’s.

Mortgage Rates

The Fed last month cut its target interest rate for overnight lending between banks to a range of zero percent to 0.25 percent, and it’s adding cash to the financial system to try to restore bank lending.

The policy still hasn’t succeeded in reducing consumer lending rates to near government borrowing costs. The gap between 30-year mortgage rates and 10-year Treasury yields is 2.26 percentage points, up from 1.55 percentage points five years ago.

The Fed’s cash additions are raising concern that inflation will accelerate. The difference between rates on 10-year notes and comparable TIPS, which reflects the outlook among traders for consumer prices, touched 1.15 percentage points yesterday, the widest since Oct. 21.

 

To contact the reporter on this story:

Daniel Kruger in New York at dkruger1@bloomberg.net

 

 

By Margot Habiby

 

Jan. 30 (Bloomberg) -- Crude oil rose in New York after a government report showed that the U.S. economy contracted less than forecast in the fourth quarter, signaling energy demand may strengthen.

Oil gained as much as 4.8 percent, and gasoline reached an 11-week high after the Commerce Department said gross domestic product shrank at a 3.8 percent annual pace, less than the 5.5 percent forecast. The International Energy Agency and OPEC have both trimmed global demand forecasts, citing economic factors.

“The biggest issue for the oil and gas markets is what’s going on with demand,” said Roger Read, an analyst at Natixis Bleichroeder Inc. in Houston. “Anything that leads you to believe underlying demand is improving or better than expected would be positive for oil and gas prices.”

Crude oil for March delivery rose 24 cents, or 0.6 percent, to settle at $41.68 a barrel at 2:46 p.m. on the New York Mercantile Exchange. Prices fell 6.5 percent in January, stretching crude’s decline to seven consecutive months, the longest on a monthly basis since Nymex trading began in 1983, according to exchange data.

Oil is down 72 percent from a July 11 record of $147.27 a barrel as the U.S., Europe and Japan sank deeper into recessions. Prices fell 10 percent this week.

Labor unrest and seasonal refinery maintenance have also bolstered prices. The United Steelworkers union rejected the latest contract offer from Royal Dutch Shell Plc covering workers at U.S. refineries with almost two-thirds of the country’s capacity. The current agreement expires Feb. 1.

‘Difficult’ Negotiations

“We are having difficult times in negotiations, and the talks are progressing slowly,” Lynne Baker, a spokeswoman for the union, said in an e-mail. “We will continue to meet, and we will meet throughout the day today.”

Gasoline for February delivery rose 3.8 cents, or 3.1 percent, to $1.2689 a gallon on the Nymex, the highest closing price since Nov. 13. The February contract expired today. The March futures contract gained 2.53 cents, or 2 percent, to $1.2687 a gallon.

“The fact is, if gasoline and heating oil move nicely higher, crude can be firm because they will probably keep the profits on the refining margins up,” said Gene McGillian, an analyst with Tradition Energy in Stamford, Connecticut.

The profit margin, or crack spread, for making three barrels of crude into two of gasoline and one of heating oil, based on futures prices, rose 4.3 percent to $13.79 a barrel at 4:24 p.m. The spread was $5.325 a barrel on Dec. 31.

“The world can withstand a strike much more so than it would have three years ago, so their bargaining position is a little weakened,” Natixis’s Read said. “They’re asking for a wage increase at a time when people are getting laid off.”

Adding Crude

He noted that when refineries shut down, it adds crude supply to the market, so a strike and seasonal maintenance could be bearish for oil.

In the U.K., workers at Ineos Group Holdings Plc’s Grangemouth refinery in Scotland walked out as protests against foreign employees at Total SA’s Lindsey refinery spread, the BBC reported today. As many as 300 people took part in the Grangemouth action, the report said.

Brent crude oil for March settlement rose 48 cents, or 1.1 percent, to $45.88 a barrel on London’s ICE Futures Europe exchange.

Volume Drops

Volume in electronic trading on the New York exchange was 367,677 contracts as of 3:15 p.m. Trading volume totaled 426,795 contracts yesterday, down 13 percent from the average over the past three months. Open interest yesterday was 1.24 million contracts. The exchange has a one-business-day delay in reporting open interest and full volume data.

OPEC won’t hesitate to cut output further if prices keep falling, Secretary General Abdalla el-Badri said yesterday. The Organization of Petroleum Exporting Countries, responsible for about 40 percent of world oil supplies, has cut crude output three times since September to halt the plunge in oil prices.

“The oil markets this year are really all about contracting oil demand versus OPEC cuts,” said Mike Wittner, head of oil research at Societe Generale SA in London. “If there is a sign that the GDP was not as bad as people thought, the next step is that oil demand maybe wasn’t as bad as people thought.”

OPEC will load 23.55 million barrels a day of oil in the four weeks ending Feb. 14, down from 23.71 million barrels in the four weeks to Jan. 17, industry consultant Oil Movements said in a report yesterday.

“Over the short term, the next month or two, we see crude oil prices pushing to the $50-$55 level,” said Edward Meir, an analyst at MF Global in Connecticut. “The markets seem to be giving OPEC the benefit of the doubt, which explains why prices have been holding above the $40 mark.”

Nigerian Unrest

Nigeria’s main militant group in the Niger River delta said it was calling off a four-month cease-fire and would start attacking Africa’s biggest oil industry beginning tomorrow. The Movement for the Emancipation of the Niger Delta, MEND, said in a statement today it was ending the cease-fire because Nigerian military forces attacked the base of an allied militant group.

MEND will start “a sweeping assault starting from Rivers state that will change the face of oil and gas exports from Nigeria,” Jomo Gbomo, the group’s spokesman, said in an e-mail. Nigeria, OPEC’s seventh-largest oil producer, pumped about 1.9 million barrels a day last month, according to Bloomberg data.

 

To contact the reporter on this story:

Margot Habiby in Dallas at mhabiby@bloomberg.net.

 

 

By Ye Xie and Whitney Kisling

 

Jan. 31 (Bloomberg) -- The dollar and yen had their biggest monthly gains against the euro since October as increased evidence of a global economic slowdown increased demand for the currencies as havens during the financial crisis.

Europe’s currency fell below $1.28 yesterday on the slowest inflation in the 16-nation region since 1999. Russia’s ruble tumbled against the dollar to the weakest level since 1998, and is on the brink of breaching the central bank’s target. The U.S. shed more than half a million jobs this month, a government report is forecast to show next week.

“The dominant force has been risk aversion,” said Steven Englander, chief U.S. currency strategist at Barclays Capital in New York. “The demand for dollar assets remains pretty strong.”

The dollar gained 9 percent this month to $1.2813 per euro, from $1.3971 on Dec. 31, and touched $1.2778 yesterday, the lowest level since Jan. 23. The yen gained 10 percent to 115.23 per euro, from 126.70, reaching 112.12 on Jan. 21, the strongest level since March 2002. The dollar depreciated 0.8 percent to 89.92 yen from 90.64, touching 87.13 on Jan. 21, the lowest level since 1995.

Sterling rose 8.6 percent this month to 88.12 pence per euro, the biggest monthly advance since the euro’s debut in 1999, after Barclays Plc said it won’t need further capital increases, easing concern that the cost of rescuing banks may balloon. The pound dropped 0.4 percent this month to $1.4540.

The U.K.’s currency plunged to $1.3503 on Jan. 23, the lowest since September 1985, after the government announced a second bank bailout plan in three months. The pound weakened to a record 98.03 pence per euro on Dec. 30, near parity.

Soros on Pound

Investor George Soros, who made $1 billion breaking the Bank of England’s defense of the pound in 1992, told reporters at the World Economic Forum in Davos, Switzerland, on Jan. 28 that he’s no longer betting against the currency after it dropped lower than $1.40.

“I did actually foresee the fall in sterling, and that was one of the positions we carried,” Soros said. Below $1.40, “it seemed to me the risk-reward was no longer clear,” he said.

The yen advanced against all of the major currencies this month, gaining 12 percent to 57.14 versus the Australian dollar and 15 percent to 45.78 against New Zealand’s dollar. Japan’s current-account surplus makes the yen attractive to investors in times of financial turmoil. Japan’s currency gained 54 percent against the Aussie and 65 percent versus the kiwi last year.

“I maintain a bearish tone for risky assets,” said Sebastien Galy, a currency strategist at BNP Paribas Securities SA in New York. “We haven’t yet reached the bottom of this economic downturn cycle.”

Honda’s Profit

Honda Motor Co., Japan’s second-largest automaker, cut its full-year profit forecast by 57 percent yesterday as vehicle demand in the U.S. plunged and the yen gained against the dollar, eroding the value of exports.

The Swiss franc gained 0.3 percent this month to 1.4855 per euro, following a 10 percent rally over the past six months. Swiss National Bank President Jean-Pierre Roth said yesterday in an interview on Bloomberg Television in Davos that the franc’s moves haven’t been “brutal.” Vice President Philipp Hildebrand said last week the SNB is ready to sell an “unlimited” amount of the currency to protect exporters.

The ruble slid 18 percent in January to 35.736 per dollar, heading toward Russia’s limit of 36 against the greenback as a slump in crude oil prices undermined the economy. It was the biggest decline since 1998, when Russia redenominated the currency and defaulted on its debts.

Bank Rossii

Bank Rossii Chairman Sergey Ignatiev said yesterday the central bank will intervene in the market, limit the amount of refinancing offered to banks and adjust interest rates to keep the ruble from breaking through the target set last week.

The euro fell versus the dollar and yen yesterday as reports showed Europe’s inflation rate dropped to 1.1 percent in January, the lowest since July 1999, and unemployment rose to 8 percent in December, the highest since October 2006.

The European Central Bank will probably keep its main refinancing rate at 2 percent at its policy meeting on Feb. 5, President Jean-Claude Trichet reiterated in an interview on Bloomberg Television in Davos on Jan. 28. The next important meeting is in March, and “very, very low interest rates have some inconveniences,” he added.

Soros told Austria’s Der Standard newspaper the following day that the euro may not “survive” unless the European Union pushes for a global plan to deal with toxic debt.

Dollar Index

The ICE’s Dollar Index, which tracks the greenback versus the euro, the yen, the pound, the Canadian dollar, the Swedish krona and the Swiss franc, increased 5.8 percent this month, following a 6 percent increase in 2008.

U.S. employers probably cut 530,000 jobs this month, following a reduction of 524,000 in December, according to the median forecast of 61 economists surveyed by Bloomberg News. The Labor Department is scheduled to release the non-farm payroll report on Feb. 6. The U.S. lost 2.589 million jobs last year, just short of 2.75 million at the end of World War II.

The Federal Reserve held its target lending rate in a range of zero to 0.25 percent on Jan. 28 and said it’s prepared to purchase Treasury securities to resuscitate lending.

 

To contact the reporters on this story:

Ye Xie in New York at yxie6@bloomberg.net;

Whitney Kisling in New York at wkisling@bloomberg.net

 

 

By Christopher Martin

 

Jan. 30 (Bloomberg) -- Natural gas fell in New York, capping the biggest monthly drop since July, as layoffs and factory closures signaled reduced industrial demand for the fuel.

Caterpillar Inc., the world’s largest maker of bulldozers and excavators, today said it will fire 2,110 factory workers at three manufacturing plants in Illinois. The firings are in addition to the 20,000 workers Caterpillar said it planned to cut on Jan. 26. Industrial users account for about 29 percent of U.S. demand for the factory and heating fuel.

“With the latest from Caterpillar we’re seeing industrial demand dropping and it’s a story that’s evolving daily,” said Jim Ritterbusch, president of Ritterbusch & Associates in Galena, Illinois.

Natural gas for March delivery fell 15.9 cents, or 3.5 percent, to settle at $4.417 per million British thermal units at 3:24 p.m. on the New York Mercantile Exchange. Gas dropped 21 percent this month, the biggest decline since prices fell 32 percent in July. Gas is down 68 percent from the 2008 high of $13.694 per million Btu reached on July 2.

The U.S. economy shrank 3.8 percent in the fourth quarter, the most since 1982, as consumer spending recorded the worst slide in the postwar era.

Economists surveyed by Bloomberg this month forecast the economy will keep contracting in the first six months of this year as consumers continue to retrench. The unemployment rate is likely to rise to 8.4 percent by the end of the year, according to the survey median, compared with 7.2 percent in December.

Stockpile Drop

Gas inventories declined 186 billion cubic feet in the week ended Jan. 23 to 2.374 trillion cubic feet, the U.S. Energy Department said in a report yesterday. The average drop for that week is 184 billion.

“We’re probably going to see smaller storage withdrawals for February” than analysts had forecast, Ritterbusch said.

Dow Chemical Co., the largest U.S. chemical maker, delayed completing its planned $15.4 billion purchase of Rohm & Haas Co. because of the global economic crisis. Both companies have announced jobs cuts and the idling of plants as the world economy contracts.

Rohm & Haas, the world’s biggest maker of acrylic-paint ingredients, said it will idle plants as the economy slows. Dow Chemical last month announced 20 plant closures and a temporary shutting of 180 others.

The chemical industry accounts for 36 percent of industrial usage of gas, Ronald Barone, an analyst with UBS AG in New York, said in a report earlier this month.

A winter storm will bring below-normal temperatures from the Midwest through the Southeast late next week, according to MDA Federal Inc.’s EarthSat Energy Weather. About 72 percent of households in the Midwest depend on gas for heating.

“Let’s face it, these layoffs keep coming at us and even with the cold weather there’s very little support,” for higher gas prices, said Tom Orr, research director at Weeden & Co. in Greenwich, Connecticut.

 

To contact the reporter on this story:

Christopher Martin in New York at cmartin11@bloomberg.net.

 

 

By Erik Schatzker and John Fraher

 

Jan. 31 (Bloomberg) -- Canadian Finance Minister Jim Flaherty said the country’s exporters are being helped by the currency’s slide against the U.S. dollar.

Manufacturers “are much more comfortable now with our currency where it is,” Flaherty said today in an interview with Bloomberg Television in Davos, Switzerland.

Canada’s currency dropped more than 18 percent versus the dollar in the past 12 months as the global recession sapped demand for commodities such as crude oil and aluminum, which generate about half the country’s export revenue. The Canadian dollar depreciated 0.2 percent to C$1.2296 yesterday. One Canadian dollar buys 81.40 U.S. cents.

Flaherty said that he will work “more and more” closely with the Canadian central bank as rates near zero even though “this is still some room for the central bank to move.”

Policy makers cut the key interest rate to 1 percent on Jan. 20, the lowest level since the central bank was founded in 1934, to keep inflation close to their 2 percent target.

“What we see now is the monetary authorities and the fiscal authorities are working hand in glove,” he said. Canada’s government is prepared to do what’s needed with fiscal policy to help the economy, he said.

‘Tremendous Uncertainty’

Separately, Bank of Canada Governor Mark Carney said in Davos that financial markets need to stop pushing banks to stockpile capital or risk impeding an economic recovery.

“There’s a tremendous degree of uncertainty,” Carney said. Markets are “too heavily discounting a clear commitment that no systemic institution will be allowed to fail.”

Flaherty said restoring confidence to the banking system will be the main theme at the Group of Seven meeting in Rome in two weeks. In a conference call with reporters today, Flaherty said his government will do “whatever is necessary” to protect the Canadian banking system.

Canada’s governing Conservatives have agreed to acquire up to C$125 billion in mortgages from banks to free up cash for more lending, and are seeking the authority to take over troubled banks and inject capital into lenders if needed.

Asian currencies also will be discussed at the meeting in Rome, Flaherty said.

“Concern over some of the inflexibility in Asian currencies” has been a “constant refrain in my three years of attending these meetings,” Flaherty said. “I suspect that will be a subject once again,” Flaherty said.

 

To contact the reporter on this story:

John Fraher in Davos at jfraher@bloomberg.net