Хронология из DJN Market Talk

2008.11.12 02:00:15   This Is Dow Jones In New York

2008.11.12 02:39:10   MARKET TALK: US Tsys Tad Up In Tokyo; 10-Year Tsys Tender Eyed

2008.11.12 02:37:12   MARKET TALK: USD/CNY May Rise On Dlr Gains; May Test 6.8320

2008.11.12 02:31:14   MONEY TALKS: China's Export Numbers Are Bad News For The US

2008.11.12 02:27:52   Kospi Down 1.2% As Banks Fall; Floor At 1100

2008.11.12 02:30:08   Nikkei Dn 2.3%; Could Fall Below 8500-Analyst

2008.11.12 02:28:41   EUR/USD Rebounds, But Outlook Grim – Trader

2008.11.12 02:24:11   2-Yr US Tsys Yld Indicated At 1.221%; Lowest Since July 2003

2008.11.12 02:20:14   Base Metals Fade; Demand Outlook Bleak

2008.11.12 02:13:37   HK Fincl Secy: "Difficult To Attain" 4%-5% GDP Growth For '08     

2008.11.12 02:08:27   Nikkei 225 Stock Average Down More Than 2%      

2008.11.12 02:02:13   Lead December JGB Futures Open Up At 138.32 Vs 138.09 Tue

2008.11.12 02:02:49   Nikkei 225 Stock Average Opens Down 1.4% At 8687.24   

2008.11.12 02:00:12   Speculation Asian Stks To Fall Weighs On EUR/JPY

2008.11.12 01:45:42   Lead Nikkei Futures Open Down 265 Points At 8515 On SGX

 

 

By Stanley White and Daniel Kruger

 

Nov. 12 (Bloomberg) -- The yen rose toward a two-week high against the euro as weakness in global equities encourages investors to sell higher-yielding assets and pay back low-cost loans in Japan's currency.

The yen also advanced for a third day against the Australian and New Zealand dollars, two favorites of so-called carry trades, as prices of the commodities the Southern Hemisphere countries export fell. Sentiment for higher-yielding currencies is likely to weaken after speculation increased that General Motors Corp. is approaching bankruptcy and Standard & Poor's cut South Africa's ratings outlook.

``Currency markets are simply following stocks, so declines in equities are a reason to push up the yen,'' said Takeshi Iba, vice president of foreign exchange in Tokyo at BBH Investment Services Inc., a unit of Brown Brothers Harriman. ``There's negative news from Oceania and South Africa, so I see the dollar rebounding against these currencies.''

The yen rose to 122.06 per euro at 8:10 a.m. in Tokyo from 122.27 late yesterday in New York. Japan's currency was little changed at 97.59 per dollar. The euro traded at $1.2508 from $1.2522. The dollar was quoted at 10.34 South African rand. The British pound bought $1.5374 from $1.5384. The yen may rise to 97 versus the dollar today, Iba said.

Against the Australian dollar, the yen traded at 64.07 from 65.35 late yesterday in Asia and it climbed to 55.81 versus the New Zealand dollar from 56.96. The yen also gained to 9.4427 per rand from 9.4539.

Carry Trades

Investors have been reducing carry trades, where they get funds in a country with low borrowing costs and buy assets where returns are higher. Japan's 0.3 percent target lending rate compares with 5.25 percent in Australia, 6.5 percent in New Zealand and 12 percent in South Africa.

Standard & Poor's cut its outlook on South Africa's BBB+ credit rating to ``negative'' from ``stable.'' The rand has fallen by a third against the dollar this year, adding to pressure on prices and making it difficult for the central bank to lower interest rates, even as economic growth slows, SnP said.

The Standard & Poor's 500 Index dropped 2.2 percent after falling as much as 3.7 percent. GM tumbled to the lowest price since 1943 on speculation the company will enter bankruptcy as it waits to learn whether the auto industry will win a new round of government loans.

The yen has advanced 8.9 percent against the dollar and 37 percent versus the euro since June as the deepening global slowdown encouraged Japanese investors to sell high-yielding assets and bring money home.

`Heavy Storm'

``When you have a heavy storm, it won't clear any time soon,'' said Benedikt Germanier, a currency strategist at UBS AG in Stamford, Connecticut. ``I still like the yen.''

Leaders of the Group of 20 industrial and emerging nations, due to gather Nov. 14-15 in Washington, will consider steps ranging from raising bank-capital standards to regulating hedge funds to address the financial crisis. Member nations' finance ministers called for interest-rate cuts and increased government spending after meeting this week in Sao Paulo.

The ruble declined 1 percent to 30.7016 versus the dollar- euro basket that the Russian central bank uses to manage the ruble's fluctuation. Bank Rossii widened its range yesterday on the ruble against a basket of dollars and euros by 30 kopeks (1 cent) to increase the currency's ``flexibility'' and lifted its benchmark refinancing rate to 12 percent from 11 percent to arrest outflows, according to separate statements after Russia's stock market closed.

Russia's currency depreciated 1.9 percent to 27.5657 against the dollar and 0.2 percent to 34.5340 versus the euro. The ruble basket consists of about 55 percent dollars and 45 percent euros.

 

To contact the reporters on this story:

Stanley White in Tokyo at swhite28@bloomberg.net;

Daniel Kruger in New York at dkruger1@bloomberg.net

 

 

2008.11.12 01:40:06   HK Short Sales Down 7.5% Tues; HSBC Heaviest

2008.11.12 01:35:16   Spot Gold Slightly Up But Interest Limited

2008.11.12 01:03:27   EUR Could Suffer If Asian Stocks Fall – Trader

2008.11.12 01:04:57   Nikkei May Fall; Support Around 8500-Strategist

2008.11.12 01:32:48   Euro Breaks Below $1.2500 On EBS; Lowest Since Oct 28

2008.11.12 00:44:29   Pentagon: US Defense Secy's Visit To Estonia A Show Of Support

2008.11.12 00:24:07   TAKING STOCK: The Next Battle For The Bottom Has Begun

2008.11.12 00:09:14   Bank Of Israel Cuts Key Interest Rate By 50 Bps To 3%

2008.11.12 00:11:32   Bank Of Israel: Global Slowdown Will Affect Israel Severely

2008.11.12 00:12:17   Bank Of Israel Says Rate Cut Will Help Encourage Investment

2008.11.12 00:14:12   Bank Of Israel Says New Rate Will Take Effect Friday          

2008.11.11 23:45:21   Dow Jones REVISED CLOSING Averages: DJIA 8693.96 DN 176.58

2008.11.11 23:54:29   EUR/USD Bears Drawn To 1.25 Level - Easy Forex

2008.11.12 00:02:42   New US Plan To Modify Home Loans Could Stem Foreclosures

2008.11.11 23:34:11   US Small-Caps Close Lower On Corporate Capital Concerns

2008.11.11 23:03:06   DJIA Closes Down 178 (2%) At 8692; GM, Amex Weigh    

2008.11.11 23:05:07   Nasdaq Ends Off 36 (2.2%) At 1581; Tech Weak On Growth Fear  

2008.11.11 23:29:57   US Stocks Fall; American Express, GM, Oil Weigh   

2008.11.11 22:44:51   Obama Looking At Variety Of Options To Help Auto Sector –Aide

2008.11.11 22:46:04   MARKET TALK: It Could Actually Be Worse

2008.11.11 22:41:32   Resurgent Risk Aversion Weighing On AUD – ANZ

2008.11.11 22:42:28   BIG PICTURE:A Detroit Three Failure May Not Sink The Economy

2008.11.11 22:42:49   WORLD FOREX: Euro Slips Vs Dlr, Yen With Market Sentiment

2008.11.11 22:33:42   US Stocks Pare Losses After Fed Official Speaks

2008.11.11 22:31:11   Dow Jones 3:30 PM Averages: DJIA 8727.33 DN 143.21

2008.11.11 21:43:12   ECB Bini Smaghi: Ctrl Bks Must Be Very Prudent If Cutting Rates

2008.11.11 21:47:03   OIL FUTURES: Nymex Crude Settles At $59.33/Bbl, Down $3.08

2008.11.11 21:48:15   Crude At 19-Month Low As China Demand Seen Slowing

2008.11.11 21:49:11   US Stocks Pare Losses On Bounce By Financials, Energy     

2008.11.11 21:57:19   Russia Ctrl Bk Ups Key Interest Rate To Avert Capital Flight

2008.11.11 22:03:03   Canada Afternoon: C$ Ends Dn Slightly In Thin, Erratic Trade           

2008.11.11 22:03:18   CHARTING MARKETS: Eurodollar Futures Pointed Higher Early

2008.11.11 22:24:11   Aides: Pelosi Seeks Legislation To Aid Auto Industry-AP      

 

 

 

By Mark Shenk

 

Nov. 12 (Bloomberg) -- Crude oil fell below $59 a barrel in New York for a second day on speculation the International Energy Agency will cut its 2009 oil-demand forecast because of slowing economic growth.

The IEA, which coordinates energy policy in 28 developed countries, will reduce the estimated growth in global demand for a third month in a report today, according to four former IEA analysts. Energy prices also dropped because of weaker equity markets and a rising U.S. dollar.

``It all comes back to the economy and how deep folks think the recession will be,'' said Rick Mueller, director of oil markets at Energy Security Analysis Inc. in Wakefield, Massachusetts. ``Demand is poor and should get worse as the recession deepens.''

Crude oil for December delivery fell 38 cents, or 0.6 percent, to $58.95 a barrel at 10:18 a.m. Sydney time on the New York Mercantile Exchange. Futures dropped as low as $58.32 yesterday. Prices have tumbled 60 percent since reaching a record $147.27 on July 11. Yesterday, oil lost $3.08, or 4.9 percent, to $59.33 a barrel, the lowest settlement since March 20, 2007.

Gasoline for December delivery declined 6.2 cents, or 4.5 percent, to $1.3059 a gallon yesterday in New York, the lowest settlement since the contract began trading in October 2005.

`Pessimistic' Market

Pump prices are following futures lower. Regular gasoline, averaged nationwide, declined 2 cents to $2.22 a gallon, AAA, the nation's largest motorist organization, said yesterday on its Web site. The fuel has tumbled 46 percent from the record $4.114 a gallon reached on July 17.

``The view of the market is very pessimistic,'' said Addison Armstrong, director of market research for Tradition Energy in Stamford, Connecticut. ``The only news I foresee that can move prices higher is a cold spell, which would boost heating oil demand, and that would have only limited impact.''

The IEA already has cut its 2008 forecast about 1.3 million barrels a day in seven revisions this year. Last week, it published a summary of its annual World Energy Outlook, slashing its 2030 projection by 9.4 percent to 106 million.

The Organization of Petroleum Exporting Countries cited falling demand for its Oct. 24 decision to reduce production by 1.5 million barrels a day. OPEC ministers will discuss the market situation when they meet next on Dec. 17 and may agree to another supply cut then, the group's president, Chakib Khelil, said on Nov. 8 in Algiers.

OPEC's `Tough Time'

``This is a tough time for OPEC because of the demand picture,'' Mueller said. ``Every time they cut production they are building up spare capacity. There's also a risk that they may make cuts and prices still won't rebound.''

Global stock markets declined as Credit Suisse Group AG said developed economies are headed for the worst recession since 1945. The Standard & Poor's 500 Index declined 18.7 points, or 2 percent, to 900.51. The Dow Jones Industrial Average fell 4147.03, or 1.7 percent, to 8,723.51.

``Prices are lower because of sagging global equities as well as the view that China's stimulus package is insufficient to prop oil demand in the face of a prolonged global economic slowdown,'' Armstrong said.

On Nov. 9, the Chinese government pledged spending to sustain economic growth through 2010 and switched to a ``relatively loose'' monetary policy. China is the world's fourth-biggest economy and the second-largest consumer of oil.

Equities Weigh

Investors looking for protection against the dollar's decline earlier this year helped lead crude oil, gold, corn and gasoline to records. The euro fell as much as 1.9 percent to $1.2507 from $1.2748.

``The oil market is being dragged lower by both the drop in equities and the strength of the dollar,'' said James Ritterbusch, president of Ritterbusch & Associates in Galena, Illinois. ``Whenever there is a large change in the value of the dollar against the euro, either up or down, you tend to see it recognized by the oil market.''

U.S. crude-oil supplies probably rose for a seventh week as imports rebounded, a Bloomberg News survey of analysts showed. Stockpiles probably increased 750,000 barrels in the week ended Nov. 7 from 311.9 million the week before, according to the median of 12 analyst estimates before an Energy Department report.

Gasoline stockpiles probably increased 200,000 barrels from 196.1 million barrels the week before, according to the survey. Supplies of distillate fuel, a category that includes heating oil and diesel, rose 1 million barrels from 127.8 barrels the week before, the survey showed.

The department is scheduled to release its weekly report tomorrow at 11 a.m. in Washington. The report is being delayed by a day because of yesterday's Veterans Day holiday.

Brent crude oil for December settlement decreased $3.37, or 5.7 percent, to settle at $55.71 a barrel on London's ICE Futures Europe exchange, the lowest settlement since Jan. 29, 2007.

 

To contact the reporter on this story:

Mark Shenk in New York at mshenk1@bloomberg.net.

 

 

Цены мирового рынка на нефть по итогам торгов 11 ноября 2008г. на ведущих нефтяных биржах значительно понизились. Официальные цены нефтяных фьючерсов ближайшего месяца поставки составили:

- в Лондоне на InterContinental Exchange Futures - IPE Brent Crude - 55,71 (-3,37) долл./барр.; - в Нью-Йорке на New York Mercantile Exchange - Light, Sweet Crude Oil - 59,33 (-3,08) долл./барр.

Причиной сегодняшнего снижения стало заявление Международного энергетического агентства об усилении тенденции к дальнейшему сокращению потребления нефти в мировой экономике. Падение цен могло быть и большим, если бы не заявление китайских властей, которые объявили о крупном проекте по развитию инфраструктуры.

За минувшую неделю баррель нефти потерял на мировых рынках 10% своей стоимости.

 

 

 

By Laura Litvan and John Hughes

 

Nov. 11 (Bloomberg) -- House Speaker Nancy Pelosi said she wants ``immediate action'' to give automakers additional aid as shares of General Motors Corp. hit their lowest level since 1943.

The failure of ``one or more of the major American automobile manufacturers'' would have a ``devastating impact on our economy,'' Pelosi said in a statement e-mailed to reporters.

Pelosi said any aid to the automakers would come with conditions. She didn't specify the level of assistance she supports, but said it should come from the $700 billion Congress authorized the Treasury to use to help stabilize the financial services industry. Pelosi said she is tapping House Financial Services Committee Chairman Barney Frank to write the legislation that may be considered as early as next week.

``Emergency assistance to the automobile industry would be conditioned on executive-compensation restrictions, a prohibition on golden parachutes, rigorous independent oversight, and other taxpayer protections to ensure that any companies that benefit from this assistance - and not the taxpayers - bear the full burden of repaying any costs that are incurred,'' Pelosi said.

Pelosi's call for federal aid for automakers still faces obstacles from the U.S. Senate and the White House, which must approve any measure. It comes as shares of GM, the biggest U.S. automaker, reached a more than six-decade low today. The company said last week it may run out of operating cash as soon as year's end.

GM had $16.2 billion on hand as of Sept. 30, down from $21 billion at the end of June, and needs at least $11 billion to pay its monthly bills.

`Urgent Action'

``We appreciate the speaker's call for urgent action,'' GM said in a statement. ``We are ready to work with Congress and the administration to secure the immediate support we need to bridge the current economic crisis.''

Ford Motor Co. said in a statement that it applauded the efforts of Pelosi and Senate Majority Leader Harry Reid to help the industry. Earlier this fall, Congress approved $25 billion in low-interest loans for the industry.

``We still have the slimmest of majorities in the Senate,'' Reid said in a statement. ``This will only get done if President Bush and Senate Republicans work with us in a bipartisan fashion, and I am confident they will do what is right for the economy.''

Don Stewart, a spokesman for Senate Minority Leader Mitch McConnell, said McConnell is reviewing Pelosi's plan and did not have immediate comment.

Shelby's Opposition

At least one Senate Republican signaled his opposition to the plan.

``The financial situation facing the Big Three is not a national problem, but their problem,'' Richard Shelby of Alabama, the top Republican on the Senate Banking Committee, said in a statement. ``I do not support the use of U.S. taxpayer dollars to reward the mismanagement of Detroit-based auto manufacturers in such a way that allows them to continue and compound their ongoing mistakes.''

The effort to use some of the $700 billion in bailout money may not succeed before the end of President George W. Bush's term on Jan. 20 because his administration has resisted using the funds for carmakers, said Clint Currie, transportation analyst for Stanford Group Co. in Washington. Multiple congressional efforts may be needed, and success may not occur until after President-elect Barack Obama takes office, he said.

`Not So Much'

``Pelosi and Reid and the incoming administration wants to help them, while the current administration, not so much,'' Currie said.

The Bush administration is waiting to see the details of Pelosi's proposal before reacting to it, White House spokesman Tony Fratto said.

The bailout plan is currently being used ``consistent with the law and congressional intent,'' Fratto said. ``If Congress wants to change the law, we'll see how they intend to do it.''

``It's strange that congressional Democrats would choose to ignore the $25 billion program they actually created to assist the automakers,'' Fratto said. ``That would be a better place to start.''

At a White House meeting yesterday, Obama discussed the urgency for aid to U.S. automakers with Bush, according to aides to the president-elect.

Ford fell 13 cents, or 6.7 percent, to $1.80 at 4:15 p.m. in New York Stock Exchange composite trading. GM fell 44 cents, or 13.1 percent, to $2.92.

Pelosi was among the lawmakers who met last week with the chief executives of GM, Ford and Chrysler LLC.

The three companies are seeking an additional $50 billion in federal loans to help them weather the worst auto market in 25 years, according to a person familiar with the matter.

 

To contact the reporters on this story:

Laura Litvan in Washington at llitvan@bloomberg.net;

John Hughes in Washington at Jhughes5@bloomberg.net.

 

 

By Craig Torres

 

Nov. 11 (Bloomberg) -- The revised bailout of American International Group Inc. marks a new phase in the government's effort to shore up financial markets: It's the first time cash from the rescue fund Congress created last month has been committed to a failing company.

The Federal Reserve, which saved the insurer from collapse two months ago with an $85 billion loan, yesterday reduced that loan and offered lower rates, while the Treasury chipped in $40 billion from its bank-rescue fund to buy preferred shares. The new terms represent a departure for Secretary Henry Paulson, who until now has said he only wants to invest Treasury funds in ``healthy'' firms.

Taxpayers are ``keeping the zombie alive,'' said Robert Eisenbeis, chief monetary economist at hedge fund Cumberland Advisors and former director of research at the Atlanta Fed. ``We keep getting deeper and deeper into these holes.''

The shift is likely to vastly expand political demands for saving dying companies in the name of financial or economic stability. The administration of President-elect Barack Obama may soon have to consider credit or capital injections for other insurers, automakers, even retailers as the U.S. slides deeper into what could be the worst recession in a quarter-century.

``Are you going to do General Motors and Ford, and, if you do those, are going to go on and do retailers?'' said William Isaac, former chairman of the Federal Deposit Insurance Corp. and now chairman of the Secura Group LLC. `` Where does it stop? That is a very difficult decision we are going to face as a country.''

AIG's Losses

With the new bailout plan, the Treasury is conceding the initial rescue wasn't sufficient. It's investing funds from the so-called Troubled Asset Relief Program created by Congress to purchase preferred shares in a company that lost $24.5 billion in the third quarter, its fourth straight unprofitable quarter. Losses in the past year wiped out profit from 14 previous quarters.

In addition to the Treasury's purchase of preferred stock, the Fed will lend AIG $60 billion, and create two new emergency loan units to finance up to $52.5 billion of the company's securities. Between loans and the capital injection, the government's $152.5 billion commitment is almost double the Fed's initial $85 billion loan.

The security of the government's collateral, the assets of the company itself, is likely improving because the Fed is removing distressed securities from the company's balance sheet and the government is now a direct stakeholder.

`Changed Course'

``The way the loan was structured previously would have led to a liquidation of AIG, whether intended or not,'' said Dino Kos, a managing director at Portales Partners LLC, New York. ``Obviously, they have changed course.''

The New York Fed gave the original loan in September to prevent widespread default against AIG creditors in the same week that Lehman Brothers Holdings Inc. collapsed.

In a statement yesterday, the Fed said the revised terms ``establish a more durable capital structure and resolve liquidity issues,'' as well as ``protect the interests of the U.S. government and taxpayers.''

The Treasury, in a separate statement, called AIG a ``systemically important company.'' The insurer guaranteed about $372 billion of fixed-income investments as of Sept. 30.

Stability

``This action was necessary to maintain the stability of our financial system,'' Neel Kashkari, the interim assistant secretary who heads the Treasury's office overseeing the bailout, said yesterday at a Securities Industry and Financial Markets Association conference in New York.

Vincent Reinhart, resident scholar at the American Enterprise Institute and former director of the Monetary Affairs Division at the Fed Board, said yesterday's expansion of the AIG bailout shows that ``no one knows the general principles'' behind the Treasury's trouble-assets program.

First, Treasury said it would buy distressed assets. Then it began injecting capital directly into banks, and now, with AIG, into troubled financial institutions.

``Now we are outside solvent institutions. If you don't have a design principle it is very difficult to draw lines,'' Reinhart said. When the Obama administration takes over the Treasury, the new leaders ``can increase the size of these programs and the scope, and say we are only following logically the Paulson plan.''

Automakers

Democratic congressional leaders urged Paulson in a Nov. 8 letter to use the rescue funds to lend to automakers, a sign that the package's scope may be broadened further. Senator Carl Levin, Democrat of Michigan, said in an interview he believes the Treasury has the authority to use the bailout funds for that purpose. That could be made explicit by adding language to an economic-stimulus bill that will be considered when Congress returns next week for a post-election lame-duck session, he said.

Shares of General Motors Corp. fell 23 percent yesterday after a Deutsche Bank AG analyst said the stock may be worthless in a year.

The revised terms for AIG reduce the interest rate on the $60 billion Fed loan to the three-month London interbank offered rate plus 3 percentage points, from a previous spread of 8.5 percentage points.

The Fed also invoked emergency authority to set up two new emergency loan facilities, one to fund the purchase of residential mortgage-backed securities from AIG's portfolio, and a second to finance the purchase of hybrid credits that AIG wrote default insurance contracts against. In effect, the Fed is taking a direct role in unwinding a troubled insurance business of AIG.

The capital injection into AIG will come from a $100 billion pool authorized by Congress for Treasury to use at its discretion, rather than the $250 billion allocated to purchase stakes in the country's banks, a Treasury official said. The government will get a 10 percent dividend for its preferred shares in the insurer, the Treasury official said.

``The Fed and Treasury are saying there should be no penalty for bad performance,'' said Walker Todd, a former Cleveland Fed attorney who is now a senior research fellow at the American Institute for Economic Research in Great Barrington, Massachusetts. ``It creates the zombie finance phenomenon. The living dead keep on walking instead of taking a decent burial.''

 

To contact the reporters on this story:

Craig Torres in Washington at ctorres3@bloomberg.net;

 

 

By Simone Meier

 

Nov. 11 (Bloomberg) -- German investor confidence unexpectedly rose in November as governments and central banks stepped up efforts to fight the turmoil on financial markets.

The ZEW Center for European Economic Research in Mannheim said today that its index of investor and analyst expectations increased to minus 53.5 from minus 63 in October. The index reached minus 63.9 in July, the lowest on record. Economists expected an unchanged reading, the median of 41 forecasts in a Bloomberg News survey shows.

Germany's benchmark DAX share index rebounded from a three- year low last month as the yearlong credit crisis shows signs of abating. Interbank lending rates in Europe have fallen to the lowest since February after central banks injected cash into the financial system. Chancellor Angela Merkel's Cabinet agreed on a stimulus package worth 50 billion euros ($64 billion) on Nov. 4.

``Investor confidence should have reached a turning point,'' said Ralph Solveen, an economist at Commerzbank AG in Frankfurt. ``That doesn't change the subdued outlook for the German economy over the coming months. It should shrink in the fourth quarter of this year as well as into 2009.''

Investor sentiment remained negative for a 16th month in November, suggesting pessimists outnumber optimists in the survey. The indicator's long-term average is 27.1, according to the ZEW. A gauge measuring investors' assessment of the current situation fell to minus 50.4 from minus 35.9 in October.

Recession

The European Commission said last week that the euro region entered a recession in the third quarter. The International Monetary Fund in Washington has called on central banks to lower borrowing costs further to ``support financial markets'' and ``help limit the decline in world growth.''

Central banks around the world have already taken steps to limit the economic damage of the financial turmoil, reducing interest rates and providing liquidity to banks. The euro interbank offered rate, or Euribor, for three-month loans declined more than 6 basis points to 4.34 percent today, the lowest level since Feb. 14, according to the European Banking Federation.

The European Central Bank last week cut its key rate by 50 basis points for the second time in a month, taking it to 3.25 percent, and President Jean-Claude Trichet said a further reduction is possible.

Cutting Forecasts

``It's more than probable'' that the ECB ``will have to modify substantially its projections in December for growth and inflation,'' council member Guy Quaden told Bloomberg News late yesterday in Sao Paulo. ``It's surely not excluded that the revision of the projections will have consequences on the field of our monetary policy.''

Germany's economy may have failed to grow in the third quarter and will weaken further, the Finance Ministry said last month. The government's two-year program to shore up the economy ranges from tax breaks for buyers of new cars to greater financial help for improving buildings' energy efficiency.

``If my optimistic scenario holds, the ZEW indicator has now entered an upward trend and should increase continuously in the coming months,'' said Edgar Walk, an economist at Bankhaus Metzler in Frankfurt.

`Very Weak'

``The ECB will cut its key rate by at least another 50 basis points next month,'' said Juergen Michels, an economist at Citigroup Inc. in London. ``It depends on incoming economic data, which will be very weak, giving them room to lower the benchmark to an even larger extent.''

The DAX has shed about 38 percent of its value this year as the global slowdown prompted companies to reduce profit forecasts.

German business confidence dropped to the lowest in more than five years in October and manufacturing contracted for a third month. European investor confidence fell to a record in November.

Still, crude oil prices have retreated 59 percent from a July record to around $60 a barrel, reducing the pressure on companies' margins, and the euro has depreciated 13 percent against the dollar this year, making exports more competitive.

Sales abroad rose more than economists expected in September and unemployment declined below 3 million for the first time in 16 years in October.

Bayerische Motoren Werke AG, the world's largest maker of luxury cars, said on Nov. 4 it expects ``clearly positive'' earnings this year and is sticking to its targets through 2012. The Munich-based company ``will overcome the current difficult situation,'' Chief Executive Norbert Reithofer said.

``We have seen a slight easing of tensions in money markets, we had coordinated central bank action and the government rescue package also helped,'' said Sandra Schmidt, an economist at ZEW, in an interview with Bloomberg Television. ``Central banks have more room to lower interest rates. That's an important factor'' influencing investor sentiment.

 

To contact the reporter on this story:

Simone Meier in Frankfurt at smeier@bloomberg.net.