Financial Page International

16 January 2010 - Global Markets Review
Good Morning Ladies & Gentlemen,
 
I'll give the US a break this week and instead or focusing on their problems, I'd like to cover this week an issue in Europe that is growing scarier by the day - one that could be the catalyst for markets to correct.
 
Strains and uncertainty hang over European government debt markets this year, with the Greek and Portuguese economies risking a "slow death," Moody's credit rating agency warned on Wednesday.
 
"The risk of 'sudden death' - a balance-of-payments crisis is negligible, but the likelihood of a 'slow death'... is high" unless economic potential competitiveness and tax-raising capacity are improved, the agency said.
 
Referring to the overall problem of government debt in Europe, Moody's said that a key factor in preventing "complete economic and financial meltdown has been the collapse of interest rates." But it added that highly indebted countries "could find their ratings tested" if investors were to switch their concern about weak economic activity to fears of inflation and market rates were to rise.
 
Referring specifically to Greece and Portugal, Moody's said that the competitivity gap would result in countries "bleeding" economic potential and therefore tax revenue, if it were not reversed.
 
Moody's said it was estimated that three million Greeks, equivalent to more than a quarter of Greeks in Greece, lived abroad, and the equivalent figure for Portugal was one third. "Greece has significantly less time to address this issue, largely because the deterioration of public finances has been much more dramatic."
 
The crisis in Greece has raised debate about cohesion of the Eurozone and of the European Union. The view of Moody's is particularly critical because it was the most lenient of the three top rating agencies in downgrading Greek debt at the end of last year.
 
If it downgrades further, there could eventually be grave consequences for the ability of Greek banks to use Greek government bonds as collateral to borrow regular funds at the lowest rates from the European Central Bank.
 
A similar line on Europe was taken by Roubini Global Economics in the United States which warned "unless advanced economies begin to put their fiscal houses in order, investors and rating agencies will likely turn from friends to foe." It said: "The UK, Spain, Greece and Ireland will face sovereign risk pressures, especially if their fiscal imbalances are not addressed immediately."
 
Anthony Thomas, senior risk analyst at Moody's, said: "In summary, expectations are low. No-one is under any illusions about the scale of the task facing European economies and policymakers, which is no bad thing." Moody's said that "divergence in country performance, rather than convergence, is more likely as (crisis) exit strategies take effect.
 
Central banks would have to walk a "tightrope" in withdrawing easy money to support economies, while not choking recovery. And it warned: "It is increasingly looking as if the next stage of this crisis, the 'exit' phase, may be even more difficult than the crisis itself."
 
A team from the International Monetary Fund was in Greece on Wednesday, to provide advice on correcting public finances. Last week, missions from the European Union and European Central Bank were in Athens scrutinising a crisis programme which must be submitted to the EU by the end of the month.
 
Moody's said: "Ultimately, the governments themselves are responsible for their own fates - whether they are members of the EU or the Eurozone, have IMF or EU support or any combination of those factors.
 
History has it that coins were first invented in the Greek kingdom of Lydia 2,600 years ago. Ever since, those in charge of the money supply have been succumbing to the temptation to debase it in order more easily to pay their bills. Now Greece is supplying the world with another lesson in the uses and misuses of money.
 
On Thursday, European Central Bank President Jean-Claude Trichet tried to tamp down speculation that Greece could be run out of the Euro zone, even as the cost of insuring Greek government bonds against default hit new highs. Greece's fiscal problems, along with those of Portugal and Ireland, have also given rise to speculation that the 16-member Euro zone could be headed for break up, or at least a winnowing-out. Fears of Greek default have sent its bond spreads up to 2.77%age points above German government bonds-unprecedented for any country since the Euro was established 11 years ago. In Germany, Chancellor Angela Merkel predicted "difficult years ahead" for the single currency.
 
There's no question Greece is in a tight spot. Its fiscal deficit hit 12.7%, according to official statistics that even now the European Union says are subject to doubt. Its monetary policy is controlled by the ECB in Frankfurt, meaning it doesn't have the option of monetizing its debt, as the US and the UK have effectively been doing over the past year.
 
But would it really be better off on its own? Throughout the 1980s, Greek inflation rates flirted with 20% a year, and interest rates were commensurately high. Seen in that light, 6% rates on Greek bonds don't look that painful. Without the single currency, there can be little doubt that Greece would already have devalued, voluntarily or not.
 
That might have taken some pressure off the government to get its fiscal house in order. But it would have impoverished the entire country in the process and probably sent interest rates soaring close to pre-Euro levels. The Euro, in other words, is not to blame for Greece's financial woes. Greece's political class is.
 
Thursday Greek Prime Minister George Papandreou (who took office in October) outlined a proposal to get the budget deficit below 3% of gross domestic product by 2012. That's easier said than done. To have any chance at all, Mr. Papandreou and his Socialist Party will have to face down public-sector unions to whom the government has made promises it can no longer afford.
 
Still, the alternative for Greece is worse, and would be whether those obligations were denominated in drachmas or Euros. Those who see the Euro as a shackles on the government in Athens aren't wrong. But they are forgetting how successive Greek governments abused the monetary freedom afforded to them before joining the single currency. The record of the drachma was one of inflation and depreciation, and Greece is well rid of it.
 
The single currency was never going to solve all of Europe's economic problems. What it has done is provide a reasonably stable medium of exchange and store of value for countries that, with few exceptions, had become chronic overspenders.
 
In light of what we now know about how Greece has been cooking its official economic books, it's fair to ask if it was ready for the discipline imposed by the single currency. With public-sector debt well north of 100% of GDP and likely to rise further this year, Greece is far outside the standard of 60% set for Euro membership in the Maastricht Treaty. This was known at the time it joined the currency bloc in 2001, but it was forgiven on grounds that the debt trajectory pointed in the right direction. Even that turned out to be wrong.
 
But nearly every country in Europe has seen its debt-to-GDP ratio shoot up in the wake of financial panic in 2008. What distinguishes Greece is that it entered the crisis in worse shape than most, and in worse shape than the outside world realized thanks to statistical book-cooking.
 
In the 20th century, the world's governments shifted to fiat currencies in part to facilitate their own fiscal profligacy. The irony of the Euro is that, in theory, it rests on even more tenuous foundations than most national fiat currencies. Yet in practice it has better served most of those who use it than the lire, pesetas and drachmas that it replaced.
 
Now the Euro has given the Greeks an opportunity, if they'll take it, to avoid another in a long series of currency debasements. But the market is speaking, and the message it's sending via credit-default swap prices and interest-rate spreads is that the burden of proof is on the Greek government to prove that it is capable of spending within its means.
 
On to those numbers on the boards:
US Markets 
How the US did this week .....

 US SummaryUS stocks fell broadly Friday despite earnings from Intel and J.P. Morgan Chase coming in above analysts' estimates, as weaker-than-expected revenue from J.P. Morgan weighed on financials such as Bank of America while troubles on the consumer side of its business raised concerns across other sectors as well.
 
Friday's declines put stocks in negative territory for the week, marking the second week of declines in three weeks.
 
The Dow Jones Industrial Average fell 100.90 points, or 0.94%, to 10609.65, Friday, marking its biggest one-day drop this year. For the week, it fell 8.54 points, or 0.08%.
 
Bank of America was the measure's worst performer Friday, off 56 cents, or 3.3%, to 16.26, after J.P. Morgan's fourth-quarter earnings quadrupled, exceeding forecasts, but its revenue came in below analysts' estimates and the banking giant posted losses in its card services, consumer lending and retail financial-services segments. J.P. Morgan fell 1.01, or 2.3%, to 43.68.
 
Intel (Nasdaq) also weighed on the Dow with a drop of 68 cents, or 3.2%, to 20.80. The giant chip maker's fourth-quarter profit surged nearly 10-fold from the depressed year-earlier period and its closely watched gross profit margin hit a record. However, investors grew fearful that the stock may be near its peak following the most profitable quarter in Intel's history.
 
The Nasdaq Composite fell 28.75, or 1.24%, to 2287.99. It dropped 1.26% over the course of the week. The Standard & Poor's 500 slipped 12.43, or 1.08%, to 1136.03, its biggest one-day drop since Dec. 17. All its sectors ended the day in the red, led by financials. The measure fell 0.78% for the week.
 
CF Industries Holdings rose 2.23, or 2.4%, to 95.42 after the company withdrew its offer to acquire fellow fertilizer maker Terra Industries, apparently drawing to a close at least one chapter in a convoluted story that made CF itself the target of a buyout offer from Agrium. Terra climbed 91 cents, or 2.8%, to 33.57, while Agrium fell 2.99, or 4.6%, to 62.33.
 
UK publisher Pearson PLC said Interactive Data is reviewing "strategic alternatives" as speculation mounts that the New York-listed financial market data provider will be sold. Pearson, the publisher of the Financial Times and Penguin books, owns about 61% of IDC. Interactive Data jumped 3.60, or 14%, to 29.07. American depositary shares of Pearson edged up 1 cent, or 0.1%, to 14.61.
 
Shares of student-lender SLM Corp. fell 77 cents, or 6.7%, to 10.75. Investors were concerned that President Barack Obama's proposal to levy new fees on financial institutions could sting SLM even more than the banks the government has targeted.
 
Scotts Miracle-Gro jumped 1.49, or 3.7%, to 41.55 after CL King analysts recommended buying the stock, saying shares of the lawn-and-garden company are at a historically cheap price.
 
OSI Pharmaceuticals rose 50 cents, or 1.5%, to 34.72 on the Nasdaq. The US Food and Drug Administration extended the review period for using the cancer drug Tarceva as a first-line treatment in patients with advanced lung cancer, after the agency was given additional data from OSI. Tarceva is co-marketed by OSI and Roche Holding's Genentech unit; while the drug is considered a second-line therapy, the companies want FDA approval to use Tarceva immediately after chemotherapy as a maintenance treatment in patients whose disease is stable after chemotherapy. Last month, an FDA panel of outside medical experts had voted against approval of Tarceva for that purpose. American depositary shares of Roche edged up 8 cents, or 0.2%, to 44.96 on the Nasdaq.
 
Kinross Gold dropped 1.01, or 5%, to 19.31 although the company said it expects to report 2009 production of about 2.23 million gold equivalent ounces, in line with its previous guidance and up about 21% from 2008 production.
 
Eaton Vance slipped 18 cents, or 0.6%, to 32.06, despite an authorization to repurchase up to eight million more nonvoting shares as the investment-management firm nears completion of a prior eight-million-share authorization made in 2007.  

European Markets 
What has been happening in Europe this week .....
 Europe SummaryEuropean stocks retreated, extending the Dow Jones Stoxx 600 Index's first weekly drop in five weeks, after JPMorgan Chase & Co. reported a loss in its retail bank and an index of US consumer sentiment rose less than forecast.
 
The Stoxx 600 slid 0.9% to 256.44, bringing this week's retreat to 1.1%. The measure has rallied 62% since March, boosted by record-low interest rates in the US and Europe and about $12 trillion committed by governments worldwide to revive the economy.
 
National benchmark indexes declined in all 18 western European markets, except Iceland. France's CAC 40 lost 1.5% while Germany's DAX dropped 1.9%. The UK's FTSE 100 slipped 0.8%.
 
GERMANY
 
German stocks declined the most since November, with the benchmark DAX Index extending its weekly drop, as fourth-quarter revenue at JPMorgan Chase & Co. missed estimates and analysts downgraded SAP AG.
 
Deutsche Bank AG and Commerzbank AG, Germany's largest lenders, sank more than 2%. SAP, the world's biggest maker of business-management software, slid 3.5% after Morgan Stanley cut its recommendation on the stock. Solarworld AG and Q-Cells SE led solar shares lower amid speculation the government plans to reduce subsidies by as much as 17%.
 
The DAX lost 1.9% to 5,875.97, bringing the retreat this week to 2.7%. The benchmark index for German equities rallied 24% last year as Europe's biggest economy emerged from recession, supported by rising exports, government stimulus measures and record-low interest rates in the region. The broader HDAX Index decreased 1.8% Friday.
 
Deutsche Bank and Commerzbank fell 3.7% to 48.50 Euros and 2.5% to 6.56 Euros, respectively. JPMorgan, the first of the largest US banks to report fourth-quarter results, Friday reported revenue of $25.2 billion in the fourth quarter, compared with the median analyst estimate of $26.2 billion in a Bloomberg survey. The bank also said it added $1.9 billion to its reserves for consumer loan losses.
 
SAP sank 3.5% to 34.10 Euros, its biggest drop since October. Morgan Stanley cut the shares to "equal-weight" from "overweight," while UniCredit SpA and Independent Research GmbH downgraded the stock to "hold" from "buy."
 
ThyssenKrupp AG, the biggest steelmaker in the country, lost 2.1% to 26.66 Euros as metal prices declined in London. Smaller rival Salzgitter AG dropped 3% to 68.02 Euros. NordLB cut its recommendation for Salzgitter to "sell" from "hold."
 
Q-Cells, a German solar-cell maker, plunged 8.8% to 11.28 Euros, the biggest drop since July. Solarworld fell 5.5% to 14.81 Euros. SMA Solar Technology AG, a producer of alternating-current converters, sank 13% to 90.70 Euros as WestLB AG cut the stock to "reduce" from "neutral." That was its biggest decline since November 2008. That was the stock's biggest drop since November 2008.
 
Drillisch added 2.3% to 4.70 Euros. The German mobile-phone service provider said it will resume paying an annual dividend as demand for its Internet offerings is bolstering earnings.
 
HeidelbergCement, the world's third-biggest cement maker, slid 2.7% to 50 Euros. The stock was downgraded to "hold" from "buy" at ING Groep NV, which said in a report that "the discount to the sector has narrowed and much of the optionality realized with balance sheet restructuring."
 
Jenoptik, a German maker of optical equipment, slumped 3.7% to 4.75 Euros. The stock was cut to "hold" from "buy" at SES Research GmbH after a rally of more than 20% since the beginning of last week.
 
FRANCE
 
France's CAC 40 Index declined 61.39, or 1.5%, to 3,954.38 in Paris, for a 2.2% drop this week. The SBF 120 Index slipped 1.4% Friday.
 
Banking stocks fell after JPMorgan Chase & Co., the second- largest US bank by assets, reported fourth-quarter revenue that missed analyst expectations.
 
Societe Generale SA, France's second-largest bank, sank 2.7% to 49.03 Euros. Dexia SA, the largest lender to local governments in Belgium and France, dropped 2.7% to 4.74 Euros.
 
Affine added 34 cents, or 2.1%, to 16.55 Euros, advancing for a third day this week. The property rental company completed building sales valued at 164 million Euros ($236 million) in 2009, more than its original target.
 
Atos Origin increased 70 cents, or 2%, to 36.11 Euros, gaining for a fifth day. France's second-biggest computer-services provider was raised to "buy" from "add" at Oddo Securities, which said the share price doesn't reflect potential of the company's Worldline unit.
 
Cap Gemini, Europe's largest computer-services company, slid 1.26 Euros, or 3.6%, to 33.89 Euros, after two days of gains. Oddo cut its recommendation on the stock to "add" from "buy."
 
Carrefour rallied 1.24 Euros, or 3.6%, to 35.83 Euros, gaining for a second day this week. Europe's biggest retailer posted its first quarterly sales increase in a year after it opened more stores and demand increased in Latin America. Revenue rose 1% to 26 billion Euros.
 
Manutan International jumped 2.26 Euros, or 5.7%, to 42, gaining for a second day. The seller of equipment to industrial customers said first-quarter sales rose 20% to 150.5 million Euros.
 
Seche Environnement, the waste handler with a stake in France's third-biggest water company, advanced 1.16 Euros, or 1.9%, to 61, after three days of losses. Oddo raised its recommendation on the stock to "add" from "reduce."
 
BELGIUM
 
In Brussels the Bel 20 closed the week on 2,536.45, a decline of 1.35% for the day.
 
Belgian-based food retailer Delhaize on Thursday reported a 10.1% fall in fourth quarter revenue to 4.87 billion Euros ($7.07 billion) for the group as a whole, against 5.42 billion Euros in the same period a year ago.
 
The fourth-quarter number includes an extra week of trade included in the period, and stripping that out, revenue fell 5.6%.
 
Accounting for effects of the weaker Dollar, which fell 10.8% during the quarter, Delhaize said revenue fell 5.6%. The company said it was confirming 2009 earnings guidance, excluding a fourth-quarter charge of 44 million Euros for the US restructuring, store closings and store impairments.
 
Worker blockades of the Belgian breweries of Anheuser-Busch InBev were set to continue into a second week after the collapse of mediated talks on Thursday.
 
Workers at the company's Leuven and Jupille breweries began blocking plant entrances after the world's largest beer maker announced it planned to cut a net 263 jobs out of its 2,700 Belgian workforce last week.
 
The brewery at Hoegaarden has been blocked since Tuesday and workers were also protesting outside company depots supplying bars and cafes.
 
The company held talks with union representatives on Thursday, chaired by a mediator, but they ended without success.
 
"There is no reconciliation. InBev was not prepared to withdraw its plan, which was our demand. The actions will continue," a union official said.
 
During the 2008-2009 season only 60% of the annual pear crop was sold by the Belgian Fruit auction. Also because of this the turnover of BFV decreased by 10%. BFV have announced this to Nieuwsblad.be. BFV are situated in Sint-Truiden, Glabbeek and Hannuit.
 
Not only pears caused the decrease in turnover. Also sharp competition for apples and pears with Poland, other European countries and Russia took place.
 
BFV sold twenty million kilos of pears between 1 January and July 2009. The previous year this was forty million during the same period. Most of the pears were delivered from September to December 2008. As a result the first six months were  very quiet in 2009.
 
THE NETHERLANDS
 
The AEX in Amsterdam ended at 337.99, off 0.77% for the session Friday.
 
The head of the Dutch carmaker trying to buy Saab said Tuesday that the company had the money to make a deal and that one was still possible even though General Motors had started to shutdown the Swedish carmaker.
 
"They are considering offers very, very seriously," Victor Muller, the chief executive of Spyker Cars, said. "I'm not that concerned about all these steps that are being taken. It's my job to reverse that decision and make sure that Saab is indeed saved."

 
So far G.M. has resisted Spyker's bids and last week began what it described as an "orderly wind-down" of Saab. An earlier deal to sell Saab to a Swedish company, Koenigsegg Group, fell apart in November.
 
The Dutch Finance Ministry is not involved in renegotiation talks with the government of Iceland over its debts related to the collapse of online bank Icesave, a spokeswoman for the ministry said on Tuesday.
 
Iceland plans to hold a referendum in the next two months on terms for paying back Britain and the Netherlands more than $5 billion for money lost in high-interest Icesave bank accounts during a financial meltdown in 2008. The two countries compensated savers in full and want their money back.
 
Iceland's finance minister said on Tuesday the country would need a quick breakthrough in talks with Britain and the Netherlands to avoid having to hold the referendum.
 
Thursday, the Netherlands Central Bureau of Statistics announced that the retail sales dropped 6.4% year-on-year in November, faster than the 4.3% decline in in the previous month. Economists were looking for a decrease of 5.5%.
 
In November, total retail sales volume fell 6.9% on annual basis, while food and beverage stores sales slipped 2.5%.
 
Meanwhile, the supermarket sales revenue dropped 2.1%. Over the first eleven months, sales of these stores fell 1.5% over a year ago.
 
Wednesday, the Netherlands' Central Bureau of Statistics announced that the industrial production dropped 2% year-on-year in November, smaller than the 7% fall in the previous month. Economists were looking for a decline of 2.8%.
 
For the first half of the year 2009, industrial output decreased 13% compared to the same period of the previous year.
 
Separately, the statistical office said the industrial turnover dropped 3% on an annual basis in November, after falling 17% in October.
 
It was also reported Wednesday that the trade surplus stood at Eur 3.1 billion in November, down from Eur 3.8 billion surplus in the previous month.
 
Exports value dropped 5% on an annual basis to Eur 27.5 billion in November, while imports value decreased 8% to Eur 24.5 billion.
 
Meanwhile, the volume of exports dropped a working day adjusted 2% year-on-year in November, compared to the 6% fall in the previous month. At the same time, imports volume was down 8%.
 
AUSTRIA
 
Vienna's ATX finished the day Friday on 2,688.46 - a dip of 0.52%.
 
Austrian Airlines Tuesday reported a moderate rise in December passenger numbers, reversing a declining trend, but cautioned economic conditions remain difficult.
 
While the number of passengers traveling with Austrian Air in December rose 1.7% to 703,300, the accumulated 2009 passenger data showed a full-year decline of 10.2% against 2008, to 9.94 million passengers. The improvement in December numbers was partly due to weaker comparatives a year earlier.
 
The revenue passenger kilometer, a closely watched industry breakdown measure of profitability, fell 2% in December, and 12.3% in the full year, Austrian Air said.
 
Austrian Air said its medium and short-haul segment carried 2.9% more passengers in December than a year earlier, while its smaller long-haul and charter segments both lost 5.5% of their passengers.
 
Austrian oil and gas company OMV said Tuesday it will sell off its Austrian heating oil marketing unit, OMV Waerme VertriebsgmbH, thereby exiting direct sales of heating oil to private customers.
 
The unit, which has 47 employees and operates six sales offices in Austria, is to be sold off before the end of 2010, and future sales to private customers will take place only through external partners, OMV said in a statement.
 
OMV said it hopes to sell the unit to one of its existing retail partners. The sale of heating oil to large corporate customers and to retail partners will still be carried out by OMV directly, the company said.
 
Austrian state debt has jumped to more than two thirds of gross domestic product (GDP), according to figures released Thursday.
 
State debt rose 14 billion Euros to 184.9 billion Euros - 67.6% of GDP - between September 2008 and September 2009, according to Statistik Austria.
 
Margit Schratzenstaller, a budget expert at Vienna economic think tank the Institute for Economic Research (Wifo), predicted that the figure as of the end of last year would be around 190 billion Euros.
 
She added that state debt would continue to rise this year following the 450 million Euros that nationalisation of Carinthian bank Hypo Group Alpe-Adria (HGAA) in December would cost the country.
 
State debt at the end of September 2009 consisted of 161.4 billion Euros' worth of bonds and 23.5 billion Euros in credit.
 
The federal government accounted for 12.7 billion Euros, and the provincial governments for 1.7 billion Euros, of the increase in state debt between September 2008 and September 2009. Municipalities accounted for 73 million Euros of the debt.
 
People's Party (OVP) Economy Minister Reinhold Mitterlehner earlier this month called for discussion on state debt reduction.
 
Machinery producer Reich-Austria GmbH and its parent holding group Holz-Her GmbH have started bankruptcy proceedings, it was announced Thursday.
 
The Alpine Land Creditors Association (AKV) said the firms based in Voitsberg, Styria, had debts of around 37 million Euros and more than 800 creditors.
 
AKV said the proceedings would affect 260 of 290 employees in Austria and 90 in Germany.
 
Reich-Austria, which started in 1914, has suffered a massive drop in business because of the recession and a 50% fall in turnover year on year to 50 million Euros in 2009 led to banks slashing its credit lines, AKV said.
 
SWITZERLAND
 
The SMI in Zurich rounded off the week on 6,576.02, down 0.78%.
 
Switzerland's retail sector turnover increased by a real 0.6% in November from the prior year, the Federal Statistical Office reported Monday. However, the annual growth rate eased from October's 3.6%. Retail sales of food, drinks and tobacco registered an increase of 1.4% and sales in the non-food sector rose 0.6%. In nominal terms, retail sales edged up 0.1% in November.
 
Month-on-month, turnover in the retail sector slipped by a seasonally adjusted 1.7% in November in real terms and 1.2% in nominal terms. Excluding fuel, the retail sector showed a seasonally adjusted decline in real turnover of 1.1%.
 
Some of Switzerland's most influential bankers have called for a more coherent response to the recent crescendo of global criticism concerning tax evasion.
 
Switzerland backpedalled fast last year to get itself removed from a "grey list" of uncooperative tax havens. But now the authorities are facing a domestic backlash for appearing to surrender too easily.
 
The Swiss Private Bankers Association (SPBA) on Thursday asked the government to look more carefully at the details of renegotiated double taxation agreements. Parliament was also urged to draw up a legal framework to allow concessions without breaking banking secrecy laws.
 
The speed and ferocity of the concerted global attack on tax havens early last year compelled Switzerland's financial regulator to hand over UBS bank client data to the United States in February. This fateful decision was ruled illegal by a Swiss court last week.
 
The Swiss Financial and Market Supervisory Authority (Finma) is considering an appeal and is still defending its action on the grounds that it saved UBS from possible disaster in the US.
 
The Swiss Re catastrophe bond index finished 2009 on an all-time high, reflecting a tightening in spreads versus Libor and rising bond prices, according to the world's second biggest reinsurer.
 
Insurers and reinsurers use catastrophe bonds to transfer to capital market investors major risks on their books, such as for storms and earthquakes, freeing up capital to underwrite new insurance business.
 
The Swiss Re All US Dollar cat bond total return came in at 13.85% for the 2009 calendar year. The 2008 year returned 2.31%.
 
The 13.85% was made up by a coupon return in the all US Dollar cat bond index of 8.5%, and a price return was five%, which marked an increase in the secondary prices.
 
The Swiss Re Cat Bond Performance indices tracks the total return for all outstanding Dollar-denominated cat bonds and is based on Swiss Re pricing indications only.
 
DENMARK
 
Copenhagen's OMX completed the week on Friday at 359.27; down 0.7%.
 
Denmark's central bank Thursday lowered its key policy rate by 0.10%age points to 1.05%, marking the second cut in a week to weaken the Danish Krone and narrow the spread between monetary policy in Denmark and that of the European Central Bank.
 
"The interest-rate reduction is a consequence of purchases of foreign exchange in the market during a longer period," Danmarks Nationalbank said in a statement.
 
"The money-market rates in Euro are still very low and the spread to the equivalent Danish rates has tended to strengthen the Danish Krone," it added.
 
Denmark's currency, the Krone, is pegged to the Euro and the Danish central bank typically moves policy in line with the ECB, which earlier Thursday left its main refinancing rate unchanged at 1.00%.
 
However, Krone volatility last year--with the currency weakening amid the financial crisis in autumn 2008, followed by strengthening in 2009--has prompted independent moves by the Danish central bank.
 
It lowered the base rate by 0.05%age points on both Jan. 7 and Dec. 10 following purchases of foreign exchange aimed to weaken the Krone. Nationalbanken has chopped its main lending rate by 4.35%age points from 5.50% in October 2008 in response to the financial and economic crisis.
 
Tuesday, the Statistics Denmark announced that the industrial production rose 1.4% month-on-month in November, compared to the 0.9% fall in October, revised from 1.8% decline estimated initially. At the same time, industrial new orders climbed 3.1%.
 
For the September to November period, industrial output dropped 2.7% compared to the previous three months period.
 
On an annual basis, industrial production dropped 17% in November.
 
Meanwhile, industrial sales of own goods and services dropped 0.5% on a monthly basis in November, while turnover fell 2.8%.
 
Monday, the same department announced that the seasonally adjusted trade surplus stood at DKK 6.6 billion in November, up from DKK 3.3 billion surplus in the previous month.
 
Exports dropped 1.3% year-on-year to DKK 42.3 billion in November, while imports fell 16.9% to DKK 35.7 billion.
 
On a monthly basis, exports increased 5.4% and imports fell 3.2% in November.
 
Meanwhile, the trade trade surplus, excluding ships, etc..amounted to DKK 6.3 billion in November, down from DKK 6.6 billion surplus in the previous month. On a monthly basis, exports fell 0.7% and imports rose 0.1% in November. Year-on-year, exports and imports dropped by 7% and 19.9% respectively.
 
The same day it was announced that the consumer price index or CPI increased 1.4% year-on-year in December, faster than the 1.3% growth in the previous month.
 
On a monthly basis, the CPI dropped 0.2% in December, after a flat reading in the previous month.
 
Meanwhile, the harmonized index of consumer prices or HICP rose 1.2% on an annual basis in December, faster than the 0.9% growth in the preceding month. The HICP dropped 0.2% compared to the preceding month.
 
Statistics Denmark also said in a report that the current account surplus amounted to DKK 9.3 billion in November, up from DKK 5.2 billion surplus in the previous month. A year ago, the current account surplus was Eur 4.3 billion.
 
However, the current transfers showed a deficit of DKK 2.47 billion in November, widening from Eur 2.45 billion in the previous month. At the same time, the capital transfers increased to Eur 37 million from Eur 32 million in the preceding month.
 
NORWAY
 
The OBX in Oslo headed into the weekend on 345.30; 0.8% lower for the day.
 
Norwegian seismic company Electromagnetic Geoservices, or EMGS, said Friday it and Dutch engineering consultancy Fugro NV have started a joint three-dimensional electromagnetic (3D EM) multi-client project in the Norwegian Sea.
 
This is the first project under the strategic cooperation agreement for the marine EM market, which the companies entered last year.
 
EMGS chief executive Roar Bekker said the company finds the business prospects for the survey attractive in view to the upcoming licensing round in Norway this year.
 
Pre-funding and subsequent late sales, received by the end of the first quarter of 2010, when the project is due for completion, will be booked in the same period.
 
Norway's consumer price annual inflation in December rose to 2% from 1.5% in the previous month, a report released by the Statistics Norway showed Monday. The increase was mainly caused by the price development of energy. Driven by electricity charges, the consumer price index moved up 0.2% from November.
 
Excluding volatile items, core consumer prices climbed 0.2% on a monthly basis, taking the annual growth to 2.4% in December.
 
The statistical office said annual inflation in 2009 was 2.1% and the annual growth in the core CPI was 2.6%. Imputed rentals for owner-occupiers and prices on food contributed most to the increase in the index.
 
Monday, the Statistics Norway announced that the producer price index or PPI rose 10% year-on-year in December, faster than the 4.8% growth in the previous month.
 
Producer prices for extraction of oil and natural gas rose 14.8% on an annual basis in December, while manufacturing,mining and quarrying prices rose 7.6%. Electricity, gas and steam supply prices fell 20.7%.
 
On a monthly basis, the PPI dropped 0.4% in December, in contrast to a 3.6% increase in the preceding month.
 
From 2008 to 2009, the produces prices decreased 0.7%, the statistical office said.
 
Also Monday, the department announced that the harmonized index of consumer prices or HICP rose 2.4% year-on-year in December, faster than the 1.9% growth in the previous month.
 
On a monthly basis, the HICP increased 0.2% in December. This was mainly due to higher prices of electricity and airline fares, the statistical office said.
 
From 2008 to 2009, the HICP on average increased by 2.3%.
 
SWEDEN
 
Stockholm's bourse, the OMX, rounded out the trading session Friday on 970.65, off 1.11%.
 
Swedish Finance Minister Anders Borg said Thursday that the "provocative" level of bonuses being paid by Swedish banks will force the government to look into whether further measures are needed to restrict them.
 
Sweden's government backs bonus reforms decided upon last year by the Group of 20 leading nations, which involve the deferral of bonuses over several years, and "claw-back" structures that allow payments to be reduced if the long-term results of investments turn sour.
 
But Swedish banks set aside lofty sums for rewards in 2009, with bonuses at major Swedish banks Swedbank, Svenska Handelbanken and Nordea Bank estimated at around 4 billion Swedish Kronor, or nearly $600 million, in total.
 
"I think the bonus levels that we are now seeing is provocative. It is surprising that the banks have not listened to the very, very clear message from the government, but also from the public," Borg said in an interview with Dow Jones during a trip to London.
 
"The profits that they are now making are based on the fact that we made very, very extensive public support programs for the banking sector, so it's provocative that they don't take the responsible line on this issue and we will have to look into...whether we need to do further measures," he added.
 
Earlier Thursday, Borg met UK Chancellor of the Exchequer Alistair Darling. Borg declined to say whether the UK's budget deficit, which is due to reach 12.6% of gross domestic product this fiscal year, was on their agenda.
 
Strengthening of the Swedish Krona may slow the economy's growth and would keep inflation low, Riksbank Deputy Governor Karolina Ekholm said Tuesday. The central bank's current expansionary monetary policy is to attain the inflation target and to stabilize resource utilization, she added.
 
"There are good reasons, at least in the slightly longer term, to expect the krona to appreciate," she said in Stockholm. "At the same time, experiences show that the krona rate is sensitive to the unrest in the financial markets."
 
The conditions in the financial markets have normalized and the krona has strengthened this year. A continued normalization of the financial markets points to a continued strengthening of the krona. If the unrest increases again the krona may once again weaken in the short term. However, this possibility is not included in the Riksbank's main scenario, she added.
 
Moreover, she said the development of the exchange rate is very important to a small, open economy like Sweden's.
 
Tuesday, the Statistics Sweden announced that the consumer price index or CPI rose 0.9% year-on-year in December, compared to the 0.7% fall in the previous month. Economists expected an increase of 0.7%.
 
On a monthly basis, the CPI increased 0.2% in December, after a flat reading in the previous month. Economists were looking for an increase of 0.1%.
 
The annual inflation rate for CPIF and CPIX were 2.7% and 2.4%, respectively in December, and the CPIF and CPIX increased 0.2% each compared to the preceding month.
 
Meanwhile, the HICP increased 2.8% year-on-year in December and was up 0.2% on a monthly basis.
 
Swedish central government payments showed a deficit of SEK 117.5 billion in December, the Debt Office said on Tuesday. The deficit in December was smaller than the SEK 14.2 billion deficit estimated by the Debt Office.
 
The net lending and the repo transactions made by government agencies were SEK 18.2 billion and SEK 11.9 billion smaller than calculated. At the same time, tax payments were SEK 1.4 billion higher than estimated. And, disbursements from authorities were SEK 4.8 billion higher than forecast.
 
Interest payments on central government debt were SEK 9.2 billion, which was SEK 0.6 billion higher than calculated.
 
In 2009, central government payments resulted in a deficit of SEK 176 billion, while the central government debt amounted to SEK 1,189 billion.
 
FINLAND
 
In Helsinki the OMX finished the day and the trading week on 6,585.92, a dip of 0.5%.
 
Finnish real estate investor Sponda Oyj said Friday it has signed a loan extension agreement for Eur57.6m with Sampo Bank Plc, part of Danish Danske Bank.
 
The agreement, which will run for three years, extends the company's short-term project loan for the Elo shopping centre in Ylojarvi, western Finland.
 
The loan's margin corresponds to Friday's market rates and its terms and conditions remain unchanged, the company said.
 
The number of new motor vehicles registered in Finland decreased 4.8% year-on-year to 8,126 in December, Statistics Finland reported on Monday.
 
The number of new passenger cars registered was 4,124, which was 8.1% lower than the number of registrations in December 2008. Of the total, the share of new diesel-driven passenger cars was 55%.
 
In full-year 2009, a total of 172,466 new vehicles were registered, was was 30.1% lower than in 2008. During the same period, the number of passenger car registrations slumped 35.2%.
 
Tuesday it was Tuesday, the Statistics Finland announced that the building cost index dropped 1% year-on-year in December, compared to the 1.8% fall in the previous month. However, labor costs in construction rose 2.9%.
 
Prices of materials decreased 2% on an annual basis in December and prices for other inputs were down 5.5%.
 
On a monthly basis, total building costs remained unchanged in December, after falling 0.1% in November.
 
Thursday, the Statistics Finland announced that the consumer price index or CPI dropped 0.5% year-on-year in December, compared to the 0.9% fall in the previous month. Economists were looking for a decline of 0.6%. The average inflation rate remained unchanged in 2009.
 
On a monthly basis, the CPI increased 0.1% in December.
 
Meanwhile, the harmonized index of consumer prices or HICP rose 1.8% on an annual basis in December and was up 0.2% compared to the preceding month.
 
The same day they announced that the wages and salaries sum dropped 2% year-on-year in the September to November period, compared to the 6.7% growth seen in the same period of the previous year.
 
The growth in the wages and salaries sum slowed down or turned negative in all main industries in the September to November period, the statistical office said.
 
In November, wages and salaries sum dropped 2% on an annual basis, smaller than the 2.6% fall in the previous month.
 
As if all the news could not be negative, they said this week that the number of overnight stays by foreign tourist decreased 9% year-on-year to 280,000 in November. Meanwhile, the number of nights spent by resident tourists fell 6% to 850,000.
 
The total number of overnight stays decreased 7% on an annual basis to 1.1 million in November.
 
SPAIN
 
Madrid's Ibex closed out the session Friday at 11,845.00, down 1.29%.
 
Spanish consumer prices rose 0.8% year-on- year in December - the lowest end-of-year rate since comparable statistics began to be issued in 1962, the National Statistics Institute (INE) said Thursday.
 
However, prices rose faster than in November, when inflation stood at 0.3% after falling for eight consecutive months.
 
The rise was attributed mainly to increasing fuel prices.
 
There had been fears of a deflation in Spain, which is facing its worst recession in 60 years.
 
Spain's banking sector has begun its reporting season with retail bank Banesto posting a 28% drop in 2009 net profit, missing forecasts.
 
Spanish banks seemed to have dodged the worst of the crisis thanks to better regulation.
 
Although the government has been able to avoid bank bailouts so far, there is growing concern about the poor state of the Spanish economy.
 
Spanish consumer prices rose 0.8% in December on a year-on-year basis, following November's 0.3% growth, the National Statistics Institute said in a report on Thursday. The annual rate matched economists' expectations. Inflation turned positive in November after staying in negative territory for eight consecutive months. From November, consumer prices remained flat, in line with consensus forecast.
 
EU harmonized inflation stood at 0.9% in December. The statistical office thus confirmed the initial estimate released on January 5.
 
PORTUGAL
 
Portugal's PSI General Index finished the week on 2,923.47, a 1.96% decline for the Friday session.
 
The Portuguese economy should grow 0.7% this year and 1.4% in 2011, the Bank of Portugal has announced, basing its forecasts on "a gradual and moderate recovery of activity worldwide".
 
The central bank also maintained its forecast in the last bulletin on the economy in 2009, which estimated a 2.7% contraction.
 
The Winter Economic Bulletin released on Tuesday indicates that the recovery should be felt in private consumption (-0.9% in 2009 to 1.0% this year), internal demand (0.3% in 2010, -2.9% in 2009) and inflation, which should return to positive ground, increasing by around 0.7% (versus -0.9% estimated for 2009).
 
The Bank of Portugal emphasises that these projections should only be viewed in light of the international crisis, also because the Portuguese economy has been showing signs of "a number of structural weaknesses, which have limited its growth potential during the last decade."
 
Exports and imports should also be back on positive ground, respectively growing by 1.7% (versus -12.5% estimated for 2009) and 0.3% (versus -10.8%). (macauhub)
 
Camargo Correa SA's bid to buy a minority stake in Cimpor-Cimentos de Portugal SGPS SA is "more politically acceptable" than a competing offer from Companhia Siderurgica Nacional SA, Banco BPI SA analysts said.
 
Camargo Correa's proposal to join forces with the Iberian Peninsula's biggest cement company "allegedly guarantees the maintenance of control in Portugal," BPI analysts including Bruno Silva said in a note to clients Friday. The actual degree of Portuguese control depends on the arrangements for board representation, they wrote.
 
The Brazilian company Thursday said it plans to buy an initial stake of 15% to 25% in Lisbon-based Cimpor. It would then merge its cement business into Cimpor to get a stake that would be less than 50%.
 
Wednesday, the Statistics Portugal announced that the consumer price index or CPI dropped 0.1% year-on-year in December, compared to the 0.6% fall in the previous month. A year ago, the CPI was up 0.8%.
 
On a monthly basis, the CPI was up 0.1% in December, slower than the 0.2% growth in the previous month.
 
Meanwhile, the harmonized index of consumer prices or HICP decreased 0.1% on an annual basis and was up 0.2% compared to the preceding month. In 2009, the HICP declined 0.9%, compared to a 2.5% growth in 2008.
 
ITALY
 
Italy's benchmark FTSE MIB Index fell 333.88, or 1.4%, to 23,472.11 in Milan. The gauge fell for the first week in five, shedding 1.4%.
 
Azimut Holding rose 22.5 cents, or 2.4%, to 9.45 Euros, the biggest gain in almost two weeks, after Italy's largest independent fund manager was upgraded to "outperform" from "neutral" at Intermonte Sim SpA.
 
Bulgari increased 10 cents, or 1.6%, to 6.26 Euros, extending gains of 3.5%. "With a low level of starting margins and profits, and with the aggressive cost cutting and rationalization implemented over 2009, Bulgari is in a position to show a magnified earnings rebound in the next couple of years even in a scenario of only modest top line recovery," Deutsche Bank AG wrote in a note. The brokerage has a "hold" rating on the world's third-largest jeweler.
 
Indesit surged 44 cents, or 5.2%, to 8.88 Euros, the highest in almost one year. Results at "DSG International Plc, the UK's largest consumer-electronics retailer and Indesit's top client in the UK, give rise to hope of a healthy quarter," Equita Sim SpA said in a note. The brokerage has a "buy" rating on the Italian maker of Hotpoint cookers and refrigerators.
 
Italcementi, Italy's largest cement maker, lost 25.5 cents, or 2.5%, to 9.98 Euros, ending a two-day gain. HeidelbergCement AG, the world's third-biggest cement maker, fell in Frankfurt trading after being downgraded to "hold" from "buy" at ING Groep NV.

 
Parmalat fell for a fourth day this week, declining 3.3 cents, or 1.8%, to 1.83 Euros. The dairy company was cut to "reduce" from "neutral" at Nomura Holdings Inc. The brokerage said in a note that it is "too soon for an acquisition and break up" and expects "input cost pressures and a slowdown in Venezuela to weigh on headline numbers."
 
Italy's seasonally adjusted jobless rate rose to 8.3% in November from 8.2% in October, a report by Istat showed on Friday. This was the highest level since March 2004. The Jobless rate figure for October was revised from 8% reported initially.
 
The jobless rate for males totaled 7.4% in November, while jobless rate for females stood at 9.7%.
 
GREECE
 
The Athens Composite drew the week to a close on 2,144.56, down 2.32% for the day Friday.
 
Thursday, the General Secretariat of the National Statistical Service of Greece announced that the jobless rate stood at 9.8% in October, up from 9.1% recorded in the previous month. A year ago, the jobless rate was 7.4%.
 
The number of unemployed totaled 491,139 persons in October, larger than the 367,204 persons a year earlier. The number of employed amounted to 4,505,100 persons.
 
European Central Bank President Jean-Claude Trichet intensified pressure on Greece to cut the continent's biggest budget deficit with a warning that the country won't get any favors from policy makers.
 
As Prime Minister George Papandreou struggles to convince investors and European Union governments he can regain control of the country's budget, Trichet Thursday said no nation can expect any "special treatment."
 
Greek bonds extended declines Thursday after Trichet's comments, which came after the ECB left its benchmark interest rate at a record low of 1%. While Greece was his main target, Trichet told other Euro members to take the "difficult decisions" needed to tackle "sharply rising" budget gaps or face higher borrowing costs that hurt economic growth.
 
The Greek remarks eclipsed those made on monetary policy as officials turn their attention from the financial crisis to the nations most hurt by the recession. German Chancellor Angela Merkel said Thursday that Greece's fiscal woes could hurt the Euro and Luxembourg Prime Minister Jean-Claude Juncker said International Monetary Fund aid wouldn't be "appropriate."
 
The incoming European Union economic and monetary affairs commissioner Olli Rehn has refuted suggestions that Greece could be kicked out of the Eurozone if it fails to bring its fiscal imbalances in order.
 
Speaking in a confirmation hearing at the European parliament on Monday, Rehn insisted that "the Greek government is aware of the seriousness of the situation because the European commission is assessing the matter with major concern," and dismissed suggestions that Greece could quit or be thrown out of the Eurozone.
 
He called on Athens to come up with a "convincing" spending program "which will have to include concrete tangible measures" to cut spending and raise government revenues.
 
Greece has come under intense pressure from the EU to bring its public finances in order and comply with deficit limits, in order to preserve the stability and functioning of the Eurozone and the shared Euro currency.
 
Last week, Greek Prime Minister George Papaconstantinou pledged to bring the government's fiscal deficit, estimated at 12.7% of gross domestic product, within the EU's 3% limit by the end of 2012, a year earlier than previously planned.
 
Last month, the country's credit rating was downgraded by three international ratings agencies despite the unveiling of various austerity measures by the government.
 
It seems to me that Greece's take on the seriousness of all this and the ECB and EU's own views are chasms apart! 
The UK Market 
Did it follow the Global trend .....
 Marks & Spencer and Next hit two-month lows on Friday as the FTSE 100 showed its sharpest fall of the year so far.UK Markets
 
The retailers have been under pressure after trading updates this week suggested that, while Christmas was strong, 2010 is likely to be a struggle.
 
That message was echoed by Citigroup, which moved to an "underweight" sector stance. "The reversal of the VAT stimulus, a possible further increase to 20% coupled with election uncertainty drives downside risk for 2010," it said.
 
A rising tax burden will squeeze household cashflow - a lead indicator for consumer demand - to show zero growth by the second half, analyst Richard Edwards said. That compares to 7% growth for the latter part of 2009.
 
The broker turned negative on UK-focused retailers such as M&S, down 1.9% at 149½p, and Next, off 2.3% to £19.61.
 
Home Retail Group, down 1.8% to 261p, and Debenhams, lower by 4.9% to 67¾p, also came off Citigroup's "buy" list.
 
The FTSE ended the day down 0.8% at 5,455.37. Banks were the biggest drag after disappointing results from JPMorgan Chase and amid concern about the proposed US tax on financial firms.
 
Barclays, off 2.3% to 311¼p, could face an annual bill of £594m under Barack Obama's proposal, according to Evolution analysts. HSBC, down 1.7% to 702½p, may be liable for $484m, they said.
 
But Royal Bank of Scotland beat the trend, helped by a bullish sector review from Deutsche Bank.
 
Alhough UK banks offer no growth and have funding and regulatory requirement risks, they still offer cheap exposure to an economic recovery, analyst Jason Napier. "On a base case of a very slow move back to normalisation of bank funding, higher interest rates and narrowing UK budget deficits, all three domestic banks offer significant upside."
 
RBS was up 2.1% to 36¾p, but Lloyds Banking Group was 1.3% weaker at 56¾p.
 
International Power led the blue-chip risers, up 4.1% to 322p, on talk that GDF-Suez was pushing on with a potential bid.
 
The French government, GDF's biggest shareholder, has received the takeover proposal and will take the final decision on whether to give the go-ahead, Mergermarket reported.
 
If approved, an approach could come within a couple of weeks although the French regional elections due in March might delay the move, it said.
 
Intertek gained 1.7% to £12.35 after results from SGS, its Swiss peer, showed margins holding up better than expected. SGS also gave a positive, albeit unspecific, view on 2010 sales and earnings growth.
 
In a weak oil sector, Cairn Energy lost 1.3% at 359p after seven directors cashed in share options for a total of £9.6m.
 
Daily Mail & General Trust was the top riser in the mid-caps, up 5.4% to 475p on upgrades from Credit Suisse and UBS.
 
Advertising growth may surprise as corporate spending bounces back in 2010, while new UK newsprint supply should cut costs, Credit Suisse said. It also expected the Daily Mail to follow rivals and lift its cover price.
 
UBS was also optimistic about a turn in the advertising market, leading it to switch to "buy" ratings on ITV (up 2.8% to 58p) and Yell (up 3.5% to 38p),
 
QinetiQ dropped 12% to 143¼p after the defence group's second profit alert in three months.
 
PV Crystalox Solar was down 5.6% to 64½p following a report that Germany will next week cut solar industry subsidies earlier than expected, and by more than expected.
 
Misys rallied 4.4% to 219p amid hopes it will sell its majority stake in Nasdaq-listed Allscripts. Morgan Stanley upgraded Misys to "overweight", saying there were "plenty of strategic options to crystallise shareholder value."
Asia Pacific Regional Markets 
Did they set the tone or follow the lead .....
Asiapac IndicesJAPAN

Tokyo stocks posted modest gains Friday as chip shares attracted buying on Intel Corp.'s robust earnings, while Shiseido rose on acquisition hopes after it said it will buy a US cosmetics company.
 
Shiseido is set to acquire Bare Escentuals Inc. for $1.7 billion in a deal that would mark the largest acquisition in its history. Its shares rose 5.0% to Y2,040 on brisk volume.
 
The Nikkei 225 Stock Average rose 74.42 points, or 0.7%, to 10,982.10, closing at its intraday high and highest closing level since October 2, 2008. The Topix index of all the Tokyo Stock Exchange First Section issues rose 7.39 points, or 0.8%, to 966.40, with 19 of 33 subindexes closing in positive territory.
 
Trading volume topped 3 billion shares for the third straight session.
 
Market analysts say that investors await the outcome of upcoming US financial institutions' fourth-quarter earnings, which include those of JPMorgan Chase & Co.
 
The Nikkei may trade between 10,600-11,000 next week, he said.
 
The value of foreign net stock buying totaled Y656.6 billion last week, rising for the seventh straight week, and its highest in four years and five months, according to TSE data.
 
Technology stocks were boosted by better-than-expected fourth-quarter earnings from Intel. Advantest gained 2.6% to Y2,555 and Tokyo Electron added 2.2% to Y6,040. Intel's profit surged nearly 10-fold from the depressed year-earlier period, as revenue jumped 28%.
 
Banks staged a rally, with Sumitomo Mitsui Financial Group rising 5.2% to Y3,050 and Mitsubishi UFJ Financial Group gaining 3.5% to Y506 on short-covering on the view that most negatives are already priced in after major equity financing moves in the sector have taken place.
 
On the other hand, steel shares weakened on concerns about the Chinese central bank's earlier-than-expected credit-tightening move this week, which has triggered some speculation about lower demand for steel products. Nippon Steel lost 1.6% to Y376 and JFE Holdings dropped 3.4% to Y3,450. JFE is down 8.5% over the past three sessions.
 
Japan Airlines, which set the TSE single stock trading volume record Thursday as over 1 billion shares changed hands, lost Y1 to Y7 Friday as about 550 million shares were traded.
 
March Nikkei 225 futures ended up 80 points, or 0.7%, at 10,970 on the Osaka Securities Exchange.
 
For the holiday-shortened week the Nikkei added 1.7%. Stocks are up 4.1% year-to-date.
 
SOUTH KOREA
 
Seoul shares rose on Friday led by techs including Samsung Electronics, which hit a fresh historical high, and shipbuilders such as Daewoo Shipbuilding.
 
The Korea Composite Stock Price Index (KOSPI) finished up 0.95% at 1,701.80 points.
 
Shares in Samsung Electronics, the world's No.1 memory chip maker, finished up 1.81% to 842,000 won after hitting a fresh historical high of 843,000 won.
 
Shares in Hynix Semiconductor, the world's No.2 memory chip maker, advanced 2.55% to 26,100 won, helped further by solid gains in the key US semiconductor index .SOXX.
 
Shipbuilders rallied amid hopes the battered industry is headed for a turnaround.
 
Shares in Hyundai Heavy Industries jumped 6.73% and Samsung Heavy Industries advanced 4.04%.
 
Daewoo Shipbuilding spiked 14.99%, lifted further by comments from POSCO on Thursday following its earnings announcement.
 
POSCO said its top priority was to buy a 68% stake in Daewoo International, followed by majority stakes in Daewoo Shipbuilding and Daewoo Engineering & Construction.
 
HONG KONG
 
Hong Kong shares ended lower Friday, reversing early gains, as upstream oil companies fell on weak crude oil prices.
 
The blue-chip Hang Seng Index fell 62.79 points, or 0.29%, to 21,654.16 after trading between 21,581.07 and 21,788.85 during the session. The benchmark index is down 2.9% this week.
 
Market volume totaled HK$84.28 billion, up slightly from HK$84.20 billion Thursday.
 
Analysts said they expect the benchmark index to be volatile in coming sessions as there is a lack of fresh leads to drive the local market.
 
Upstream oil companies led the blue-chip fall. Cnooc fell 1.1% to HK$12.28 and PetroChina was down 1.1% at HK$9.52.
 
Bank of China rose on bargain hunting, despite the concerns over monetary tightening and the need for China's banks to raise funds. The lender gained 1.0% to HK$3.66 after falling 9.0% in the last six sessions.
 
Contract handset maker Foxconn International bucked the market downtrend, rising 6.4% to HK$11.02 because of expectations of a recovery in the handset market this year.
 
CHINA
 
Chinese shares rose again Friday as liquidity jitters eased, ending the week up by 0.9%, led by real estate developers.
 
The benchmark Shanghai Composite Index edged up 8.6 points, or 0.3%, to close at 3,224.15. The Shenzhen Composite Index for China's smaller second exchange added 0.2% to 1,226.72.
 
Investor confidence rebounded as fears prompted by a surprise increase in bank reserve requirements this week in an effort to control lending faded, analysts said.
 
Poly Real Estate Group, the country's No. 2 developer, jumped 1.9% to 20.98 Yuan, while rival China Vanke Ltd. added 1.1% to 10.14 Yuan.
 
Lenders finished mixed after the banking regulator urged banks this week to ensure adequate capital levels following a record surge in lending in 2009.
 
Industrial & Commercial Bank of China Ltd., China's biggest commercial lender, and China Construction Bank Ltd. both shed 0.2% - ICBC to 5.08 Yuan, and CCB to 5.88 Yuan. Midsize lender Pudong Development Bank Ltd. gained 2.2% to 21.43 Yuan.
 
China Life Insurance Co., the country's biggest life insurer, climbed by 0.9% to 29.53 Yuan, while Ping An Insurance Co., rose 0.2% to 51.08 Yuan.
 
TAIWAN
 
The main TAIEX share index rose 66.91 points to 8,356.89, its highest finish since 10 June 2008.
 
Net pioneer Asustek advanced 3.08%, with the electronics sub-index 1.13% higher.
 
Among Taiwan's technology plays, Chi Mei Optoelectronics added 2.5% and Innolux Display gained 5% after the Commercial Times reported, citing unnamed foreign institutional investors, that Chi Mei, Innolux and TPO Displays will have annual revenue of 600 billion New Taiwan Dollars ($18.9 billion) after their merger, overtaking AU Optronics as the island's largest flat-panel maker.
 
The merger is scheduled to be completed March 1.
 
THE PHILIPPINES
 
The local stock market dipped slightly on Friday as news on weak US retail sales data tempered investors' risk appetite.
 
The Philippine Stock Exchange composite index shed 3.44 points or 0.11% to close at 3,118.47.
 
The decline was led by the cyclical financial and property sectors which offset the modest gains posted by the industrial, holding firms and mining/oil counters.
 
Despite the overall decline, there were 51 advancers as against 50 decliners and 66 unchanged stocks.
 
Value turnover was P3.9 billion.
 
The two most actively traded stocks closed unchanged, namely geothermal power crown jewel Energy Development Corp. and tycoon Henry Sy's holding firm SM Investments Corp.
 
Investors bought up shares of Alliance Global Group Inc., Philippine Long Distance Telephone Co. and First Philippine Holdings Corp. but dumped stocks of Ayala Land Inc., Pepsi-Cola Products Philippines Inc. and Metropolitan Bank and Trust Co.
 
INDONESIA
 
Share prices on the Indonesia Stock Exchange closed higher on Friday as investors were encouraged by the positive influence of the world markets.
 
The composite index increased 1.909 points, or 0.07%, to close at 2,644 with 6.7 billion shares worth 3.3 trillion rupiah ( some 360 million US Dollars) changing hands.
 
THAILAND
 
The Stock Exchange of Thailand (SET) composite index moved down 2.90 points, or 0.39% to close at 746.52 points on Friday.
 
Some 2.91 billion shares worth 19.10 billion baht (about 578.78 million US Dollars) changed hands.
 
Shares in big banks fell after recent strong gains ahead of results next week.
 
Bangkok Bank was down 1.1%, Siam Commercial Bank dropped 2% and Kasikornbank lost 1.4%.
 
Tisco Financial Group, which owns the country's second-largest car loan lender, Tisco Bank, said on Friday that higher lending and cost cuts would push 2010 earnings above last year's 1.99 billion baht ($61 million).
 
The financial holding firm also reiterated its strategy of expanding market share by acquisitions, with Chief Executive Officer Pliu Mangkornkanok saying it was looking to buy more car loan assets this year.
 
"We are still interested in buying more assets if there is an opportunity. But the chances are lower than last year as the economy is picking up," Pliu told reporters.
 
"For this year's net profit, it should edge up from last year due to an increase in lending. And we expect to keep our interest rate spreads at a high level and will control costs further," Pliu said.
 
Last year, Tisco bought a car hire-purchase loan portfolio worth 1.75 billion baht from GMAC (Thailand) after it bought Primus Leasing, which operates hire purchase for Ford, Mazda and Volvo and has assets of 8.5 billion baht.
 
A recovery in domestic car sales should ensure the bank sees loan growth of 10% this year, the CEO said. Last year, it achieved 14% if acquisitions were included.
 
President Oranuch Apisaksirikul also told reporters net interest margins were likely to be similar to last year's 4.60%.
 
Earlier this week, the financial holding firm reported a 16% rise in 2009 net profit to nearly 2.0 billion baht, in line with analysts' forecasts.
 
Fourteen analysts polled by earnings tracker Thomson Reuters I/B/E/S forecast a net profit of 2.24 billion baht for 2010.
 
Tisco Bank had assets of 139 billion baht and loans of 112 billion baht as of December. The group also has brokerage and asset management businesses.
 
SINGAPORE
 
Singapore share prices closed flat on Friday amid fresh doubts about the strength of the US economic recovery following disappointing retail sales figures.
 
The key blue-chip Straits Times Index edged down 1.10 points to 2,908.42. Overall volume was 1.68 billion shares worth S$1.42b. There were 170 gainers and 322 losers.
 
Overnight, disappointing US retail sales and weekly jobless claims data proved a drag on Wall Street, with major indexes ending Thursday only marginally higher.
 
The Commerce Department said retail sales fell 0.3% last month, the first decline since September, as consumers spent less during the holiday shopping month. The report stunned analysts expecting a gain of 0.5% in sales, the key driver of US economic activity.
 
A separate report from the Labor Department showed initial claims for state unemployment benefits rose 11,000 to 444,000 last week.
 
Singapore Telecommunications Ltd (SingTel) has declined to comment on persistent rumours it plans a near $4 billion float of its Optus unit on the Australian stock exchange (ASX).
 
Media reports suggest SingTel will sell 25% of Optus, Telstra's main competitor, to fund acquisitions and expansion in markets outside Australia and Singapore.
 
"Singapore Telecommunications does not comment on speculation," a SingTel spokeswoman told AAP on Friday.
 
SingTel's ASX shares inched one cent higher to $2.36.
 
MALAYSIA
 
Share prices on Bursa Malaysia closed mixed Friday as retail investors took profits from gains made during the week, dealers said.
 
At 5.30pm, the benchmark FTSE Bursa Malaysia Kuala Lumpur Composite Index (FBM KLCI) rose 3.87 points or 0.3% to 1,298.58.
 
Dealers said market sentiment remained firm as investors were very optimistic about Intel's earnings despite weaker data on US retail sales and employment.
 
Intel's fourth-quarter report pushed Wall Street to end higher overnight with the Dow Jones rising 0.28% to 10,710.55, the Standard & Poor's 500 Index adding 0.24% to 1,148.46 and Nasdaq gaining 0.38% to 2,316.74.
 
The world's largest microchip maker's fourth-quarter revenue rose 28% to US$10.6 billion Dollars, better than the US$10.2 billion expected by analysts.
 
Locally, active trading moved the benchmark index from 1,295.72 to touch 1,300.89, a fresh 24-month high in early session.
 
However, there was retail selling pressure on counters involving glove makers and steel in afternoon session, dealers explained.
 
Bursa Malaysia's Finance Index meanwhile, rose 33.27 points to 11,330.05, the Industrial Index fell 1.35 points to 2,716.73 and the Plantation Index increased 5.57 points to 6,515.04.
 
The FBM Emas Index gained 9.659 points to 8,771.56, the FBM Top 100 Index increased 18.79 points to 8,512.76, the FBM Ace Index dropped 33.05 points to 4,588.94 and the FBM70 Index slid 7.029 points to 8,612.86.
 
The market breadth was negative with 467 losers against 326 gainers while 255 counters were unchanged and 257 others untraded.
 
Volume declined to 1.677 billion shares valued at RM1.919 billion, compared to the 1.755 billion shares worth RM2.063 billion on Thursday.
 
Among active stocks, Pentamaster rose 12 sen to 53.5 sen, Dataprep increased 2.5 sen to 40 sen, Hubline gained one sen to 23 sen, SAAG Consolidated fell half a sen to 17 sen and Ariantec declined 3.5 sen to 10 sen.
 
Top gainers KPJ Healthcare-Wa rose 76 sen to RM1.66, Malaysian Pacific added 49 sen to RM7.50, Hai-O increased 32 sen to RM8.62 and Delloyd went up 22 sen to RM2.80.
 
Of the heavyweights, Sime Darby lost two sen to RM8.98, while Maybank, CIMB and Maxis increased two sen each to RM6.91, RM13.44 and RM5.37 respectively.
 
Turnover on the Main Market fell to 1.467 billion shares worth RM1.876 billion from 1.546 billion shares valued at RM2.005 billion Thursday.
 
The ACE Market volume rose to 158.121 million units valued at RM29.701 million from the 130.991 million units worth RM29.117 million previously.
 
Warrants rose to 35.927 million units worth RM6.172 million from 33.125 million units valued at RM5.755 million Thursday.
 
Consumer products accounted for 59.047 million shares traded on the Main Market, industrial products 352.285 million, construction 97.245 million, trade and services 425.567 million, technology 228.558 million, infrastructure 11.426 million, finance 73.239 million, hotels 1.884 million, properties 193.604 million, plantations 21.095 million, mining 110,000, REITs 2.675 million and closed/fund 60,900.
 
INDIA
 
Indian shares finished slightly lower after trading range-bound for another session Friday, even as most markets in Asia closed with gains.
 
The Bombay Stock Exchange's 30-stock Sensitive Index shed 0.2% to close at 17,554.30 after trading between 17,529.11 and 17,639.85 during the session.
 
Major Asian markets ended mostly higher, with chip makers leading the advance after a solid earnings report from Intel Corp., while Chinese property stocks found buyers after a string of recent declines.
 
The Sensex ended flat, up 0.08%, for this week, after gaining a marginal 0.4% last week. But market participants widely expect trade on the Sensex to stay range-bound until the Reserve Bank of India's quarterly monetary policy review 29 January.
 
On the National Stock Exchange, the 50-stock S&P CNX Nifty slipped 7.70 points, or 0.2%, to close at 5,252.20.
 
Total traded volume on the BSE slipped to 61.23 billion rupees ($1.34 billion) from Thursday's 62.03 billion rupees. Losers outnumbered gainers 1,508 to 1,420, while 66 stocks remained unchanged.
 
Metal stocks dropped as base metal prices were mostly slightly lower on the London Metal Exchange. Aluminum producer Hindalco Industries dropped 2.6% to 166.60 rupees to be the biggest%age loser on the index, while Tata Steel slid 0.3% to 645.25 rupees.
 
Investors booked profits in stocks that rose sharply in the previous session.
 
Heavyweight Reliance Industries--the country's largest private sector refiner by capacity--which climbed 3.0% Thursday, closed down 1.0% at 1,109.20 rupees, while software services exporter Wipro, which jumped 3.6% in the last session, shed 0.9% at 734.70 rupees.
 
Oil & Natural Gas Corp., India's largest oil explorer and producer, also ended down 1.4% at 1,213.20 rupees, reversing part of its 2.9% gain in the previous session.
 
Sun Pharmaceutical Industries, down 2.0% at 1,525.50 rupees, utility vehicles maker Mahindra & Mahindra, down 1.3% at 1,155.25 rupees and engineering giant Larsen & Toubro, down 1.0% at 1,651.20 rupees, were among the other losers.
 
However, Reliance Communications rallied 4.8% to 191.50 rupees, rising sharply for a second straight session after television reports had Thursday said, citing sources, that the company's telecom tower unit, Reliance Infratel, had received regulatory approval for its 156 million share initial public offering.
 
Cement maker ACC gained 3.0% to 980.60 rupees after Morgan Stanley upgraded the stock to Overweight from Equal-weight with a new price target of 1,110 rupees. "We have been positive on the India cement industry, relative to consensus. We are now turning more bullish," the brokerage house said in a research report.
 
HDFC Bank, the second-largest private lender by assets, ended up 0.3% at 1,691 rupees after it beat market estimates with a nearly 32% jump in fiscal third-quarter net profit at 8.19 billion rupees.
 
Tata Motors rose 1.8% to close at 796.70 rupees after the company said it had sold 74,707 vehicles globally in December--84% higher than the year earlier period.
 
Tata Consultancy Services, India's largest software services exporter by revenue, climbed 1.2% to 791.80 rupees ahead of its third-quarter results due later in the day.
 
AUSTRALIA
 
COMMONWEALTH Bank's profit upgrade late Friday drove an abrupt turn at the bourse, which entered positive ground just before the close.
 
The market had been trading lower throughout Friday's session until 1558 AEDT, when Commonwealth Bank of Australia suggested its first-half cash profit would rise about 44% from a year earlier after solid income growth.
 
Commonwealth Bank's shares were listed as closing down by 40 cents (0.7%) to $56.39 at 1610 AEDT, but finished higher by $1.31 (2.31%) higher at $58.10.
 
Its major rivals all lost ground during the trading session, but also closed higher after CBA's announcement washed over the sector.
 
Westpac closed 12c higher at $25.50, ANZ firmed 3c to $22.43 and National Australia Bank jumped 25c (0.92%) to $27.30.
 
Major resources companies remained in the red at the close.
 
BHP Billiton lost 13c to $43.65, while rival Rio Tinto fell 53c to $78.62.
 
In market news Friday, Macarthur Coal upgraded its first-half earnings guidance, following better than expected sales, but warned that it expected delays with its Middlemount project in central Queensland. Macarthur stock dropped 16c (1.39%) to $11.38.
 
Major gold stocks also fell as the spot price of gold in Sydney fell to $US1138.3 at 1639 AEDT, down $US3.65 on Thursday's close.
 
Lihir Gold gave up 5c (1.5%) to $3.29, Newcrest Mining fell 31c to $36.17 and Newmont Mining eased 9c (1.71%) to $5.18.
 
Major retailers were mixed, with Woolworths down 19c at $27.94, Coles-owner Wesfarmers firming 3c to $31.05 and department store David Jones closing steady at $5.14, as did Myer, at $3.62.
 
NEW ZEALAND
 
The New Zealand sharemarket eased Friday mostly due to profit-taking in leading shares.
 
The downward move gained momentum as the session progressed and also reflected weakness in the Australian sharemarket.
 
The benchmark NZSX-50 index closed down 20.381 points, or 0.622%, at 3257.952, having opened down around 0.72 points. Turnover was worth $70.3 million. There were 36 rises and 49 falls among the 112 stocks traded.
 
Contact Energy fell 14c to 618 and Fletcher Building fell 13c to 831 and both have a sizeable impact on the index.
 
There was little corporate news relating to listed companies to trade off Friday and the profit reporting season in February is awaited. Strategic Finance Friday flagged an interim loss due to increased provisions.
 
NZOG was unchanged at 162 after saying the first shipment of light crude will leave Port Taranaki next week.
 
Shares in the New Zealand Refining Co closed up 3c at 376 and traded as high as 387 as they continued to recover from a 4-1/2-year low touched earlier this month.
 
Telecom gained 1c to 251.
 
The dual-listed banks reflected the weak Australian market with ANZ down 67c at 2772 and Westpac down 49c at 3146.
 
Australian-listed Spotless Group confirmed it will start trading on the New Zealand market on Monday after taking over Taylors Group but brokers do not expect there to be very much liquidity in the stock in this market.
 
Cavalier fell 15c to 270 and SkyCity fell 2c to 332.
 
Port of Tauranga fell 4c to 710 and APN fell 3c to 295 on light volume.
 
Methven rose 10c to 179, Tourism Holdings rose 2c to 100, Pike River Coal rose 3c to 102 and Hellaby rose 3c to 168.
 
Fisher and Paykel Appliances was unchanged at 63 and the Healthcare stock rose 4c to 338.
 
Air NZ rose 1c to 118, after US-based airline industry magazine Air Transport World named the company as its airline of the year.  
Global Commodities 
'Food for thought' or 'a Grain of truth' .....
 CommoditiesOil retreated below $80 a barrel this week after a recent spate of cold weather failed to boost demand.
 
The International Energy Agency, the western countries' oil watchdog, on Friday left its consumption forecast largely unchanged, surprising some traders who had expected an upward revision with falling temperatures in the northern hemisphere.
 
In its monthly oil market report, the Paris-based agency explained that the role of crude oil in heating had declined in favour of cleaner sources of energy, including natural gas.
 
The IEA instead cut its forecast for 2010 global consumption by just 20,000 barrels a day to 1.4m b/d.
 
It reiterated that oil consumption dropped for a second year, falling 1.3m b/d. The last time demand fell for two consecutive years was 1983 and 1984.
 
On the supply side, the IEA said the Opec oil cartel's members that are subject to production limits increased their output last month by 75,000 b/d to 26.6m b/d. Iraq is excluded from Opec's output quotas.
 
The cartel is pumping at its highest rate in a year, with compliance with the group's self-imposed limits slipping to 58%, down from 60% in November. Opec will review its production policy in Vienna in mid-March.
 
US crude fell on the IEA report, extending a three-day decline spurred by the US Department of Energy reporting a larger-than-expected rise in inventories.
 
Nymex February West Texas Intermediate fell 5.3% over the week to $78.94 a barrel after hitting a high of $83.95 on Monday.
 
Copper prices declined as rising inventories pushed the metal down from a 1½-year high. LME copper for delivery in three months' time fell 1% over the week to $7,423 a tonne. Aluminium declined 0.1% to $2,312 a tonne.
 
Among agricultural and soft commodities, cocoa held on to its 32-year high in London after fourth-quarter figures showed a rise in European consumption. The benchmark London Liffe May cocoa price added 1.4% over the week to £2,306 a tonne.
 
Gold closed the week at $1,131 - flat at the end of the week after a pretty choppy few days. 
Global Currencies 
In for a Penny, in for a Pound .....
UK Markets
 The South African Rand posted its biggest weekly drop in five as investors bet it will fail to extend last year's 28% rally in 2010 as the unit's strength erodes the competitiveness of South African exports.
 
The currency lost as much as 0.5% to 7.4402 per Dollar and traded 0.1% weaker at 7.4138 by 4 p.m. in Johannesburg, from 7.4047 late Thursday. The move took the Rand's slide this week to 0.8%, the steepest decline since the five days ended 11 December.
 
The Yen advanced this week as a move by China to tighten monetary policy sparked fears over the prospects for global growth and stoked haven demand for the Japanese currency.
 
Commodity-linked currencies such as the Australian Dollar fell sharply against the low-yielding Yen after the People's Bank of China raised its reserve requirement ratio for commercial banks on Tuesday.
 
Although many analysts believed the move reflected concerns over the rapid expansion in Chinese bank credit in the first few weeks of 2010, fears that it might herald quicker and more aggressive monetary tightening hit currencies of countries, such as Australia, that supply China's voracious demand for raw materials.
 
Renewed buying interest in the Yen comes from fears that China may be about to tighten monetary policy further, which could rein in prospects for world growth.
 
Over the week, the Yen rose 2.1% to Y83.85 against the Australian Dollar, climbed 1.7% to Y88.34 against the Canadian Dollar and gained 1.8% to Y66.93 against the New Zealand Dollar.
 
The Yen also advanced against the Dollar and the Euro as fears over global growth damped expectations that the European Central Bank of the Federal Reserve would move to raise interest rates.
 
Analysts said the resultant fall in the yield differential between Japanese government bonds and those in the US and the Eurozone boosted the Yen.
 
Jean-Claude Trichet, president of the European Central Bank, indicated that a rate rise was not close to being on the agenda after the central bank left interest rates on hold at 1% after its policy meeting.
 
Mr Trichet said that, with the Eurozone facing a "bumpy road" and a "great level of uncertainty", the current low level of interest rates was appropriate.
 
A surprise drop in US retail sales in December tempered expectations that the Federal Reserve would look to depart from its ultra-loose monetary policy stance soon.
 
Over the week, the Yen rose 1.9% to Y90.86 against the Dollar and climbed 2.2% to Y130.54 against the Euro.
 
The Yen also rose 0.4% to Y147.88 against the Pound on the week.
 
But Sterling advanced elsewhere, rising 1.5% to $1.6275 against the Dollar and 1.9% to £0.8823 against the Euro on the week on hawkish comments from Andrew Sentance, a Bank of England policymaker, and a rise in UK industrial production in November.
 
Concerns over fiscal problems in Greece undermined the Euro against the Dollar, sending it down 0.4% to $1.4363 on the week.
 
The single currency and the price of Greek government bonds relative to their German counterparts fell after Mr Trichet gave his clearest warning yet that the central bank would not be giving any "special treatment" to countries that find themselves in difficulty.  

Finally in currencies, for the Dollar versus the RMB; the latter closed at CNY 6.8273 in the over-the-counter market. 
China 
Key news eminating from China this week .....
 China MarketsA hard economic landing for China, fiscal crises in developed countries and broad asset-price collapses are the biggest risks to global stability this year and beyond, according to the World Economic Forum, which meets in Davos this month.
 
China is one of the biggest concerns in this year's Global Risk report, partly because of the way it has responded to the global financial crisis and partly because it is one of the only risks yet to be realised from those consistently identified in the report's five-year history.
 
The report has been successful in identifying the big risks in the past few years, having flagged up in 2006-2008 asset-price overvaluations, consumer over-indebtedness, oil and food price jumps and the destabilising effects of the US current account deficit.
 
However, its impact is somewhat muted by the fact that it pointedly has never attempted to forecast how or when these risks would materialise.
 
This year's report says the chances of a serious economic slowdown in China are above 20% and would lead to economic losses of between $250bn and $1,000bn. The repercussions would be greater than this because of the country's central role in areas such as funding developed country deficits and consuming the majority of exports from its south-east Asian neighbours.
 
The authors of the report said that while China appeared to have navigated the global financial crisis well, it had relied on especially high credit growth to do this, which risked mimicking the asset price bubbles and unbalanced growth of the west before the crisis.
 
Commercial lending by Chinese banks grew more than 45% between July 2008 and July 2009, according to data from Swiss Re.
 
China is on a very unbalanced path of economic growth. This helped to explain why asset price collapses were still high on the agenda, in spite of the pain that the US and western Europe have been through in the past two years.
 
The likelihood of another collapse is also above 20%, according to the report, and would cause global economic losses of more than $1,000bn.
 
Another significant risk that was gaining importance as countries' fiscal positions worsened was the need to address chronic under-investment in infrastructure.
 
This is not just about the risk to airports or other existing structures in the developed world, but is particularly acute for agriculture and food security.
 
The last fiscal crises of the 1980s and 1990s resulted in a big drop in agricultural investment, which has never been replaced - and the world had now reached a point where it needed to increase food production by 70% to feed an expected population of 9.1bn by 2020.
 
The risks of fiscal crises faced by western countries particularly were not based mainly on "exploding budget deficits" but about the current models for health, education and unemployment protection, which in the US and UK especially are clearly not sustainable.
 
*************************************
 
A proposal by Chinese authorities to allow mainland citizens to buy shares listed in Hong Kong has been scrapped, marking the official end of a potentially groundbreaking plan that once gave high hopes to investors in the territory.
 
The State Administration of Foreign Exchange, a body under the central bank which announced the scheme in August 2007, said in a bland statement that the proposal was one of 19 no longer valid because they had expired.
 
Safe also annulled 36 documents because they had been replaced by new regulations.
 
The declaration by Safe, which caused little surprise because the "through train" scheme had not moved forward since the proposal was announced, brings to an end speculation of massive fund inflows into Hong Kong from Chinese investors.
 
In the three months after the proposal was first floated in 2007, the Hang Seng index rose 55% to 31,638 points, which still stands as the market's peak.
 
The plan then suffered a setback in November 2007 when Wen Jiabao, the premier, in effect shelved the proposal by attaching four open-ended conditions to final approval.
 
The proposal had provoked infighting between agencies in Beijing with conflicting interests in management of the country's financial system and capital account.
 
Timothy Fung, China equity strategist at Credit Suisse private banking, said: "No one believed the through train would come. There were too many problems such as capital controls and foreign exchange. I think China prefers other means such as QDII for capital outflow."
 
Mr Fung was referring to the qualified domestic institutional investor scheme, which allows Chinese funds to invest overseas.
 
China resumed approvals for QDII in October last year after a 17-month suspension when E Fund Management and China Merchants Fund Management, the fund management groups, each received quotas to invest in offshore securities of $1bn and $500m respectively. A large number of fund companies are waiting to set up their own QDII funds.
 
China's State Council last week approved in principle the launch of stock index futures and the trial debut of short selling and margin trading in China.
 
However, no details had yet been released in spite of official promises that they would be made available last week.
 
China had previously announced the launch of short selling and margin trading on a trial basis 18 months ago, but that trial never started.
 
*************************************
 
Microsoft Chief Executive Officer Steve Ballmer said his company isn't considering pulling out of China after Google said it may leave the country this week.
 
"That is not part of the way for us to grow, for us to create jobs, for us to be part of the growth and development of the Chinese system," Ballmer said Friday in a Bloomberg Television interview. "I do not even consider it."
 
Microsoft, the world's largest software maker, filters Internet search results in China and Ballmer said the company needs to comply with "proper orders" under Chinese law to do business in the country. Because the US imports so many goods from China, it's important for US companies to export to China to foster domestic job growth, he said.
 
Google defied the Chinese government by saying it will end self-censorship of its search results after hacking attacks that were targeted at Google Gmail e-mail accounts belonging to human-rights activists.
 
Ballmer said he doesn't understand how such attacks "got tied into the whole notion of doing business in China."
 
"There are cyberattacks on all companies of any size from all parts of the world -- not just China -- at all times," he said.
 
Microsoft doesn't break out sales from specific countries. The company said in October that demand in China, the world's second-biggest PC market, was "very strong" in the previous quarter.
 
Microsoft has laboured for more than a decade to expand its sales in China because four-fifths of software in China is pirated, according to a 2008 study by the Business Software Alliance, a trade group that represents software sellers.
 
"China is an opportunity," Ballmer said. "But it is an opportunity that is hard to take advantage of because of the very low regard for intellectual-property rights in China." (low regard? or non-existence!!!)
 
*************************************
 
Nissan Motor's factory in central China is making cars almost 24 hours a day, yet Pan Xiaowei still waited three months for her new Tiida compact to arrive at the dealership.
 
"It wasn't like this a couple of years ago," said Pan, 34, whose husband runs a property development company in Shandong province. "We used to buy and get a car straight away, and now you have to pre-order and wait."
 
China overtook the US last year as the world's largest automobile market with sales surging 46% to 13.6 million, according to the China Association of Automobile Manufacturers. Nissan, Ford Motor Co. and Honda Motor Co. are running their Chinese factories at full capacity, with overtime and weekend shifts, and still can't deliver enough cars.
 
About 99.7% of cars made in China through November last year were sold, the association said. Foreign automakers are expanding assembly lines as buyers in secondary cities beyond Beijing and Shanghai benefit from government subsidies of at least 5 billion Yuan ($732.5 million), a sales tax cut and 8.9% economic growth.
 
Car sales have been fueled by demand in rural areas where the growth rate exceeded that of urban regions last year for the first time, Trade Minister Chen Deming said in a Jan. 13 interview with state broadcaster CCTV.
 
"Spending power in the medium and small cities is rising, and demand there has surpassed those in bigger cities," said a Henan province dealer for Nissan's joint venture with Wuhan-based Dongfeng Motor Group Co. "Cars are no longer considered a luxury item but a standard consumer product."
 
Wei's company has about 40 outlets in the central region selling several brands. About 55-60% of sales come from middle- and small-sized cities, he said.
 
Nissan is the No. 1 Japanese automaker in China, with last year's sales rising 39% to 756,000, outselling Toyota Motor Corp. and Honda, according to the three companies. Nissan's top seller is the Teana.
 
Nissan is spending 5 billion Yuan to expand its Hubei province plant to build up to 600,000 vehicles annually from the current 430,000, spokeswoman Kana Minamidate said. That central China factory makes the Tiida compact and Livina series popular in secondary markets, she said.
 
"The plant was originally operating with two shifts but now we have three shifts to build cars almost 24 hours a day," Minamidate said, adding that customers still wait for deliveries.
 
Nissan also is spending 1 billion Yuan on a light- commercial vehicle factory in the eastern city of Zhengzhou that will open this year and build up to 120,000 vehicles annually.
 
China requires overseas carmakers to work with local partners, who must own at least 50% of joint ventures. These ventures produced eight of the 10 best-selling cars last year, according to automobile association data.
 
Changan Ford Mazda Automobile Co. has plants in Chongqing and Nanjing building cars "at maximum allowable overtime and weekends". The company will open a $490 million factory in Chongqing in 2012 making up to 150,000 vehicles a year, boosting overall capacity to 600,000.
 
Near-term growth will be concentrated in eastern and central regions, and cities outside Beijing, Guangzhou, Shanghai and Shenzhen. The venture opened more than 65% of its new dealerships last year in smaller cities, and that proportion is expected to reach 75% in the next few years.
 
Urban residents earn about three times more than rural, who comprise more than half of China's 1.3 billion people, according to government statistics.
 
Rural Chinese buying a new minivan or light truck can get a subsidy of 10% of the purchase price, up to 5,000 Yuan. Those replacing light trucks can get another 5,000-18,000 Yuan.
 
The government also reduced the sales tax on new vehicles with engines of 1.6 liters or smaller to 5% from 10%. It said Dec. 10 it was raising the rate to 7.5%.
 
Honda, which opened 55 dealerships mostly in small cities last year, is focusing expansion in suburbs and exurbs of major cities, said Masayuki Igarashi, general manager of its China operations office in Tokyo. Its best-selling model is the Accord.
 
Chief Financial Officer Yoichi Hojo said in November that the company, which makes about 550,000 cars a year in China, doesn't have enough capacity. The Yokohama, Japan-based automaker plans to increase production at its Hubei province plant to 240,000 cars this year from 200,000.
 
The Wuhan factory runs at full capacity and built 210,000 units last year with overtime and weekend shifts, Honda spokesman Yoshiyuki Kuroda said. It makes CR-Vs, Civics and Accords, and wait times are at least a month, he said. 
Summary  
The coming week looks like .....
Commodities Indices
 Fourth-quarter earnings season gets under way in earnest next week, with five components of the Dow Jones Industrial Average and 10% of the Standard & Poor's 500 Index posting results.
 
Meanwhile, wholesale prices likely were flat in December while housing starts and building permits rose little, according to economists' forecasts.
 
US markets, government offices and some businesses will be closed Monday in observance of Martin Luther King's birth.
 
Two major banks are expected to report smaller losses than a year earlier amid prior-year write-downs, while a third- Bank of America - is seen posting a slightly wider loss on Wednesday - as they continue to suffered from bad loans. However, cheap money to fund new loans and higher interest rates on them are expected to boost their traditional lending business. Citigroup reports fourth-quarter results Tuesday, followed by Wells Fargo a day later.
 
The two biggest US investment banks could post lower-than-expected results next week as their once-robust fixed-income trading has dropped off. Analysts in recent weeks have lowered their earnings projections for Goldman Sachs Group, which reports Thursday, and Morgan Stanley, which reports a day earlier. Many on Wall Street will be looking for how Morgan's new Chief Executive, James Gorman, feels about 2010.
 
International Business Machines (IBM) is expected to post higher earnings on Tuesday, though revenue may dip from a year earlier. Big Blue has benefited from its shift toward software and services and away from hardware in recent years. Google Inc. (GOOG), which reports Thursday, likely will post improved results as the Internet-search giant maintains its strong lead in that area despite the best efforts of Microsoft and Yahoo. EBay, due out Wednesday, also could see higher results as it works to build on improvements in its core auction business.
 
General Electric is expected to post lower fourth-quarter earnings Friday on what some analysts forecast to be double-digit slide in equipment orders. But the focus is likely to be on the industrial giant's outlook, as investors and analysts seek clues about whether the nascent recovery is on track. GE has projected unchanged overall revenue in 2010 as well as flat sales and profit for its industrial units. Meanwhile, the late-night television lineup at GE's NBC Universal media unit has been generating substantial controversy, and any comments from GE executives regarding the matter will garner attention.
 
The Producer Price Index, which measures wholesale inflation, is expected to be flat for December after a 1.8% increase a month earlier. The report will be released Wednesday, the same day the government details December housing starts and building permits, which are expected to rise 1% and 0.2%, respectively. Housing starts are at extremely low levels and are not likely to grow soon because of the large inventory of unsold new homes. On Tuesday, the National Association of Home Builders will issue its January housing market index, which fell slightly in December. The nonprofit Conference Board will release its December index of leading indicators Thursday, the same day the Philadelphia Fed reports on regional manufacturing activities.
 
The first US initial public offerings of the year are scheduled to price next week, with deals from life insurer Symetra Financial and household paper products maker Cellu Tissue Holdings set to debut on the New York Stock Exchange. Both deals are expected to price Thursday and trade the next day. A third offering, from boat-fuel producer Andatee China Marine Fuel Services Corp., also might debut next week on the Nasdaq Stock Market.
 
Japan Airlines is expected to file for bankruptcy next week as part of a state-led restructuring. With $16 billion in debts, it would be the sixth-largest corporate failure in Japanese history. Japan's transport minister said Friday that a state-backed corporate turnaround body will start its rehabilitation process for the ailing carrier Tuesday. It is expected to file for court-led rehabilitation the same day.
 
The Australian Office of Financial Management's bond auctions get back into full swing next week with $1.2 billion of Treasury bonds and $300 million of indexed bonds, maturing in 2025, for sale. A further $1.7 billion of Treasury notes, which mature in a few months, will also be auctioned.
 
The steady rise of inflation in New Zealand may have sputtered out in Q4, as the nation's consumer price index (CPI) is projected to go unchanged from Q3. That said, the annual rate of CPI growth is anticipated to rise to 2.1% from 1.7%, and with Credit Suisse overnight index swap (OIS) rates are already pricing in 200 basis points worth of rate hikes by the Reserve Bank of New Zealand over the next 12 months, weaker than expected results has the potential to push the New Zealand Dollar lower as the markets will shift to price in fewer rate increases. However, CPI proves to be strong, the currency is likely to rally in response.
 
On Tuesday, the release of the UK's consumer price index (CPI) is projected to show that headline inflation grew 0.3% during the month of December, while the annual rate is projected to jump to a nine-month high of 2.6% from 1.9%. Such an outcome would leave CPI above the Bank of England's 2.0% target, and would likely add to speculation that the central bank will officially end its quantitative easing program in February.  As a result, an increase in CPI in line with or above expectations has potential to push the British Pound higher. If the reading is lower than anticipated, though, the currency is likely to pull back.
 
The Canadian Dollar could see a pickup in volatility on Tuesday as the Bank of Canada is expected to leave rates unchanged at 0.25% once again. After the Bank left rates unchanged on December 8, they repeated that they would maintain a neutral stance through June 2010, and while this is likely to remain the case once again, the bigger issue to keep in mind is that the Bank is likely to issue revisions to their GDP and CPI outlooks.
 
Globally, attention will be on China's annual growth figure for 2009. Economists expect the Chinese Government to confirm that the economy grew 11% in the last quarter compared with the same period in 2008, and grew 8.5% over the year.
 
Also on Tuesday, the People's Bank of China increased the amount of cash banks are required to keep on hand by 50 basis points in an attempt to slow lending.
 
All told, the focus should shift back to earnings next week and with so many banks posting, I think we will see a significant downtick for markets over the week. 
As always, I will keep you posted with major developments as/when they occur in the week ahead.
 
In the meantime, I wish you all a very pleasant weekend.
 
Market Newsletter Written By 


Adrian Page

Managing Director
Financial Page International
 
In This Issue
US Markets
European Markets
The UK Market
Asia Pacific Markets
Global Commodities
Global Currencies
China This Week
Summary
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