Financial Page International

27 February 2010 - Global Markets Review
Good Morning Ladies & Gentlemen,
 
Finland's jobless rate hit 9.5% in January - up from 7.9% in December.
 
Spain's unemployment rate is at 19.5% and almost half of their under 25's are out of work.
 
The number of unemployed people actively seeking work in France increased by 19,500 in January from the end of December, the number of active jobseekers totaled 2.66 million - the highest since July 2005.
 
Thursday, Germany's Federal Statistical Office announced that the jobless rate stood at 7.5% in January, up from 7.2% recorded a year ago. The number of unemployed amounted to a seasonally adjusted 3.22 million in January, which was up by 110,000 persons or 3.8% compared to the previous year. The number of employed persons totaled 39.8 million in January.
 
In the US initial claims for jobless benefits rose by 22,000, to 496,000, according to Labour Department data. Economists had expected the number of claims to fall.
 
But get this; they actually blamed the initial claims increases on ..... the snow!  Seriously, they said bad weather contributed to more people claiming benefits!
 
Ladies and gentlemen, I have said it all along that the world is not out of the woods until unemployment is under control.
 
However, instead of being under control, we are far from that stage just yet and I would consider unemployment in Europe particularly, to be rampant!
 
Yet how does this totally common economic indication lead almost every financial analyst/economist to state that 'confidence is high' and 'we are optimistic .....'? 
 
Try and figure that one out over your Saturday morning coffee.
 
Of course, this week I have been repeatedly asked about Greece and in particular what would happen if the PIS countries in Europe (Portugal, Ireland, Greece and Spain) all fall out of the Euro.
 
That's a hard one to answer but in mu humble opinion, I simply cannot see the Euro failing. 
 
Indeed, in the late 90's I was a protagonist against the single-currency; my view that it would be impossible to bring the powerhouses of Europe (Germany and France etc.) onto an equal footing with ..... this was my analogy at the time ..... Greece!
 
However, I think so much has been invested (no pun intended) in the Euro over the past decade that I cannot see how the ECB and EMU can fail to weather this storm.
 
But George Soros, that well-known 'rich-bloke' in the States, sees things differently.
 
In principle, the Greek debt crisis could be an excellent opportunity for the Euro zone to correct the design flaws that have haunted it since the Maastricht Treaty was drawn up.
 
In practice, however, few of the currency block's member governments appear to have much inclination to take it.
 
In recent days, figures as diverse as financier George Soros, former French Prime Minister Edouard Balladur and European Central Bank council member Lorenzo Bini Smaghi have all argued that Europe needs to make permanent, institutional changes to the way the Euro zone is governed, all effectively pleading for member states to transfer more powers to centralized bodies.
 
This, they argued, would keep individual member states from undermining the stability of the Euro by running irresponsible or fraudulent budget policies, at the cost of another incremental surrender of sovereignty at the national level.
 
"The resolution of the Greek crisis can - and must be - the occasion for reinforcing the measures of European surveillance, including the Stability and Growth Pact, to avoid such situations happening again in future," Bini Smaghi wrote in a guest article for Corriere della Sera.
 
"More useful will be a political union, ex ante and not just ex post," he added.
 
Soros, meanwhile, saw a 'clear' need for "more intrusive monitoring and institutional arrangements for conditional assistance."
 
However, government officials and analysts around the Euro zone were skeptical that any such measures can be agreed on, largely because of German fears that any change in the current arrangements would be the thin end of a wedge leading to repeated bailouts of the currency area's weaker economies.
 
"I don't see that an institutional solution would produce anything superior to an ad-hoc one," said Moritz Schularick, an economics professor at the Free University in Berlin. "The last thing we want is to institutionalize moral hazard."
 
The Euro zone's member governments have gone out of the way to stress that institutional reform isn't on the agenda, and that no aid for or sanctions on Greece--if it ever comes to them--should be seen as having any sort of status as a legal precedent.
 
"I don't see the need to (apply) to other countries the answers we are giving to the Greek problem," Luxembourg Prime Minister and Euro group chairman Jean-Claude Juncker told reporters last week.
 
As a first step, the European Commission has proposed giving monitors from Eurostat expanded powers to audit data from all member states. Without such powers, it argues, "instances of non-compliance with the rules by individual member states will continue to compromise the reliability of the governance system by its participants."
 
"It's an interesting proposal which deserves to be studied," a French Finance Ministry spokesman said. "But there is no position definitively for or against it" in the French government, he added.
 
The German Finance Ministry didn't respond to requests for comment on the matter.
 
More thorough coordination of economic policies has been a long-standing French goal, but France had supported Germany in rejecting a similar proposal from the commission in 2005, after the first time Greece admitted misleading its partners as to the size of its budget deficit.
 
By 2008, the benefits of keeping Eurostat noses out of national statistics bodies became clear: member states were still free to present accounts that kept massive contingent liabilities from bailouts of their respective banking systems largely out of their national debt and deficit statistics.
 
But, fatefully, the 2005 decision also meant that Greece was able to continue under-reporting its deficit, by sending unverifiable data to Brussels, allowing its debt problems to grow into something that threatens the very fabric of monetary union.
 
To some, the Greek experience suggests that Germany has more to lose by allowing its partners to keep their sovereignty than by giving up a bit of its own. An official at one Euro-zone member state complained to Dow Jones that the capacity of leaders on both sides of the Rhine to think of Europe's longer-term future has shriveled since the time of the Maastricht Treaty.
 
"The problem is with the current personnel in European politics," the official said. "Helmut Kohl and his people thought in longer terms than the next electoral cycle."
 
However, Ansgar Belke, a professor at the University of Duisburg-Essen, pointed out that Chancellor Angela Merkel has powerful constraints stopping her from agreeing to such measures, even if she wanted to.
 
"For one thing, you can't win any votes by rescuing Greece," Belke said, pointing to opinion polls that show more than 70% of Germans opposed to any bailout.
 
But more importantly, Belke said, the realities of sovereign states in Europe have to be acknowledged. A case in point is that Germany's Constitutional Court, in ruling on the legality of the Lisbon Treaty, specifically stated that responsibility for macroeconomic policy must remain at national level.
 
"To think of a system of fiscal transfers is to ignore the political and legal restraints," Belke said.
 
All told, I still believe that the Euro will exist in a decade's time and that the EMU will get through this undoubtedly troubled period - but I think we may see a couple of 'casualties' along the way and not necessarily just the PIGS countries - has anyone Italian ever admitted to wanting to be in the Euro?
 
Hold that thought! 
 
On to the number for the week:  
US Markets 
How the US did this week .....

 US SummarySales of previously owned US homes unexpectedly dropped 7.2% in January to a seven-month low, indicating a lack of job growth is undermining government incentives to bolster the housing market.
 
The decline to an annual pace of 5.05 million, reported Friday by the National Association of Realtors in Washington, was the second-largest on record after December's 16.2% plunge. A separate report showed the economy grew at a 5.9% pace last quarter, faster than initially estimated.
 
A federal tax credit for home buyers is showing few signs of providing the lift that it did late last year, when purchases surged in November to the highest level since 2007. The figures cap a week of data -- including weaker consumer confidence, fewer business-equipment orders and more applications for jobless benefits -- that indicates the economy is losing momentum at the start of 2010.
 
US stocks swung between gains and losses after other reports Friday showed consumer sentiment dropped and a measure of business activity expanded in February at the fastest pace since 2005. The Standard & Poor's 500 Index was little changed at 1,106.22.
 
The Dow sat at 10,324 - up 0.2% on the day and the Nasdaq at 2241, a gain of 0.3%.
 
The Institute for Supply Management-Chicago Inc. said its business barometer climbed to 62.6 this month from 61.5 in January. Readings greater than 50 signal expansion.
 
The Reuters/University of Michigan final index of consumer sentiment for February dropped to 73.6 from 74.4 in January.
 
The economy expanded at a 5.9% annual rate in the fourth quarter, the best performance in six years, the Commerce Department said in its first revision of the figures. Inventories added 3.88 percentage points to gross domestic product, and investment in software and equipment grew at the strongest pace in almost a decade.
 
Economists forecast existing home sales would rise to a 5.5 million rate in January, according to the median of 70 projections in a survey. Estimates ranged from 5.04 million to 6 million.
 
The share of homes sold to first-time buyers fell to 40% in January from 43% the prior month, Lawrence Yun, the Realtor group's chief economist, said in a news conference, indicating the renewal of the tax credit in early November failed to spur increased demand.
 
The end of Fed purchases of $1.25 trillion in mortgage- backed securities, aimed at keeping borrowing costs low, represents another challenge for housing. The program is scheduled to expire at the end of March. The average rate on 30- year mortgage has hovered within a half point of 5% since August, according to Freddie Mac.
 
Federal Reserve Bank of Chicago President Charles Evans said liquidity added to the market by the Fed will keep borrowing costs low.
 
"When we stop buying them there is a lot of liquidity that we will have put in place, which are supporting lower mortgage rates," Evans said in an interview with CNBC Friday. "We certainly would like to see the housing market take off. It is quite a ways away from that."
 
Weakness in housing is damping the outlook for companies including Home Depot Inc., the largest US home-improvement retailer.
 
"We're not projecting robust growth," Frank Blake, chief executive officer at Atlanta-based Home Depot, said Feb. 23 on a conference call, citing rising mortgage defaults and a lack of employment. The company reported a fourth-quarter profit that topped analysts' estimates.
 
The number of previously owned unsold homes on the market decreased 0.5% to 3.27 million. At the current sales pace, it would take 7.8 months to sell those houses, compared with 7.2 months at the end of December.
 
The median price was $164,700 in January, unchanged from a year earlier.
 
Purchases fell in all four regions of the country, declining 11% in the Northeast, 7.4% in the South, 6.9% in the Midwest and 5.2% in the West.
 
Housing, the industry that ignited the subprime mortgage meltdown and triggered the worst recession in seven decades, began to recover in 2009 after a three-year decline. Some 5.16 million previously owned homes were sold last year, up from 4.91 in 2008.

 
New-home sales, which account for less than 6% of the market and compete with cheaper foreclosed properties, fell in January to the lowest level on record, the Commerce Department reported Feb. 24.
 
Even as the economy is forecast to grow an average 3% this year, it isn't generating jobs. Economists surveyed at the beginning of this month forecast unemployment this year will average 9.8%, a percentage point below the historic post World War II-peak of 10.8% reached in November 1982. 

European Markets 
What has been happening in Europe this week .....

 Europe SummaryEuropean stocks gained, paring a weekly decline for the Dow Jones Stoxx 600 Index, as mining companies rallied with metals prices and Cie. de Saint-Gobain SA reported better-than expected earnings.
 
The Stoxx 600 gained 1% to 245.80, trimming its decline this month to 0.5%. The gauge has fallen 5.6% from this year's high on Jan. 19 amid concern that efforts by Greece, Portugal and Spain to curb their budget deficits will harm the economic recovery.
 
National benchmark indexes rose in 16 out of 18 western European markets. Germany's DAX gained 1.2%, France's CAC 40 increased 1.9% and the UK's FTSE 100 climbed 1.5%. Greece's ASE Index jumped 2.2% after Luxembourg Finance Minister Luc Frieden said the Euro-region countries "have no choice" but to provide financial aid for the nation, according to the Handelsblatt newspaper.
 
Germany is considering buying Greek bonds through state- owned lender KfW Group, German lawmakers said Friday. KfW is preparing measures that are part of a European plan to grant Greece as much as 25 billion Euros ($34 billion) in aid should the need arise, said four lawmakers, who spoke on the condition of anonymity because the information is confidential. 
 
GERMANY
 
German stocks advanced, paring the DAX Index's weekly drop, as UBS AG recommended buying some shares in Europe's largest economy, overshadowing a report that showed US homes unexpectedly declined in January.
 
Henkel AG, the German maker of Loctite glues and Persil detergent, gained 4.8% as Societe Generale SA raised its price estimate on the shares 7.5%. ThyssenKrupp AG, the country's largest steelmaker, followed metal prices higher.
 
The DAX index added 66.13, or 1.2%, to 5,598.46, paring the weekly decline to 2.2%. The gauge fell 0.2% in February amid concern Greece's fiscal woes may spread to some other peripheral European nations.
 
Henkel climbed 4.8% to 37.835 Euros. Societe Generale raised its price estimate to 43 Euros from 40 Euros.
 
Thyssenkrupp climbed 2% to 23.25 Euros. Prices of copper, lead, tin and nickel advanced on the London Metals Exchange Friday.
 
Bayer AG sank 1.4% to 48.67 after Germany's biggest pharmaceutical company missed its goal to limit to 5% the decline in 2009 earnings before interest, taxes, depreciation, amortization and special items. 
 
FRANCE
 
France's CAC 40 Index rose 68.03, or 1.9%, to 3,708.80 in Paris, paring this week's decline to 1.6%. The index fell 0.8% this month. The SBF 120 Index climbed 1.8% Friday.
 
Air Liquide advanced 4.66 Euros, or 5.6%, to 87.71, for the biggest gain since March. The world's biggest producer of industrial gases was raised to "buy" from "underperform" at BofA-Merrill Lynch Global Research.
 
Credit Agricole, France's biggest bank by branches, climbed 42 cents, or 4%, to 10.92 Euros, increasing for the third day this week. Natixis Securities raised its recommendation on the stock to "add" from "reduce."
 
Rhodia rose 37 cents, or 2.7%, to 13.97 Euros, increasing for a second day this week. Standard & Poor's revised the BB- credit rating outlook of the French maker of plastics and perfume ingredients to positive from stable.
 
Cie. de Saint-Gobain jumped 2.52 Euros, or 7.9%, to 34.52, rebounding from five days of losses. Europe's biggest supplier of building materials plans to save an additional 200 million Euros ($270 million) this year. Profit in 2009 fell 85% as the value of assets decreased. Collins Stewart raised its recommendation on the stock to "hold" from "sell."
 
Wendel, which has a stake in Saint-Gobain, increased 2.64 Euros, or 6.8%, to 41.14.
 
Spir Communication SA sank 3.21 Euros, or 14%, to 19.79, for the biggest decline in a year. The small- ads publisher reported a net loss of 92.9 million Euros for 2009, compared with a profit of 10.5 million Euros a year earlier.
 
Vallourec advanced 3.95 Euros, or 2.9%, to 140.35, gaining for a second day this week. The shares may climb to 219 Euros, Goldman Sachs Group Inc. wrote in a report dated Thursday, citing the French company's cash and earnings forecasts. Goldman Sachs' previous price estimate on Vallourec shares was 188 Euros. 
 
BELGIUM
 
The Bel 20 in Brussels rounded off the week on 2,514.87, a gain of 1.38% on the day.
 
Tuesday, the National Bank of Belgium said in a report that the business confidence indicator stood at minus 7 in February, unchanged from the previous month. Economists expected a reading of minus 6.5.
 
Manufacturing industrial confidence decreased to minus 8.6 in February from minus 7.2 in January. At the same time, the building industry confidence rose to minus 14.3 from minus 15.7 in January.
 
Meanwhile, the confidence indicator in trade sector stood at minus 4.9 in February, up from minus 9 in the previous month.
 
Thursday, Belgium's National Institute of Statistics announced that the consumer price index or CPI rose 0.7% year-on-year in February, faster than the 0.62% growth in the previous month.
 
The CPI increased for the third straight month in February, after seven consecutive months of negative figures, the statistical office said.
 
On a monthly basis, the CPI rose 0.42% in February compared to the 0.46% increase in the preceding month. 
 
THE NETHERLANDS
 
In Amsterdam the AEX closed the session Friday at 317.74, up 0.92%.
 
The recent collapse of the Dutch government is likely to slowdown the Netherlands' budget consolidation efforts, say economists at Commerzbank.
 
The Dutch government led by Prime Minister Jan-Peter Balkenende collapsed over the weekend, after a row on troop commitments in Afghanistan prompted the second strongest fraction of the Social Democrats led by Deputy Prime Minister Wouter Bos to leave the governing coalition. New elections, presumably in May, thus appear inevitable.
 
Economists at Commerzbank said now is a critical time for the Dutch economy, both from an economic and fiscal policy point of view and the latest government crisis throws up a few uncertainties on both fronts. Netherlands' budget deficit is projected to rise to 6% of gross domestic product this year as a result of the government's stimulus measures to foster growth, while in the next few years, government debt is expected to rise to over 70% of GDP.
 
The economists assured that the Dutch do not face immediate risks, with yield pick-ups of ten-year government bonds versus German papers trading just under 20 basis points most recently, which is just a tiny fraction of the premiums the crisis-ridden peripheral Euro countries have to pay.
 
Furthermore, initial measures to tackle the budget deficit have already been put in place by the outgoing government that targets a fairly realistic 4.5% of GDP deficit target by 2012. Yet, there is an additional need for consolidation of 75 percentage points per year to bring the deficit under E.U. rules, and to this end, the government had plans to announce further austerity measures in June. This plan has now been disrupted and the schedule is likely to pushed back by at least half a year, the economists said.
 
Commerzbank estimates that deficit reduction from 2011 onwards will not be at risk but expects the 3% threshold to be reached later than 2012. The economists added that Tuesday's Dutch bond auctions should provide an indication as to any potentially adverse market reactions.
 
Tuesday, Netherlands Central Bureau of Statistics announced that the producer confidence indicator stood at minus 6.9 in February, up from minus 8.3 in January. Economists expected a reading of minus 7.5.
 
The rise in producer confidence was mainly due to improvement in the assessment of the order position, the statistical office said. The order position index increased to 98.6 in February from 96.2 in the previous month.
 
Among the sub indicators, expected production in the next three months were less pessimistic and opinion on the order situation improved compared to the previous month. On stocks of finished products traders showed a positive fraction than in January. 
 
SWITZERLAND
 
The SMI in Zurich completed a hectic trading week Friday at 6,710.99, adding 1.01%.
 
Employment in Switzerland fell 0.1% year-on-year to 3.96 million in the fourth quarter of 2009, data released by the Federal Statistics Office showed Thursday. At the same time, the employment outlook indicator rose 0.4%.
 
A measure for vacancies fell 11% in the fourth quarter, compared to the previous year, but rose 7.5% on a sequential basis after adjusting for seasonal variations.
 
Suggesting that private consumption in Switzerland is set to rise strongly in the coming months, the UBS consumption indicator climbed to 1.36 in January from 1.19 in December. Thus, the indicator reached close to levels seen prior to the Lehman Brothers collapse.
 
The marked increase in January is due to improving business activity in the retail sector, an increase in new vehicle registrations and an improvement in consumer sentiment, the UBS bank said in a statement.
 
Despite the relatively high unemployment rate, private consumption appears to be accelerating. At its current level, the UBS consumption indicator is only slightly below its long-term average of 1.5.
 
Taking into account other indicators tracking the development of other GDP components like exports, imports and investments, the Swiss economy is likely to grow at a rate close to its potential of around 2%, the bank said.
 
The Swiss National Bank said on Monday that the M3 money supply growth rate - the broadest measure of money supply in the country - stood at 5.6% year-on-year in January. This compares to a 6.6% rate in December.
 
At the same time, the M2 money supply rate slowed to 15.9% from 21.2% while the M1 money supply rate slowed to 15.2% from 20.9%. 
 
AUSTRIA
 
In Vienna, the ATX headed into the weekend at 2,438.95, a drop slightly of 0.07%.
 
The Austrian economy is ready to bounce back from the global recession with a massive surge in exports, according to the country's Federal Economic Chamber.
 
While the financial crisis had a huge effect on markets across the globe, Dr Christoph Leitl, President of the Austrian Federal Economic Chamber, said he fully expects the country's exports to top 100 billion Euros in the next 12 months.
 
He confidently predicted: "The Austrian economy will return to positive growth this year."
 
Observers say new markets and emerging economies teamed with government initiatives will help spark the export industry back to life.
 
And it is here that Austria - traditionally a strong exporter - expects to make its biggest gains.
 
The strength of the Euro currency against the Dollar and Pound over the course of the economic crisis saw many European economies suffer as it became more expensive to buy their exports.
 
Austria's exports were slashed by over a fifth in 2009 - dropping to just under 87 billion Euros - in a nation which relies heavily on selling their products abroad.
 
Half of Austria's total economy relies on such trade while 50% of all jobs are generated by exports, which is why support packages such as the acclaimed Go-international scheme have helped establish strong links in areas such as trade fairs and exhibitions.
 
Dr Leitl, 61, said the strength of the Euro had been an "additional obstacle during a time of enormous difficulty" but that Austria was already showing clear signs of progress.
 
"Austrian products became far more expensive in every market where prices are calculated in Dollars.
 
"As a result, many companies saw their export profit margins dwindle and some even lost customers because they were unable to keep their prices competitive whilst the Euro was so strong against the Dollar."
 
However the downturn - which saw Austria's overall economy shrink by 3.6% last year - has begun to ease and strong growth should follow in 2010.
 
Dr Leitl said: "Fortunately, however, we are beginning to see signs that the process of economic turnaround is underway.
 
"The Austrian economy will return to positive growth this year, and exports will make a significant contribution to this.
 
"In 2010 we are predicting a 5.5% export growth rate, and the total export volume is once again expected to cross the magical 100 billion Euro threshold."
 
Dr Leitl said that the Economic Chamber was looking to help companies exploit growing economies and industries to ensure this growth.
 
He said: "We want to act now to help innovative, export-oriented businesses enter promising new markets where we have identified great business potential.
 
"So in recent months we have begun to place greater emphasis on several growth markets such as the Far East, South East Asia, the Middle East, South America and certain Commonwealth of Independent States countries.
 
"But it is not simply a case of identifying the most promising countries or regions - we are also highlighting the sectors which we think will become increasingly important to our companies in the future.
 
"These include environmental technology, infrastructure, construction, food, energy and the technology sector."
 
And Dr Leitl said his organisation has developed a range of tools which companies can make use of in their efforts to secure new contracts.
 
Dr Leitl said: "We have introduced more attractive support packages and comprehensive services to encourage more companies who are new to international business to take the first steps to exporting, as well as to make it easier for companies that are already working abroad to try out new markets.
 
"There is a danger that companies who fail to seize the opportunities now may find they have missed the boat.
 
"Of course, doing business abroad is not without risk, but there are so many excellent opportunities all over the world for Austrian companies at the moment, and the potential rewards are high."
 
And Dr Leitl added that the measures put in place by governments to prevent an even deeper recession can be used to help boost companies' growth.
 
He said: "Furthermore, governments around the world have implemented a raft of national economic support programmes.
 
"This means that there are billions of Euros available to Austrian companies through projects, grants and funding designed to stimulate growth - as long as they are willing to grasp the business opportunities and understand how to make the most of them."
 
The Austrian Federal Economic Chamber represents more than 400,000 businesses of all sizes which are required by law to become members.
 
Self-funded by members, it covers sectors across the board including crafts, trades, industry, commerce, banking and insurance, information and consultancy, transport and communication and tourism and leisure.
 
Austria's seasonally adjusted industrial production rose 0.3% month-on-month in December, the Statistics Austria said Wednesday. Compared to the previous year, there was a decline of 4.2% after adjusting for working days.
 
Construction output decreased 4.5% on a monthly basis and fell 5.3%.
 
Taking both sectors together, output dropped 0.8% month-on-month and 4.6% over the previous year. 
 
SWEDEN
 
The OMX in Stockholm ended the day and the week Friday at 947.39, up 0.73%.
 
Housing prices and mortgages do not comprise stability problems and should not affect monetary policy, Riksbank Deputy Governor Lars Svensson said Wednesday.
 
"Any future problems on the housing markets, or, indeed, any future problems with financial stability whatsoever, can best be managed through regulation and supervision," Svensson said in a speech.
 
According to him, the repo rate is an altogether too blunt and unsuitable instrument to be used for any other purpose than stabilizing inflation around the inflation target and resource utilization around a normal level.
 
On February 11, the Swedish central bank held its key interest rate at 0.25% and said it will begin to raise the repo rate in the summer or early autumn.
 
Minutes of the monetary policy meeting showed Friday that Svensson entered a reservation against the decision and advocated cutting the repo rate to 0% and a repo rate path 0.25% below that in the main scenario until the end of the fourth quarter of 2010.

 
He said the lower repo rate path he advocated would provide a better outcome for both inflation and resource utilization. "Such an interest rate path would not entail any problems for financial stability or the functionality of the financial markets," he said.
 
Thursday, the Statistics Sweden announced that the producer price index or PPI rose 0.3% year-on-year in January, compared to the 0.8% fall in the previous month. Economists expected a decline of 1.1%.
 
On a monthly basis, the PPI increased 2% in January, faster than the 0.2% growth in the previous month. Economists were looking for an increase of 0.6%.
 
The PPI for home sales rose 2.2% on an annual basis and was up 1.9% compared to the preceding month.
 
Export price index dropped 1.5% annually in January, while import price index climbed 1.9%. Export and import prices increased by 2.1% and 3%, respectively compared to the preceding month.
 
Swedish economic sentiment indicator increased for tenth consecutive month in February, the National Institute of Economic Research or NIER said on Thursday.
 
Economic tendency indicator stood at 107.7 in February, up from 103.9 in the previous month, revised from 103.4 reported initially. Economists expected a reading of 104.1.
 
The confidence indicator for the business sector increased further in February. The confidence indicator was 3 in February, up from minus 4 in the previous month. Economists had forecast a reading of minus 2. The confidence indicator increased for the eleventh consecutive months and is considerably above the historic average.
 
Meanwhile, the consumer confidence indicator rose to 13 in February from 8.5 in January. Economists expected a reading of 9. This level indicates that households have more positive opinion on the economic situation than normal, the NIER said. 
 
NORWAY
 
Oslo's OBX finished the week at 317.57, up a sizeable 1.85%.
 
Seadrill Ltd and Ensco International Plc, two mid-sized offshore oil and gas rig contractors, offered upbeat views of 2010 Thursday to offset disappointment surrounding the sector leader.
 
Solid fourth-quarter results from the two companies offered a sharp contrast to disappointing numbers Wednesday from Transocean Ltd, caused in part by an unexpected amount of downtime for its rigs.
 
Transocean shares fell 1.7% Thursday, on top of a 5.5% drop the day before, as several analysts cut their price targets for the world's largest offshore rig contractor.
 
Ensco shares rose 4.3%. Trading in Oslo-listed Seadrill had already stopped before its results were released.
 
Seadrill said its operating profit more than doubled in the three months to the end of December to $382 million, as more rigs came into operation. Analysts had expected $369 million.
 
Mirroring recent moves by Transocean and Noble Corp, the company also increased its dividend.
 
Oslo-listed contractor Siem Offshore Inc said Friday it moved to a net profit of USD14.7m in the fourth quarter of 2009 from a loss of USD49m a year earlier.
 
Operating revenue edged up to USD49.2m from USD47.6m and the company turned to an operating profit of USD3.6m from a loss of USD33.6m. Siem Offshore  recorded a total of 66 off-hire days, of which 26 due to scheduled dry-docking of two vessels.
 
The company swung to diluted EPS of USD0.04 from a loss per share of USD0.2.
 
At the end of the reporting period, the number of vessels in operation was 29, up from 25 a year earlier.
 
Norway's jobless rate stood at 3.2% in February, down from 3.3% in January, the Labor and Welfare Organization NAV said on Thursday. A year ago, the jobless rate was 2.7%.
 
The number of unemployed totaled 83,436 persons in February, smaller than the 85,132 persons in the previous month. 
 
DENMARK
 
In Copenhagen, another volatile week saw the OMX close at 354.77, gaining 0.23% in the process.
 
Danish brewer Carlsberg Tuesday posted an increase in fourth-quarter net profit and gave a bullish outlook for 2010, expecting net profit growth of more than 20% and operating profit in line with 2009.
 
"Working capital improvement will continue to be a key focus area," Carlsberg said.
 
The maker of Tuborg, Carlsberg and Kronenbourg will increase investments in brands and channel marketing, and continue implementation of operational and capital efficiency improvements. Carlsberg said there are opportunities to further strengthen its market position in several key markets, including Russia, and that it expects continued market growth in Asia.
 
The Copenhagen-based company's exposure to Russia increased substantially after it bought part of UK-based rival Scottish & Newcastle in 2008, thereby gaining full control of eastern European brewer Baltic Beverages Holding, which had previously been a joint venture between the two companies.
 
Russian beer consumption has increased rapidly in the past few years but the economic downturn, there as elsewhere, has hit consumer spending and sent beer volumes lower. Starting New Year's Day, Russian beer taxes tripled. Carlsberg expects earnings in the first half of 2010 to be affected by the duty increase, but then to recover in the second half of the year as customers get used to the higher prices.
 
Carlsberg posted a net profit of DKK383 million ($70.11 million) for the three months to Dec. 31, up from DKK111 million a year earlier when the company was hit by charges relating to the acquisition of Scottish & Newcastle. Still, net profit in the past quarter fell short of analysts' expectations for DKK554.7 million, as Carlsberg experienced higher than expected exceptional costs of DKK324 million.
 
Carlsberg's fourth-quarter sales fell 6% to DKK13.62 billion from DKK14.52 billion, missing expectations for DKK13.93 billion. Operating profit before special items rose to DKK1.64 billion from DKK1.39 billion, above market expectations for DKK1.36 billion.
 
Danish financial group Alm Brand said Friday its net loss widened to DKK1bn in 2009 from DKK29m in 2008.
 
Alm Brand's financial performance remained severely impacted by impairment write-downs in the group's unit Alm Brand Bank A/S, CEO Soren Mortensen said, adding that the write-downs have been declining since the end of June, and that the development in claims seems to have stabilised.
 
The bank's new strategy implies that loss-making activities are being wound up, while costs are cut substantially, Alm Brand said. Going forward, the unit will focus on developing its activities in the private, small and medium-sized business and agricultural segments in line with the rest of the group as well as its asset management and markets activities.
 
In 2009, the group's revenue decreased to DKK7.571bn from DKK8.176bn, impacted by lower level of economic activity.
 
The group reported a highly unsatisfactory pretax loss of DKK1.336bn versus a profit of DKK44m, due to write-downs of DKK1.7bn in the bank, Alm Brand said. The banking activities' loss widened to DKK1.758bn from DKK532m.
 
Denmark's Danske Bank and Sweden's SEB have joined a team of banks to launch a share offering in Danish telecom TDC for its private equity owners, sources told Reuters.
 
The private equity firms, which hold nearly 88% of TDC's stock, have appointed a consortium of a total of nine banks to sell shares in TDC despite a recent string of cancelled European public share offerings, sources close to the deal said.
 
Blackstone, Permira, Kohlberg Kravis Roberts, Providence and Apax Partners hold 87.9% of TDC via Nordic Telephone Company Holding, following a record 100 billion Danish crown ($18.1 billion) buyout in 2005.
 
Copenhagen investment bankers said the owners were pushing ahead with IPO plans and preparing a prospectus.
 
Sources said the group included six international banks.
 
FINLAND
 
Helsinki's OMX rounded off the day at 6,680.45, up 1.12%.
 
Finland consumer confidence improved further in February, the Statistics Finland said on Thursday.
 
The consumer confidence indicator stood at 15.9 in February, up from 14.5 in January. A year ago, the confidence indicator was minus 3.9.
 
Among the sub indicators, the index measuring consumers' own economic situation in 12 months increased to 10.8 in February from 10.2 in January, while the corresponding index on Finland's economic situation dropped slightly to 21.2 from 21.7.
 
Further, the gauge measuring nation's unemployment situation decreased to minus 19.2 in February from minus 18.7 in January, while the index on households' saving possibilities climbed to 50.9 from 44.7.
 
Finland's manufacturing confidence indicator increased in February, the Confederation of Finnish Industries EK said on Thursday.
 
The manufacturing confidence indicator stood at minus 1 in February, up from minus 6 in January, revised from minus 13 reported initially. In long-term average, the confidence indicator was 2.
 
Among the sub indicators, the construction confidence indicator stood at minus 32, same as the previous month, while the service companies confidence indicator scored 0 points, smaller than the revised 1 in January. The retail trade confidence indicator dropped to minus 4 from revised minus 2 in the previous month.
 
Tuesday, the Statistics Finland announced that the jobless rate stood at 9.5% in January, up from 7.9% in the previous month. A year ago, the jobless rate was 7%.
 
The number of unemployed persons totaled 250,000 in January, larger than the 184,000 persons in December. The number of unemployed was 206,000 a year ago. Total labor force amounted to 2.62 million in January, smaller than the 2.64 million last year.
 
Meanwhile, the labor force participation rate stood at 64.9% in January, down from 65.7% recorded last year. 
 
SPAIN
 
The IBEX in Madrid ended the week at 10,333.60, up 2.05%.
 
Spanish producer price index or PPI rose 0.9% year-year-in January, faster than the 0.4% growth in the previous month, the National Institute of Statistics said on Thursday. Economists were looking for an increase of 0.8%. A year ago, the PPI was down 0.5%.
 
On a monthly basis, the PPI was up 1% in January, compared to the 0.1% increase in the preceding month.
 
Bank of Spain Governor Miguel Angel Fernandez Ordonez said on Wednesday that labor reform and a credible fiscal consolidation policy were imperative to repair Spain's battered economy.
 
Speaking at a conference organized by KPMG in Madrid, Ordonez called on the people to accept the government's fiscal consolidation measures and warned that a failure to act now would damage the credibilty of the country.
 
The central bank chief urged the government to implement its reform plans with "concrete and ambitious measures that bring profound changes in our labor market".
 
"If we don't adopt an ambitious labor-market reform, the Spanish economy will enter a tough and complex period," Fernandez Ordonez said.
 
The comments come as thousands of workers protested in Spain's major cities against government spending cuts and plans to raise the retirement age by two years to 67.
 
Demonstrations took place in Madrid, Barcelona and Valencia in protest of Prime Minister Jose Luis Rodriguez Zapatero's Eur 50 billion spending cut plans and a civil service hiring freeze.
 
Spain has the largest unemploment rate in the Eurozone at 19.5%, with some 44.5% of under 25s without a job. 
 
PORTUGAL
 
Lisbon's PSI General brought the week to a close on 2,610.30, up 1.41%.
 
Cimpor-Cimentos de Portugal SGPS SA, Portugal's biggest cement maker, dropped the most in a year in Lisbon trading after a 4.15 billion-Euro ($5.6 billion) takeover bid by Cia. Siderurgica Nacional SA failed.
 
Cimpor fell 31.3 cents, or 5.4%, to 5.54 Euros, the most since Feb. 20 2009. The bidder garnered 8.57% of Cimpor's stock, Euronext Lisbon said Friday in a statement. The offer required at least one-third plus one share to proceed.
 
CSN failed to entice enough shareholders even after sweetening its bid for Cimpor by 7.5% to 6.18 Euros a share. The South American nation's biggest steelmaker raised its proposal after Brazilian cement makers Camargo Correa SA and Votorantim Cimentos SA announced agreements to acquire stakes in Cimpor.
 
Thursday, the Statistics Portugal announced that the economic sentiment indicator dropped to minus 0.8 in February from minus 0.7 in January. A year earlier, the confidence indicator was minus 3.1.
 
The confidence indicator on manufacturing industry stood at minus 18.6 in February, up from minus 18.8 in January. Manufacturing confidence was minus 35.2 a year ago.
 
The services confidence rose to minus 7.2 in February from minus minus 9.3 in January, while the confidence indicator on trade increased to minus 9.7 from minus 10.3. The construction and public works index dropped to minus 47 from minus 46.
 
Meanwhile, the consumer confidence indicator dropped to minus 34.4 in February from minus 32.3 in January. 
 
ITALY
 
Italy's benchmark FTSE MIB increased for a second session this week, rising 225.09, or 1.1%, to 21,068.32 in Milan. The gauge has fallen 3.2% this week.
 
Banco Popolare rose for a third day this week, increasing 13 cents, or 2.9%, to 4.68 Euros. The lender said in a statement that it sold 90% of Factorit SpA to Banco Popolare di Sondrio Scrl and Banca Popolare di Milano Scrl. The deal, coupled with terms of the covered bonds, gives more visibility to the bank's capital strengthening, Intermonte Sim SpA said in a note.
 
Beni Stabili advanced 1.95 cents, or 3%, to 67 cents, ending a three-day loss. Societe Generale SA upgraded the real-estate company to "hold" from "sell," citing the "highly likely adoption of SIIQ status."
 
Digital Bros sank the most in more than three weeks, declining 4.8% to 2.15 Euros. Intermonte Sim SpA cut its price estimate on the video game developer and publisher to 2.4 Euros from 2.7 Euros with a "neutral" rating unchanged. The brokerage cited "worse-than-expected results."
 
Geox climbed 43.25 cents, or 9.4%, to 5.02 Euros, the biggest gain in almost a year. The shoemaker posted a fourth-quarter net profit below expectations, though the dividend was above estimates, Cheuvreux said in a note. The company said that net income fell 7.7% to 66.7 million Euros in 2009 and revenue reached 865 million Euros. The company will pay a dividend of 20 cents on last year's earnings.
 
Mediaset rose for a second day this week, increasing 9 cents, or 1.7%, to 5.56 Euros. UBS AG rated the television company of Prime Minister Silvio Berlusconi a "neutral" and set a price estimate for the stock of 5.8 Euros.
 
Parmalat  advanced 5.9 cents, or 3.3%, to 1.85 Euros, a first gain this week. Italy's biggest dairy food company said full-year earnings before interest, taxes, depreciation and amortization rose 16% as the company raised prices and saved on purchases of raw milk.
 
The results were "strong as expected," Cheuvreux said in a note. The brokerage kept the stock on its "selected list." Intermonte Sim SpA increased its price estimate to 1.95 Euros from 1.85 Euros and kept a "neutral" rating.
 
Piaggio & C. rose 14 cents, or 6.9%, to 2.16 Euros, the highest in two years. Exane BNP Paribas added the Italian scooter maker to its "Emerging Consumer List" because of its business in India, Vietnam and Indonesia.
 
The company said in a statement that 2009 net income was 47.4 million Euros, 9.4% higher than 2008. Fourth-quarter results were "much better than expected at the operating level," Cheuvreux said in a note after the release.
 
Saras sank 11.5 cents, or 6.4%, to 1.69 Euros, extending losses of 4% Thursday. The refiner said in a statement that its 2009 adjusted net loss widened to 54.5 million Euros compared with a 22 million-Euro loss forecast from analysts surveyed. The company won't pay a dividend on 2009 earnings.
 
BofA-Merrill Lynch Global Research cut its price estimate to 1.92 Euros from 2.4 Euros and kept a "neutral" rating.
 
Telecom Italia fell for a second day, losing 1 cent, or 1%, to 1.05 Euros. Telefonica SA is focused on generating synergies through its industrial alliance with Telecom Italia and is comfortable with its current 46% stake in Telco SpA, Chairman Cesar Alierta said Friday on a conference call.
 
Deutsche Bank AG, which has a "buy" rating on Italy's biggest phone company, said the call with analysts held Thursday by Chief Executive Officer Franco Bernabe was "encouraging," though the postponement of the business plan's announcement "does not help."
 
Tenaris SA gained 19 cents, or 1.3%, to 15.25 Euros. Natixis Securities upgraded the stock to "add" from "reduce." Exane BNP Paribas lifted its price estimate on the world's biggest maker of seamless pipes used to extract oil and gas by 19% to 15.5 Euros and kept a "neutral" rating. The brokerage said in a note the "12% drop in the share price Thursday may look severe, but the valuation was clearly stretched before that."
 
UBS AG trimmed its prices projection for Tenaris' ADRs to $50 from $52. The brokerage kept a "buy" rating. 
 
GREECE
 
In Athens the Athex rounded out the week on 1,913.16, up 2.17%.
 
Wednesday, rating agency Standard & Poor's kept Greece's 'BBB+' long-term and 'A-2' short-term sovereign credit ratings on CreditWatch with negative implications.
 
"In our view, a further downgrade of one to two notches is possible within a month," S&P's credit analyst Marko Mrsnik said.
 
On December 16, the rating agency had lowered the long-term rating to its current level and maintained it on CreditWatch. At the same time, it placed the short-term rating on CreditWatch with negative implications. Since then, the Greek government has taken measures to cut its budget deficit to 8.7% of GDP by the end of 2010 from the current 12.7%.
 
"Greece's large budgetary and external imbalances, combined with a continued weak external economic environment, suggest, in our opinion, that deflationary pressures are likely to comPound the country's economic travails," Mrsnik said. "Consequently, we anticipate further pressures in Greece's banking sector, which would have residual effects on public finances."
 
The rating agency said its ratings on Greece will continue to depend on the sovereign's stand-alone credit rating fundamentals and not benefit from an implicit rating floor in case of extraordinary support organized by the EMU and its member states.
 
"If public support for the government's stability program decreases from its current level, compromising its execution, we could also lower the ratings," Mrsnik said.
 
Despite the currently apparent strong public support for the Greek government, implementation risks will persist over the course of the government's current stability program, S&P said.
 
Elsewhere, Bloomberg reported that Moody's Investor Service may cut its sovereign debt rating on Greece within months if the country fails to meet its deficit reduction plans. If Moody's lowers its ratings, Greek government bonds would no longer be eligible as collateral at the European Central Bank. Currently, the ECB accepts bonds rated BBB- by at least one rating agency as collateral for loans.
 
Fitch Ratings on Tuesday downgraded the long-term and short-term issuer default ratings, or IDR, of Greece's four largest banks, citing banks' already weakening asset quality and expected weakness in profitability.
 
The rating agency downgraded long-term ratings of National Bank of Greece, Alpha Bank, Efg Eurobank Ergasias and Piraeus Bank to 'BBB' from 'BBB+' and short-term ratings to 'F3' from 'F2'. The outlook on the long-term IDRs is negative.
 
At the same time, the agency has downgraded the banks' individual ratings to 'C' from 'B/C'. Separately, Fitch has also affirmed Agricultural Bank of Greece's long-term IDR at 'BBB-' and short-term IDR at 'F3'. The outlook on the long-term IDR is negative.
 
In a statement, Fitch said the required fiscal tightening that needs to be made by the Greek government will have a significant effect on the real economy, affecting loan demand and putting additional pressure on asset quality. The latter could result in higher credit costs, ultimately weakening underlying profitability.
 
Moreover, Fitch said the negative outlook on all the banks' IDRs could be revised to stable if Greek banks succeeds in reducing ECB funding and be able to rebalance their funding and liquidity position without impairing their profitability, and if their underlying earnings capacity proves to be more resilient.        

The UK Market 
Did it follow the Global trend .....
 UK MarketsLondon's FTSE 100 bounced on Friday, reclaiming much of the ground lost in the previous session as miners gained support from rallying metals, but results from Lloyds Banking Group were poorly received.
 
There was little reaction to final data on fourth-quarter growth in the UK, which was revised up to show gross domestic product rose 0.3%, up from the initial reading of 0.1%.
 
At the end of trading, the FTSE 100 closed 76.3 points or 1.5% higher at 5,354.52, clawing back some of Thursday's 65-point loss.
 
Lloyds reported a slightly narrower loss for 2009 than in the previous year, but the cost of impaired loans rose significantly. The part-nationalised company, which bought out struggling lender HBOS just over a year ago, announced full-year losses of £6.3bn, down from £6.7bn in 2008.
 
But the legacy of troubled assets acquired in its takeover of HBOS drove impairments up to £24bn. Lloyds said it saw improvements to bad debt losses over the second half and expected to make up further ground in 2010, in spite of "a weak upturn" in the economy.
 
Investors sold the shares down 4.4% to 52½ p.
 
Royal Bank of Scotland, whose results on Thursday showed a narrowing of losses, turned negative after early gains, losing 1.9% to 37.7p.
 
Other banks fared better. Barclays rose 1.8% to 312.4p, while HSBC gained 1.4% to 719.6p and Standard Chartered climbed 1.9% to £15.69.
 
Miners made up ground after heavy losses on Thursday. Rebounding metals prices on commodity exchanges helped support the sector and Rio Tinto climbed 3.5% to £33.42, while BHP Billiton added 2.4% to £20.07.
 
One of the best performances on the FTSE 100 was Serco, the support services group, which reported a 30% rise in full-year profit thanks to contract wins which contributed to a 27% rise in revenues.
 
The company, which takes on outsourcing work such as operating prisons and air traffic control, said it expected further contract wins in the UK after the general election. Serco shares gained 6.1% to 553.4p.
Asia Pacific Regional Markets 
Did they set the tone or follow the lead .....
Asiapac IndicesJAPAN

Japanese stocks rose, driving the Nikkei 225 Stock Average to a third weekly advance, as carmakers and retailers climbed following government reports on factory output and sales.
 
Toyota Motor Corp., the world's largest carmaker, gained 1.8%. A report showed production of transport equipment increased 5.5% in January from a month earlier, compared with a 2.9% drop in December. Factory output overall rose 2.5%. Isuzu Motors Ltd., Japan's biggest maker of light- duty trucks, climbed 2.3% after Citigroup Inc. raised its rating. Aeon Co., the country's No. 1 supermarket chain, gained 2.9% after Goldman Sachs Group Inc. boosted its rating.
 
The Nikkei 225 rose 0.2% to 10,126.03 at the close in Tokyo, and added 24.07 points this week, or less than 0.1%. The broader Topix index climbed 0.3% to 894.10 Friday, with about four stocks advancing for every three that declined. The number of shares traded Friday was the lowest since Feb. 16. The gauge climbed 0.6% this week.
 
The Topix has dropped 1.5% this year on speculation governments will withdraw measures that stimulated growth, and that Greece, Spain and Portugal will struggle to curb deficits. Companies in the gauge trade at 31.2 times estimated earnings, compared with 14.1 times for the Standard & Poor's 500 Index in the US and 12.2 times for the Dow Jones Stoxx 600 in Europe.
 
Factory production rose 2.5% from a month earlier, the 11th straight gain, the Trade Ministry said Friday in Tokyo. The median estimate of 28 economists surveyed was for a 1% increase.
 
The numbers suggest the economy will keep expanding on the back of Asian demand and the central bank is unlikely to act unless financial markets become volatile, said Yoshimasa Maruyama, a senior economist at Itochu Corp. in Tokyo.
 
Toyota increased 1.8% to 3,330 Yen. Isuzu rose 2.3% to 223 Yen after Citigroup boosted its rating to "buy" from "hold." Mazda Motor Corp., Japan's second-largest car exporter, increased 4% to 234 Yen. Automakers were the biggest contributor to the Topix index's advance.
 
Output at the country's 12 vehicle makers rose 31% from a year earlier to 753,773 units in January, the Japan Automobile Manufacturers Association said in a statement Friday.
 
Bridgestone Corp., the world's largest tiremaker by sales, gained 2.8% to 1,558 Yen, and Sumitomo Rubber Industries Ltd., Japan's second-largest tiremaker by market value, climbed 2.1% to 724 Yen. Tiremakers advanced the most among the Topix's 33 industry groups.
 
Aeon climbed 2.9% to 914 Yen after Goldman Sachs lifted its rating to "buy" from "neutral." Seven & I Holdings Co., which is Japan's largest retailer and operates 7- Eleven stores, gained 1.7% to 2,004 Yen. Yamada Denki Co., the country's biggest electronics retailer, rose 3.5% to 6,200 Yen.
 
Retail sales unexpectedly jumped 2.6% from a year earlier, according to the Trade Ministry, confounding analysts' median projection for a 0.2% drop.
 
SOUTH KOREA
 
Seoul shares finished higher on Friday, but Hynix Semiconductor dipped after news of block share sales and KB Financial declined after talk of accounting irregularities at its banking unit.
 
The Korea Composite Stock Price Index (KOSPI) finished up 0.45% at 1,594.58 points, snapping a two-session losing streak.
 
Hynix Semiconductor dropped 3.23% after news its leading shareholders plan to sell as much as 13% of the world's No.2 memory chip maker in block deals this year.
 
KB Financial Group, the holding firm of Kookmin Bank, extended losses from the previous session, dipping 0.41% after rumours of accounting irregularities at Kookmin, which the bank denied.
 
South Korea's Financial Supervisory Service (FSS) said late on Thursday it was looking into discrepancies in some entries in the bank's ledger that the bank had attributed to a lapse in the maintenance of its accounting system, not irregularities.
 
UBS in a note on Friday echoed this view, saying it appeared to be an "accounting reconciliation issue" and keeping its "buy" rating and target price of 73,000 won on KB Financial shares.
 
Shares in IB Sports, a sports agency representing Kim Yuna, who won the gold medal in women's figure skating in the Olympics on Friday, plunged 14.42% as investors moved quickly to lock in profits following the victory. Trading volume, at 3.8 million shares, was more than 30 times that seen Feb 18.
 
Maeil Dairy, which Kim endorses, rose 2.46%.
 
Defensive issues outperformed, with KT Corp, South Korea's dominant fixed-line operator and No.2 mobile carrier, ending up 1.94%. Tobacco monopoly KT&G shed 1.58%. 
 
HONG KONG
 
Hong Kong shares rose 1.03% on Friday on increasing optimism for fourth-quarter earnings, with gains led by mobile carrier China Unicom after a broker upgrade.
 
The benchmark Hang Seng Index ended up 209.13 points at 20,608.70 with HSBC (0005.HK), the most actively traded stock, gaining 0.6% ahead of its earnings next Monday.
 
The China Enterprises Index of top locally listed mainland Chinese stocks closed up 1.36% at 11,543.73.
 
Although the index is up 2.4% in February, it has fallen 5.8% since the start of the year, as investors fret about further monetary tightening measures from China and the outlook of the global economic recovery.
 
But in March, investors will look ahead to fourth-quarter results from most Chinese companies and China's annual parliamentary session.
 
Analysts expect China's National People's Congress, set to be held next Friday, to reaffirm an appropriately loose monetary policy despite recent official liquidity tightening steps.
 
China's No. 2 mobile carrier China Unicom, which topped percentage gainers among the blue-chips, rose as much as 8.2% to a five-week high after Deutsche Bank upgraded the stock to buy from sell. The stock closed up 7.6%.
 
Turnover was at HK$54.19 billion ($7.07 billion) from Thursday's HK$61.5 billion.
 
Sentiment was also boosted by a Taiwan media report that the Taiwan government would allow brokerages and retail investors to buy red chips in Hong Kong and Macau directly in a further easing of business ties with China.
 
Shares in Wynn Macau Ltd (1128.HK), a unit of Wynn Resorts, soared 5.4% to a more than one-month high, a day after the casino operator posted quarterly results that beat analysts' expectations, boosted by a strong economy and strict cost controls. The shares closed up 1.7%.
 
CHINA
 
China's stocks fell for the first time in three days, trimming a monthly advance, as commodity companies declined after raw-material prices dropped Thursday. Automakers advanced on earnings prospects.
 
Jiangxi Copper Co., the nation's biggest producer of the metal, retreated 1.8% and Aluminum Corp. of China Ltd. slid 1.3%. Anhui Jianghuai Automobile Co., a unit of the largest light-truck exporter, paced gains by automakers after reporting higher profit. Huatai Securities Co. advanced 5.3% on its first day of trading in Shanghai.
 
The Shanghai Composite Index dropped 8.68, or 0.3%, to 3,051.94 at the close. The gauge added 2.1% this month as easing inflation delayed prospects for higher interest rates. China's markets were shut last week for Lunar New Year holidays. The CSI 300 Index, measuring exchanges in Shanghai and Shenzhen, lost 0.3% to 3,281.67.
 
Concern the government will raise borrowing costs and curb lending to cool the economy have dragged the Shanghai index down 6.9% this year. The central bank said Thursday the nation's economic and financial development faces a "more severe and complicated" situation in 2010.
 
Jiangxi Copper lost 1.8% to 35.04 RMB. Aluminum Corp. of China, the nation's biggest maker of the lightweight metal and also called Chalco, dropped 1.3% to 12.68 RMB. Zhuzhou Smelter Group Co., China's biggest producer of refined zinc, fell 2.1% to 13.77 RMB.
 
The London Metal Exchange Index of six metals including copper and zinc dropped 2.2%. Crude oil for April delivery slumped 2.3% in New York Thursday, the steepest decline in almost three weeks. The contract is headed for its first weekly decline in three.
 
Jianghuai Automobile gained 4.1% to 10.63 RMB, the biggest gain in almost three weeks. Profit for 2009 jumped 482% to 335.5 million RMB ($49 million) from a year earlier, the company said in a preliminary earnings statement Friday.
 
SAIC Motor Corp., China's largest carmaker, advanced 2.5% to 22 RMB. FAW Car Co., which makes passenger cars in China with Volkswagen AG, gained 3.4% to 23.40 RMB.
 
Huatai Securities, a Nanjing-based brokerage, gained 5.3% to 21.06 RMB. The company raised 15.7 billion RMB from an initial public offering after selling the shares at the low end of the price range. The IPO was the biggest in China since Metallurgical Corporation of China Ltd. in September.
 
In 2009, shares in Chinese IPOs climbed an average 74% on their first day of trading, according to data compiled. Before Friday, that average had dropped to 28.5% for debuts this year, with five companies falling.
 
Sichuan Road & Bridge Co. led gains among infrastructure companies in China's western Sichuan and Chongqing region on speculation they will benefit from the government's plan to revitalize the western part of the country.
 
Sichuan Road & Bridge, a road builder, jumped the 10% daily to 9.97 RMB, the highest since June 2008. Sichuan Expressway Co., a toll-road operator, climbed 10% to 9.30 RMB, capping a 17% gain this week.
 
The government said this week it will speed up the relocation of industries including information technology, light manufacturing and textiles to central and western regions.
 
Huadian Power International, the listed unit of China's fourth-largest power producer, added 1% to 5.18 RMB after saying it expects to post a profit of between 1.1 billion RMB and 1.3 billion RMB for 2009, compared with a loss in 2008.
 
Sichuan Changhong Electric, China's second- biggest television maker, slid 2.2% to 7.25 RMB. It said a report by the China Business News newspaper that the company had artificially inflated its sales for 1998 by 5 billion RMB was "untrue." Changhong said its sales and accounting methods in 1998 were "completely accurate and legitimate." 
 
TAIWAN
 
Taiwan's share prices closed higher Friday, with the weighted index, the market's key barometer, moving up 9.14 points, or 0.12%, to close at 7,436.1.
 
The local bourse opened at 7,451.17 and fluctuated between a high of 7,479.28 and a low of 7,383.68. Market turnover totaled NT$80.46 billion (US$2.5 billion).
 
Of the eight major stock categories, five categories gained ground. Construction issues gained 1.9%, the most of any category, followed by paper and pulp issues, which rose 0.6%.
 
Cement, plastic and chemical, and banking and financial shares all advanced 0.5%, respectively.
 
Textile shares remained unchanged, while foodstuff shares and machinery and electronics issues both lost 0.2%.
 
Losers outnumbered gainers 1,772 to 941, with 298 remaining unchanged.
 
Foreign investors and Chinese QDIIs sold a net NT$1.52 billion in shares, the third consecutive day in which they sold more than they bought. For the week, they were net sellers of NT$11.52 billion in shares.
 
THE PHILIPPINES
 
Philippine stocks ended higher Friday as the buying on selected blue chips allowed it to buck the poor Thursday performance of the US equities.
 
The bellwether Philippine Stock Exchange index rose by 0.41% or 12.49 points to 3,043.75 on Friday, while the broader all share index gained 0.64% or 12.38 points to 1,928.34.
 
Trading was thin where only 975 million shares worth 2.75 billion pesos (59.4 million US Dollars) changed hands. Foreign buyers beat sellers at 1.3 billion pesos (28.1 million US Dollars).
 
Market players were bullish as shown by the 79 issues that gained as compared with the 44 stocks that dipped. A total of 50 shares closed flat.
 
Of the six counters, only holding firms tumbled, losing as much as 0.62% or 10.70 points to 1,697.48. Financial stocks gained the most, finishing at 654.78 or 0.93% higher.
 
Homegrown fastfood giant Jollibee Foods Corp. and food manufacturing company Universal Robina Corp. are just two of the consumer-related issues that ended higher Friday. Manila Electric Co., Philippines' largest power distributor, also finished in the positive.
 
Following the positive performance of these issues, the local composite index ended the week in the positive turf, posting a week-on-week gain of 1.02%. For the month of February, the local market was up by 1.03%, reversing its poor performance in the previous month.
 
Abadillo said that while the local market managed to stay at the 3,000 level, this is hardly sustainable on dearth of positive news.
 
Concerns over the fiscal crisis continued to hound trading in the US and emerging markets. News that global debt watcher Moody 's Investor Service saying that it may downgrade the sovereign credit rating on Greece, sent jitters in the US market. The Dow Jones industrial average lost 53 points or 0.5%.
 
Blue chips closed mixed. Heavyweight Philippine Long Distance Telephone Co., the most actively traded issue on Friday, rose by 0. 58%. Metropolitan Bank and Trust Co. and Ayala Land, Inc. closed flat. The stock price of Ayala Corp. and Alliance Global Group, Inc., two of the Philippines'biggest holding firms, finished lower.
 
SINGAPORE
 
The shares prices in Singapore slightly rose 1.71 points on Friday with the benchmark Straits Times Index (STI) closing at 2,750.86 points.
 
The overall volume stood at 1.28 billion shares worth 1.44 billion Singapore Dollars (about 1.02 billion US Dollars).
 
United Overseas Bank eased 0.6% even though the third-biggest lender posted a 57% rise in quarterly profit, helped by a sharp fall in bad debt charges, beating analysts' expectations.
 
UOB came off after results due to profit-taking. Generally, Singapore sentiment Friday largely tracked regional markets and the market was looking for developments on Greece's debt.
 
Palm oil producer Golden Agri-Resources fell 1.85% after it reported a 54% decline in quarterly net profit and a 46% drop in annual profit, missing analysts' forecasts.
 
Gainers included top telecoms firm Singapore Telecommunications, which rose 1.3%, and top developer CapitaLand, which rose 1.1%.
 
INDONESIA
 
Like Malaysia, Jakarta markets were closed for a public holiday Friday.
 
THAILAND
 
The Stock Exchange of Thailand (SET) composite index moved up 4.27 points, or 0.60%, to close at 721.37 points on Friday.
 
Some 2.24 billion shares worth 19.70 billion baht (about 596.96 million US Dollars) changed hands.
 
The Thai index climbed to its highest since Jan. 21 as foreign investors continued buying, dealers said.
 
Judges in Thailand's Supreme Court were reading out a verdict on the assets of ousted premier Thaksin Shinawatra. They have to decide whether his assets were illegally accumulated and should be confiscated. The hearing continued after the market close.
 
Foreign investors have bought Thai shares worth a net $191 million over the past four days.
 
Listed companies in Thailand are trading at just 10.6 times estimated 2011 earnings, making the market one of the cheapest in Asia after Pakistan. It compares with Indonesia's 12.9 and the Philippines' 12.79, according to Thomson Reuters data.
 
Among outperformers, Thai Airways International surged 6.1% after the national carrier reported better-than-expected fourth-quarter earnings and gave a positive profit outlook for 2010.
 
Top coal miner Banpu advanced 2.6% after Kim Eng Securities forecast earnings would rise in the first quarter from the previous quarter, citing a resumption in activity at BLCP, a 50% owned unit, after a shutdown.
 
MALAYSIA
 
Kuala Lumpur markets were closed for a holiday Friday.
 
INDIA
 
Indian shares climbed 1.1% on Friday to their highest close in more than two weeks, after the national budget raised tax exemption limit for individuals and boosted consumption power.
 
Financials led the gainers as the 2010/11 budget proposed a recapitalisation plan for state-run banks and infrastructure spending that would help increase demand for loans.
 
The 30-share BSE index closed up 1.08%, or 175.35 points, at 16,429.55, helping the benchmark to notch a 0.4% gain in February after falling 6.3% in January.
 
In his budget, Finance Minister Pranab Mukherjee raised the tax-exemption slab for personal incomes, enabling higher consumer spending.
 
Mukherjee also withdrew some incentives to help tide the economy through the worst of the downturn, but analysts said this would not stop the economic recovery.
 
"The market's rally post the budget reflects a realistic and progressive F2011 budget," Morgan Stanley said in a note. "The government is achieving fiscal consolidation program which is positive for earnings growth and market performance."
 
The BSE index rose as much as 2.6% after the budget before paring gains. Twenty-five of its components advanced. 
 
Mukherjee said the 2010/11 fiscal deficit will decline to 5.5% of GDP in the new year from 6.9% this year, slightly lower than a Reuters poll forecast of 5.6%.
 
Expectations for robust economic growth in the new fiscal year will help India reach its deficit target without making tough decisions to cut spending, analysts said.
 
Top lender State Bank of India climbed 3.2% while rivals ICICI Bank and HDFC Bank rose 2.4% and 1% respectively.
 
Auto makers were boosted by the prospect of greater consumer spending, and analysts said a rise in excise duty on large cars and vehicles was in line with expectations.
 
Leading vehicle maker Tata Motors was also helped by a rise in sales and margins at its Jaguar Land Rover unit as luxury buyers returned after the global crisis. The stock rose 6.3%.
 
Top car maker Maruti Suzuki India and utility vehicle maker Mahindra and Mahindra gained 4.5% and 5.1% respectively.
 
Cigarette-to-hotel group ITC fell 6.2% to 232.05, after the budget increased excise duty on cigarettes and tobacco products.
 
Bharti Airtel, which is in the process of buying most of the African assets of Kuwaiti telecoms Zain for $9 billion, joined the broad market rally and gained 1.1% to 279.25 Rupees.
 
"While we believe that the premium paid by Bharti to acquire Zain is largely factored in to Bharti's stock price, we see more near-term risks than upside catalysts to re-rate the stock," Goldman Sachs said, cutting the stock to neutral from buy.
 
In the broader market, gainers were nearly twice the number of losers on volume of 363 million shares, higher than last week's daily average of 331 million shares.
 
The 50-share NSE index  closed 1.3% higher at 4,922.30. Indian markets are closed on Monday for a public holiday.
 
Top private power producer Tata Power shed 4.1% to 1,212.95 Rupees, as its third-quarter consolidated result disappointed, dealers said.
 
Ranbaxy Laboratories, Cipla and Sun Pharmaceutical rose between 1.2-3.7% after the budget allowed weighted deduction of 200% on in-house research and development by drug makers.
 
Real estate stocks such as DLF and Unitech rose 2.7% and 1.9% respectively after the budget proposed a slew of tax concessions and measures that could boost demand for the sector.
 
ABB dropped 1.6% to 794.75 Rupees, after the power and automation technologies provider said its annual revenue fell 9%.
 
AUSTRALIA
 
Australian shares finished the day higher as a number of company reported their earnings Friday.
 
The S&P/ASX 200 gained 43.6 points or 0.95% to 4,637.7. The All Ords put on 36.2 points or 0.93% to 4,651.1.
 
By industry, energy rose 44.3 points or 0.3%, materials added 148.5 points or 1.27% and financials were 57.6 points or 1.25% higher. Industrials fell 16.8 points or 0.44%.
 
Among the major miners, BHP Billiton put on $0.65 or 1.61% to $41.10 and Rio Tinto gained $1.10 or 1.59% to $70.50.
 
In financials, ANZ Friday announced that unaudited underlying profit for the four months to 31 January 2010 was $1.6 billion, 16% higher than the same period the previous year. The bank also said income growth was around eight% and cost growth around seven%, "based on further investment in the business, particularly in Institutional and Asia". It also said group margins are 14 basis points higher, excluding markets, on the second half 2009. Shares rose $0.89 or four% to $23.14.
 
Among the other major banks, CBA gained $0.74 or 1.39% to $53.92, Westpac added $0.44 or 1.71% to $26.13 and NAB increased $0.75 or 3.04% to $25.44.
 
In energy, AGL reported half year statutory net profit of $183.7 million, down 88.9% from $1.65 billion in the same period a year earlier. Underlying net profit was $234.8 million, compared with $192.5 million in the same period a year earlier. The energy company also reaffirmed its full year guidance for underlying net profit of between $390 million to $420 million. Shares put on $0.57 or 4.13% to $14.37.
 
Woodside Petroleum was $0.27 or 0.63% higher to $43.37 and Santos lost $0.05 or 0.38% to $12.96.
 
And among the retailers, Woolworths announced half year net profit rose 11.4% to $1.1 billion from $998.4 million in the same period a year earlier. And sales rose 4.2% to $27.2 billion from $26.1 billion a year earlier. On outlook, the company said it expects the second half of the year to be impacted by low price inflation and the "cycling of government stimulus packages". The company expects net profit to grow in the range of eight to 11%. Shares jumped $1.39 or 5.46% to $26.84.
 
Wesfarmers lost $0.03 or 0.1% to $31.13.
 
Also in retail, Harvey Norman announced net profit from continuing operations was $158.6 million for the half year, up 59.9% from $99.33 million in the same period a year earlier. The company also said the interim dividend is seven cents fully franked, compared with five cents in the same period a year earlier. Chairperson Gerry Harvey said the company has an optimistic outlook. Shares rose $0.06 or 1.59% to $3.83.
 
JB Hi-Fi lost $0.30 or 1.5% to $19.48 and David Jones fell $0.12 or 2.5% to $4.74.
 
QBE announced net profit of $1.97 billion in calendar 2009, compared with $1.86 billion in 2008. Insurance profit fell five% from last year to $2.064 billion. The insurer said the reduction was mostly due to lower savings from previous year estimates and lower interest yields. Shares dopped $1.60 or 6.96% to $21.40.
 
Crown reported net profit of 115.3 million for the half year to 31 December 2009, compared with a net loss of $409.7 million in the same period a year earlier. CEO Rowen Craigie said the results for Crown Melbourne and Burswood were "satisfactory".
 
"While we started the half year strongly, our domestic casino operations were adversely impacted later in the half due to a softening of consumer confidence and a greater than expected impact of refurbishment works at the two properties." Shares gained $0.17 or 2.2% to $8.
 
And Breville Group reported net profit of $15.3 million, up 42.6% from $10.8 million. Sales revenue dropped 3.8% from $246.3 million to $236.9 million. The company said this was a result of "higher currency translation rates and the impact of rationalising the US non-electrical homewares category". Breville said in the statement it is "well positioned" for the second half and reaffirmed its guidance for the full 2010 financial year. Shares jumped $0.15 or 9.8% to $1.68.
 
NEW ZEALAND
 
New Zealand shares ended flat Friday after a mixed day characterized by low volumes and few surprises on the results front.
 
NZX-50 Index closed broadly flat, down 0.1%, or 4.4 points, at 3,156.10.
 
AMP NZ Property Trust moved sharply after announcing significant changes in its governance and management structure.
 
AMP rose 4.1% to end at NZ$0.77.
 
Network infrastructure provider and gas distributor Vector closed flat at NZ$1.94 although its profit from continuing operations rose 12%, helped by higher revenue and lower net borrowing costs.
 
Airliner Air New Zealand also reported results, which saw an improved fiscal first half. Air NZ shares ended the day at NZ$1.29, down 1.5%.
 
Auckland International Airport also closed flat at NZ$1.86, although it released an improved first-half net profit and upgraded its full-year guidance. Schaper said this was because the market was well informed about the results due to information in the company's recent rights issue.
 
Medical equipment retailer EBOS, the index's biggest winner, finished up 5.2% at NZ$6.28 after its first-half results were well received Thursday.
 
Telecom rallied to finish up 0.9% at NZ$2.33 although the company remains in the media spotlight due to issues with its emergency call operation service as it went down overnight.
 
Fellow heavyweight Fletcher Building closed down 0.9% at NZ$7.93 after Statistics New Zealand reported January dwelling consents had fallen 2.8%.
 
The NZZ-50 index closed up 1.5% for the week but fell 0.3% for the month as the result season remained void of any big surprises.         
Global Commodities 
'Food for thought' or 'a Grain of truth' .....
 CommoditiesSugar prices plunged 11% this week, as countries including Egypt and Pakistan delayed buying.
 
The importers hope the arrival of the latest Brazilian sugar cane crop from late March onwards will cut prices.
 
ICE March raw sugar fell to 23.86 cents per Pound, down 2% on the day and an eight-week low. The cost of the sweetener has plunged 23.5% since its 29-year high of 30.40 cents in early January.
 
Traders said "waves of speculative and fund selling" crushed the sugar price through the week. They added that the 25 cents level, previously a key support, was now a ceiling. "While the fall will overshoot or already has, it will be hard to get back up through key levels around 25 cents and higher," said one.
 
In other commodities, crude oil prices remained in the $70-$80 a barrel range that has largely prevailed since October amid a lacklustre recovery in energy demand in the US and Europe. Consumption in emerging markets is,however, booming.
 
In late trading on Friday, Nymex April West Texas Intermediate rose to $79.77 a barrel, roughly flat on the week. ICE April Brent traded at $77.60 a barrel.
 
Gold prices were largely unchanged on the week, with bullion on Friday trading at $1,115 a troy ounce in the London market.
 
The gold market was hit on Friday by an increase in India's gold import duties from Rs200 per 10 grams to Rs300.
Global Currencies 
In for a Penny, in for a Pound .....
UK Markets
 The Pound tumbled to a nine-month low against the Dollar and its weakest level against the Yen for 11 months this week as fears grew over the health of the UK economy.
 
Figures on Thursday showing a sharp drop in UK investment expenditure in the fourth quarter spooked investors, raising fears over a possible double-dip recession in the UK. This saw Sterling slide across the board.
 
Dovish comments earlier in the week from Mervyn King, governor of the Bank of England, indicated that there was a chance of further quantitative easing in the UK with the prospect of looser monetary policy likely to undermine Sterling.
 
Meanwhile, investors were becoming more concerned about the UK's fiscal deficit with polls showing the increasing prospect of a hung parliament after the UK general election, expected in May.
 
Such a result could produce a government that lacked the strength to make tough decisions necessary to rein in the deficit, traders reasoned.
 
Additionally, UK economic data have generally surprised to the downside during the past couple of months.
 
During the week, the Pound fell 2% to $1.5148 against the Dollar, its weakest level since May, and dropped 1.7% to a six-week low of £0.8950 against the Euro.
 
The Pound's fall was more dramatic against the Yen, however, plunging 4.7% to Y134.93 over the week, its lowest level for 11 months.
 
The Yen was boosted as stock markets struggled in the face of rising risk aversion.
 
Renewed fears over Greece's fiscal problems, lower-than-expected US consumer confidence data and weaker-than-forecast German business confidence figures all conspired to dent investor optimism, fuelling haven demand for the low-yielding Japanese currency.
 
Over the week, the Yen rose 2.9% to Y88.96 against the Dollar and climbed 3.1% to a one-year high of Y120.79 against the Euro.
 
Haven demand also supported the Dollar, keeping it close to a nine-month high against the Euro and a seven-month peak against the Swiss Franc.
 
The Dollar rose 0.3% to $1.3580 against the Euro on the week and climbed 0.2% to SFr1.0777 against the Swiss franc.
 
The Dollar's advance was more pronounced against commodity-linked currencies, which are particularly sensitive to concerns over global growth.
 
The Dollar rose 2% to C$1.0603 against the Canadian Dollar over the week, climbed 1% to $0.8899 against the Australian Dollar and gained 0.7% to $0.6940 against the New Zealand Dollar.
 
A quiet South African Rand tracked the Euro in the afternoon session on Friday. The local currency earlier bounced off R7.68 against a weaker Dollar.
 
The Rand was bid at R7.7188 to the Dollar from R7.7323 at its previous close. It was bid at R10.4645 to the Euro from its previous close of R10.4558 and was at R11.7099 against the Sterling from R11.7636.
 
The Euro was bid at $1.3571 from $1.3536 previously.
 
And finally in the currency markets, here in China the RMB rose against the US Dollar late Friday afternoon as trading companies sold surplus holdings of the US unit after completing month-end trade settlement.
 
On the over-the-counter market, the US Dollar was at CNY6.8260, down from Thursday's close of CNY6.8268. It traded between CNY6.8259 and CNY6.8268. 
China 
Key news eminating from China this week .....
 China MarketsNew real estate policies released yesterday attempts to rein in ballooning housing prices and property speculation in China's capital city.
 
The Implementing Opinions for Promoting the Steady and Healthy Development of the Real Estate Market in Beijing (Implementing Opinions), asserts adherence to a 40 percent initial housing loan payment for second properties and single land leases of commercial housing should not exceed 20 hectares.
 
Foreigners will now be restricted to buying only one piece of property per person. Moreover, foreign buyers who have worked or studied in the country for less than a year will not be allowed to purchase commercial housing.
 
The capital is also requiring that property developers unveil entire houses in one time within three days. Starting January 1, 2010, individuals transferring the ownership of their non-common houses held for less than five years should contribute the full business tax amount.
 
Individuals transferring the ownership of their non-ordinary houses held  for five years or more, or common houses which held for less than five years will be required to pay business tax on the balance between the selling price and the original purchase price of the house.
 
New apartment prices in China's major cities have been increasing at rapid pace; way beyond what average salaries can afford. In 2009, average prices for real estate in Shanghai, Hangzhou and Shenzhen began at about RMB20,000 (US$2,9451) per square meter.

 
According to real estate industry website Soufun.com,  52 new property projects in Beijing to be launched in March will cost an average of RMB22,000 per square meter.
 
************************************
 
Shares of Shanghai Pudong Development Bank were suspended from trading on Friday after the medium-sized Chinese lender said it was preparing to take on strategic investors, while analysts said China Mobile, the world's biggest wireless operator, would buy a 20% stake.
 
The bank, in which Citigroup has a 3.8% stake, plans to sell shares to China Mobile for about Rmb40bn ($5.9bn), according to a research report by Guotai Junan Securities, one of the country's biggest brokerages.
 
Wu Yonggang, author of the Guotai Junan report, declined to reveal the source of the information. Pudong Development could not be reached for comment. China Mobile also declined to comment.
 
Although Citi's stake in Pudong Development would be diluted as a result of the fundraising, the US bank was unlikely to buy new shares to shore up its holding, analysts said, adding that Citi had been focusing more on Guangdong Development Bank, another Chinese lender in which it has a 20% stake. Citi declined to comment on Friday.
 
China Banking Regulatory Commission also refused to comment. It is understood that there would not be any regulatory problems as China Mobile did not have stakes in other Chinese lenders.
 
Mr Wu said the deal would allow Pudong Development to boost its capital adequacy ratio by four percentage points to close to 14%.
 
"It would be able to support Pudong Development's steady and rapid growth in the next three years," wrote Mr Wu.
 
Pudong Development is one of the many Chinese state-controlled banks that are seeking to raise funds to shore up their balance sheets recently, following a year of unprecedented loan growth and the introduction of stricter capital requirements by regulators.
 
This week alone, Chinese lenders including Bank of Communications and China Merchants Bank, have announced plans to raise up to Rmb76bn through equity and bond sales. Analysts said at least Rmb150bn of bank fundraising was in the pipeline.
 
Pudong Development on Friday said it would announce details of the new investors by March 4.
 
Separately, the CBRC on Friday said total assets held by Chinese banks rose 25.2% year-on-year to Rmb80,500bn at the end of January. The ratio of non-performing loans dropped to 1.48%, 0.1 percentage point lower than the beginning of the year while their combined value fell Rmb14.3bn to Rmb483bn.
 
************************************
 
An export recovery in the world's most populous country is running up against an unexpected constraint - manpower.
 
With Chinese exports back to their early 2008 levels, factory owners are worried about their ability to service a surge in orders now that a new manufacturing cycle has begun after the lunar new year holidays.
 
The problem is particularly acute in southern Guangdong province and its Pearl river delta manufacturing heartland near Hong Kong, the region known as "the workshop of the world".
 
Guangdong accounts for a third of China's exports and would rank as one of the world's 10 largest exporters if it were a country in its own right. But the province's ability to attract and retain migrant labour from China's vast interior is slipping.
 
Quantifying labour shortages is extremely difficult given large variances by region, industry and skill level. Recruiters for Galanz, the world's largest manufacturer of microwave ovens, were this week offering production line workers a relatively robust monthly base wage of Rmb1,700 ($250). Skilled technicians in much greater demand were commanding 65% more.
 
In Dongguan, a manufacturing centre near Guangzhou, the local government estimates that there is now just one worker for every two jobs. At the height of the crisis, which for Chinese manufacturers came last spring, local officials calculated there were four workers competing for every three jobs.
 
Beijing's successful economic stimulus programme has contributed to a coastal scramble for labour, by increasing investment and employment opportunities elsewhere.
 
In December, China unveiled the world's fastest passenger train service between Guangzhou and the central city of Wuhan, covering 1,100km in just three hours. The Harmony Express line has reduced travel time between Guangzhou and Shaoguan, an industrial backwater in Guangdong's remote mountain region, to just 40 minutes, anchoring local workers closer to home.
 
************************************
 
Carlyle Group, the US private equity firm, has unveiled another agreement with a Chinese partner, this time to launch a local currency fund focused on smaller company investments.
 
Carlyle is teaming up with Fosun Group, which calls itself China's largest privately-owned conglomerate, to jointly sponsor a renminbi fund that will begin with $100m of seed capital and raise capital from Chinese investors.
 
The tie-up further deepens Carlyle's engagement in China at a time when foreign private equity groups are searching for ways to access the country's fast-growing markets.
 
Overseas private equity groups have struggled to make inroads into China, partly because of strict regulations governing the use of Dollar-based offshore funds to acquire local assets.
 
Foreign private equity groups are also increasingly being challenged by aggressive domestic operators that have sprung up with the encouragement of the Chinese government.
 
Carlyle last month inked plans to establish a renminbi-denominated fund in co-operation with the Beijing municipal government.
 
It signed a memorandum of understanding with the financial arm of Beijing's local government and expects the fund to begin operating later this year.
 
Carlyle and Fosun will each commit $50m to the fund, which will be jointly managed by the two sides and will look for investment and co-operation opportunities globally as well as in China, according to Guo Guangchang, Fosun's chairman.
 
Mr Guo said many of the Chinese companies in Fosun's portfolio are looking to expand and invest overseas and Fosun intends to leverage Carlyle's strong brand and global network to help them achieve that goal.
 
Fosun is a diversified conglomerate with interests ranging from steel and real estate to retail and pharmaceutical operations and has invested in numerous state-owned enterprises.
 
Carlyle was an early mover in China and has made about 50 investments to date with an aggregate equity expenditure of $2.5bn, the biggest by a single foreign private equity group.
 
However, even Carlyle has struggled to secure deals in some fast-growing sectors, and it hopes the formation of local currency funds will help it to source opportunities and overcome regulatory obstacles.
 
David Rubenstein, Carlyle founder, told the Financial Times he expects other foreign private equity companies operating in China to emulate Carlyle's move to partner with a prominent domestic entreprenEur.
 
************************************
 
Zhu Min, one of the most prominent financial officials in China, is to become a special adviser to the head of the International Monetary Fund in the latest sign of China's increasing voice in global financial institutions.
 
Mr Zhu has been one of the deputy governors of the Chinese central bank since October. Before that he was a senior executive at Bank of China and spent six years working for the World Bank. His move to the role at the IMF follows the selection in 2008 of Justin Yifu Lin, the Chinese academic, as chief economist of the World Bank.
 
The appointment comes at a time when China is pushing for a larger role at the IMF and in global economic policymaking. The G20 summit in London last year agreed on a reform of the IMF that would give China a stronger voice.
 
Mr Zhu, who will start at the IMF in May, will work as a special adviser to Dominique Strauss-Kahn. "Zhu Min brings a wealth of experience in government and the financial sector," said Mr Strauss-Kahn.
 
His move last year to the People's Bank of China sparked speculation he was being groomed for one of the three deputy managing director positions at the IMF, conjecture that is not likely to end with his new role. But the IMF already has a deputy managing director from Asia, Takatoshi Kato of Japan, and developing countries have a representation with Murilo Portugal from Brazil.
 
Mr  Zhu is a respected figure in international financial circles. At this year's World Economic Forum he made headlines when he said the Dollar could rise sharply if investors unwound the carry trade involving the US currency. "It is a massive issue. Estimates are that the Dollar carry trade is $1,500bn - which is much bigger than Japan's carry trade was," he said.
 
One sensitive issue for Mr Zhu will be the RMB, which Mr Strauss-Kahn has said repeatedly should rise in value to assist global rebalancing.
 
In December Mr Zhu said the sharp fall in China's exports last year had given Beijing reason to depreciate rather than appreciate the currency, but China had kept the RMB stable against the US Dollar which had helped steady the global economy. 
Summary  
The coming week looks like .....
Commodities Indices
 In the US, brace yourself because bad weather could be blamed for a small rise in the February unemployment rate (seriously), which will be released next Friday.
 
This week, the number of people filing first-time unemployment claims jumped, in part because of the weather. The monthly jobs report comes as the labor market is being watched closely for any sign of revival. The jobless rate fell to 9.7% in January from 10% in December, according to a government report, but a separate government survey showed the economy continued to shed jobs last month.
 
Major retailers are expected to post same-store sales increases from the low levels of a year earlier, near the depth of the recession. But recent snowstorms likely kept shoppers home, reducing the size of sales gains. This week, Target Corp. (TGT), Home Depot Inc. (HD) and Macy's Inc. (M) joined a parade of consumer-focused companies in warning that sales gains will continue to be slow, especially in the first half of the year.
 
Edmunds.com predicted Thursday that Toyota's US market share would fall to its lowest level since July 2005 in February as the Japanese auto maker's image has faltered after recalls of eight million vehicles. February car sales figures will be released Tuesday. The car-shopping Web site estimated five of the seven largest US auto makers would post year-to-year growth and new vehicle sales are expected to be 785,000 units, up 14% from the depressed performance a year earlier.
 
The government will report on January personal income and spending Monday along with January construction spending. The same day, the Institute for Supply Management will issue its February manufacturing index, followed Wednesday by its report on the services sector. Also Wednesday, the Federal Reserve will release its Beige Book, describing economic conditions in various regions. A day later, the government's revised figures on fourth-quarter productivity are due along with reports on January factory orders and January pending-home sales.
 
Among the companies reporting quarterly results next week are retailers, including Dress Barn and Foot Locker; big food companies, such as Del Monte Foods and Wendy's/Arby's Group; and energy firms. Satellite-television provider DISH Network and spinoff EchoStar post results Monday, and warehouse discount clubs BJ's Wholesale Club and Costco Wholesale both report Wednesday. As of 19 February, 422 companies in the Standard & Poor's 500 Index had reported their latest quarter's results, and 72% reported better-than-expected bottom lines.
 
It's those low expectations again!
 
Focus turns to next week's central bank policy meetings in Australia and Canada on Tuesday and the UK and EU on Thursday.
 
The BOC is expected to maintain steady rate policy, the RBA is expected to hike rates 25 bps, the ECB is expected to remain on hold and there is uncertainty about whether the BOE will maintain its current level of asset purchases.
 
The Bank of England will release their monetary policy decision and with so much emphasis this week being put on the possibility of further asset purchases by the BoE we could see further pressure on the Pound up to that release.
 
Next week's UK economic calendar includes the March 1st release of February manufacturing PMI expected at 56.4 compared to 56.7 last month.
 
January consumer credit, mortgage applications and mortgage lending will also be released on March 1st. Consumer credit is expected at 0.150 compared 0.052 last month, mortgage applications are expected at 52K compared to 59K last month and mortgage lending is expected at 1.102bln compared to 1.165bln last month.
 
On March 3rd February consumer confidence index will be released expected at 68 compared to 69 last month along with February services PMI expected at 54 compared to 54.5 last month.
 
Next week's Japanese economic calendar includes the March 2nd release of January household spending expected at -0.5% compared to 1% last month. The January unemployment rate will also be released on March 2nd expected unchanged at 5.1%.
 
Next week's EU economic calendar includes the March 1st release of EU February manufacturing PMI expected at 52 compared to 52.4 last month.
 
EU January unemployment will be released on March 1st expected unchanged at 10%. On March 2nd February HICP will be released expected at 1.1% compared to 1% last month. On March 3rd EU February services PMI will be released expected at 52.3 compared with 52.5 last month along with January retail sales.
 
January retail sales are expected at 0.2% compared to flat last month. The ECB policy meeting will be held on March 4th, no change is expected.
 
Next week's Canadian economic calendar includes March 1st release of January IPPI and RMPI along with December GDP. The BOC policy meeting will be held on March 2nd and no policy change is expected. On March 4th January building permits will be released.
 
Next week's Australian economic calendar includes the March 1st release of Q4 company profits expected 4% compared to -2.1% last month along with Q4 business inventories expected at 0.5% compared to 0.8% last month.
 
Q4 current account will also be released on March 1st expected at -17bln compared to -16.2bln last month.
 
On March 2nd January building approvals will be released expected at -4% compared to 2.2% last month along with January retail sales expected at 1% compared to -0.7% last month.
 
The RBA policy meeting will be held on March 2nd. A 25bps rate hike to 4% is expected. On March 3rd Q4 GDP will be released expected at 0.3% compared to 0.2% last quarter.
 
On March 4th January trade balance will be released expected at -2.5bln compared to -2.25bln last month.
 
All told, as you can see from the above, next week is going to be rather hectic and I expect markets to be volatile and totally reactive to not the actual 'non-hikes' announced by the Central Banks, but more the tones expressed by them as they shed more light on future intentions.
 
Of course focus will remain on Greece and as further propositions from other EU countries come to light relating to how they may help Greece, I expect to see further deterioration in the Euro in the short term.
 
2 months into 2010 and the near-term road ahead is looking rocky Ladies and Gentlemen! 
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
 
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