Financial Page International

30 January 2010 - Global Markets Review
Good Morning Ladies & Gentlemen,
 
Unemployment reared its head again this week - particularly in the US and Scandinavia; but I wanted to focus this week on concerns within Europe that have caused a massive confidence drop over the Euro - albeit short-term I feel.
 
The European Commission Thursday cleared a Spanish plan to recapitalize its troubled banking sector so that the credit institutions can continue lending normally.
 
The commission could allow the plan as it found it necessary to maintain confidence in the national banking system while setting up necessary safeguards to prevent distortion in the market place.
 
Under the plan a fund called the Fondo de Reestructuracion Ordenada Bancaria, or FROB, will be able to buy convertible preference shares in the banks that will qualify as Tier 1 in the regulatory capital of the beneficiaries, the commission said.
 
In order to participate in the scheme, banks will have to draw up an integration plan, showing what measures they are going to take to achieve increased efficiency and solvability. This plan will have to be approved by the Bank of Spain before it is presented to the FROB.
 
Conditions for recapitalization will also include rules on payment of dividends and management remuneration, behavioral commitments and a ban on coupon payment of hybrid instruments, the commission said.
 
Portugal's report of an unexpectedly large 2009 budget deficit renewed concern that Greece isn't the only Euro-zone country with fiscal problems. And Greece spooked markets with a denial of its plans to tap Chinese funds.
 
Indeed, concern is rising that other countries could join Greece and Portugal in the Euro-zone intensive-care unit. Spain, Italy and Ireland are grappling with budget problems amid anemic economic growth and lower-than-expected tax revenue. The cost of insuring against a sovereign-debt default rose for Greece, Portugal, Spain and Italy on Wednesday.
 
Late Tuesday, the Portuguese government said it would record a higher-than-expected budget deficit of 9.3% of gross domestic product for 2009. The government pledged to reduce the deficit to 8.3% of GDP in 2010. The European Commission had projected an 8% budget deficit for 2009. The commission, the European Union's executive arm, has given Portugal until 2013 to brings its deficit below the 3% of GDP level required by European Monetary Union rules.
 
The Greek government, meanwhile, denied that it had reached any deal to sell Greek bonds or state-linked assets, such as Greece's largest bank, to Chinese investors, or that it had mandated any investment bank to negotiate a sale on its behalf. Greek officials have said that the country plans to move ahead with a new 10-year bond issue in the next two to four weeks.
 
The Greek denial follows a Financial Times report that Athens had mandated Goldman Sachs Group Inc. to sell Greek debt of up to €25 billion ($35.2 billion) in Asia, and possibly a stake in the National Bank of Greece SA.
 
"We categorically deny that there is any direct or indirect agreement between the Greek government and Chinese or other investment funds to purchase debt, Greek bonds or Greek assets," Greece's Finance Ministry said in a statement.
 
But a person with direct knowledge of the situation said Greece had hoped to sell up to €25 billion in bonds to Chinese and other Asian investors. That looked increasingly distant Wednesday, after early feedback from China revealed interest in sums of less than half that total, according to the person.
 
Everyone has been focusing on Greece, but now they are waking up to the fact that it's not just Greece.
 
Greece, however, is in worse shape than Portugal. Its reported budget deficit is 12.7% of GDP, but some economists are skeptical of the figure, meaning it could be even higher.
 
In setting its 2010 budget, the Portuguese government said it would freeze government wages and reduce payrolls through attrition. It also planned to introduce a 50% tax on bonuses paid in 2010 to top executives in financial institutions and to resume privatizations of state assets.
 
Market participants say parliamentary approval for the relatively modest cutbacks is likely. That means the next big risks could come from ratings firms unconvinced that Portugal is doing enough to put its fiscal house in order. Christoph Weil, an economist at Commerzbank, said it is unclear whether Portugal's budget consolidation will be enough to forestall a credit downgrade by ratings firms.
 
More troubling, Portugal's reticence in dealing decisively with its deficit, especially compared to the tough choices made recently by Ireland to reduce spending, has increased concern that ailing Euro economies are banking on a bailout from bigger Euro-zone countries, such as Germany.
 
European Commission and European Central Bank officials have stated in strong terms that no such bailout is going to happen. At the same time, allowing a Euro country to default on its debt also seems unlikely, underscoring the conundrum facing Euro-zone policy makers.
 
Debt markets reflected rising concern about Portugal and Greece. The annual cost of insuring €10 million in Portuguese five-year sovereign bonds against default using credit default swaps rose to €138,000 from €130,000. By comparison a similar insurance for Greek debt rose to a record €370,000 Wednesday.
 
The European Commission ruled on the public finances of four member states on Wednesday, deciding to grant Malta and Lithuania an extra year to bring their deficits into line.
 
Hungary and Latvia were denied this privilege however. Both countries have had to turn to the International Monetary Fund and the European Union for bailouts as a result of the financial crisis, but the commission said they are now making progress in improving the health of their accounts.
 
Under EU rules, member states are required to limit their deficits to three% of national GDP, although stimulus spending and falling tax receipts over the last year means 20 members are now in breach of this rule.
 
"In the case of Malta and Lithuania ... the worsening in the economic situation since the recommendations were made justifies extending the deadline by one year," said economic and monetary affairs commissioner Joaquín Almunia.
 
"Hungary and Latvia, which are benefiting from conditional balance-of-payments support, seem on track to bring their deficits to below three% by the agreed deadlines, but they need to pursue their efforts to ensure this really happens," he added.
 
Following the extension, Malta now has until 2011 to dip below the three% threshold, with Eurozone accession frontrunner Lithuania getting until 2012.
 
The deadlines for Hungary and Latvia remain unchanged on 2011 and 2012 respectively.
 
A constitutional court ruling against pension cuts in Latvia last month caused concern in Brussels that the country might not meet its lending terms, as the union slowly exits the worst recession since the Great Depression.
 
Runaway spending has also caused doubts over the cohesion of the 16-member Euro area, with Greece and Portugal seen as particularly problematic.
 
Speaking from Davos, Switzerland, where leaders are gathered for the annual World Economic Forum, New York University professor Nouriel Roubini, known for his early prediction of the economic crisis, said Spain also posed a major threat to the stability of the European currency club.
 
"The Eurozone could drift, essentially with a bifurcation, with a strong centre and a weaker periphery, and eventually some countries might exit the monetary union," he warned on Wednesday.
 
"If Greece goes under, that's a problem for the Eurozone. If Spain goes under, it's a disaster," he added.
 
It's prophetic in a way; for those that read my Newsletters I did say late in 2008 that I bet the US caused the problem initially, but it would be Europe that suffered more than anyone.
 
I also mentioned that it would not surprise me at all if more European Banks bit the dust within a year - and once again, that is looking likely coming true.
 
Britain's banks are no longer regarded as among the most secure in the world as the Government has failed to introduce proper safeguards in the wake of the global credit crisis.
 
One of the world's biggest credit ratings agencies said that Britain's ongoing "weak economic environment" and Gordon Brown's failure to properly reform the financial system had led to its unprecedented decision to "downgrade" Britain's banks.
 
The warning from Standard & Poor's sparked an immediate slump in the stock market and the value of the pound Thursday.
 
The international creditworthiness of the country's banking system is now on a level which is equivalent to poorer countries such as Chile and Portugal.
 
It could now cost banks more to borrow money on the wholesale financial markets - with consumers facing higher prices for mortgages and loans as a result.
 
The downgrade underlines the growing concerns over Britain's financial state among international investors and is a major embarrassment for the Prime Minister just days after Britain only managed to limp out of recession.
 
Earlier this week, official figures showed that the economy grew by just 0.1 per cent during the final three months of 2009 - compared to expected growth of 0.4 per cent or more.
 
The downgrading of Britain's banks could be followed by the entire country's credit-rating being reduced. The credit-rating determines the cost of borrowing on international financial markets.
 
A downgrade would mean the Government has to pay more to borrow money which could have a major impact on the country's finances.
 
In a statement released yesterday, Standard & Poor's said: "We no longer classify the United Kingdom among the most stable and low-risk banking systems globally.
 
"This is due to our view of the country's weak economic environment, the reputational damage we believe has been experienced by the banking industry, and what we see as the high dependence on state-support programs of a significant proportion of the industry."
 
The ratings agency also warns that the high debts of the British government and consumers are likely to lead to banks accumulating losses.
 
Standard & Poor's also implicitly criticises the Prime Minister's response to the banking crisis. "In our view, enhanced regulatory oversight and reform of the framework for financial stability remains incomplete," it said.
 
Britain's banks were previously comparable with those in countries such as France and Germany. However, they are now considered less secure than Italy and Belgium. Over the past few centuries, the British banking system has been regarded as one of the best, and most secure, in the world.
 
Standard & Poor's also warned that the banks may face a further downgrade if Britain "fails to strengthen" by tackling "persistent budget deficits".
 
There is increasing criticism among financial experts at the Government's failure to announce detailed plans for public-spending cuts to reduce record levels of public-sector borrowing.
 
Last night, Mark Hoban, the shadow financial secretary, said that the Government needed to take urgent action. "This is disappointing news and demonstrates the need for reforms to the banking sector so that we don't repeat the mistakes of the last decade. Our reforms should help restore the reputation of the UK banking sector."
 
The Prime Minister's spokesman refused to comment on the Standard & Poor's report. However, he said: "The Prime Minister and Chancellor have both made it clear that it is encouraging that the UK economy is coming out of recession.
 
"Every country has to have a regulatory framework that is appropriate for its banking system."
 
Global business leaders are currently meeting in the Swiss resort of Davos where banking reform is high on the agenda. Mr Brown and Alistair Darling, the chancellor, have criticised radical plans unveiled by Barack Obama to break-up American banks.
 
President Obama has proposed that banks are no longer able to trade on the financial markets using their own funds following criticism of their behaviour in the run-up to the global credit crisis. This would make banks more secure.
 
However, the proposal is being vigorously opposed by banks - who are about to unveil huge profits, and bonuses for many staff, over the past year.
 
Yesterday, the heads of 30 banks including Barclays and HSBC held a private meeting in Davos to discuss how to rebuff the growing calls for new regulation.
 
Mr Darling, the Chancellor, travelled to the Swiss resort last night to warn banks that they must change their behaviour and culture.
 
The British Government has provided more than £1 trillion in support to the banking industry and taxpayers now own majority stakes in RBS and Lloyds Banking Group.
 
And it's not just the UK either; the Italian Economy ministry said Thursday Italian banks received about 117,000 requests for a moratorium on debts and mortgages from small- and medium-sized domestic companies as of Dec. 31.
 
In an emailed statement the Italian ministry said requests rose more than 40% from November and that as of the end of December 83,000 requests worth about EUR7 billion were accepted.
 
In a move to help Italian companies survive the economic crisis which started in 2009, the government and local banks have launched a plan allowing companies to suspend the payment of outstanding debts for 12 months.
 
So we do have a problem in Europe and unless the affected countries; Greece, Spain, Portugal and to a slightly lesser extent Ireland manage to turn things around, 2010 is going to be a year that perhaps Europe will want to forget even before we reach February!
 
On to the numbers on the boards for the week that was:
US Markets 
How the US did this week .....

 US SummaryUS stocks fell, dragging the Standard & Poor's 500 Index to a three-month low, as disappointing results at technology companies offset government data showing the economy grew at the fastest pace in six years.
 
Microsoft Corp. helped lead computer-related shares to the biggest drop among 10 groups as Chief Financial Officer Peter Klein said the company has yet to see a recovery in spending on enterprise software. SanDisk Corp., the biggest maker of flash- memory cards, slid 12% after its sales forecast trailed some estimates. The S&P 500 fell for three straight weeks for the first time since July and capped its biggest monthly loss since last February.
 
The S&P 500 slid 1% to 1,073.87 at 4:08 p.m. in New York, its lowest close since Nov. 6. The Dow Jones Industrial Average fell 53.13 points, or 0.5%, to 10,067.33. The Nasdaq Composite Index lost 1.5% to 2,147.35.
 
The S&P 500 fell 1.6% this week and has tumbled 6.6% from a 15-month high on Jan. 19 after President Barack Obama called for limits on risk-taking by banks and China moved to restrict lending and cool economic growth. Stocks fell Thursday after Qualcomm Inc. lowered its sales forecast and speculation mounted Greece won't be able to finance its budget deficit.
 
The performance of the S&P 500 in January is a reliable predictor of how it will do during the year, according to the Stock Trader's Almanac. Before last year, when the index dropped 8.6% in January and rose 23% for the year, the so- called January barometer registered only five major errors since 1950, according to the almanac.
 
The S&P 500 rose as much as 1.1% earlier after fourth-quarter economic growth and a gauge of business performance in January beat projections. The Commerce Department said the economy grew at a 5.7% rate in the final three- months of 2009, compared with a median forecast of 4.8% in a Bloomberg survey of economists. The Institute for Supply Management-Chicago Inc. said its business barometer climbed to 61.5 from 58.7 in December. The median forecast was for a drop to 57.2.
 
Wal-Mart Stores gained 1.6% to $53.43. The shares were raised to "buy" from "neutral" at Goldman Sachs Group Inc., which forecast earnings at the US retailer will increase on the back of cost-cutting and profit margin growth, while the valuation of the shares is "compelling."
 
Tenet Healthcare rose 7.4% to $5.54 for the biggest gain the S&P 500. HCA Inc., the hospital chain taken private in a $33 billion leveraged buyout, reported fourth- quarter results and announced a $1.75 billion dividend to stockholders.
 
PNC Financial Services Group added 2.4% to $55.43. Bank of New York Mellon Corp. is in talks to buy PNC's global investment-servicing unit for as much as $2.5 billion to add hedge-fund and mutual-fund clients, said a person familiar with the matter.
 
Berkshire Hathaway's Class B shares rose 3.6% to $76.43, extending their gain since being picked to join the S&P 500 on Jan. 26 to more than 12%. The investment company run by Warren Buffett split the Class B shares 50-for-1 last week, dropping the price to a level that let them meet the trading-volume standards of the index.
 
Chevron fell 1.5% to $72.12. The second- biggest US energy company reported its biggest fourth-quarter profit decline since 2001 and fell-short of analyst estimates for earnings per share.
 
Avery Dennison slumped 15% to $32.51 for the biggest drop in the S&P 500. The world's largest label maker reported fourth-quarter earnings excluding some items of 44 cents a share, missing the average analyst estimate in a Bloomberg survey by 35%.  

European Markets 
What has been happening in Europe this week .....
 Europe SummaryEuropean stocks rose, trimming the first monthly drop since October, as Bayerische Motoren Werke AG and Infineon Technologies AG raised their sales forecasts and the US economy expanded at the fastest pace in six years.
 
BMW rallied 4.8% after the world's largest maker of luxury vehicles also said it's "confident" that it will post a pretax profit for 2009. Infineon Technologies AG surged 3% as the semiconductor maker posted a second consecutive quarterly profit. Henkel AG rose 1.3% after the consumer- goods maker said earnings will climb "noticeably" this year.
 
The Dow Jones Stoxx 600 Index climbed 1% to 246.96, snapping a two-day decline. US gross domestic product grew 5.7% in the fourth quarter as factories cranked up assembly lines to prevent inventories from plunging. That beat the median economist forecast and marks the best performance since the third quarter of 2003.
 
The Stoxx 600 lost 2.7% this month, having fallen for three consecutive weeks, as US President Barack Obama called for limits on risk-taking by banks and China moved to restrict lending to cool growth. The measure soared 61% from March through the end of 2009.
 
National benchmark indexes climbed in 14 of the 18 western European markets. France's CAC 40 added 1.4%, while Germany's DAX increased 1.2%. The UK's FTSE 100 rose 0.8%, boosted by a rally in mining shares. 
 
GERMANY
 
German stocks climbed for the first time in three days after the US economy had its best quarter of growth since 2003 and companies from Bayerische Motoren Werke AG to Infineon Technologies AG forecast improved sales.
 
The DAX Index gained 1.2% to 5,608.79, trimming this week's loss to 1.5%. The measure still slid 5.9% in January, the first monthly drop since October, amid concern governments and central banks will withdraw stimulus measures and Greek bonds tumbled on speculation the country will struggle to tame its deficit. The broader HDAX Index increased 1.2% Friday.
 
The world's largest economy expanded in the fourth quarter at 5.7%, the fastest pace since the third quarter of 2003, as factories cranked up assembly lines to prevent inventories from plunging.
 
Stocks extended gains Friday after the Reuters/University of Michigan index of consumer confidence and the Institute for Supply Management-Chicago Inc.'s business barometer both topped economists' estimates.
 
BMW advanced 4.8% to 30.96 Euros. The world's largest luxury carmaker said it will raise sales this year in the US, China and Germany, and that group unit sales will rise by a single-digit percentage. The company is "confident" it will be able to post a pretax profit for 2009.
 
Rival Daimler AG gained 3.4% to 33.425 Euros. The stock was raised to "neutral" at HSBC Holdings Plc and US truckmaker Paccar Inc. reported adjusted per-share profit that was more than twice the level expected by analysts in a Bloomberg survey.
 
Infineon climbed 3% to 4.019 Euros. Europe's second- largest chipmaker doubled its 2010 sales-growth target after posting a second consecutive quarterly profit on higher demand from carmakers and industrial customers.
 
Henkel AG climbed 1.3% to 36.885 Euros after the German maker of Loctite glues and Persil detergent said full- year operating profit advanced, boosted by its laundry and home- care business. The company also said it expects operating profit to advance "noticeably" this year.
 
Munich Re fell 0.6% to 108.50 Euros. The world's biggest reinsurer was cut to "underperform" from "neutral" at BofA Merrill Lynch Global Research, which cited "a worsening operating environment, a need for consensus estimate cuts, and a valuation that lacks appeal relative to the sector."
 
Porsche SE, maker of the 911 sports car, fell 1.5% to 41.11 Euros. First-half revenue dropped 3.3% to 2.9 billion Euros, as unit sales declined 3.1%, the company said in a statement released before the company's shareholders meeting Friday. 
 
FRANCE
 
France's CAC 40 Index rebounded from two days of losses, rising 50.67, or 1.4%, to 3,739.46 in Paris. The measure fell 2.1% this week. The SBF 120 Index advanced 1.3% to 2,739.31 Friday.
 
Air Liquide increased 1.57 Euros, or 2.1%, to 76.99 Euros, ending a two-day loss. The industrial- gas producer won authorization to market its Kalinox analgesic to health providers.
 
Cie. de Saint-Gobain rose for the first time in three days, adding 1.48 Euros, or 4.4%, to 34.85 Euros. Royal Bank of Scotland Plc reiterated a "buy" recommendation on Europe's biggest supplier of building materials, saying in a note that it prefers companies with "less non-residential dependence, established emerging market growth and stronger balance sheets."
 
Etam Developpement jumped 1.07 Euros, or 6.1%, to 18.57 Euros, taking this week's gain to 12%. The women's clothing designer and retailer said fourth-quarter revenue rose 6.5% to 286.9 million Euros ($400.6 million).
 
Eurofins Scientific tumbled 2.64 Euros, or 6.9%, to 35.5 Euros, its steepest decline since September. The company that offers laboratory safety and analysis services said a 2011 revenue target of 1 billion Euros may be delayed by two years.
 
Rue du Commerce surged 32 cents, or 6.5%, to 5.25 Euros, the highest in more than two months. The online electronics retailer said revenue rose to 124.4 million Euros in its third quarter, from 112 million Euros a year earlier.
 
Sanofi-Aventis rose 92 cents, or 1.8%, to 53.6 Euros, ending a two-day loss. The drugmaker will set up a joint venture in vitamin and mineral supplements with Minsheng Pharmaceutical Group Co. of China, expanding in the nation's 7 billion-Euro market for consumer health goods.
 
Total, France's biggest refiner, added 83.5 cents, or 2%, to 42.05 Euros, a second gain this week. Crude oil rose for the first time in four days after data showed the US economy expanded at the fastest pace in six years.
 
Vallourec, the world's second-largest maker of steel tubes for oil and gas production, jumped 4.2 Euros, or 3.5%, to 125 Euros. 
 
BELGIUM
 
The Bel 20 in Brussels ended the week at 2,505.20, up 0.75%.
 
Belgium's Transics, which makes computers for trucks, said on Thursday it had held talks about a tie-up with rival Punch Telematix, but these had not led to any agreement so far.
 
Belgian media speculated this week that Transics was in merger talks with Telematix, an affiliate of industrial holding group Punch International.
 
Shares in all three companies were suspended from trading on Thursday afternoon.
 
Transics, responding to a request from the Belgian financial markets regulator CBFA to issue a statement, said it regularly investigated external growth opportunities and contacted third parties about these.
 
It said it had in the past held preliminary and exploratory discussions about a transaction with Punch Telematix.
 
"These discussions have thus far not led to any agreement or formal engagements, except for customary confidentiality undertakings," Transics said in its statement.
 
Thursday, Belgium's National Institute of Statistics announced that the consumer price index or CPI rose 0.62% year-on-year in January, faster than the 0.26% growth in the previous month.
 
The CPI increase for the second straight month in January, after seven consecutive months of negative figures, the statistical office said.
 
On a monthly basis, the CPI rose 0.46% in January, compared to the 0.16% increase in the preceding month. 
 
THE NETHERLANDS
 
In Amsterdam the AEX closed the trading session Friday on 327.90, a gain of 1.22%.
 
The European Commission said Thursday that it approved Netherland's recapitalization of Dutch bank and insurer SNS Reaal NV.
 
"The plan confirms that SNS has a viable business model, while ensuring a sufficient own contribution of the company to the restructuring costs and limiting undue distortions of competition," the commission, the European Union's antitrust body, said in a statement.
 
The commission had already approved the recapitalization in December 2008, but on a temporary basis and as a rescue measure, it said.
 
The Netherlands sees no point in appointing a mediator to solve its dispute with Iceland over compensation for the failure of Iceland's banking system during the credit crisis, the Dutch finance minister said on Thursday. Iceland owes Great Britain and the Netherlands $5 billion for money they used to compensate savers in Icesave, the online bank whose Icelandic parent Landsbanki failed in Oct. 2008.
 
Iceland's parliament passed a law last year to set terms for repaying the money, but the island nation's president refused to sign it. By law that pushed the bill into a national referendum, scheduled for March 6.
 
Opinion polls show a strong chance the referendum will fail, which has led the Icelandic government to suggest it would like some sort of renegotiation or mediation to solve the crisis.
 
"I'm always willing to listen," Wouter Bos said at a Foreign Press Association luncheon in The Hague. "Mediation, I'm not sure. I don't see the added value."
 
Tuesday, the Netherlands' Central Bureau of Statistics announced that the producer confidence indicator dropped to minus 8.3 in January from minus 8.1 in December. Economists expected a reading of minus 7.
 
Producer confidence is composed with three component indicators: expected production over the next three months, opinion on orders received and the assessment of stocks of finished products, the statistical office said. The opinion on the order worsened slightly, while on stocks of finished products traders were optimistic than the previous month. 
 
AUSTRIA
 
The ATX in Vienna rounded out the week at 2,493.53, a rise of 0.82% on the day.
 
Austria's Financial Market Authority expects the nation's banks to write-off credit and boost capital reserves in 2010 as lenders with business in eastern Europe recognize more bad loans.
 
"We expect that massive write-offs will be needed in the next 12 months," Helmut Ettl, co-chairman of the regulator, said at a briefing in Vienna. Austrian banks should boost capital reserves, he said.
 
Erste Bank Group AG and Raiffeisen International Holding AG are among Austrian lenders that expanded in eastern Europe during the past decade. The global financial crisis caused the biggest economic slowdown in the region since the end of Communist rule, leaving some people unable to pay off loans.
 
Austria's central bank said Dec. 14 that its baseline stress-test predicted the nation's banks may post writedowns of 10 billion Euros ($14.1 billion) over the next two years. The test envisioned loan defaults rising to 8% in Austria and 16% in eastern Europe.
 
Austria responded to the financial crisis by allocating 15 billion Euros to a fund for troubled lenders and set up a 75 billion-Euro clearinghouse to boost liquidity by guaranteeing bank bonds. The government has taken over two lenders since November 2008, Kommunalkredit Austria AG and Hypo Alpe-Adria Bank International AG.
 
"At the moment we don't foresee any further state takeovers," Ettl said. The regulator "is working under the assumption" that Oesterreichische Volksbanken AG, the country's fourth-biggest bank, will find an investment partner, he said.
 
Volksbanken said Friday that it hired Lazard & Co. to evaluate possible strategic partners.
 
The regulator is awaiting the Austrian National Bank's evaluation of a bank tax on assets. Any new levy shouldn't require "excessive payments," Authority co-Chairman Kurt Pribil said at the same briefing.
 
Chancellor Werner Faymann said Feb. 19 that he wants to implement a bank tax modeled on the one proposed by US President Barack Obama. The Austrian tax may raise as much as 500 million Euros a year if it is approved by Parliament.
 
Austria's industrial production fell 1.9% month-on-month in November taking the annual decline to 5.9%, data released by the Statistics Austria showed Friday.
 
Construction production was up 1.1% over October and increased 0.1% compared to the previous year.
 
Total production in November fell 1.3% month-on-month and 4.7% year-on-year. 
 
SWITZERLAND
 
Zurich's SMI completed the week Friday at 6,440.72, a dip of 0.03%.
 
The head of Switzerland's banking lobby Thursday spoke out in favor of limiting proprietary trading at banks, which actively trade financial instruments on their own account.
 
"Prop trading is necessary, but we would favor limitations on it in some form," Swiss Bankers Association Chief Executive Urs Roth told Dow Jones Newswires on the sidelines of an event here.
 
Roth's endorsement of additional limits comes shortly after US President Barack Obama unveiled a proposal that would prevent commercial banks and institutions that own banks from owning and investing in hedge funds and private equity firms, and limit the trading they do for their own accounts.
 
Roth's comments also come as the Swiss regulator toughens up capital, liquidity and risk rules for Credit Suisse Group and UBS, which had to be shored up with a government-led financial aid package after massive losses on illiquid securities. Roth emphasized both banks have undertaken considerable efforts to shrink their balance sheets in recent quarters.
 
Switzerland, home to UBS and Credit Suisse, will keep its universal bank model despite US moves to split commercial banking from riskier activity, its bank lobby said on Thursday.
 
"I do not think we'll take the direction of separating banking activities. We have a long tradition of universal banks in Switzerland," Patrick Odier, the banker who heads Switzerland's powerful banking association, told Reuters.
 
Swiss regulators have been faster than others at imposing more stringent requirements on bank capital ratios and on leverage after the country's economic stability was threatened by the near-collapse of bank flagship UBS in late 2008.
 
Analysts say the combination of investment banking with large wealth management activities at UBS and Credit Suisse give these banks a more balanced business mix than many rivals in the current regulatory environment. Both banks have boosted their capital ratios and have also cut down aggressively their balance sheet and on proprietary trading.
 
Switzerland's private consumption indicator edged down in December although it remained positive, UBS bank reported on Tuesday.
 
The consumption indicator fell to 1.20 in December from 1.26 in November, still below its long-term average of 1.50.
 
The index is calculated by taking five parameters into account namely new car sales, activity in the retail sector, the number of hotel stays by Swiss residents, the consumer confidence index and credit card transactions made via UBS points of sale.
 
SWEDEN
 
The OMX in Stockholm finished a volatile week on 953.71, recouping 1.76% of the week's declines.
 
Shares in Swedish retail chain Hennes & Mauritz AB soared Thursday when a turnaround in sales was announced, reversing seven months of consecutive same store sales declines.
 
"Sales for December increased by 15% compared to the same month previous year. Sales in comparable units increased by 3%", H&M said in its fourth-quarter earnings report, adding that sales up to January 26 have "increased by 13%."
 
The Stockholm-based company only experienced one positive month of same store sales in its financial year ending November 30. During the total period, same store sales declined 5%.
 
Still, total sales increased 4% in the financial year, following 250 new store openings.
 
Sweden's top banks are going their separate ways on the question of employee bonuses.
 
On Thursday, Nordea, the biggest lender in the Nordic region, said it would pay out €280 million, or $390 million, in bonuses for 2009, which it said was necessary to retain the best employees. A day earlier, its rival Swedbank said it was canceling almost all of its 2009 bonuses.
 
Bank bonuses have become a political issue on both sides of the Atlantic as financial companies that would have gone under without government support returned to making big profits on risky strategies, and to paying out staggering bonuses.
 
The Swedish government, which owns 20% of Nordea, has provided various forms of support to the country's banks since the financial crisis erupted. Prime Minister Fredrik Reinfeldt said in September that the era of excessive bonuses "must come to an end." The same month, Finance Minister Anders Borg famously accused bankers of "partying like it's 1999, when it's 2009."
 
Writing in Dagens Nyheter, a Swedish daily, Hans Dalborg, Nordea's chairman, and Christian Clausen, the chief executive of the bank, which is based in Stockholm, said they "understand the debate about the financial sector that is ongoing throughout the world."
 
They said, however, that to maintain leadership, companies must hire and retain the very best. "The market for the skills required is global, with high salaries and a strong bonus element," they wrote. "We often face international competitors who tempt our employees by multiplying and guaranteeing their bonuses for several years."
 
They said Nordea had scaled back its total bonus payout, to around 16% of the bank's revenue from investment banking, asset management and capital markets for 2009, down from about 20% for 2008. In absolute terms, the 2009 bonus payout of €280 million still represents an increase of 22% from 2008, because the business performed better.
 
Mr. Dalborg and Mr. Clausen also noted that the top seven executives had waived their bonuses and pay increases for 2009.
 
Swedbank, also based in Stockholm, said Wednesday that it would cancel 2009 bonuses, except for "situations where such a decision would violate employment contracts." As a result, it will pay out bonuses for 2009 of 17 million kronor, or $2.3 million, an unpleasant surprise for employees who had been banking on a pool of 406 million kronor through the third quarter of the year.
 
One difference between the Swedish banks, both of which report full-year results next month, is clear: Nordea was firmly profitable through the third quarter of last year, racking up net profit of €1.9 billion, or $2.7 billion, for the first nine months of 2009. Swedbank, badly exposed to the meltdown in Latvia and other Baltic countries, had a loss for the same period of about 8.7 billion kronor, or $1.2 billion.
 
Elisabeth Lennhede, a spokeswoman for Skandinaviska Enskilda Banken, or S.E.B., the other major Swedish bank, said she could not comment on the bonus issue. S.E.B. will make its policy public next month, when it releases its results, she said.
 
The Nordea bonus pool pales in comparison with those of the biggest global banks. Goldman Sachs last week said it was setting aside $16.2 billion, or about 36% of its 2009 revenue, for bonuses.
 
Sweden's retail sales rose 4.5% year-on-year in December, faster than the 3.6% growth in the previous month, the Statistics Sweden said on Thursday. Economists expected an increase of 5.3%.
 
Month-on-month, retail sales increased a seasonally adjusted 0.2% in December, after falling 0.6% in November. Economists were looking for an increase of 0.7%.
 
Thursday, the same Statistics Sweden announced that the jobless rate stood at 8.6% in December, up from 8% in the previous month. Economists' expected the rate to be 8.3%.
 
The jobless rate for men was 8.9% in December, while jobless rate for women was 8.1%.
 
The number of unemployed totaled 417,000 persons in December, which is an increase of 108,000 compared to the previous year.
 
Sweden's consumer confidence rose to 8.5 in January from 7.6 points in the previous month, indicating that households are somewhat more optimistic than normal, the National Institute of Economic Research showed Thursday. The expected reading was 8.8.
 
The economic tendency indicator, which measures business and consumer confidence in the economic situation stood at 103.4, up from 101.2 in December. The index stood above the consensus forecast of 102. Further, the survey found that the confidence indicator for the business sector rose 15 points between the third and fourth quarters of 2009. 
 
FINLAND
 
Helsinki's OMX brought the week to a close at 6,704.05, up 1.23% for the session although heavily down on the week.
 
Finnish lifting equipment maker Kone Corporation reported Friday a rise in net profit of 12.8% on the year to Eur167m in the fourth quarter of 2009 and announced plans to propose a total dividend of Eur1.30 per share for last year.
 
The board of directors will propose an ordinary dividend of Eur0.65 plus an extra payment of Eur0.65 per share.
 
In the fourth quarter of 2009, operating profit rose to Eur202.7m from Eur189.2m. Operating profit margin improved to 14.2% from 13.2% a year earlier.
 
In October-December 2009, orders received totalled Eur813.5m, down 3.8% at historical exchange rates, and up by 0.3% at comparable exchange rates.
 
In the full 2009, the order intake declined by 13% to Eur3.432bn. At the end of December 2009, the order book was Eur 3.309bn.
 
Net sales increased by 3.1% to Eur4.744bn in 2009. Operating profit, excluding one-off restructuring costs, rose to Eur600.3m, corresponding to 12.7% of net sales. Restructuring costs, related to the company's fixed cost adjustment programme, totalled Eur33.6m. The profit attributable to shareholders went up to Eur465.6m from Eur417.3m. EPS ose to Eur1.84 from Eur1.66.
 
For 2010, Kone expects its net sales to decline some 5% at comparable exchange rates. The operating profit is expected to be in the range of Eur560m-Eur610m.
 
Finland's consumer confidence index increased slightly in January, the Statistics Finland said on Wednesday.
 
The consumer confidence index stood at 14.5 in January, up from 14.4 in the previous month, and also better than confidence on the long-term average. In November, the confidence index was 10.9.
 
In January, the confidence in all four components of the consumer confidence indicator improved from the previous month The index measuring consumers' own economic situation in 12 months increased to 10.2 from 8.9 in December, while the corresponding index on Finland's economic situation rose to 21.7 from 19.8.
 
Further, the gauge measuring Finland's unemployment situation improved to minus 18.7 in January from minus 21.8 in December, while the index on households' saving possibilities dropped to 44.7 from 50.7.
 
Finland's manufacturing confidence indicator dropped in January, the Confederation of Finnish Industries EK said on Wednesday.
 
The confidence index decreased to minus 13 in January from minus 10 in December, revised from minus 9 reported initially. In the long-term average confidence indicator stood at 2.
 
Among the sub indicators, the confidence indicators in the construction dropped in January, but services and retail trade sectors improved. The construction confidence indicator fell to minus 33 from minus 24 in December, while the confidence indicator in the service sector rose to minus 2 from minus 18. The retail trade confidence climbed to minus 5 from minus 6 in December.
 
Tuesday, the Statistics Finland announced that the jobless rate stood at 7.9% in December, up from 6.1% recorded a year ago. Economists expected the jobless rate to be 8.6%. In November, the jobless rate was 8.5%.
 
The number of unemployed totaled 206,000 persons in December, larger than the 162, 000 persons in the previous year. Total labor force stood at 2.62 million, down from 2.66 million a year earlier.
 
Meanwhile, the labor force participation rate was 64.9% in December, smaller than the 66.2% in a year ago.
 
In 2009, the average annual unemployment rate stood at 8.2%, up from 6.4% recorded in 2008. 
 
DENMARK
 
In Copenhagen the OMX ended the session and the week on 354.85, up 1.11%.
 
The Nationalbank said that was the conclusion of a stress test it carried out on Denmark's 14 biggest banks to determine their resilience to writedowns.
 
Small Denmark is home to more than 100 banks -- most of them small, but Danske Bank is the Nordic region's second-biggest bank after Sweden's Nordea.
 
Hit by loan losses, Roskilde and 16 other small Danish banks disappeared in 2008 and 2009 -- either failing or being merged with stronger banks.
 
Most major Danish banks strengthened their capital base in the past year by joining government schemes or through other capital injections while core earnings were strong in the first half of 2009. The Nationalbank said this had improved banks' ability to absorb writedowns.
 
"The banks' books are expected to remain characterised by big writedowns on lending, but the Danish banking sector is generally seen to be capitalised to meet expected economic developments through 2011," it said in a twice-yearly report.
 
Novo Nordisk's market capitalization swelled by around $2.5 billion on Tuesday after US authorities approved a diabetes drug from the Danish firm.
 
Novo Nordisk said the US Food and Drug Administration has granted approval for Victoza to treat type 2 diabetes in adults.
 
The drug is to be used in conjunction with diet and exercise to improve glycemic control.
 
The Danish drugmaker said it expects to introduce Victoza in the US in four to six weeks.
 
The company said Victoza is unique in that it's not associated with weight gain, and trial data demonstrate a reduction in body weight. The FDA has not yet approved a higher dosing of Victoza to specifically tackle obesity.
 
The drug will carry a warning on the risk of tumours, and it's not recommended for use by patients who already are at risk of thyroid cancer.
 
Thursday, the Statistics Denmark announced that the jobless rate stood at 4.3% in December, unchanged from the previous month. The jobless rate for November was revised from 4.4% reported initially. Economists expected the jobless rate to be 4.5%.
 
The number of unemployed totaled 121,400 persons in December, larger than the 119,900 persons in the previous month. 
 
NORWAY
 
Oslo's OBX finished the day Friday on 329.81, up 1.80%.
 
Oslo-listed marine freight operator Stolt-Nielsen posted Thursday a lower-than-expected operating profit of USD28m for the fourth quarter of fiscal 2008/09, ended 30 November 2009, down from USD48m a year earlier.
 
On average, the fourth-quarter operating profit was expected to drop to USD31m, according to analyst estimates, collected by SME Direkt for TDN Finans.
 
Fourth-quarter operating revenue dipped to USD430m from USD490m.
 
The pretax profit shrank to USD19m from USD45m, underperforming the market consensus for USD24m.
 
The net profit dropped to USD22m from USD53m, while it was projected at USD21m.
 
Norwegian drilling contractor Songa Offshore said Wednesday it launched an offering of USD200m senior notes, expected to have a maturity of seven years.
 
The net proceeds will be used for refinancing and for general corporate purposes.
 
Following the closing of the debt issue, Songa Offshore expects to carry out an exchange offer pursuant to which it will propose to exchange its secured fixed-rate bond due 2011 and its floating rate bond due 2012, for additional notes.
 
Norway's jobless rate stood at 3.3% in January, up from 2.7% in December, the Labor and Welfare Organization said on Thursday. Economists expected the jobless rate to be 3.1%. A year earlier, the jobless rate was 2.6%.
 
The number of unemployed totaled 85,132 persons in January, larger than the 69,852 persons in the previous month. 
 
SPAIN
 
In Madrid, the IBEX rounded off a hectic week by closing at 10,947.70, a rise of 1.09%.
 
Spanish bank BBVA reported Wednesday its fourth quarter net profit dropped 94% to Euro31 million ($44 million) due to loan losses and other provisions related to the recession.
 
Spain's second-largest bank by market capitalization said that excluding the one-off costs totaling Euro1.05 billion ($1.48 billion) its profit would have been Euro1.08 billion, similar to the figure for the last quarter of 2008.
 
Fourth quarter gross income rose 15% to Euro5.3 billion.
 
For all of 2009, BBVA said its profits were down 16% to Euro4.2 billion.
 
Tourist overnight stays in Spain fell 7.9% year-on-year to 3.5 million in December, Madrid-based National Statistics Institute reported on Thursday. Domestic overnight stays fell 5.3%, while foreign overnight stays dropped 10.3%.
 
In the whole of 2009, overnight stays in non-hotel tourist accommodation (holiday dwellings, campsites & rural tourism establishments) decreased 9.1% compared to 2008.
 
The Canary Islands was the preferred holiday dwelling destination in 2009, with more than 29.1 million overnight stays. Other favored destinations were the Balearic Islands, Valencia and Catalonia.
 
By tourist area, the island of Gran Canaria was the preferred destination, with more than 10.9 million overnight stays. The island of Tenerife reached the highest average occupancy rate (62%) in 2009.
 
Retail sales in Spain dropped 0.5% year-on-year in December after the 4.1% decrease in the previous month, Madrid-based National Statistics Institute reported on Wednesday.
 
Sales were down across the Iberian nation, with the largest declines witnessed in the Balearic Islands, Valencia, Murcia, Madrid and La Rioja.
 
On a monthly basis, retail sales soared 28.8% in December reversing the 6.9% fall in the preceding month.
 
The Spanish average amount per mortgage dropped 9.9% year-on-year in November, the same National Institute of Statistics said on Tuesday. Meanwhile, mortgages constituted for dwellings fell 11.7%.
 
On a monthly basis, average mortgage value increased 8.3% in November. 
 
PORTUGAL
 
Lisbon's PSI General closed out the day/week Friday on 2,736.60, dropping 0.27%.
 
Portugal plans to cut its fiscal deficit by 1 percentage point to 8.3% of gross domestic product this year to address investor concerns over soaring debt and deficit, the government said in the draft 2010 budget on Tuesday.
 
The reduction will start from a wider-than-expected deficit of 9.3% for last year, it said. The government's previous estimate for 2009 fiscal gap was around 8%.
 
"We will reduce the deficit by one percentage point without increasing taxes as we will concentrate our efforts on containing and reducing spending," Finance Minister Fernando Teixeira dos Santos told reporters.
 
Still, the draft document projects an increase in the debt-to-GDP ratio to 85.4% from last year's 76.6%.
 
The minister added that the high deficit of 2009 reflected the worsening of the economic crisis, which caused a 14% drop in revenues from 2008, or around 5 billion Euros.
 
Thursday, Moody's Investors Service said Portugal's government needs credible deficit reduction plan to ensure its ability to reverse its adverse debt dynamics, and in turn to avoid further downward pressure on its ratings.
 
The rating agency said the Portuguese government's 2010 budget deficit target of 8.3% of GDP is slightly higher than previously anticipated and it is only a full percentage point reduction from last year's higher than expected deficit of 9.3%.
 
Moody's noted that the government's fiscal reduction goal for this year is deliberately being kept modest so as not to undermine the expected weak recovery. The limited deficit reduction this year means that more ambitious cuts will be needed in 2011-2013 if the government is to reduce the deficit to 3% of GDP in line with its Stability and Growth Pact commitment to the European Commission.
 
"As the structural deficit will still be around 7% even after this year's reduction, it is difficult to envisage the government achieving this target without deeper cuts in spending or tax increases than current plans suggest," said Anthony Thomas, a Vice President-Senior Analyst in Moody's Sovereign Risk Group.
 
Thursday, the Statistics Portugal announced that the consumer confidence indicator stood at minus 32.3 in January, down from minus 30 in December. The consumer confidence was minus 46.1 a year ago.
 
The confidence indicator on manufacturing increased to minus 18.8 in January from minus 21.7 in December. At the same time, the service sector confidence dropped to minus 9.3 from minus 8.9 in December, while the trade confidence rose to minus 10.3 from minus 10.6.
 
Meanwhile, the economic sentiment indicator stood at minus 0.7 in January, down from minus 0.6 in December. 
 
ITALY
 
Italy's benchmark FTSE MIB Index gained 293.16, or 1.4%, to 21,896.29 in Milan, trimming its weekly loss to 3%.
 
Amplifon climbed 21 cents, or 6.7%, to 3.37 Euros, the highest since February 2008. Mediobanca Securities upgraded the world's largest hearing-aid distributor to "outperform" from "neutral."
 
Buzzi Unicem, Italy's second-biggest cement maker, added 28 cents, or 2.7%, to 10.8 Euros. Construction and basic-resources shares extended gains after a report showed that the US economy expanded at the fastest pace in six years. Italcementi SpA (IT IM), Italy's largest cement maker, rose 8.5 cents, or 1%, to 9 Euros.
 
Prysmian, the world's second-biggest cable maker, increased 44 cents, or 3.5%, to 13.18 Euros. Tenaris, the world's largest maker of seamless pipes used to extract oil and gas, rose 57 cents, or 3.6%, to 16.23 Euros.
 
Cairo Communication sank 29.25 cents, or 9.1%, to 2.93 Euros, the biggest loss since September 2001. The Italian publisher and advertising sales agency was downgraded to "underweight" from "buy" at Gruppo Banca Leonardo.
 
Eni, Italy's biggest oil company, increased 22 cents, or 1.3%, to 16.93 Euros, ending a two-day loss. Crude oil rose for the first time in four days after data showed the US economy expanded at the fastest pace in six years.
 
Fiat rose 36.5 cents, or 4.2%, to 9.14 Euros, ending a seven-session decline. Automobile stocks advanced in Europe Friday, led by Bayerische Motoren Werke AG after the world's largest luxury carmaker said it will increase sales this year in the US, China and Germany. The company also said it's "confident" that the group will be able to post a pretax profit for 2009.
 
Exor, Fiat's main shareholder, added 48 cents, or 4.2%, to 11.95 Euros.
 
Finmeccanica fell 37 cents, or 3.6%, to 10.05 Euros, a second day of declines. The defense contractor cut its 2010 target for earnings before interest, taxes and other items to between 1.52 billion Euros and 1.6 billion Euros, from between 1.65 billion Euros and 1.76 billion Euros previously.
 
Equita cut the weighting of Finmeccanica in its main portfolio to zero. Separately, Nomura International Plc cut its price estimate to 13.25 Euros from 14 Euros with a "buy" rating unchanged.
 
Impregilo added 3.25 cents, or 1.4%, to 2.36 Euros, a second gain this week. Equita Sim SpA lifted its price estimate on Italy's biggest builder by 12% to 3.75 Euros and increased the weighting of the stock in its main portfolio by 50 basis points.
 
Intesa Sanpaolo increased 4 cents, or 1.5%, to 2.78 Euros, ending a two-session decline. Italy's second biggest bank, is preparing an offer for the performing assets of Gruppo Delta, a unit of Cassa di Risparmio della Repubblica di San Marino, to expand its consumer credit business, two people familiar with the matter said.
 
"Such a move would make strategic sense for Intesa, increasing its market share in consumer credit and making it the second operator in Italy," Keefe, Bruyette & Woods Ltd. wrote in a note.
 
Telecom Italia climbed 3.1 cents, or 2.9%, to 1.09 Euros, rising for a second day. Italian Prime Minister Silvio Berlusconi will send a letter to Argentina's Premier Cristina Fernandez de Kirchner asking her not to nationalize the telecommunications industry, MF reported, citing excerpts of the letter. 
 
GREECE
 
The Athens Composite Index, not surprisingly in Athens, finished trading Friday on 2,048.32, a huge gain of 3.15% on the day's session.
 
The poor performance of Greece's new Eur8 billion, five-year bond raises fresh concerns about the country's ability to raise the Eur54 billion needed this year to cover its financing needs, analysts said Thursday.
 
Greece sold the bonds Tuesday, having attracted Eur25 billion of orders. The strong demand initially eased worries about Greece's ability to borrow in the bond market, although the premium investors demanded--350 basis points over mid-swaps--was high.
 
However, the performance of the new bonds in the secondary market has been less encouraging. Spreads widened by around 30 basis points Wednesday, after the government denied reports that it planned to sell bonds directly to China, and announced plans for a new 10-year issue.
 
Greece Finance Minister George Papaconstantinou firmly rejected speculation that his country will be forced to quit the Eurozone amid a budget deficit crisis threatening the credibility of the single currency bloc.
 
"Speculation about leaving the Eurozone is absurd," German daily Die Welt quoted him as saying on Monday. "I categorically exclude that Greece will quit the Eurozone."
 
The finance minister also said that he does not expect the government's austerity measures to lead to deflation or social problems.
 
Monday, the General Secretariat of the National Statistical Service of Greece announced that the trade balance including oil products showed a deficit of Eur 2.28 billion in November, narrowing from Eur 2.62 billion deficit a year ago.
 
Exports dropped 16.9% year-on-year to Eur 1.17 billion in November, while imports fell 13.9% to Eur 3.63 billion.
 
Meanwhile, the trade deficit, excluding the oil products amounted to Eur 2.18 billion in November, smaller than the Eur 2.38 billion a year earlier.
The UK Market 
Did it follow the Global trend .....
 UK MarketsThe FTSE 100 Index climbed for the first time in three days, with the benchmark trimming its third straight weekly drop, as UK mining companies had their first advance this week and banks rallied.
 
Rio Tinto Group, the world's third-biggest mining company, advanced 1.5%. Xstrata Plc added 2.7%. HSBC Holdings Plc, Europe's largest bank, rose 2.6%.
 
The benchmark FTSE 100 Index added 42.78, or 0.8%, to 5,188.52, trimming this week's decline to 2.2%. The FTSE All-Share Index gained 0.8% Friday and Ireland's ISEQ Index rose 1%.
 
The FTSE 100 dropped 4.1% this month as the US government called for limits on risk-taking by banks and China moved to restrict lending and cool economic growth. The gauge is still 48% higher than in March after governments and central banks around the world sought to encourage growth by maintaining low interest rates and committing more than $12 trillion to stimulate the economy.
 
UK house prices jumped in January by the most in five months as the economy emerged from recession, Nationwide Building Society said. The average cost of a home increased 1.2% from the previous month to 163,481 Pounds ($263,842). Prices are now 8.6% higher than a year earlier and down 12% from their peak in October 2007.
 
UK consumer confidence rose in January for the first time in three months as Britons became more optimistic for the economy's prospects, GfK NOP said.
 
Stocks extended gains after a report showed the US economy expanded in the fourth quarter at a 5.7% rate, the fastest pace since the third quarter of 2003, as factories cranked up assembly lines to prevent inventories from plunging.
 
The Reuters/University of Michigan index of consumer confidence and the Institute for Supply Management-Chicago Inc.'s business barometer both topped economist estimates as well.
 
HSBC rose 2.6% to 677.3 pence, snapping three days of declines. Barclays, the UK's second-biggest bank, added 2.1% to 270.55 pence.
 
Rio Tinto gained 1.5% to 3,099 pence. Xstrata, the world's fourth-largest copper producer, advanced 2.7% to 1,031.5 pence. BHP Billiton Plc climbed 1.3% to 1,866 pence.
 
A gauge of mining shares in the Dow Jones Stoxx 600 rose 1.3%, rebounding from seven consecutive days of declines. Stocks have fallen with metal prices amid concern the global economic recovery may stall, denting demand for raw materials.
 
Tate & Lyle Plc climbed 2% to 396.3 pence, rebounding from Thursday's 4.5% plunge. The maker of the low-calorie sweetener Splenda was raised to "neutral" from "sell" at UBS AG.
 
Connaught plunged 11% to 320.2 pence, the biggest drop since 2001. The UK's biggest public housing maintenance company said Chief Executive Officer Mark Davies stepped down and will be replaced by Mark Tincknell.
 
Informa rose 4% to 330 pence, a third straight gain. The UK publisher of Lloyd's list advanced after Credit Suisse Group AG initiated coverage of the stock with an "outperform" recommendation.
 
Resolution climbed 1.1% to 79.9 pence, a second gain this week. The buyout company was given a "buy" recommendation in new coverage at Icap Plc.   
Asia Pacific Regional Markets 
Did they set the tone or follow the lead .....
Asiapac IndicesJAPAN

Tokyo stocks lost ground Friday, closing at a five-week low as weakness in both U.S. tech shares and the Dollar took a toll, while reactions to earnings reports triggered volatility among shares of individual firms such as Kyocera, Advantest, and NEC.
 
The Nikkei 225 Stock Average lost 216.25 points, or 2.1%, to 10,198.04, closing at its intraday low and the lowest level since Dec. 21. The Topix index of all the Tokyo Stock Exchange First Section issues also dropped 13.20 points, or 1.4%, to 901.12, with 32 of 33 subindexes closing in negative territory. Trading volume was average, at about 2.26 billion shares.
 
The index lost 3.7% for the week and is now down 3.3% for the year to date after posting losses in eight of the last 10 sessions.
 
Kyocera was among the early winners, surging at the open after announcing nearly six-fold operating profit growth for its October-December quarter and dazzling analysts with a brighter full-year operating profit outlook. Its shares closed down 0.1% at Y8,200 after succumbing to broader market pressure, however.
 
Sumitomo Trust & Banking shares managed to close up 1.6% to Y503 after the firm reported Thursday evening that its group net profit grew about 2.5-fold on year to Y52.2 billion for the nine months through December.
 
On the other hand, tech giant NEC lost 3.7% to Y234, as its third-quarter net loss of Y9.6 billion disappointed investors, despite narrowing from a net loss of Y130.8 billion in the prior year. Credit Suisse analyst Hideyuki Maekawa said the company may still be able to meet its net profit outlook of Y10 billion for the full fiscal year, however.
 
Among highly volatile shares, Advantest lost 10% to Y2,253 on heavy volume. One analyst noted that earnings are proving slow to recover while most wafer process equipment makers are returning to profitability. Elpida Memory Inc. also dropped 9.0% to Y1,601 despite showing its first quarterly profit in more than two years.
 
Earnings reporting season hit full stride after the market closed Friday, with many bellwether firms announcing quarterly results, including Sumitomo Heavy, All Nippon Airways, Fujitsu, Toshiba, Daiwa Securities Group, NTT Docomo, and three of the largest rail companies. 

SOUTH KOREA
 
South Korean shares closed at nearly a nine-week low Friday after bellwether Samsung Electronics' solid earnings failed to offset concerns about global monetary tightening and a potential slowdown in economic momentum.
 
The Korea Composite Stock Price Index, or Kospi, fell 40 points, or 2.4%, to 1602.43, the lowest close since Dec. 2.
 
Market analysts also worried about signs of slowing economic momentum in coming months.
 
South Korean December industrial output data continued to rise, but the pace has been weakening, as the rate of gains in the leading indicator dropped, which will likely weigh on stocks ahead, said Park Seok-hyun, an analyst at KTB Securities.
 
Industrial output rose 33.9% in December from a year earlier, faster than forecasts for 30.7% growth, while the 12-month average leading index rose 12.8% following revised growth of 12.6% in November.
 
Foreigners were net sellers of shares worth KRW79.6 billion.
 
Samsung Electronics posted a net profit of KRW3.05 trillion in the fourth quarter, a strong rebound from a net loss of KRW20 billion a year ago, but its stock fell 3% to KRW784,000 due to widespread weak sentiment.
 
Samsung painted an upbeat picture, noting that profitability will improve in the traditionally slower first quarter due to strong chip prices and lower marketing costs.
 
Hynix Semiconductor lost 3.6% at KRW22,750 on concerns about its stake sale. Its creditors said Friday they didn't receive any bids for their stake in the chip maker by a Friday deadline of 0600 GMT.
 
KT Corp. also fell 0.4% at KRW49,800 after saying it posted a net loss of KRW448.3 billion in the fourth quarter, reversing from a net profit of KRW20 billion a year earlier, because labor costs related to heavy job cuts ballooned.
 
Auto makers finished lower in tandem with the broader market after staying in the black most of the day on their stronger-than-expected fourth-quarter earnings.
 
Kia Motors fell 0.5% to KRW19,550. Its stock outperformed the broader market as the company posted an eight-fold jump in its fourth-quarter net profit to KRW603.9 billion from KRW74.8 billion a year earlier, as consumers lapped up its new models and tax incentives made it more attractive to buy cars.
 
Hyundai Motor fell 0.4% to KRW113,000. Its fourth-quarter net profit nearly quadrupled from a year earlier, coming in at KRW945.5 billion, while net profit for the full year more than doubled to KRW2.962 trillion. 
 
Bucking the market trend, S-Oil Corp. rose 0.8% to KRW51,500 even after it said it incurred a net loss of KRW57.9 billion in the fourth quarter, narrowing from a KRW187.1 billion loss in the year-earlier period due to an increase in sales of lighter oil products, it said in a statement.
 
HONG KONG
 
Hong Kong had the mildest week. The Hang Seng Index had been down only 2.5% on the week but then dropped like the proverbial rock and was down 3.6% on the week in the early afternoon local time to 19,980 (near its Wednesday intraday low), before recovering to 20,121 at the close.
 
By a statistical fluke, it is one of the less-volatile Asian exchanges on the week. Its short-term technical indicators remain negative.
 
Hong Kong shares ended 1.15% lower on Friday and posted the worst monthly%age decline in 15 months, as investors dumped Chinese banks on wariness over Beijing's moves to curb lending growth.
 
But Li & Fung outperformed with a 10.22% gain. The consumer goods exporter said it had signed an agreement with Wal-Mart Stores to supply the U.S. retailer with goods valued at $2 billion in the first year.
 
The China Enterprises Index of top locally listed mainland Chinese stocks closed down 1.18% at 11,498.20.
 
For the month, the HSI was down 8%, its biggest one-month decline since October 2008.
 
Shares in Canadian coal miner SouthGobi Energy Resources fell about 12% in their Hong Kong debut on Friday, hurt by the stock's overly high valuation and poor timing.
 
SouthGobi, which raised $439 million in its IPO, is the second company to list in Hong Kong in 2010 after Russia's UC RUSAL. Both trade at double-digit%ages below their offering prices.
 
Worries about monetary policy tightening in China have pressured stock markets in Asia, hurting initial public offerings both in Hong Kong and on the mainland.
 
CHINA
 
Chinese shares ended mixed Friday amid investor concern plans by banks to sell new shares might dilute the market, with the country's main index finishing January down 8.8%.
 
The benchmark Shanghai Composite Index slipped 4.85 points, or 0.2%, to close at 2,989.29, while the Shenzhen Composite Index for China's smaller second exchange added 0.6% to 1,120.45.
 
Investors are concerned by a 22 billion RMB ($3.2 billion) planned share sale by midsize lender China Merchants Bank Co. due to be reviewed by regulators next week and possible sales by other banks.
 
Industrial & Commercial Bank of China Ltd., China's biggest commercial lender, and Bank of China Ltd. both shed 0.2% - ICBC to 4.85 RMB, and BOC to 4.1 RMB.
 
Other heavyweights fell back after a short rally Thursday. China Petroleum and Chemical Corp., also known as Sinopec, and developer China Vanke Co. both lost 0.7% - Sinopec to 11.42 RMB, and Vanke to 9.34 RMB.
 
Construction-related shares gained after a commerce official said Friday the government might announce steps to boost rural sales of building materials.
 
Jiangxi Wannianqing Cement Co. surged by the daily maximum of 10% to 8.17 RMB and Hebei Taihang Cement Co. advanced 5.1% to 10.11 RMB.
 
TAIWAN
 
Taiwan's share prices continued their fall Friday after a one-day respite, with the weighted index, the market's key barometer, sliding 54.14 points, or 0.7%, to close at 7,640.44.
 
The local bourse opened at 7,593.38 points and fluctuated between 7,649.73 and 7,481.90.
 
A total of 3.9 billion shares changed hands on market turnover of NT$117.24 billion (US$3.69 billion).
 
All eight major stock categories lost ground, with cement shares the biggest losers, falling by 1.2%.
 
Textile issues fell 1.0%, plastic and chemical stocks lost 0.9%, and electronics and machinery issues and banks and financial stocks both dropped 0.8% respectively.
 
Foodstuff and construction issues both lost 0.7%, while paper and pulp stocks lost 0.6%.
 
Losers outnumbered gainers 2,306 to 839, with 149 stocks remaining unchanged.
 
Foreign institutional investors and China qualified domestic institutional investors were net sellers of NT$10.59 billion in shares.
 
THE PHILIPPINES
 
Local stocks resumed their downtrend on Friday as the plunge in US stocks to nearly a three-month low revived risk aversion and curbed bargain-hunting.
 
After a technical bounce on Thursday, the main-share Philippine Stock Exchange index fell by 8.44 points or 0.285% to close at 2,953.19.
 
Dealers said a weak sentiment in Wall Street spooked the local equities market which found little incentive to sustain the modest bargain-hunting in the previous session.
 
This developed as US stocks tumbled after Qualcomm Inc. lowered its sales forecast while speculation mounted Greece won't be able to finance its budget deficit. Offshore financial markets also gave a lukewarm response to President Barack Obama's economic comments in his State of the Union address, where he called for more efforts to create jobs and also ordered caps on spending.
 
But the drop in the local stock market was more modest compared to the Dow Jones Industrial Average which slumped 115.70 points (1.13%) on Thursday. The technology-heavy Nasdaq composite or the Standard & Poor's 500 index also faltered by 1.91% and 1.18%, respectively.
 
Despite the overall drop at the local market, there was some modest bargain-hunting that benefited bellwether Philippine Long Distance Telephone Co. as well as Alliance Global Group Inc., First Philippine Holdings Corp. and Belle Corp. They were among the 45 advancers as against 62 decliners and 57 unchanged stocks.
 
On the other hand, the decliners were led by Ayala Corp., Ayala Land Inc., Megaworld Corp., Metro Pacific Investments Corp., Aboitiz Power Corp. and SM Prime Holdings Inc.
 
The Ayala and Metro Pacific groups have teamed up to bid for the Angat power plant, seen as an alliance in defense of their water distribution businesses.
 
The share prices of Energy Development Corp., Philex Mining Corp., Metropolitan Bank and Trust Co., Bank of the Philippine Islands and First Gen Corp. were unchanged.
 
Value turnover at the stock market improved to P2.55 billion from P2.3 billion in the previous session but was still below the daily average of about P3 billion.
 
Only the services sector bucked the downtrend while the property and financial counters were the worst hit, respectively dropping by 1.4% and 1.6%.

SINGAPORE
 
Singapore shares edged down 0.45 per cent Friday, taking its cue from regional stock markets that tumbled amid fears over doubts about the strength of global recovery.
 
The Straits Times Index was down 12.33 points at closing bell to end the week at 2,745.35.
 
Some 1.76 billion shares exchanged hands at a value of S$1.95 billion. Losers outnumbered gainers 345 to 153.
 
The Straits Times Index was this week schizophrenic. Sometimes adopting the character of the Australasian markets, and sometimes that of the Indian exchange, it resembled the latter insofar as volatility was concerned (and was uncharacteristically the third most volatile major exchange in Asia); in terms of absolute movement it split the difference between Wellington and Sydney, posting a third-least-bad performance, down about 2.8% on the week to 2,750.
 
As throughout the rest of Asia, the STI's short-term technical indicators are unfavourable.

INDONESIA
 
Indonesia's Jakarta Composite Index slipped 8.77 points, or 0.33% to close at 2,611.
 
Coal miner Bumi Resources fell nearly 3% and Bank Danamon was down 2%. Malaysia slid 0.4% and hit its lowest since Nov. 30 during the session.
 
MALAYSIA
 
Share prices on Bursa Malaysia closed lower Friday as profit-taking in lower liners and heavyweights pulled the marketdown, dealers said.
 
At 5pm, the benchmark FTSE Bursa Malaysia Composite Index (FBM KLCI)fell 5.35 points to 1,259.16 after opening 6.05 points easier at 1,258.46.
 
An analyst said the market, which underwent a correction last week,was just drifting to form a base. "The downside is limited to the 1,248 points level. I think the market is just going to continue to drift for a while," he said.
 
At the close, Bursa Malaysia's Finance Index gained 4.02 points to 11,078.79while the Industrial Index lost 44.18 points to 2,586.04 and the Plantation Index dropped 36.87 points to 6,188.13.
 
The FBM Emas Index decreased 33.09 points to 8,484.0, the FBM Ace Indexdeclined 15.75 points to 4,381.83 and the FBM70 Index slipped 4.24 points to8,326.22.
 
Decliners led advancers 456 to 252 while 260 counters remained unchangedand 351 others were untraded.
 
Volume rose to 973.25 million shares, worth RM1.62 billion, from Thursday's 935.253 million shares worth RM1.425 billion.
 
THAILAND
 
Thai stocks gained almost 1% on Friday as better-than-expected economic data revived flagging sentiment but most other Southeast Asian stock markets ended in negative territory.
 
Thailand reported a strong set of economic data for December, with a surge in manufacturing output reflecting strength in electronics exports and boosting hopes for strong GDP growth in the fourth quarter, carrying on into this year.
 
Big caps turned higher by the close, with PTT, the biggest stock by market capitalisation, up 0.3% and top olefins maker PTT Chemical ending 2.7% higher.
 
The main Thai stock index ended up 1% after an eight-day fall as political concerns grew. It contracted 5.2% in January, Southeast Asia's second-worst performer after Singapore's 5.3% loss for the month.
 
Thai market sentiment remains fragile as anti-government, "red shirt" demonstrators step up their protests, and further political turbulence may come from rifts within the ruling coalition over constitutional reform.
 
Thailand's PTT Exploration and Production reported a larger-than-expected 32% fall in its quarterly earnings on Friday, mainly due to higher costs related to Australia's Montara field and projects in Iran and Oman.
 
After the earnings announcement, PTTEP shares were down 1.5% at 129.50 Baht, near a seven-week low of 129 Baht.
 
INDIA
 
Indian shares erased early losses and ended higher Friday after the country's central bank kept policy rates unchanged and raised its economic growth forecast for the current fiscal year.
 
The Bombay Stock Exchange's 30-stock Sensitive Index rose 0.3% to close at 16,357.96. The benchmark index, which has lost 3.1% this week, fell as much as 2% to 15,982.08 during the session after the Reserve Bank of India raised the cash reserve requirement of banks by a larger-than-expected 75 basis points to 5.75% to remove excess liquidity from the banking system.
 
The RBI was widely expected to increase the cash reserve ratio, or the minimum amount lenders need to hold with the central bank in cash, by 50 basis points.
 
The central bank, however, left key borrowing and lending rates unchanged and raised its forecast for economic growth for this fiscal year to 7.5% from 6%, lifting investor sentiment.
 
On the National Stock Exchange, the 50-stock S&P CNX Nifty gained 0.3% to 4,882.05.
 
Total traded volume on the BSE rose to 57.03 billion rupees ($1.2 billion) from Thursday's 50.07 billion rupees. Gainers outnumbered decliners 1,471 to 1,354, while 62 stocks remained unchanged.
 
Banks were buoyant as policy rates remained unchanged. Private lender ICICI soared 5.3% to 830.40 rupees, while State Bank of India climbed 2.7% to 2,058 rupees.
 
Bharat Heavy Electricals gained 3.1% to end at 2,406.45 rupees, while energy giant Reliance Industries rose 0.9% to 1,046.55 rupees.
 
Software exporter Wipro slipped 3.8% to 647.40 rupees, while Hindustan Unilever dropped 4.4% to 244.10 rupees.
 
Auto maker Tata Motors fell 2.9% to 694.35 rupees and Tata Steel slid 2.8% to 569 rupees.
 
AUSTRALIA
 
The Australian share market dived to a nine-week low in volatile trading Friday after offshore equities and commodities markets tumbled amid increased risk aversion, weaker-than-expected U.S. economic data and a slide in U.S. technology stocks.
 
The benchmark S&P/ASX 200 index closed down 103.7 points, or 2.2%, at 4569.6, after falling as low as 4566.7. The index was 7.8% below its January peak of 4955.1.
 
Volume was strong, even after allowing for Thursday's expiry of January equity options.
 
Overnight, the S&P 500 fell 1.2% on disappointing U.S. durable goods data, a weak sales forecast from Qualcomm and U.S. Dollar strength, caused by a negative Standard & Poor's report on U.K. banks, as well as continued credit stress in Greece.
 
Traders said they were generally surprised by the extent of the fall in Australian equities, citing increased risk aversion and unwinding of U.S. Dollar carry trades as negative factors.
 
In the banking sector, Commonwealth Bank fell 3.4% to A$53.23 and Westpac fell 2.9% to A$23.86, while ANZ fell 1.9% to A$21.73 and National Australia Bank fell 1.2% to A$26.37.
 
BHP Billiton fell 3.2% to A$39.40 and Rio Tinto fell 4.8% to A$68.00 after London Metals Exchange copper fell 4.6%. Alumina fell 6.1% to A$1.54 as the alumina price fell 3.3%.
 
In the energy sector, Woodside Petroleum fell 3.1% to A$42.33 after workers at the Pluto liquefied natural gas project in Western Australia state ignored a court order to end strike action, according to a report in the Australian Financial Review.
 
Defensives mostly reversed Thursday's underperformance, with CSL up 1.1% at A$31.18, Foster's up 0.4% at A$5.34 and AGL Energy up 0.4% at A$13.85. However, Telstra fell 2.3% to A$3.34 after UBS kept its Buy rating on the stock but slashed its price target to A$4.00 from A$4.55.
 
NEW ZEALAND
 
New Zealand shares fell, joining a global slide amid renewed concern Greece will need a bail-out while economic recovery in the U.S. remains tepid and China looks to tighten credit. The NZX 50 Index fell less than its counterparts in Asia as companies including Hallenstein Glasson Holdings forecast better earnings.
 
The NZX 50 fell 18.95, or 0.6%, to 3165.65, the lowest since Dec. 21 and the 13th decline in 15 sessions. Within the index, 21 stocks fell, 20 rose and nine were unchanged. Turnover was $88.9 million.
 
New Zealand Refining, the nation's only oil refinery, led the NZX 50 lower. New Zealand Oil & Gas shed 2.6% to $1.52 and Pan Pacific Petroleum dropped 2.3% to 43 cents.
 
Pike River Coal, which has flagged the need for more capital amid further production delays, declined 3.1% to 95 cents.
 
Kathmandu Holdings, the outdoor equipment chain, fell about 2% to $2 as Westpac Banking Corp. disclosed that it has ceased to be a substantial holder of the stock, with its stake dropping to 3.1% from 6.3%.
 
Pumpkin Patch, the children's clothing chain, fell 2% to $1.96.
 
Hallenstein surged 11% to $3.60, leading gainers on the NZX 50 after the clothing retailer forecast a 50% jump in first-half profit on buoyant trading over the Christmas-New Year period and raised its dividend.
 
Charlie's Group Ltd., the Auckland-based owner of the Charlie's and Phoenix Organics brand drinks, jumped 7.8% to 9.7 cents after reporting it turned to a first-half profit, from a year-earlier loss, on the sale of an Auckland property, cost cutting and growth in its Australian business.
 
NZ Farming Systems Uruguay Ltd., the company using intensive New Zealand dairy farming techniques to develop farms in South America, rose 4.6% to 46 cents after reiterated its target for a full-year loss, saying milk prices will be volatile after three months of gains.
 
Telecom Corp. fell 1.2% to $2.38 amid negative publicity over outages on its XT network - which has been beset with glitches for three days.
 
Auckland Airport successfully completed the institutional part of its capital raising with 99% of its institutional shareholders taking up entitlements and its shares will resume trading on Tuesday.
 
NZOG fell 4c to 152 after releasing a quarterly report. Charlie's rose 0.7c to 9.7c after saying it expected to post an interim profit.
 
ING Property rose 2c to 77, ING Medical Property Trust rose 4c to 119 but Goodman Property Trust was unchanged at 103 and Kiwi Income Property Trust was unchanged at 101. Property for Industry fell 2c to 115.
 
Mainfreight rose 6c to 571 and Freightways fell 1c to 327.
 
Ebos eased 1c to 597 and Cavalier Carpets rose 3c to 279.
Global Commodities 
'Food for thought' or 'a Grain of truth' .....
 CommoditiesThe appeal of commodities as an asset class for retail investors has been strengthened immeasurably by the emergence of commodity-related exchange traded products (ETPs) which can be bought and sold as easily as equities, avoiding the burden of storing gold bars or delivering barrels of oil.
 
About $30bn (£18.6bn, €21bn) of new money flowed into commodity-related ETPs in 2009 which proved a banner year for commodity markets when total investor inflows reached a record $68bn.
 
Total commodity assets under management (AUM) stood at $257bn at the end of last year, according to data from Barclays Capital, with assets held by commodity ETPs estimated at a record $91.5bn.
 
A growing number of investors are opting for ETPs as their preferred vehicle for gaining exposure to commodities in preference to structured products or indices such as the S&P GSCI index, which remains the most widely followed benchmark. At the end of the year, assets under management held by commodity indices stood at about $111bn.
 
But it is over the past decade that the growing appeal of commodity ETPs becomes clearer, with assets up 914% ($91.5bn), while structured products AUM have increased 270% ($54bn) compared with a rise of 19% ($105bn) for commodity indices AUM, according to Barclays' estimates.
 
Gold played a starring role for commodity ETPs with inflows of 573 tonnes in 2009, which took total holdings to a record 1,762 tonnes, according to the World Gold Council.
 
Fearing a deep global recession and further volatility across financial markets, investors sought a haven in gold, while silver, platinum and palladium ETPs also saw huge inflows as these funds provide "easy access to hard assets".
 
Currency movements, particularly the outlook for the Dollar, inflationary pressures and the strength of the global economic recovery should determine whether investor interest in gold remains strong this year.
 
Crude oil stayed higher and gold futures were lower on Friday, after the US government reported the economy grew more than expected in the fourth quarter of last year. Crude oil for March delivery was up 37 cents, or 0.5%, at $74.01 a barrel. Gold for April delivery was down $1.40, or 0.2%, at $1,083.40 an ounce. The Commerce Department reported real gross domestic product rose 5.7% in the final three months of 2009.
 
Copper prices tumbled as traders feared demand from China could wane as that country taps the brakes on its economy. Energy prices also fell on signs that consumption of gasoline and other petroleum products remains weak.
 
Copper for March delivery fell 4.55 cents to $3.0525 a Pound. Copper has sold off for much of the week as China rein in its overheated economy by curbing bank lending and raising interest rates.
 
Weak demand was also dragging down energy prices. The Energy Information Administration said Wednesday appetite for petroleum products has dropped four straight weeks. 
Global Currencies 
In for a Penny, in for a Pound .....
UK Markets
 The Euro dropped to a six-month low against the Dollar this week as concerns over the health of Greece's finances escalated.
 
Worries over the ability of Athens to fund its budget deficit dominated the currency markets as traders followed the movements of Greek government bond yields compared with their German counterparts. Some analysts said the Euro was trading like an emerging market currency.
 
In the short term the Euro might continue to track fiscal concerns linked to Greece. But in the longer term, the European Monetary Union is likely to remain intact and the European Central Bank will probably take a policy line similar to that of the Bundesbank, focusing on price stability.
 
The longer-term trading pattern for the Euro against the Dollar should resemble that of the Deutschemark, rather than an emerging market currency (which it is currently doing).
 
The Euro hit a low of $1.3900, its weakest level since July 14, on Friday after the spread of the yield of 10-year Greek bonds against German Bunds hit its highest level since Greece adopted the Euro in 2001.
 
Analysts said the pressure on the Euro was likely to continue as uncertainty persisted over a potential bail-out for Greece. They said the single currency would be hurt by further deterioration in bond markets, not just in Greece, but in other countries on the periphery of the Eurozone, such as Portugal and Spain.
 
Over the week, the Euro fell 1.6% to $1.3916 against the Dollar, dropped 1.2% to a five-month low of £0.8673 against the Pound and lost 0.6% to a nine-month trough of Y126.32 against the Yen.
 
Meanwhile, the Dollar rose as US growth came in much stronger than expected, showing a rise of 5.7% in gross domestic product in the fourth quarter, way above forecasts for a reading of 4.5%. "We believe this data is good news for the US currency," said Vassili Serebriakov at Wells Fargo. "As 2010 progresses, we suspect that relative economic growth trends should continue favouring the Dollar against the Euro, the Yen and the Pound."
 
During the week, the Dollar rose 0.4% to $1.6044 against the Pound, gained 1.2% to SFr1.0535 against the Swiss franc and climbed 1% to $0.8909 against the Australian Dollar.
 
The Dollar advanced against the Yen after figures showed consumer prices in Japan fell at a record pace in December, prompting the government to reiterate its call for Japan's central bank to step up its fight against deflation.
 
The Yen fell 1% over the week to Y90.75 against the Dollar.
 
The New Zealand Dollar advanced on Thursday after the Reserve Bank of New Zealand struck a hawkish tone following its policy meeting.
 
Although the central bank left interest rates unchanged at 2.5%, it said in its policy statement that it expected to begin removing monetary policy stimulus around the middle of the year. This was more aggressive than its previous view that "conditions may support" the removal of policy stimulus around that time.
 
Significantly, a previous reference to tighter financial conditions - including a higher exchange rate - reducing the need for more immediate action, was removed.
 
Analysts said this suggested that, while mid-2010 remained the most likely time for the first rate rise, there was a risk of an earlier move depending on economic developments.
 
Sterling fell against the Dollar on Friday as the US currency rallied on the back of surprisingly strong growth data which added to optimism that the world's biggest economy is recovering from recession.
 
The GDP data pushed the Pound to its weakest against the Dollar in nearly three weeks while it inched further away from a five-month high versus the Euro, which earned a slight reprieve after being dogged by concerns about Greece's ballooning debts.
 
Traders brushed off figures showing a jump in British house prices and rising consumer confidence, while traders said Sterling/Dollar stop-loss orders aggravated the Pound's downward move to a session low of $1.6036.
 
Against its South African counterpart, the Dollar traded lower during New York deals on Friday. At about 10:30 am ET, the greenback-Rand pair touched 7.5355, which may be compared to Thursday's closing value of 7.5970. This set a 1-week low for the US currency. Thereafter, the pair reversed its direction and currently trading at 7.6053.
 
And finally the RMB - a little changed Dollar-yuan central parity rate continued to discourage position-taking by foreign-exchange traders Friday, leaving China's yuan little changed against the US Dollar late in the afternoon.
 
On the over-the-counter market, the Dollar was at CNY6.8268 around 0930 GMT, down marginally from CNY6.8269 at Thursday's close. It barely moved during the session, trading between CNY6.8267 and CNY6.8270.
 
The Dollar has settled at either CNY6.8268 or CNY6.8269 in every session in the past week and within seven points of CNY6.8270 since the start of the year. 
China 
Key news eminating from China this week .....
 China MarketsIndustrial and Commercial Bank of China, the world's largest lender by market value, said on Wednesday it would rein in lending to some borrowers in response to government attempts to slow explosive loan growth in the country.
 
But the bank stressed it did not intend to stop all lending and would continue to fund projects already under construction as well as small businesses, consumer credit and "key industries and areas" - a reference to sectors and regions that enjoy explicit policy support from the central government.
 
"ICBC will not rush to lend, nor will it stop lending," the bank said in a statement. But it will "strictly control lending to new projects, and strictly limit lending to industries that are pollution or emissions intensive or which experience overcapacity".
 
In the past week, the Chinese government as ordered some banks temporarily to suspend lending altogether after total new loans in the country exceeded Rmb1,100bn ($161bn) in just the first two weeks of January.
 
Beijing has set a target of Rmb7,500bn in new loans for the whole year after banks lent a total of Rmb9,600bn last year, more than double the amount of new loans extended in 2008.
 
Authorities fear runaway lending could exacerbate potential inflationary pressures in the economy and will likely lead to future non-performing loans.
 
The huge build-up of credit last year is already being blamed for asset price bubbles, most noticeably in Chinese real estate, which officials and analysts agree is seriously overvalued in many markets.
 
ICBC said on Wednesday its net profit in 2009 rose 15 per cent from a year earlier to about $18.7bn - an impressive performance but a deceleration from the 19 per cent growth the bank experienced in the first three quarters of last year.
 
More than 85 per cent of profits in the Chinese banking sector come from the difference between government-set lending and deposit rates, a situation which encourages banks to lend as much as they can in order to make bigger profits.
 
ICBC said that its lending pace in the first half of January was "a bit fast", but remained below that of the same period last year. But it said loan growth has stabilised since then thanks to the repayment of credit card debt and the return of a "concentrated volume of existing loans".
 
Reports in state-run media said some smaller Chinese banks were being forced to call in and cancel large volumes of loans extended in recent weeks after they exceeded the loan quotas reinstated by the central bank this month.
 
China's banking regulator said it had issued no such order to banks but released a public statement instructing lenders to regulate the pace of new loans this year and be wary of a resurgence of bad loans and any changes in the property market.
 
*******************************
 
Li Keqiang, the man poised to become China's next premier in 2012, stepped on to the Davos stage with what looked like a royal wave.
 
In asily his most high-profile speech abroad since his elevation to vice-premier two years ago, he resolutely defended China's record in pursuing balanced growth, implicitly rejecting criticism that Beijing had not done enough to mend its export-led model.
 
"China's contribution to the world's economic recovery is obvious," he said, adding that its 8.7 per cent growth in output last year came in spite of falling exports that shaved nearly 4 per cent off the headline rate. Growing domestic demand, both through government-led investment and consumption, contributed more than 12.5 per cent to the growth in gross domestic product, he said. "While promoting growth, we spared no effort in rebalancing the structure of the economy."
 
The vice-premier, who analysts say is being groomed to succeed Wen Jiabao as premier, stayed clear of contentious topics. He avoided even oblique reference to exchange rate policy - a point of friction with the US - let alone topics such as Iran, Google or domestic political reform.
 
The closest he brushed with controversy was to criticise countries that preached free trade but adopted protectionist practices, a swipe at recent US measures against Chinese products such as tyres.
 
The succession process to determine who will lead what may already be the world's second-biggest economy is opaque. 
 
China experts say Xi Jinping, who two years ago was made a member of the nine-man politburo standing committee along with Mr Li, is likely to succeed Hu Jintao as president.
 
Mr Li, who has a doctorate in economics, peppered his speech with data aimed at proving that China was shifting to more balanced and sustainable growth. Sales of consumer goods had risen 15.5 per cent last year, while income grew in tandem with GDP, increasing disposable income, he said. Acknowledging that China remained "excessively dependent on exports", he added: "I am confident consumption will play a bigger and better role to drive China's economic development."
 
Some delegates criticised China's fixed exchange rate policy, citing it as evidence that Beijing intended to return to its export-led model. George Soros, the billionaire investor, said lifting the renminbi-Dollar peg would boost domestic consumption and help fight inflation. "It cries out for action Friday," he said.
 
Chinese delegates said Beijing would not respond to US pressure to alter the exchange rate but hinted at "gradual change".
 
*******************************
 
China is considering rules that would ensure compensation is paid to people before they can be evicted from their homes to make way for construction, addressing a grievance that has sparked public protests.
 
Seizures must be paid for at market rates in cash or other property, according to draft rules posted on the Web site of the Legislative Affairs Office of the State Council. The rules would also stop developers from shutting off water, heat and electricity to force people out, according to the draft, which was made public Friday.
 
Property disputes last month prompted the People's Daily newspaper, published by the central committee of China's Communist Party, to say in an editorial that people's rights should be better protected. A 68-year-old man in the eastern province of Jiangsu suffered severe burns after he set himself on fire this week in a dispute over demolition of buildings to make way for roads, the official Xinhua News Agency reported.
 
Land grabs by corrupt government officials are a common cause of protests in China, threatening social stability and the ruling Communist Party's legitimacy. China's population considers corruption to be the biggest blot on the country's image, China Daily reported, citing a survey by the Horizon Research Consultancy Group.
 
Property prices in China rose at the fastest pace in 18 months in December, highlighting the government's struggle to rein in speculation. Premier Wen Jiabao pledged Dec. 27 to stabilize property prices, crack down on speculation and keep housing affordable using tools like taxes and land regulations.
 
The new draft rules include a proposal for authorities to invite public opinions on projects designed to "serve the public interest." The public consultation period for the proposed eviction regulations ends on Feb. 12.
 
Nationwide, the number of so-called mass incidents -- everything from ethnic unrest in Tibet and Xinjiang to strikes and riots -- rose to about 90,000 in 2008 from more than 80,000 in 2007, according to figures from the Chinese Academy of Sciences that studies unrest. The government doesn't release official numbers.
 
*******************************
 
The Shanghai stock market, famous for sending initial public offering shares skyrocketing on their first day of trading, set a subdued new landmark on Thursday when China XD Electric became the first IPO in more than five years to fall on its first day of trading.
 
Shares in the mainland's biggest maker of electricity transmission and distribution equipment fell 1.4 per cent to Rmb7.79 in Shanghai from the IPO price of Rmb7.90. Shanghai's benchmark composite index rose 0.25 per cent on the day.
 
The fate of the company, which raised $1.5bn with its offering, underlines the fact that IPOs in China may no longer safely be viewed as licences to print money: several recent large offerings have only seen single-digit percentage rises on their first trading days and others have seen subsequent declines to below their offer price.
 
The China Securities Regulatory Commission, the market regulator, introduced changes in June aimed at "improving the relevance between the IPO market and the secondary market", according to a statement on its website. It warned at that time that "there may be cases where the offer prices are relatively too high and new stocks will fall below the offer price on their debut".
 
China XD's debut came after the Shanghai benchmark slumped 8.6 per cent since the beginning of the year, making it the 10th-worst performer among the 94 benchmarks tracked globally by Bloomberg.
 
XD Electric priced its IPO at a relatively modest 34 times 2008 earnings, compared with an average of about 50 times for Chinese IPOs over the past seven months, according to Reuters calculations.     
Summary  
The coming week looks like .....
Commodities Indices
 Next week probably sees one of the busiest weeks for months in terms of reporting and Central Bank meetings and a slew of economic and corporate data; so I think we can safely say we will see increased volatility next week for sure.
 
With the Fed's monetary policy decision behind us, the US Non-Farm Payrolls and the G7 meeting along with three interest rate announcements from the Reserve Bank of Australia, the Bank of England, and the European Central Bank will take the center stage in what could become another pivotal week ahead for equities, commodities and currencies.
 
Sunday will begin the trading session with a sequence of significant economic releases from "down under", starting with the Australian Manufacturing PMI-Purchasing Managers' Index, a leading indicator of economic conditions measuring the activity level of purchasing managers in the manufacturing sector.
 
Another notable report- the Australian TD Securities Melbourne Institute Inflation Gauge, a measure of consumer inflation used as a leading monthly indicator of the quarterly-issued Consumer Price Index, will be released followed by the Australian House Price Index, a measure of changes in home prices.
 
Monday will start with the Swiss PMI-Purchasing Managers' Index, measuring the activity level of purchasing managers in the manufacturing and service sectors.
 
Two important releases will follow with the Euro-zone Manufacturing PMI-Purchasing Managers' Index, a leading indicator of economic conditions measuring the activity level of purchasing managers in the manufacturing sector and the UK Manufacturing PMI-Purchasing Managers' Index.
 
The sequence of notable UK reports will continue with Bank of England's Mortgage Approvals Report, a leading indicator of housing market activity measuring newly issued home loans along with the UK Net Lending to Individuals, a gauge of consumer credit conditions.
 
The US economic data will bring the first spotlight event of the week- the US Personal Income and Outlays, a measure of the income received and purchases made by consumers, released along with the Personal Consumption and Expenditures Deflator- a leading indicator of inflation preferred by the Fed because it measures a variable basket of goods and services, as opposed to the CPI-Consumer Price Index which measures a fixed basket of goods and services.
 
Another spotlight event- the US ISM Manufacturing Index, a leading indicator of industrial activity, where a reading above or below 50 is the dividing line between economic expansion and contraction, will be released along with the US Construction Spending.
 
The evening reports will begin with the Australian Business Confidence, a survey on the economic outlook of businesses and the Japanese Cash Earnings, a measure of workers' income.
 
The day will conclude with one of the main spotlight events of the week- the Reserve Bank of Australia Interest Rate Announcement.
 
Tuesday will kick-off with the UK Construction PMI- Purchasing Managers' Index, measuring the level of activity of purchasing managers in the construction sector.
 
A notable report will follow with the release of the Euro-zone PPI- Producer Price Index, the main measure of wholesale inflation experienced by manufacturers and a leading indicator of consumer inflation.
 
The US economic data will bring the US Pending Home Sales Index, a leading indicator of housing market conditions.
 
The day will conclude with a series of important economic reports, beginning with the Australian Services PMI- Purchasing Managers' Index, measuring the level of activity of purchasing managers in the services sector.
 
The UK Nationwide Consumer Confidence Index, a survey of consumers' financial conditions and outlook on the economy, will follow along with the British Retail Consortium Shop Price Index of changes in prices of goods.
 
The Australian Trade Balance of the difference between imports and exports will wrap up the day.
 
Wednesday will begin with two notable releases- the Euro-zone Services PMI- Purchasing Managers' Index and the UK Services PMI- Purchasing Managers' Index, a leading indicator of economic conditions measuring the activity of purchasing managers in the services sector.
 
More European news will bring a spotlight event- the Euro-zone Retail Sales, an important measure of consumer spending.
 
The US economic reports will begin with a spotlight event- the ADP-Automatic Data Processing Employment Report, an important gauge of labor market conditions in the private sector of the economy.
 
Another spotlight event- the US ISM Non-Manufacturing Index of economic conditions in the services industries: agriculture, mining, construction, transportation, communications, wholesale trade and retail trade, will be released followed by the EIA- Energy Information Administration Weekly Oil Inventories.
 
The sequence of spotlight events will continue with the New Zealand Employment Situation and Unemployment Rate, the main gauge of employment trends and labor market conditions.
 
The day will end with two notable reports- the Australian Retail Sales, the main gauge of consumer spending along with the Australian Building Approvals, a leading indicator of housing market activity.
 
Thursday will start with the Swiss Trade Balance of the difference between imports and exports and the German Factory Orders, a leading indicator of industrial activity in the Euro-zone's largest economy.
 
Two of the main spotlight events of the week will follow- the Bank of England Interest Rate Announcement and the European Central Bank Interest Rate Announcement.
 
Another significant event that morning will be the European Central Bank President Jean-Claude Trichet's press conference following the ECB Governing Council's interest rate decision. The language of his statement will be closely watched for any hints of future changes in the ECB's monetary policy.
 
The Canadian Building Permits, a leading indicator of housing market conditions, will come in the morning.
 
The US economic reports will begin with the weekly Jobless Claims, a gauge of labor market conditions measuring new unemployment claims along with the US Non-farm Productivity and Labor Costs Index, measuring the growth of labor efficiency and price changes in labor costs.
 
A notable Canadian economic data will bring the Canadian Ivey PMI-Purchasing Managers' Index, a leading indicator of economic conditions measuring the activity of purchasing managers in all sectors of the economy.
 
The US economic reports will continue with the US Factory Orders, a leading indicator of economic activity measuring orders placed with domestic manufacturers and the US EIA- Energy Information Administration Weekly Natural Gas Inventories.
 
The day will conclude with the Australian Construction PMI- Purchasing Managers' Index, measuring the level of activity of purchasing managers in the construction sector and the Reserve Bank of Australia's Monetary Policy Report on inflation, economic conditions and future monetary policy.
 
Friday will start with the Japanese Leading Indicators of economic activity.
 
The UK economic data will bring a notable report with the release of the UK Input and Output PPI- Producers Price Indexes, the main measures of wholesale inflation experienced by manufacturers and leading indicators of consumer inflation.
 
The German Industrial Production, the main gauge of industrial activity measuring the output of factories, mines and utilities will be released.
 
A sequence of spotlight events will begin with the Canadian Employment Situation and Unemployment Rate, the main gauge of employment trends and labor market conditions.
 
The busy first trading week of the month will conclude with its main spotlight economic event- the US Non-Farm Payrolls and Employment Situation Report, one of the most important indicators of economic health, measuring the number of new jobs created, scheduled at 8.30pm here, along with the US Unemployment Rate and Average Hourly Earnings, also at 8.30pm Shanghai time.
 
Another important event to keep an eye on over next weekend will be the G7 meeting of finance ministers and central bankers in Iqaluit, Canada.
 
All told, a full week to say the least!  
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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