Financial Page International

9 January 2010 - Global Markets Review
Good Morning Ladies & Gentlemen,
 
So after the first week of 2010, I am happy to announce that stockmarkets corrected 25% this week and companies now show true valuations.
 
Added to this, Bankers have had their salaries cut and their bonuses have been abolished completely until the bank as a whole (not just their asset management arm) shows positive growth.
 
The same banks are now lending money to the 'people on the street' and we've seen the last of the Bank Bailouts.
 
Unemployment is coming DOWN globally; inflation is a long way off; the UK is NOT being run by a cretin and America has started to reduce its budget deficit.
 
Japan has ended two decades of chaos and is now growing healthily; Greece is prospering, along with Ireland and Spain.
 
Oh, and Jean-Claude Trichet is being proactive!
 
*************************************************
 
Oops - those were my New Year 'Wishes' - unfortunately I must bring you back to reality with a bump.  The opposite of the above continues to happen!
 
Here are the major headlines of the past two days, showing just how much of a pipe-dream my wishes above may be:
 
The eagerly anticipated US labour market report came in worse than expected. A Reuters poll of analysts had suggested that no jobs would have been lost or gained in December, and that the unemployment rate would inch up to 10.1 per cent.
 
In the event, 85,000 jobs were lost last month!
 
Bank of America, the biggest US bank, expects to pay record bonuses to investment bankers while keeping the overall cost of incentive compensation below previous years, according to a company spokesman.
 
"Some people will be getting very good bonuses because they had a very good year," the spokesman said.
 
London's investment banks are luring back traders and analysts they lost to brokerage firms during the credit crisis, compensating for lower bonuses by as much as doubling base salaries.
 
Tishman Speyer Properties LP and BlackRock Inc. will miss a bond payment Friday on debt from their $5.4 billion purchase of Manhattan's Stuyvesant Town and Peter Cooper Village apartments, the companies said in a statement.
 
"Friday's announcement has no immediate impact on tenant services or the day-to-day operations of the community," Tishman and BlackRock said in a joint statement.
 
Missing the payment puts the 80-acre property, Manhattan's largest residential enclave, on course to become the second- largest default in a commercial mortgage-backed security, after the $4.1 billion default of loans backing Extended Stay America Inc. hotels last year, according to Fitch Ratings. Tishman and BlackRock's monthly debt payments are $16.1 million.
 
Commercial lending and home foreclosures mean the falling number of bank loans is emerging as the No. 1 economic concern of 2010.
 
Indeed, the numbers are eye-catching. As of Dec. 23, which is the latest date for available data from the Federal Reserve, bank lending at nearly $6.7 trillion was down $100 billion from the month before. In the past year, the volume of loans outstanding by banks in the US has fallen just over $500 billion. Bank loans have been trending down for a while. Worse, most analysts don't see bank lending turning around anytime soon.
 
A combination of banks wanting to take fewer risks and lower demand for credit from consumers and businesses will cause banks to continue to make fewer loans this year than last.
 
But while bank loans are falling, the well of credit for corporations is far from dry.
 
In fact, the 22 largest banks in the Treasury's Troubled Asset Relief Program issued or renewed $127 billion in business loans in November, roughly the same as five months ago.
 
And at a recent $6.7 trillion, bank lending is at the same level it was in the end of 2007, when the economy was still expanding.
 
That will be a problem if we see serious inflation. When asset prices rise and loan values don't, that can signal economic stagnation.
 
Iceland's president stunned his nation Thursday by refusing to sign off on a plan to repay £2.3bn owed to the British taxpayer, reigniting a major diplomatic row with London and leaving Gordon 'Brown-the-Clown' mortally embarrassed at the latest twist in the saga of Reykjavik's banking meltdown.
 
A repayment plan for the debt, owed after the British Government paid compensation to UK savers who lost money in the collapse of the Icelandic internet bank Icesave, had been approved by Iceland's parliament despite huge opposition. But Thursday, in a move that horrified the ruling coalition, President Olafur Ragnar Grimsson declared that MPs had failed to take public opinion into account, and called a referendum. It was an extraordinary step for a ceremonial President, and only the second presidential veto in the republic's 66-year history.
 
The response from Britain - and the Netherlands, which is expecting repayment on a €1.3bn (£1.16bn) loan - was furious. The Prime Minister's official spokesman said: "The Government expects the loan to be repaid. We are obviously very disappointed by the decision by the Icelandic President, but we do expect Iceland to live up to its legal obligations and repay the money."
 
If it was the US that was owed money, they'd sue them for sure!
 
Talking of the good old US of A, look at their 'Golden' State - California. It looks like their 'Golden' State is losing some of its shine.
 
Arnold Schwarzenegger Friday warned the state remained deep in fiscal crisis as he unveiled his final annual spending blueprint for the state, which calls for steep reductions in education, healthcare and social services as well as cuts in transportation projects, state worker pay and environmental programs.
 
In unveiling the plan, which addresses a deficit that has grown to $19.9 billion, the governor warned the state could again run short of the cash it needs to pay its bills if lawmakers do not act quickly to curb spending. The proposal includes no new broad-based tax hikes. The governor announced he would declare a fiscal emergency and immediately call the Legislature into a special session to deal with the state's continued financial problems.
 
So all told, my wishes for a better Financial Year have taken a hit during the first week of 2010 and guess what; markets this week were up over the week, even when you include all of the above!
 
On to those numbers on the boards:
US Markets 
How the US did this week .....

 US SummaryUS stocks rose for a fifth day as speculation companies will end the longest profit slump on record and the Federal Reserve will leave interest rates near zero overshadowed an unexpected decrease in jobs.
 
United Parcel Service rallied 4.8 after saying profit will top its previous estimate. Alcoa added 2.5% before the largest aluminum company releases fourth-quarter earnings on Jan. 11, the first Dow Jones Industrial Average company scheduled to report. AK Steel Holding Corp. rallied 9.3% as JPMorgan Chase & Co. boosted its share price estimate on prospects for higher prices.
 
The Standard & Poor's 500 Index gained 0.3% to 1,144.98 at 4:06 p.m. in New York. The Dow Jones Industrial Average climbed 11.33 points, or 0.1%, to 10,618.19. Equities recovered from a slump that sent the S&P 500 down as much as 0.5% after the government reported the nation lost 85,000 jobs last month, compared with a median forecast for an unchanged reading in a survey of economists.
 
Stocks also gained as inventories at US wholesalers unexpectedly jumped in November by the most in five years, a sign companies are picking up the pace of orders as sales climbed 3.3%, the biggest gain since January 2008. Industrial shares rose the most of 10 S&P 500 industry sectors, adding 1.1% as a group.
 
US equities climbed for a fourth day Thursday, sending the S&P 500 to a 15-month high, on easing concern over commercial real-estate losses and gains in holiday retail sales.
 
The S&P 500 rallied 23% last year, including a rebound of 65% from a 12-year low in March, after governments around the world enacted stimulus measures and the Federal Reserve left its benchmark interest rate near zero to end the recession.
 
The biggest annual rally in six years left the index trading at almost 25 times its companies' reported earnings from continuing operations, the highest level since 2002, according to Bloomberg data.
 
The combined profit of companies in the S&P 500 is expected to increase in the fourth quarter from the year-earlier period for the first time since the second quarter of 2007, ending a record nine straight periods of declines.
 
S&P 500 profits increased 62% in the fourth quarter, according to analyst projections compiled by Bloomberg. The index's price-to-earnings ratio falls to less than 15 when compared with estimated profit for 2010.
 
AK Steel rallied the most in the S&P 500 Index, adding 9.3% to $25.77. JPMorgan raised the steel maker's share-price estimate to $34 from $29, citing the prospect of rising steel prices. U.S. Steel Corp., which also had its price estimate raised at JPMorgan, gained 7.3% to $65.34, the most since August.
 
General Electric, considered a bellwether for the U.S. economy, climbed the second-most in the Dow, adding 2.2% to $16.60. Caterpillar Inc., the world's largest maker of construction equipment, rallied 1.1% to $60.34.
 
Halliburton was added to Goldman Sachs Group Inc.'s "conviction buy" list as the bank upgraded the stock from "neutral." Shares of the world's second-largest oilfield- services provider climbed 5.1% to $34.12.
 
Limited Brands rose 4.4% to $19.59. The owner of the Victoria's Secret chain was raised to "overweight" from "equal weight" at Barclays Plc.
 
Financial shares fell the most among the 10 industry groups in the S&P, losing 0.5%, on concern slower trading will hurt investment bank earnings.
 
Citigroup Inc. analysts said fixed-income, commodities and currencies trading in the fourth quarter declined substantially and "we are looking for industry fixed income trading to fall 15-20% in 2010." The analysts also wrote in the report that "we expect 2011 revenues to also be under pressure due to the impact of regulatory reform."
 
Coca-Cola Co. retreated 1.9% to $55.15 after JPMorgan cut its rating to "neutral" from "overweight."
 
MetroPCS Communications fell the most in the S&P 500. The shares declined 5.6% to $7.10 after Soleil Securities downgraded the pay-as-you-go mobile-carrier to "sell" from "hold."
 
Apollo Group, owner of the largest for-profit university in the U.S., slid the second-most in the S&P 500. A government report showed findings that Apollo was late repaying federal financial aid money and should better inform students about the costs, requirements and details of its programs. The shares dropped 5.4% to $60.50, the biggest intraday decline since October.  

European Markets 
What has been happening in Europe this week .....
 Europe SummaryEuropean stocks rose, extending the Dow Jones Stoxx 600 Index's fourth straight weekly gain, as UBS AG recommended banks and German exports increased more than forecast, overshadowing an unexpected drop in US payrolls.
 
The Stoxx 600 climbed 0.4% to 259.15, extending a 15-month high.
 
National benchmark indexes rose in every western European market, except Austria and Spain. France's CAC 40 added 0.5% and the UK's FTSE 100 gained 0.1%.
 
GERMANY
 
German stocks rose, extending the benchmark DAX Index's weekly advance, as better-than-estimated exports overshadowed a report that showed the US economy unexpectedly shed jobs in December.
 
Deutsche Bank AG, Germany's biggest lender, rallied 3.6% after UBS AG upgraded the shares and increased its rating on European investment banks to "overweight." Deutsche Lufthansa AG surged 2.9% as global flight traffic rose in November. Metro AG, Germany's largest retailer, lost 2.3% as JPMorgan Chase & Co cut its recommendation on the shares.
 
The DAX gained 0.3% to 6,037.61, bringing this week's advance to 1.4%. The measure has surged 65% since it reached a low last year in March as Europe's largest economy emerged from its worst slump in more than six decades. The broader HDAX Index added 0.4% Friday.
 
German exports, adjusted for working days and seasonal changes, increased 1.6% in November from October, the Federal Statistics Office in Wiesbaden said Friday. Economists surveyed by Bloomberg News had forecast a 0.8% rise. A separate report showed industrial production grew 0.7% in November, compared with a 1.8 contraction the previous month.
 
Deutsche Bank rallied 3.6% to 53.20 Euros, the highest level since October. UBS moved to "overweight" on European investment banks, saying "January has started strongly, with corporate debt issuance at 2009 levels and major M&A." The brokerage raised Deutsche Bank to "buy" from "neutral."
 
Separately, the bank was rated "outperform" in new coverage at Macquarie Group Ltd.
 
Commerzbank AG, the country's second-largest lender, rose 1.3% to 6.81 Euros. The bank's online broker Comdirect Bank said executed orders in December increased to 1.69 million from 1.14 million the previous month. Banks were among the best performers in the pan-European Dow Jones Stoxx 600 Friday.
 
Lufthansa, Europe's second-biggest airline, advanced 2.9% to 12.68 Euros for a fifth consecutive increase. Global freight traffic rose 10.9% in November from a year earlier, while passenger traffic gained 4.2%, according to the Airports Council International (ACI) in Geneva.
 
Volkswagen AG, Europe's largest automaker, added 1.1% to 66.46 Euros, its highest close in three weeks. India's passenger car sales rose the most in three years in 2009 as economic growth and cheaper loan rates helped the country withstand a global slump in demand.
 
Separately, the company is considering selling its new mid-size sedan for about 25% less than its current Passat to deliver 400,000 vehicles in the US in 2012, a person briefed on the matter said.
 
ThyssenKrupp AG, Germany's biggest steelmaker, added 1.9% to 28.07 Euros, the first advance in three days. Commerzbank increased its price estimate for the shares to 31 Euros from 25 Euros.
 
Metro dropped 2.3% to 40.46 Euros, marking a fourth day of declines. The shares were cut to "neutral" from "overweight" at JPMorgan, which cited concerns that the company's Eastern European market "may deteriorate."
 
Conergy jumped 34% to 93 cents, its biggest surge since August. The solar company and its former supplier MEMC Electronic Materials Inc. have moved closer to resolving their legal dispute, Handelsblatt reported. The newspaper cited a letter from Conergy's lawyers to a US court saying talks between the companies are going "well," and that it will be known soon if an amicable settlement can be reached.
 
Continental, Europe's second-biggest auto- parts maker, increased for a sixth day, gaining 1.9% to 46.85 Euros. That's its longest series of gains almost three months. Fitch Ratings affirmed its B+ rating on the company's long-term debt following Contintal's announcement Thursday it of a 1.1 billion-Euros ($1.6 billion) share sale.
 
Grenkeleasing, a company that leases computer equipment to small businesses in eight European countries, increased 2.6% to 31.30 Euros, its highest close since July 2007. The company was raised to "buy" from "hold" at Commerzbank.
 
HeidelbergCement, the nation's largest cement maker, rose 1.2% to 51.15 Euros, the highest price since November 2008. The company was rated "outperform" at CA Cheuvreux, which initiated coverage of the company, saying that the stock "is still attractive compared with peers."
 
Praktiker, Germany's second-biggest home- improvement retailer, retreated 5% to 6.72 Euros, the lowest close since July. JPMorgan and Morgan Stanley both cut their price estimates for the shares.
 
FRANCE
 
France's CAC 40 Index added 20.34, or 0.5%, to 4,045.14, bringing its weekly gain to 2.8%. The SBF 120 Index gained 0.5% Friday.
 
Aeroports de Paris added 2.2% to 58.43 Euros, snapping two days of declines. The operator of Paris's Orly and Roissy-Charles de Gaulle airports was raised to "buy" from "add" at Oddo Securities.
 
Beneteau rallied 8.8% to 12.49 Euros, the highest since August 2008. The sailboat-maker reported first-quarter revenue of 87.7 million Euros ($125.6 million), up from 86.3 million Euros a year earlier, and confirmed its 17% sales-growth target for the full year.
 
BNP Paribas, France's biggest bank, advanced 2.4% to 59.60 Euros, a third day of gains. Banks climbed after UBS AG lifted its recommendation on European investment banks to "overweight."
 
Societe Generale advanced 1.5% to 52.08 Euros, rising for a third day. France's second-biggest bank plans to put 42 billion Euros of illiquid assets into a separate unit in France to reduce operational risk.
 
Groupe Pizzorno Environnement added 0.5% to 19.50 Euros, the highest since August. The waste-management company reported third-quarter revenue of 49.96 million Euros, up from 40.83 million a year earlier, and said it sees a slight increase in sales for the full year.
 
Icade gained 2.3% to 72.10 Euros, snapping two days of losses. The real-estate company was upgraded to "buy" from "reduce" at Kepler Capital Markets.
 
Technip, Europe's second-largest oilfield- services provider, lost 1.2% to 52.22 Euros, snapping five days of gains. Crude oil fell after US payrolls unexpectedly declined last month, spurring concern that the economy and fuel demand will be slow to recover.
 
Thales added 1.8% to 35.41 Euros, a second day of gains. Europe's second-biggest defense-electronics maker was upgraded to "buy" from "neutral" at UBS.
 
Veolia Environnement soared 3.9% to 25.10 Euros, the biggest gain since July. The world's largest water company was added to Goldman Sachs Group Inc.'s "conviction buy" list. Veolia's recycling business will "benefit from higher recycled material prices and volumes over the course of 2010," Goldman analysts wrote in a note.
 
BELGIUM
 
The Bel 20 in Brussels ended the first trading week of the year at 2,591.64, a gain of 0.04%.
 
Sinking beer sales in Belgium are forcing Anheuser-Busch InBev SA to cut nearly 10% of the jobs in its home country, the company said Thursday.
 
The world's largest brewer said it was reorganizing operations to meet lower demand and would shed up to 303 workers in Belgium.
 
Belgians on average now drink 20% less beer by volume than they did in 2000, the company said.
 
"Even though beer has traditionally proved one of the most resistant products in less prosperous economic times, our industry isn't immune to the general economic climate," it said in a statement.
 
AB InBev said Belgian consumers also were increasingly turning to premium brands or novelty beers - and quitting bars to drink beer at home or elsewhere. The company's beer volumes fell 1.7% in the country in the first nine months of 2009.
 
These changes call on the company to adapt to "slimmer and more flexible" ways of making, selling and distributing beer, the company said. That means cutting up to 189 jobs - and warning that another 114 are at risk.
 
Belgian chemical company Taminco is to float on Euronext Brussels and hopes to raise up to 160 million Euros ($229.1 million) through selling new shares, which would mark the biggest IPO in the country since 2007.
 
The company, which makes ingredients for crop protection products, animal feeds, and drug making, among other things, said on Wednesday it was planning to raise the cash to pay down debt and for general company usage.
 
The flotation would mark the largest IPO in Belgium since zinc and lead company Nyrstar (NYR.BR) raised about 1.74 billion Euros in Oct. 2007.
 
Ghent-based Taminco generated revenues of 692.0 million Euros in 2008, and said 45 to 65% of its shares are expected to be in free float.
 
It was spun out of Belgian drugmaker UCB in 2003 and was bought by CVC for about 800 million Euros in 2007.
 
The global coordinators and joint bookrunners are Bank of America Merrill Lynch, Morgan Stanley, KBC Securities and BNP Paribas Fortis, while the lead managers are Commerzbank and Rabo Securities.
 
Shareholders in Fortis will halt their efforts to freeze the break-up of the financial group and will focus on seeking compensation from BNP Paribas and the Dutch state, their lawyer said on Wednesday.
 
A group of about 2,300 shareholders will ask a court for some 145 million Euros ($208 million) to compensate them for the losses they suffered as a result of the 2008 carve-up of the stricken financial group.
 
Fortis shares, previously regarded as a solid investment, fell to below 1 Euro after the break-up from more than 5 Euros just before.
 
THE NETHERLANDS
 
In Amsterdam, the AEX finished the day at 341.94, 0.41% to the plus-side.
 
Thursday, Netherlands' Central Bureau of Statistics announced that the consumer price index or CPI rose 1.1% year-on-year in December, faster than the 1% growth in the previous month. This was the fifth consecutive month of increase in inflation. Economists expected an increase of 1.2%. A year earlier, the CPI was up 1.9%.
 
On a monthly basis, the CPI dropped 0.6% in December, after falling 0.1% in November. Economists were looking for a decline of 0.5%.
 
Meanwhile, the harmonized index of consumer prices or HICP rose 0.7% year-on-year in December, at the same pace as in the previous month.
 
Markit Economics announced on Monday that the Netherlands NEVI Manufacturing Purchasing Managers' Index stood at a seasonally adjusted 53.1 in December. A reading above 50 indicates expansion, while one below 50 suggests contraction. This marks the highest reading in the index since March 2008.
 
Manufacturing output increased at a robust pace in December reflecting growth in new incoming business. New orders increased for the sixth straight month and at an accelerated pace, with respondents citing foreign demand as the main impetus to growth.
 
Despite the improvement in manufacturing activity, employment in the Dutch manufacturing sector continued to fall in December, albeit at its weakest rate since September 2008.
 
AUSTRIA
 
The ATX in Vienna closed the day and the week on 2,588.49, a slight drop of 0.08% on the day.
 
Abu Dhabi's International Petroleum Investment Company has increased its stake in Austrian oil and gas company OMV AG slightly to 20%, the Vienna-based company said Thursday.
 
IPIC -- a state investment fund in the Emirates capital -- previously held a 19.6% stake but now owns 60,050,273 shares, or 20% of registered capital, OMV said in a statement.
 
IPIC and Austria's investment and privatization agency OeIAG, OMV's other core shareholder, together now hold 51.7 of all voting rights, the statement said.
 
OMV AG is one of Austria's largest listed industrial companies.
 
The management and supervisory boards of allied Austrian property groups Immofinanz and Immoeast, each in the process of emerging from 24 months of financial turmoil, have taken the decision to merge to establish "a strong, unified and leading real estate property company in central and eastern Europe and Germany."
 
Subject to approval by shareholders on 20 January, the merger will take effect retroactively from 30 April 2009. Requiring shareholder approval of both companies with a majority of 75% of votes, the exchange ratio offered for the 45.638% minority shareholders of Immoeast - ie equity not already held by Immofinanz - will be three Immofinanz shares for two of Immoeast.
 
Valuations of the companies have been based on the Net Asset Value as of 31 October 2009, and the exchange ratio verified with discounted cash flow valuations. The court appointed merger auditor PwC, and respective advising investment banks Morgan Stanley and Deutsche Bank, have all approved the terms of the merger.
 
Austria's wholesale price index dropped 1.1% year-on-year in December following the 3% fall in the previous month, Statistics Austria reported on Thursday.
 
Significant falls were recorded in the wholesale prices of fertilizers & agrochemical products, iron & steel, grain and live animals, while the prices of non-ferrous metals, other petroleum products, leather and gasoline all increased.
 
On a monthly basis, wholesale prices climbed 0.1% in December. In calendar year 2009, wholesale prices decreased 7.5% from a year ago.
 
SWITZERLAND
 
Zurich's SMI rounded off the first week of the New Year on 6,617.88, gains of 0.95% for the day.
 
Swiss Life Holding, Switzerland's biggest life insurer, gained the most in almost two months in Zurich trading on speculation Germany's Allianz SE may make a takeover bid.
 
Swiss Life added 4.3% to 142.2 Swiss francs, valuing the Zurich-based insurer at 4.66 billion francs ($4.5 billion). The stock has climbed 10% this year, making it the best performer on the 30-member Bloomberg Europe 500 Insurance Index.
 
Allianz spokeswoman Petra Kruell said Europe's biggest insurer won't comment on the speculation. Chief Financial Officer Oliver Baete said on Nov. 9 that the Munich-based company isn't examining any "concrete mergers and acquisitions." Martin Laederach, a Swiss Life spokesman, said in an e-mailed response to questions that the company "doesn't comment on such takeover speculation,"
 
Swiss Life said last month it aims to generate a return on equity of 10% to 12% by 2012 from selling more pension products after scrapping a target a year earlier with the onset of the financial crisis. The insurer is cutting 520 jobs as it aims to save as much as 400 million francs over the next three years as it seeks to regain an A rating.
 
Talanx AG, Germany's third-biggest insurer, said in March that it planned to buy as much as 9.9% of Swiss Life, fueling speculation it may eventually make a takeover bid. Talanx, which owns 50.2% of Germany's second-biggest reinsurer Hannover Re, said at the time that it didn't plan to raise its stake further.
 
Swiss Life climbed 91% last year, the third-best performer after Storebrand ASA and Old Mutual Plc on the 30- member Bloomberg Europe 500 Insurance Index.
 
Thursday, Switzerland's Federal Statistical Office said the consumer price index or CPI rose 0.3% year-on-year in December after recording zero growth in November. Economists had forecast 0.5% rise for December.
 
On a monthly basis, the CPI fell 0.2% in December after rising at the same pace in the previous month. Moreover, the statistical office said the average inflation rate for the year 2009 was negative 0.5%.
 
The Swiss SVME purchasing managers' index or PMI fell to 54.6 in December from 56.9 in November, suggesting that growth in the country's manufacturing activities eased, a report from the Credit Suisse showed Monday. Economists had forecast a reading of 57. However, the PMI reading continued to log a reading above the 50-point threshold for five straight months.
 
Output was up for a fifth consecutive month in December and backlog of orders indicator continued to rise. Corporate purchasing was higher than in the previous month for the fifth period in a row. The purchasing prices subindex was unchanged from November to December.
 
The suppliers' delivery times component more or less stagnated compared with November, at a level well within the growth zone. The increase in suppliers' delivery times since mid-2009 is a sign of increasing capacity utilization, the Credit Suisse said.
 
Inventory streamlining continued into December, but the speed of the decline has slowed somewhat and the stocks of finished goods component improved. Suggesting that there is no sign yet of a turnaround on the labour market, the employment component remained below the threshold.
 
SWEDEN
 
The OMX in Stockholm completed its first week of trading closing at 973.44, 0.79% to the upside.
 
Sweden will consider a second payment of an Icelandic rescue loan in discussions with the International Monetary Fund, a spokesman for the Swedish Finance Ministry said Tuesday.
 
The comment came after Icelandic President Olafur Ragnar Grimsson vetoed legislation to compensate UK and Dutch depositors for $5.5 billion in losses from the collapse of online bank Icesave, a move that observers say risks derailing the North Atlantic country's international bail-out program with the IMF.
 
"When it comes to the Nordic countries' loans to Iceland, the first part of the payment has already been approved," Markus Sjoqvist, press secretary for Swedish Finance Minister Anders Borg, said.
 
"The second part of the payment, we will now have to consider in conjunction with board discussions in the IMF," he said.
 
Sjoqvist added that the Swedish government is closely following events in Iceland, but must await further developments before it can analyze the situation.
 
Iceland is counting on a $2.5 billion combined loan from the Nordic countries on top of a $2.1 billion bail-out package from the International Monetary Fund committed after the North Atlantic island's banking sector collapse in autumn 2008.
 
The Icelandic government in a statement Tuesday said it "remains fully committed to implementing the loan agreements," which it considers an integral part of Iceland's economic program.
 
Last month, Iceland received a first tranche of Eur300 million (around $430 million) from the Nordic countries, which have divided their loan payments into four payouts of equal amounts. A second review of Iceland's IMF program is scheduled this month.
 
The Executive Board of the Riksbank was not unanimous in its decision to hold the repo rate at a record low of 0.25% in December, the minutes of the meeting released on Monday showed. The same applied to the decisions regarding the repo rate path in the period ahead and on a further fixed-interest rate loan.
 
At the monetary policy meeting held on December 15, Deputy Governor Lars Svensson voted to cut the repo rate to 0 per cent and advocated a repo rate path 0.25% below that in the main scenario until the end of the third quarter of 2010, according to the minutes.
 
Meanwhile, Deputy Governors Lars Nyberg and Barbro Wickman-Parak supported the decision to hold the key rate at 0.25%, but entered reservations against the repo rate path in the Monetary Policy Update. These two Deputy Governors assessed that it would be necessary to hike the interest rate sooner than indicated but that the path would then not need to be so steep during the remaining forecast period.
 
After the Executive Board meeting, the central bank on December 16 said the repo rate is expected to remain at this low level until autumn 2010 and then to be raised towards more normal levels. "Recovery in the economy is continuing and inflationary pressure will be low in the coming period," the central bank said.
 
Sweden's seasonally adjusted manufacturing purchasing managers index or PMI increased to 58.2 in December from 56 in November, a report from the Swedbank/SILF said on Monday. Economists expected a reading of 55.8. A reading above 50 indicates expansion, while one below 50 suggests contraction.
 
DENMARK
 
Copenhagen's OMX saw the bourse end at 353.23, up 0.56%.
 
Denmark's central bank Thursday lowered its key policy rate by 0.05 percentage point to 1.15%, after recent purchases of foreign exchange to weaken the Danish krone.
 
"The money-market rates in Euros are very low and the spread to the equivalent Danish rates tends to strengthen the Danish krone," Danmarks Nationalbank said in a statement.
 
The move further reduces the spread between monetary policy in Denmark and that for the European Central Bank, which has its main refinancing rate at 1%.
 
Denmark's currency, the krone, is pegged to the Euro and the Danish central bank typically moves policy in line with the ECB.
 
However, krone volatility in the past year, with the currency weakening amid the financial crisis last autumn followed by strengthening this spring, has prompted unilateral moves by the central bank.
 
It also lowered the rate on current-account and certificates of deposit by 0.05 percentage point to 0.80% and 0.90%, respectively.
 
The European Commission launched a formal investigation Thursday into allegations that Danish drugs firm H. Lundbeck A/S broke rules on fair competition.
 
The commission, the European Union's executive arm and regulator, suspects the company of using its dominance in the market to prevent sales of generic versions of its anti-depressant drug Citalopram through a range of illegal actions and agreements.
 
The launch of the investigation means the matter becomes a priority case, the commission said.
 
The length of the probe will depend on the complexity of the case and cooperation of the parties involved, it said.
 
Denmark's seasonally adjusted purchasing managers index or PMI increased to 48.9 in December from 46.5 in the previous month, Purchasing and Logistics Forum/DILF said on Monday. A year earlier, the PMI reading was 40.4.
 
A reading above 50 indicates expansion, while a reading below 50 signals a contraction. The PMI reading in December was the highest level since September 2008.
 
New orders increased further to 63.6 in December from 57.6 in November, while output dropped to 50.8 from 55.2 in the previous month. At the same time, employment index rose to 37.6 from 37 in November.
 
Denmark's unemployment rate rose to 4.4% in November from 4.2% recorded in October, Statistics Denmark said Thursday. The jobless rate came in line with economists' forecast.
 
The number of unemployed rose 5,000 persons to 122,700 in November, the highest since January 2006.
 
NORWAY
 
The OBX in Oslo saw the week out at 349.44 - a gain of 0.46%.
 
Norwegian experienced strong passenger growth last year and flew 18 per cent more passengers than the previous year. In total, 63 new routes were established; 30 in Denmark, 18 in Sweden and 15 new routes in Norway.
 
In December, Norwegian transported 815 562 passengers. This is an increase of 163 667 passengers or a 25% increase from the same month last year.
 
The traffic figures for 2009 demonstrate that more passengers prefer to travel with Norwegian, said Bjørn Kjos, Chief Executive Officer of Norwegian.
 
With a total of 70 new Boeing 737-800 aircraft by 2014, Norwegian is set to have one of the most environmentally friendly fleets in Europe. December was another milestone in the companys history when the number of passenger kilometers produced by new 737-800s exceeded the number of passenger kilometers produced by the companys fleet of Boeing 737-300s which are currently being phased out. The new 737-800 aircraft also provide our passengers with a more comfortable flying experience, with more leg room and less noise, said Kjos.
 
The yield is estimated at 0.55 NOK for December, down 17 per cent compared to the same month in 2008. The development partially reflects the removal of fuel surcharges that covered last years fuel price, a significantly adjusted route portfolio, and the introduction of new aircraft with higher capacity and lower unit cost.
 
The severe cold spell over large parts of Norway over the past weeks has led to a high consumption of electricity, with a record peak on Wednesday.
 
Between 8am and 9am on Wednesday Norwegians consumed nearly 24.000 Megawatt-hours. This is the highest recorded consumption of electricity ever.
 
The power system still has surplus capacity. The production capacity in winter time is 26.500 Megawatt-hours.
 
The Norwegian Purchasing Managers' Index for the manufacturing sector rose to a seasonally adjusted 50.4 in December from 48.7 in November, a survey conducted by logistics association NIMA and Fokus Bank showed Tuesday. The expected reading was 49.5.
 
The non-seasonally adjusted PMI climbed to 48 in December from 47.0 in November. A reading above 50 suggests expansion in the sector, while a level below 50 indicates contraction.
 
Among the sub-indices, the production index stood at 49.4 in December, up from 47.2 in November. On the other hand, orders dropped to 49.7 from 50.2 and the employment index eased to 42.8 from November's 43.8.
 
FINLAND
 
Helsinki's OMX completed the day and the week by closing on 6,690.24 - a 0.32% uptick.
 
The refusal by Iceland's President to sign legislation to reimburse $5.5 billion lost by U.K and Dutch depositors in an online bank could delay payouts of a Nordic rescue loan to the crisis-ridden country, a Finnish government official said Tuesday.
 
"Of course, it is possible that it could delay (payouts) somewhat," Ilkka Kajaste, deputy director general at the Finnish Finance Ministry, told Dow Jones Newswires.
 
Iceland is counting on a $2.5 billion combined loan from the Nordic countries on top of a $2.1 billion bail-out package from the International Monetary Fund committed after the North Atlantic island's banking sector collapse in autumn 2008.
 
A second review of the IMF-led loan program was scheduled in January, but market-watchers fear failure to sign the so called Icesave bill could throw the IMF-deal into a tailspin with delayed disbursements as a result.
 
The Icelandic government in a statement Tuesday said it "remains fully committed to implementing the loan agreements," which it considers an integral part of Iceland's economic program.
 
Kajaste said the Icelandic commitment was "good news."
 
"The question is how it will be financed under these circumstances," he said.
 
He said it was too early to have a definitive answer on how loan disbursements may be affected and that it also depended on the outcome of the referendum.
 
Icelandic President Olafur Ragnar Grimsson earlier Thursday vetoed the legislation after nearly a quarter of Iceland's voting-age population registered disapproval in a signature campaign against the bill.
 
Under Icelandic law, a vetoed bill will be put before the country in a national referendum, where it needs to retain a simple majority of voters to remain valid.
 
Options traders are betting Nokia will gain 14% by Feb. 19 as the world's biggest maker of handsets returns to profit and investors bet the company is about to introduce technology.
 
Speculation that Nokia will rise pushed the number of bullish options on the stock to almost double the level of bearish ones, the highest ratio in about a year, according to data compiled by Bloomberg.
 
The contracts may pay off should Nokia's earnings surprise investors this month after the company reported its first quarterly loss in October. Chief Executive Officer Olli-Pekka Kallasvuo is scheduled to give the Jan. 8 keynote speech at the Consumer Electronics Show in Las Vegas. The wagers come after Fitch Ratings cut Nokia's credit ranking on Dec. 21 and the shares trailed the Standard & Poor's 500 Index by 41 percentage points in 2009, the most ever.
 
Finland's trade surplus stood at Eur 1.35 billion in October, up from Eur 432 million surplus a year ago, the National Board of Customs Statistical unit said on Monday. The trade surplus in October was revised from Eur 1.38 billion reported initially.
 
Exports value decreased 14% year-on-year to Eur 4.98 billion in October, revised slightly from Eur 5 billion estimated earlier, while imports fell 32% to Eur 3.6 billion.
 
For the January to October period, the trade surplus stood at 1.82 billion, down from Eur 2.96 billion surplus a year earlier. Exports and imports decreased by 34% each.
 
SPAIN
 
The Ibex in Madrid finished the day Friday at 12,163.00, a drop of 0.03%.
 
Markit Economics reported on Wednesday that the Spain Services Purchasing Managers' Index stood at a seasonally adjusted 45 in December, down from 46.1 in November. A reading above 50 indicates expansion, while one below 50 suggests contraction. Spanish services sector activity has now been in decline for two years.
 
Levels of new business received by Spanish service providers fell at a slightly slower pace during December, although the rate of contraction was still marked. Employment levels in the services sector were reduced again and at a considerable pace in line with falling workloads.
 
Input costs faced by service providers increased for the fifth month running in December, while output charges were slashed sharply. Panelists cited contracting demand and competitive pressures as contributory factors for pulling back charges.
 
Spanish export prices dropped 1.7% year-on-year in November, slowing from the 3.5% decrease in the previous month, Madrid-based National Statistics Institute reported on Tuesday.
 
By economic destination of goods, export prices dropped 1.4% annually for consumer goods and down 5.1% for intermediate goods.
 
Meanwhile, import prices registered a decrease of 3.1% in November compared to a year ago. That came after a 7.2% decline in October.
 
On a monthly basis, export and import prices increased 0.3% and 0.6%, respectively.
 
The total number of unemployed in Spain increased by 54,657 from a month ago to 3.92 million in December, the Ministry of Employment and Immigration reported on Tuesday. Compared to November 2008, the number of unemployed soared by 794,640.
 
The rise in unemployment was particularly marked in the services, construction and industry sectors, the Ministry said.
 
By provinces, Valencia, Castilla-La Mancha and the Canary Islands recorded the biggest rise in the number of unemployed, while Jaen, Cordoba and Ceuta registered decreases in in the number of unemployed.
 
PORTUGAL
 
Lisbon's PSI General rounded out the week on 3,020.92, up 0.69%.
 
Wednesday, the Statistics Portugal announced that the consumer confidence indicator stood at minus 30 in December, down from minus 27.4 in November The consumer confidence was minus 42.7 a year ago.
 
The confidence indicator on manufacturing decreased to minus 21.7 in December from minus 17.7 in November. At the same time, the service sector confidence dropped to minus 8.9 from minus 8 in November, while the trade confidence stood stable at minus 10.6.
 
Meanwhile, the economic sentiment indicator stood at minus 0.5 in December, down from minus 0.4 in November.
 
Thursday, the Statistics Portugal announced that the industrial turnover decreased 4.1% year-on-year in November, slower than the 10.7% fall in the previous month. A year ago, industrial turnover was down 13%.
 
The turnover in the external market declined 1.6% on an annual basis in November, while the turnover in the domestic market dropped 5.5%.
 
On a monthly basis, industrial turnover dropped 5.3% in November, in contrast to a 1.2% growth in the previous month.
 
Meanwhile, annual employment, wages and salaries and hours worked declined by 5.7%, 4.0% and 7.6%, respectively in November.
 
ITALY
 
Italy's benchmark FTSE MIB Index gained 102.12, or 0.4%, to 23,811.13 in Milan. The gauge increased 3% this week.
 
A2A retreated for a fourth day, losing 0.4% to 1.42 Euros. Goldman Sachs Group Inc. downgraded Italy's largest municipal utility to "neutral" from "buy." The brokerage cited "an increased risk of a dividend cut following the increased gearing."
 
Banca Monte dei Paschi di Siena increased 1.6% to 1.33 Euros, extending gains of 3.6% Thursday. The shares broke their 200-day moving average Thursday.
 
Edison rose for a third day, adding 1.2% to 1.14 Euros. Goldman Sachs Group Inc. upgraded the country's second-largest power generator to "buy" from "neutral." The brokerage cited "increased M&A potential and high exposure to the economic and energy commodity prices recovery."
 
Eutelia gained 6.3% to 38.9 cents. The provider of voice, data and Internet services said it expects to sign an agreement with creditor banks on debt restructuring when it approves 2009 accounts later this year, according to a statement distributed by the Italian exchange Friday.
 
Italcementi advanced 3.6% to 10.24 Euros, the biggest gain in more than four months. Italy's largest cement maker plans to sell about 700 million Euros ($1 billion) in bonds to institutional investors in February, daily Il Sole 24 Ore reported. Italcementi is expanding its presence in central Asia after signing an agreement with Kazakh fund Verny, Sole said.
 
Luxottica added 1.7% to 18.77 Euros, a fifth straight gain. The world's biggest maker of eyeglasses was raised to "outperform" from "neutral" at Exane BNP Paribas, which said Luxottica "reacted quickly to US consumers' renewed appetite for bargain hunting."
 
Societa Partecipazioni Finanziarie rallied 9.1% to 12.96 cents after the company finalized an agreement with Cassa di Risparmio della Repubblica di San Marino SpA, according to a statement distributed through the Italian exchange.
 
Telecom Italia, Italy's largest phone company, fell 1.3 cents, or 1.2%, to 1.07 Euros. Argentine regulators have given Telecom Italia until Feb. 25 to sell its stake in a company that controls Telecom Argentina SA, newspaper Cronista reported. Telecom Italia has not received notification from the government regarding the matter, spokesman Massimiliano Paolucci said.
 
UniCredit rose for a second session, adding 0.9% to 2.41 Euros. Market regulator Consob approved the bank's plan to sell new shares in a 4 billion-Euro rights offer. JPMorgan Chase & Co., which has an "overweight" rating on UniCredit, said in a note that it "would use weakness on the rights issue execution to accumulate on the stock."
 
Natixis Securities trimmed its price estimate to 2.9 Euros from 3 Euros, while keeping an "add" recommendation.
 
GREECE
 
The Athex Composite in Athens ended the first week of the New Year at 2,327.57, up 0.76%.
 
The European Union members will not bail out Greece even if such a move becomes necessary, European Central Bank Executive Board member Juergen Stark told Italian financial newspaper Il Sole 24 Ore, in an interview published Wednesday.
 
Stark said the ballooning budget deficit in Greece is created by the country's government and not a result of the global economic crisis.
 
"The markets are deluding themselves when they think at a certain point the other member states will put their hands on their wallets to save Greece," the paper quoted Stark as saying.
 
Greece vowed to speed up efforts to reduce its massive budget deficit and bring it in line with European Union rules within two years, a year earlier than previously planned.
 
Finance Minister George Papaconstantinou revealed on Tuesday that the Prime Minister had ordered his ministers to move faster in cutting soaring deficits, a day before officials from the European Union and the European Central Bank are visiting the country to review its fiscal plans.
 
The government is now targeting to bring its deficit, estimated at 12.7% of gross domestic product, with the EU's 3% limit by the end of 2012.
 
"The Prime Minister asked that the adjustment be front-loaded and that the reduction of the deficit takes place in three years," Papaconstantinou told reporters. "The fiscal adjustment will be done quickly so that we can turn a new page for the country."
 
Greek Manufacturing Purchasing Managers' Index or PMI increased to a four months high in December, but it was still below the neutral mark of 50, the Markit Economics said on Monday. A reading above 50 indicates expansion, while one below 50 suggests contraction. The latest PMI signals a slight deteriorating business conditions for Greek manufacturers.
 
Manufacturing production dropped at a slower pace in December and weakest rate since October. New incoming business also decreased slightly. Meanwhile, input price inflation was sharp in December, after moderate rates of increase in the previous two months.      
The UK Market 
Did it follow the Global trend .....
 Trading optimism combined with takeover speculation to help push Tomkins to a two-year high on Friday.UK Markets
 
Shares in the engineer gained 2.7 per cent to 212p, helped by a Collins Stewart note arguing that consensus forecasts were too low.
 
The year 2009 looks to have finished strongly amid restocking by carmakers and industrial manufacturers, said analyst Mark Wilson.
 
Combined with cost savings, the recovery in US housing and car markets should drive Tomkins' margins toward double-digit levels in the next two years, the broker said. It made the stock its top sector pick for 2010 with a 245p target price.
 
Persistent takeover theories also helped buoy Tomkins, which is up 25 per cent since late November.
 
Two private equity firms have been rumoured to have looked at putting a deal together for the engineer. But TPG, one of the buy-out groups linked, was said to have shelved the plan.
 
The wider market ended little changed for the third straight session, with the FTSE 100 edging just 7.52 points higher to 5,534.24. For the week the index was up 2.4 per cent, its third straight weekly gain.
 
Miners provided much of the support on Friday after iron ore prices reached their highest in more than a year amid talk of Chinese demand. Kazakymys gained 2.4 per cent to £14.99 and Xstrata was up 2.3 per cent to £12.46½, while Vedanta Resources took on 1.8 per cent to £28.86.
 
ENRC led the blue-chip risers, up 5.2 per cent to £10.34, after RBS added the stock to its "buy" list with an £11 target price.
 
Legal & General was the top performer among financial stocks, gaining 3.1 per cent to 84¼p. Dealers cited recent "buy" recommendations from brokers including MF Global, along with perpetual speculation that the insurer might be attractive to Resolution at current levels. Resolution gained 0.3 per cent at 89¾p.
 
Barclays added 1.6 per cent to 320½p after an upgrade to "buy" from UBS.
 
Trading, regulatory and expansion risks are all in the price as Barclays is the only bank in its peer group to trade at below tangible book value, the broker said.
 
Man Group led the fallers, sliding 2.3 per cent to 319¾p, on fresh fears that the poor performance of its flagship fund, AHL, will hit sales and performance fees this year. Morgan Stanley cut its profit forecasts for the hedge fund manager to around 15 per cent below consensus levels.
 
Vodafone eased a further 1.3 per cent to 137p following this week's profit warning from US partner Verizon. Nomura argued that, while Verizon blamed its alert on pension costs, its problems pointed to growing pressure on US mobile margins.
 
Mitchells & Butlers led the pub operators higher after reporting stronger-than-expected trading through Christmas.
 
M&B took on 8.5 per cent to 273¾p while JD Wetherspoon added 5.7 per cent to 466p and Punch Tavernswas 7.1 per cent firmer at 76p.
 
Tullett Prebon rose 4.6 per cent to 309p after Noble upgraded it to "buy" on valuation grounds. Noble argued that the stock had fallen to a 50 per cent discount against closest peer Icap, up 2.6 per cent to 456½p.
 
Among the retailers, Debenhams eased 3.5 per cent to 75¼p amid continued talk that its trading update due on Tuesday might disappoint.
 
Game Group edged down 0.5 per cent to 104½p following weaker-than-expected numbers from US peer Gamestop, which blamed shortages of hardware and key titles.
 
Boiler maker Spirax-Sarco said its 2009 profit would beat expectations, lifting its shares by 5.1 per cent to £12.98 and helping other engineers sustain their recent rally. Weir Group was up 3.3 per cent to 832p and Morgan Crucible added 3.7 per cent to 176¼p.
 
The owner of the James Bond and Harry Potter film studios, Pinewood Shepperton, climbed 9.4 per cent to 148½p amid talk that investment fund Crystal Amber had increased its holding to 15 per cent ahead of moves aimed at extracting value from the company's property assets.
 
Luminar, a nightclub operator, added 13.7 per cent to 47½p on hopes that it could meet guidance, which was revised at the end of December. There was also talk that it could be vulnerable to a bid.
 
Commoditrade, a commodities investment group that has an interest in one of the largest trading teams on the London Metals Exchange, rose 9.1 per cent to 4½p after an overhang of 4.5m shares was cleared.
 
Traders reckon the company should have benefited from the recent rise in the copper price to a 16-month high.
 
Infrastrata, which is trying to develop a large underground gas storage facility in Dorset, retreated 1 per cent to 98p as Evolution Securities completed a sell order.
 
Minerva eased 2 per cent to 74½p after South African businessman Nathan Kirsh let his 50p-a-share hostile offer lapse. Traders said the shares had not fallen further because of news that a large development in the City of London had been leased.
 
This leaves Minerva's Walbrook development as one of the few new office buildings available for rent in the Square Mile.
 
Care UK improved 2.9 per cent to 423p on rumours that the care home operator is still in talks with two potential suitors. 
Asia Pacific Regional Markets 
Did they set the tone or follow the lead .....
Asiapac IndicesJAPAN

Tokyo stocks rose Friday, as carmakers and electronics exporters rose on a weaker Yen, while Japan Airlines tumbled anew on concerns that the government may pursue court protection in turning around the troubled firm.
 
Market analysts say that stocks are due for profit-taking after this week's 2.4% gain. Markets are closed on Monday for a holiday.
 
The Nikkei 225 Stock Average rose 116.66 points, or 1.1%, to 10,798.32. The Topix index of all the Tokyo Stock Exchange First Section issues rose 9.44 points, or 1.0%, to 941.29, with 26 of 33 subindexes ending in positive territory.
 
Trading volume totaled about 2.63 billion, the heaviest seen since December 16.
 
The Dollar rose to a four-month high against the Yen after new Japanese Finance Minister Naoto Kan said Thursday that the country's currency should weaken further. The Dollar subsequently gave up some of its gains as Kan softened his stance. The Dollar climbed to as high as Y93.63, compared with Y93.28 in late New York trading on Thursday.
 
Major exporter shares benefited noticeably from the currency cues; Toyota Motor rose 2.9% to Y3,960, Nikon gained 4.4% to Y1,911 and Sony added 2.4% to Y2,809.
 
Aeon jumped 6.5% to Y848 although it reported a net loss of Y9.93 billion for the nine month period ending in November. Analysts credited aggressive cost-cutting for keeping the loss to a smaller-than-expected level.
 
Embattled Japan Airlines, or "JAL", lost 12% to Y67 in another day of very heavy trading as the Nikkei reported in the afternoon that the government may use court protection as a means to turn the firm around and let it keep its flight services intact. The paper reported that the government will make a decision as early as January 12 on the matter, with the airline then filing a petition for bankruptcy protection with the Tokyo District court under the Corporate Rehabilitation Law a week later.
 
JAL shares are flat for the year after rising to as high as Y93 intraday this week.
 
March Nikkei 225 futures closed up 110 points, or 1.0%, at 10,810 on the Osaka Securities Exchange.
 
SOUTH KOREA
 
South Korean shares closed up Friday led by financial stocks and shipyards, but the main index lurched in and out of positive territory throughout the session as some investors adopted a cautious approach ahead of the release of US nonfarm payroll data tonight.
 
The Korea Composite Stock Price Index, or Kospi, gained 11.81 points, or 0.7%, to end at 1695.26.
 
However, the central bank governor's post-meeting comment failed to send out clear messages about what's next, resulting in a muted reaction from stock investors.
 
Daewoo Securities climbed 5.8% to KRW22,650, and Samsung Securities advanced 3.5% to KRW70,200.
 
Banks finished higher on bargain hunting, tracking American peers, said analysts. KB Financial Group ended up 0.2% at KRW57,900, and Shinhan Financial Group closed 2% higher at KRW44,450.
 
Shipbuilders extended gains from Thursday amid ongoing expectations for the global economic recovery. Hyundai Heavy Industries jumped 5.7% to KRW205,000, and Daewoo Shipbuilding & Marine Engineering climbed 3.1% to KRW20,250.
 
Bellwether Samsung Electronics regained strength and ended up 1% to KRW821,000 after its rosy fourth-quarter earnings guidance spurred profit-taking in the previous session.
 
But some technology and car makers stayed weak on lingering concerns that the strengthening Korean won may hurt their earnings, said analysts.
 
LG Electronics lost 3.5% to KRW111,000, and Hyundai Motor closed flat at KRW106,000.
 
HONG KONG
 
Hong Kong stocks erased earlier losses to close up slighlty higher on Friday, fuelled by a rise in index heavyweight China Mobile after it said it has removed a senior official over alledged irregularities.
 
Hutchison Telecom, which resumed trading after being suspended on Monday, climbed 28.48%. Parent Hutchison Whampoa said it would pay HK$2.20 per share to its unit to take the company private.
 
The benchmark Hang Seng Index ended up 0.12%, or 27.3 points at 22,296.75, reversing a 0.17% fall at midday.
 
The China Enterprises Index of top locally listed mainland Chinese stocks fell 0.29% to 13,035.09.
 
China Mobile advanced 1.64%.
 
CHINA
 
China's shares ended slightly higher Friday, reversing early losses, due to afternoon bargain hunting in property developers and banks.
 
The benchmark Shanghai Composite Index, which tracks both A and B shares, ended up 0.1%, or 3.22 points, at 3196.00, after hitting an intraday low of 3149.02. The index lost 2.5% this week.
 
The Shenzhen Composite Index rose 0.7%, or 7.87 points, to 1187.86.
 
Analysts said the gains were fleeting as developers and banks were just catching up after having fallen for most of the week. They set the next support for the Shanghai index at the 120-day moving average of 3113.13.
 
Continued concerns Beijing may be preparing to introduce more tightening measures will weigh the market next week, analysts said.
 
A report by state-run China Securities Journal Friday cited a senior official at the state-owned assets regulator as saying China has warned state-run companies about the risks of investing in the stock, property and futures markets.
 
Real estate firms rose after suffering sharp losses earlier this week. China Vanke ended 0.7% higher at CNY10.35 after having fallen 4.3% in the previous four sessions. Poly Real Estate Group rose 1.3% to CNY21.49 after falling 4.1% during the period.
 
Banks also climbed because of bargain hunting. Bank of China rose 0.5% to CNY4.23 after having declined 2.3% in the last four sessions. Industrial & Commercial Bank of China ended 0.4% higher at CNY5.23 after dropping 3.9% during the period.
 
Metal companies declined due to sharp drops in commodity prices.
 
Jiangxi Copper fell 2.6% to CNY40.21 and Aluminum Corp. of China ended 1.0% lower at CNY14.98.
 
Base metals futures on the Shanghai Futures Exchange retreated Friday as investors booked profits.
 
The benchmark April copper contract settled 2.2% lower at CNY60,500 a metric ton. The benchmark aluminum contract settled 2.3% lower at CNY17,575/ton and the benchmark zinc contract settled 3.3% lower at CNY21,265/ton.
 
TAIWAN
 
Taiwan stocks ended up 0.53% on Friday, led by gains in tech exporters such as Chi Mei after the island posted market-beating exports in December and the Taiwan Dollar stabilised against the greenback.
 
The main TAIEX share index rose 43.48 points to 8,280.90, after snapping a five-day winning streak in the previous session.
 
Turnover was active at T$160 billion ($5.1 billion), compared with T$200 billion on Thursday.
 
Chi Mei Optoelectronics, Taiwan's No. 2 LCD maker, surged 4.13%, and bigger rival AU Optronics gained 1.34%, with the optoelectronics sub-index 1.58% higher.
 
The local currency was largely flat in thin trade on Friday, with most investors trading to meet actual needs as they kept a wary eye open for central bank intervention following days of warning from the authorities.
 
The TAIEX index is expected to rise further before the Chinese New Year holidays falling in February, he said.
 
Chi Mei, the most heavily-traded issue by volume, had won a contract to supply more than half of Samsung's LED backlit TVs, and is expected to ship about 500,000 units per month in the first quarter, a local newspaper reported on Friday.
 
Taiwan's exports in December rose 46.9% from a year earlier, beating market expectations, in a further sign that trade-dependent Asian economies are profiting from demand in China and other emerging markets.
 
Financial shares jumped 0.94% on investor hopes that a historical financial deal between Taiwan and China would brighten their outlook in 2010.
 
The deal is set to take effect on Jan. 16.
 
Cathay Financial, the island's top listed financial holding firm, rose 1% and Shin Kong Financial, parent of Taiwan's No. 3 insurer, advanced 3%.
 
Cathay and local rivals are set to post their quarterly results before Sunday.
 
TSMC, the world's largest contract chip maker, fell 0.31% before saying its December sales more than doubled from a year ago.
 
UMC, TSMC's closest rival, dropped 1.09%. UMC is slated to release its December sales later Friday.
 
Shipping shares were up 1.97%, after a local newspaper reported that transportation fees were rising on growing demand for Asian shipments as the global economy recovers.
 
Evergreen Marine jumped 5.38% and rival Yang Ming Marine climbed 1.59%.
 
THE PHILIPPINES
 
Shares on the Philippine Stock Exchange traded sideways on Friday as local investors continued to temper their moves in the absence of clear market moving developments.
 
The PSE index clawed back losses of as much as 15 points to end the trading session at 3,077.18, representing a decline of only 0.6 points or 0.019%. A total of 1.4 billion shares changed hands for a value turnover of P2.4 billion.
 
Market watchers noted that big investors are still waiting on the sidelines in the first trading week of 2010, leaving the bulk of market action to speculative investors.
 
A total of 55 stocks moved higher, compared to 57 that declined, and another 55 that remained unchanged.
 
The Energy Development Corp. remained the most active stock on the bourse with trades in the Lopez-led firm accounting for 9.6% of total activity. This was followed by index heavyweight PLDT which accounted for 7.3% of total trades.
 
For next week, traders expect local players to continue to look to the US stock market for direction.
 
THAILAND
 
Thai stocks advanced 0.59%, having hit a one-week high in early trade, boosted by demand for exporters such as chicken exporter Charoen Pokphand Foods, which rose 2.65%.
 
Thailand's top energy firm PTT climbed 0.82% after the company said it was not in talks with commercial banks on delaying debt repayments related to suspended projects at the Map Ta Phut industrial estate.
 
Thailand's hard-hit tourism industry appears to be bouncing back as visitors return to the Kingdom.
 
Tourist arrivals have increased at the beginning of the high season in December last year by 40 per cent. Prior to that, the number of visitors - mostly from the United States and Canada - dropped by nearly 20 per cent from the year before.
 
Prolonged political instability, the week-long closure of Bangkok's airport, coupled with the global financial downturn, had decimated Thailand's tourism sector.
 
Now, as economies around the world show signs of recovery, Thai authorities said they expect 14 million people to visit the country in 2010, down by only 4 per cent from 2008.
 
Tourism officials are marketing Thailand as a destination that provides good value for money and the hotels in central Bangkok are now reporting higher occupancy rates.
 
But the nightmare of the 2008 airport closures lingers for many tourists and tour operators alike. Thai authorities said the same scenario will never happen again.
 
Suraphon Svetasreni, governor, Tourism Authority of Thailand, said: "It's very unlikely because the lesson learned is a very expensive lesson. It will be the public at large who will not allow it. I, for one, will not allow it.
 
SINGAPORE
 
Singapore stocks closed 0.3 per cent higher on Friday, in line with gains in other Asian markets.
 
The Straits Times Index rose 9.51 points to end at 2,922.76. Volume was at 2.56 billion shares. Gainers led losers 379 to 167.
 
Dealers said a better overnight performance on Wall Street encouraged retail investors back into the market after Thursday's decline.
 
They said earnings prospects for the first quarter also underpinned markets in the region, and the markets should continue upwards next week due to expectations that the US economy was likely to show more signs of recovery.
 
Analysts said the opening of the integrated resorts and expectations of firm headline gross domestic product figures for the first and second quarter will continue to support the Singapore market in the first half of this year.
 
MALAYSIA
 
Share prices closed mixed on Bursa Malaysia on Friday as some investors cashed out profits from earlier gains, dealers said.
 
The FTSE Bursa Malaysia Kuala Lumpur Composite Index ended 1.56 points or 0.12 per cent better at 1,292.98, after opening 3.51 points higher at 1,294.93.
 
A dealer said strong late buying in selected bluechips, led by CIMB Group, helped the benchmark index end the week in positive territory.
 
On the performance of the other indices, the Finance Index surged 67.45 points to 11,239.50, the Industrial Index edged up 0.59 of a point to 2,692.46 but the Plantation Index declined 14.88 points to 6,539.66.
 
The FBMEmas Index rose 9.32 points to 8,695.64, the FBMTop 100 Index improved 8.47 points to 8,466.02, the FBMACE added 3.76 points to 4,448.31 while the FBM70 Index edged up 1.72 points to 8,526.01.
 
Decliners led advancers 367 to 326 while 268 counters were unchanged and 344 others were untraded.
 
Trading volume declined to 1.036 billion shares, valued at 1.277 billion, from 1.475 billion shares, worth RM1.900 billion, registered Thursday.
 
INDONESIA
 
Indonesia's Jakarta Composite index added 27.48 points ending the day higher at 2614.37.
 
PT Telekomunikasi Selular, Indonesia's largest mobile-phone carrier, expects the nation's wireless market to reach a plateau in two years as user growth slows.
 
The potential for adding new users is "shrinking," President Director Sarwoto Atmosutarno said in an interview in Jakarta Friday. "The remaining room to grow is about 35 million, and 11 operators are fighting for them," he said. "We must get at least 15 million."
 
Telkom shares rose 1.1% to close at 9,350 rupiah in Jakarta trading while the nation's benchmark index added 1.1%. The stock, the biggest by value on the Jakarta Composite Index, gained 37% last year, trailing the benchmark's 87% advance.
 
INDIA
 
Indian shares ended lower for a second straight session, with technology stocks, financials and metals leading the losses as investors remained cautious ahead of quarterly corporate results.
 
The Bombay Stock Exchange's 30-stock Sensitive Index fell 0.4% to end at 17,540.29. The index, which gained 0.4% this week, traded between 17,508.96 and 17,658.12 during the day.
 
On the National Stock Exchange, the 50-stock S&P CNX Nifty lost 0.4% to close at 5,244.75.
 
Technology bellwether Infosys Technologies will be the first among major companies to report third-quarter results Jan. 12.
 
A Dow Jones Newswires technical analysis suggests the Sensex could trade between 16,900 and 18,100 next week.
 
Total traded volume on the BSE rose to 63.04 billion rupees ($1.37 billion) from Thursday's 61.74 billion rupees . Gainers outnumbered decliners 1,724 to 1,174, while 67 stocks remained unchanged.
 
Realty stocks have shown some strength with some long build-up seen in counters like DLF, Unitech and HDIL.
 
Banking shorts continues, though a subdued financial counter discouraged fresh shares.
 
Software firms like Tata Consultancy Services and Wipro WIPRnsc1 were under pressure and shorts are slowly entering the counters, analysts said.
 
Analysts expect market to remain sideways and wait for clear direction, with immediate support for index futures at 5,240.
 
AUSTRALIA
 
Banks and consumer staples stocks pushed the Australian share market to a 15-month high as profit taking drove mining stocks lower.
 
The benchmark S&P/ASX200 index was up 12.7 points, or 0.26 per cent, at 4,912.1 points, while the broader All Ordinaries index had gained 11.7 points, or 0.24 per cent, to 4,942.2 points.
 
On the Sydney Futures Exchange at 1626 AEDT, the March share price index contract was 12 points higher at 4,896 on a volume of 14,904 contracts.
 
Billabong jumped 58 cents, or 5.29 per cent, to $11.55, while Coca-Cola Amatil rose 18 cents, or 1.62 per cent, to $11.29.
 
Among retail stocks, Coles owner Wesfarmers advanced 76 cents to $31.46 and Woolworths added 24 cents to $28.09.
 
Mr Taylor said profit taking had also driven mining stocks lower following positive forecasts for iron ore demand this week.
 
BHP Billiton was down 15 cents at $43.62, Rio Tinto inched one cent higher to $79.01, Fortescue Metals Group slipped 11 cents to $5.06, OZ Minerals retreated 3.5 cents to $1.24 and Atlas Iron was eight cents weaker at $2.15.
 
Commonwealth Bank was up 72 cents at $56.16, National Australia Bank fell nine cents to $26.90, Westpac added 10 cents to $25.15, ANZ put on 13 cents to $22.25 and Macquarie Group advanced 41 cents to $48.90.
 
Gold stocks were weaker after the precious metal's spot and futures prices eased overnight.
 
Lihir dipped five cents to $3.36 and Newmont inched two cents lower to $5.30.
 
Newcrest shed 95 cents, or 2.56 per cent, to $36.20, after saying it had been granted planning approval for its $2 billion Cadia East project near Orange in NSW.
 
The spot price of gold in Sydney at 1630 AEDT was $US1,124.70 per fine ounce, down $US9.18 from Thursday's close of $US1,133.88.
 
Energy stocks were mostly weaker on the back of lower crude oil prices.
 
Woodside was 20 cents lower at $48.70, Oil Search gained eight cents to $6.16 and Santos retreated 15 cents to $14.29.
 
In the headlines on Friday, logistics company Brambles says it had completed a process of rejuvenating its leadership team.
 
Brambles shares were up two cents at $7.04.
 
Shares in CBH Resources are in a trading halt, pending an announcement by the company amid speculation it may be set to announce a deal with fellow zinc, lead and silver miner Perilya or a takeover bid from London-based Nyrstar NV.
 
CBH last traded at 14.5 cents, while Perilya, which continues to trade, was 1.5 cents lower at 68 cents.
 
The media sector was mixed.
 
News Corp dropped 13 cents to $17.83, its non-voting scrip shed 27 cents to $15.23, Fairfax was down 2.5 cents at $1.72 and Consolidated Media gained seven cents to $3.07.
 
The top-traded stock by volume Verus Investments, with 214.55 million shares worth $9.26 million changing hands.
 
Its shares jumped 0.6 cents, or 15.38 per cent, to 4.5 cents.
 
Preliminary market turnover was 1.99 billion shares worth $3.21 billion, with 582 stocks up, 535 down and 320 unchanged.
 
NEW ZEALAND
 
Michael Hill International shares rose 10.6 per cent to 73 Friday after the jewellery retailer reported a 4.4 per cent lift in same store sales for the half year to the end of December.
 
Brokers said the positive trading statement from the company was a contrast to flat trading report by retailer The Warehouse earlier this week. The Warehouse saw its situation as indicative of the non-retail market overall. Its shares fell 4c to 411 Friday.
 
Overall, leading shares rose as a new year rally gained momentum. Fletcher Building rose 21c to 832 and Telecom rose 6c to 259. Contact was unchanged at 632.
 
The benchmark NZSX-50 index rose 25.415 points, or 0.774 per cent, to a 15-month high 3310.226. Turnover was worth $53 million. There were 41 rises and 29 falls among the 102 stocks traded.
 
Michael Hill said all countries in which it operated performed well and improved their same store trading but retail conditions were still difficult in North America.
 
Mainfreight rose 10c to 578 on thin volume and Fisher & Paykel Healthcare rose 4c to 339.
 
Tourism Holdings was another stand out in percentage rise terms, rising 8c, or 9.41 per cent, to 93 on light volume.
 
Steel & Tube rose 3c to 290, Nuplex rose 12c to 313 and Rakon rose 2c to 116.
 
APN rose 4c to 304 and Methven rose 2c to 167.
 
Restaurant Brands rose 5c to 174 and Infratil rose 1c to 166. TrustPower rose 3c to 728 and Port of Tauranga rose 3c to 715. Xero rose 3c to 165.
 
NZX eased 2c to 226. SkyTV eased 10c to 518 and GPG eased 1c to 90. 
Global Commodities 
'Food for thought' or 'a Grain of truth' .....
 CommoditiesOrange juice futures spiked to a two-year high on Friday, extending this year's gains to almost 17 per cent as meteorologists predicted frigid temperatures in Florida, the world's second-largest producing area.
 
Meteorologists said temperatures in Florida could drop for several hours on Friday night and Saturday below 28 degrees Fahrenheit [about -2 degrees Celsius] - the limit for citrus damage.
 
ICE March frozen concentrate of orange juice rose to 151.15 cents a Pound, gaining by the exchange-set daily trading limit of 10 cents, with orange juice futures at the highest level since early January 2008. Prices rose 90 per cent last year.
 
So far this week, winds have kept Florida temperatures from dropping too sharply with only about 10-15 per cent of the growing area saw minor damage to fruits.
 
The cold weather damage could exacerbate lower production this season because of citrus tree diseases.
 
The US Department of Agriculture said last month that Florida's citrus crop would fall to 135m boxes in the 2009-10 season, down almost 17 per cent from last season's 162.4m boxes. Each box weighs 90 Pounds.
 
In other commodities markets, crude oil prices were also affected by cold weather.
 
Nymex February West Texas Intermediate rose 3.7 per cent on the week to $80.89 a barrel.
 
Iron ore prices jumped to a 1½-year high on the back of strong Chinese demand.
 
The benchmark Australian ore rose on Friday to $131.2 a tonne, according to swaps data from the Singapore Exchange. It gained 11 per cent on the week.
 
Sugar prices declined the most in a week on increased sales by hedge funds and speculators. Cocoa also dropped.
 
Thursday, sugar futures fell 1,4%, reversing a rally to the highest price in almost 29 years. That signaled the commodity may extend a slump, according to traders who monitor price charts. Index funds are reducing their holdings after prices more than doubled last year, analysts said.
 
Cocoa futures for March delivery dropped $13, or 0.4%, to $3,296 a metric ton in New York. The price advanced 26% in the past 12 months.
 
Gold jumped after falling sharply in Asian trade on Friday, hitting $1130 an ounce after the United States reported much-worse-than-expected job losses for December.
 
Rising 3.1% for the week against the Dollar, the Gold Price stood 3.0% higher vs. the Euro and 3.9% higher against Sterling by Friday's New York opening, trading at €789 and £705 per ounce respectively.
Global Currencies 
In for a Penny, in for a Pound .....
UK Markets
 Hopes were dashed for an end to the cycle of US job losses after disappointingly weak non-farm payrolls data, released on Friday, dragged the Dollar lower against both the Euro and Sterling.
 
Although the Dollar was well supported in the days ahead of the data on upbeat expectations, the US currency fell 0.4 per cent against the Euro to $1.4363 and lost 0.7 per cent against the Japanese Yen to Y92.61 after the announcement.
 
Over the week, the Dollar gained 0.3 per cent against the Euro to $1.4371, but it lost 0.3 per cent against the Yen to Y92.95.
 
The Argentine Peso rose 0.2 per cent against the US Dollar on the week to 3.8010 Pesos after reaching a low of 3.8100 Pesos on Thursday.
 
The Japanese currency regained ground after the new finance minister Naoto Kan retracted his call for a weaker Yen. Following reports that he had been rebuked by the prime minister, Mr Kan said currency levels should be determined by the markets.
 
In Argentina, Martin Redrado agreed on Friday to step down as governor of the central bank following government pressure to resign.
 
The move followed President Cristina Fernández de Kirchner's attempt to fire Mr Redrado earlier this week for "misconduct" after he failed to transfer $6.5bn of reserves to a government fund to pay off debt.
 
The Argentine Peso rose 0.2 per cent against the US Dollar on the week to 3.8010 Pesos after reaching a low of 3.8100 Pesos on Thursday.
 
Analysts doubted the resignation would bring an end to the dispute, amid continued rumours that the former governor was likely to mount a legal challenge against the government.
 
Sterling regained some of its recent losses after an opinion poll suggested the opposition Conservative party could win a majority in the coming general election. The YouGov poll eased investor fears that the UK could have a hung parliament and the possibility that a government without a working majority would struggle to bring down the UK's budget deficit. The Pound was supported by the weak US data and stronger than expected UK producer prices data.
 
Sterling added 1 per cent against the Dollar on the week to $1.5998 but lost 1.3 per cent against the Euro on the week to £0.8982.
 
The Australian Dollar was one of the biggest gainers this week, up 2.8 per cent against the Dollar to $0.9216. The Aussie held at near a 26-month high against the Euro at €0.6393 and a 25-year peak against Sterling at £0.5741.
 
The New Zealand Dollar also gained against the US Dollar, adding 1.4 per cent to $0.7358 over the week.
 
South Africa's Rand gained as much as 0.9% against the Dollar on Friday, riding on the greenback's general weakness.
 
The Rand rallied to a session high of 7.3550 to the greenback but gave back some of the gains to trade at 7.3725 by 1734 GMT, 0.67% stronger than Thursday's close at 7.4225.
 
In Chinese news, the US Dollar appreciated vis-à-vis the RMB as the greenback closed at CNY 6.8276 in the over-the-counter market, up from CNY 6.8275. 
 
Thursday, People's Bank of China guided interest rate expectations higher by selling three-month bills at higher rates for the first time in nineteen weeks. 
China 
Key news eminating from China this week .....
 China MarketsBeijing has approved the launch, on a trial basis, of stock index futures and the short selling of stocks, an important and long-awaited step in the development of China's equity market.
 
Shorting stocks and trading index futures will allow traders to profit from falling as well as rising markets. They will also enable investors to hedge their positions against downturns in China's notoriously volatile markets.
 
The China Securities Regulatory Commission said on Friday that the State Council, China's cabinet, had approved the measures, although it might take three months to complete preparations for the launch of index futures.
 
The government also approved margin trading, under which investors borrow money from brokerages to buy shares.
 
In short sales, investors sell stock they do not own, betting that they will be able to buy it back at a lower price and profit from the difference.
 
The regulator said it would follow the principle of "test first, then expand", and would select some companies to launch products on a trial basis.
 
But the statement left many questions unanswered, including which companies will participate, whether foreign groups will be included, and the exact timetable.
 
Chinese investors have been awaiting the introduction of stock index futures for more than three years, since the establishment in 2006 of the China Financial Futures Exchange in Shanghai. The exchange has been conducting mock trading since then and the regulator has been preparing guidelines for index futures and educating investors about risks.
 
It was not clear whether the futures launch would take place within the three-month period mentioned by the regulator, or be further delayed. The introduction of trial short selling and margin trading is expected to come first, but the timetable is uncertain. More than a year ago, the regulator announced that short selling and margin trading would be introduced on a trial basis, but that never happened.
 
************************************
 
Large parts of central China are facing power cuts and energy rationing as a result of extreme winter weather that has disrupted coal supplies and prompted a spike in energy demand.
 
The State Grid said on Thursday the central Chinese provinces of Hunan, Hubei, Henan, Jiangxi and Sichuan, as well as the municipality of Chongqing, were facing significant pressure on power supply systems as a result.
 
Central China has been left vulnerable to power cuts because of reduced coal supplies from Shanxi province. The area is one of China's main coal producers but the government is implementing a plan there to close and merge all small coal mines in a bid to improve safety.
 
Hu Zhaoguang, an official at State Grid, said on Thursday that the power cuts would be "a short-term, temporary issue". The electricity shortages were the result of problems transporting coal in the snow, lower hydropower output during the winter and reduced coal supplies.
 
Officials said Hubei province, which was already rationing power to some industrial users before the cold snap, appeared to be the worst affected, and the Hubei electric power company had imposed cuts on "several thousand" steel mills and other heavy industry companies, according to China Daily.
 
Amid reports that aluminium smelters in Hunan and Henan provinces had faced power disruptions, concerns about energy shortages have driven up aluminium prices in China by more than 4 per cent over the last few days. However, Chalco, the country's largest aluminium producer, said it had suffered no problems.
 
China's vast power generation network continued to expand last year, with output increasing by 7 per cent the China Electricity Council said on Thursday.
 
PetroChina said Thursday it planned to build a third pipeline to bring gas from inland China to more-populated eastern regions to meet soaring demand.
 
************************************
 
China's central bank sold three-month bills at a higher interest rate for the first time in 19 weeks after saying its focus for 2010 is controlling the record expansion in lending and curbing price increases.
 
After the announcement Thursday, Stocks fell across Asia and oil declined on concern growth will slow in China, the engine of the world economy's recovery from its worst recession since World War II. The People's Bank of China offered 60 billion RMB ($8.8 billion) of bills at a yield of 1.3684%, four basis points higher than at last week's sale, according to a statement.
 
Premier Wen Jiabao said on Dec. 27 that last year's doubling in new loans had caused property prices to rise "too quickly," while surging commodity costs were increasing inflationary pressure. Guiding market rates higher may be a prelude to raising reserve requirements or benchmark interest rates, said Shi Lei, a Beijing-based analyst at Bank of China Ltd., the nation's third-largest lender.
 
The MSCI Asia Pacific Index of regional stocks fell 0.5% and oil for February delivery slid 0.7% after 10 days of gains. Copper for three-month delivery dropped 0.7%. The Shanghai Composite Index fell 1.9%, led by Bank of China Ltd. and Industrial & Commercial Bank of China Ltd.
 
Policy makers will seek "moderate" loan growth while managing inflation expectations, the People's Bank said Thursday in a report on its annual work meeting. The government has told lenders to pace lending, while tightening mortgage rules for second-home purchases. Liu Mingkang, the top banking regulator, wrote in an opinion piece in Bloomberg News this week that "structural bubbles threaten to emerge" in the economy.
 
The central bank is set to withdraw 137 billion RMB from the financial market this week, the biggest since the week ended on 23 October.
 
China's one-year interest-rate swap, the cost of receiving a floating rate for 12 months, rose 10.5 basis points to 2.24%. A basis point is 0.01 percentage point.
 
The central bank kept the benchmark one-year lending rate at a five-year low of 5.31% last year after five reductions in the last four months of 2008. It may rise to 5.85 by the end of 2010, according to a Bloomberg News survey of 29 economists in November.
 
The People's Bank said it would curb volatility in lending and monitor the property market, while reaffirming a "moderately loose" monetary policy. The statement contrasted with the start of 2009, when the central bank targeted "appropriate" increases in lending and said monetary policy would play "a more active role in promoting economic growth."
 
Consumer prices climbed 0.6% in November from a year earlier, snapping a nine-month run of declines. The central bank is on alert for inflation after economic growth accelerated to 8.9% in the third quarter of 2009, the fastest in a year.
 
Housing Minister Jiang Weixin said Thursday that the nation will limit credit for some home purchases to reduce property-market speculation. Prices across 70 cities rose at the fastest pace in 16 months in November, gaining 5.7% from a year earlier, led by Shenzhen, Wenzhou and Jinhua.
 
The central bank didn't state a 2010 target for growth in M2, the broad measure of money supply, after overshooting a 17% goal last year. The actual rate was more than 25% for most of 2009, rising to a record 29.7% in November.
 
************************************
 
China's exports probably ended a 13- month slide in December, aiding an economic rebound that has so far depended on government stimulus measures and a credit-fueled building boom.
 
Shipments rose 5% from a year earlier, according to the median forecast in a Bloomberg News survey of 21 economists. Imports may have surged 32.5%, leaving a trade surplus of $20 billion. The data may be released as early as Jan. 10.
 
Export growth may encourage Chinese policy makers to consider letting the RMB resume its appreciation against the Dollar this year after a 17-month halt that aided the nation's manufacturers during the financial crisis. Preventing currency gains helped China withstand last year's contraction in global trade and overtake Germany to become the world's No. 1 exporter.
 
RMB forwards indicated Thursday that the government will let the currency appreciate 2.9% against the Dollar in the next year. The currency gained 21% in three years after a fixed exchange rate was scrapped in July 2005.
 
China's 2010 export numbers may be boosted by the global recovery and comparisons with low levels last year. Taiwan reported Thursday its biggest export gain in 14 years in December after shipments plunged a year earlier.
 
The International Monetary Fund this month will probably raise its estimate for world growth this year from a 3.1% forecast in October, John Lipsky, the organization's first deputy managing director, said Jan. 6.
 
The surge in Chinese imports forecast in the Bloomberg survey would be the biggest in 16 months as the recovery gathers pace in the world's third-biggest economy, manufacturers buy materials for processing into exports, and commodity prices climb. On the nation's east coast, Qingdao Port Group Co. is expanding wharves to handle iron-ore imports.
 
The trade surplus would top November's level, channeling cash into an economy already awash with money from record lending and facing the risk of property bubbles in some cities and resurgent inflation. The central bank Thursday guided bill yields higher, a move that may help to drain liquidity from the financial system.
 
In an interview with state media, Premier Wen Jiabao said Dec. 27 that China will "absolutely not yield" to trading partners' calls for currency gains.
 
In contrast, Zhang Bin, a researcher at the government- backed Chinese Academy of Social Sciences, said this week that policy makers should consider a one-time 10% appreciation against the Dollar. He argued that the move would stem inflows of speculative capital.
 
The nation may attract "huge" amounts of so-called hot money as foreign investors step up bets on RMB gains, according to Zhang Xiaoqiang, deputy head of the National Development and Reform Commission.
 
China shipped products worth $957.7 billion in the first 10 months of 2009, while Germany sold goods worth $917.7 billion to customers abroad, according to data compiled by Global Trade Information Services Inc. Exports from China exceeded German shipments every month since April last year, data show.
 
Chinese exporters weathered the first global recession since World War II better than their German counterparts, GTI's figures suggest. Exports from China fell 20% in the first 10 months of 2009, according to the GTI database, while shipments from Germany tumbled more than 27%.
 
China surpassed Germany in 2007 to become the third-largest economy and is forecast to overtake Japan this year, assuming the No. 2 spot behind the US
 
************************************
 
Thanks to their spectacular gains in 2009, equities in mainland China and Hong Kong are attracting the attention of investors across the world.
 
But navigating these markets is likely to prove treacherous in 2010, analysts warn, due to the risks of resurgent inflation, capital outflows and an end to the loose monetary policies that jacked up asset prices following the global crash.
 
Many investors are concerned that the easy money was made in 2009 when the Shanghai Composite rose 80 per cent and the Hang Seng gained 52 per cent.
 
In the short term, however, some believe that the region's stocks may rise higher - even entering bubble territory - as credit expansion and hot money inflows stretch valuations to their limits.
 
A surge in Chinese bank lending last year - totalling more than Rmb9,000bn ($1,318bn) in new loans - has been blamed for fuelling speculation in the stock market, together with historically low interest rates. While new loan growth is expected to drop to about Rmb7,000bn in 2010, that would still expand the M2 money supply by as much as 20 per cent.
 
With credit expansion and interest rates playing such a big role, analysts recommend investors pay exceptionally close attention to the direction of government policy, in particular monetary policy and bank regulation.
 
The consensus is that China is unlikely to raise interest rates aggressively in the near term while US rates remain on hold, as doing so would only invite more hot money into the renminbi.
 
Nonetheless, investors fear that inflation could suddenly resurge in China, prompting the government to raise interest rates faster than expected. Rising inflation and interest rates typically spell disaster for stock prices.
 
As a result, some strategists say that a strong global recovery - which would put upwards pressure on both inflation and rates - would be the greatest threat to Chinese stock prices. A prolonged global recession, the thinking goes, would be bullish for Chinese equities, because inflation would remain so low that loose money and fiscal policies could extend beyond 2010.
Summary  
The coming week looks like .....
Commodities Indices
 Alcoa will report fourth-quarter results Monday in the "unofficial" start to the reporting season. Other components of the Dow Jones Industrial Average posting results are Intel on Thursday and J.P. Morgan Chase on Friday.
 
Citigroup analysts said the weak Dollar could prevent Alcoa from meeting Wall Street's forecasts as it downgraded its investment rating on the aluminum giant's stock this week. Intel, the world's largest chip maker by revenue, is expected to post higher results from a year ago, when it had a $1 billion investment write-down. J.P. Morgan's results also are likely to jump substantially from the prior-year quarter, which included the peak of the financial crisis. But some analysts recently cut estimates for the banking giant's earnings, citing sluggish trading.
 
A report on December consumer prices--a key measure of inflation--is expected to show a rise of 0.2%, lower than the 0.4% increase a month earlier. The Consumer Price Index, due next Friday, has been quite steady for the past six months.
 
The November trade deficit, out Tuesday, is seen widening slightly as the economy picks up. The Federal Reserve releases its Beige Book, with reports on regional economic activity in the US, on Wednesday, a day before the government reports on December retail sales. Next Friday, the government will detail December industrial production and Reuters/University of Michigan issues its initial reading on January consumer sentiment.
 
AMR Corporation's American Airlines next week is expected to formally raise its offer to invest in Japan Airlines, intensifying its battle with rival Delta Air Lines to forge a partnership with the cash-strapped Japanese carrier. American met with JAL executives Thursday morning and sweetened its offer by $300 million to $1.4 billion, according to people familiar with the situation. JAL's weakness provides American and Delta with a rare opportunity to invest in the carrier and share in its access to routes in Asia, the world's fastest-growing region for aviation.
 
The Financial Stability Board (are they still in a job I ask?), which includes central bank experts and regulators from around the world, will hold its next plenary meeting in Basel, Switzerland, today. The meeting will be held amid signs of a re-emergence in global financial risk appetite, with equity markets recovering and private- sector companies regaining capital markets access. The FSA meeting also comes before regular gatherings of global central bankers and financiers at the Bank for International Settlements in Basel later this weekend and Monday.
 
Fast-rising Japanese shares may take a breather next week as worries grow that the market may be overheating, dealers said on Friday.
 
A weaker Yen may keep sentiment generally upbeat, particularly if accompanied by fresh signs of a recovery in the US economy, they added.
 
But there are concerns that stocks may have risen too quickly and the uncertain outlook for corporate earnings may come back into focus during the upcoming results season in the United States and Japan.
 
The appointment of Japan's new Finance Minister Naoto Kan should have limited long-term impact on the market, analysts said, although exporter shares could benefit if he reiterates his preference for a weaker Yen.
 
Next week's Japanese economic calendar includes the January 12th release of November current account expected at ¥1.110trln compared to ¥1.40trln last month. December money supply will also be released on the 12th expected unchanged at 0.1%. On January 14th CGPI for December will be released expected at 0.1% compared to 0.2% last month along with November machinery orders. The machinery orders are expected to rise by 8.5% compared to -4.5% last month.
 
Chinese stocks may extend declines next week as the nation's central bank begins to tighten its monetary policy to head off faster inflation. I won't be surprised if the market goes down; it could be as early as next week or some time before Chinese New Year.
 
I do expect the Chinese stock market to gain in the long term; however the market is going to reflect a W-shape in my opinion which means more volatility in the short-term but it is still going up in the long term.
 
The week ahead in Australia includes Monday's release of ANZ job ads expected at 4% compared to 5.2% last month. On Tuesday the housing finance plan will be released expected at 2% compared to -1.5% last month.
 
On Wednesday December unemployment will be released and the unemployment rate is expected to fall by 0.1% to 5.6% from 5.7% with employment growth at 20k compared to 31.2k is last month.
 
Next week's European calendar includes Wednesday's release of EU November industrial production expected at -0.3% compared to -0.6% last month.
 
On Thursday German December CPI will be released expected unchanged at -0.1%. ECB policy meeting will also be held next Thursday and no rate change is expected.
 
On Friday next week the EU December CPI November trade balance will be released.
 
Next week's UK economic calendar includes the Tuesday release of December RIC's house prices and November trade balance. On Wednesday industrial production is due for release along with NIESR GDP estimate for December.
 
All told, another busy week ahead for the markets and I get the feeling that focus again could be on China next week; for sure, I feel that there are more 'announcements' to come out of Beijing as they try to draw on the purse strings.
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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