18 Apr, 2009 - deVere Insight – 18th April 2009

VIEWS – In this edition we feature the Global Market Update form Fidelity International

http://www.fidelity-international.com/docs/volatility/GlobalMarketUpdate.pdf

HEADLINES

HK shares edge up to end higher for 6th straight wk

FTSE ends 1% higher as financials rally

Europe stocks close higher, up for 6th straight week

Nikkei up but off highs, steel and techs surge

US -Economic optimism, GE spur 6th week run-up

INTERNATIONAL OUTLOOK - The current rally in stock markets may be the start of a new bull market, said hedge fund manager Crispin Odey, founding partner at Odey Asset Management and one of the hedge fund industry's highest profile figures.

"Opinion is divided over whether this is a bear market rally or the beginning of a new bull market.  I think it has the chance to be a new bull market," Odey said in a note to clients.  "In little over a month much has changed", following a sharp rally in stocks led by banks and base materials stocks, he said.

Odey, who remains positive on banks, owns shares in banks such as Barclays and said he believed the bull market will extend from the banking sector, "to encompass other industries where capacity has been sufficiently reduced as to allow pricing power to come through".

The FTSE 100 index has risen 14% since March 3, when it closed just above 3,500, on hopes that moves such as quantitative easing, the repurchase by governments of Treasury bond, will help boost lending by banks and steer developed economies back to growth.

Last year Odey made money betting on falling bank shares, but in February revealed he has been buying into UK banks because he thought they looked so cheap.

Odey was one of the few hedge fund managers to make money last year, returning 10.9% in his European fund while the industry suffered record performance losses of 19% on average, according to Hedge Fund Research.

Barclays was the biggest positive contributor to the performance of Odey's 871 million euro (£770 million) European fund in March, adding 5.17 percentage points of the fund's 5.27% gain.

"Everything is about re-establishing profit margins.  My banks buy case demands only that net interest margins are rising, not that bad debts are falling," he wrote in the note to investors.  "Since on my numbers these banks are trading on between two and three times future earnings, two years out, I am not afraid of the volatility in the share price."

CURRENCIES - Sterling slipped on Friday, pulling back from a three-month high against the dollar as the pound followed losses in the euro, while currencies perceived to be higher risk failed to benefit from better than expected U.S. earnings results.

Citigroup and General Electric both reported smaller losses than expected in the first quarter, boosting European share markets.

However, this did little to stop investors from selling the UK currency against the dollar as risk aversion remained a key theme in currency markets, while traders also took profits from a gain in sterling against the dollar earlier this week.

The pound was also pressured on Friday after UK Trade and Investment Minister Mervyn Davies said he was not worried about a further slide in the currency, while adding a weak currency would help the British economy out of the recession.

Some analysts brushed off the optimism prompted by fairly solid U.S. earnings reports this week, adding that they did little to change the view that the UK economy will be weak for a while.

"The market is not so much looking for bad news, but trying to find some reality out of the good news," said Lauren Rosborough, currency strategist at Westpac in London.

She added that this caution among investors would likely keep sterling hemmed around $1.48 and $1.50 in the near term.

Sterling traded 0.7% lower at $1.4810, retreating from $1.5069 hit on Thursday, its strongest since mid-January.

Helping to keep selling pressure on sterling against the dollar were losses in the euro, which hit a one-month low against the U.S. currency.

The euro was stung by comments from ECB President Jean-Claude Trichet on Friday which bolstered the view the central bank will launch unconventional monetary policies next month.

Speaking in Tokyo, Trichet said that banks would be the focus of such policies, without offering any details on the plan.

"Sterling is being held hostage to euro/dollar moves," said Marc Ostwald, strategist at Monument Securities in London.  "There's also the sobering thought that the budget might not be good news for sterling."

Trichet's comment helped to nudge the euro 0.2% lower to 88.05 pence.  The pair was set to post a weekly loss of roughly 2% this week, its worst performance since the start of February.

The UK government will present its budget to parliament next Wednesday.  It is widely expected to downgrade its economic outlook for the year, while cranking up government borrowing.

Ahead of the budget, Bank of England policymaker David Blanchflower on Friday told a UK newspaper the nation is facing a jobs crisis, and that the government should use the budget to stem it.

In an interview on Thursday, David Miles, who will replace Blanchflower on the BoE's policy-setting committee in June, said the worst of the UK's recession may be over.

COMMODITIES - Gold nudged down on Thursday, hovering below $890 per ounce, in the absence of strong physical buying and as recent strength in stocks dented its attractiveness as an alternative asset.

Bullion rose a touch on Wednesday on strong demand from India, the world's top gold consumer, ahead of a key gold-buying festival at end-April, but this did not exert a strong influence on the market on Thursday.

"There is a little bit of a recovery in physical demand in India, which is related to the season.  But it is not strong," said Dick Poon, a division manager at Heraeus Ltd in Hong Kong.

"I think money is still being put back into the equity markets ... We may test the level below $880 again because there is no strong buying, and the holdings at ETFs aren't rising for the time being," he said.

Spot gold stood at $888.90 per ounce at 0340 GMT, down 0.2% from New York's notional close of $890.60.

It last closed above $900 on April 2 before hitting a 10-week low of $864.30 last week.

Gold was little changed after data showing China's economy grew 6.1% in the first quarter from a year earlier, the weakest growth on record but posted other data, such as industrial output, that signalled some optimism.

Wednesday's data showing a surprise 0.1% dip in U.S. March consumer prices, the first annual drop in 54 years, weighed on gold as it hurt the metal's allure as an inflation hedge.

But bullion's fall was halted at $887 as traders said inflation remained a long-term concern due to the massive economic stimulus plans announced by central banks worldwide.

Technical charts suggest gold has maintained its momentum, staying above its 100-day moving average of $886.

But investors mostly stayed on the sidelines, waiting for clearer signals on the outlook for the financial sector and equity markets, with a slew of corporate earnings due in the coming weeks.

The world's largest gold-backed exchange-traded fund, the SPDR Gold Trust, said its holdings as of April 15 remained unchanged at a record 1,127.68 tonnes, a level first reached on April 9.

TOKYO - Japan's Nikkei average gained 1.7% on Friday as steelmakers surged after Nippon Steel negotiated a smaller-than-expected price cut with Toyota Motor Corp, but the benchmark marked its first negative week since early March.

Sony Corp and other high-tech shares also jumped after Google Inc's quarterly profit topped expectations and the world's top cellphone maker Nokia said it saw signs of stabilising demand.

Manufacturers of trains jumped after President Barack Obama said the United States will seek to develop high-speed rail nationally, emphasising a broader commitment to U.S. infrastructure investment and transport other than cars.

But investors were nervous ahead of first-quarter results from Citigroup due later on Friday, seizing on gains in the yen against the euro as a reason to lock in profits.

The euro fell to its lowest in a month against the dollar, and at one point slipped nearly 1% against the yen, after ECB President Jean-Claude Trichet said he appreciated U.S. comments that a strong dollar was in its interests.

Analysts said that while the market was taking heart from growing signs of brightness for the global economy, it was still wary ahead of Japanese earnings results, which move into higher gear later this month.

"We're out of the worst period now but we've yet to enter a period of real recovery, so the market's taking a bit of a breather right now," said Mitsushige Akino, chief fund manager at Ichiyoshi Investment Management.

"Everybody now expects Citigroup results to be better than predicted, the way others were, so if they're even a little bit bad we could see selling."

JPMorgan's results on Thursday beat analysts' expectations as debt trading and underwriting revenue surged, fuelling hopes that the banking sector is stabilising.

The benchmark Nikkei rose 152.32 points to 8,907.58 after earlier gaining more than 2%.  But it lost 0.6% on the week, snapping a five-week rising streak, with market participants saying future direction was difficult to read.  The broader Topix gained 13.53 points to 845.57.

Japanese steelmakers, led by the world No.2, Nippon Steel, agreed with Toyota to cut steel prices around 10%, a source said, a smaller cut than expected that signals steel mills' earnings may not suffer too much.

Nippon Steel Co soared 10.5% to 346 yen, while JFE Holdings shot up 10.6% to 2,985 yen and Kobe Steel climbed 8% to 175 yen.

Yuji Matsumoto, an analyst at Nomura Securities, said Nippon Steel's operating profit would exceed his forecast by more than 100 billion yen if the price cut was held at 10% but he also saw risks of another price cut.

High-tech exporters rose after Google's results, though Chief Executive Eric Schmidt said the economic environment remains tough with users still searching but buying less.

"I think what happens with manufacturers almost means more to the market right now than what happens with financial shares, though over the longer term financials of course are more important," said Masayoshi Okamoto, head of dealing at Jujiya Securities.

Toshiba Corp said after the close it expects its mainstay semiconductor business to continue to post losses in the current business year to March 2010 but repeated its aim to return to profit on a group basis.

Sony rose 5.9% to 2,590 yen and Sharp Corp climbed 9% to 981 yen.  Hitachi Ltd rose 8.9% to 331 yen.

Okamoto said trade in Japanese and U.S. banking shares was likely to be in a limited range before the announcement of the results of the U.S. government's "stress test" on 19 major banks, set to be announced May 4.

Mitsubishi UFJ Financial Group rose 1.6% to 513 yen, while No. 2 bank Mizuho Financial Group gained 2.6% to 197 yen and Sumitomo Mitsui Financial Group rose 3.8% to 3,040 yen.

Kawasaki Heavy Industries, which makes trains for the New York subway, advanced 6.7% to 222 yen.  Nippon Sharyo Ltd shot up 8.5% to 384 yen and Kinki Sharyo climbed 8.3% to 509 yen.

Trade was moderate on the Tokyo exchange's first section, with 2.5 billion shares changing hands, roughly in line with last week's daily average.

Advancing stocks beat declining ones, 923 to 653.

MEXICO CITY - Mexico's peso firmed on Friday, bonds gained and stocks rose after the central bank slashed interest rates in a bid to support the economy as it slides into recession.  The peso firmed 0.13% to 13.108 per dollar at the central bank's final reference.

Mexico's central bank slashed its key interest rate by 75 basis points to 6.00% on Friday, its fourth cut in a row as it strives to pump life back into an economy that is sinking into recession due to the U.S. downturn.

The peso initially sold off following the decision, as some market players had bet on an even bigger rate cut.  Prior to the decision, the peso briefly broke below 13 per dollar for the first time since December.

The "market appears to have bought the rumour and sold the fact," wrote Brown Brothers Harriman strategist Win Thin in a report, adding that the peso "has been unable so far to stage a convincing break of the 13.00 level, and we continue to feel that the current emerging markets rally is nearing its limits."

The three-quarter percentage point cut was in line with a slim majority of analysts polled this week.

But speculation had swirled around how much the central bank would cut, with some brokerages putting on bets of 100 basis points or more in recent days.  Some others had expected only a 50 basis point cut.

Mexico's peso has rebounded 18% against the dollar from a 16-year low hit on March 9, buoyed by the government's move to secure massive international credit lines as well as signs of moderation in the U.S. economic slowdown.

ABU DHABI - Buyers looking to acquire a property in the capital this year will be able to take advantage of a special promotion currently being run by RAKbank offering some of the lowest interest rates on the market.

Customers who sign up for a mortgage finance deal with the bank before the end of June will have home loans with interest rates as low as 7.49%, down from the previous rate of 8.3%, and among the most competitive on the market.  The interest rate varies depending on type of employment and loan amount.

The promotion applies to UAE nationals, residents and non-residents purchasing existing and upcoming residential freehold projects, including those on Al Raha Beach and Yas Island by Aldar, and the Shams project on Reem Island by Sorouh.

Buyers who sign up for a mortgage deal during Cityscape Abu Dhabi or before the end of April will also get exclusive benefits, with lower loan processing fees and the flexibility to settle 20% of the loan free of cost once a year, if interested in the option of early settlement.

Following its entry last year into Abu Dhabi's property landscape, RAKbank is looking to make its mark on the capital this year and develop more partnerships with the city's leading developers to offer finance for a larger number of properties.

The bank offers up to 90% mortgage finance and up to a 25 year loan tenure, and requires a minimum salary of Dh 10,000.

HONG KONG - Hong Kong shares pared early sharp gains to end only slightly higher on Friday as losses on the Shanghai bourse weighed down locally listed Chinese stocks while Yue Yuen Industrial fell after a share sale by an investor.

Among Friday's outperformers, property stocks were lifted by a Goldman Sachs upgrade on the sector to neutral from cautious, owing to sooner than expected signs of stabilisation in major economies.

Expectations for an early recovery in the Chinese economy, supported by GDP data released this week, also sent the blue-chip index up 4.7% in its sixth consecutive weekly gain.  But the market's advance is unlikely to be sustained given still fragile fundamental support and its nearly 15% rally so far in April.

"Turnover is still holding up and that’s probably because the smart fund managers have already started taking profits," said Peter Lai, director with DBS Vickers.

"The situation hasn't changed all that much.  The upside is limited, while the downside may not be unlimited anymore but there is still a substantial downside to the market," he said.

Investors are also seen to be getting their guard up ahead of key corporate earnings next week.  The benchmark Hang Seng Index ended up 0.12% at 15,601.27 on Friday, after opening 2.4% higher.  Turnover edged up to HK$75.3 billion from Thursday's HK$74.6 billion.

Yue Yuen Industrial, a supplier of sports shoes to Nike and Adidas, plunged 13.33% to HK$17.94 on news an investor had sold 20 million shares for HK$18.65 each.

Sino Land, which Goldman Sachs rated a 'buy', jumped 9.75%.  Top developer Sun Hung Kai Properties added 1.97%, while property conglomerate Wharf Holdings climbed 5.76%.

The China Enterprises Index of top mainland firms dropped 0.97% to 9,052.18.

Aluminium Corp of China, better known as Chalco, slumped 4.45% to HK$6.19 after Goldman Sachs cut its rating on the stock to neutral from buy, deeming the stock too expensive following its nearly 60% rally since the beginning of the year.

Cathay Pacific Airways Ltd dropped 3.44% to HK$9.26 after the airline on Friday said it would cut passenger and cargo capacity from May following a sharp drop in turnover in the first quarter of 2009.

From May, Cathay will reduce passenger capacity by 8% and its unit Dragonair will slash capacity by 13%.  Overall cargo capacity will be reduced by 11%.

EUROPE - European shares closed higher on Friday, rising for the sixth straight week, with banks gaining after better than expected results from Citigroup and General Electric.

The FTSEurofirst 300 index of top European shares rose 1.6% to 814.69 points, its highest close in more than two months.  Over the week, the index rose 4.7%.

Banks were given a boost after Citigroup reported first-quarter revenues of $24.8 billion and a loss of 18 cents per share, better than forecasts.  Citigroup shares were down 5.7% on Wall Street on comments from the company indicating consumer credit deterioration remained a worry, but banks in Europe rallied on hopes that the worst was over for the sector.

BNP Paribas, Barclays, Deutsche Bank, Lloyds, Royal Bank of Scotland and UBS rose between 4.6% and 16.6%.

"What this shows, and what the market is reacting to directly, is that banking is very profitable if you take out all the stupid stuff, like exotic derivatives," said David Evans, market analyst at BetOnMarkets.com.  "If you're the middleman in things like fixed income transactions, and forex, it's extremely profitable."

Evans said: "It seems that people are questioning earnings now a bit more because of the bail-out factor."

"With all the accounting rules changes, investors are quite sceptical as they think some of the profits might have come from that.

General Electric Co reported a better-than-expected quarterly profit as strength at its energy equipment business offset falling earnings at its hefty finance arm and the NBC Universal media unit.

The pan-European index has risen 26.2% from the lifetime low it hit on March 9, and has reduced its loss for 2009 to just 2.1%.  It fell 45% in 2008, hammered by a banking crisis and worldwide economic slowdown.

"What we have got now is a market which has got a slightly more confident look.  It is really wanting to see how the results season pans out.  There is a view underway that recovery is a matter of time and the worst of the earnings downgrades are behind us now," said Mike Lenhoff, strategist at Brewin Dolphin.

Telecom stocks were among top gainers in the FTSE with BT Group and Vodafone rising 9.4% and 3.9% respectively.  Morgan Stanley said it sees a 45% upside on Vodafone stock.

Mobile phone maker Ericsson gained 4% after Sony Ericsson posted a slightly smaller loss than expected for the first quarter.

Carrefour fell 2.1% as the market reacted to its trading statement, issued after Thursday's close.  The world's No. 2 retailer reported lower quarterly sales for the first time in six years.

Further indications that the worst may be over came from the University of Michigan Surveys of Consumers' preliminary April consumer sentiment index, which rose to 61.9 from March's final reading of 57.3.

But Bank of Ireland and Allied Irish Banks fell 13.6% and 5.8% respectively.  The Irish government's "bad bank" solution for the sector's soured debts should be scrapped in favour of full, temporary nationalisation of the system, 20 leading academic economists said in an opinion piece in the Irish Times newspaper on Friday.  Accor fell 4.7% after the French group posted a 9.6% drop in first-quarter sales as weakening economies hurt demand for its hotels.

Across Europe, Britain's FTSE 100, Germany's DAX and France's CAC-40 closed between 1% and 1.8% higher.

DUBAI - Aiming to secure the raw materials required to fuel the company's future growth strategy, Dubai Aluminium Company Limited (Dubal) has entered into an agreement with Vale to develop a green-field alumina refinery in Brazil's northern state of Pará.

The transaction is subject to the fulfilment of certain customary conditions.

Dubal, the world's largest modern aluminium smelter with a captive power station, will hold a 19 per cent equity stake in the joint venture company, Companhia de Alumina do Pará (CAP); Vale, the world's second-largest metals and mining company, will hold 61 per cent and Hydro Aluminium 20 per cent.

CAP will be responsible for the implementation and operation of an alumina refinery located in Barcarena. 

The initial production capacity will be 1.86 million tonnes per year of alumina, through two lines, each of 930,000 tonnes per year.

Future capacity expansions at this refinery have the potential to reach up to 7.4 million tonnes per year.  The start-up of the first phase is scheduled for the end of 2012, Dubal said in a statement yesterday.

LONDON - Britain's leading share index ended 1% higher on Friday, with financials in the vanguard as better-than-feared results from Citigroup and GE reassured investors, while telecoms gained on positive comment.

By the close, the FTSE 100 was up 39.82 points at 4,092.80, having gained 2.6% over the shortened trading week after Easter.  The benchmark index is down 6.8% this year, but has gained 19.8% since its low in March.

Investor sentiment was buoyed by further earnings reports from the United States, with both Citigroup and General Electric Co's seeing first quarter numbers top market expectations, although outlook statements remained cautious.

U.S. bluechips were modestly higher by London's close as investors squared positions at the end of a solid week.

"The recent positive earnings from major banks like Goldman Sachs, JP Morgan, Wells Fargo and Citigroup has improved investor optimism that the worst of the banking crisis may be over," said Joshua Raymond, market strategist at City Index.

"This quarter's results are far from conclusive and there is no certainty that profitability will continue to improve over Q2.  We are not out of the woods yet but the market is starting to give investors more reasons to smile," Raymond added.  Banks were the best blue chip performers in London, with Lloyds Banking Group the biggest gainer, up 16.6%, while Royal Bank of Scotland, Barclays, and Standard Chartered added between 0.3 and 14.3%.

Barclays will provide a trading update when it holds its annual general meeting next Thursday, with insurer Legal & General and fund manager Schroders also due to update the market on the same day.

Insurers joined in the rally as equity market valuations rose, with Legal & General, Aviva, Prudential, and Friends Provident up between 1.0 and 12.3%.

Schroders added 2.9%, recovering after falls following a Credit Suisse downgrade on Wednesday, while interdealer broker Icap took on 6.7%.

Telecoms companies performed well, with fixed line firm BT Group, up 9.4%, garnering support from a bullish note from Citigroup.  Looking forward to BT's Q1 results on April 30, the broker said the numbers should clarify the group's cash position.

Mobiles heavyweight Vodafone gained 3.9% after Morgan Stanley reiterated its "overweight" stance on the company, saying it saw 45% upside to the share price.

Miners, however, were weaker, as a recent rally by metal prices stalled as the demand outlook cooled slightly.  Randgold Resources, Rio Tinto, Fresnillo and Anglo American fell between 2.2% and 5.4%.

Retailer Next was a big faller, down 3.5%.  John Lewis, seen as a barometer of British retail spending, said weekly sales at its department stores fell 1.5%, the best performance so far this year.

AstraZeneca fell 1% after it announced that a U.S. court on Thursday granted a temporary restraining order barring Apotex from selling a generic version of AstraZeneca's lucrative Pulmicort Respules asthma medicine.

The Bank of England's dovish policymaker David Blanchflower said on Friday that the government must use next week's budget to stem Britain's job crisis.

Finance Minister Alistair Darling told cabinet ministers on Thursday that policies aimed at helping families and businesses through the recession would be the budget's priority.

"Although opinion amongst traders is still split as to whether this one month rally is the start of a real recovery or just an oversold bounce before the next dive lower, there is a definite air of calm around markets at the moment, something that has been lacking for some time," said Tim Hughes, head of sales trading at IG Index.

BRASILIA - Brazilian stocks edged lower on Friday as investors cashed in on gains in the previous session, while the currency edged lower.  Sao Paulo's main stock index, the Bovespa dipped 0.24% to 45,909.10 points, tracking losses on Wall Street.

"Investors are wanting to take some profits because (stocks) have risen a lot," said Luiz Roberto Monteiro at brokerage Souza Barros.

The Bovespa has gained around 21% over the past month.  The national currency, the real edged 0.73% lower to 2.193 per dollar.

On Wall Street, U.S. stocks traded mixed as investors paused to reassess the sustainability of a recent spate of upbeat profits and whether the troubled banking sector had turned a corner, following mixed results from Citigroup.

Domestic retailers erased substantial gains they made on Wednesday after official data showed retail sales rose in February for the second straight month.  Lojas Americanas fell 2.5% to 8.20 reais after gaining more than 2% in the previous session.  Lojas Renner shed 4.2% to 18.31 reais after gaining nearly 6% on Thursday.

Oil giant Petrobras was the biggest weighted loser, down 1.3% to 29.61 reais even as oil prices crept higher.

MOSCOW - Sistema's one-quarter stake in Russian state telecoms holding Svyazinvest, which could be used as the basis of an asset swap, has been valued at 23 billion roubles ($688 million), two sources with knowledge of the matter said.

The valuation is an early indication that the government, which is mapping out another restructuring of its telecoms holdings, is pursuing an asset swap with Sistema, involving the Moscow-based conglomerate's Svyazinvest stake of 25% plus one share.

The restructuring could be simplified by the exit of Moscow-based conglomerate Sistema from Svyazinvest, while Sistema's telecoms holdings would also be tidied up.

"That is the valuation of the stake," a Svyazinvest source said on Friday.  The date for the valuation was Dec. 31.  Ernst & Young, which did the valuation, declined to comment, citing client confidentiality.

Svyazinvest declined official comment on the figure but confirmed it had received the valuation.

"This valuation was commissioned on the communications ministry's request and it was handed over to the ministry.  The ball is in the minister's court and if he wishes he can disclose it," Svyazinvest's director of external communications, Igor Pshenichnikov, said by telephone.  Pshenichnikov said the final valuation report was not finished.

"We are not going to comment until we have seen the final conclusions," Sistema spokeswoman Irina Potekhina said by telephone. 

SHANGHAI - Still new to the trade, Chinese automakers are revving their engines to take an ambitious path to the premium and lucrative end of the car market as they aim to share the spoils with dominant foreign brands.

At the Shanghai auto show next week, indigenous, cut-price makers such as Chery Automobile and Geely Automobile will showcase sedans to go up against some of the best-regarded models from entrenched brands such as Volkswagen's Audi.

"We want to compete with locally made foreign brands," Chery Chairman Yin Tongao said recently at the launch of the premium Riich and Rely brands.

"Toyota and Volkswagen both started from the lower end and became established players in the upper market.  We are taking the same path," he added.

Most Chinese carmakers, including big, state-owned ones such as the parent of Chongqing Changan Automobile and FAW group, have so far focused on competing mainly on price with basic and often rudimentary vehicles, leaving foreign-branded cars to sweep up the mid-to-high-end segments.

But as wealth grows in what has become the world's biggest car market, local manufacturers are looking to boost their profile to cater to what some say is a generally patriotic population that would, given the choice, opt for local products.

Priced at 200,000 to 300,000 yuan ($29,300-$43,900), the Riich G6 sedan would be Chery's priciest model, which it sees competing against the Audi A6, a favourite among China's senior government officials.  The model is due out around August.

Chery's best-selling QQ, meanwhile, sells for as little as 30,000 yuan, or less than what a Shanghai car license costs.  The privately held carmaker aims to sell up to 60,000 cars under the two new brands this year. 

OMAN - Oman and Brunei signed a memorandum of understanding (MoU) setting up a joint investment fund with a capital of $100 million to be shared equally by the two countries.

The MoU, inked on Thursday at Al Alam Palace, was signed on behalf of Oman's government by Ahmad Bin Abdul Nabi Macki, Minister of National Economy and Deputy Chairman of Financial Affairs and Energy Resources Council and for Brunei's government by Behen Major General (retired) Dato Awang Haj Mohammad Bin Haj Dawood, Minister of Energy.

In a statement, Macki said the fund will be headquartered in Oman and will target available investment opportunities in the two countries in various fields including trade, industry and tourism.

Macki conferred with Brunei's Energy Minister and the Second Minister of Foreign Affairs and Trade at Al Alam Guest House earlier in the day on the sidelines of the Sultan of Brunei's visit to Oman.

In the meeting, they discussed a number of issues on joint investment and trade co-operation, besides the economic situation in light of the global financial crisis.

Macki noted the efforts exerted by Oman's government to develop its local and external investments and explained the development programmes being implemented during the current five-year plan.

The two Brunei officials, on their part, mentioned the government development plans being executed in their country's various economic sectors.

The meeting was attended by Syed Fakhri Bin Mohammad Al Said, Oman's ambassador to Brunei and Muharram Bin Biah, Brunei's ambassador to Oman.

NEW YORK - U.S. stocks rose on Friday, capping the S&P 500's longest weekly winning streak since 2007, helped by a reassuring report on the mood of consumers and stabilization in General Electric and Citigroup's quarterly results.

The University of Michigan survey showed that U.S. consumers have more confidence in the economy than they have had since the sudden collapse of Lehman Brothers in September, the latest in a spate of data suggesting the economic slump may be easing.

GE and Citigroup both posted better-than-expected results, lifting the broader market, and bank stocks rallied as investors bet other financial companies could follow up with more news showing the sector is on the mend.

Among banks, shares of Bank of America, due to post quarterly results on Monday, climbed 2.5% to $10.60.  The KBW Bank index climbed 3.4% and has come close to more than doubling since its March lows.  GE shares gained almost 1% to $12.39.

"The rate of deceleration in the economy is slowing," said David Lutz, managing director of trading at Stifel Nicolaus Capital Markets in Baltimore.  "From a macro standpoint, the reason for a lot of the drive is just that we're continuing to get data points that show things are beginning to operate very well in the credit markets."

The Dow Jones industrial average rose 5.90 points, or 0.07%, to 8,131.33.  The Standard & Poor's 500 Index climbed 4.30 points, or 0.50%, to 869.60.  The Nasdaq Composite Index added 2.63 points, or 0.16%, to 1,673.07.

The surge capped the S&P 500's longest weekly winning streak since spring 2007 and added to its strong recovery since the stock market's descent to 12-year closing lows early last month.

For the week, the S&P 500 rose 1.5%, the Dow climbed 0.6% and the Nasdaq gained 1.2%.

The benchmark S&P 500 is now up more than 28% since the bear market closing low of March 9.  Its year-to-date drop has narrowed to about 4%.

On Nasdaq, a 1.6% gain in the shares of Apple, the maker of the iPhone and iPod, underpinned the technology sector's advance ahead of Apple's quarterly results next week.

"Apple is probably going to have positive things to say," added Lutz.

Apple's stock closed at $123.42, while Google gained 0.9% to $392.24, a day after posting a stronger-than-expected quarterly profit.

Also underpinning the market's advance were the gains in the shares of companies seen better able to withstand economic downturns.

Shares of fast-food company McDonald's Corp rose 2.5% to $56.09 after its chief executive told CNBC that he saw "some thawing" in economic conditions.  The stock gave the top boost to the Dow.

Deutsche Bank said Procter & Gamble, Colgate-Palmolive, Kimberly-Clark Corp were undervalued at current levels.  P&G rose 2.4% to $51.66, making it the Dow's second-biggest advancer, while shares of diversified health-care company Johnson & Johnson added 1.6% to $53.05.

Profit-taking ahead of the weekend, however, tempered some of the upside, according to traders.

Citigroup reported a smaller-than-expected first-quarter loss, but its shares dropped almost 9% to $3.65 as some investors paused following the stock's strong run-up since early last month when the bank said, along with others, it had had a good start to 2009.

BANGKOK - Thailand's benchmark stock index was down 0.1% at 452.33 at mid - session on Friday in turnover of 11 billion baht ($286 million) amid heightened political uncertainty.

Earlier, the index edged up as much as 1.5% to its highest level since Jan. 12, despite an assassination attempt on the leader of the "yellow shirt" protest movement, the latest twist in Thailand's political crisis.

Prime Minister Abhisit Vejjajiva said the government needed to maintain the state of emergency in Bangkok imposed since Sunday.  Some analysts expected selling from foreign investors later in the day due to growing worries about the political situation.

Stocks on the move included: Sino-Thai engineering up on hopes of winning bids.  The country's third largest contractor rose sharply, up 5.2% to 3.62 baht, its highest since Aug. 29, 2008, due to expectations that the company might win a bid for work on a mass transit project in Bangkok.

Energy shares up on high oil prices: The energy subindex rose 1.6% in early trade, led by a 2.15% rise on top oil and gas firm PTT to 166.50 baht.  PTT Exploration and Production climbed 1.52% to a three-week high of 100 baht.

TMB Bank up after bond buy-back plan - Thailand's sixth-largest lender rose 2.2% to 0.47 baht, outperforming a 0.7% rise in the banking subindex, after the bank said it was offering to buy back up to $100 million of its perpetual, Tier I bonds.

JOHANNESBURG - The JSE was flat by noon in what a local equities trader said was a quiet session with the strong rand limiting moves on the local bourse.

By 11:58, the JSE all share index was flat, down 0.01%.  Resources weakened 0.25% but gold miners added 1.84% and platinum counters edged up 0.39%.  Banks were flat, down 0.04%, as were financials, up 0.07% while industrials edged up 0.12%.

The rand was last bid at 8.91 to the dollar, from 8.91 when the JSE closed on Thursday.  Gold was quoted at US$871.58/oz a troy ounce from US$878.28/oz at the JSE’s last close, and platinum was at US$1,212/oz from its previous close of US$1,201.50/oz.

"We’re flat, there is not much happening out there.  The UK has also turned negative," the trader said.  "Once again the strong rand is keeping the market from gaining.  The Dow was higher last night, but our market is just not moving.

"US company earnings have been better than analysts had expected and that has kept the world market momentum going.”

"The gold index is up despite the strong rand and the weaker price.  That is what we have seen in the market lately - that when equities are down, gold moves up.  “

"I would still keep away from these gold stocks because as the market recovers they will retreat.  But at the moment short-term investors are coming in at these low levels," he said.

"Upside in the short term seems limited, but any more positive comments from General Electric later this morning could give the market another boost to end the week on a positive note," a trader added.  Telecoms advance after Morgan Stanley reiterates its overweight stance on Vodafone; BT Group +6.8% and Vodafone +1.5%.  Another trader adds the market will be looking out for Citigroup’s figures later in the session "to see if we can hit three out of three".

On the JSE, Anglo American lost 4.72 rand, or 2.50%, to 183.98 rand and BHP Billiton was off one rand to 183.50 rand.  Petrochemicals group Sasol added 3.66 rand, or 1.37%, to 271.66 rand.

Kumba Iron Ore gained 2.07 rand, or 1.24%, to 169.07 rand and Highveld Steel was up one rand, or 1.45%, to 70 rand, but ArcelorMittal lost 1.29 rand, or 1.47%, to 86.71 rand.

Gold miner Gold Fields firmed 2.90 rand, or 3.05%, to 98 rand and Harmon was up two rand, or 2.53%, to 81 rand.  Among platinum miners, Lonmin rose 5.58 rand, or 3.17%, to 181.58 rand.  In diversified miners, African Rainbow was up 2.06 rand, or 1.79%, to 117 rand.

Elsewhere on the JSE, brewer SAB Miller eased 91 cents to 142.59 rand and British American Tobacco shed 4.03 rand, or 1.92%, to 205.77 rand.  However, Imperial put on 1.59 rand, or 2.94%, to 55.64 rand.

Among banks, Absa gave up 1.20 rand, or 1.16%, to 102.55 rand but FirstRand was up 16 cents, or 1.21%, to 13.36 rand.

Financial services group Old Mutual was up 9 cents, or 1.12%, to 8.14 rand but Sanlam weakened 80 cents, or 4.71%, to 16.20 rand.  Sugar group Illovo gained 95 cents, or 3.79%, to 26 rand.

Among retailers, Woolies was up 47 cents, or 3.83%, to 12.75 rand, Spar gained 65 cents, or 1.19%, to 55.15 rand and Foschini put on 70 cents, or 1.49%, to 47.70 rand, but Nu Clicks weakened 16 cents, or 1.04%, to 15.24 rand.

Construction group Group Five was off 45 cents, or 1.58%, to 28.05 rand and WBHO lost 2.49 rand, or 2.68%, to 90.51 rand.  Cement manufacturer Pretoria Portland Cement rose 1.17 rand, or 3.61%, to 33.60 rand.

Telecommunications group MTN Group was down 30 cents to 105.60 rand but Telkom gained 3.40 rand, or 3.25%, to 107.90 rand.

BANKING - Citigroup reported a smaller-than-expected first-quarter loss as cost-cutting and improved investment banking and trading results helped offset red ink from consumer banking and credit cards.

The third-largest U.S. bank on Friday joined Goldman Sachs Group Inc, JPMorgan Chase & Co and Wells Fargo & Co posting results that suggest massive government efforts to jump-start the ailing economy are helping boost bank profits, though the industry's problems are far from over.

"Perhaps the banking sector crisis is bottoming," said Richard Hunter, head of U.S. equities at Hargreaves Landsdown in London.

Citigroup also plans to delay a proposed exchange of up to $52.5 billion (£35.5 billion) of preferred shares into common stock until the U.S. government completes "stress tests" to gauge which large banks might need more aid.  Results of the tests are due in early May.

The bank has taken $45 billion of taxpayer money in a series of bailouts.  Its exchange offer contemplates a swap of up to $27.5 billion of preferred securities at a $3.25 per share conversion price, and the government converting up to $25 billion of preferred into a potential 36% stake.

In morning trading, Citigroup shares were down 24 cents at $3.77 on the New York Stock Exchange.  They hit a record low of 97 cents on March 5.  The cost of protecting Citigroup debt against default fell, indicating investors see less risk.

Citigroup's quarterly loss available to common shareholders narrowed to $966 million, or 18 cents per share, from $5.19 billion, or $1.03, a year earlier.  Revenue for the New York-based bank doubled to $24.79 billion.

Analysts on average expected a loss of 30 cents per share on revenue of $21.73 billion.

JAKARTA - Indonesian coal miner PT Indo Tambangraya Megah forecast on Friday its revenue would climb to between $1.33-$1.54 billion this year, compared with $1.32 billion in 2008, on higher production.

The company, which is a unit of Thailand's Banpu PCL, expects to sell 20.5 million tonnes of coal this year, up from 17.8 million tonnes in 2008, president director Simyo Ruchirawat told reporters.

Some of its coal units will begin production in new blocks, which will significantly boost the company's coal output.  Production in 2009 will also be in line with sales, with output at 20.5 million tonnes, up from 17.6 million tonnes last year.

"We are also looking at opportunities to acquire mines in Kalimantan to improve our portfolio," Ruchirawat said without elaborating on possible acquisition targets.  Indo Tambangraya planned to spend $126 million this year, up from $100 million in 2008, on a port expansion and completion of a power plant project in East Kalimantan to cut energy costs, he said.

The firm owns shares in several Indonesian coal miners including PT Trubaindo Coal Mining, PT Indominco Mandiri, PT Kitadin, PT Jorong Barutama Greston and PT Bharinto Ekatama.  The company has said net profit in 2008 jumped more than four-fold to $234.93 million, against $55.79 million a year earlier due to higher coal prices.

Coal prices for power-plants from Australia, the benchmark for Asia, hit a record peak of $201 a tonne in July last year, boosted by supply problems and rising demand. 

RETAIL - Tesco, the world's No.3 retailer, is set to show its resilience to the economic downturn by posting profits of over 3 billion pounds ($4.5 billion) just four years after passing the £2 billion mark.

Investors, however, will be looking for reassurance from the supermarket group that strong growth can continue.  They will scrutinise profit margins to see if they have been hit by Tesco's discount brand range, launched in September to counter the threat of hard discounters like Aldi.

They also want to hear that Tesco is addressing its recent sales underperformance against major rivals Asda, J. Sainsbury and Morrison.

Tesco's medium-term target is to grow UK sales at stores open at least a year, excluding fuel, by between 3 and 4%.  But analysts' current consensus forecast for the year ending February 2010 is for growth of about 1.7%.

Abroad, investors are keen for signs that the group, which employs 440,000 people in about 4,000 stores across 14 countries, is coping in some of the world's most challenged economies, such as Ireland, Hungary and Turkey.

Tesco's U.S. plans will also be under the spotlight after the firm said in November it was slowing down its expansion there, and conceded in February it had made some mistakes.  Analysts are keen to hear if it still expects its U.S. Fresh & Easy chain to break even by the end of fiscal 2009-10. 

DUBAI - The correction in Dubai's real estate prices could lead to a myriad of productive investment opportunities in the sector here within the next 12 to 24 months according to investors survey results, in a new report by real estate advisory firm Jones Lang LaSalle.

According to the company's Investor Sentiment Survey, "With significant adjustments in capital and rental values already in place, during the next 12 to 24 months, Dubai may prove to be one of the most lucrative real estate investment opportunities in the region."

Dubai's property and construction sector is undergoing a much publicised market adjustment, with several large scale projects on hold or scrapped altogether, and prices easing.  At the same time, developers in Dubai are seeing this period as an opportunity to reassess developments, and refocus on end user elements, such as increased flexibility in payment plans, for example.

"This price adjustment is expected to aid Dubai considerably as investors are attracted back at fairer values and with greater yields.  Early signs of such activity are already visible," the Survey reveals.

Financial help in the form of government assistance from the $10 billion bond issue is imminent.  It is thought that real estate firms are likely to be significant recipients of the funds, which should help drive investor sentiment once more in a key segment of Dubai's economy.  The government has also pledged to continue with infrastructure spending to complete all major projects.

From a regional perspective, the Jones Land LaSalle survey points towards optimism among investors over prospects of the Middle East real estate sector, a key driver of the market.

"Sentiment, be it positive or negative, drives markets.  Since we last undertook our Investor Sentiment Survey in September 2008 in the aftermath of the Lehman Brothers collapse, sentiment has, without doubt, fuelled a dramatic change in the health of the MENA real estate sector," said Ian Ohan, Head of MENA Investment Transactions at Jones Lang LaSalle.

At present, investors expect Abu Dhabi and Saudi Arabia to be the best performing real estate markets in the region.

EUROPEAN OUTLOOK - As Europe's macroeconomic data begins to show signs of stability, stock market investors are set to look beyond what is shaping up to be a grim set of first quarter European company earnings figures.

Equity markets always seek to price in future prospects and often react before analysts change earnings outlooks and before corporations alter guidance.  Strategists don't expect markets to be any different on the way up.

Some banks have already advised clients to extend their shift into cyclical stocks from defensive plays, although many remain cautious and see the latest market upswing as no more than a bear market rally.

"The corporate earnings numbers for the first quarter in general are going to be poor but I think the market will probably look through that," said Robert Parker, vice chairman of asset management at Credit Suisse.

Dutch-based Philips Electronics on Tuesday missed expectations for a profit, posting a 74 million euro (65 million pound) loss instead.  Its stock ended up 3.3% on the day after the company promised to accelerate restructuring.

Parker said he expected the latest stock market rally, which as seen the pan-European FTSEurofirst 300 gain 23% since its low of March 9, to last a little bit longer than the consensus view.

"We are going to have a setback but rather than the setback being now there is the chance of the setback could be delayed until late May or June when the market is significantly higher than it is now," he said.

Goldman Sachs expects European corporate earnings to fall 38% in 2009, revised from a decline of 16%.  But it expects 2010 earnings to grow 19% from its previous forecast of 8%. 

MILAN - Valentino Fashion Group, behind brands such as Valentino and Hugo Boss reported a broadly stable 2008 core profit on Friday, adding the outlook for this year remains difficult.  Net turnover rose 3% to 2.2 billion euros ($2.88 billion).

Earnings before interest, tax, depreciation and amortisation were 320.4 million euros versus 330.3 million euros the previous year.  The figures were adjusted for one-off costs relating to management changes at the Hugo Boss board and group reorganisation.

"The outlook for 2009 remains difficult and the Group acted quickly to optimise processes and save costs where necessary," Chief Executive Stefano Sassi said in a statement.

Hugo Boss reported better-than-expected 2008 earnings last month and expects profitability to grow this year in spite of slowing sales.  Revenues rose 3% to 1.69 billion euros. 

FRANKFURT - Germany's E.ON, the world's largest utility, is in exclusive talks with a group of local utilities to sell its Thuega unit for as much as 3.5 billion euros ($4.59 billion), people with knowledge of the matter said.

E.ON plans to negotiate until the end of June only with the group, which consists of two consortia working together, said the three people, who declined to be identified because the sales process is confidential.

One consortium, consisting of the local utilities of Frankfurt, Nuremberg and Hanover, aims to buy around 45% of Thuega, said the sources, reiterating information reported in February.

The consortium is looking for a fourth member to join the group, they said.  This partner would buy the Thuega stake that is not bought by current members of the group, said one person with knowledge of the matter.

Thirty local utilities in which Thuega holds stakes, the 'Kom 9' group, make up the second consortium and aim to buy 20% to 30% of Thuega, the sources said.

Badenova, one of these local utilities, said that it, together with about 30 other Thuega units, is in talks with E.ON to buy at least 20% of Thuega.

E.ON said several parties were interested in Thuega but declined to give more details.

The power company said in November it was considering all options, including a sale, for Thuega, which groups its minority stakes in 110 local German utilities with total annual sales of 15.5 billion euros.

Divesting the business would lower E.ON's shareholding in local utilities in Germany so that the German cartel office might approve an expansion of E.ON's larger local utility holdings in Germany. 

SHANGHAI - Saudi Basic Industries Corp (SABIC) is hoping for imminent Chinese approval for its $2.5 billion petrochemicals joint venture and then more expansion in China, Chief Executive Mohammed Al-Mady said on Friday.

SABIC and Chinese oil refining giant Sinopec Corp unveiled the plan last year but are still awaiting approval by China's National Development and Reform Commission.

"We hope it will be imminent because it's in the interest of both sides," Al-Mady said on the sidelines of the Boao Forum in China's Hainan Island.

"You have to realise that we have been discussing this for a long time, from the beginning, and these things take a lot of time."

He said the companies were in the final stage of negotiations to clear the project, which is due to be built by the end of September this year.  The plant in the port city of Tianjin, close to Beijing, will produce 4 million tonnes of petrochemical products, including 1.2 million tonnes of ethylene, a year.

Asked whether SABIC has any other plans to expand in China, he said: "We have a business that fits with our strategic plan.  Of course, China is a very important country.  We are looking for more than just one project."

Ahmed Al-Umar, the general manager of Sabic Asia Pacific, said SABIC was selling more than 320,000 tonnes of polymer a year to a joint venture in Fujian province which is half owned by Sinopec, with Saudi Aramco and Exxon Mobil each holding a 25% stake.

SABIC is aiming for sales growth in China that is at least on a par with Chinese economic growth, Al-Mady said.

"The company is seeing improvements for various products' demand. For example, polymer demand is increasing, fertiliser is stable at a reasonable price, even though steel is still a little bit depressed," he said.

ITALY / ABU DHABI - Italian toll-road operator Atlantia would be happy for institutional investors such as Abu Dhabi fund Aabar Investments to increase their stakes if they decide to, Chairman Gian Maria Gros Pietro said on Friday.

"Our company benefits from having a big part of its equity in the hands of professional investors with a long-term view," Gros Pietro said in a telephone interview.

"If we talk for a moment about Aabar, for example, the 3.3% it has is already a significant stake and potentially strategic, but if this investor or other professional investors decide to buy more, why not?”  Gros Pietro added.

He said long-term investors were important because many of Atlantia's initiatives often projected returns more than 10 years down the line.

Gros Pietro said he could not exclude changes in the make-up of Atlantia's core shareholder pact, but added it was not up to managers to decide.  The Benetton family's Edizione Holding investment vehicle controls 40% of Atlantia while Spain's Abertis holds 6.7%.

Earlier this month, two sources close to Atlantia said moves were afoot to allow a change to the shareholders' pact to let in new investors.

Along with Aabar Investments, Swiss bank UBS has taken a 2.9% stake in Atlantia recently and Norges Bank a 2.02% holding.

GENEVA / ZURICH - Swiss jet manufacturer Pilatus Aircraft could sell training planes to Sweden in exchange for Switzerland buying Saab-built fighter jets in a deal valued at 1 billion Swiss francs, Swiss television reported on Thursday.

The deal could act as an incentive for the Swiss government to in turn buy several fighter jets from Swedish defence and aerospace group Saab, television programme 10 vor 10 reported.

Sweden would buy 50 Pilatus PC-21 training planes, while Switzerland would purchase 22 Gripen fighter jets from the Sweden's Saab.

"We're not commenting on the reports," a Pilatus spokesman said, also declining to comment on whether negotiations on a deal of this size were taking place at all.

The Swiss government also declined to comment, but said that offers from three different companies, Saab, Anglo-German-Italian Eurofighter and France's Rafale, had been submitted and will be reviewed in December.

The Swiss government is looking to replace ageing Northrop F-5E/F Tigers, purchased in 1976 and 1981.  Last month, Switzerland said, however, that it would delay a decision on buying new fighter jets to at least 2010.

As well as submitting a proposal last July, Saab also said it signed cooperation agreements with Rheinmetall Schweiz AG and Pilatus Aircraft in connection with a possible Gripen sale.

CHILE - Chile's dominant airline, said on Friday that it would invest around $1.4 billion between 2009 and 2011 to expand its fleet.

LAN, which has operations across South America, will buy long- and short-haul planes as well as new-generation cargo aircraft, Chairman Jorge Awad said.

"These investments represent a firm bet on the future, aimed at boosting our competitive advantages," Awad told a shareholders' meeting.

ELECTRONICS - Dutch electronics company Philips Electronics NV said on Friday it would book a 48 million euro ($63 million) gain on the sale of its 17% stake in British set-top box maker Pace Plc.

Philips, which will book the non-taxable gain in the second quarter, said the sale was in line with its strategy to dispose of non-core shareholdings.  The capital markets transaction reduced its holding in Pace to zero.