US interrest rates ready to drop?

The dollar fell to a seven-week low against the euro on speculation U.S. interest rates will drop below those of the 15 nations that share the euro for the first time in three years. "We cannot live with a euro at this level with three other currencies which are weak,'' France's European Affairs Minister Jean-Pierre Jouyet said in a Jan. 12 interview in Malta.

Longer-run inflation expectations are "well-anchored," in Fed Governor Mishkin's view, so "the easing of the stance of monetary policy in response to deteriorating financial conditions seems unlikely to have an adverse impact on the outlook for inflation."

The sub-prime mortgage lending crisis has seen 112 companies report write-downs of more than $170bn (£87bn) but this is only the tip of the iceberg, research consultancy Advisen has warned.

Embattled bond insurer MBIA Inc. likely will have to serve up a pricey 14 percent yield to close its planned $1 billion note offering, dealers said Friday.

The European Central Bank's independence isn't at risk and won't be questioned by a summit of European Union leaders planned by French Prime Minister Francois Fillon, the German government said.

The odds have grown that the economy will slip into a recession. At the beginning of last year, many economists put that chance at less than 1-in-3; now an increasing number says it has climbed to around 50-50. Goldman Sachs, the biggest investment bank on Wall Street even thinks a recession is inevitable this year.

Just days after warning the US had gone into recession, Merrill Lynch's Gary Dugan, chief investment officer of Merrill's global wealth management arm, is priming its richest clients to swoop on undervalued assets. Top of Merrill's list of recommended assets are natural gas futures, pharmaceutical shares and the Japanese stock market.

UBS AG may split its investment banking and money management operations into two separately traded companies, SonntagsZeitung reported, without saying where it got the information. The bank, based in Zurich, may also take another $5 billion to $8 billion in writedowns.

UBS AG, Europe's biggest bank by assets, faces soaring interest costs when it sells bonds in euros today. UBS is offering investors a yield premium of about 70 basis points more than the benchmark midswap rate.

Credit Agricole SA is selling its 2.07 percent stake in French utility Suez SA, valued at about 1.25 billion euros ($1.86 billion). Credit Agricole Dec. 20 announced writedowns and provisions that will cut 2007 earnings by 1.6 billion euros, on top of writedowns of 850 million euros it reported in the first three quarters of 2007.

Sumitomo Mitsui Financial Group Inc., Japan's second-largest bank by market value, will follow rivals Mitsubishi UFJ Financial Group Inc. and Mizuho Financial Group Inc. in selling securities to boost capital.

U.S. chain stores, reeling from the slowest holiday shopping season in five years, got some more bad news on Sunday: 2008 will not be any better and could see changes that may shift the retail playing field forever.

U.S. retailers will close stores and reduce square-footage growth plans this year to offset slowing sales, slumping stock prices, a saturated market and a penny conscious shopper, analysts said on Sunday.

Full-year 2007 US auto sales dropped almost 3 percent to 16.14 million vehicles, the lowest since 1998. Wagoner said he expects the market in 2008 to be about as tough as the year just ended, estimating total U.S. industry sales to come in at 16.3 million to 16.5 million units.

General Motors Corp. is close to an agreement with the United Auto Workers on another round of buyout and early retirement offers to cut the number of workers in jobs banks and clear openings for workers hired at lower-tier wages, a top company official said Sunday.

GM is scheduled to announce a partnership with Coskata, a year-and-a-half-old company with technology for turning wood chips, grasses, or municipal waste into ethanol. The auto giant has committed to doubling its flex-fuel vehicle output to 80,000 cars by 2010, and to making half of its new cars flex-fuel-capable by 2012.

Debenhams Plc, the second-largest U.K. department store company, climbed the most ever in London trading after the Sunday Times reported that the retailer's sales over the holiday period beat analysts' estimates.

JJB Sports Plc, the U.K.'s second- largest sporting-goods retailer, forecast a drop in earnings after cutting prices to clear leftover inventory.

Experts who follow the much-anticipated UK annual property index from consultants IPD are confidently predicting that it will show a slump of 15pc in the capital value of UK property from June, when values peaked, including a 4pc to 5pc fall in December alone, revealing that the second half of 2007 was one of the worst in recent memory.

Soybeans rose to a record in Chicago as global production declines and demand increases for animal feed, vegetable oil and fuel made from crops. Corn futures rose to an 11-year high.

Copper prices rose in Asia after imports of the metal by China, the world's largest user, reached an eight-month high. Copper and copper-product imports rose 8.6 percent more than a year earlier in Dec.

Eni SpA and partners in the Kashagan oil field agreed to cede a greater stake in the world's biggest crude discovery in 30 years to Kazakhstan.

Deutsche Bank AG raised its forecast for crude oil prices this year because of global political tensions and a "tight'' balance between demand and supply. West Texas Intermediate and Brent crude oil will average $85 a barrel this year, 6.3 percent more than a previous forecast of $80 a barrel.

While few, if any, investors are making money buying U.S. stocks this year, the market for puts and calls is providing a bonanza on Wall Street where options trading has never been so brisk.

China is starting to gain control of its turbocharged economy, just as a U.S. slowdown raises the risks of doing so. Last month's trade surplus shrank to $22.7 billion from $26.2 billion in November, and the broadest measure of money supply rose by the least in seven months.

Sears Holdings Corp., the retailer run by investor Edward Lampert, fell as much as 12 percent in early U.S. trading after saying profit will trail analysts' estimates following a drop in holiday sales.

International Business Machines Corp., the world's biggest computer-services company, posted earnings and sales that topped analysts' projections as orders from Asia and Europe bolstered results.

HeidelbergCement AG, Germany's biggest cement maker, said full-year profit rose 38 percent, after it spent a record $15.4 billion to buy U.K. based sand and gravel producer Hanson Plc.

U.K. Producer Prices Rise at Fastest Pace Since 1991. Manufacturing output prices rose 5 percent from a year earlier after a 4.7 percent gain in November.

The TD Securities-Melbourne Institute monthly inflation gauge rose by 0.6 per cent in December, following consecutive 0.3 per cent rises in October and November. The inflation gauge rose by 3.7 per cent in the 12 months to December.

Asian markets were bumpy Monday, with the Taiwanese Taiex index posting a 1.79% advance following the landslide electoral victory of pro-China opposition party Kuomintang. Japan was closed for a holiday. The Hang Seng ascended to 27142.88 before declining 1.48% to 26468.13. The Shanghai Composite gave up early gains to slide 0.5%, pulled down by U.S.-listed stocks
European stocks rose for the first time in four days, led by technology companies, after sales and earnings for International Business Machines Corp. topped analysts' estimates. National benchmarks rose in 13 of the 18 western European markets. The U.K.'s FTSE 100 gained 0.7 percent. France's CAC 40 climbed 0.9 percent and Germany's DAX advanced 0.4 percent.

U.S. overnight and premarket: