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China’s stocks, the worst-performing equities market among major developing countries this year, are poised to rebound in 2011 as the government keeps inflation under control, according to investor Mark Mobius.

Consumer prices will stay at “tolerable” levels, easing investor concerns about excessive tightening of monetary policy after two interest-rate increases since October, Mobius, who oversees about $40 billion as executive chairman of Templeton Emerging Markets Group, said in response to e-mailed questions.

The Shanghai Composite Index climbed 0.3 percent to 2,759.58 at the 3 p.m. close. It has plunged 16 percent this year, the most among benchmark equity gauges for the 21 nations in the MSCI Emerging Markets Index, on concern tightening measures will slow economic growth. Along with rate increases, the central bank has boosted lenders’ reserve requirements six times this year to tame an inflation rate that climbed to 5.1 percent last month, the highest level in two years.

“We are confident that the Chinese government has the capability to control inflation at a reasonable level in 2011,” Mobius, 74, said yesterday. “If China can keep the CPI at about 4 percent in 2011, the equity market should perform well.”

‘Tolerable’ Inflation

The inflation rate jumped to a two-year high of 4.4 percent in October on rising food prices, spurring the central bank to boost borrowing costs for the first time in three years. The People’s Bank of China acted again on Christmas Day after November consumer prices surged to the highest level in 28 months. The government’s annual inflation target is 3 percent.

Government leaders pledged this month at the Central Economic Work Conference, attended by President Hu Jintao and Premier Wen Jiabao, to shift monetary policy to “prudent” from “appropriately loose” next year. Vice Premier Li Keqiang said the country will place more emphasis on inflation controls, China National Radio reported Dec. 28.

China is tightening after a record expansion of credit to counter the effects of the world financial crisis. The broadest measure of money supply, M2, has surged by 55 percent over the past two years and outstanding yuan-denominated loans have climbed 60 percent to 47.4 trillion yuan ($7 installment payday loans.16 trillion).

“Inflation remains a problem but within tolerable levels and will probably not result in excessive tightening,” Mobius said.

Emerging Markets

The central bank may raise rates as many as three times in the first half of next year, according to Morgan Stanley, while JPMorgan Chase & Co. forecasts two increases in that period. Inflation may stay at a “comparatively high level” in the first half, Liu Jianwei, a Shenzhen-based fund manager at Bosera Asset Management Co., said in an interview this week.

China is lagging behind counterparts across Asia that took steps earlier to raise borrowing costs from global recession lows. Malaysia boosted its benchmark rate three times, starting in March, Taiwan began in June and South Korea in July.

The MSCI Emerging Markets Index advanced 16 percent this year as investors poured money into developing countries where growth is outpacing the U.S. and the European Union. Russia’s Micex Index has advanced 22 percent, while India’s Sensitive Index has risen 16 percent.

“Emerging markets are now in a secular bull market and we expect this trend to continue into 2011, but with significant corrections along the way,” he said. “Even more money will be directed into these markets as investors around the world are beginning to realize that emerging markets are growing three times faster than developed markets, have more foreign reserves and lower debt-to-GDP ratios than developed markets.”

He favors commodity and consumer stocks because of increasing demand and rising incomes in developing nations.

“The negative impact on sentiment has already been factored in as the Chinese market underperformed,” said Mobius. “Going into 2011, we don’t think the government will significantly tighten liquidity unless there is a hyperinflation, which we think is highly unlikely.”

–Zhang Shidong. With assistance from Irene Shen and Richard Frost. Editors: Allen Wan, Eric Martin

To contact Bloomberg News staff for this story: Zhang Shidong in Shanghai at +86-21-6104-3040 or szhang5@bloomberg.net

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Microsoft Corp. chief executive officer Steve Ballmer, expected to unveil new software for tablets at the Consumer Electronics Show next week, will face skeptics who say his company won

Swiss central bank President Philipp Hildebrand, who ended 15 months of intervening in foreign- exchange markets this year, may prove powerless to stop the franc from extending a record rally that he calls a “burden.”

Options traders are more bullish on the franc for the next three months than any major currency except the yen, according to data compiled by Bloomberg. Bank of Tokyo-Mitsubishi UFJ Ltd. says it may appreciate 7.9 percent to 1.17 per euro in six months after rising more than any major peer since intervention ended in June. Standard Bank Plc estimates an advance to 1.20.

Currency traders say Hildebrand probably won’t renew efforts to stop the gains after previous sales failed to halt the appreciation that made exports more expensive and saddled the Swiss National Bank with $22 billion of exchange-rate losses in the first nine months of 2010. While policy makers said on June 21 that intervention was no longer needed as the risk of deflation had ebbed, price increases have since slowed.

“The SNB cannot do much, they are just observers,” said Beat Siegenthaler, a Zurich-based currency strategist at UBS AG, ranked by Euromoney Institutional Investor Plc as the world’s second-biggest foreign-exchange trader. “Of course they are very worried. Their options are limited.”

The franc advanced 1.2 percent last week to 1.2627 per euro, climbing to a record 1.2439 on Dec. 22. It gained 0.7 percent against the dollar to 96.23 centimes, extending its 2010 rise to 7.6 percent. The Swiss currency rose 0.1 percent against the euro and dollar as of 12:51 p.m. in Tokyo today.

Monetary Union

Switzerland’s currency, a haven in times of economic turmoil, has strengthened 17 percent against the euro this year amid concern the fiscal crisis engulfing Greece, Ireland, Portugal and Spain will curb growth in the 16-country region and may force some nations out of the monetary union.

The franc’s gain against the euro is an additional “burden” for Swiss exports, which account for about 50 percent of gross domestic product, Hildebrand, 47, told reporters in Zurich on Dec. 16. Growth in Switzerland’s $492 billion economy is likely to be “significantly lower in the quarters ahead,” partly because of the currency’s strength, he said.

Werner Abegg, a spokesman for the central bank, declined a Bloomberg News request to arrange interviews with policy makers.

The SNB said it had started selling on March 12, 2009, its first solo foreign-exchange intervention since 1992. The policy, designed to ward off deflation, protect exports and revive growth, sparked the biggest one-day decline since the euro’s 1999 start. The franc slumped 3.4 percent to 1.5299 per euro. By the end of June 2010, it had strengthened 16 percent to 1.3184.

SNB’s Losses

The central bank said on Nov. 12 that it had a nine-month loss of 8.46 billion francs ($8.8 billion) after depreciation in the euro and dollar caused its holdings to decline in value by 21.2 billion francs. A year earlier, the 103-year-old bank reported a profit of 6.89 billion francs.

“The SNB tried intervening, and that clearly didn’t work, so they stepped away,” said Richard Benson, a London-based executive director at Millennium Asset Management, who oversees $14 billion of currency funds. The franc “will carry on strengthening whilst the stresses and strains of the euro zone cease to be resolved,” he said.

Derivative traders are paying a 2.56 percentage-point premium for three-month call options, which grant the right to buy the franc against the euro, relative to puts, which allow for sales, Bloomberg data show. That compares with an average premium of about 1 percentage point over the past two years.

Ratings Downgrades

The franc may strengthen toward 1.10 per euro next year as the debt crisis in Europe intensifies, Lee Hardman, a London- based strategist at Bank of Tokyo-Mitsubishi, wrote in a note to clients on Dec. 22.

Fitch Ratings cut Portugal’s debt rating one level to A+ on Dec. 23, citing concern about the “financing environment” for the government. Moody’s Investors Service said on Dec. 15 it may reduce Spain’s Aa1 credit rating and a day later placed Greece’s Ba1 classification on review for a possible downgrade payday loans. Ireland was cut five levels by Moody’s on Dec. 17. Switzerland has top AAA rating from the three companies.

Analyst forecasts remain bearish on gains by the franc. As recently as Nov. 30, the median of 28 estimates compiled by Bloomberg was for the franc to end 2010 at 1.33 per euro. The currency will trade at 1.30 by the end of March, a separate survey of 34 strategists showed.

Some investors say the franc is too strong, with the nation’s benchmark interest rate 0.75 percentage point below the European Central Bank’s 1 percent. Two-year notes yielded 48 basis points less than German securities of similar maturity on Dec. 23, compared with 39 basis points at the end of September.

Relative Value

The currency is 34 percent overvalued against the euro, based on the relative costs of tradable goods and services as measured by the Organization for Economic Cooperation and Development in Paris.

“The market is getting a little carried away with its concern over the European sovereign-debt risks,” said Jurgen Buscher, Zurich-based head of JB Private Asset Management and the former director of foreign exchange at Deutsche Bank Private Wealth Management. The franc may weaken to the 1.30 per euro to 1.40 over the next year, he said.

Switzerland’s trade surplus, which frees the country from dependence on foreign capital and can prompt purchases during times of turmoil, declined to 1.93 billion francs last month from 2.05 billion francs in October, the Federal Customs Office said on Dec. 21.

While the stronger franc helped spur a 3.4 percent drop in exports last month, the Swiss economy is benefiting from its proximity to Germany, according to Steven Barrow, head of Group of 10 currency strategy at Standard Bank in London.

‘Saving Grace’

German gross domestic product will grow 3.6 percent this year, more than double the 1.7 percent for the euro region, according to economists’ estimates compiled by Bloomberg. Switzerland’s GDP will rise 2.7 percent, the forecasts show.

The currency gain “is obviously detrimental as far as trade is concerned,” Barrow said. “The saving grace has been that Switzerland’s closest trading neighbors, northern Europe and Germany in particular, have actually been quite strong.”

Germany’s benchmark DAX Index of stocks has rallied 18 percent this year, while the Swiss Market Index is little changed from the end of 2009.

Swiss economic growth will probably slow by a percentage point next year to 1.7 percent, according to the median in a Bloomberg survey of 13 economists. That compares with 1.45 percent for the euro area and 2.5 percent in Germany, surveys show. Greece and Portugal will likely contract, with Spain’s GDP increasing by 0.6 percent.

Inflation Forecast

Hildebrand cut the central bank’s 2012 inflation forecast to 1 percent on Dec. 16 from 1.2 percent, almost six months after SNB Vice Chairman Thomas Jordan said that intervention was no longer necessary because the threat of deflation had largely disappeared. Consumer prices increased 0.2 percent in November from a year earlier, down from a 1.1 percent gain in May.

Policy makers said in their quarterly report on Dec. 24 that “if a deflation risk emerges, the SNB would take the measures necessary to ensure price stability,” repeating a statement made from their meeting a week earlier.

They may still have to live with a stronger currency as long as the euro area remains in crisis, according to Collin Crownover, head of currency management at State Street Global Advisors Inc. in Boston, which manages $1.9 trillion of assets.

“The issues in the euro-zone periphery won’t be solved, they will continue into next year,” said Crownover. “I don’t see the SNB coming back in again. Of course there is always a set of circumstances where they feel they have to. But in absence of really strong appreciation, they are most likely going to be on the sidelines. They got very little for their intervention.”

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In her 18 years at the small post office branch at Lambert-St. Louis International Airport, clerk Barbara Hartmann has sold envelopes to countless forgetful fliers who were booted from security lines for carrying forbidden pocketknives, and needed to mail them home. Fast.

“The customers will come up, and they’re really embarrassed because they’ve got kicked out of line,” she said. “It happens all day long.”

She has gone the extra mile to accommodate travelers

Ivory Coast state television disappeared from the airwaves outside the nation’s largest city late Thursday, a blow to the incumbent president’s attempts to cling to power in the bloody aftermath of an election most of the world says he lost.

Meanwhile, the United Nations said at least 173 people had died in violence over the Nov. 28 runoff vote, and that government forces were blocking access to a possible mass grave. The U.N. deputy human rights commissioner in Geneva, Kyung-wha Kang, detailed hundreds of arrests and detentions, and dozens of cases of torture and mistreatment.

The state television channel controlled by incumbent Laurent Gbagbo continued to air in Abidjan, but only black and white snow appeared in at least six other cities around the West African nation just minutes before Ivorians sat down to their nightly newscast, residents told The Associated Press.

It was not immediately clear how the signal was cut off. Advisers to Gbagbo’s challenger, Alassane Ouattara, refused to comment. But the event falls in line with a series of strategies Ouattara has been employing to try to break Gbagbo’s stranglehold on the news.

A week ago, Ouattara’s supporters unsuccessfully attempted to seize control of the channel. Ouattara has been broadcasting a private radio station that intersperses rally songs with news broadcasts from the Golf Hotel, where he has been holed up since the election. Ouattara also had said that he planned to launch his own version of state TV.

There was no immediate comment late Thursday from representatives for Gbagbo.

The U.N., U.S., France and others have said Ouattara won the runoff vote, but Gbagbo has refused to step down. State TV ran continuous footage of Gbagbo taking the oath of office in the days after he declared victory without mentioning that his claim was heavily contested.

The U.N. Human Rights Council adopted a resolution late Thursday calling for an end to the violence, which has raised fears of a return to civil war. Kyung-wha told diplomats that there may be more fatalities than the ones she was able to document.

“Unfortunately it has been impossible to investigate all the allegations of serious human rights violations, including reports of mass graves, due to restrictions on movement by U.N. personnel,” Kyung-wha said. “Indeed, the Special Representative of the Secretary-General was stopped at gunpoint as he sought to verify such allegations.”

U.N. deputy spokesman Farhan Haq said that forces loyal to Gbagbo, supported by masked men armed with rocket launchers, were blocking the road to a village outside Abidjan “where allegations point to the existence of a mass grave.”

Kyung-wha also expressed concern about how Ivory Coast media being controlled by political allies of Gbagbo. She said state television and some private newspapers were inciting “hatred and violence” and releasing “false and inflammatory information against the United Nations.”

Amid the rising concerns over violence, the United States has said it and other countries are discussing ways to help quell the postelection violence.

“We are in discussions with other regional countries to see if there are ways in which we can reinforce the U.N. peacekeeping force,” spokesman P.J. Crowley told reporters Wednesday. “It could be that that kind of reinforcement could be another way to send a clear message to President Gbagbo.”

Crowley declined to name the countries that have been contacted but noted that Nigeria is a major troop contributor to West African peacekeeping forces. He also noted that France has interests in Ivory Coast, a former French colony where at least 13,000 French citizens reside.

A Nigerian military spokesman said Thursday that military intervention into another country could only be decided by the president, and a presidential spokesman could not be reached for comment. The regional bloc ECOWAS is due to hold a meeting on the crisis late Friday.

There has been little international interest so far in a military intervention in Ivory Coast, which suffered a 2002-2003 civil war. The United States and the European Union are imposing sanctions targeting Gbagbo, his wife and political allies. Hundreds of U.N. peacekeepers have been protecting the hotel where Ouattara is based.

Over the weekend, Gbagbo ordered all U.N. peacekeepers out of the country immediately. The U.N. considers Ouattara president and is staying put, raising fears that U.N. personnel and other foreigners could be targeted as tensions mount.

Charles Ble Goude, Gbagbo’s minister of youth, called for demonstrations next Wednesday. Goude is the subject of a 2006 United Nations sanction for his role in inciting the Young Patriots, a pro-Gbagbo group that led violent attacks against foreigners, especially French citizens.

The U.S. State Department has ordered most of its personnel to leave because of the deteriorating security situation and growing anti-Western sentiment. France and Germany also have recommended that their citizens leave.

On Thursday, the U.N. said at least 471 arrests and detentions had been substantiated between Dec. 16 and 21. It said at least 90 people have been tortured or treated inhumanely, and that there have been 24 cases of disappearances.

The U.N. also has expressed serious concern about the involvement of foreign mercenaries from neighboring Liberia, which suffered brutal back-to-back civil wars until 2003.

U.N. peacekeeping chief Alain Le Roy has confirmed that the mission in Ivory Coast “has seen what appear to be mercenaries from Liberia and perhaps Angola.” He said they did not speak any of the local languages in Ivory Coast.

Ivory Coast’s 2002-2003 civil war saw the involvement of Liberians fighting on nearly all sides of the conflict. The two countries share a porous, 370-mile-(600-kilometer)-long border. Liberia’s president has urged citizens not to get involved in Ivory Coast’s political crisis.

Ivory Coast was once an economic hub because of its role as the world’s top cocoa producer. The 2002-2003 civil war split the country into a rebel-controlled north and a loyalist south. While the country officially reunited in a 2007 peace deal, Ouattara draws his support from the northern half of the country, where he was born, while Gbagbo’s power base is in the south.

Gbagbo claimed victory in the presidential election only after his allies threw out half a million ballots from Ouattara strongholds in the north, a move that infuriated residents there who have long felt that they are treated as foreigners in their own country by southerners.

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Indonesia’s anti-monopoly agency is evaluating Temasek Holdings Pte’s assets in the country and said the government has the right to seize them if a court-imposed fine isn’t paid.

The Singapore state-owned investment company lost its final appeal in the Supreme Court on May 24 for violating antitrust laws, the Indonesian court said on its website at the time. A fine of 150 billion rupiah ($17 million), which includes 15 billion rupiah for each of 10 Temasek-linked companies involved in the case, was set, the anti-monopoly agency said.

“We’re now inventorying Temasek’s assets and expect to complete that in 2011, and they will be seized if the fine isn’t paid,” Tresna Soemardi, the agency’s chairman, said in a phone interview yesterday.

The Indonesian competition regulator KPPU has said Temasek breached antitrust laws by using indirect stakes in PT Telekomunikasi Selular, known as Telkomsel, and PT Indosat, the country’s top two mobile-phone service providers, to fix prices.

“Temasek has not received official notification from the Supreme Court,” Goh Yong Siang, Temasek’s senior managing director of strategic relations, said in an e-mailed response to queries cash advance now.

Calls to the Supreme Court after office hours yesterday weren’t answered.

“Once the company has been formally notified of the fine and doesn’t pay it, the Indonesian anti-monopoly commission may ask for a court order to seize the assets,” Muhammad Reza, the agency’s chief of investigations, said by phone.

Temasek’s Singapore Technologies Telemedia Pte unit sold its stake in Indosat, Indonesia’s second largest mobile-phone services provider, to Qatar Telecom QSC in June 2008 after an earlier district court ruling. A unit of Singapore Telecommunications Ltd., Southeast Asia’s biggest phone operator and majority owned by Temasek, has a 35 percent stake in Telkomsel, the biggest mobile carrier.

Koran Tempo first reported the possible seizure of Temasek’s assets today.

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The world held its breath in the spring as Greece, teetering on the brink of bankruptcy, received a $141-billion bailout from the European Union and the International Monetary Fund. Then markets watched as Ireland accepted a $91-billion bailout and its government unveiled the harshest budget measures in its history to tame massive deficits. Now investors are nervously eyeing Portugal and even Spain, whose economy is five times larger than Greece, Ireland and Portugal combined.

What

The International Monetary Fund cut its forecast for Ireland’s economic growth today in a report that called for the country to reduce its budget deficit and overhaul its banking sector to recover from financial crisis.

The Washington-based fund said it expects Ireland’s economy to grow 0.9 percent in 2011, down from 2.3 percent estimated by the fund in October. The IMF also forecast 1.9 percent growth in 2012, in a staff report accompanying its agreement to contribute 22.5 billion euros ($30 billion) to an 85 billion-euro rescue effort with European authorities.

“Even this modest recovery is subject to downside risks,” the IMF said, predicting that unemployment would stay above 10 percent through 2015. “The large fiscal adjustment will remain a drag on consumption, as will the unwinding of home-grown imbalances from the boom years — leading to weak credit growth, continued weakness in property prices and wages, and high real debt burdens.”

Ireland’s financial woes pose “significant” spillover risks that could affect Greece, Portugal, Spain and other euro- area economies, the Washington-based fund said. Financial contagion also could affect banks from countries including the U.K., Germany, France and the U.S. that have large portfolio investments in Ireland, the IMF said.

Bond Yield

The yield on Irish 10-year bond rose to 8.59 percent, the highest since Dec. 2, while credit-default swaps insuring Irish debt climbed for a third day, their longest run of gains this month. Ireland’s credit rating was cut five levels by Moody’s Investors Service earlier today and further downgrades are possible as the government struggles to contain losses in the country’s banking system.

European Union leaders grappled this week with how to fix the current crisis and prevent future debt shocks in Brussels talks. German officials, driven by public outcry against propping up fiscally reckless countries, have resisted enlarging a 750 billion euro emergency fund or developing joint bond sales.

There are “significant risks” that could affect Ireland’s ability to pay back the loan, meaning the IMF is taking on “substantial risk,” according to a Dec. 8 document included in today’s release says. The IMF’s board approved the rescue funds yesterday after Ireland’s parliament approved the bailout, and IMF spokeswoman Caroline Atkinson said the fund retained enough liquidity “to meet any needs” that may arise bad credit payday advance.

General Election

The IMF said today that Ireland’s upcoming general election is a risk to the rescue program, along with economic uncertainty and the “unprecedented” budget cuts needed. The fund said the main opposition parties have indicated “broad support” for the rescue program’s objectives of cutting the budget and stabilizing the banks while also wanting to revisit some of the specific policies.

Ireland has pledged to shrink its financial sector and increase banks’ ability to withstand economic stresses as a condition of receiving aid. Irish banks are slated to undergo new stress testing in the first half of 2011, starting with the six biggest banks followed by credit unions and subsidiaries of foreign banks.

The Irish banking sector remains vulnerable to “constant funding concerns” and loans to the Irish property market, the IMF said in today’s report. Another factor is the government’s costs in managing Anglo-Irish Bank, which was nationalized two years ago and has “sucked in ever-increasing public funds,” the IMF said.

Subordinated Debt

Ireland plans to require holders of subordinated debt to share in the banking system’s losses. At this time there are no plans to require losses from senior bondholders, and the IMF concurs with that decision, said Ajai Chopra, deputy director of the IMF’s European Department, on a conference call with reporters today.

Exports will continue to lead Ireland’s recovery, the fund said. Government budget cuts will hamper growth, and “subdued” inflation will help competitiveness and also act as a “short- term drag” on the recovery, the IMF said.

Ireland’s ratio of debt to gross domestic product is expected to reach 99 percent by the end of 2010, up from 25 percent in 2007 at the onset of the financial crisis, the IMF said. Debt is expected to peak at 125 percent of GDP in 2013, and it could go higher if the shocks to Ireland’s economy become permanent, the fund said.

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German business confidence probably held close to a record high in December as stronger domestic demand helped bolster the recovery in Europe’s largest economy.

The Ifo institute’s business climate index, based on a survey of 7,000 executives, probably fell to 109.0 from 109.3 in November, which was the highest since records for a reunified Germany began in 1991, the median of 36 forecasts in Bloomberg News survey shows. Ifo releases the report at 10 a.m. in Munich.

Germany’s economy is fueling the euro region’s recovery as declining unemployment encourages consumer demand, and companies boost investment, helping counter weaker exports. While countries from Ireland to Spain are struggling to restore growth and curb budget deficits, the German Bundesbank on Dec. 3 forecast a record pace of economic growth this year.

“This is a classic recovery story where it starts in the manufacturing sector, employment picks up and then it spreads to consumers,” said Jens Sondergaard, an economist at Nomura International Plc in London. “All the worries that this was just an export recovery are not there anymore.”

Ifo’s gauge of executives’ expectations probably declined to 106 from 106.3, the Bloomberg survey shows. An indicator of the current situation may increase to 112.5 from 112.3. That would be the highest since May 2007.

Record Expansion

Germany’s benchmark DAX stock index has gained more than 17 percent this year, making it the best performer among major European equity markets. Investor confidence improved in December, the ZEW Center for European Economic Research in Mannheim said on Dec. 14.

While weaker exports were among the main reasons behind a slowdown in the third quarter, consumer demand may help bolster an expansion in 2011, the Bundesbank said on Dec. 13. The economy will probably grow 3.6 percent this year, the fastest pace since data for a reunified Germany was first compiled in 1992, before cooling to 2 percent in 2011, it forecast.

By comparison, the European Commission last month projected the 16-member euro region to expand 1 payday advance lender.7 percent this year and 1.5 percent in 2011 as governments step up austerity measures.

In Germany, unemployment fell for a 17th straight month in November, keeping the jobless rate at 7.5 percent. That’s the lowest since April 1992. Manufacturing growth accelerated in December and industrial output increased in October.

A consumer sentiment index published by GfK AG rose to its highest level in three years, the Nuremburg-based market- research firm said on Nov. 23.

Crisis ‘Burden’

Axel Strotbek, chief financial officer of Volkswagen AG’s Audi luxury-car division, said on Dec. 14 that orders for the new A1 compact are “higher than expected.” Peter Bauer, chief executive officer at Infineon Technologies AG, Europe’s second- largest chipmaker, said last week the sales target for the current fiscal year may be “conservative.”

“For the past 10 years, the German economy has been running on one engine — exports,” said David Milleker, chief economist at Union Investment GmbH in Frankfurt. “Now it’s more like three — exports, consumption and investment.”

German companies may struggle to maintain their sales growth as governments from Spain to France lower budget deficits such as through spending cuts, undermining the region’s recovery. German factory orders from euro-area countries dropped 0.9 percent in October from the previous month.

European leaders are seeking ways to stop contagion and restore investor confidence after Ireland last month became the second euro-region country to ask for external aid.

“The euro crisis would become something of a burden for the German economy if every two months another country had to be rescued,” said Fabienne Riefer, an economist at Deutsche Postbank in Bonn, Germany. “It would also affect the mood of the public and eventually the real economy.”

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The Swiss central bank may keep borrowing costs near zero tomorrow in a bid to keep a lid on the franc after Europe’s debt crisis pushed the currency to a record, threatening the country’s recovery.

The Swiss National Bank, led by Philipp Hildebrand, will leave the three-month Libor target rate at 0.25 percent, according to all 19 economists in a Bloomberg News survey. The Zurich-based central bank will announce its decision at 9:30 a.m. tomorrow followed by a press conference 30 minutes later.

The Swiss franc has appreciated 16 percent against the euro this year as investors became more concerned about the ability of European governments to contain the fiscal crisis and prevent a breakup of the 16-member region. While the SNB in June stopped intervening in currency markets, a stronger franc may undermine the country’s export-led recovery and increase deflation risks.

“The Swiss central bank is definitely mindful of the euro- area crisis,” said David Kohl, deputy chief economist at Julius Baer Group in Frankfurt, who expects the SNB to keep borrowing costs on hold until June 2011. “They will refrain from anything which could push up the franc. It will be a quiet meeting.”

The Swiss currency climbed to a record 1.2759 against the euro today and traded at 1.2778 at 10:25 a.m. in Zurich.

‘Resilient’ Exports

The Swiss government yesterday forecast economic growth to weaken to 1.5 percent next year from an estimated 2.7 percent in 2010, citing Europe’s debt crisis and a strengthening franc among the risks. The SNB, which in September projected the economy to grow about 2.5 percent this year, tomorrow will also release its 2011 economic estimate.

While the SNB in June phased out its 15-month policy of countering franc gains through purchases of foreign currencies, Hildebrand said on Nov. 23 that the central bank is ready “to take exceptionally far-reaching measures” if needed payday loans no faxing.

With governments from Ireland to Spain struggling to reduce their budget deficits, the euro has plunged 5.2 percent against the franc this year. That’s making Swiss exports from Swatch Group AG watches to ABB Ltd. turbochargers less competitive in the region buying two thirds of all goods.

“Swiss exports have so far been surprisingly resilient to the strength of the currency,” said Eoin O’Callaghan, an economist at BNP Paribas SA in London. Still, “it’s too early to sound the all-clear. The sector remains vulnerable to additional appreciation.”

‘Dominant Issue’

Switzerland’s recovery is already cooling. Growth weakened in the third quarter, leading economic indicators fell to the lowest level in seven months in November, and investor confidence declined. Consumer prices rose 0.2 percent in November from a year earlier partly as a stronger franc lowered costs of imports such as heating oil.

The SNB in September forecast inflation to average 0.7 percent this year and 0.3 percent in 2011 before accelerating to 1.2 percent in 2012. The central bank, which aims to keep annual gains in consumer prices below 2 percent, has said that inflation may “temporarily” turn negative in early 2011.

Dirk Schumacher, an economist at Goldman Sachs Group Inc. in Frankfurt, says that while he considers the SNB’s inflation forecasts too low, he doesn’t expect the central bank to raise projections as policy makers keep the benchmark rate on hold.

“The euro-region crisis remains the dominant issue at the moment,” Schumacher said. “The SNB is well aware that the consequences for the Swiss economy, through the exchange rate, could be quite dramatic if the situation got a lot worse.”

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