Friday, January 7, 2011

20110107 0911 Global Market Related News.

Firmer dollar weighs on US wheat, corn
MANILA, Jan 7 (Reuters) - U.S. corn and wheat futures  retreated for a second straight session as a  stronger dollar blunted a rally at the start of the year, with  corn on track to post its first weekly drop since November.
"The main influence we're looking at in terms of this  morning's trade remains the currency market and the focus on  the payrolls data," said Luke Mathews, commodity strategist at  Commonwealth Bank of Australia. 

Gold steady ahead of US payrolls data; dollar weighs
SINGAPORE, Jan 7 (Reuters) - Spot gold hovered around  $1,370, as investors wait for a key U.S. employment  report due later in the day for clues on the health of the  economy, as the dollar held firm.
"If we see a weaker number, it would be negative for the  dollar and positive for gold. Unless the number is much  stronger than expected, we probably won't see much move in  gold prices."

Barcap raises gold forecast on safe-haven buying
NEW YORK, Jan 6 (Reuters) - The price of gold will average nearly $1,500 an ounce this year as investors keep buying the metal as a safe haven on bullish factors including low interest rates, currency weakness and inflation fears, Barclays Capital said on Thursday.
Barcap raised its 2011 forecast to $1,495 an ounce with a range between $1,300 and $1,620 an ounce. In November, the bank had a forecast of $1,445 for this year.

Euro falls, dollar up as US jobs data looms
HONG KONG, Jan 7 (Reuters) - The euro fell to a near  four-month low against the dollar while Asian stocks  eased as investors awaited U.S. payroll data for more evidence  of a stronger U.S. economic recovery.
"The much stronger than anticipated ADP outcome, alongside  the nascent wave of optimism on the U.S. economy, appears to  have fed expectations for a much higher payrolls reading  today," said forex analysts at Citigroup in a note.  

OIL: Oil drops 2 pct as dollar rises; awaits jobs data
NEW YORK, Jan 7 (Reuters) - Oil prices tumbled more than 2 percent on Thursday to below $89 a barrel as a stronger dollar and weaker U.S. equities deterred buyers.
"An influx of Canadian crude is finding its way into the Cushing region and is likely to translate to a record supply at the futures delivery point with next week's data release," said Jim Ritterbusch, president of Ritterbusch & Associates in Galena, Illinois.

NATURAL GAS: Natural gas ends down despite runup after EIA data
NEW YORK, Jan 6 (Reuters) - Front-month U.S. natural gas futures ended slightly lower on Thursday as some moderation in the U.S. weather outlook for late next week offset early buying after a supportive weekly government inventory report.
"The (EIA storage) report was a little better than expected, but (prices) didn't stay up for long. The market is struggling here," a Chicago-based analyst said, noting weather forecasts for late next week seemed to moderate a bit.

COMMODITIES: Markets end down; investors await US jobs data
NEW YORK, Jan 6 (Reuters) - Commodities fell on Thursday, with oil, copper and corn ending down at least 2 percent, as investors waited to see if the U.S. government will confirm job gains shown in a private report that boosted commodities the previous session.
"Markets in our view are looking for a very strong confirmation of the labor market rebound," said Zach Pandl, economist at Nomura Securities International.

GLOBAL MARETS: Dollar rises, stocks slip before US jobs data
NEW YORK, Jan 6 (Reuters) - The euro fell to a five-week low against the dollar on Thursday on revived worries about the euro zone's sovereign debt crisis, while stocks eased on softer retail sales data before a U.S. employment report expected to give direction to markets.
"The market has just been on a tear ... and a lot of investors are probably sitting on their hands waiting for the (jobs) report tomorrow," said Don Wordell, portfolio manager of RidgeWorth MidCap Value Fund in Orlando, Florida.

China power sector to boom as oil sector goes slower
BEIJING, Jan 6 (Reuters) - China unveiled a raft of targets for its energy and power sectors on Thursday, revealing a plan for a rapid increase in power generation but a much slower rise in the country's oil refining capacity over the next five years.
China, already the world's top energy user, faces the challenge of keeping its growing economy fuelled while cutting back on its staple fuel, cheap but dirty coa0l.

Brent oil lures some big investors from US crude
LONDON, Jan 6 (Reuters) - Strength in price, trading volumes and market structure of Brent crude has helped to lure some of the big investment money that has typically favoured U.S. oil futures -- a trend that is likely to gather momentum.
For decades, those who prefer Brent  have based their arguments on its usefulness as a benchmark for crude sales in Europe, the Middle East, Africa and Asia -- encompassing major exporters and the fast-growing Chinese and Indian markets.

Oil price volatility to increase in 2011-HSH Nordbank
SINGAPORE, Jan 6 (Reuters) - Oil price volatility will  increase in 2011 because of uncertainty about the pace of  economic recovery in OECD economies, says HSH Nordbank, the  most accurate forecaster among private institutions last year.
U.S. crude will average $90 a barrel this year, about $10  more than last year and the second-highest annual figure on  record, driven by strong demand from Asia, said Sintje Diek,  oil analyst at the German bank. 

India Food Prices Continue Sharp Rise; Rate Increase Likely (Source: CME)
Food prices in India are continuing their sharp rise, increasing concerns among economists about a prolonged spell of high prices and adding pressure to the central bank to raise interest rates later this month. The Reserve Bank of India next meets on Jan. 25 to consider an interest rate rise after pushing up rates six times in 2010--one of the most aggressive tightenings of any central bank. But calls for a further move keep coming, most recently with the International Monetary Fund saying in a report released Thursday that rates need to be higher to curb inflation. India was one of the world's best-performing economies in 2010 and is being looked to as an engine of recovery for the global economy as it tries to shake off the impact of the financial crisis. The IMF predicts the Indian economy will grow 8.75% in the year ending March 31 and 8% in the following 12 months, driven by high consumer demand and strong industrial growth. But rising inflation is an increasing threat to that rosy picture.
The central bank will need to walk a fine line, however, since liquidity within the bank system is tight and further rate hikes could exacerbate that problem, economists said. Data from the Ministry of Commerce and Industry showed that the wholesale price index for food articles rose 2.5% in the week ended Dec. 25 from the previous week. The year-on-year inflation rate for food surged to 18.32% from 14.44% the week before. It was the fifth straight week of rising food prices, which have been hovering at elevated levels in recent months. The rise is mainly due to higher vegetable prices, particularly onions, after unseasonal rains in some parts of the country damaged crops, significantly squeezing market supplies. Heightened demand from consumers who have seen their incomes rise also is playing a part as is the government's failure to remove key blockages in the supply chain that prevent the increased demand from being met.
According to a government statement, Finance Minister Pranab Mukherjee has urged provinces to ensure supply bottlenecks are removed. The government already has banned exports of onions--a politically sensitive staple given its ubiquity in Indian cuisine. It also removed the import duty and directed state-run cooperatives to sell the vegetable at subsidized prices in local markets. But onion prices continue to rise, up 82% from a year earlier and there is little sign of a marked decline anytime soon. Indeed Pakistan, which had been exporting onions to India, banned their export by land--the only cost-effective route--because the trade was tightening supplies in Pakistan, which also has high food inflation. Anand Sharma, India's trade minister, described Pakistan's decision as a "setback."

World Bank Urges G20 Action To Stabilize Food Prices (Source: CME)
With rising food prices re-emerging as a threat to global growth and stability, the Group of 20 industrial and developing nations should prioritize the provision of food for the poor, World Bank President Robert Zoellick says. In an opinion piece in the Financial Times, Zoellick sets out nine action points to ensure the poor have access to food. "The answer to food price volatility is not to prosecute or block markets, but to use them better," he writes. French President Nicholas Sarkozy has identified food price volatility as a priority for his country as it takes the presidency of the G20 in 2011. Poor weather conditions in major exporting countries have significantly curtailed harvests and expectations. Food prices hit a record high in December, exceeding levels that prompted riots around the world in 2008, the United Nations food agency said. Zoellick called for more efforts to understand the relationship between international prices and local prices in poor countries.
And he said food aid should be exempted from export bans. In Cambodia, the local price of rice has risen by a quarter since mid-2009, while international prices have fallen 15%.

Food Costs Give Policymakers Challenge To Chew On (Source: CME)
Central bankers worldwide are focusing on inflation--but hoping for different outcomes. Central banks, especially in Asia, want to bring down inflation by raising rates or controlling capital flows. Meanwhile, the Federal Reserve Board is worried that U.S. inflation is too low. Fed officials are working to increase economic activity to both generate jobs and lift pricing power. A key reason for the varying views is that central banks in emerging markets have to consider food prices when thinking about inflation. And lately, food prices have been on a tear. The monthly food price index compiled by the United Nations Food and Agriculture Organization increased for the six consecutive month in December, rising to a record 214.7. The index measures export prices for 50 food commodities. Residents in emerging nations spend from one-third to as much as one-half of their incomes on food.
So the spike in food costs translates quickly into overall higher inflation, putting pressure on central banks to reverse price trends. Policymakers and government officials also have to consider that higher food costs have the potential to cause social unrest as occurred in 2008. In contrast, food and beverages account for only 16% of the U.S. consumer price index, and policymakers here tend to ignore food (and fuel) when thinking about inflation pressures. That's in part because swings in food prices say more about weather than about underlying economic fundamentals. Indeed, the recent jump in global food prices is the result of droughts or flooding in agriculture-exporting nations. Central bankers with differing goals usually could achieve their respective ends through exchange rates. Inflation-fighting central banks would raise rates, which lifted their currencies to bring down import prices.
Meanwhile, the Fed's accommodative policy--whether intentional or not--would tend to exert downward pressure on th e dollar. A cheaper dollar would raise U.S. import prices, ultimately pushing up the core CPI. But as with so many instances in this business cycle, the usual is no longer the norm. Emerging nations that depend on exports to propel growth do not want their currencies to strengthen in the face of tighter monetary policy. That's especially true for those competing about China that closely manages its own exchange rate. "For many [emerging-market] countries, the stronger currency that typically goes hand in hand with the start of the tightening cycle would help limit inflation pressures, but the default setting for EM policymakers remains weaker currencies, not stronger," said Win Thin, global head of emerging markets strategy at Brown Brothers Harriman. Central bankers pushed back when the Fed announced its second round of quantitative easing this fall because of QE2's potential drag on the dollar.
Global policymakers could continue to protest in 2011 if inflation worsens in their countries. Just as many indicators suggest the U.S. recovery is on stronger footing, potential skirmishes among policymakers add a new risk to the outlook--one that will play out in the financial markets, especially in currencies.

GLOBAL ECONOMY-U.S. economy picking up; European growth mixed
NEW YORK/LONDON, Jan 5 (Reuters) - The U.S. services sector grew last month at its quickest pace since mid-2006 and private-sector hiring was triple economists' forecasts, though recovery across Europe remained mixed.
Chinese service sector firms also continued to grow in December even as the government announced a series of measures to tamp down rising inflation.

China's growth-crazed provinces urged to slow down
BEIJING, Jan 6 (Reuters) - Alarmed by the vaulting ambitions of many Chinese provinces to grow at all costs, China's top economic chief is pleading with officials to calm down and spare a thought for the environment.
Zhang Ping, who heads China's National Development and Reform Commission, the central economic planning agency, said only five or six of China's 30 provinces are targeting annual economic growth of 8 or 9 percent.

PRECIOUS-Gold slips as upbeat data lifts appetite for risk
LONDON, Jan 6 (Reuters) - Gold prices slipped in Europe on Thursday for a fourth successive session as the dollar firmed versus the euro and risk appetite improved after a raft of better-than-expected U.S. data.
Spot gold  was bid at $1,376.60 an ounce at 0954 GMT, against $1,377.65 late in New York on Wednesday. U.S. gold futures for February delivery  fell $3.10 to $1,376.60.

FOREX-Dollar consolidates gains as mkt awaits U.S. jobs
LONDON, Jan 6 (Reuters) - The dollar steadied on Thursday after surging the previous day on strong U.S. private sector jobs data, but investors were reluctant to chase the greenback higher ahead of Friday's payrolls numbers.
A string of robust U.S. data have driven the dollar higher on expectations that the world's largest economy would recovery faster than other major economies.

US wheat, corn retreat after surge; rally seen overdone
MANILA, Jan 6 (Reuters) - U.S. wheat and corn futures  slipped after sharp gains in the previous session  spurred by worries over global food supplies shrinking on  unfavourable weather conditions among major producers.  "I could not for the life of me understand why there was a  rally last night," said Ole Houe, senior manager at FCStone  Australia.

U.S. recovery hopes drive developed stocks
LONDON, Jan 6 (Reuters) - Developed market stocks climbed on hopes for renewed U.S. economic growth, although the dollar and emerging markets steadied, unwilling to push a rally further ahead of more data on Friday. "The data that we have seen up to November has been pretty solid but one thing that has been lagging is the employment market in the U.S. and there is a feeling that to really underpin the recovery, the job market needs to turnaround," said Giles Watts, head of equities at City Index.

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