Wednesday, October 31, 2012

20121031 1811 FCPO EOD Daily Chart Study.

FCPO closed : 2496, changed : -5 points, volume : lower.
Bollinger band reading : side way range bound.
MACD Histogram : weakening, buyer closing position.
Support : 2490, 2450, 2400, 2350 level.
Resistance : 2520, 2550, 2570, 2600 level.
Comment :
FCPO closed recorded small loss with declined volume transacted. Soy oil price currently trading higher after overnight closed little lower while crude oil price currently rising higher.
Price swing between gains and losses on higher productions and inventories level concern and both cargo surveyors ITS and SGS released higher but slowing down export data.
FCPO daily chart revised to suggesting a side way range bound market development.
When to buy : buy at support or weakness with quick cut loss and profit target.
When to sell : sell at resistant or strength with quick cut loss and profit target.

VEGOILS-Palm slips as high exports may do little to cut stocks
Wed Oct 31, 2012 2:01am EDT
* Palm oil prices capped by high production and growing
stockpile -analyst
    * October exports up 10.9 pct -ITS
    * Indonesia will not change its policy tax structure
    * Palm oil's target adjusted to 2,468 ringgit -technicals

    By Anuradha Raghu
    KUALA LUMPUR, Oct 31 (Reuters) - Malaysian palm oil futures
inched down on Wednesday as the strongest exports recorded for
this year may do little to cut into high stocks at a time when
output is surging in the world's second largest producer of the
edible oil.
    Cargo surveyor Intertek Testing Services data showed that
Malaysian palm oil shipments climbed 10.9 percent to 1.6 million
tonnes -- the highest this year, although stocks are set to hit
another record beyond 2.48 million tonnes.
    "Based on the shipment number, we will still end up with a
higher stockpile because October's production is still very
high," said OSK Research analyst Alvin Tai. "Exports rising
higher month-on-month is not surprising, but the quantum still
needs to be stronger."
    By the midday break, the benchmark January contract
on the Bursa Malaysia Derivatives Exchange fell 0.3 percent to
2,494 ringgit ($816) per tonne.
    Total traded volumes stood at 6,815 lots of 25 tonnes each,
nearly half of the usual 12,500 lots.
    Technicals showed that the bearish target of 2,379 ringgit
per tonne for Malaysian palm oil has been adjusted to 2,468
ringgit based on its falling speed, said Reuters market analyst
Wang Tao.
    Palm oil dropped to a two-week low earlier this week after
its biggest rival and top producer Indonesia planned to lower
monthly export taxes in November after international prices fell
this month.
    The lower taxes will lift margins for Indonesians and shift
demand away from competing Malaysian products. Officials in
Jakarta said they will not alter their tax structure which is
aimed at driving its domestic palm oil downstream industry.
    "The export tax structure is progressive and it has been
adjusted to fluctuated palm oil prices in the international
market," director general of agriculture-based industry Benny
Wachjudi said at an industry meeting.
    "It is very different from the Malaysian government's export
tax policy. I am sure Malaysian export tax policy will not last
long because it is not adjusted to the development on palm oil
prices in the international market."
    Brent crude held steady near $109 a barrel on Wednesday
after the huge storm Sandy whiplashed the U.S. East Coast,
reducing fuel demand even as refineries in the region gradually
resumed operation.
    U.S. soyoil for December delivery inched up 0.3
percent in early Asian trade. The most-active May 2013 soybean
oil contract on the Dalian Commodity Exchange rose 0.2
percent by the midday break.

20121031 1754 FKLI EOD Daily Chart Study.

FKLI closed : 1673 changed : -2.5 points, volume : lower.
Bollinger band reading : correction range bound upside biased.
MACD Histogram : weakening, buyer taking profit.
Support : 1670, 1660, 1657, 1651 level.
Resistance : 1680, 1690, 1700, 1710 level.
Comment :
FKLI closed little lower in lesser volume traded with November contract ended almost on par to cash market closed recorded small decline. Overnight U.S. markets closed for business due to
U.S. equity markets will open today after the longest weather-related shutdown in more than a century, resuming after the New York Stock Exchange was spared by Hurricane Sandy and today Asia markets traded mostly higher while European markets currently trading little higher.
Asian and European markets trading higher after South Korea reported higher industrial production data and higher U.S. home prices.
FKLI daily chart study continue to calling a correction range bound upside biased market development.
When to buy : buy at support or weakness with quick cut loss and profit target.
When to sell : sell at resistance or strength with quick cut loss and profit target.

20121031 1636 Global Markets & Commodities Related News.

STOCKS: European stock index futures signalled a mixed open as disappointing earnings from ArcelorMittal and Anheuser-Busch InBev rekindled worries over the outlook for corporate profits.Asian shares rose as risk appetite recovered after European equities and the euro firmed overnight, and investors looked to coming U.S. and Chinese data for fresh clues on direction. U.S. stock markets were closed for a second straight day on Tuesday. (Reuters)

FOREX: The yen drifted off a one-week high against the dollar thanks to a general improvement in risk appetite, paring gains made after the Bank of Japan balked at delivering a surprise for markets.  (Reuters)

FOREX-Yen off highs, euro supported after Italy debt sale
SYDNEY/TOKYO, Oct 31 (Reuters) - The yen drifted off a one-week high against the dollar thanks to a general improvement in risk appetite, paring gains made after the Bank of Japan balked at delivering a surprise for markets.
"The damage to the U.S. economy from Hurricane Sandy could be huge. If U.S. bond yields fall sharply, that is likely to send the dollar/yen lower," said Tohru Sasaki, the head of Japan rates and FX research at JPMorgan Chase Bank.

Hurricane Sandy losses worse than Irene: disaster forecasters  (Reuters)
Hurricane Sandy appears to have easily caused more losses than last year's Hurricane Irene, but final totals will be hard to come by for some time because of the scale of the disaster, catastrophe forecasting companies said on Tuesday.

Outages, floods hit two N.J. refineries; others restart (Reuters)
Flooding at the second-largest refinery on the U.S. East Coast plus power glitches at two other plants and a key New Jersey terminal hub slowed the recovery in fuel supplies disrupted by Hurricane Sandy.

POLL-U.S. corn harvest seen 93 pct done, soy 88 pct (Reuters)
The pace of U.S. corn and soybean harvesting slowed last week as rains in areas east of the Mississippi River delayed farmers' final push to get crops into storage bins.

GRAINS: U.S. soybeans rose, extending gains from the previous session on concerns the South American crop will not be as large as previously touted, as heavy rain slows planting in some regions there. Wheat rose for the first time in five sessions and corn also firmed, with both grains underpinned by the strength in beans. (Reuters)

Oil products trade to grow at crude's expense-analysts (Reuters)
Global traded volumes of fuels like diesel are set to boom at the expense of crude as producers build the next generation of refineries on their own soil, analysts said on Tuesday.

OIL: Brent crude held steady near $109 a barrel after the huge storm Sandy whiplashed the U.S. East Coast, reducing fuel demand even as refineries in the region gradually resumed operation.  (Reuters)

Euro Coal-Prices rise $1-$1.50/T with gas, swaps
LONDON, Oct 30 (Reuters) - Prompt European coal prices rose by $1-$1.50 a tonne on Tuesday in line with coal swaps and higher gas but few trades were reported.
South African cargo prices rose by $1.00 but remain below $80 a tonne, a level at which many of the smaller producers will be making losses.

POLL-Iron ore price to weaken as China shifts gear (Reuters)
Iron ore prices may drop nearly 10 percent over the next three years as top consumer China's economic growth shifts to a slower gear, threatening to squeeze profits at global miners Vale, Rio Tinto and BHP Billiton, a Reuters poll showed.

BASE METALS: London copper climbed for a second session, pushing further away from two-month lows as risk appetite picked up., but the industrial metal is heading for its weakest month since May as demand from top consumer China stays sluggish.  (Reuters)

PRECIOUS METALS: Gold edged up, but was poised to snap a four-month winning streak, with investors staying on the sidelines ahead of key U.S. employment data and in the wake of Hurricane Sandy.  (Reuters)

METALS-Copper climbs for 2nd day, but eyes worst month since May
SINGAPORE, Oct 31 (Reuters) - London copper climbed for a second session pushing further away from two-month lows as risk appetite picked up, but the industrial metal is heading for its weakest month since May as demand growth from top consumer China slows.
"China's rebalancing strategy isn't clear, that's holding investors back a bit and what is happening in the euro zone hasn't gone away," said Thomas Lam, chief economist at DMG & Partners Securities in Singapore.

PRECIOUS-Gold to snap 4-mth winning run; US data, election eyed
SINGAPORE, Oct 31 (Reuters) - Gold edged up but was poised to snap a four-month winning streak, with investors staying on the sidelines ahead of key U.S. employment data and in the wake of Hurricane Sandy.
"There are a lot of event risks -- nonfarm payrolls, the U.S. election, a change of power in China, plus the routine policy meetings of various central banks," said a Singapore-based trader.

Iron ore holds near $120, eyeing 2nd monthly gain
SINGAPORE, Oct 31 (Reuters) - Spot iron ore prices held near $120 a tonne and sellers upped offers for imported cargoes to top market China on Wednesday on hopes steel mills will continue to lift production for the rest of the year amid a modest revival in demand.
Iron ore is up nearly 15 percent in October, its second monthly gain in a row, after a recovery in Chinese steel prices in September encouraged producers to restock on the raw material.

Baltic index down on limted iron ore movement
Oct 30 (Reuters) - The Baltic Exchange's main sea freight index, which tracks rates for ships carrying dry commodities, fell on Tuesday as rates for capesizes fell on limited iron ore activity.
The overall index, which reflects daily freight market prices for capesize, panamax, supramax and handysize dry bulk transport vessels, fell 5 points to 1,043 points.

20121031 1113 Global Markets & Energy Related News.

GLOBAL MARKETS-Asian shares firmer; yen slips as risk appetite warms (Reuters)
Asian shares rose and the yen was pressured, as risk appetite recovered slightly after European equities and the euro firmed overnight while U.S. financial markets looked set to  resume trading with the passage of a powerful storm. "Concerns over Japan's fiscal problems and deteriorating trade balance are behind the current phase of yen weakness and the BOJ easing is just one catalyst, said Yuji Saito, director of foreign exchange at Credit Agricole in Tokyo. "So having cleared the post-BOJ positions, the dollar/yen will likely steady ahead of the U.S. jobs data and the U.S. presidential election," he added.

OIL-Brent hovers near $109; recovery eyed post Sandy (Reuters)
Brent crude held steady near $109 a barrel on Wednesday after the huge storm Sandy whiplashed the U.S. East Coast, reducing fuel demand even as refineries in the region gradually resumed operation. "This is really the last thing that the U.S. needed," Nunan said, adding that Americans without insurance coverage would have less spare cash to spend on consumer goods just as the world's largest economy was showing signs of recovery.

POLL-U.S. crude oil inventories seen up on higher imports (Reuters)
U.S. crude oil inventories were forecast to have risen for the fourth straight week as a result of increased imports, an extended Reuters poll of analysts showed on Tuesday.

NATURAL GAS-U.S. natgas futures end down 3 pct, Sandy dampens demand (Reuters)
U.S. natural gas futures ended lower on Tuesday in electronic trade, as Hurricane Sandy knocked out power to millions of East Coast customers this week and slowed demand despite the cooler outlook for late this week and next week. "There may be less demand this week because of power outages, but I'm not sure about the net effect with all the nuclear plants down. There are a lot of nuke units out now," a Chicago-based trader said.

Euro Coal-Prices rise $1-$1.50/T with gas, swaps (Reuters)
Prompt European coal prices rose by $1-$1.50 a tonne on Tuesday in line with coal swaps and higher gas but few trades were reported. "The market must be at the bottom now, at these prices too many producers are feeling pain," one European trader said.

20121031 1005 Malaysia Corporate Related News.

IGB bags RM8bn job in Taipei
IGB Corp won a TWD80bn (RM8.36bn) development project in Taipei, bagging another major property venture this year as its flagship development at Mid Valley City is at its tail end of completion. According to news report from Taiwan, the IGB-led consortium, Taipei Gateway International Development Co, won the bid to build Taiwan’s Twin Towers after a competitive process fending off challenges from two other companies. (Financial Daily)

Aeon Malaysia not involved in Carrefour deal
Aeon Co (M) (Aeon Malaysia) said it is not involved in any discussion with any party with regard to the proposed acquisition of Carrefour SA’s operations in Malaysia. In a statement to Bursa Malaysia yesterday, Aeon Malaysia, however, did say it would make an appropriate announcement to the exchange should there be any further development on this matter. (Financial Daily)- Please see accompanying report

MAHB may buy 15% stake in Aranmula airport in Kerala
Malaysia Airports Holdings (MAHB) may acquire a stake of up to 15% in KGS Aranmula International Airport Ltd, Kerala in India. According to a report in the Indian daily Business Standard yesterday, Anil Ambani-backed KGS Group, which is developing the airport, was looking at diluting up to 15%, and has already made the offer to MAHB. (Malaysian Reserve)

Petronas Carigali discovers additional oil reserves in Bertam
Prime Minister Datuk Seri Mohd Najib Razak yesterday announced that Petronas Carigali SB and Lundin Oil have jointly discovered additional oil reserves under a production sharing contract (PSC) at Block PM 307 of the Bertam oilfield. He said the oil field, located 160km offshore Peninsular Malaysia, is opposite the state of Pahang at the depth of 76m. (Malaysian Reserve)

Bumi Armada collects vessel
Bumi Armada has taken delivery of offshore support vessel (OSV) Armada Hibiscus from Sam Jung Holdings Ltd. It said in a statement that the 100m, 300-man accommodation work-barge, would go to work for ENi Spa (Italy) in the Congo under a RM56m two-year contract with extension options. (StarBiz)

Tan Chong aims to sell 50,000 Nissan cars
Edaran Tan Chong Motor SB, the sales and marketing arm of Tan Chong Motor Holdings, aims to sell 50,000 Nissan cars by year-end, aided by the emergence of the new Nissan Almera. Executive director Datuk Dr Ang Bon Beng said the company would like to position Nissan Almera as the leader and best-selling B-segment, non-national sedan car in Malaysia. Nissan Almera has four variants – 1.5E M/T (RM66,800), 1.5E A/T (RM69,800), 1.5V A/T (RM76,800) and 1.5VL A/T (RM79,800). (StarBiz)

20121031 1004 Global Economy Related News.

Singapore: Below-potential growth likely as price pressures persist
Singapore’s economy will grow at below-potential levels for a second year in 2013 even as a tight labour market and rising costs of goods and services add to inflationary pressures, the central bank said. The island’s pace of growth “slowed discernibly” in the past two quarters, and external demand is expected to remain “tepid and volatile” next year, the Monetary Authority of Singapore said in a twice-yearly review yesterday. Gross domestic product may increase 1.5% to 2.5% this year, it said, reiterating a previous forecast. It didn’t give a prediction for 2013 growth. (Bloomberg)

Japan: BOJ offers unlimited loans to banks to increase demand
Japan’s central bank said it will offer unlimited loans at low interest rates to lenders to try to boost credit demand among companies and households. The money will be for terms of up to four years and based on the overnight call rate, currently 0.1%, the central bank said in a statement yesterday. The move was alongside a JPY11trn (USD138bn) expansion of the central bank’s main easing tool, its asset-purchase programme. Japan is turning to a wider array of unconventional tools for monetary easing as the global slowdown, waning auto sales and a dispute with China set back an economy that remains mired in deflation. (Bloomberg)

S. Korea: Output rises for first time in four months on carmakers
South Korea’s industrial production rose for the first time in four months as stronger sales of cars and electronics helped offset the effects of a cooling global economy. Output rose 0.8% last month from August when it dropped a revised 0.9%, Statistics Korea said yesterday. The median estimate of 11 economists in a Bloomberg News survey was for a 1.5%. Production rose 0.7% from a year earlier. (Bloomberg)

India: Chidambaram irked as Subbarao defies call for rate cut
India’s central bank resisted calls from Finance Minister Palaniappan Chidambaram for lower interest rates, prompting him to say the government will revive economic expansion by itself if necessary. Governor Duvvuri Subbarao kept the repurchase rate at 8% to damp price increases, while reducing the cash reserve ratio to 4.25% from 4.5% to support lending, the Reserve Bank of India said in Mumbai yesterday. Borrowing costs have remained unchanged since a 50 basis-point cut in April. (Bloomberg)

Spain: September budget deficit narrows
Spain’s central government budget deficit narrowed in September as a sales-tax increase buoyed government revenue, boosting Prime Minister Mariano Rajoy’s campaign to resist asking for a sovereign bailout. The central government’s deficit was 4.39% of gross domestic product in the nine months through September, compared with 4.77% in the eight months through August. Value-added tax receipts surged 11.9% in September from a year earlier as an increase came into effect, Deputy Budget Minister Marta Fernandez Curras told reporters in Madrid late yesterday. (Bloomberg)

Germany: Jobless rate rises for first time in three years
German unemployment rose twice as much as economists forecast in October and the jobless rate increased for the first time in three years as the sovereign debt crisis damped economic growth and investment. The number of people out of work climbed a seasonally adjusted 20,000 from September to 2.94m, the Federal Labour Agency in Nuremberg said yesterday. Economists forecast a gain of 10,000, the median of 31 estimates in a Bloomberg News survey shows. The adjusted jobless rate rose from a two-decade low of 6.8% in August to a revised 6.9% in September and held there in October, the agency said. (Bloomberg)

US: Real estate recovery challenged by hurricane Sandy
The US real estate recovery that’s gained strength this year faces a setback from flooding and property damage inflicted by Hurricane Sandy, the biggest tropical gale to hit the Atlantic seaboard. The storm battered homes in Eastern coastal states that account for about one out of every five US real estate sales and threatened inland areas with flooding and blackouts. Lenders put transactions on hold and companies like Coastline Realty in Cape May, New Jersey, pulled in their for-sale signs to prevent the wind from turning them into projectiles. (Bloomberg)

20121031 1001 Global Markets Related News.

Asian Stocks Advance on U.S. Housing, South Korea Ouput (Bloomberg)
Asian stocks rose, with the regional benchmark index heading for its first advance in four days, after U.S. home prices increased and South Korea’s industrial production expanded. Canon Inc. (7751), a Japanese camera maker that gets 27 percent of its sales in the Americas, gained 1.5 percent. Fuji Heavy Industries Ltd. (7270) surged 6.3 percent after the maker of Subaru cars raised its profit forecast. BHP Billiton Ltd. (BHP), the world’s No. 1 mining company by market value, added 0.9 percent in Sydney after crude and metals prices increased. The MSCI Asia Pacific Index (MXAP) added 0.5 percent to 121.69 as of 9:49 a.m. in Tokyo before the open of markets in China and Hong Kong. The regional benchmark advanced 11 percent from this year’s low on June 4 through yesterday as stimulus measures in the U.S., Japan and China boosted sentiment amid a global economic slowdown and Europe’s debt crisis.
“We have had a range of economic data, particularly from the U.S. and China, that have proved to be positive indicators,” said Angus Gluskie, managing director at White Funds Management in Sydney, which oversees more than $350 million. “The underlying economic data is improving and supportive of future earnings as long as nothing else goes wrong.” Futures on the Standard & Poor’s 500 Index added 0.2 percent in New York. U.S. equity markets may reopen today after the longest weather-related shutdown in more than a century. Trading will resume after the New York Stock Exchange was spared by Hurricane Sandy as it swept through the city yesterday. In the U.S., the S&P/Case-Shiller index of property values in 20 cities rose 2 percent from August 2011, the biggest year- to-year gain since July 2010, after rising 1.2 percent in the year to July, the group said yesterday in New York.

Japanese Stocks Halt Three-Day Fall on U.S. Homes, BOJ (Bloomberg)
Japanese shares gained, with the Nikkei 225 Stock Average (NKY) snapping a three-day decline, as U.S. home prices rose the most in two years and the bank of Japan and the country’s government signaled stronger resolve to tackle the stronger yen and deflation. Canon Inc. (7751), a Japanese camera maker that gets 27 percent of its sales in the Americas, gained 1.3 percent. Fuji Heavy Industries Ltd. jumped 5.6 percent after the maker of Subaru cars raised its profit forecast. NSK Ltd. had the second-biggest drop in the Nikkei 225 after slashing full-year earnings forecasts. The Nikkei 225 Stock Average rose 0.7 percent to 8,907.18 as of 9:27 a.m. in Tokyo. The broader Topix (TPX) Index climbed 0.6 percent to 737.79, with more than two shares advancing for each that fell. Stocks fell yesterday in the last 15 minutes of trading after the Bank of Japan announced its first back-to-back monthly stimulus expansion since 2003.
“The U.S. housing market is clearly recovering,” said Hiroichi Nishi, an equities manager in Tokyo at SMBC Nikko Securities Inc. “The joint statement from the government and the BOJ on stimulus measures helps convince investors that they are determined to overcome deflation and raises expectations they will continue to take aggressive steps to ease policy.” The Topix rose 2 percent through yesterday from Sept. 6 after the European Central Bank started a global wave of monetary policy easing to boost growth, with the U.S. Federal Reserve and the Bank of Japan following suit. Shares on the stock gauge traded at 0.9 times book value, compared with 2.2 for the Standard & Poor’s 500 Index and 1.5 for the Europe Stoxx 600 Index.

NYSE Expects Normal Open Tomorrow After Storm (Bloomberg)
U.S. equity markets will reopen tomorrow after the longest weather-related shutdown in more than a century, resuming after the New York Stock Exchange was spared by Hurricane Sandy as it swept through New York yesterday. The decision was announced in statements by NYSE Euronext, Nasdaq OMX Group Inc. (NDAQ) and Bats Global Markets Inc. The NYSE’s headquarters are running on backup power and will keep using it if necessary all week, Larry Leibowitz, the chief operating officer, said in a phone interview. Fixed-income trading, halted at noon yesterday, will also reopen, under a recommendation by the Securities Industry and Financial Markets Association.
U.S. exchanges are in the second day of a suspension called to safeguard workers as Sandy barreled north, halting public transit and forcing evacuations in New York City. NYSE Euronext’s building on Wall Street is near areas of Manhattan that were deluged when the storm propelled a 13-foot sea surge. Arthur Levitt, the former chairman of the Securities and Exchange Commission, said the NYSE needed a better backup plan. “We’ve got people there at the floor, which was not compromised by the flooding,” Duncan Niederauer, chief executive officer of NYSE Euronext, said today in an interview on Bloomberg Television with Matt Miller. “We’re spending the day testing connectivity with clients, many of whom are operating from their own contingency sites. So first and foremost, we’re going to deal with them.”

Recap Stock Index Market Report (CME)
The December S&P 500 registered a new low for the decline in overnight trading action but managed to close in positive territory. Early support for equities came from strong performances from BP, UBS and Deutsche Bank during the early European trade. Q3 Earnings this morning from Ford surpassed street expectations and showed record high profit margins. This sent its shares up more than 1.0% in European action and was seen offering support to the US indices. US Home Price Data earlier this morning came in ahead of estimates, and that seemed to offer an added level of support.

European Stocks Climb as BP, Deutsche Bank Top Estimates (Bloomberg)
European stocks rose the most in two weeks as companies from BP Plc (BP/) to Deutsche Bank AG (DBK) reported earnings that topped estimates and U.S. house prices climbed. Hurricane Sandy closed New York markets for a second day. BP, Europe’s second-biggest oil company, and Deutsche Bank, Germany’s largest lender, advanced more than 4 percent. UBS (UBSN) AG, Switzerland’s biggest bank, jumped to a 15-month high after raising a profitability goal. Danske Bank (DANSKE) A/S tumbled 9.4 percent on plans to sell new shares. The Stoxx Europe 600 Index (SXXP) advanced 0.9 percent to 271.76 at the close of trading, extending this month’s gain to 1.2 percent. The gauge has rallied 16 percent from this year’s low on June 4 as European Central Bank policy makers agreed on an unlimited asset-purchase program and the Federal Reserve announced a third round of quantitative easing.
“Once again, we’re seeing good resilience of European companies,” said Jacques Porta, who helps manage $627 million at Ofi Patrimoine in Paris. “Expectations were so negative that there haven’t been many bad surprises.” Per-share profit has topped analysts’ forecasts at 53 percent of the Stoxx 600 companies that have reported results since Oct. 9, according to data compiled by Bloomberg. The S&P/Case-Shiller index of property values in 20 U.S. cities rose 2 percent in August from a year earlier, the biggest gain since July 2010, after rising 1.2 percent in July. The median forecast of 25 economists in a Bloomberg survey projected a 1.9 percent gain.

Emerging Stocks Risen First Day Three; India Shares Fall (Bloomberg)
Emerging-market stocks rose for the first time in three days as consumer discretionary shares rebounded from a six-week low. India’s benchmark equity gauge tumbled the most in three weeks after the central bank refrained from cutting interest rates. Grupa Lotos SA (LTS), Poland’s second-largest oil refiner, climbed to the highest level in more than a year after profit beat analysts’ estimates. State Bank of India Ltd. sank the most in almost three months. OAO Gazprom, Russia’s biggest natural gas exporter, dropped to a three-month low after the board approved a 25 percent spending increase this year.
The MSCI Emerging Markets Index gained 0.3 percent to 993.09 in New York. Copper rose in New York for the first time in nine sessions on the prospects for demand to strengthen in China. Bank of America Merrill Lynch raised its forecast for the country’s economic growth to 7.7 percent from 7.6 percent this year. India refrained from cutting borrowing costs today to fight price pressures, while Hungary lowered its main interest rate for a third month as concern about economic growth outweighed inflation. “The absence of bad news is good news,” Aurelija Augulyte, an emerging-markets strategist at Nordea Bank AB in Copenhagen, said by e-mail. “The markets are at the turn toward risk-off, but not there yet.” The MSCI Emerging Markets Index (MXEF) has lost 1 percent this month, headed for its worst month since May. Equity trading volumes in some Asian markets were lower than average as Hurricane Sandy shuttered U.S. stock markets for a second day and sent floodwaters gushing into New York City.

U.S. Stock Trading Shut for Second Day, Joining Bonds (Bloomberg)
For the first time in more than a century, weather has stopped U.S. equity trading for two straight days as Hurricane Sandy swept across New York City. NYSE Euronext (NYX) will this morning test a back-up plan in case its headquarters or trading floor are unable to open tomorrow. Stock trading was canceled for a second day, joining bond markets, as 90-mile-per-hour winds and surging seas paralyzed America’s financial capital. The first shutdown for consecutive days due to weather since 1888 was announced by NYSE Euronext after consultations with other exchanges. The Securities Industry and Financial Markets Association earlier recommended a full market close in dollar-denominated fixed-income securities after they shut at noon New York time yesterday.
Hurricane Sandy, the Atlantic’s Ocean’s biggest-ever tropical storm, slammed into southern New Jersey and churned north over land. The storm, 900 miles wide, produced life- threatening surges in a region with 60 million residents and caused what may add up to billions of dollars of damage. At least 316,500 customers were without power, and thousands of securities industry employees stayed home as Sandy threatened to flood lower Manhattan, home to much of the borough’s electrical infrastructure. “It’s an unprecedented event coordinated with an unprecedented storm,” Ryan Larson, the Chicago-based head of U.S. equity trading at RBC Global Asset Management (U.S.) Inc., said in a telephone interview yesterday. His firm oversees $250 billion in assets. “The response from the exchanges and regulators in terms of the closing of the market was certainly appropriate and remains appropriate for the exchanges to be closed tomorrow as well.”

Dollar Drops as Safety Bid Eases Before Chinese PMI Data (Bloomberg)
The U.S. dollar weakened versus most of its 16 major peers on speculation reports tomorrow will show improvement in Chinese manufacturing, brightening the global economic outlook and damping demand for haven assets. The greenback remained lower after dropping yesterday against the yen as Asian stocks rose and as U.S. capital markets prepared to reopen today after Atlantic storm Sandy swept through New York. Demand for the euro was tempered before data that may show unemployment in Europe climbed to a record last month, adding to signs the debt crisis is hurting growth. “We should start to see now further evidence that we’ve had a bottom on the growth profile, and we should see an improvement in PMI,” said Imre Speizer, a strategist in Auckland at Westpac Banking Corp., referring to China’s economy and the nation’s manufacturing index. “It would probably be a negative for the U.S. dollar.”
The dollar bought 79.62 yen as of 9:29 a.m. in Tokyo after falling 0.2 percent yesterday. It fetched $1.2960 per euro following a 0.4 percent decline in New York, the biggest drop since Oct. 17. Europe’s shared currency was little changed at 103.20 yen after rising 0.2 percent to 103.18 yesterday. The dollar has strengthened 2.1 percent against its Japanese counterpart this month. It has declined 0.8 percent versus the euro since Sept. 30. The MSCI Asia Pacific Index (MXAP) of shares climbed 0.4 percent.

Aussie Dollar Remains Higher Before China Manufacturing Reports (Bloomberg)
Australia’s dollar remained higher before reports tomorrow that may show improvement in China’s manufacturing, brightening the export outlook for the South Pacific nation. The New Zealand dollar gained against all of its 16 major peers after data showing the nation’s home-building approvals rose in September to the highest level in more than four years. Australia is also set to release data on building permits today. The so-called Aussie and kiwi were also supported as gains in European shares and U.S. stock-index futures boosted demand for higher-yielding currencies. “Investors are expecting better figures from China, lending some support to the Aussie,” said Junichi Ishikawa, an analyst at IG Markets Securities Ltd. in Tokyo. “Gains in stocks tend to be a plus for the South Pacific currencies.” The Australian dollar bought $1.0367 as of 10:58 a.m. in Sydney from $1.0365 yesterday, when it gained 0.3 percent. The New Zealand dollar strengthened 0.2 percent to 82.20 U.S. cents.
A gauge of manufacturing based on a survey of purchasing managers in China, the world’s second-biggest economy, is predicted to increase to 50.2 in October from 49.8 in September, according a Bloomberg News poll of economists. The data will be published tomorrow.

Dollar Weakens While Canadian Shares Gain After Storm (Bloomberg)
The dollar fell the most in almost two weeks amid speculation damage from superstorm Sandy will be less severe than anticipated. Canadian stocks advanced and oil rose from the lowest level in almost four months. The dollar weakened 0.4 percent to $1.2960 per euro at 4 p.m. in New York and slid against nine of its 16 major counterparts. Canadian shares increased 0.5 percent, while Brazilian equities rallied 0.9 percent. The Stoxx Europe (SXXP) 600 Index climbed 0.9 percent. Oil rose 0.2 percent, paring an earlier gain of as much as 0.8 percent. S&P 500 futures expiring in December added 0.2 percent from Friday’s close as of 6:29 p.m. New York time, ahead of the reopening of equity markets.
“The numbers have yet to be established in terms of what that’s going to cost to clean up,” Jack Spitz, managing director of foreign exchange at National Bank of Canada in Toronto, said in a phone interview. “Whether it’s disruptive any more than the last two days will be seen. It’s lightened liquidity in all markets, and even shut some down. There’s much less liquidity in the overall financial markets when New York is closed.” Sandy, now termed a post-tropical cyclone, came ashore in southern New Jersey at 8 p.m. New York time yesterday and drove floodwaters to life-threatening levels in a region with 60 million residents. U.S. equity markets were shut for a second day today, with the New York Stock Exchange saying it plans to open tomorrow. The Securities Industry and Financial Markets Association also recommended that trading resume tomorrow of U.S. dollar-denominated fixed-income securities.

Sandy Moves West Trailing Devastation, Deaths in the East (Bloomberg)
Superstorm Sandy churned west across Pennsylvania today, leaving the East Coast to the task of recovering from its trail of floods, death and destruction. The storm caused at least 40 U.S. deaths, according to the Associated Press, including 18 in New York City that Mayor Michael Bloomberg reported. Many government offices and U.S. stock markets, which shut for a second day, planned to open tomorrow, with the exception of New Jersey. Damage will total billions of dollars and mass transit, New York’s lifeblood, won’t be restored for days. “It’s fair to say the path of destruction that she left in her wake is going to be felt for quite some time,” the mayor said at a press briefing today. “Make no mistake about it, this was a devastating storm, maybe the worst that we have ever experienced.” He said he expects the number of deaths to go up as more information comes in.
While President Barack Obama announced plans to see storm damage in New Jersey tomorrow, Bloomberg said he asked the president not to come to New York. “We’d love to have him, but we have lots of things to do,” the mayor said. From Washington to Boston, officials of state and local governments, transit systems and businesses joined homeowners in assessing damage and arranging for recovery. Flooded runways and other damage to New York’s main airports mean they may not be able to open until Nov. 1, according to AMR Corp. (AAMRQ)’s American Airlines and US Airways Group Inc.

Labor Department Plans to Publish U.S. Jobs Report on Time (Bloomberg)
The Labor Department is striving to issue its monthly report on employment in the U.S. in three days as scheduled, a spokesman said today. “The employees at the Bureau of Labor Statistics are working hard to ensure the timely release of employment data on Friday, November 2,” Carl A. Fillichio, the department’s senior adviser for communications and public affairs, said in an e- mailed response to a Bloomberg inquiry. The report on October employment is due at 8:30 a.m. in Washington on Nov. 2. The jobs report, the last before the election, may help sway voters trying to decide between giving President Barack Obama another four years in office or to change course with Republican challenger Mitt Romney. The Obama administration has pointed to 24 straight months of job growth as evidence the economy is improving, while the Romney campaign has said progress is too slow.
Payrolls probably rose by 125,000 workers in October, and the jobless rate increased to 7.9 percent from a three-year low of 7.8 percent reached in September, according to the median forecast of economists surveyed by Bloomberg. The data won’t be affected by Hurricane Sandy because the surveys of employers and households were conducted in the middle of the month, before the storm struck. Federal government agencies in Washington were closed for a second day today in the wake of Sandy, the Atlantic’s largest- ever tropical storm. Federal agencies will reopen tomorrow, according to a statement on the website of the U.S. Office of Personnel Management.

Hurricane Sandy May Slow Economy as Workers Stay at Home (Bloomberg)
Hurricane Sandy may slow the world’s largest economy by keeping millions of U.S. employees from work and shoppers from stores in one of the nation’s most populated and productive regions. The storm may cut economic output by $25 billion in the fourth quarter, according to Gregory Daco, a U.S. economist at IHS Global Insight in Lexington, Massachusetts. He said that could reduce the fourth quarter pace of growth to between 1 percent and 1.5 percent, from the firm’s earlier estimate of 1.6 percent. Sandy lashed a region with 60 million people -- about as many as Italy -- that accounts for about a quarter of the $13.6 trillion U.S. economy, estimates Eric Lascelles, the Toronto- based chief economist at RBC Global Asset Management Inc. It forced the closures of U.S. financial markets, halted air and rail service and idled workers for the federal and state governments from Virginia to Massachusetts.
“If people aren’t going to Broadway shows and restaurants and hotels all those businesses that rely on people spending money are going to take a hit for sure,” said Stephen Bronars, a senior economist at Welch Consulting in Washington and an adjunct professor at Georgetown University. “People are still going to go out and buy a car or other durable goods they need, they’re just not going to do it this week. There will be winners and losers.”

S. Korea Output Rises for First Time in Four Months on Carmakers (Bloomberg)
South Korea’s industrial production rose for the first time in four months as stronger sales of cars and electronics helped offset the effects of a cooling global economy. Output rose 0.8 percent last month from August when it dropped a revised 0.9 percent, Statistics Korea said today. The median estimate of 11 economists in a Bloomberg News survey was for a 1.5 percent rise. Production rose 0.7 percent from a year earlier. “Demand both overseas and at home is still weak but it seems the worst has passed, with exports to major markets declining at a much slower pace,” said Lee Sung Kwon, an economist at Shinhan Investment Corp. in Seoul. “Things should improve sooner or later.”
Hyundai Motor Co. (005380), South Korea’s largest carmaker, and Samsung Electronics Co. (005930), the biggest maker of mobile phones, reported profit that beat analysts’ estimates in the third quarter. The resilience of exporters highlights the prospect for the economy to rebound after expanding at the slowest pace in three years in the three months through September. The won appreciated 0.4 percent to 1,091.50 per dollar yesterday in Seoul, according to data compiled by Bloomberg. The Kospi Index rose 0.4 percent.

Korea Best in Asia on Investor Confidence in Economy (Bloomberg)
Kang Man Soon wept on the day 15 years ago that she gave her gold wedding ring to the government, joining the millions who donated heirlooms to boost South Korea’s reserves during the Asian financial crisis. “We just couldn’t let the country go bankrupt after all the sacrifices and hard work to save it from Japanese colonial rule and civil war,” said Kang, whose husband fulfilled a promise to replace the gold band by giving her a one-carat diamond ring this year for her 60th birthday. “The economy is much bigger and stronger now and our cars and products and pop songs are famous around the world.”
Since the 1997-1998 slump, South Korea has ridden economic crises better than most advanced economies. The stock market has risen fivefold, led by Samsung Electronics Co. (005930), which now makes almost a quarter of the world’s mobile phones, and Hyundai Motor Co. (005380) and its affiliate Kia Motors Corp. (000270) are the most profitable of the six biggest global automakers. With growth this year set to beat Asia’s other wealthy nations, the three biggest credit rating companies upgraded South Korea’s debt, citing the ability to weather shocks better than its peers. “It’s this expensive lesson we learned that made us prepare so well for the next crisis,” said Kwon Dae Young, who was in charge of injecting foreign capital into banks at the finance ministry in 1997. “Korean companies now have much healthier balance sheets and the government is backed up well with a solid amount of foreign exchange reserves.”

BOJ Claims Front-Runner Rank in Innovation as Stocks Decline (Bloomberg)
The Bank of Japan’s first back-to- back monthly stimulus expansion since 2003, and the unveiling of an unlimited program to support bank loans, proved insufficient to reverse the yen’s strength and stoke the stock market. The skepticism that met the BOJ’s announcement yesterday underscores Governor Masaaki Shirakawa’s struggle to lift the world’s third-largest economy out of two decades of deflation. While he touted the bank as a front-runner in innovation, the central bank’s challenge is that corporate demand for credit is limited, said Junko Nishioka, chief economist at RBS Securities Japan Ltd. and a former BOJ official. Japan’s benchmark Nikkei 225 Stock Average slid 1 percent after the BOJ boosted its asset-purchase program by 11 trillion yen ($138 billion) and announced the facility to underwrite banks’ loans. The yen closed in Tokyo about 5 percent from a postwar high against the dollar and 26 percent stronger than what Nissan Motor Co. Chairman Carlos Ghosn said was a “neutral” value.
“Japanese companies are cutting capital spending as exports are weakening and domestic demand is shrinking -- in this environment, it’s hard to think lending will increase,” said Hiroaki Muto, a senior economist at Sumitomo Mitsui Asset Management in Tokyo. “They wanted to show that they were doing something” with yesterday’s decision, he said. Economy Minister Seiji Maehara attended his second BOJ meeting yesterday, highlighting political pressure for action from the central bank. The joint statement he issued with Shirakawa after the meeting was the first of its type, Maehara said. It said that the government “strongly expects” powerful easing until deflation is overcome.

Argentina’s Rating Cut to B- by S&P on U.S. Court Ruling (Bloomberg)
Argentina’s credit rating was cut one level by Standard & Poor’s, which cited a U.S. court ruling that prevents the country from honoring its debt without also paying holders of its defaulted bonds. S&P lowered the country’s rating to B-, six levels below investment grade and in line with that of Jamaica, Pakistan and Belarus, from B, according to an e-mailed statement today. “The downgrade of Argentina’s unsolicited rating reflects our opinion that the government may face increasing risks in the management of its debt after the U.S. appeals court ruling,” S&P said in the statement. “The decision may effectively increase Argentina’s liabilities and the government’s debt service.”
The U.S. Court of Appeals said Oct. 26 that Argentina can’t make payments on restructured sovereign debt while refusing to pay holders of its defaulted notes because doing so would discriminate against bondholders. The decision may help creditors including hedge fund Elliott Management Corp. collect $1.4 billion on defaulted debt. The perceived risk Argentina will renege on creditors is now the highest of any government in the world on speculation the nation will opt to cease all dollar debt payments rather than settle with the holdouts. The cost to insure Argentine debt against default soared as much as 576 basis points, or 5.76 percentage points, to 1,534 basis points after the ruling. It fell 37 basis points today to 1,496. Credit-default swaps pay the buyer face value in exchange for the underlying securities or the cash equivalent should a government or company fail to adhere to its debt agreements. A basis point equals $1,000 annually on a contract protecting $10 million of debt.

U.K. October Consumer Sentiment Falls to Six-Month Low, GfK Says (Bloomberg)
U.K. consumer confidence fell to a six-month low in October as Britons become more pessimistic about their finances and spending, GfK NOP Ltd. said. An index of sentiment declined to minus 30 from minus 28 in September, the London-based research group said in an e-mailed report today. A gauge of how consumers see their personal financial situation over the next year dropped 5 points to minus 13, also the lowest in six months. Britain exited a recession in the third quarter as gross domestic product surged the most in five years. Still, the Confederation of British Industry said yesterday that while its retail sales index rose to a four-month high in October, “uncertainty over the global economic outlook could dent consumer confidence, hitting prospects for the retail sector.”
“While the Olympics are thought to have boosted GDP in the last quarter, the late summer boost in consumer sentiment has now faded,” said Nick Moon, managing director of social research at GfK. “The fragility of the recovery is underlined by the fact that people are more worried about their own financial situation over the next 12 months. This certainly doesn’t suggest there will be a spending boom on the back of the official emergence from recession.” A measure of Britons’ outlook for the economy over the next 12 months fell 2 points to minus 29 in October, GfK said. A gauge of the climate for making major purchases decreased 2 points to minus 33. GfK interviewed 2,004 people between Oct. 5 and Oct. 14.
Bank of England Governor Mervyn King said earlier this month that cooling inflation over the past year has “somewhat” eased the squeeze on consumers. Still, policy makers have said the inflation outlook remains uncertain as energy costs increase. Officials will decide on Nov. 8 whether to extend so- called quantitative easing after they complete their latest round of bond purchases next month.

Spain Narrows Central Government Budget Deficit to 4.39% (Bloomberg)
Spain’s central government budget deficit narrowed in September as a sales-tax increase buoyed government revenue, boosting Prime Minister Mariano Rajoy’s campaign to resist asking for a sovereign bailout. The central government’s deficit was 4.39 percent of gross domestic product in the nine months through September, compared with 4.77 percent in the eight months through August. Value- added tax receipts surged 11.9 percent in September from a year earlier as an increase came into effect, Deputy Budget Minister Marta Fernandez Curras told reporters in Madrid late yesterday. “All these developments and read-outs allow us to be optimistic about reaching our budget objectives,” Curras said. “The central government deficit is under control.”
Even as the government says the central government’s balance is within target, Rajoy is struggling to control regional spending and a swelling social-security shortfall. The prime minister, seeking to deliver on his European commitment of limiting the overall public sector deficit to 6.3 percent of GDP this year, is facing mounting pressure to trigger the European Central Bank’s bond-buying program by signing up to a European rescue package.

20121031 1001 Global Commodities Related News.

USDA says crop progress report, due Monday, delayed by Sandy(Reuters)
The weekly U.S. crop progress report that is normally released on Monday afternoons will be delayed as the federal government closes down ahead of Hurricane Sandy, the Department of Agriculture said.

DTN Closing Grain Comments 10/30 14:28 (CME)
Another Quiet Day
Corn was the only market to close near its session highs, while wheat and soybeans drifted well off their respective highs by the close. The Dow Jones Industrial Average will trade again Wednesday following a two-day closure, which may allow activity to pick up for commodities in general.

Pro Farmer: After the Bell Wheat Recap (CME)
Wheat futures wrapped up a choppy day of trade with a mid-range and mixed finish. Nearby contracts settled marginally lower in Chicago and Kansas City with deferred months firmer. Minneapolis wheat futures posted slight gains in most contracts. Futures initially benefited from light short-covering thanks to a weaker dollar and spillover support from corn and beans today, but this gave way to bouts of profit-taking as export demand for U.S. wheat remains sluggish.

Wheat Market Recap Report (CME)
December Wheat finished down 1 1/4 at 856 3/4, 9 3/4 off the high and 4 up from the low. March Wheat closed down 1 at 871 3/4. This was 4 up from the low and 9 1/2 off the high. December Chicago wheat ended the day slightly lower and struggled to advance throughout the day amid growing concern over the sluggish US export pace. The sharply lower US Dollar and dry weather conditions in the western plains helped to support. Remnants of Hurricane Sandy shifted over to areas of Ohio and other wheat growing regions in the east which may have helped pressure futures midday. Tunisia announced a tender for 100,000 tonnes of milling wheat for December through January shipment. Cash traders noted that US soft wheat prices have narrowed their spread to French origins but it remains to be seen just how competitive US offers will be. Support in the wheat market continues to be linked to thoughts that the USDA will cut world production and ending stocks again next week after adverse weather conditions negatively impacted crops in Australia and Argentina. December Oats closed up 1 at 388 3/4. This was 2 1/4 up from the low and 1 off the high.

Pro Farmer: After the Bell Corn Recap (CME)
Corn futures were firmer throughout the day and ended mostly around 5 cents higher through the July contract, with far-deferred contracts around a penny higher. Futures were supported by weakness in the U.S. dollar index today, although buying was limited due to a lack of fresh news and the disruptive storm event on the East Coast.

Corn Market Recap for 10/30/2012 (CME)
December Corn finished up 4 3/4 at 741 3/4, 2 off the high and 5 3/4 up from the low. March Corn closed up 5 1/2 at 744 1/2. This was 6 1/2 up from the low and 1 1/2 off the high. December corn saw modest gains to end the session but traded higher throughout the day as the US Dollar moved lower and on support from a surging soybean market. Corn bids in the Gulf of Mexico were steady today on very slow export business but traders were hopeful that rising price levels in South America and Ukraine will push demand to the US border. Private Egyptian buyers have reportedly purchased an additional 20,000 tonnes of South American corn overnight after buying 180,000 tonnes of corn from the same origin yesterday. Support in futures was also linked to ideas that the recent rainfall in Argentina and Southern Brazil has delayed corn planting enough that some farmers may switch acreage over to soybeans. The wheat market struggled to hold onto gains throughout the session which added resistance to the advance in corn prices. November Rice finished up 0.035 at 14.765, equal to the high and equal to the low.

Australian Wheat Exports Plunging Most in Six Years: Commodities (Bloomberg)
The deepest slump in Australian wheat shipments in six years will exacerbate the biggest contraction in global exports in a generation after droughts withered crops around the world. Sales by Australia, last year’s second-largest supplier, will tumble 31 percent to 17 million metric tons in the 12 months through Sept. 30, based on the median of seven analyst estimates compiled by Bloomberg. The prediction is 1 million tons lower than forecast by the U.S. Department of Agriculture. The most widely held option on the Chicago Board of Trade gives holders the right to buy the grain for delivery in December at $10 a bushel, or 16 percent more than now, bourse data show.
A lack of rain is also curbing corn and soybean harvests, driving futures to records and contributing to the highest global food costs in six months, United Nations data show. Countries will spend more than $1 trillion on food imports for a third year in 2012, the UN estimates. Wheat surged 32 percent this year, the most since 2007, after dry weather in the U.S., Europe and Australia. The USDA expects worldwide exports to drop 16 percent, the biggest decline since 1986. “The rain didn’t come until late,” said Maitland Davey, a 69-year-old who farms 3,700 acres northeast of Perth, the capital of Australia’s biggest exporting state. “I hate ripping that ground up dry, dust just flying everywhere,” he said, predicting a 30 percent decline in his harvest this year.

Gasoline Supply Seen Down to 1990 Low on Sandy: Energy Markets (Bloomberg)
Gasoline stockpiles on the U.S. East Coast may sink to the lowest level since at least 1990 as Hurricane Sandy moves ashore, curtailing fuel production and distribution, based on Energy Department data. Refineries accounting for 94 percent of regional processing capacity shut or reduced rates before Sandy, the largest tropical storm on record in the Atlantic, approached the East Coast yesterday. Colonial Pipeline Co., which operates the largest link between Gulf Coast refiners and East Coast distributors, planned to shut its main line delivering fuel to Philadelphia and New York Harbor late yesterday as customers shuttered operations.
Prices had jumped 5.9 percent in three days, breaking the longest losing streak since 1986, as the storm headed directly for the heart of East Coast fuel refining and distribution. Gasoline inventories in the central Atlantic area are already 16 percent below a year earlier. Sandy threatens to flood and disrupt power at refineries and terminals that account for one- third of U.S. finished gasoline production, according to BNP Paribas SA. “Given that the hurricane is passing over the refining and terminal system and not just near them, it’s clear that supply concerns will outweigh concerns about reduced demand as people stay home,” Harry Tchilinguirian, BNP Paribas SA’s head of commodity markets strategy in London, said in an interview yesterday. “You’re going to have a run-up in prices that could be kept up.”

Oil Trades Near Two-Day High as Refiners Plan Post-Storm Restart (Bloomberg)
Oil traded near the highest level in two days in New York after the Atlantic superstorm Sandy moved away from the U.S. East Coast and refineries started planning to resume operations. Futures were little changed after rising 0.2 percent yesterday. Restarts at Phillips’s 238,000 barrel-a-day Bayway refinery in Linden and Hess’s 70,000 barrel-a-day Port Reading plant are contingent on post-storm assessments, the companies said. Philadelphia Energy Solutions’ 355,000-barrel-a-day Pennsylvania refinery is restoring operations, Cherice Corley, a spokeswoman at the plant, said in an e-mail. Crude for December delivery was at $85.70 a barrel, up 2 cents, in electronic trading on the New York Mercantile Exchange at 8:17 a.m. Singapore time. Prices rose 14 cents yesterday to $85.68, the highest close since Oct. 26. Futures are down 7 percent in October, the biggest decline in five months, and 13 percent this year.
Brent oil for December settlement slipped 8 cents to $109 a barrel on the London-based ICE Futures Europe exchange. The European benchmark crude’s premium to the West Texas Intermediate contract was at $23.30. Floor trading on the Nymex, suspended for a second day yesterday because of the storm, may resume today if New York City lifts the evacuation order for Zone A in Manhattan, CME Group Inc., the exchange’s owner, said in an e-mail. Electronic trading is operating normally. Gasoline for November delivery rose 6.18 cents to $2.7906 a gallon in New York, the highest level since Oct. 16. The contract expires today. The more-active December future was up 2 cents at $2.6355.

Recap Energy Market Report (CME)
December crude oil prices trended higher throughout most of the US trading session, but remained inside of Monday's range. Early support for the crude oil market came from gains in global equity markets and weakness in the US dollar. Another source of support seemed to come from reports suggesting that refinery damages from Hurricane Sandy might not be as bad as initially expected, which should support demand for crude oil. However, afternoon weakness in the product markets seemed to drag December crude oil prices lower into the New York closing.

Copper Rises, Ends Longest Slump in 14 Years, on China Outlook (Bloomberg)
Copper futures rose, ending the longest slump in 14 years, on prospects for demand to increase in China, the world’s biggest consumer. Total Chinese demand, including refined and scrap metal, may gain an average 6 percent a year from 2011 to 2015, Wang Zhongkui, the deputy general manager of Beijing Antaike Information Development Co., said today. Imports of refined copper jumped 17 percent in September from a month earlier, the most this year, data showed last week. “The market is in a supply deficit, and Chinese copper imports have recently risen again,” helping to support prices, analysts led by Tobias Merath at Credit Suisse Group AG’s private-banking unit, said in a report. Copper futures for December delivery gained 0.3 percent to settle at $3.506 a pound at 1:14 p.m. on the Comex in New York. The metal fell in the previous eight sessions, the longest slide for a most-active contract since October 1998.
Comex floor trading was closed for the second straight day after Hurricane Sandy slammed into the U.S. East Coast, flooding streets and leaving millions of people without power. Copper also gained after central banks took more steps aimed at spurring economic growth. The Bank of Japan (8301) expanded its asset-purchase program for the second time in two months, and the Reserve Bank of India cut lenders’ reserve requirements to back a policy revamp by the government. “Given the added stimulus, I wouldn’t be surprised to see copper hold at these levels and consolidate a bit,” Matt Zeman, a strategist at Kingsview Financial in Chicago, said in a telephone interview. On the London Metal Exchange, copper for delivery in three months rose 0.3 percent to $7,720 a metric ton ($3.50 a pound). Aluminum, nickel, tin, zinc and lead also gained.

Hedge Funds Returning to Palladium as ETPs Retreat: Commodities (Bloomberg)
Hedge funds are siding with analysts predicting decade-high palladium prices even as investors cut holdings in exchange-traded products backed by this year’s worst-performing precious metal. The funds’ wagers on a rally more than doubled since August as ETP holdings slumped to a seven-month low this month, data compiled by Bloomberg show. Prices for the metal used mostly in catalytic converters will average $800 an ounce in the third quarter, 34 percent more than now and the highest since 2001, based on the median of 13 analyst estimates. Speculators that slashed bets to the lowest level since 2009 in May as growth slowed are now more bullish after central banks from the U.S. to Europe to China pledged additional measures to boost economies. Palladium’s 9 percent retreat this year contrasts with a 10 percent advance in platinum, driven by mine strikes and violence in South Africa, the biggest producer of the metal also used in autocatalysts.
“Platinum got the South Africa boost but palladium didn’t enjoy that,” said Jeffrey Sica, the Morristown, New Jersey- based president of SICA Wealth Management, who helps oversee more than $1 billion of assets. “I do anticipate higher prices because of the global liquidity push. At some point there will be growth revival.”

Silver Market Recap Report (CME)
As with other metals markets, silver prices were able to post modest gains during Tuesday's session as well as consolidating well above the recent lows for the move. A negative turnaround in the Dollar was a key factor with silver's early strength, as well as the emergence of a general "risk on" mood throughout many commodity markets as the now-Tropical Cyclone Sandy passes inland and away from New York City. Lukewarm strength in US equity index futures weighed on the silver market, and kept prices close to unchanged level later on in the trading day.

Gold Market Recap Report  (CME)
The gold market ended up posting moderate gains during Tuesday's trading, although prices remain firmly within the trading range of the previous four sessions. Many traders pointed towards a tangible improvement in global risk sentiment, which started during European trading but gained additional momentum from reports that Hurricane Sandy's damage may be lower than early forecasts. Today's lone major US data release, a private survey of US home prices, generally matched market expectations but was also felt to have underpin gold's early gains. News that a major gold ETF had over $100 million in outflows last week may have weighed on the gold market later on during the trading session and kept prices from gaining further ground.

Gold Fever Still Gripping Many Investors (CME)
By The Economist Intelligence Unit - Mon Oct 29 16:34:00 CDT 2012 CT
Miners' Rising Output Tempers Rally, But Collapse Unlikely
Gold has long been a difficult market to analyze, its fervent supporters regarding the metal as the one true source of value, while detractors, including many economists, view it as a "barbarous relic" with no place in serious discussions of monetary policy. Despite the skeptics, gold remains popular, partly reflecting its status as an "alternative currency" during a time of expansionist monetary policy driven by the U.S. Federal Reserve and other major central banks, the Economic Intelligence Unit wrote in a recent report. These policies led to negative "real" interest rates in developing countries that eliminated the opportunity costs of holing gold. "But as with any commodity, high prices are creating a market response," with mining companies expected to boost gold production by more than 20% this year compared with 2008, the group said. Rising production has tempered a rally in gold prices, but a market collapse is unlikely "unless real interest rates increase sharply."
With the Fed set to hold benchmark rates near historic lows until 2015, "that means a good chance of a high gold price for some years to come," the group wrote. COMEX gold futures currently trade around $1,708 an ounce, down 4.7% over the past three weeks but up 9% so far this year, based on the front-month contract.

World Wine Output to Fall to 37-Year Low, Depleting Stocks (Bloomberg)
Global wine production will slump to the lowest in 37 years after weather damage to grapes from France to Argentina, forcing a draw down of stocks, the International Organisation of Vine and Wine said. Output may fall to about 248.2 million hectoliters (6.56 billion gallons) this year from 264.2 million hectoliters in 2011, according to the group, known as OIV. That would be the lowest since at least 1975, Federico Castellucci, director general, said at a press conference in Paris today. Drought and hail harmed vines and grapes in France and Italy, the biggest producers, while Argentina also suffered weather damage to its vineyards, according to Castellucci. The production slump will deplete stocks and result in a “tight” market for wine to make spirits and vermouth, the OIV head said.
“We’re dipping into the reserves for supply,” Castellucci said in an interview. “There’s a lack of product in bulk. Merchants worldwide are starting to turn to the small countries for bulk wine, that shows there’s real tension.” World wine consumption in 2012 is estimated at 235.7 million to 249.4 million hectoliters, with an additional 30 million hectoliters of wine used to make spirits, vermouth and vinegar, according to the OIV. Castellucci declined to provide an estimate of global wine stocks, citing a lack of data. Market feedback suggests bulk wine availability is falling and prices are climbing, he said. “If we don’t have availability in the market, there’s a strong chance some products will increase in price,” Victor Magalhaes, an OIV statistician, said in an interview, citing wine vinegar as a product that may become more expensive. “Countries that are large producers of must and juice all face a shortage this year,” he said, referring to young wine.

20121031 1001 Soy Oil & Palm Oil Related News.

ITS CPO export up 10.9% to 1,600,545 tonnes for the period of 1~31 Oct 2012.
SGS CPO export up 9.3% to 1,567,112 tonnes for the period of 1~31 Oct 2012.

Pro Farmer: After the Bell Soybean Recap (CME)
Soybean futures closed 5 to 6 3/4 cents higher through the September contract. That was in the lower portion of today's range. Soybean futures were supported by short-covering today amid ideas Monday's sharp losses were overdone. Additionally, talk of Chinese demand sifted through the market on a light news day.

Soybean Complex Market Recap (CME)
November Soybeans finished up 6 1/2 at 1533 3/4, 14 1/2 off the high and 8 up from the low. January Soybeans closed up 6 3/4 at 1536 1/2. This was 8 1/4 up from the low and 14 1/2 off the high. December Soymeal closed up 3.5 at 476.0. This was 4.2 up from the low and 6.7 off the high. December Soybean Oil finished down 0.09 at 50.09, 0.46 off the high and 0.03 up from the low.
November and January soybeans were as much as 19 cents higher midday but fell off session highs and ended the day with single digit gains. Strong international demand, firm cash markets, and a lower US Dollar all helped to support. December soybean meal surged just nearly 2% in the early trade which led soybeans and oil higher. Outside markets were relatively stable today following yesterday weather developments in the northeast but US trading desks were still closed for many big banks and funds which left the trade rather choppy and thin. Gulf of Mexico bids were steady on the day after a stronger tone yesterday which offset some of the sharply lower trade in futures. Offsetting the higher trade was a weather forecast for South America that was more favorable. Weather watchers are hopeful that a drier pattern will begin to develop this week in Argentina while showers are set to move into parched areas of Northern Brazil later this week and into the weekend.

EDIBLE OIL: Palm oil futures fell to a near 2-week low as lower November export taxes in top producer Indonesia may shift demand away from competitor Malaysia and investors fret over a slowing global economy. (Reuters)

VEGOILS-Palm oil drops to 2-wk low on Indonesia tax, U.S. storm
Tue Oct 30, 2012 6:12am EDT
* Futures market falls again on Indonesia's export tax cut
    * Investors wary of macroeconomic uncertainties, raging U.S.
    * Prices stay choppy in a range of 2,430-2,600 ringgit
    * Palm oil's target of 2,379 ringgit unchanged -technicals

 (Updates prices)
    By Anuradha Raghu
    KUALA LUMPUR, Oct 30 (Reuters) - Palm oil futures fell to a
near 2-week low on Tuesday as investors feared lower November
export taxes in top producer Indonesia could shift demand away
from competitor Malaysia while  fretting over a slowing global
    Prices of the edible oil also came under pressure from
weaker Brent crude as Sandy, one of the worst storms to hit the
United States in years, shuttered U.S. refineries, curbing
energy demand in the world's largest economy and weighing on
other commodity markets.
    "At the moment, we don't see any supportive news for palm
oil. Prices are likely to stay choppy in a range of 2,430 to
2,600 ringgit," said Phillip Futures analyst Ker Chung Yang in
    "The tax cut will hurt Malaysia's palm oil prices as
Indonesia's palm oil becomes more competitive in the near
future. Malaysian players will certainly hope that the
government will do more to counter such an act from Indonesia."
    The benchmark January contract on the Bursa
Malaysia Derivatives Exchange slid 1.8 percent to 2,501 ringgit
($820) per tonne after dropping as low as 2,491 ringgit, a level
unseen since Oct. 18.
    Total traded volumes stood at 33,602 lots of 25 tonnes each,
higher than the usual 25,000 lots.
    Palm oil prices may still target 2,379 ringgit per tonne, as
a rebound from the Oct. 3 low of 2,230 ringgit has been
completed and a preceding downtrend has resumed, said Reuters
market analyst Wang Tao.
    Brent crude hovered above $109 a barrel on Tuesday due to
the storm, and analysts expect weaker crude oil to weigh on the
whole commodities asset class.
    In other vegetable oil markets, U.S. soyoil for December
delivery inched up 0.2 percent in early Asian trade. The
most-active May 2013 soybean oil contract on the Dalian
Commodity Exchange fell 0.3 percent.

China, India should cut tariff to boost green palm oil demand-RSPO
By Chew Yee Kiat
SINGAPORE | Tue Oct 30, 2012 6:26am EDT
Oct 30 (Reuters) - The world's largest edible oil buyers China and India should reduce import tariff to spur demand for eco-friendly palm oil, industry body Roundtable on Sustainable Palm Oil (RSPO) said on Tuesday.
Formed in 2004, the RSPO brings together plantation firms, consumers and green groups to promote the supply of palm oil produced from estates that do not harm wildlife or cut forests to expand.
Take up of more expensive green palm oil has been dominated by the European Union, with price-sensitive India and China with their billion-plus populations slow to order cargoes, said RSPO President Jan-Kees Vis.
"You would only need to shave a tiny proportion from the import tariff in order to make CSPO (certified sustainable palm oil) competitive with non-certified palm oil," Vis told reporters at the sidelines of the RSPO meeting in Singapore.
India and China account for almost 30 percent of global palm oil consumption in 2011, according to the U.S. Department of Agriculture data, making them key in RSPO's campaign to get more plantations to produce eco-friendly cargoes.
"Both markets are very price sensitive, and even though the sustainability premium is not high, any premium is a problem," Vis said.
A lower import tariff for green palm oil could attract producers to grow more sustainable palm oil, which currently has an annual output capacity of about 6 million tonnes -- roughly 12 percent of global palm oil production.
Chinese import duty for edible vegetable oils is at 9 percent, and 2 percent for industrial palm oil use. For India, there is no duty on CPO imports, while the refined palm oil attracts a duty of 7.5 percent.
But Vis, who is also the global director of sustainable sourcing development at Anglo-Dutch consumer goods giant Unilever , said the RSPO had to work with local industry players to push for these tariff cuts.
"If we as the RSPO board walk into the government office in New Delhi, I don't even think they will grant us an interview. So we have to work with the local players," Vis said.
Talks are in progress to convince the Chinese government to consider the proposal, but Vis said that the process could be a long one.
"We are working with the Chinese chamber of commerce for food and agricultural products. They are supporting the sustainable palm oil network in China," Vis said. "We're trying to get it into the next five-year plan."

VEGOILS-Palm oil ends lower, Indonesia tax cut weighs
Mon Oct 29, 2012 6:18am EDT
* Traders book profits from 1-month high after Eid al-Adha
    * Indonesia to cut crude palm oil export tax to 9 pct in Nov
    * Palm oil to fall to 2,379 ringgit -technicals
    * Coming Up: Malaysia Oct. palm oil exports; Wednesday

 (Updates throughout)
    By Chew Yee Kiat
    SINGAPORE, Oct 29 (Reuters) - Malaysian palm oil futures
dropped on Monday after a long weekend break, as losses in other
vegetable oil markets during the holiday and an export tax cut
by Indonesia prompted traders to book profit.
    Last Friday, U.S. soyoil lost 1 percent while the
China soyoil contract edged down 1.4 percent. Malaysian
financial markets were closed for the Eid al-Adha holiday.
    Selling pressure also mounted after the midday break on news
that Indonesia, the world's top palm oil producer, would cut its
palm export tax for November, a move that could hamper demand
for Malaysian products.
    Indonesia will cut the export tax to 9 percent, down from
13.5 percent in October, and lower the export tax for refined
palm olein to 3 percent in November from 6 percent in October.
    "Part of the fall is due to the market catching up after the
holiday. The significantly lower export duty by Indonesia also
put some pressure on prices," said a trader with a foreign
commodities brokerage in Malaysia.
    The benchmark January contract on the Bursa
Malaysia Derivatives Exchange slid 2.4 percent to close at 2,540
ringgit ($831) per tonne.
    Total traded volumes stood at 36,345 lots of 25 tonnes each,
higher than the usual 25,000 lots.  
    Palm oil prices rose to a near 1-month high at 2,615 ringgit
last Thursday, after cargo surveyors reported higher Malaysia's
palm exports for Oct. 1-25 compared to a month ago.
    Traders will be looking for more trading cues from the
full-month exports figure for October on Wednesday.
    Technicals were bearish as a bullish target at 2,676 ringgit
per tonne has been aborted, and a target at 2,379 ringgit has
been established, said Reuters market analyst Wang Tao.
    Brent crude oil fell below $109 a barrel on Monday as
refineries along the U.S. East Coast wound down operations ahead
of the approach of Hurricane Sandy, reducing crude use in the
world's largest oil consumer.
    In other vegetable oil markets, U.S. soyoil for December
delivery edged down 0.7 percent in late Asian trade. The
most-active May 2013 soybean oil contract on the Dalian
Commodity Exchange closed 1.4 percent lower.

Thursday, October 25, 2012

20121025 1115 Global Markets & Energy Related News.

GLOBAL MARKETS-Asian shares steady, earnings still in focus
TOKYO, Oct 25 (Reuters) - Asian shares steadied, but sentiment remained vulnerable with weak corporate earnings continuing to undermine investor confidence.
"Global sentiment is not conducive to risk-taking. In fact we are seeing more defensive plays," said Lee Kyung-soo, an analyst at Shinyoung Securities, adding that the Korean stock market will likely hold steady ahead of third quarter results from Hyundai Motor Co.

Oil falls on US crude stocks rise, Europe's weak data
NEW YORK, Oct 24 (Reuters) - Brent crude prices fell for a seventh consecutive session on Wednesday as rising U.S. crude inventories and weak euro zone economic data offset supportive signs that Chinese petroleum demand could stage a recovery.
"The report is mostly bearish, with the large increase in crude oil inventories being the highlight of the report," said John Kilduff, partner at Again Capital LLC in New York.

NATURAL GAS - US natgas futures end down on mild extended forecasts
NEW YORK, Oct 24 (Reuters) - U.S. natural gas futures ended lower on Wednesday for the second time this week, undermined by prospects for a sizable inventory build on Thursday and by milder early-November weather despite the cold shot expected next week that should stir more demand.
"We're still seeing plenty of supply, and demand has peeled back a bit with the milder weather. Unless we get some cold weather, we could see prices move even lower," said Jason Schenker, president of Prestige Economics in Texas.

Euro Coal-S.Africa coal prices hit fresh lows, $77/T trades
LONDON, Oct 24 (Reuters) - South African prompt physical coal prices fell by $2.60 a tonne to the lowest since late December 2009 on Wednesday, extending a month-long decline, with a trade at $77.00 for a November cargo, traders said.
"There is still a lot of Q4 South African in traders' hands and it just doesn't price in competitively in most markets," one trader said.

20121025 1114 Local & Global Economy Related News.

The leading index (LI), which monitors the economic performance in advance, rose 2% yoy in Aug (2.3% yoy in Jul). The  coincident index (CI), which  measures the current economic activity, up 1.6% yoy from 0.2% yoy in Jul while  the lagging index increased 3.5% yoy in Aug (2.3% yoy in Jul). Conversely, the level of Diffusion Index for both LI and CI showed below 50% for the first time in 2012. (Department of Statistics)

Vietnam: Inflation accelerates in October for a second month
Vietnam’s inflation accelerated for a second month, reducing the scope to ease monetary policy and spur an economy set to grow at the slowest pace in 13 years. Consumer prices rose 7% in October from a year earlier after climbing 6.48% in September, the General Statistics Office said in Hanoi yesterday. The median of four estimates in a Bloomberg News survey was 6.75%. Prices gained 0.85% from the previous month. The nation will maintain a tight, flexible monetary and fiscal policy in 2013 and lower interest rates in line with inflation, Prime Minister Nguyen Tan Dung told legislators at the National Assembly in Hanoi this week.

China: Industry gauge rises as easing prospects abate
A Chinese manufacturing index rose and economists have pared forecasts for cuts in interest rates and bank reserve requirements as confidence grows that the world’s second-biggest economy is stabilising. The preliminary, or flash, reading was 49.1 for a purchasing managers’ index released yesterday by HSBC Holdings Plc and Markit Economics, after a final level of 47.9 for September. China will probably keep the benchmark one-year lending rate at 6% through the end of 2012, based on median estimates in a survey conducted 18-22 Oct, instead of prior forecasts for a quarter percentage-point reduction.

Euro: Recession deepens as manufacturing shrinks
Euro-area services and manufacturing output contracted more than economists forecast in October and German business confidence dropped to the lowest in more than 2 1/2 years as Europe’s recession deepened. A composite index based on a survey of euro-area purchasing managers in services and manufacturing fell to 45.8, the lowest in more than three years, from 46.1 in September, London-based Markit Economics said yesterday. Economists had forecast a reading of 46.5, according to a Bloomberg News survey. A separate factory index in China rose. In Germany, the Ifo institute’s business climate index unexpectedly dropped to 100.0 from 101.4 in September.

UK: BOE ready to add to QE if recovery fades
Bank of England Governor Mervyn King said the Monetary Policy Committee is ready to add to stimulus again as it assesses the strength of the domestic recovery amid signs that global economic weakness is spreading. “At this stage, it is difficult to know whether some of the recent more positive signs will persist,” King said in a speech late yesterday in Cardiff, Wales. “Should those signs fade; the MPC does stand ready to inject more money into the economy.” King said gross domestic product data tomorrow may confirm a “zig-zag” pattern of recovery in the UK that is likely to continue. His comments come two weeks before officials must decide whether to increase bond purchases and at a time when the economies that have driven global growth through the crisis have shown signs of faltering.

US: Home sales rising to two-year high spur US growth
Americans bought new homes in September at the fastest pace in two years, another sign the industry whose decline was at the heart of the recession is bouncing back. Sales climbed 5.7% to a 389,000 annual pace, the most since April 2010, following a revised 368,000 rate in August, figures from the Commerce Department showed yesterday in Washington. The median estimate of 75 economists surveyed by Bloomberg called for an increase to 385,000. Population growth and mortgage rates pushed to record lows by Federal Reserve purchases of housing debt are generating sales for builders like Toll Brothers Inc. and spurring the three-year economic recovery. Housing starts in September jumped 15% to the fastest pace since July 2008, a report last week showed.

20121025 1114 Malaysia Corporate Related News.

TH Plantations is set to buy 6,500ha of oil palm estate and a quarry in Sarawak for more than RM200m. "It's a brownfield block in Bintulu, away from native customary land. The oil palms are young, between two and five years old," a source said. "It's  going for RM20,500 per hectare. It is at a slight premium because this Bintulu estate includes a quarry mine, separately priced at around RM70m. It has income-generating rock reserves of up to 30 years," the source added. (BT)

Petroliam Nasional (Petronas) and Progress Energy Resources Corp have agreed to meet Canadian officials in Ottawa this week on its RM16bn proposed acquisition of Progress. Petronas said its subsidiary Petronas Carigali Canada Ltd, together with Progress, will be meeting officials from Canada's Ministry of Industry to better understand the Canadian government's requirements with respect to the proposed acquisition. Based on the announcement by the Canadian Ministry of Industry last Friday, Petronas said it has up to 30 days, or longer as mutually agreed to, to make any additional representations and submit any further undertakings. In this regard, Petronas said it will work together with Progress to ensure that the Canadian Industry Minister Christian Paradis has the necessary information to determine that the proposed acquisition of Progress would be of net benefit to Canada. (BT)

Sunway REIT aims to achieve RM7bn in total assets under management in three to five years through a combination of acquisitions from its sponsor, Sunway Bhd, and external acquisitions. According to CEO Datuk Jeffrey Ng, Sunway REIT does not intend to expand overseas. (Bernama)

The government will not cut the  excise duty for cars, dashing hopes of driving cheaper cars. International Trade and Industries Minister Datuk Seri Mustapa Mohamed said that the excise duty on imported and locally manufactured cars cannot be reduced because it would have an adverse impact on the industry as a whole. A reduction will have a significant impact on government's revenue from excise duty now estimated at RM7bn a year. (Bernama)

Prominent corporate lawyer Datuk E Sreesanthan, who is facing charges of insider trading, has offered himself to be re-elected as a director of Sime Darby Bhd in its coming AGM. Sreesanthan had taken a leave of absence from Sime Darby on July 25, five days after he was charged by Securities Commission with seven counts of insider trading. Sime Darby previously said Sreesanthan had indicated his intention to retire by rotation when his term comes up for renewal in the company AGM. However, executive close to Sreesanthan said he has prepared for all the challenges for his case during his leave of absence. As a result, he now has time to go back to resuming his duties as a board member and is offering himself to be re-elected to the Sime Board. (Financial Daily)

Naim Holdings Bhd says its subsidiary Naim Engineering Sdn Bhd has confirmed the acceptance of a letter of award from  Gadang Engineering (M) Sdn Bhd to be a subcontractor for the Mass Rapid Transit (MRT) project in the Klang Valley. The Package S2 contract involves the execution and completion of elevated stations and other works at Taman Industri Sungai Buloh, PJU 5 and Dataran Sunway for RM204.6m. (BT)

Taiwan's Phison Electronics Corp is looking to list its operations on Bursa Malaysia by 2016. Its Malaysian-born CEO and co-founder Datuk Pua Khein-Seng said that the plan to float Phisontech Electronics’ was not for capital gains, but more to showcase the ability of home-grown information technology companies to thrive globally. Phison Electronic, listed on the Taiwan Stock Exchange and established in 2000, manufactures and markets universal serial bus (USB) flash pen drives, card readers. adapters, flash memory controllers and integrated circuits. (BT)

The Federal Land Development Authority (FELDA) buys palm oil from its settlers at market prices and not at a discount, said its chairman Tan Sri Mohd Isa Abdul Samad. His comment aimed to dismiss allegations made by an opposition leader that Felda Palm Industries Sdn Bhd was buying fresh fruit bunch at a discount of RM200 per tonne from the traded monthly crude palm oil prices. (Financial Daily)

Four telcos shortlisted for DTTB infrastructure
Four out of eight companies which submitted their bids for the digital terrestrial television broadcasting (DTTB) infrastructure buildup is believed to have been shortlisted. The four, said to be Celcom Axiata, Puncak Semangat SB, REDtone International and Sapura Holdings, will now enter the second stage of bidding. DTTB is for the free-to-air channels to migrate from an analogue to digital format. Telekom Malaysia and YTL Communications did not submit a bid. (StarBiz)

No excise duty cut on cars
The government will not cut the excise duty for cars. International Trade and Industries Minister Datuk Seri Mustapa Mohamed said that the excise duty on imported and locally manufactured cars cannot be reduced because it would have an adverse impact on the industry as a whole. Government’s revenue from excise duty is estimated at RM7bn a year. Mustapa said that “the government is aware that the domestic automotive industry has to be developed further to become more competitive and offer more benefits to the people, particularly in selling cars at a reasonable price.” (Financial Daily)

Daya wins tender to construct mall in Putrajaya
Daya Materials is the winner for the construction portion of IOI Properties’ upcoming IOI City Mall in Putrajaya, valued at RM500m. The mall sits on 36 acres and will be complemented by two office blocks and a hotel. While the mall is scheduled to be completed in 2014, the office blocks will be completed a year later. The mall has a GDV of RM1bn and will target the 1.1m residents living within 10-minutes drive from the Putrajaya area. (StarBiz)

Bumi Armada wins contracts worth RM147m
Bumi Armada has secured five contracts totaling RM147m, with an optional extension value of RM102m. The contracts are for works in Gabon, Congo and Saudi Arabia. The RM12m contract in Gabon is for the charter of an accommodation boat while the RM92m contracts in Congo are for the charter of a towing vessel and an accommodation barge. The Saudi Arabia’s RM43m contract is for the charter of towing vessels. (Malaysian Reserve)

RM1.04bn for forest plantation scheme
The government has allocated RM1.04bn for a forest plantation scheme to ensure sustainable wood supplies in the country. Malaysian Timber Industry Board (MTIB) director-general Dr Jalaluddin Harun said the allocation would be used to turn 375,000 ha nationwide into forest plantations from 2006 until 2021. A total of 106,000 ha had been approved for the planting purposes, of which 56,000 ha had been planted. 40 companies have taken part in the scheme, with RM650m soft loan of the RM1.04bn allocation disbursed to them. (StarBiz)

Request for RA extension for rubber-based producers likely to be rejected
MITI believes the request to extend reinvestment allowance (RA) by rubber-based producers whose exports rose 14.8% to RM13.4bn for the first eight months of this year will most probably be rejected again by the government. MITI says the government views the current 15-year period granted for companies to enjoy tax break for reinvestments to be sufficient. (Malaysian Reserve)

Pacificmas Bhd has announced that it will be delisted from the Main Board with effect from Oct 30.On  Sept 11, the financial services provider announced that its board of directors had resolved to table the proposed members' voluntary winding-up of the company at an EGM. (BT)

20121025 1047 Global Market Related News.

Asia FX By Cornelius Luca - Wed 24 Oct 2012 15:31:16 CT (Source:CME/
The appetite for risk improved cautiously and selectively on Wednesday after imploding for two the past three days amid lackluster corporate earnings. The foreign currencies ended divergently after falling since Thursday, as the boost from a better Chinese PMI was countered by weak Eurozone data. The US stock markets ended lower after the S&P500 seems to have confirmed a triple top formation on Tuesday. The short-term outlook for the European and commodity currencies is sideways. The medium-term outlook for most of the foreign currencies is still slightly bullish. The LGR short-term model is short on yen, sterling and Canadian dollar, and long euro, franc and Australian dollar. Good luck!

US: Markit manufacturing PMI edged up to 51.3 in October from 51.1 in September
US: New home sales rose to 389,000 in September from 368,000 in August.
US: The Fed left interest rates unchanged and re-affirmed its commitment to support the US economy is needed.

Today's economic calendar
Japan: Corporate service price  for September
China: Leading Economic Index for September

Asian Stocks Rise After U.S. Home Sales Data; KDDI Jumps (Bloomberg)
Asian stocks rose, with the regional benchmark index heading for its first advance in five days, as sales of new homes in the U.S. climbed to a two-year high, helping to support what the Federal Reserve described as modest growth in the world’s biggest economy. SK Hynix Inc. (000660), the world’s second-largest maker of computer memory chips, climbed 1.9 percent in Seoul. KDDI Corp. jumped 4.8 percent after Japan’s No. 2 mobile-phone company and Sumitomo Corp. offered as much as 216 billion yen ($2.7 billion) for the remaining shares of their cable television joint venture. Sharp Corp. sank 4.8 percent in Tokyo after the Nikkei newspaper reported the maker of Aquos televisions may post a 400 billion yen first-half loss.
The MSCI Asia Pacific Index (MXAP) gained 0.3 percent to 122.43 as of 10:22 a.m. in Tokyo, erasing losses of 0.1 percent. About two shares rose for each that fell. The gauge rose 12 percent from this year’s low on June 4 through yesterday as stimulus measures in the U.S., Japan and China boosted sentiment amid a global economic slowdown and Europe’s debt crisis. “The economy is recovering in the U.S., allowing investors to have a certain amount of confidence,” said Mitsushige Akino, who helps oversees about $626 million in assets at Ichiyoshi Investment Management Co. in Tokyo. “To a certain extent, weaker corporate earnings have already been priced in, so earnings shouldn’t drive down the overall market any further, but individual shares will react.”
The Nikkei 225 Stock Average added 0.5 percent, while Australia’s S&P/ASX 200 Index rose 0.1 percent. Taiwan’s Taiex Index gained 0.3 percent and South Korea’s Kospi Index advanced 0.1 percent. Markets in China and Hong Kong have yet to open.

Japan Stocks Swing From Gains, Losses on Fed Comments (Bloomberg)
Japanese stocks swung between gains and losses after the U.S. Federal Reserve said the economy is growing modestly, and the nation’s new home sales climbed to a two-year high. Funai Electric Co., a maker of audio-visual equipment that relies on North America for half its revenue, gained 2.2 percent. Mitsubishi Motors Corp. rose 2.9 percent after the carmaker raised its profit forecast. Nippon Electric Glass Co. led declines on the Nikkei 225 Stock Average (NKY) after first-half net income tumbled and industry bellwether Corning Inc. said it may cut jobs to improve earnings. The Nikkei 225 Stock Average rose 0.3 percent to 8,976.39 as of 9:47 a.m. in Tokyo after falling as much as 0.1 percent. The broader Topix (TPX) Index added 0.3 percent to 745.38.
“The economy is recovering in the U.S., allowing investors to have a certain amount of confidence,” said Mitsushige Akino, who helps oversee about $626 million in assets at Ichiyoshi Investment Management Co. in Tokyo. “Weaker corporate earnings have already been priced in, so earnings shouldn’t drive the overall market down any further but individual shares will react.” The Topix has risen 3.4 percent through yesterday from Sept. 6 after the European Central Bank started a global wave of easing to boost growth, with the Fed and the Bank of Japan following suit. Shares on the stock gauge traded at 0.9 times book value, compared with 2.2 for the Standard & Poor’s 500 Index and 1.5 for the Europe Stoxx 600 Index.

U.S. Stocks Fall to Seven-Week Low as Fed Offsets Economy (Bloomberg)
U.S. stocks declined, sending the Standard & Poor’s 500 Index to a seven-week low, as the Federal Reserve’s call for moderate growth offset signs of improvement in Chinese factory output and America’s housing market. Netflix Inc. (NFLX) plunged 12 percent after the world’s largest online video service cut its forecast for domestic growth. Altera Corp. (ALTR) slumped 8.4 percent as the maker of programmable chips used in phone systems predicted sales that fell short of estimates. D.R. Horton Inc. (DHI) and Toll Brothers Inc. (TOL) added at least 1.5 percent to pace gains in homebuilders. Facebook Inc. (FB), the world’s biggest social networking site, surged 19 percent after reporting sales that topped analysts’ projections.
The S&P 500 declined 0.3 percent to 1,408.75 at 4 p.m. New York time, dropping 1.8 percent in two days. The Dow Jones Industrial Average lost 25.19 points, or 0.2 percent, to 13,077.34. Volume for exchange-listed stocks in the U.S. was 6.1 billion shares, or about in line with the three-month average. “It’s been a pretty lackluster market,” Walter “Bucky” Hellwig, who helps manage $17 billion of assets at BB&T Wealth Management in Birmingham, Alabama, said in a telephone interview. “There’s nothing new or encouraging in terms of the Fed’s outlook regarding the economy. In addition to that, top line growth of companies has been disappointing.”
Equities erased gains as the Fed said the economy is still growing modestly and unemployment remains elevated as it maintains $40 billion in monthly purchases of mortgage-backed securities aimed at spurring the three-year expansion. An earlier advance was driven by a survey signaling a smaller contraction in China’s manufacturing. Purchases of new homes in the U.S. rose to the highest level in more than two years.

Recap Stock Index Market Report (CME)
The December S&P 500 trended higher during the early morning hours, supported by favorable economic data and better than expected earnings from Boeing. The morning bounce began with positive data flow out of China, with a read on manufacturing showing a larger than anticipated jump. This morning's round of US corporate earnings seemed to offer added support, with standout leadership coming from Boeing, Facebook and Dow Chemical. Meanwhile, US equity markets failed to gain much upside after a stronger than expected New Home Sales report and a muted reaction following the FOMC meeting decision. The major US indices registered their low of the session ahead of the closing bell.

European Stocks Climb on SAP Revenue Forecast (Bloomberg)
European stocks advanced, after yesterday tumbling the most in four weeks, as technology companies rallied, outweighing worsening economic data from the euro area. SAP AG (SAP) gained 4.2 percent after the world’s biggest maker of business-management software raised its full-year revenue target as license sales beat estimates. STMicroelectronics NV (STM) climbed 4.2 percent on plans to cut costs. Volvo AB and Nordea Bank AB (NDA) retreated more than 1.5 percent after the companies reported third-quarter earnings that missed projections. The Stoxx Europe 600 Index (SXXP) rose 0.4 percent to 269.52 at the close in London, after earlier falling as much as 0.4 percent. The equity benchmark dropped 1.7 percent yesterday as company earnings disappointed investors. The gauge has rallied 15 percent from this year’s low on June 4 as the European Central Bank approved an unlimited bond-buying plan for the most-indebted members of the currency zone.
“People were expecting a pretty undynamic earnings season given the macro drop, so there are few surprises on that front,” Philip Saunders, a portfolio manager at Investec Asset Management, said on Bloomberg Television in London. “Clearly some leading stocks have disappointed, but beneath the surface, there is is some good news as well.” Stocks slid earlier as separate reports showed euro-area services and manufacturing output have contracted more than economists had forecast, while German business confidence unexpectedly declined.

Treasuries Stay Lower Before Durable Goods Orders (Bloomberg)
Treasuries stayed lower following a loss yesterday before a report economists said will show durable goods orders rose and a $29 billion seven-year auction. U.S. government securities due in 10 years and longer have handed investors a 5 percent loss in the past three months, according to indexes compiled by Bloomberg and the European Federation of Financial Analysts Societies. Only South African and Greek bonds have done worse, based on changes in debt levels and currency rates, the indexes show. Benchmark 10-year notes yielded 1.79 percent as of 9:32 a.m. in Tokyo, according to Bloomberg Bond Trader data. The price of the 1.625 percent note due in August 2022 was 98 17/32. The record low was 1.38 percent on July 25. “I just don’t think there’s any value in Treasuries,” said Roger Bridges, who oversees the equivalent of $15.5 billion of debt as head of fixed income at Tyndall Investment Management Ltd. in Sydney. “Growth isn’t as bad as people were expecting.”
Orders for U.S. durable goods probably rose 7.5 percent in September following a 13.2 percent slump in August that was the biggest since January 2009, according to the forecast of 77 economists surveyed by Bloomberg. The Commerce Department report is scheduled for 8:30 a.m. New York time. Ten-year yields will be 1.77 percent at year-end and 2.06 percent by June 30, according to a Bloomberg survey of economists, with the most recent projections given the heaviest weightings. Treasuries fell yesterday as the Federal Reserve said it would maintain stimulus measures with the economy growing at a “moderate” pace. The central bank, in its last meeting before the Nov. 6 presidential election, retained its program of $40 billion in monthly purchases of mortgage-backed debt aimed at spurring the three-year expansion and said “inflation recently picked up somewhat.”
Today’s auction is the last of three note sales this week. The U.S. sold $35 billion of five-year debt yesterday and the same amount of two-year securities on Oct. 23.

Euro Stays Lower Before German, French Confidence Data (Bloomberg)
The euro remained lower against its major counterparts amid signs the region’s debt crisis is hampering growth in its biggest economies. The 17-nation euro traded below $1.30 for a third day before data forecast to show German consumer confidence will fail to improve in November and French household sentiment fell for a fourth month. New Zealand’s dollar held onto a gain following the Reserve Bank’s decision to keep interest rates unchanged. Demand for the dollar was limited after the Federal Reserve said it plans to continue bond buying in a third round of quantitative easing, which tends to debase the U.S. currency. “The recession that you’ve got in the peripheries is certainly now spilling over into the core,” Joseph Capurso, a currency strategist in Sydney at Commonwealth Bank of Australia (CBA), the nation’s biggest lender, said of Europe’s economies. “France is in a recession, Germany, if not in a recession, then is very close to it, so that’s certainly not a good sign, and the euro dipped a bit.”
The euro dropped 0.1 percent to $1.2968 at 9:21 a.m. in Tokyo after declining 0.7 percent over the previous two days. It touched $1.2921 yesterday, the weakest level since Oct. 15. The shared currency was little changed at 103.53 yen. The dollar bought 79.84 yen from 79.81. GfK SE (GFK), a market-research company in Nuremberg, Germany, will probably say tomorrow that its consumer-sentiment index will remain at 5.9 for a fourth-straight month in November, according to the median estimate of economists in a Bloomberg News survey. A report from the Ifo institute yesterday showed German business confidence unexpectedly fell to the lowest in more than 2 1/2 years.

N.Z. Dollar Touches One-Month Versus Yen After RBNZ (Bloomberg)
New Zealand’s dollar rose to a near six-month high versus the yen after the central bank left interest rates unchanged and said market sentiment has improved. The so-called kiwi climbed for a second day against the U.S. dollar after newly installed Reserve Bank of New Zealand Governor Graeme Wheeler said inflation is expected to accelerate. Australia’s dollar rose for a second day versus the yen as swaps traders cut bets that the South Pacific nation’s central bank will reduce borrowing costs next month. “Wheeler disappointed those in the market who had been expecting an easing signal,” said Imre Speizer, a market strategist in Auckland at Westpac Banking Corp. (WBC), Australia’s No. 2 lender. “The market was fully priced for a January rate cut, and that pricing will be at least partially unwound.”
The New Zealand dollar climbed 0.4 percent to 65.74 yen as of 12:10 p.m. in Sydney, the most since April 30. It added 0.2 percent to 82.24 U.S. cents. Australia’s dollar rose to 82.81 yen, the highest since Sept. 19, up 0.2 percent from yesterday’s close. The Aussie climbed 0.1 percent to $1.0362. The MSCI Asia Pacific Index (MXAP) of shares advanced 0.3 percent, snapping a four-day decline and boosting the allure of higher- yielding currencies. The RBNZ expects annual inflation to head back to the middle of its 1 percent to 3 percent target range from 0.8 percent in the third quarter, Wheeler said in a statement. Improved market sentiment suggests that risks to the global outlook are “more balanced,” he said. Australia’s statistics bureau said yesterday the so-called core inflation rate rose 2.4 percent in the three months ended Sept. 30, surpassing the 2.2 percent increase estimated by economists.
Overnight-index swaps data compiled by Bloomberg show traders see a 63 percent chance Australia’s central bank will lower its key rate to 3 percent at its Nov. 6 meeting, compared with a 97 percent likelihood signaled on Oct. 22.

Fed Says Growth ‘Moderate’ While Maintaining Bond Buying (Bloomberg)
The Federal Reserve said the economy is still growing modestly and unemployment remains elevated as it maintains $40 billion in monthly purchases of mortgage-backed securities aimed at spurring the three-year expansion. “Growth in employment has been slow,” the Federal Open Market Committee said today at the conclusion of a two-day meeting in Washington. “Household spending has advanced a bit more quickly.” Fed Chairman Ben S. Bernanke is leading a third round of unprecedented bond-buying as he seeks to speed job creation for 12.1 million unemployed Americans. The FOMC, in its last scheduled meeting before the presidential election, repeated today that it would press on with the asset purchases until the labor market improves “substantially.” “Strains in global financial markets continue to pose significant downside risks,” the statement said. “Inflation recently picked up somewhat, reflecting higher energy prices.” It said longer-term inflation expectations have remained stable.
Treasuries were little changed after the statement, with the 10-year note yield rising one basis point, or 0.01 percentage point, to 1.77 percent as of 2:53 p.m. The Standard & Poor’s 500 Index fell less than 0.1 percent to 1,412.85 in New York after rising as much as 0.5 percent.

Bernanke Seen Attacking Jobless Rate With QE Through 2013 (Bloomberg)
Federal Reserve Chairman Ben S. Bernanke says he’ll stoke the economy until the job market recovers “substantially.” That promise may force him to keep buying bonds until the final months of his term ending in January 2014, according economists in a Bloomberg survey. Sixty-eight percent of 60 economists said the Fed chairman’s third round of quantitative easing will last until late next year or beyond. Just 51 percent of them said the strategy will help boost employment, with a median estimate of 116,000 jobs over the course of next year. “The recovery in the labor market is probably going to be more sluggish than the Fed recognizes” said Michael Hanson, senior U.S. economist at Bank of America Corp. in New York and a former Fed economist. He said policy makers have “painted themselves in a bit of a corner, waiting to see a significant improvement in the labor market.”
Bernanke said in August that new bond buying, while spurring growth and generating jobs, may erode confidence the Fed will exit smoothly from record accommodation, including the first two rounds of bond purchases totaling $2.3 trillion. Most surveyed economists believe Bernanke has gone too far with quantitative easing, with 55 percent saying policy is too easy, compared with 48 percent who said so in a Sept. 7-10 survey. Bernanke and his colleagues on the Federal Open Market Committee resumed a two-day meeting in Washington today and plan to release a statement at about 2:15 p.m. on policy, including their current plan to buy $40 billion in mortgage-backed securities each month for an indefinite period.

Home Sales Rising to Two-Year High Spur U.S. Growth: Economy (Bloomberg)
Americans bought new homes in September at the fastest pace in two years, another sign the industry whose decline was at the heart of the recession is bouncing back. Sales climbed 5.7 percent to a 389,000 annual pace, the most since April 2010, following a revised 368,000 rate in August, figures from the Commerce Department showed today in Washington. The median estimate of 75 economists surveyed by Bloomberg called for an increase to 385,000. Population growth and mortgage rates pushed to record lows by Federal Reserve purchases of housing debt are generating sales for builders like Toll Brothers Inc. (TOL) and spurring the three-year economic recovery. Housing starts in September jumped 15 percent to the fastest pace since July 2008, a report last week showed.
“All the things that were really holding back housing are finally starting to lift,” said Guy Berger, a U.S. economist at RBS Securities Inc. in Stamford, Connecticut, who projected sales would climb to 390,000. “It really is tough to find any bad signs here. Inventories are very, very lean. Assuming the economy remains on track, housing should continue to improve for the rest of the year and into 2013.” Stocks fell, erasing earlier gains, after the Fed said employment growth is slow and strains in financial markets continue to pose risks to the economy. The Standard & Poor’s 500 Index dropped 0.3 percent to 1,408.75 at the close in New York. Treasury securities declined, sending the yield on the benchmark 10-year note up to 1.79 percent from 1.76 percent late yesterday.

India Rate-Cut Odds Climb as Policy Revamp Stems Rupee Plunge (Bloomberg)
India’s central bank will consider reducing interest rates for the first time since April after government efforts to pare the budget deficit stemmed a slide in the rupee, boosting scope to stimulate the economy. Governor Duvvuri Subbarao will cut the repurchase rate to 7.75 percent from 8 percent, 10 of 26 analysts said in a Bloomberg News survey ahead of an Oct. 30 decision. Two predicted a reduction to 7.5 percent and the rest no change. A majority of respondents in another poll forecast Subbarao will lower banks’ reserve ratios to spur lending. Finance Minister Palaniappan Chidambaram said Oct. 12 that India needs cheaper credit, following a revamp of economic policy that included fuel-subsidy curbs and helped make the rupee one of Asia’s best-performing currencies in the past three months. While Subbarao has signaled that a narrower budget gap may provide more room to join nations from Brazil to Thailand in extending rate cuts, he also faces inflation of almost 8 percent.
“There is blatant pressure from the government to ease and it’ll be hard for the central bank to ignore it,” said Rajeev Malik, a Singapore-based senior economist at CLSA Asia-Pacific Markets. “Our case for cutting rates rests on the RBI making a reciprocal gesture to the government following its initiatives in the last one month. But more needs to be done on the fiscal deficit.” The Reserve Bank of India unexpectedly reduced the amount of deposits lenders must set aside as reserves last month to boost growth, even as it kept interest rates unchanged as expected by the majority of economists in a Bloomberg survey.

Brazil Seen Leading Latin American Economic Resurgence (CME)
Central Bank May be Forced to Reverse Course
Economic growth in Brazil and other Latin American countries, on pace for the weakest performance in three years, is expected to improve in 2013 thanks to stronger domestic consumption and China's ongoing demand for commodities, according to the Economist Intelligence Unit. Real Gross Domestic Product will increase an estimated 3.8% in Latin America next year from 3.1% this year, the group's analysts said in a recent report. The expected improvement will be driven in large part by Brazil, where GDP growth may jump to 4.2% from 1.5% in 2012. "South American economies will continue to be supported by China's demand for soft and hard commodities exports, even if the period of sustained increases in both prices and volumes has come to an end," the group wrote. Also, historically low interest rates in the U.S. and other major economies "will continue to benefit those Latin American economies that are well integrated into global financial markets."
The Ibovespa index, Brazil's stock-market benchmark, is up nearly 10% since the middle of 2012 as the country's central bank rate cuts bolstered economic prospects. CME Group's U.S. dollar-denominated Ibovespa futures, launched October 22, offer investors access to the expanding Brazil market through a single trade and provide risk mitigation through CME Clearing. The new Ibovespa contract complements CME Group's existing slate of equity index products, including U.S.-based S&P 500, Dow Jones and NASDAQ-100 contracts. For more information, join CME Group at an Ibovespa breakfast briefing November 1 at the annual Futures Industry Association Expo in Chicago.

N.Z. Holds Benchmark Rate at 2.5% as Wheeler Term Begins (Bloomberg)
New Zealand’s new central bank chief extended a period of record-low borrowing costs as a stronger housing market offset a fragile global economy, boosting the currency as traders pared bets on interest-rate cuts. “For now it remains appropriate for the official cash rate to be held at 2.5 percent,” Reserve Bank Governor Graeme Wheeler said in a statement today after a meeting in Wellington. The decision was the first for the former World Bank official who took over from Alan Bollard in late September. Slowing global growth is hurting demand for New Zealand’s exports, which make up about 30 percent of country’s gross domestic product. Sluggish domestic demand and the strongest Group of 10 currency this year have pushed inflation below the central bank’s 1 percent to 3 percent target range.
“The high New Zealand dollar is undermining export earnings and encouraging substitution toward imported goods and services,” Wheeler said. “GDP continues to expand at a modest pace. Housing market activity is increasing as expected and repairs and reconstruction in Canterbury are boosting the construction sector.” Today’s decision was forecast by all 17 economists in a Bloomberg News survey. New Zealand’s dollar rose as traders reduced wagers on a rate cut. It bought 81.97 U.S. cents at 10:33 a.m. in Wellington compared with 81.51 cents immediately before the statement.

ECB Said to Push Spain’s Bankia to Swap Junior Debt for Shares (Bloomberg)
European authorities are pushing Bankia (BKIA) group to impose losses on junior debtholders as part of Spain’s bank bailout by swapping their securities for stock in the nationalized lender, two people with knowledge of the matter said. The European Central Bank and European Commission want investors including preference shareholders to accept newly issued shares in exchange for their existing securities to help reduce the cost to the taxpayer of Spain’s 100 billion-euro ($130 billion) bank rescue, said the people, who declined to be named because the matter isn’t public. Bankia opposes the proposal, they said. Forcing losses on the investors is politically sensitive because many are retail clients, and Economy Minister Luis de Guindos has said in Parliament in Madrid that banks should never have sold preferred shares to individual investors.
Under EU rules, junior bondholders must share the burden of rescuing lenders to reduce the cost to taxpayers and the exercise typically involves exchanging the notes for cash or new securities at a discounted value. De Guindos, who has changed legislation to limit future sales of preference shares to retail clients, has said the government is seeking a solution for the investors. European Union Competition Commissioner Joaquin Almunia said in June that Spain could use budget revenue to compensate them. Spokesmen for the ECB and the Spanish Economy Ministry declined to comment yesterday. Antoine Colombani, an EU spokesman, said the terms of Bankia’s restructuring are being discussed with Spanish authorities. A spokesman for Bankia also declined to comment.

Draghi Defends Bond Purchases With Warning of Deflation (Bloomberg)
European Central Bank President Mario Draghi defended his plan to buy government bonds in the German parliament today with a warning about deflation risks. The ECB’s so-called Outright Monetary Transactions “will not lead to inflation,” Draghi told lawmakers in Berlin in a closed-door session, according to a text provided by the ECB. “In our assessment, the greater risk to price stability is currently falling prices in some euro-area countries,” he said. “In this sense, OMTs are not in contradiction to our mandate: in fact, they are essential for ensuring we can continue to achieve it.” Draghi is seeking to win support in Europe’s largest economy for his plan to purchase government bonds to stem the debt crisis and safeguard the euro. Some German policy makers including Bundesbank President Jens Weidmann have said the proposal is tantamount to printing money to finance governments, which is prohibited by the ECB’s statutes.
“OMTs will not lead to disguised financing of governments,” Draghi said. “All this is fully consistent with the Treaty’s prohibition on monetary financing. Moreover, they will focus on shorter maturities and leave room for market discipline.”

Euro-Area Recession Deepens as Manufacturing Shrinks: Economy (Bloomberg)
Euro-area services and manufacturing output contracted more than economists forecast in October and German business confidence dropped to the lowest in more than 2 1/2 years as Europe’s recession deepened. A composite index based on a survey of euro-area purchasing managers in services and manufacturing fell to 45.8, the lowest in more than three years, from 46.1 in September, London-based Markit Economics said today. Economists had forecast a reading of 46.5, according to a Bloomberg News survey. A separate factory index in China rose. In Germany, the Ifo institute’s business climate index unexpectedly dropped to 100.0 from 101.4 in September. The European Central Bank and the International Monetary Fund have both lowered their forecasts for the euro-area economy as governments cut spending to plug budget gaps, eroding consumer and export demand. Even so, the region’s debt burden rose to a record in the second quarter, reaching 90 percent of gross domestic product, another report showed today.
“The euro-zone recession is still getting worse,” said Holger Schmieding, chief economist at Berenberg Bank in London. “In a disappointing set of data, the fact that the Ifo expectations index did not decline further offers the only ray of hope. In this sense, the survey results today do not dispel the hope that the euro economy could turn the corner early next year.”

Rajoy Sees Case for Slowing EU-Driven Austerity (Bloomberg)
Spanish Prime Minister Mariano Rajoy said there is a case for easing budget-deficit targets set by the European Union as the recession undermines tax revenue. “I think what a lot of other people think,” Rajoy told the Spanish senate yesterday. “Things could be done more calmly, taking into account especially that we are in a recession, but in any case I can’t give up on Spain’s commitments.” Rajoy’s comments undercut Budget Minister Cristobal Montoro’s insistence that Spain can stick to the path of budget consolidation demanded by the EU even after the Bank of Spain said the euro area’s fourth-largest economy contracted for a fifth quarter between July and October. “In 2012, we definitively will comply with our target,” Montoro said as he presented the 2013 budget to the Parliament in Madrid. The EU has set Spain a deficit goal of 6.3 percent of gross domestic product this year, after overspending amounted to 9.4 percent last year, the same as Greece’s and the second- highest shortfall behind Ireland.

German business sentiment posts surprise 6th drop in a row (Reuters)
German business sentiment dropped sharply in October to its lowest in more than 2-1/2 years, the sixth consecutive fall dispelling any lingering doubt that Europe's largest economy is now mired in the euro zone debt crisis.