Monday, July 30, 2012

20120730 1812 FCPO EOD Daily Chart Study.

FCPO closed : 3005, changed : +78 points, volume : lower.
Bollinger band reading : pullback correction little downside biased.
MACD Histogram : recovering, seller reducing exposure.
Support : 2970, 2950, 2920, 2900 level.
Resistance : 3020, 3050, 3070, 3100 level.
Comment :
FCPO closed rallied higher with little lesser volume distributed. Soy oil currently trading higher after last Friday advance little higher while crude oil price currently trading little higher.
Price soar higher ahead of tomorrow export data and after news from Reuters on Malaysia government to increase crude palm oil tax free export quota to 2 million tonnes, persisted dry weather from U.S. and prospect on further stimulus measures from world central bank sent broad commodities price upwards.
FCPO daily chart analysis continue to suggesting a pullback correction little downside biased 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.

20120730 1749 Crude Palm Oil Related News.

Malaysia to boost tax free palm oil quota by 2 mln T -govt sources 0#FCPO: - RTRS
30-Jul-2012 12:24
July 30 (Reuters) - Malaysia will increase shipping quotas for tax free crude palm oil by up to 2 million tonnes this year to help planters cope with higher output in the next few months, government sources said, as the world's No.2 supplier struggles to maintain its export momentum.
"We are doing this on a case-by-case basis for local firms since production is starting to rise in the second half of this year and exports are a bit slow," said one government official who declined to be named due to the sensitivity of the issue.
"It is a stock management effort. This is in an interim response to Indonesia at the moment. We are still formulating a comprehensive response," the source added.
The move will lift Malaysia's total duty free CPO export quota to 5 million tonnes this year and comes after top importer India this month raised base import prices of refined palm oil in a move that encourages more crude palm oil shipments.
Both Malaysia and India are responding to last year's move by top palm oil producer Indonesia to slash export taxes of refined palm oil -- used as a cooking oil -- and spur its own processing industry.
Malaysia says Jakarta's export tax cut has eaten into its own refined palm oil shipments and hurts its processors -- a concern similar to that voiced by India, which has spent billions to build the factories of its edible oil manufacturing sector.

20120730 1730 FKLI EOD Daily Chart Study.

FKLI closed : 1628.5 changed : +5 points, volume : lower.
Bollinger band reading : pullback correction little upside biased.
MACD Histogram : falling lower, buyer closing position.
Support : 1623, 1615, 1600, 1595 level.
Resistance : 1630, 1640, 1650, 1660 level.
Comment :
FKLI closed recorded gain with lesser volume transacted doing 3.5 point discount compare to cash market that soared higher. Last Friday U.S. markets rallied higher again and today Asia markets closed mostly higher while European markets currently trading in positive territory.
News on ECB and European leader pledged to support the Euros, better than expected U.S. corporate earnings, China to implement more infrastructure project and better than forecast U.S. GDP(declined) reported send global market trading higher.
FKLI daily chart reading revised to suggesting a pullback correction little 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.

20120730 1656 Regional Markets EOD Daily Chart Study.

 DJIA chart reading : little upside biased with possible pullback correction.
 Hang Seng chart reading : side way range bound.
KLCI chart reading :  pullback correction upside biased.

20120730 1622 Global Markets & Commodities Related News.

GLOBAL MARKETS: European shares were set to gain for a third straight session and Asian shares extended their gains, supported by expectations the U.S. Federal Reserve and European Central Bank will act to support their fragile economies. U.S. stocks surged on Friday, driving the S&P 500 to its highest close since May 3 as hopes increased that the Federal Reserve and the European Central Bank may provide further stimulus.

FOREX: The euro slipped as short-term technical charts flashed a bearish signal, but its losses were limited by hopes the European Central Bank will soon launch fresh action to tackle the euro zone's debt crisis.

FOREX-Euro falters but drop contained on ECB hopes
SINGAPORE, July 30 (Reuters) - The euro slipped on Monday as short-term technical charts flashed a bearish signal, but its losses were limited by hopes the European Central Bank will soon launch fresh action to tackle the euro zone's debt crisis.
"That was a short-term bearish signal on the charts," he said, adding that the single currency had failed to form a key reversal pattern on weekly charts.

ECB's Super Mario takes the stage
Mario Draghi may not need to show his money this week, but impatient markets will be unforgiving if the European Central Bank chief does not flesh out his dramatic promise to do whatever is needed to save the euro.

Cautious consumers, foreign trade curb U.S. Q2 growth
U.S. economic growth slowed in the second quarter as consumers spent at their slowest pace in a year, increasing pressure on the Federal Reserve to do more to bolster the recovery.

Australian wheat growers tap some, not all, of price spike
Australian wheat growers look set to miss out on the full benefits of a spike in prices on the back of the worst drought to hit the U.S. Midwest in more than 50 years after reducing plantings and selling stocks earlier in the year.

GRAINS: Chicago soybeans jumped 2 percent to a one-week top, while new-crop corn rose to a contract high as the worst drought in five decades continued to threaten crop yields across the U.S. grain belt with little relief expected this week.

OIL: Brent crude rose toward $107 per barrel, stretching gains into a fifth consecutive day on hopes the United States and Europe will this week announce new measures to shore up their fragile economies, boosting the outlook for oil demand.

India coal buyers see defaults as prices slip -traders
LONDON/NEW DELHI, July 27 (Reuters) - Indian coal markets are seeing scattered defaults among end-user and trade buyers in part because of a 20 percent slide in prices this year, although the vast majority are honouring their contracts, Indian trader said.
International coal prices have slumped to about $85 a tonne for South African cargoes from comfortably over $100 in December because of oversupply and tepid Asian demand .

Euro Coal-Prices rise 50c-$1/T but discounts deepen
LONDON, July 27 (Reuters) - Physical prompt European coal prices rose by around 50 cents to $1.00 a tonne on Friday, bolstered by strong swaps values, but weak fundamentals could reassert themselves soon and pull prices down, traders and utilities said.
Coal swaps rose by $1.00 on Friday in line with stronger oil and the euro.

Coal import defaults worsen in China as economy weakens
SHANGHAI/JAKARTA, July 27 (Reuters) - Chinese traders have so far this month scrapped import deals for at least two million tonnes of coal due to plentiful supply, industry sources say, another sign of how a slowdown in world's second largest economy is curbing its need for resources.
China's economy expanded at its slowest pace in more than three years in the second quarter of 2012, confirming a downtrend that leaves full-year growth on course for its softest showing since 1999.

Iron Ore-Traders eye pause in declining spot prices
SHANGHAI, July 30 (Reuters) - Chinese traders expect iron ore prices to pause from a recent decline and stabilise after hitting a 2-1/2 year low last week, as the country's steelmakers take advantage of low prices to restock the key steelmaking ingredient.
Still, industry participants said any bargain buying would be limited, and prices were unlikely to stage a significant rebound amid uncertainties about the health of the global economy.

China iron ore prices slump to 2 1/2-yr low
BEIJING, July 27 (Reuters) - Benchmark international iron ore prices hit their lowest level in more than two and a half years on Friday as China's slowing economy reduced global demand growth.
The fall in the price of iron ore cargoes to the world's biggest steelmaking country will trigger alarm bells among global iron ore giants such as Vale , BHP Billiton  and Rio Tinto , all targeting growth in Chinese demand with rapid capacity expansion plans.

Russia's Norilsk Q2 nickel output down 8 pct q/q
MOSCOW, July 30 (Reuters) - Russia's Norilsk Nickel , the world's largest nickel and palladium producer, said on Monday its nickel output declined to 69,639 tonnes in the second quarter of 2012 from 75,824 tonnes in the preceding quarter.
The company also said in a statement that its second-quarter platinum output rose to 186,000 troy ounces from 166,000 in the first three months of 2012, while palladium output rose to 729,000 troy ounces from 649,000.

Japan's nickel ore imports from Indonesia grew 4 times in June
TOKYO, July 30 (Reuters) - Japan's imports of nickel ore from Indonesia grew more than four times from a year earlier to 136,600 tonnes in June, the Ministry of Finance's monthly customs data showed on Monday.
Cargoes that had been delayed in the wake of the implementation of a new tax in Indonesia arrived in May and June, an official at Japan's Mining Industry Association told Reuters last week.

Italy steel exports up, imports fall -industry
MILAN, July 27 (Reuters) - Steel exports from Italy, the European Union's second largest producer, jumped 9.8 percent year-on-year to 8.21 million tonnes in the first five months of 2012, the industry group Federacciai said on Friday, in a rare bright spot for Italy's shrinking economy.
Steel imports, about 58 percent of which came from other EU countries in the January-May period, dropped 26.3 percent to 6.21 million tonnes in the first five months of 2012, data published on Federacciai's website showed.

Russia's Evraz sees 2 percent steel output rise in Q3
MOSCOW, July 27 (Reuters) - Russia's largest steelmaker said on Friday that it expects its crude steel production to rise by 2 percent in the third quarter of 2012 compared to the previous quarter.
The company, which saw crude steel production drop 6 percent in the second quarter from the previous three months due to capital repairs at its mills, said the temporary shutdowns of some of its enterprises will continue to affect its operations in the third quarter.

Japan's June zinc exports double yr/yr to 9,356 tonnes
TOKYO, July 30 (Reuters) - Japan's June zinc exports doubled to 9,356 tonnes from a year earlier as smelters resumed work following closures last year after the March 2011 earthquake and tsunami devastated the northeastern region.
Taiwan was the biggest buyer of refined zinc from Japan last month, purchasing 2,328 tonnes, an increase of 59 percent from the same month a year earlier, customs-cleared trade data showed on Monday.

Japan June copper exports to China double in June
TOKYO, July 30 (Reuters) - Japan's June exports of copper cathode to China, the world's biggest consumer of the metal, nearly doubled from the same month a year ago, customs data from the Ministry of Finance showed on Monday.
The strong gains came off a low base a year ago, when a magnitude 9.0 earthquake damaged smelters in the world's third-biggest refined copper producer, prompting them to sharply curtail exports in the three months through June.

BASE METALS: London copper held steady buttressed by hopes that Europe and the United States will this week announce fresh measures to shore up their faltering economies, helping to boost demand for industrial metals.

PRECIOUS METALS: Gold held steady above $1,620 per ounce, as investors wait for the central banks on both sides of the Atlantic to give clearer cues on the potential for further monetary stimulus.

METALS-Copper firms, underpinned by stimulus hopes
SINGAPORE, July 30 (Reuters) - Copper edged up on Monday as its demand outlook improved on hopes Europe and the United States will announce fresh measures to shore up their faltering economies, while investors also eyed factory data from top metals consumer China for trading cues.
"There are still some feel good factors running through the market," said senior commodities strategist Nick Trevethan of ANZ in Singapore.

PRECIOUS-Gold hovers around $1,620/oz, meetings eyed
SINGAPORE, July 30 (Reuters) - Gold held steady above $1,620 per ounce on Monday, as investors wait for the central banks on both sides of the Atlantic to give clearer cues on the potential for further monetary stimulus.
"I don't see the Fed drastically changing its rhetoric on QE3 at this week's meeting," said Li Ning, an analyst at Shanghai CIFCO Futures. "Technically, gold is poised for some correction after last week's rally, as there is still quite a bit of pressure at the $1,640 level.

Baltic index slides on slow freight business
July 27 (Reuters) - The Baltic Exchange's main sea freight index, which tracks rates to ship dry commodities, fell on Friday as the market continued to struggle with slower cargo trade and mounting fleet growth.  
The overall index fell 2.61 percent or 25 points to 933 points. The index fell for the fourteenth straight day and has declined over 10 percent this week.

20120730 1127 Global Markets & Commodities Related News.

GLOBAL MARKETS-Shares extend gains on stimulus hopes
TOKYO, July 30 (Reuters) - Asian shares extended their gains on Monday, supported by expectations the Federal Reserve and the European Central Bank  will deliver new measures to underpin their fragile economies.
"It (the GDP) contained enough weakness to support the Fed's commitment to an exceptionally long period of nearly zero overnight interest rates," said Richard Hastings, macro strategist at Global Hunter Securities.

COMMODITIES-Stimulus, euro hopes too late to prevent weekly loss
NEW YORK, July 27 (Reuters) - Commodities rose the most in over a week on Friday, but a renewed rally in drought-stricken grain markets and growing hopes for further global stimulus came too late to prevent the sector's first weekly decline in over a month.
"Financial markets see a benign mix of gently rising risk appetite as worries over an imminent euro zone disaster ease and prospects for another U.S. stimulus increase," said Carsten Fritsch, oil analyst at Commerzbank in Frankfurt.

Oil market playing chicken with Saudi Arabia
(Robert Campbell is a Reuters market analyst. The views expressed are his own.)
NEW YORK, July 27 (Reuters) - Crude oil has shown great resilience in the face of unsupportive data over the last month, bolstered by traders' optimism that central banks will prime the economic pump yet again by printing more money.
Even traders who acknowledge that sentiment may have lifted crude temporarily out of alignment with fundamentals say they have to keep buying. Momentum can be friendly, after all.
The trick, of course, is knowing when to stop chasing the crowd, because when sentiment shifts, the reckoning can be brutal.

OIL-Brent holds above $106, eyes on US, Europe stimulus
SINGAPORE, July 30 (Reuters) - Brent crude held above $106 per barrel on Monday, after rising for four straight sessions on hopes the United States and Europe will this week announce new measures to shore up their fragile economies, boosting the outlook for oil demand.
"If unemployment starts to worsen, you can be sure that the FOMC are going to step in and inject more stimulus into the economy," said Tony Nunan, a Tokyo-based risk manager at Mitsubishi Corp.

POLL-Iran tensions to keep oil above $100 into 2013
July 26 (Reuters) - Fewer analysts project oil prices at $100 or less over the next two years this month than last, as Iranian tensions and expectations of money printing by the global central banks outweighed concerns about economic growth.
A Reuters poll showed on Friday that eight of 30 respondents in the monthly survey forecast Brent crude to average $100 a barrel or less in 2013 and six of 19 analysts expect the same in 2014.

Japan's Iran crude imports drop 33.9 pct y/y in June
TOKYO, July 30 (Reuters) - Japan's crude imports from Iran fell 33.9 percent in June from a year earlier, as refiners reduced purchases from the Islamic Republic before the imposition of EU sanctions from July 1.
Customs-cleared imports from Iran fell to 812,693 kilolitres (170,389 barrels per day), Ministry of Finance data showed on Monday.

NATURAL GAS-US Aug natgas futures expire down 3 pct, longs take profits
NEW YORK, July 27 (Reuters) - U.S. natural gas futures, pressured by some long liquidation or profit taking ahead of the August contract expiration, ended lower on Friday, but supportive inventory data and warm weather forecasts for the next two weeks helped limit the downside.
"Prices were drifting a little lower late this week ahead of expiration, but we've had a lot of warm weather, and I haven't seen any reports calling for a sizeable break in the heat," said Tom Saal, senior vice president at INTL Hencorp Futures.

EURO COAL-Prices rise 50c-$1/T but discounts deepen
LONDON, July 27 (Reuters) - Physical prompt European coal prices rose by around 50 cents to $1.00 a tonne on Friday, bolstered by strong swaps values, but weak fundamentals could reassert themselves soon and pull prices down, traders and utilities said.
"Fixed prices have gone up today but the discounts to indexes have increased," one European trader said. "These prices are not justified by fundamentals," the trader said.

20120730 1115 Malaysia Corporate Related News.

New market reps to lure investors
Faced with an ageing remisiers pool, stockbroking companies have forwarded a proposal to the Securities Commission (SC) Malaysia to create two new categories of capital market representatives. The new market representatives are to complement remisiers in bringing more retail business. This objective that runs parallel with that of the SC’s, which is currently deliberating on the proposal that could help reverse dwindling retail participation in the market. (Financial Daily)

Ken Holding Bhd’s RM1.22bn project dwarfs its market cap
Ken Holdings Bhd is poised to embark on a huge development project in Johor Bahru. The proposed mixed development, with an estimated gross development value (GDV) of RM1.22bn over six to seven years, is expected to deliver gross profit of RM301m, about three times the company’s current market capitalization of RM114.1m, at its closing price of RM1.19 last Friday. For the project, the company acquired four parcels of land through the proposed acquisition of a 100% stake in land owner Gadini SB from Malaysia Building Society Bhd. The acquisition is now in the final stages. (Financial Daily)

Banking system stirred
A recent issuance of banking licenses in Singapore may have some implications on the Malaysian banking system, according to industry sources. Recently, the Monetary Authority of Singapore (MAS) said it would be granting two full-fledged licenses in the city state to two yet unnamed Chinese. The full banking licenses, called Qualifying Full Bank (QFB) licenses in Singapore, will be issued to two Chinese banks already operating in Singapore. (StarBiz)

MRCB in line for RM1bn MRT job
Malaysian Resources Corp Bhd (MRCB) is expected to win a contract worth about RM1bn this week for the Sungai Buloh-Kajang My Rapid Transit (MRT) line. If awarded, this will be the first railway-related job for MRCB this year. The contract is expected to boost MRCB’s existing order book to more than RM2.5bn. (BT)

Bank Indonesia turns to Chinese bonds for diversity
Indonesia’s central bank is set to buy Chinese bonds by year end, helping to diversify its holdings of foreign reserves and cushion the archipelago from external shocks to its financial system. The planned purchase would mark Bank Indonesia’s first ever move to buy China’s interbank bonds, said Hartadi A. Sarwono, a deputy governor for research and monetary policy at the central bank. (BT)

Seaport Terminal charts course for Penang Port
Seaport Terminal SB – the successful bidder for the proposed privatization of Penang Port SB (PPSB) – broke its silence last week by assuring that it is committed to invest in increasing the capacity of the country’s oldest port. In a statement, the Tan Sri Syed Mokhtar al-Bukhary-owned company said it will deepen the navigation channel according to the needs of the port and dispelled claims that no dredging works will be carried out to deepen the northern channel. (BT)

MPHB: Govt liberalization will help boost legal betting
Multi-Purpose Holdings Bhd (MPHB) expects growth for its wholly-owned gaming arm, Magnum Corp SB, to come mainly from the migration of gamers from one end of the spectrum – the illegal games – to the legal ones in view of potential liberalization by the government. MPHB managing director Tan Sri Lau Kim Khoon@Surin Upatkoon believes the games that Magnum creates, such as the 4D Jackpot, cannot be duplicated by illegal gaming syndicates due to their sheer size, and this advantage is crucial in pulling customers away from illegal games. (Malaysian Reserve)

Bonus for civil servants will not affect Govt’s deficit reduction plan
The half-month bonus payment to civil servants, which will involve a total payout of RM2.2bn, will not disturb the government’s deficit target, said Second Finance Minister Datuk Seri Ahmad Husni Hanadzlah yesterday. The country’s finances can afford a yearly bonus payout through the government devices, and the government debt is under control, he said. (Malaysian Reserve)

Oka Corp gains RM8.4m on revaluation
Oka Corp Bhd has made a gain of RM8.4m from a revaluation exercise of its properties in the country. The gain sees the concrete and readymix product maker’s net asset per share value rise to RM1.56 per share from RM1.43 per share as at the end of 31 Mar 201, according to an exchange filing last Friday. (Malaysian Reserve)

MAHB: Posts higher 2Q earnings on improved passenger traffic
Malaysia Airports Holdings (MAHB) posted a higher net profit of RM100.69m for the second quarter ended June 30 against RM91.1m a year ago. The improved performance was driven by growth in passenger traffic and commercial revenue. Its revenue rose 21.9% to RM807.8m from RM662.7m in the same corresponding period a year ago. Earnings per share increased to 8.32 sen in the second quarter from 8.28 sen previously. CFO Faizal Mansor said the results were good for the first 6 months and the group was on track to achieve its headline key performance indicators. (StarBiz)

MAHB: KLIA2 airport tax to remain unchanged
Malaysia Airports Holdings (MAHB) CFO Faizal Mansor said the airport tax for the new lowcost carrier terminal KLIA2 would remain unchanged when it begins operations in April next year. He said the charges are, however, regulated by the government, and it  is the government's decision whether to increase or lower the tax. Faizal was responding to AirAsia X Chairman Tan Sri Rafidah Aziz's statement Thursday that timeliness and a concrete blackand-white commitment on fixed airport charges in the new low-cost  carrier terminal are needed to cool down the ongoing tension between AirAsia Chief Tan Sri Tony Fernandes and MAHB. (Bernama)

Malaysia Resources Corporation: To get 60-acre prime land boost
The EPF is planning to inject a dose of entrepreneurship into its property business. MRCB, the EPF’s property and construction arm, is in negotiations to acquire private developer Nusa Gapurna Development Sdn Bhd, a Klang Valey-based property concern owned by businessman Datuk Mohamad Salim Fateh Din through Gapurna Sdn Bhd. The deal, to be financed via an exchange of shares, will give the politically well-connected businessman a direct stake in MRCB and a lead management role in the merged entity. A Gapurna executive said  Gapurna is the midst of preparing a proposal for consideration by the MRCB board. However, he said the valuations for the deal have not been finalized and parties are looking at the possibilities. (The Edge Weekly)

AirAsia: Indonesia may cancel acquisition Of Batavia Air
The Indonesian government may cancel the acquisition of local airline Batavia Air by Malaysia's AirAsia Bhd and its Indonesian partner, if the transaction breaches the ownership limit imposed on foreign companies in national airlines. The English weekly, Sunday Post, quoted the Director General of Indonesian Transportation Ministry Herry Bhakti Gumay as saying that AirAsia and its partner in the acquisition, PT Fersindo Nusaperkasa, had yet to report their acquisition to the ministry. Herry said the Indonesian government will give Batavia, AirAsia and Fersindo Nusaperkasa one month to report their plan to them. He added that they will cancel the acquisition process if Indonesia is not the majority shareholder. Herry also said the ministry would not hesitate to revoke Batavia Air's flight permit. (Bernama)

KYM Holdings: Pecoh could attract US$5bn in steel mill investment
Riding on the upcoming Vale iron ore distribution centre, the Perak Eco Industrial Hub (Pecoh) in Lumut to be developed by KYM Holdings with the state and other parties could attract some US$5bn in investment from an international steel mill among others. COO Allan Chin Kong Yaw said Boston Consulting Group (BCG) was appointed to conduct a study last year and the findings indicate that the 1,376ha Pecoh has the potential to house a large steel mill with production capacity of up to 5m tonnes a year. (Financial Daily)

Kim Loong Resources: To drive downstream business with RM10m R&D investment
Kim Loong Resources has allocated about RM10m for research and development (R&D) to drive its downstream business forward. Its executive chairman, Gooi Seong Lim, said considering the high land prices, the group would not be actively looking  to expand its landbank. Nevertheless, he said, the company has set aside fund for land acquisition if the opportunity arose. He said they aim to make this business sustainable by shifting our focus on the downstream sector to make something useful from the palm oil waste, such as developing our biogas power generator and other uses of biomass. Gooi said the group was eyeing something more higher-end, such as cellulose fibre, which could be used to make paper and fabrics. (Bernama)

Crescendo Corporation: To launch Johor township with GDV of RM3bn
Crescendo Corporation is preparing to launch its Bandar Cemerlang township, a development spanning 1,390 acres in Johor. The project will have a GDV of RM3bn over 10 to 15 years. MD Gooi Seong Lim said the company will start the development with some medium-cost houses in phase one which will have a GDV of about RM150m. He added that the township is strategically located near Ulu Tiram town and can be accessed via Johor Baru-Kota Tinggi Highway. He also said Crescendo is enjoying good demand for its Nusa Cemerlang Industrial Park (NCIP) in view of Singapore government's strategy to relocate some of its medium and small industries to Johor. As such, the company plans to develop about 50% of NCIP landbank in the next couple of years and convert some of the land into business park that would entail developments with higher value. (StarBiz)

Integrax: Vale Malaysia open to collaboration
Vale Malaysia Minerals Sdn Bhd, the local unit of Vale SA, is open to discussions with Integrax and other parties on collaboration for its iron ore distribution center and port in Lumut, Perak, said director Marcelo Figueiredo. He said Integrax had approached them and they are currently studying everything in an open way. (Financial Daily)

Integrax: Signs handling services deal with TNB
Integrax’s subsidiary has sealed a 28-year contract with Tenaga Nasional (TNB) to provide handling services for the importation of coal for the latter's power plant in Telok Rubiah, Perak. The company said its unit, Lekir Bulk Terminal Sdn Bhd (LBT), had signed a new jetty terminal usage agreement with TNB’s unit TNB Janamanjung Sdn Bhd (TNBJ) for the coal imports to be used in the new 1,010MW coal-fired power plant. Integrax said the agreement would expire on March 30, 2040. Under the agreement, LBT will procure and appoint a reputable contractor to undertake the design, engineering, procurement and construction of about 80-tonne grab bucket unloader, feeder conveyors and its associated equipment and structures. Integrax added that the agreement would continue to be effective and subsist after the initial period so long as the power plant was in operations and provided that TNBJ and LBT reached an agreement on the base operating payments and tonnage payments to be charged after expiration of the initial period. (StarBiz)

Ajiya: Unit to build factory in Thailand
Ajiya subsidiary Thai Ajiya Safety Glass Co Ltd will design, build and complete two units of factory-cum-three-storey office main building and associated external works at Amatanakorn Industrial Estate, Chonburi, Thailand, for 167.8m baht. Ajiya said in a statement that the company signed a contract yesterday with Vanbilv Co Ltd entailing the payment or such other sum as would become payable equivalent to RM16.78m. (StarBiz)

Building Materials: CMS Cement says will not raise price
CMS Cement Sdn Bhd, Sarawak’s sole cement producer and manufacturer, will not raise the price of cement despite recent reports of a nationwide cement price hike, Cahya Mata Sarawak group MD Datuk Richard Curtis said. He said CMS had always remained committed to the state’s socio-economic growth and would not increase its prices although cement production in Sarawak posed a logistical challenge due to terrain, raw materials and geographical population spread. In considering the impact of its price hike on the construction sector, he said, CMS also respected the Malaysian Competition Act and did not engage in price discussions with any Malaysian cement producers. (StarBiz)

Building Materials: MBAM wants ministry to investigate possible hike in cement prices
The Master Builders Association Malaysia (MBAM), concerned over a possible hike in cement prices, is appealing to the Domestic Trade, Co-operatives and Consumerism Ministry to look into the matter immediately. In a statement, MBAM said it had been notified by a member that a major cement manufacturer would be increasing cement price in the Klang Valley beginning Aug 1. The listed price of cement will increase to RM17.75 per bag, from RM16.75 previously, while the listed price of cement bulk will cost RM340 per tonne from RM320 per tonne earlier. (Bernama)

Construction: Firms keen on high-speed rail job must bid via tender exercise
The Land Public Transport Commission (SPAD) will not be considering proposals submitted previously by several companies for the high-speed rail project linking Kuala Lumpur and Singapore, a key official said. SPAD chief development officer Azmi Abdul Aziz said companies which have submitted proposals and are still interested in the high-speed rail project will have to participate in the tender exercise to be called next year. Business Times reported previously that UEM Group-Hartasuma, China Infraglobe Consortium-Global Rail and YTL Corporation have made presentations on the project to the National Key Economic Area laboratory. Azmi said the feasibility study that is currently being carried out by SPAD does not include details pen out in their proposals as the commission does not want to be influenced by any of the studies that they have carried out in preparing their proposals. (Business Times)

Oil & Gas: Petronas raises Progress Energy offer after rival bid
Progress Energy Resources Corp said Malaysia's state oil company Petronas has agreed to raise its offer to buy the Canadian natural gas producer by 8% after Progress received an unsolicited proposal from a third party. Petronas, which in June launched a C$20.45 per share offer for Progress, will now pay C$22.00 for each share, or C$5.17bn ($5.12bn) in total. Progress did not name the third party that made the unsolicited offer, but said its board has approved Petronas's latest offer. (StarBiz)

Plantation: Players positive on palm oil price will remain strong
Local plantation players say crude palm oil (CPO) is still fundamentally strong with the average price this year expected in the range of RM2,800 to RM3,000 per tonne. Many disagree with international palm oil expert Dorab Mistry, who recently forecast that CPO might decline to RM2,700 per tonne by year-end due to poor offtakes, and even slump to RM2,200 per tonne if there was a repeat of the 2008 financial crisis. United Malacca CEO Dr Leong Tat Thim is positive that the average CPO price can reach RM3,000 per tonne this year. The average MPOB price for the six months of this year was already at RM3,207 per tonne. (StarBiz)

Steel: M&As can help steel makers better tap strong demand in Asean
Malaysian Iron and Steel Industry Federation (Misif) president Datuk Soh Thian Lai said mergers and acquisitions (M&As) are needed among Malaysian steel manufacturers to better tap the strong demand for steel products in the Asean region as a large entity can increase production efficiency and obtain cost savings and economies of scale. Soh, who is also group MD and CEO of Yung Kong Galvanising Industries, said Asean countries were still net importers of steel products. (StarBiz)

Economy: Malaysia’s credit rating affirmed
Standard and Poor’s (S&P) Ratings Services on Friday affirmed its A-/A-2 foreign currency and A/A-1 local currency sovereign credit ratings on Malaysia, with a stable outlook. In a statement yesterday, it also affirmed its Asean scale rating on Malaysia at axAAA/axA-1+. It said the sovereign credit rating on Malaysia reflects the country’s strong external liquidity position, its competitive middle-income economy and high savings rate. (Business Times)

20120730 1114 Global Economy Related News.

South Korea: Manufacturer confidence drops to three-year low on Europe woes
South Korean manufacturers’ confidence dropped to the lowest level in more than three years as Europe’s worsening fiscal crisis damped sentiment in a country where exports make up about half the economy. An index measuring expectations for August was at 70, the lowest level since May 2009, after dropping from a revised 81 in July. A measure of expectations at non-manufacturing companies also dropped to 69 from a revised 76. Consumer confidence fell to a five-month low in July, the Bank of Korea said on 25 July. (Bloomberg)

EU: Spain jobless reaches post-Franco record amid austerity
Spanish unemployment rose to the highest on record after Prime Minister Mariano Rajoy made it easier to fire workers, while implementing the steepest budget cuts in the country’s recent democratic history. Unemployment, already the highest in the European Union, rose to 24.6% in the 2Q2012 from 24.4% in 1Q2012. More than 50% of under-25 year olds are already jobless in Spain and overall unemployment is as high as 33.9% in the southern region of Andalusia. (Bloomberg)

EU: German inflation unexpectedly held steady in July on oil prices
German inflation unexpectedly held steady in July after energy prices rose. Inflation, calculated using a harmonized European Union method, stayed at 2% in July while economists forecasted a decline to 1.9%. Consumer prices rose 0.4% m-o-m. Non-harmonized inflation remained at 1.7%, with prices rising 0.4% from June. (Bloomberg)

UK: Osborne urged to think again as triple-dip recession predicted
Chancellor of the Exchequer George Osborne was urged by businesses and his political opponents to reconsider the UK’s austerity strategy, as economists warned the nation could face a “triple-dip” recession. Osborne is facing renewed criticism after figures released last week showed Britain’s recession deepened in the second quarter, prompting questions about his economic plans and whether he should remain at the Treasury. GDP fell 0.7% from the first quarter, the third consecutive quarterly decline. Osborne said he will maintain the UK’s austerity program even as the economy remains weak after Standard & Poor’s reaffirmed the nation’s AAA credit rating. (Bloomberg)

US: Growth slows as consumers restrain spending
The world’s largest economy cooled in the second quarter as limited job growth prompted Americans to curb spending while state and local governments cut back. GDP, the value of all goods and services produced, rose at a 1.5% annual rate after a revised 2% gain in the prior quarter. Household purchases, which account for about 70% of GDP, grew at the slowest pace in a year. Household consumption rose at a 1.5% rate from April through June, down from a 2.4% gain in the prior quarter. Purchases added 1.05 ppt to growth. (Bloomberg)

Dow Jones posts another triple-digit gain
Stocks posted steep gains for a second day on Friday, reclaiming a weekly advance as investors anticipated moves from the European Central Bank and the US Federal Reserve. The Dow Jones Industrial Average ended up 187.73 pts or 1.5%, to close at 13,075.66 pts. It was its first close above 13,000 pts since 7 May while the Standard & Poor 500 gained 25.95 points or 1.9% to 1385.97. (Star Telegram)

20120730 1109 Global Market Related News.

Asia FX By Cornelius Luca - Sun 29 Jul 2012 17:15:43 CT(Source:CME/
The foreign currencies open little changed in the Far East after the European and commodity currencies have surged since Wednesday on hopes that both ECB and the Fed will ease as early as this week in order to alleviate the Eurozone debt crisis and support the deteriorating US economy. Facts will need to meet these hopes. The short-term outlook for the European and commodity currencies is sideways. The medium-term outlook for most of the foreign currencies is sideways. The LGR short-term model is short only the euro and franc.  Good luck!

US: Gross domestic product grew 1.5% in the second quarter, down from 2% posted in the first quarter.
US:  The final Reuters and the University of Michigan consumer sentiment index for July was upwardly revised to 72.3 from the mid-month reading of 72.0.

Today's economic calendar
Japan:  JMMA Manufacturing Purchasing Manager Index for July
Japan:  Industrial production for June

Asian Stocks Advance Third Day on Optimism Over Europe (Source:Bloomberg)
Asian stocks rose for a third day, led by financial firms, on optimism European policy makers will support the euro and after companies including Konica Minolta (4902) Holdings Inc. and Fujifilm Holdings Corp. reporting earnings. Commonwealth Bank of Australia, Australia’s biggest lender by market value, gained 2.3 percent after the cost to protect Asian bonds against default declined. Konica Minolta, a maker of photo film that gets 28 percent of its sales in Europe, jumped 6.9 percent in Tokyo after operating profit almost doubled from a year earlier. Cnooc Ltd. (883) added 1.4 percent after U.S. regulators got a court order to freeze assets of traders who allegedly profited by trading before the energy company announced a takeover. The MSCI Asia Pacific Index added 0.9 percent to 116.99 as of 10:54 a.m. in Tokyo with about three stocks rising for each that fell. The index added 1.8 percent on July 27, the biggest gain since June 29.
“There is a strong political and financial will for the euro,” said George Boubouras, Melbourne-based head of investment strategy at UBS AG’s Australian unit. The Swiss bank has about $1.5 trillion in assets under management. “Actions that address the EU challenges will create the opportunity for a sustainable rally ahead.”

Japan Stocks Rise as European Debt-Crisis Concern Ebbs (Source:Bloomberg)
Japanese stocks rose for a third day amid optimism European policy makers will act to ease the region’s debt crisis, boosting the outlook for exporters. Makita Corp., a maker of power tools that generates 42 percent of sales in Europe, advanced 1 percent. Konica Minolta Holdings Inc. (4902) surged 7.1 percent after reporting a 94 percent increase in first-quarter operating profit. Hitachi Cable Ltd. slumped 9.2 percent as the maker of power cables and optical fiber lowered its full-year profit estimate. The Nikkei 225 Stock Average advanced 0.8 percent to 8,634.97 as of 9:59 a.m. in Tokyo, bringing its three-day gain to 3.2 percent. The broader Topix Index today climbed 0.6 percent to 730.77.
“There is a strong political and financial will for the euro,” said George Boubouras, Melbourne-based head of investment strategy at UBS AG’s Australian unit. The Swiss bank has about $1.5 trillion in assets under management globally. “Actions that address the EU challenges will create the opportunity for a sustainable rally ahead.” Leaders in Berlin, Paris and Rome have backed European Central Bank President Mario Draghi’s approach to combat the sovereign debt crisis, saying they will do what’s needed to protect the 17-nation euro. The proposal involves the region’s rescue fund buying government bonds, two central bank officials said July 27 on condition of anonymity.

European Stocks Climb for an Eighth Week; Santander Jumps(Source:Bloomberg)
European stocks rose for an eighth week as German Chancellor Angela Merkel and French President Francois Hollande joined European Central Bank President Mario Draghi in promising to do everything to protect the euro. Banco Santander SA (SAN) jumped 14 percent as Spanish lenders led gains on the benchmark Stoxx Europe 600 Index. (SXXP) Barclays Plc (BARC), the British lender fined for rigging Libor, climbed 4.9 percent as it posted first-half profit that beat analysts’ estimates. MAN SE slumped 7.4 percent as the German truckmaker controlled by Volkswagen AG cut its earnings forecast for 2012. The Stoxx 600 added 0.6 percent to 259.81 this past week, its eighth consecutive advance for the longest stretch of weekly gains since January 2006. The gauge has rebounded 11 percent from this year’s low on June 4 as central banks from Europe to China eased monetary policy to help spur economic growth. The Stoxx 600 has risen 3.4 percent so far this month.
“The real focus for everyone is Europe and the comments made by Draghi and Merkel,” said Chris Beauchamp, a market analyst at IG Index in London. “They make a strong defense of the euro. But if you do not see these words backed up with real action, disappointment could quickly set in.”

Treasuries Fall as European Leaders to Meet on Crisis Measures(Source:Bloomberg)
Treasury 10-year note yields rose for the first time in five weeks as European leaders pledged to take steps to resolve the region’s sovereign-debt crisis, damping demand for the safest assets. European Central Bank President Mario Draghi and the head of the Bundesbank will discuss new rescue measures, which could include bond purchases, two central bank officials said. The leaders of Germany and France said they would do “everything” necessary to save the common currency. The Federal Reserve will announce Aug. 1 whether it intends to take additional measures to bolster the U.S. economy. “Draghi’s comments have lifted expectations that the ECB is finally ready to act,” said Guy Haselmann, an interest-rate strategist in New York at Bank of Nova Scotia (BNS), one of the 21 primary dealers that trade with the Fed. “The marketplace is expecting something out of the Fed.”
The U.S. 10-year yield rose nine basis points for the week, or 0.09 percentage point, to 1.55 percent, according to Bloomberg Bond Trader prices. The 1.75 percent note due in May 2022 fell 26/32, or $8.13 per $1,000 face amount, to 101 27/32. Treasury trading volume reported by ICAP Plc, the largest inter-dealer broker of U.S. government debt, rose to $330.3 billion at 5:03 p.m. yesterday, the highest since June 6. Trading has averaged $240.1 billion this year.

Dollar Repatriation First Since Lehman Evokes Post-LTCM Rally(Source:Bloomberg)
Until about four months ago, JKMilne Asset Management invested at least half the money in its global fund outside the U.S. No more. With Europe’s debt crisis intensifying, the Fort Meyers, Florida-based firm with $1.8 billion under management has all its money in dollars. “It’s been a winning strategy,” John Milne, chief executive officer, said July 26 in a telephone interview. “Given the magnitude of the problem, there was the realization that there was a contagion possibility.” Milne has plenty of company. U.S. investors repatriated $48.9 billion from December to May, the first time they brought assets home during a six-month stretch since the period following the failure of Lehman Brothers Holdings Inc. in 2008, according to the latest Treasury Department data compiled by Bloomberg. The flows are among the biggest since 1999, after the collapse of hedge fund Long-Term Capital Management LP boosted the dollar as investors retreated from all but the world’s safest assets.
IntercontinentalExchange Inc.’s Dollar Index rose 3.2 percent this year as investors moved cash into funds that focus on U.S. bonds. Inflows more than doubled to $157 billion in the first six months from $65 billion during the same period a year earlier, while international bond investments were unchanged, according to TrimTabs Investment Research.

Euro Weakens Versus Peers Before Confidence, Jobless Data(Source:Bloomberg)
The euro fell against most major peers, retreating from near a two-week high against the yen, before a report today that may add to signs the region’s debt crisis is weighing on consumer sentiment. The 17-nation currency trimmed gains from last week before data tomorrow that may show the region’s unemployment increased to a record last month. European Central Bank President Mario Draghi meets U.S. Treasury Secretary Timothy Geithner today as he attempts to win over Bundesbank President Jens Weidmann on measures to ease the region’s debt woes. The ECB can’t resolve the debt crisis, Moody’s Investors Service said, as central bank officials gather for a policy decision on Aug. 2.
“The euro will continue to struggle,” said Daisaku Ueno, a senior currency and debt strategist at Tokyo-based Mitsubishi UFJ Morgan Stanley Securities Co., a unit of Japan’s biggest financial group by market value. “To resolve Europe’s debt crisis, monetary policy will have to bear a lot of the burden.” The euro dropped 0.3 percent to $1.2285 as of 11:02 a.m. in Tokyo, trimming last week’s 1.4 percent rally. The common currency slid 0.3 percent 96.35 yen after touching a two-week high of 97.34 on July 27. The dollar bought 78.42 yen, little changed from last week. Today’s report from the European Commission in Brussels will probably confirm its index of household sentiment in the euro area declined to an almost three-year low of minus 21.6 in July, according to economists in a Bloomberg News survey.

FOREX-Euro's bounce fizzles, U.S. GDP awaited
LONDON, July 27 (Reuters) - The euro fell, retreating from a two-week high against the dollar, as investors sold into its recent rally on fresh doubts about whether the European Central Bank would take bold measures to tackle the sovereign debt crisis.
"It suggests we saw a bit of an overreaction to Draghi's comments yesterday," said Adam Cole, global head of FX strategy at RBC.

Geithner to Meet Schaeuble, Draghi in Germany Next Week(Source:Bloomberg)
U.S. Treasury Secretary Timothy F. Geithner will meet with German Finance Minister Wolfgang Schaeuble and European Central Bank President Mario Draghi in separate sessions on July 30. The meeting with Schaeuble will take place on the German island of Sylt in the afternoon of July 30, and the session with Draghi will be held that evening in Frankfurt, the Treasury Department said in a statement today. The Treasury said the meetings will be closed to the press, with a photo opportunity before the Schaeuble meeting. A Treasury official with knowledge of the matter said that Geithner and Schaeuble won’t hold a news conference after the meeting. European stocks rose for an eighth week as German Chancellor Angela Merkel and French President Francois Hollande joined Draghi in promising to do everything to protect the euro. “France and Germany are fundamentally attached to the integrity of the euro zone,” Merkel and Hollande said in a joint statement today. “They are determined to do everything to protect it.”
The leaders of the euro area’s two biggest economies issued their statement a day after Draghi said that the central bank will act to preserve the euro.

Hiring Probably Limited by Slowing Growth: U.S. Economy Preview(Source:Bloomberg)
The pace of hiring in July probably failed to reduce the U.S. jobless rate, which has been stuck above 8 percent for more than three years, economists said before a report this week. A payroll increase of 100,000 workers would follow an 80,000 gain in June, according to the median forecast of 68 economists surveyed by Bloomberg News ahead of Labor Department figures Aug. 3. Unemployment is projected to hold at 8.2 percent. Other data this week may show manufacturing stagnated in July and consumer confidence fell for a fifth month. Federal Reserve policy makers will meet ahead of the jobs report to decide whether additional stimulus is needed to combat a slowing economy as Europe’s debt crisis lingers. Companies such as Lockheed Martin Corp. (LMT) are among those warning they’ll have to reduce headcounts later this year in the run up to the so-called U.S. fiscal cliff of automatic tax increases and government spending cuts.
“The pace of hiring is pretty lackluster,” said Omair Sharif, a U.S. economist at RBS Securities Inc. in Stamford, Connecticut. “It’s going to be a painfully slow grind lower on the unemployment rate. Firms have become cautious as the U.S. is slowing a fair bit and global markets are getting worse.” Payroll gains slowed to an average 75,000 in the April to June period, down from 226,000 in the first quarter and the weakest in almost two years, Labor Department figures show.

Deflation Dismissed by Bond Measure as QE3 Anticipation Abounds(Source:Bloomberg)
For all the handwringing over the slowdown in the U.S. economy, the bond market shows there’s less risk of deflation now than before the Federal Reserve’s first two rounds of large-scale debt purchases. The expectation that consumer prices will rise, measured by the five-year, five-year forward breakeven rate, means that Fed Chairman Ben S. Bernanke has persuaded traders the U.S. will avoid the chronic deflation that has slowed Japan’s economy since 1995. It also complicates the central bank’s decision about starting more quantitative easing to boost an economy that grew at the slowest pace in a year during the second quarter. Commodity prices surged during QE1 and QE2 in 2008 and 2010.
“Higher inflation results in a tax on consumers and slows the economy down,” Michael Materasso, a senior portfolio manager and co-chairman of the fixed-income policy committee at Franklin Templeton Investments, which oversees $320 billion of bonds, said in a July 24 interview at Bloomberg headquarters in New York. “If you end up with a spike in commodity prices, have you done more harm than good?” The Fed’s favored bond-market gauge of inflation expectations ended last week at 2.39 percent, above the 2 percent levels in 2008 and 2010 that led the central bank to inject $2.3 trillion into the economy by purchasing Treasuries and mortgage-related bonds, the policy known as quantitative easing. The five-year, five-year measure shows how much traders anticipate consumer prices will rise during a period of five years starting in 2017.

Facebook Stock Plunge Slashes $34 Billion of Market Value(Source:Bloomberg)
Facebook Inc. (FB) has lost about $34 billion in market value since its May initial public offering, as the operator of the world’s largest social-networking service fails to assuage concerns about how it can make more money from almost a billion users. Facebook’s stock dropped 12 percent yesterday, its biggest one-day loss on record, after its first quarterly earnings report as a public company. That brought the plunge to 38 percent since the May 17 debut, which at $16 billion was the largest ever for a technology company. Chief Executive Officer Mark Zuckerberg’s fortune plunged to $12.1 billion yesterday from $13.7 billion, according to the Bloomberg Billionaires Index. “Investors were always paying for potential for Facebook,” said Aaron Kessler, an analyst at Raymond James & Associates in San Francisco, who has a market perform rating on the stock. “Clearly, today people are willing to pay less for that potential, which may be a few years out still.”
Of the largest IPOs on record, no other company has lost so much value so quickly, data compiled by Bloomberg show. General Motors Co. (GM) raised $18.1 billion after expanding its November 2010 offering and gained value in the comparable period, as did Visa Inc. (V), which generated $19.7 billion when it listed in 2008.

Chinese City Halts Waste Project After Thousands Protest(Source:Bloomberg)
Authorities in eastern China scrapped plans for a pipeline to discharge waste from a paper mill into the sea after a protest by thousands of residents turned violent. The mayor of Nantong in Jiangsu province said on July 28 the project would be permanently canceled, a day after the vice mayor of Qidong, a lower-level coastal city where the demonstration took place, pledged to suspend construction of the pipeline from a paper factory run by a venture of Japan’s Oji Paper Co. The unrest was the latest in a series of confrontations between local governments and residents over pollution concerns linked to industrial projects. Thousands of people in the southwestern city of Shifang protested earlier this month over the construction of a molybdenum copper plant, and demonstrators in northeast China’s Dalian last year succeeded in getting a chemical factory shuttered on environmental grounds, according to reports by state media.
The Qidong protests “demonstrate that ordinary people’s awareness of their rights has increased and they are more willing to assert their rights,” Willy Wo-Lap Lam, an adjunct professor of history at the Chinese University of Hong Kong, said in a telephone interview yesterday. “It also demonstrates more sophistication on the part of the authorities in handling protests.”

Japan’s Production Unexpectedly Falls as Korean Confidence Sinks(Source:Bloomberg)
Japan’s industrial production unexpectedly declined and South Korean manufacturers’ confidence dropped to a three-year low as global demand weakened. Production fell 0.1 percent in June from May, when it slid 3.4 percent, Japan’s Trade Ministry said today. The median estimate of 29 economists surveyed by Bloomberg News was for a 1.5 percent gain. The South Korean confidence index for August was at 70 from 81 for July, the central bank said. Weakness in the U.S., European and Asian economies is fueling speculation that extra stimulus may be rolled out in coming months by central banks including the Federal Reserve and the Bank of Japan. (8301) European Central Bank President Mario Draghi’s success in taming the euro region’s debt crisis may be the key to the global outlook after he pledged to do whatever it takes to preserve the common currency.
“It’s increasingly likely that the Fed and ECB will ease further by September and I think the BOJ will follow,” said Masamichi Adachi, a senior economist at JPMorgan Securities in Tokyo and a former central bank official. In Japan, “it’s a very likely scenario that the government will implement a supplementary budget this autumn and the BOJ will expand the asset-purchase program again.”

South Korea Manufacturer Confidence Drops to 3-Year Low(Source:Bloomberg)
South Korean manufacturers’ confidence dropped to the lowest level in more than three years as Europe’s worsening fiscal crisis damped sentiment in a country where exports make up about half the economy. An index measuring expectations for August was at 70, the lowest level since May 2009, after dropping from a revised 81 in July, the Bank of Korea said in a statement in Seoul today. A measure of expectations at non-manufacturing companies also dropped to 69 from a revised 76. “The South Korean economy is muddling through uncertainty caused by the European debt crisis,” Oh Suk Tae, an economist at SC First Bank Korea Ltd. in Seoul, said before the release. “The central bank indicated that it’s ready to act, but the market is expecting supplementary fiscal support only if the economy contracts significantly.”
Asia’s fourth-largest economy grew at the slowest pace in almost three years last quarter, with HSBC Holdings Plc and Citigroup Inc. saying the Bank of Korea may cut rates again this year. The BOK lowered its main rate a quarter percentage point to 3 percent on July 12, and Governor Kim Choong Soo warned last week the nation may miss a 3 percent growth estimate for 2012.

Record Cash Collides With Yen as Topix Valuation Approaches Low(Source:Bloomberg)
Japan’s stagnating stock market, its aging populace and the slowing global recovery are masking record cash in company accounts and equity valuations that are close to a 20-year low. The 1,671 companies in the Topix (TPX) Index, the country’s broadest measure of equity performance, had 105.2 trillion yen ($1.34 trillion), or 41 percent of their market value, according to the latest filings compiled by Bloomberg. Almost half have more cash than debt, a record. At the same time, the index’s 75 percent drop since 1989 pushed prices to 0.86 times book value, 4 percent from a two-decade low, data show. For bulls, the combination makes Japanese shares irresistible as earnings rebound from last year’s earthquake and chief executive officers spend more on buybacks and dividends that have doubled since 2006. Bears say the country has been disappointing investors for the last 20 years and that rising cash shows managers are reluctant to invest as the yen appreciates and the recovery weakens.
“The price that a Japanese company sells for is significantly lower than the rest of the world,” said David Herro, the Chicago-based manager of the $8.5 billion Oakmark International Fund and Morningstar Inc.’s international fund manager of the decade. “What would really ignite the Japanese stock market is an acceleration of better capital allocation and a weakening in the yen. I think those are the only two factors preventing the Japanese from exploding on the upside.”

New U.K. Strategy Urged as Triple-Dip Recession Predicted(Source:Bloomberg)
Chancellor of the Exchequer George Osborne was urged by businesses and his political opponents to reconsider the U.K.’s austerity strategy, as economists warned the nation could face a “triple-dip” recession. The London-based Sunday Times newspaper reported economists’ concerns that the euro-area crisis and a possible Greek exit from the region could push the U.K. into a recession again next spring. The opposition Labour Party’s finance spokesman Ed Balls renewed his attack on Osborne, saying the chancellor’s policies are “flat-lining” economic recovery. Osborne is facing renewed criticism after figures released last week showed Britain’s recession deepened in the second quarter, prompting questions about his economic plans and whether he should remain at the Treasury. Gross domestic product fell 0.7 percent from the first quarter, the third consecutive quarterly decline.
“If last week’s figures won’t make the government wake up and change course, then I don’t know what will,” Balls wrote in an article for the London-based Sun newspaper today. “But the longer they stick to this failing plan, the heavier the price our country will pay.” Osborne’s Labour opponents say his fiscal plans are too harsh at a time when households and banks are weighed down by debt. Taking longer to bring the budget into balance would have paid for tax and spending measures and sustained consumer confidence, they say.

Merkel, Monti Agree ‘Will Do Everything’ to Protect Euro(Source:Bloomberg)
German Chancellor Angela Merkel and Italian Prime Minister Mario Monti agreed that the European Union’s summit conclusions last month must be implemented “as quickly as possible” after speaking by phone yesterday. Merkel and Monti “agreed that Germany and Italy will do everything to protect the euro area,” German government spokesman Georg Streiter said in an e-mailed statement today in Berlin. Monti agreed to travel to Berlin for talks with Merkel in the second half of August, Streiter said.

Spanish Bond Yields Drop Most in 7 Months on Bets ECB Will Buy(Source:Bloomberg)
Spain’s government bonds rose, with 10-year yields dropping the most in seven months, amid speculation the European Central Bank will accelerate efforts to ease the region’s sovereign debt crisis. Italy’s securities also rallied after German Chancellor Angela Merkel and French President Francois Hollande pledged to do everything to keep the 17-nation currency bloc intact, echoing comments the day before from ECB President Mario Draghi. Germany’s bunds declined after Moody’s Investors Service cut the outlook on the nation’s Aaa rating, citing concern the country will have to support weaker euro-region members. The ECB meets to review monetary policy on Aug. 2.
“A lot of it is down to Mr. Draghi’s comments, which convinced the market that come next Thursday the ECB will be providing us with some support” for bonds, said Eric Wand, a fixed-income strategist at Lloyds Banking Group Plc in London. “The language he used was pretty forceful. If he fails to deliver on that promise the market is going to make them pay and big time.” Spain’s 10-year yield fell 52 basis points, or 0.52 percentage point, this week to 6.74 percent at 5 p.m. London time yesterday, the biggest weekly drop since the period ended Dec. 2. The 5.85 percent bond due in January 2012 gained 3.38, or 33.80 euros per 1,000-euro ($1,237) face amount, to 93.83. The Italian 10-year bond yield declined 21 basis points this week to 5.96 percent after rising to 6.71 percent on July 25, the highest level since Jan. 16.

U.K. Home Prices Fall for First Time This Year, Hometrack Says(Source:Bloomberg)
U.K. house prices fell in July for the first time this year and may extend their decline as a deepening recession curbs demand for homes, Hometrack Ltd. said. Values slipped 0.1 percent from June, when they stagnated, the London-based property-research company said in a report today. A measure of demand fell the most in six months. In London, the pace of home-price inflation slowed to 0.1 percent. Data this week showed Britain’s economy shrank 0.7 percent in the second quarter, the most in more than three years, while Chancellor of the Exchequer George Osborne said there are “deep-rooted economic problems.” At the same time, the euro- area debt crisis is mounting, with speculation increasing that Spain may need a full sovereign bailout.
“Weaker demand is to be expected over the summer months, but compared to previous years, the seasonal slowdown has started earlier and developed more rapidly,” said Richard Donnell, director of research at Hometrack. “This reflects growing concern over the U.K.’s economy and the deepening euro- zone crisis.” Compared with June, prices fell in eight out of 10 regions tracked by Hometrack and were unchanged in one, according to the report. London was the only region to register an increase. From a year earlier, values nationally fell 0.5 percent. The number of new buyer registrations, a measure of demand, dropped 2.1 percent in July from the previous month, while the volume of properties being put up for sale rose 1.4 percent. Donnell said the gap between supply and demand “is set to widen over the summer months and points to further modest price falls.”

20120730 1109 Global Commodities Related News.

Hedge Funds Add Wagers in Longest Streak Since 2009: Commodities(Source:Bloomberg)
Hedge funds raised commodity bets in the longest bullish streak in three years as speculation that policy makers will increase economic stimulus drove prices toward the biggest monthly rally since October. Money managers raised their net-long positions across 18 U.S. futures and options by 3.4 percent to 1.17 million contracts in the week ended July 24, U.S. Commodity Futures Trading Commission data show. Wagers gained for seven weeks, the longest increase since June 2009. Corn bets climbed to the highest since September 2011, and traders are the most bullish on natural gas since October 2006.
Investors added bets even as commodities fell 0.4 percent in the week to July 24. The bulls were proved right after prices rebounded 1.8 percent in the following three days as European Central Bank President Mario Draghi pledged to protect the euro on July 26. German Chancellor Angela Merkel and French President Francois Hollande echoed his comments the next day. A U.S. government report on July 27 showed the world’s biggest economy grew at a slower pace in the second quarter, increasing pressure on the Federal Reserve to boost aid measures. “Some of these issues that have been weighing against commodities, particularly industrial metals and energy, have probably over-emphasized the negative,” said Bill O’Neill, the chief investment officer for the Europe, Middle East and Africa at Merrill Lynch Wealth Management, which oversees more than $1.8 trillion. “The fundamental backup is the policy easing.”

Wheat Market Recap Report (Source:CME)
September Wheat finished up 14 at 898, 13 off the high and 18 1/2 up from the low. December Wheat closed up 14 at 911 1/4. This was 18 3/4 up from the low and 12 1/2 off the high. September Chicago wheat traded slightly higher into the close but well off session highs. Kansas City and Minneapolis followed higher. Chicago wheat saw sharply higher gains early in the session after Russia's state forecaster cut it's 2012 grain outlook to 77-80 million tonnes due to this year's drought. It is also being reported that Russia will sell grain from state intervention stocks to cool rising domestic grain prices. This is supportive to wheat signaling the tight supply outlook for the Black Sea region. Scattered showers and cooler temperatures will provide relief for spring wheat areas in the Black Sea but drier conditions are expected to persist in southern Russia and Ukraine next week. Outside markets offered support today on rumors that the ECB will begin a new bond buying program soon. The US Dollar sank on the news which rallied commodity prices. September Oats closed up 7 1/2 at 377. This was 8 up from the low and 3 off the high.

Corn Market Recap for 7/27/2012(Source:CME)
September Corn finished up 17 1/4 at 798 1/2, 2 1/2 off the high and 22 up from the low. December Corn closed up 17 at 793 1/4. This was 21 3/4 up from the low and 2 1/2 off the high. December corn traded slightly higher into the close today and settled just off session highs. The higher trade is linked to a slightly warmer and drier forecast next week in the central and southwestern Midwest. The corn market also reacted positively after a well-known crop scout pegged the Iowa state corn yield at 117 bushels/acre and a satellite crop forecaster saw the US corn yield as 122 bushels/acre. More reports of poorly pollinated corn circulated around the market today sending bears to the sideline for now. Demand remains weak in the corn market which offers pressure and Taiwan Mills bought 60,000 tonnes of Brazilian corn overnight. Traders set aside the bearish news and shifted focus back to the ongoing drought in the US. Outside markets were supportive as the US Dollar sank and Crude Oil advanced as investors anticipate further monetary stimulus from world central banks. September Rice finished up 0.22 at 15.6, equal to the high and 0.05 up from the low.

88%. An Alarming Corn Statistic(Source:CME)
The severity of this year’s drought in the United States can be reflected in all sorts of data. One of the more alarming statistics gives you a sense of its geographic reach: 88 percent of the nation’s corn crop is in regions impacted by drought, according to the USDA.   The corn crop, initially expected to yield a record 166 bushels per acre, has been cut back to 146, with many analysts expecting that number to fall further in the next USDA supply/demand report on August 10.

GRAINS-Soybeans, corn face 1st weekly drop since mid-June
SINGAPORE, July 27 (Reuters) - Chicago soybeans rose recouping some of previous session's deep losses triggered by rains in the parched U.S. grain belt, while corn dipped for a fourth day out of five this week.
"Grains are coming down mainly due to rain forecast which will benefit soybeans," said Lynette Tan, investment analyst at Phillip Futures in Singapore. "The damage to corn has been done, so the downside in corn will be less."

Thailand extends rice intervention to end-September
BANGKOK, July 27 (Reuters) - Thailand has extended a scheme to help farmers through intervention in rice markets to the end of September due to the lingering impact of severe flooding in the country last year.
Under the scheme, which had temporarily ended as timetabled on June 30, the country pays farmers 15,000 baht ($470) per tonne for paddy, compared with around 9,000 baht in the open market.

Iowa corn yield potential sinks as drought worsens
FORT DODGE, Iowa, July 26 (Reuters) - Corn yield prospects in central and northeast Iowa were highly variable as drought and periods of extreme heat this summer diminished production potential, scouts on a crop tour said Thursday.
Plants were tall and mostly green in areas that have higher quality soils which hold moisture better, while crops in sandier soils were brown and shriveled under the worst U.S. Midwest drought in five decades, scouts on the MDA EarthSat July Crop Tour observed.

Fast planting boosts US spring wheat prospects-tour
FARGO, North Dakota, July 26 (Reuters) - Spring wheat potential in the northern U.S. Plains was 8.2 percent higher than 2011 as an early planting protected the crop from harm when temperatures surged during the summer.
The 2012 U.S. hard red spring wheat crop was projected to yield 44.9 bushels per acre, up from 41.5 bushels per acre in 2011 and up 7.7 percent from the tour's five-year average of 41.7 bushels per acre, scouts on an annual crop tour said on Thursday.

Argentine wheat sowing nears end, crops healthy - exchange
BUENOS AIRES, July 26 (Reuters) - Argentine farmers have nearly finished 2012/13 wheat plantings and crops are generally in good shape apart from some dryness in western areas, the Buenos Aires Grains Exchange said on Thursday.
The South American country is the world's No. 6 supplier of wheat and the leading supplier to neighboring Brazil, but growers have dedicated less land to the grain in recent years due to poor profit levels they blame on government policy.

Drought afflicts 86 percent of U.S. Midwest, crops wilt
July 26 (Reuters) - The most extensive U.S. drought in five decades intensified this week across the Midwest and Plains states that produce most of the country's corn, soybeans and livestock, a report from climate experts showed on Thursday.
And the drought is worsening in the South, which was just recovering from last year's drought - the worst Texas had seen in a century.

W. Europe maize mostly healthy; dry Italy a risk
PARIS, July 26 (Reuters) - Maize crops in western Europe are mostly developing well, with the return of warm, sunny weather this week helping crops in France and Germany, although crop stress in Italy after a hot spell could cut yields there, analysts and growers groups said.
Western European maize (corn) is in better shape than crops in the United States, where the Midwest is enduring its worst drought in decades, and in eastern Europe, where crops in European Union members Bulgaria, Hungary and Romania, and further east in Ukraine have been stressed by hot, dry conditions.

Russian wheat crop below 47 mln tonnes-Geosys
PARIS, July 26 (Reuters) - Russia's wheat harvest is likely to be below 47 million tonnes this year, as drought that has damaged part of its crop is seen cutting yields further in the productive northern region, French farm data supplier Geosys said in the lowest forecast to date.
A Reuters poll of analysts on June 28 put the median wheat crop estimate at 50.5 million tonnes with the lowest forecast, by Russia's farm ministry, at 47.5 million tonnes.

Sugar Traders Are Most Bearish Since April: Commodities(Source:Bloomberg)
Sugar traders are the most bearish in three months on speculation that drier weather will accelerate harvesting in Brazil, the world’s largest producer. Ten of 16 analysts surveyed by Bloomberg said they expect raw sugar to drop next week and three were bullish. A further three were neutral, making the proportion of bears the highest since April 13. Sugar output in Brazil’s center south, the biggest producing region, rose 2 percent in the first half of this month, industry group Unica said July 25. Cane-growing areas will be mostly dry through the start of August, according Somar Meteorologia, a Sao Paulo-based weather forecaster. Prices rebounded from a 21-month low last month and entered a bull market on July 9 after rain in May and June delayed Brazil’s harvesting and exports. Sugar is now poised for its worst weekly performance since March as the drier weather eased concern about the crop and refocused attention on the prospects for a glut.
Czarnikow Group Ltd., which traded the commodity in 90 countries last year, is forecasting a second consecutive surplus in the season that starts Oct. 1. “The harvest in Brazil is catching up and that is a good bearish signal for the market,” said Jonathan Bouchet, a trader at Boman Capital SA, a Geneva-based hedge fund. “The weather in South America at the moment is adequate to harvest and ship, which will increase supplies and keep pressure on prices.”

SOFTS-Sugar, cocoa ease, ECB plege supports
LONDON, July 27 (Reuters) - Softs markets were broadly steady as the European Central Bank's pledge to protect the euro zone leant support to the commodities complex, boosting investor confidence. Sugar futures nudged lower in early trading, digesting Thursday's sharp fall, as drier weather in Brazil aided harvest progress and eased port congestion.

Brazil's coffee crop 20 pct sold - Safras
SAO PAULO, July 26 (Reuters) - Sales of Brazil's 2012/13 coffee crop have reached 20 percent of this season's expected output that should total 54.9 million 60-kg bags, local crop analyst Safras e Mercado said on Thursday.
The rate of sales of the crop by producers by July 20 is five percentage points behind sales at the end of June last year. Safras did not provide mid-July sales data for last season.

Brazil sugar vessel lineup eases as rains recede
SAO PAULO, July 26 (Reuters) - The lineup of ships waiting to load sugar in Brazil fell to 82 from 87 a week earlier as rains let up over the main ports and striking sanitary inspectors had limited effect on shipments of bulk commodities, Williams shipping agents said in a report.
Harvest of the 2012/13 crop in the important center-south region picked up steam in early July, with mills churning out nearly a third of the sugar produced so far this season in the first two weeks of this month, according to industry association Unica.

Guatemala coffee farmers worried fungus will hit next crop
GUATEMALA CITY, July 26 (Reuters) - A fast-spreading strain of leaf rust, one of the world's most devastating coffee diseases, could hit Guatemala's next coffee crop and damage up to 10 percent of production, the president of the country's coffee growers' association Anacafe said on Thursday.
Since the last harvest, which ended in April, growers have been battling a new form of leaf rust fungus, or roya, that kills leaves on coffee trees, sapping them of nutrients so the weakened plants produce fewer beans.

India's 2011/12 cotton imports to treble on thin supply
MUMBAI, July 26 (Reuters) - Tight domestic supplies of cotton and lower prices abroad have prompted Indian textile mills to ramp up imports, which are likely to treble in the year ending Sept. 30, 2012, industry officials said on Thursday.
Mills in the world's second biggest cotton producer have already imported 500,000 bales and have signed contracts for around 1 million bales at 75-80 cents per lb, compared with the local price of about 88 cents, dealers said.

Oil Trades Near Week High Before Central Banks Meet on Economy(Source:Bloomberg)
Oil traded near the highest level in a week in New York on speculation that U.S. and European policy makers will act to boost growth and concern that unrest in the Middle East may spread and disrupt supplies. Futures were little changed, heading for the first monthly gain in three. The European Central Bank and the U.S. Federal Reserve are scheduled to meet separately this week to discuss the economy. The Syrian government’s use of “indiscriminate violence” will hasten its collapse, U.S Defense Secretary Leon Panetta said. The Middle East produces about a third of the world’s crude. Enbridge Energy Partners LP (EEP) said it’s unsure how soon it can resume an pipeline that supplies oil to Chicago-area refineries after a leak. “The market is riding high on the talk of stimulus,” said Jonathan Barratt, the chief executive officer of Barratt’s Bulletin, a commodity-markets newsletter in Sydney. “We also have some geopolitical concerns.”
Oil for September delivery was at $90.01 a barrel, down 12 cents, in electronic trading on the New York Mercantile Exchange at 11:16 a.m. Sydney time. The contract climbed 0.8 percent to $90.13 on July 27 for a fourth day of gains and the highest close since July 20. Prices are up 5.9 percent this month. Brent crude for September settlement was at $106.45 a barrel, down 2 cents, on the London-based ICE Futures Europe exchange. The European benchmark’s premium to West Texas Intermediate was at $16.44. It closed at $16.34 on July 27, the widest gap in more than two months.

Morning Crude Oil Market Report (Source:CME)
September crude oil prices took on a slightly higher track during the initial morning hours, helped in part by a rebound in outside market sentiment. Yesterdays comments from ECB bank President Mario Draghi provided a favorable shift in risk appetites, and that along with a sell off in the US dollar has offered support crude oil prices. There were reports earlier this morning, suggesting that Euro zone officials and the ECB are working on a plan to purchase Italian and Spanish debt, and that has provided an added lift to risk assets this morning.

OIL-Oil rises towards $106 on euro zone, QE hopes
LONDON, July 27 (Reuters) - Brent crude oil rose to around $106 per barrel, buoyed by a European Central Bank pledge to protect the euro zone and hopes for a fresh economic stimulus in the United States.
"Financial markets see a benign mix of gently rising risk appetite as worries over an imminent euro zone disaster ease and prospects for another U.S. stimulus increase," said Carsten Fritsch, oil analyst at Commerzbank in Frankfurt.

Australia's fuel trade jumps as plug pulled on refineries
SINGAPORE, July 26 (Reuters) - Australia is set to become Asia's biggest importer of fuels, opening up trading opportunities in one of the world's most profitable energy markets, as ageing Caltex and Shell oil refineries near Sydney shut and other plants look vulnerable.    
The trend will reverberate across energy markets since Australia burns top-quality fuels and a rise in imports means more competition for Europe -- Asia's top buyer of such grades.

Oil prices wil be driven by the externals this week By Dominick Chirihella - Sun 29 Jul 2012 04:42:30 CT (Source:CME)
Last week was all about jawboning out of Europe. First from ECB President Draghi followed up by comments from Germany's Merkel reinforcing Draghi's main comment that the ECB will do everything to support the euro. Support for this type of comment from Merkel is very important as Germany is where the money is. For now the jawboning was enough to send many risk asset markets into a modest end of the week short covering rally. However, we can't lose sight that these type of comments have been coming out of Europe for the last three years and so far the sovereign debt issues are still not solved.
The big question is will the bold comments finally be converted to actions.. especially this coming week as the ECB holds its monthly meeting on Thursday August 2. Will the ECB initiate a bold solution that puts the EU problems on the back burner once and for all which has not been the case for the last several years. Will they simply lower short term interest rates and issue the usual support of the euro comments or will their actions include stimulus and some form of bond backing or buying of bonds from the troubles EU member states? Whatever the ECB decides to do this week the market is now expecting actions that will support the debt problems and drive down the bond yields of the problem countries as well as send the euro into a much longer lasting rally that goes well beyond a simple modest short covering rally like we saw the last two trading days of last week. With the market now trading over the last few session with a strong ray of hope that the ECB and the EU will finally get a handle on the problems any disappointment next week will result in a huge push to the downside in the euro as well as in global equity markets.
Who said August is a quiet and sleepy time for global risk asset markets? Yes many participants are at the peak of the summer vacation season coupled with the London Summer Olympics at its peak but that is not going to prevent the markets from potentially active and volatile trading over the upcoming week and possibly for the rest of the summer. In addition to what is setting up to be a major ECB meeting on Thursday the US Federal Reserve FOMC will meet on Tuesday and Wednesday with many expecting the Fed to embark on a new round of quantitative easing of some form. The US economy has slowed to just a 1.5% growth rate a decline of 0.5% from the first quarter. The employment situation is not getting any better and the plethora of economic data that has hit the media airwaves over the last month or so has been supportive of further slowing of the US economy.
Is there enough negative data to support the Fed taking action now (as a recent WSJ article suggested) or will the Fed take a wait and see of what comes out for the ECB on Thursday while it awaits more data points like Friday's latest nonfarm payroll data? A new round of easing out of the US Fed is not a slam dunk at this meeting in my opinion. I think there are many reasons why it will be prudent for the Fed to wait another month or two before initiating a new round of easing that many believe will have limited success in bolstering the US economy and spurting the private sector hiring process. I do not think the Fed will act at this meeting and save their next so called silver bullet until the end of August at the Jackson Hole symposium (possibly mentioned in Bernanke's speech) or until the mid September FOMC meeting.
On top of the market volatility from the outcomes of the two the world's two major central bank meetings this week the US Labor Department will release the latest nonfarm payroll data and the headline unemployment number. This data is not only important for the QE followers but it will play into the upcoming election in the US. The current market consensus is for a 100,000 new net jobs created with the unemployment rate holding steady at 8.2%. The last several months the jobs data has come in well below the market expectations. In addition to the end of the week jobs data there is a full schedule of macroeconomic data out of the US this week...Chicago PMI, Consumer Confidence, construction spending, auto sales and factory orders all of which could be market moving data points as the market evaluates the data versus how it may impact the Fed's decision regarding more QE.
So what happens to oil this week. Both the WTI and Brent markets recovered a modest portion of their earlier week losses (see below for a more detailed discussion) but still lost value on the week across the entire oil complex. Aside from the very dynamic situation in Syria the geopolitical risk in the rest of the middle east region has been mostly quiet and will likely remain quiet for the next week or so. The main exposure area that could bolster oil prices will be a significant deterioration in the situation in Syria especially regarding the chemical weapons stockpiles in that country.
On the fundamentals side the global oil complex is comfortably balanced with supply still outstripping demand as we saw with the across the board builds in oil inventories in the US this past week. The current oil fundamentals do not support the current price levels and as such the current fundamentals are not the main price drivers of the global oil complex. I do not expect this situation to change in the short to even medium term.
Which brings me back to the macro relationships of oil and the so called externals or financial and economic data points that are currently the primary price drivers for the oil complex as well as the broader class of risk asset markets. How oil trades this week will be directly impacted by the outcome of the FOMC meeting as well as the ECB meeting and Fridays jobs reports. Oil market participants are now back in the perception trade or what will the forward fundamentals be if the US and EU central banks embark on more easing as well as more stimulus from China. All of these are money printing actions that will eventually have an impact on inflation and thus be viewed as bullish for oil and other commodities. The macro markets are all once again highly correlated and oil will likely move very much in sync with the US dollar, euro and global equities. This week (and possibly beyond) oil will move more directly with the externals and less so from the its own current fundamentals and geopolitics.
In spite of the short covering rally on Thursday and Friday the oil complex still ended the week in negative territory with RBOB gasoline leading the way lower. WTI declined more than Brent this week as US crude oil inventories continue to build even with refinery run rates at the highest level in several years (93% of capacity). The September WTI contract decreased by about 1.43% or $1.31/bbl while the September Brent contract ended the week with a decrease of 0.34% or $0.36/bbl. The Sep Brent/WTI spread widened by about $0.95/bbl for the week as the normalization process is still interrupted by lower loadings out of the North Sea. I still expect the spread to gradually continue to narrow over the next 3 to 6 months as the surplus in the US mid-west is also starting to recede from a combination of exports of crude oil out of the region through the Seaway pipeline coupled with refinery utilization rates at the highest level in months.
On the distillate fuel front the Nymex Sep HO contract decreased by 1.16% or $0.0338/gal on the week as distillate fuel inventories surged higher for the third week in a row versus an expectations for a more modest build. Gasoline prices decreased strongly on the week after a much larger than expected build in gasoline stocks. The Sep Nymex gasoline price decreased 4.97% or $0.1463/gal this past week.
Nat Gas futures finally came off of its highs declining on the week on an injection number that came in right at the consensus level. The September Nat Gas futures contract decreased by 1.98% or $0.061/mmbtu on the week but is still trading above the key psychological level of $3.00/mmbtu.
Nat Gas prices are under pressure on expiration day for the August Nymex futures contract and after a weekly injection report that came in at the market consensus level. The most interesting fact is the market has been holding above the $3/mmbtu level once again. For the moment it seems to be the line in the sand for this market and if it holds today we could potentially see a bit of a jump in prices next week. The latest NOAA six to ten day and eight to fourteen day temperature forecasts are marginally more supportive than the forecasts from earlier in the week insofar as the area of the country that is expecting to experience above normal temperatures. The current forecast is showing above normal temperatures for most of the US with the exception of the west coast which is expecting below normal temperatures. Cooling demand will remain a positive for Nat Gas for the next several weeks.
On the nuclear front the level of outages this year continues to exceed both last year and the five year average and the gap is widening a tad. Currently there is 8,200 MW of nuke outages versus last year at 2,600 MW and the five year average at 4,100 MW. The combination of the call for Nat Gas to replace the lost power generation from nuclear along with warmer than normal temperatures should result in a modest increase in Nat Gas consumption over the next several weeks.
The main negative looming over the Nat Gas market remains the economic favorability of coal over Nat Gas. With prices at current levels the economics are positive for coal and have been for most of the last three weeks of trading. Some utilities have switched back to coal as I discussed yesterday and with the forward curve still in a modest contango through February the likelihood of the economics moving back to being favorable for Nat Gas is getting lower every day. As has been the debate for the last several weeks... will cooling demand and nuke outages being enough to offset the loss of coal switching demand and thus result in injection underperforming for the rest of the injection season. At the moment the market sentiment suggests that this market may still have room to go higher.
Overall I still view Nat Gas futures prices as overvalued versus the current fundamentals. There is still an exposure of the industry prematurely hitting maximum storage capacity especially if some of the increases in demand do start to recede as describes above. Also do not lose sight of the simple fact that even if the industry does not prematurely hit storage limitations there will be a record amount of Nat Gas in storage prior to the start of the upcoming winter heating season. there will not be a shortage or supply related issues anytime soon ...barring some unforeseen tropical activity in the US Gulf of Mexico.
On the financial front equity markets around the world were mostly higher on the week. The financial markets were mostly impacted by the expectation of some new bold action by the ECB after Draghi's comments on Thursday. Global equity values increased as shown in the EMI Global Equity Index table below and is now marginally in positive territory for the year.
The EMI Index increased by 1.9% on the week and is in now back in positive territory for the year also by 1.9%. Over the last week the Index increased in value in most all of bourses with three bourses still in negative territory for the year. Over the last several months the global equity markets have been struggling to stay in positive territory except for Germany which is soaring higher based on the falling euro which is a major benefit to this export driven economy.
The euro surged higher (mostly during the second half of the week and after Draghi's comments) on the week while the US dollar declined modestly. Last week the global equity markets were a positive price driver for oil and most commodity markets during the second half of the week.
I still think the oil price is overvalued. I am keeping my view at neutral for oil as the market seems to have switched from being primarily driven by geopolitical risk but has moved to being mostly driven by the prospects for additional quantitative easing to concerns over the evolving debt situation in Europe as well as the slowing of the global economy. WTI seems to be working its way back into the $85 to $95/bbl trading range while Brent is moving back to the $100 to $110 trading range. There are a lot of dynamics that will impact oil prices in the short term and the ranking of the price drivers are fluid and very susceptible to changing as we saw after Draghi's comments yesterday. The only constant for oil prices in the short term is above normal levels of volatility.
I am keeping my view at neutral with a view toward the upside as the hot weather that has persisted across major portion of the US and has subsided only slightly. On the other hand the economics of coal switching now favors coal which will result in a reduction in Nat Gas demand. Finally Nat Gas at current price levels is overvalued and is still susceptible to a round of selling.

Gold Climbs to Five-Week High on Stimulus Speculation(Source:Bloomberg)
Gold futures rose to a five-week high on speculation that central banks in the U.S. and Europe will add to stimulus programs in an effort to spur faltering economies. European Central Bank President Mario Draghi will hold talks with Bundesbank President Jens Weidmann in the coming days on measures including bond purchases, two central bank officials said. Yesterday, Draghi said policy makers will do whatever is needed to save the euro. The U.S. economy cooled in the second quarter, government data showed today. “It seems the ECB is pulling out at all stops to protect the euro,” William O’Neill, a partner at Logic Advisors in Upper Saddle River, New Jersey, said in a telephone interview. “The GDP numbers provided some support as expectations of some form of easing remain alive.”
Gold futures for December delivery rose 0.2 percent to settle at $1,622.70 an ounce at 1:40 p.m. on the Comex in New York. Earlier, the price reached $1,633.30, the highest for a most-active contract since June 19. This week, the metal rose 2.5 percent, the most since June 1.

20120730 1108 Soy Oil & Palm Oil Related News.

Soybean Complex Market Recap(Source:CME)
August Soybeans finished up 28 at 1683 3/4, 11 off the high and 42 3/4 up from the low. November Soybeans closed up 34 1/2 at 1602. This was 51 1/4 up from the low and 10 off the high. August Soymeal closed up 8.4 at 527.2. This was 15.1 up from the low and 5.4 off the high. August Soybean Oil finished up 0.36 at 52.04, 0.18 off the high and 0.54 up from the low. November soybeans traded sharply higher into the closing bell as the market shifted focus back to the weather outlook for the month of August. Soybean meal and oil followed higher. A closely followed crop scout pegged the Iowa soybean yield at 39 bushels/acre and a satellite crop forecasting agency expects the US soybean yield to drop to 35.7 bushels per acre. Both estimates sent soybeans to new highs for the day. There was talk among traders over the 16-30 day forecast which many traders thought looked bullish for the soybean market with above normal heat and below normal moisture for a large percentage of the US Midwest. This has traders worried that yield potential will continue to drop over the coming weeks. Soybean bears are hopeful that better weather conditions in the eastern US may offset some yield loss in the west. This offered pressure to prices towards the close. Outside markets are offering support today with a lower US Dollar and higher crude oil prices.

VEGOILS-Palm oil inches up on ECB comments, set for weekly loss
SINGAPORE, July 27 (Reuters) - Malaysian crude palm oil bounced from a five-week low hit the previous day after the European Central Bank pledged to protect the euro zone in comments that encouraged some risk taking in financial markets.
"The selling was a bit overdone yesterday, so we see a little bit of recovering today," said a trader with a foreign commodities brokerage in Malaysia. "Optimism over Europe may not last for long as the sovereign debt issue remains unsolved."

For blighted US soybeans, a little rain goes a long way
CHICAGO, July 26 (Reuters) - Two inches of rain over the next two weeks is all that the U.S. soybean crop needs to ensure that millions of tiny pink flowers now budding at a near-record pace mature into the small green pods that will help feed the world.
As scattered rain in the north and east of the farm belt this week brought the first significant relief to this summer's drought, the worst in 56 years, agronomists said even a small amount of moisture will help the soybean crop avoid the fate facing corn, which has been decimated by the unrelenting heat.