Thursday, August 30, 2012
Bollinger band reading : pullback correction upside biased.
MACD Histogram : weakening, buyer taking profit.
Support : 2970, 2950, 2920, 2900 level.
Resistance : 3020, 3050, 3070, 3100 level.
FCPO closed recorded gains with reduced volume traded. Soy oil price currently having downward correction after overnight closed recorded advanced more than 1.5% while crude oil price moving side ways range bound.
Price recovered today on overnight soy oil surged due to bad weather factor while market await Monday export data, however gains were limited on weak global economy concern.
Still, FCPO technical chart study continue to show a pullback correction upside 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.
Posted by MW Chong at 6:04 PM
Bollinger band reading : pullback correction little upside biased.
MACD Histogram : falling lower, seller testing market.
Support : 1640, 1630, 1623, 1615 level.
Resistance : 1650, 1660, 1670, 1680 level.
FKLI closed slightly higher with lesser volume changed hand with September contract closed doing 1 point discount compare to cash market that closed recorded minor gain. Overnight U.S. markets closed recorded small gain and today Asia markets ended in negative zone while European markets currently registering loss.
Global market traded mostly recorded loss after Japan reported lower than expected retail sales and weaker Korea manufacturers confidence while await U.S. Federal Reserve's chairman speech tomorrow.
FKLI daily chart reading adjusted to suggesting a pullback correction little upside biased market development testing middle Bollinger band support level.
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.
Posted by MW Chong at 5:25 PM
DJIA chart reading : correction range bound little upside biased.
Hang Seng chart reading : little downside biased with possible pullback.
KLCI chart reading : correction range bound little upside biased.
Posted by MW Chong at 4:59 PM
GLOBAL MARKETS: Asian shares hit a one-month low on growth concerns while major currencies trod water as investors waited to see whether U.S. Federal Reserve Chairman Ben Bernanke will give any hint about further U.S. stimulus in a speech to fellow central bankers on Friday. European shares continued to drift lower, with investors reticent about lifting their exposure to riskier assets given uncertainty over the next moves by the U.S. Federal Reserve and the outlook for the global economy. U.S. stocks edged higher on Wednesday in the lightest trading of the year as investors waited for a key speech by Federal Reserve Chairman Ben Bernanke on Friday. (Reuters)
U.S. Q2 growth revised up, Fed still seen in play (Reuters)
The U.S. economy fared slightly better than initially thought in the second quarter, but the pace of growth remained too slow to shut the door on further monetary easing from the Federal Reserve.
China's official PMI seen hitting 9-month low in August (Reuters)
China's official manufacturing managers' index (PMI) may have eased to a 9-month low of 50 in August, supporting the case for fresh easing measures by the central bank as the world's second-largest economy struggles against stiff global headwinds.
FOREX: The euro edged higher versus the dollar, finding support ahead of a speech by U.S. Federal Reserve Chairman Ben Bernanke on Friday, but the Australian dollar hit a one-month low on concerns about the outlook for China. (Reuters)
FOREX-Euro edges higher; Aussie touches 1-month low
SINGAPORE, Aug 30 (Reuters) - The euro clawed higher versus the dollar, finding support ahead of a speech by U.S. Federal Reserve Chairman Ben Bernanke on Friday, but the Australian dollar hit a one-month low on ongoing concerns about the outlook for China.
"If he were to say something tremendous, the dollar is likely to come under strong selling pressure," Okagawa said, adding that such uncertainty made it difficult to buy the dollar aggressively at this point.
U.S. grain sector on high alert for aflatoxin in drought-hit corn (Reuters)
The grain industry, makers of milk products and crop insurers are on high alert for a naturally occurring toxin in corn that could present another challenge to farmers already hit by the worst drought in 56 years.
GRAINS: U.S. wheat fell as traders locked in profits following its biggest daily climb since mid-July in the previous session, although concerns that Russia is poised to implement export curbs continued to support prices. (Reuters)
U.S. natgas storage projected up 61 bcf in weekly EIAs (Reuters)
U.S. natural gas inventories, on average, were forecast to have gained 61 billion cubic feet last week, according to a Reuters poll of industry traders and analysts on Wednesday.
OIL: U.S. crude futures fell towards $95 a barrel after oil facilities in the Gulf of Mexico were largely spared storm damage while a surprise build in crude stockpiles and a possible release of strategic oil stocks weighed on prices. (Reuters)
Japan nickel imports from Indonesia rise as delayed cargoes arrive
TOKYO, Aug 30 (Reuters) - Japan's nickel imports from Indonesia surged in July from the year before due to the arrival of cargoes delayed after Jakarta imposed new mining regulations and because figures for 2011 were decimated by the deadly earthquake and tsunami that hit in March that year.
An industry body in Tokyo said that nickel trade between the two countries was "returning to normal" after shipments slated for May and June were postponed as details of Indonesia's new mining rules, announced in May, became clear.
China's Baosteel expecting "most difficult" third quarter
BEIJING, Aug 29 (Reuters) - Baoshan Iron and Steel , China's biggest listed steelmaker, expects the third quarter to be the "most difficult" of the year, but the company should avoid any losses over the period, executives said on Wednesday.
The company, also known as Baosteel, earned profits of 2.38 billion yuan ($374.63 million) in the first half of the year, down 53 percent from a year earlier, its performance hit by sluggish demand and persistent overproduction in the Chinese steel sector, the world's biggest.
Global iron ore demand may drop in H2 2012 from H1 - Baosteel (Reuters)
Global demand for iron ore will not grow and could even drop in the second half of 2012 compared with the first six months, with supply also rising, a senior official at China's Baoshan Iron and Steel Co Ltd said on Thursday.
COLUMN-Bearish iron ore fundamentals conflict with positive technicals
--Clyde Russell is a Reuters market analyst. The views expressed are his own.--
LAUNCESTON, Australia, Aug 30 (Reuters) - Sentiment toward iron ore is probably at its most bearish since the 2008 global recession, in contrast to technical indicators which are sending some signals that a bullish turning point may be near.
Spot iron ore in Asia fell to $90.30 a tonne on Wednesday, the lowest since November 2009, and it's hard to find any optimistic traders given mounting evidence of slowing demand in China, the world's largest consumer.
Global iron ore demand may drop in H2 2012 from H1 - Baosteel
SUZHOU, China, Aug 30 (Reuters) - Global demand for iron ore will not grow and could even drop in the second half of 2012 compared with the first six months, with supply also rising, a senior official at China's Baoshan Iron and Steel Co Ltd said on Thursday.
Global seaborne supply of iron ore would rise by more than 50 million tonnes in the second half from the first half, Zhang Dianbo, head of purchasing at Baosteel , China's biggest listed steelmaker, told an industry conference.
BASE METALS: Copper rallied after China's Premier Wen Jiabao said he was confident the crisis-stricken euro zone can survive its nagging debt crisis, which lifted the euro and forced shorts to cover. (Reuters)
PRECIOUS METALS: Gold was trapped in a tight range ahead of a speech from U.S. Federal Reserve Chairman Ben Bernanke this week, which could stoke expectations for a third round of quantitative easing to stimulate the economy. (Reuters)
METALS-LME copper falls as China stimulus hopes fade; c.bankers eyed
SHANGHAI, Aug 30 (Reuters) - London copper fell for a fourth session on doubts that top consumer China would launch any significant economic stimulus measures soon, while nervousness ahead of a meeting of central bankers in the United States also curbed risk appetite.
"Some people believe China won't be rolling out any big stimulus measures before this year's political leadership transition is complete," said a Shanghai-based trader. "That means we may only see clear policy direction around June next year when the new leaders have fully settled down."
PRECIOUS-Gold stuck in tight range before Fed speech
SINGAPORE, Aug 30 (Reuters) - Gold was trapped in a tight range ahead of a speech from Federal Reserve Chairman Ben Bernanke on Friday that could stoke expectations for a third round of quantitative easing to stimulate the U.S. economy.
"Sentiment is a bit mixed. People are pretty cautious," said Ronald Leung, director of Lee Cheong Gold Dealers in Hong Kong.
Posted by MW Chong at 4:16 PM
GLOBAL MARKETS-Asian shares hit 1-mth low, euro steady before Bernanke speech
By Chikako Mogi
TOKYO, Aug 30 (Reuters) - Asian shares hit a one-month low on growth concerns while major currencies were range-bound on Thursday as investors waited to see whether U.S. Federal Reserve Chairman Ben Bernanke will give any hint about further U.S. stimulus in a speech on Friday.
Markets sensitive to industrial demand, such as iron ore, were pressured by the slowdown in the Chinese economy, while the decline in dollar-based commodities and energy prices also reflected investors toning down elevated expectations for further U.S. monetary easing next month.
Data on Wednesday showing solid U.S. pending home sales while the Fed said in its Beige Book that nationwide business activity grew gradually in July and early August, pinning the Standard & Poor's 500 Index .SPX near a four-year high and the dollar in familiar levels against the yen around 78.61 JPY=.
"Central banks' accommodative stance is the most significant factor for markets, so investors will be increasingly reluctant to take positions and be sensitive to swings in the dollar in the run-up to Jackson Hole," said Naohiro Niimura, a partner at Tokyo-based research and consulting firm Market Risk Advisory.
Bernanke will speak on Friday at the Jackson Hole meeting of central bankers and economists, an event he has used in the previous two years to signal the Fed's easy policy intentions.
"Receding expecations for an imminent Fed easing weighed on dollar-based commodities while concerns about weak demand from the world's largest consumer China hit commodities such as iron ore, which are driven more by fundamentals than speculators."
MSCI's broadest index of Asia-Pacific shares outside Japan .MIAPJ0000PUS shed 0.9 percent to a four-week low, pulled down by a 2 percent plunge in its materials sector .MIAPJMT00PUS. Japan's Nikkei stock average .N225 slid 0.7 percent. .T
Australian shares .AXJO tumbled 1.2 percent to a two-week low as miners extended losses on falling iron ore prices, which hit their lowest levels since late 2009 .IO62-CNI=SI. Rio Tinto RIO.AX fell below A$50 a share for the first time in over three years. The ore is Australia's single biggest export earner.
The Australian dollar fell to a one-month low around $1.0320 AUD=D4.
"We are seeing a mining industry in a state of flux," Boart Longyear Chief Executive Craig Kipp said.
"Global uncertainties ... are driving our mining customers to be more cautious with their capital," he said.
Hong Kong shares .HSI tumbled 1 percent ahead of a futures settlement at the end of Thursday trade, with the decline accelerating after stop losses were triggered at the 19,700 level when the index opened below the 200-day moving average.
Shanghai shares .SSEC rebounded from their lowest close since Feb. 2009 on Wednesday.
Despite sounding out primary dealers on potential demand for 28-day reverse repurchase agreements on Wednesday, China's central bank on Thursday opted against using the unconventional money market tool, widely seen as a compromise between short-term liquidity injections and a cut in bank reserve requirement ratios.
EVENTS KEEP MARKETS RANGE-BOUND
U.S. crude oil CLc1 fell 0.5 percent to $95.05 a barrel, after slipping the previous day as Gulf Coast refineries and platforms seemed to have escaped damage from Hurricane Isaac. Brent LCOc1 eased 0.1 percent to $112.41. O/R
The euro EUR= firmed 0.1 percent to $1.2537 and held steady against the yen at 98.55 EURJPY=.
Speculation rose that the European Central Bank was moving ahead on a plan to buy bonds to lower peripheral euro zone states' borrowing costs, after ECB chief Mario Draghi wrote in an opinion piece in a German newspaper on Wednesday that the bank needed to employ "exceptional measures." (Full Story)
Draghi cancelled his attendance at Jackson Hole due to a heavy workload as he gears up for the bank's critical policy-setting meeting on Sept. 6, with markets expecting the central bank to provide details of the bond-buying scheme.
Markets might remain in ranges for weeks beyond Jackson Hole and the ECB meeting, with key events lined up that could clarify the timing of any further easing by the Fed, and the roadmap for the euro zone's crisis-management.
A key U.S. jobs report is due on Sept. 7 ahead of the Fed's Sept. 12-13 policy meeting and the German constitutional court rules on the region's bailout funds on Sept. 12, before euro zone finance ministers meet on Sept. 14-15.
A report on Greece by its international lenders is due by early October to determine whether Athens will get a bailout.
The currency options market suggested players were not expecting sharp price swings, with one-month euro/dollar volatility still below 10 percent EURVOL.
Later on Thursday, Italy will issue 6.5 billion euro longer-dated bonds. Italian government bond yields fell on Wednesday as dealers sensed good demand for Thursday's issuance after two successful auctions earlier this week.
Asian credit markets weakened, pushing the spread on the iTraxx Asia ex-Japan investment-grade index ITAIG5Y=MG wider by 3 basis points.
Posted by MW Chong at 2:28 PM
VEGOILS-Palm oil edges up, Bernanke speech eyed
By Chew Yee Kiat
SINGAPORE, Aug 30 (Reuters) - Malaysian crude palm oil futures inched up on Thursday, recovering from a near 2-week low although traders remained cautious ahead of a speech by U.S. Federal Reserve Chairman Ben Bernanke on Friday. Investors are looking to the speech for any hint on further U.S. stimulus that could boost sentiment and support demand for risky assets such as palm oil, which has lost around 5 percent so far this year. The edible oil has posted two straight weeks of gains as the worst drought in over half a century damaged soybean crops in the U.S. Midwest, hurting soybean oil supply and shifting more vegetable oil demand to the cheaper palm oil. "The rise in palm oil for the past week or two was mainly on borrowed strength from soy, and if soy seems to be running out of steam, palm is going to follow," said a trader with a foreign commodity brokerage in Kuala Lumpur.
By the midday break, the benchmark November 2012 contract FCPOc3 on the Bursa Malaysia Derivatives Exchange gained 0.2 percent to 3,006 ringgit ($961) per tonne. Prices hit 2,978 ringgit on Wednesday, the lowest level since Aug. 17. Total traded volume stood at 20,149 lots of 25 tonnes each, much higher than the usual 12,500 lots. Palm oil may end its current rebound from 2,978 ringgit in a resistance zone of 3,050-3,067 ringgit and drop back to 2,978 ringgit, said Reuters analyst Wang Tao. On top of bearish technicals, traders are also taking into account prospects of higher palm oil stock levels in August that could weigh on futures prices. But the market will be looking out for export numbers for the full month as resilient demand could help ease stock growth. Exports rose as much as 6.6 percent for the first 25 days of August from a month earlier on higher demand from major food buyers India and China, cargo surveyor data showed. PALM/ITSPALM/SGS
Brent crude fell towards $112 a barrel on Thursday after oil facilities in the Gulf of Mexico were largely spared storm damage, but maintenance at North Sea fields and a possible strike in Norway's oil sector curbed losses. In other vegetable oil markets, the most active U.S. soyoil contract for December delivery BOZ2 slipped 0.4 percent by 0517 GMT. The most active January 2013 soyoil contract DBYF3 on the Dalian Commodity Exchange gained 0.7 percent by the midday break.
Monthly palm oil exports from Indonesia up 20 pct m/m in July - RTRS
JAKARTA, Aug 30 (Reuters) - Palm oil exports from Indonesia, the world's top producer, rose 20 percent to 1.5 million tonnes in July compared to the previous month, industry data showed on Thursday. This year, palm oil output will be between 23 million and 25 million tonnes, with around 18 million tonnes exported. Indonesia's top customers for the edible oil include India, China and Europe. In January-July, exports to India totalled 3.08 million tonnes, with China shipping 1.75 million tonnes and the European Union 2.25.
Indonesia to stop palm firms from using subsidised fuel
Will ban palm firms from using subsidised fuel from Sept. 1 Regulation issued without industry feedback. JAKARTA, Aug 30 (Reuters) - Indonesia will ban palm oil plantation firms from using subsidised fuel from next month, an official at the Indonesian Palm Oil Association (GAPKI) said on Thursday, in a move aimed at reducing the strain on the country's budget. Costly fuel subsidies have made Indonesia's pump prices the cheapest in Asia -- at about half the market rate. The country spent about $18 billion on fuel subsidies last year and this is expected to rise to about $20 billion in 2013. Since leaving prices at their current level threatens to increase the budget deficit and reduce the amount of money available for much-needed infrastructure spending, the government is now trying to reduce use of the subsidised fuel. It has already stopped government vehicles from using it.
"Starting on Sept. 1, plantations cannot use subsidised fuel," Fadhil Hasan, executive director at GAPKI told Reuters, adding the government regulation was issued before the association had time to give feedback. Firms that may be hurt by the government's fuel move include Wilmar International WLIL.SI, PT Sinar Mas Agro Resources & Technology SMAR.JK and PT Astra Agro Lestari. "As logistic costs represent 14 percent of total production expense, the ban will adversely impact plantation companies if they do not increase their selling prices," Jakarta-based brokerage Bahana Securities said in a report on Thursday. Benchmark November palm oil futures FCPOc3 on the Bursa Malaysia Derivatives Exchange were trading at around 3,000 ringgit ($960) per tonne on Thursday, down 5 percent so far this year. Palm oil output from Indonesia, the world's top producer, is expected this year to be between 23 million and 25 million tonnes, compared with 22.5 million in 2011.
India, China and Europe are the main buyers of Indonesian palm oil, with exports totalling 8.6 million tonnes during the first six months of this year. President Susilo Bambang Yudhoyono's Democrat Party has been trying to tackle the issue of costly subsidies in Indonesia -- Southeast Asia's largest economy -- though the parliament earlier this year stymied its plans to lift the price of subsidised fuel.
Posted by MW Chong at 2:25 PM
GLOBAL MARKETS-Asian shares ease, euro steady ahead Bernanke speech
TOKYO, Aug 30 (Reuters) - Asian shares eased and major currencies stayed range-bound on Thursday as investors avoided betting on direction before a speech by U.S. Federal Reserve Chairman Ben Bernanke, with focus on whether there will be any hint about further U.S. stimulus.
"With risk somewhat bid, the market continues to hunt for positions with the back end of the US Treasury curve still in focus but with little gusto, as all eyes are now on the Bernanke speech on Friday," said Sebastien Galy, strategist at Societe Generale.
White House prepares to sideline IEA on oil release
(John Kemp is a Reuters market analyst. The views expressed are his own)
LONDON, Aug 29 (Reuters) - Disagreements between the White House and staff at the International Energy Agency (IEA) over releasing emergency stocks risk sidelining the agency, and sowing confusion in the market, at a time when policymakers are concerned about the impact of rising oil prices on the global economy and support for sanctions on Iran.
OIL-Oil lower as offshore damage from Isaac seen limited
NEW YORK, Aug 29 (Reuters) - Brent crude prices edged lower in choppy trading on Wednesday, while U.S. oil futures fell on expectations that damage to oil facilities from Hurricane Isaac will be limited and in reaction to data showing a sharp rise in U.S. crude oil stocks.
"It is expected that oil production in the Gulf of Mexico will quickly return to normal," said Carsten Fritsch, an oil analyst at Commerzbank in Frankfurt.
POLL-US natgas storage projected up 61 bcf in weekly EIAs
NEW YORK, Aug 29 (Reuters) - U.S. natural gas inventories, on average, were forecast to have gained 61 billion cubic feet last week, according to a Reuters poll of industry traders and analysts on Wednesday.
Utilities typically stockpile natural gas from April through October to meet peak winter heating demand.
POLL-Analysts raise oil price forecasts for 2012, 2013
BANGALORE, Aug 29 (Reuters) - Analysts have raised their oil price forecasts for this year and 2013 due to supply concerns and to expectations for a further round of monetary policy stimulus, which could improve prospects for economic growth, a Reuters poll found.
The Reuters monthly oil poll, based on forecasts from 28 analysts, forecast Brent at an average of $109.50 a barrel in 2012, up $1.20 from the figure in the July poll.
U.S. oil industry waits out Isaac, no damage reported
HOUSTON, Aug 29 (Reuters) - Isaac was downgraded to a tropical storm on Wednesday as it continued to batter the U.S. Gulf Coast, causing flooding and power outages but so far no discernible damage to refineries or offshore oil and gas platforms.
Shell plans to begin flyover inspections of its platforms in the central Gulf of Mexico on Thursday and could begin restarting them on Friday.
U.S. crude stocks post surprise rise, oil products mixed-EIA
NEW YORK, Aug 29 (Reuters) - U.S. crude oil stockpiles rose unexpectedly last week as oil imports jumped, while inventories of refined products were mixed as plant utilization remained unchanged, government data showed on Wednesday.
Domestic stocks of crude, excluding oil held in the Strategic Petroleum Reserve, rose by 3.78 million barrels to 364.52 million barrels in the week ended Aug. 24, the Energy Information Administration reported. Analysts polled by Reuters had forecast a drop of 1.5 million barrels.
Widely eyed US energy data seen providing false readings
NEW YORK, Aug 29 (Reuters) - Energy investors have taken bets for years on what they thought was an important indicator of future energy production: the weekly rig count data provided by oil service firms.
A Reuters analysis of the data, and interviews with officials at companies involved in collecting and compiling it, shows that it may sometimes be an arbitrary and misleading gauge subject to revisions.
NATURAL GAS-Warm forecast props up U.S. Sept natgas futures at expiry
NEW YORK, Aug 29 (Reuters) - U.S. natural gas futures ended higher on Wednesday after four straight losing sessions, backed by warm forecasts for late this week and next week, though high supplies and bearish technicals limited buying in the expiring September contract.
"Much of the country looks above normal next week, and that heat supported some liftoff from the lows today," Gelber & Associates analyst Patrick Saunders said in a report, adding the market was getting oversold, which also triggered some buying.
Posted by MW Chong at 11:23 AM
Malaysia External Trade Development Corporation (Matrade) is collaborating with Halliburton to provide a platform for Malaysian companies to promote their products and services to world-class businesses. Halliburton is one of the world's largest providers of products and services to the energy industry. Matrade will host a programme on business opportunities in the oil and gas industry with Halliburton Malaysia on Sept 6 in Matrade Hall at Menara Matrade in Kuala Lumpur. (Bernama)
Malaysia has shown significant improvement across all consumer confidence indicators with an increase of 17.1 index points according to MasterCard Worldwide Index of Consumer Confidence. Overall, nine out of 14 Asia-Pacific markets polled recorded positive improvements when compared to 2H11 with a regional rise from 52.1 index points in 2H11 to 57.2 index points in 1H12, said MasterCard Worldwide vice president/senior country manager for Malaysia and Brunei, Jim Cheah. Consumers in the region which remained most optimistic were India (82.1 index points), China (77.4), Vietnam (77.2), and Thailand (75.8), while the least optimistic markets were Japan (23.6), Taiwan (25.7) and Australia (39.2). Hong Kong, which dropped 38.7 index points in the last index, improved by 21.9 index points to lead the region, followed closely by South Korea (+21.4 index points), Malaysia (+17.1) and New Zealand (+15.3), it said. (Bernama)
The Malaysian Investment Development Authority (Mida) has approved the setting up of 54 regional and global operations in Malaysia in 1Q12 with investments of RM5.4bn. Its CEO, Datuk Noharuddin Nordin, said these operations would create over 9,000 jobs, mainly in managerial, professional and technical levels. "Malaysia's world-class infrastructure, good connectivity, strategic location within Asean, attractive investment incentive packages and liberal policies on foreign equity participation are among the compelling reasons cited by the multinational corporations for siting their regional and global establishments in this country," he said. (Bernama)
Foreign investors' perception of Malaysia has improved, a survey by the Economist Corporate Network (ECN) shows. The ECN's Asia Business Outlook Survey 2012 done in Jan this year, revealed that half of the 500 multinational companies polled were planning to raise their investment in Malaysia this year. “None of the companies said they were reducing their investment in Malaysia. I think it's a pretty positive outlook for Malaysia," said Justin Wood, its chief economist for South and Southeast Asia. Malaysia ranked 7th of 12 Asian countries in terms of the investment priorities of those companies. Topping their list of priorities were China, India, Indonesia, Vietnam, Singapore and Thailand. In the same survey, Malaysia was ranked fourth after Indonesia, Vietnam and India as markets most attractive to do production and manufacturing. The ECN expects Malaysia's economy to slow to 4.7% this year, from 5.1% last year in the face of global weakness, particularly from the US and Europe. He said there was a possibility the ECN may raise its 4.7% growth forecast for the country, given the robust growth seen in 1H12. It expects the ringgit to appreciate modestly against the US dollar, averaging RM3.07 this year and RM3.00 in 2013. (BT)
The US economy expanded 1.7% annual rate in 2Q12, from an initial estimate of 1.5%, reflecting an improvement in the trade deficit and a pickup in household spending on utilities. This came in line with the median estimate and follows 2% annualised gain in 1Q12. (Bloomberg)
The US MBA purchase applications index gained 1.0% wow in the 24 Aug week (0.9% in the earlier week), whilst the refinance index fell 6.0% wow (-9.0% in the prior week). (Bloomberg)
US after-tax corporate profits gained 13.3% yoy in 2Q12 (a revised 19.1% in 1Q12). (Bloomberg)
The US pending home sales index gained 2.4% mom in Jul (-1.4% in Jun), exceeding consensus of 1.0%. (Bloomberg)
The US economy is growing slowly amid slight improvements in retail sales and the depressed housing market, while hiring held steady, the Federal Reserve said in a report. (AFP)
European Union lawmakers said they will fight proposals from EU Financial Services Commissioner Michel Barnier that would water down legislation capping banker bonuses. (Bloomberg)
Countering arguments made by the German economics establishment since before the introduction of the euro, ECB President Mario Draghi said it’s in Germany’s interest to consent to extraordinary steps to preserve the currency shared by 17 nations. (Bloomberg)
China's economy is stabilising slowly as policy stimulus gains traction while the government's sustained property curbs have suppressed speculation, according to Zhang Ping, head of the National Development and Reform Commission. (Reuters)
Crude oil sank in Asia as a call by the G7 nations for oil producers to increase output overrode US supply disruptions due to Hurricane Isaac. New York's main contract, light sweet crude for Oct delivery, shed 37 cents toUS$95.96/bbl and Brent North Sea crude for delivery in the same month slipped 36 cents to US$112.22. (CNA)
Rapid economic growth has put pressure on Indochina's infrastructure, and new investment plans are needed, the Asian Development Bank pointed out. (The Nation)
Asean's economic meeting pledged yesterday to support the association's new members in order to narrow development gaps between the member countries. (The Jakarta Post)
South Korea's current account surplus rose to a new record of US$6.1bn in Jul (US$5.88bn in Jun) as falling world oil prices pushed down the value of imports (CNA)
Bank of Thailand Governor Prasarn Trairatvorakul said Thailand’s economic fundamentals are still strong enough to withstand any possible current negative impact of the global economic crisis. But if the impact reaches a critical level, the central bank was ready to use its monetary policy to help ease the damage, including a reduction in the key policy rate. (Bangkok Post)
Thailand’s custom exports value declined 4.46% yoy while imports rose 13.73% in Jul, resulting in a trade deficit of US$1.74bn. Exports fell more than consensus estimate for a 3.75% decline. Governor of the Bank of Thailand Prasarn Trairatvorakul said there was a high risk that Thailand’s latest export growth target of 7% would not be achieved. (The Nation)
Approximately 40% of the Master Plan for the Acceleration and Expansion of Indonesian Economic Development (MP3EI) projects are less viable and requires incentives from the central government, according to Bastary Pandji Indra, Director of Development for Public-Private Cooperation, Ministry of National Development Planning. (IFT)
The Indonesian government is targeting FDI in 2013 to reach US$ 30bn from US$22bn in 2012. (IFT)
The Indonesian government has come up with an idea to raise base electricity prices by 1% per month until it achieves a 15% hike, starting from Jan next year. (Jakarta Post)
Standard & Poor's Ratings Services believes Vietnam must undertake timely reforms of the country's state-owned enterprises and its banking sector, especially after the recent arrest of one of the founders of Asia Commercial Bank (ACB). (StarBiz)
The Vietnamese Government has agreed to grant tax exemption for farm goods grown in Cambodia by Vietnamese enterprises and individuals and imported for processing. (Vietnam News)
Vietnam raised retail petrol prices yesterday by VND650 (US$0.033) per litre to VND23,650, while diesel rose by VND300 per litter to VND21,850. (Vietnam News)
Myanmar president U Thein Sein announced the second day of government reforms, with three ministers allowed to resign “to accelerate the reform process of the government,” according to Director of President Office spokesperson U Zaw Htay. (The Nation)
Vietnam and Cambodia have agreed to boost education exchanges and human-resource training for people in the border provinces. (Vietnam News)
Posted by MW Chong at 10:05 AM
Sime Darby Bhd aims to increase its plantation landbank to 1m hectares in the next three years, eyeing land expansion in Indonesia and Africa, said group CEO Dato' Mohd Bakke Salleh. Presently, the group has 878,794 ha in Malaysia, Indonesia and Liberia. Of this, 522,000 ha is planted with oil palm and around 350,000 is unplanted. On the other hand, Bakke believes there is still upside in CPO prices and is of the opinion that prices should be able to "firm up". (Financial Daily)
Sime Darby Plantation Sdn Bhd and its partner, Tenaga Nasional Bhd , have decided to move forward together to conduct a feasibility study on the potential of a biogas project. "It is subject to further details to be agreed upon by the parties," said Sime Darby Bhd in updating the status of the agreement to Bursa Malaysia after Mitsui & Co Ltd withdrew as a consortium member in early this year. (BT)
Telekom Malaysia (TM) is optimistic of hitting the target of 1.34m premises passed and 98 exchange areas for its High Speed Broadband (HSBB) under the Public-Private Partnership (PPP) programme by year-end. Its Group CEO Datuk Seri Zamzamzairani Mohd Isa said TM has rolled out HSBB to close to 1.26m premises covering 81 exchange areas. Zamzamzairani said after the end of the PPP agreement, TM will be focusing on its HSBB services in areas outside of the PPP on a demand-driven basis. TM's HSBB has been made available in Terengganu, Penang, Kedah, Johor, Melaka, Negeri Sembilan and Perak. (Bernama)
AirAsia Bhd may sign an order for as many as 100 Airbus SAS aircraft at next month's Berlin airshow after reporting an 11-fold jump in quarterly profit. Chief executive officer Aireen Omar said negotiations with Airbus are going "quire well" and the carrier would like to sign the deal in Berlin. (Bloomberg)
AirAsia: Indonesia approves AirAsia purchase of Batavia Air. The Indonesian government has approved in principle the purchase of Batavia Air by Malaysian low cost airline company, AirAsia Bhd and its Indonesian partner, PT Fersino Nusaperkasa. (Source: The EdgeDaily)
Petronas gets nod for Progress Energy buy
Petroliam Nasional’s (Petronas) proposed acquisition of Canadian firm Progress Energy Resources Corp via its subsidiary Petronas Carigali Canada Ltd (Petronas Canada) has been approved by Progress Energy’s debenture holders. Under the arrangement, Progress Energy’s holders of its 5.25% convertible unsecured subordinated debentures due 31 Oct 2014 and its 5.75% Series B convertible unsecured subordinated debentures due 30 June 2016 would receive CAD22 (RM69.46) in cash per common share held. Petronas Canada had, in June, reached an agreement to acquire Progress Energy for about CAD5.5bn. (StarBiz)
Tobacco: Philip Morris hopes any tax hike will be moderate. Cigarette makers in Malaysia have, as in the last few years in the run-up to the tabling of the national budget, requested the government to be moderate in any increase in excise tax. "We have been appealing for a moderate approach to excise tax given the ongoing high presence of illicit cigarettes. From the perspective of Philip Morris Malaysia, we would consider a moderate increase as anywhere between zero to up to one sen per stick, maximum, over a one-year period," said Richard James, Philip Morris (Malaysia) Sdn Bhd's corporate affairs director. (Source: Business Times)
Ahmad Zaki Resources Bhd has won a RM174.6m project from Mass Rapid Transit Corp Bhd for the construction and completion of elevated stations and other associated works at Taman Suntex, Taman Cuepacs and Bandar Tun Hussein Onn. The date for the practical completion for the works shall be on Jun-2016. (BT)
Highway concessionaire Lingkaran Trans Kota Holdings Bhd (Litrak) will receive over RM80m in compensation from the government for postponing toll hikes. Chief financial officer Richard Lim Kim Ong said the company had received half of the cash payout in the middle of this year and the balance will come in the following year after an audit of the traffic has been conducted. According to Litrak's concession agreement, the toll rates for Lebuhraya Damansara Puchong (LDP) were scheduled for a rise on January 1 2011, but the government had decided to defer until further notice. Lim said the cash payout from the federal government will help ease the company's top line as traffic along the LDP has been almost saturated. "Revenue-wise, we are not affected because we are receiving compensation," Lim told the press after Litrak's annual general meeting here yesterday. (BT)
Top world rubber producers at the current International Tripartite Rubber Council (ITRC) meeting in Bandung, Indonesia, will need to reach full agreement on the "alert, trigger and defence" pricing mechanism to ensure natural rubber stays stable and curb the current downtrend in prices. An industry source close to the council said the outcome of the meeting in Bandung was crucial as "it will have a significant influence on the future direction of the world rubber prices which have fallen by about 30% so far this year." It is believed that Thailand suggested US$2.80 per kg while Malaysian and Indonesia wanted US$2.70 per kg as the pricing mechanism," the source added. (StarBiz)
Hibiscus Petroleum Bhd is planning to acquire an oil-producing asset, as part of its portfolio balancing strategy, with the RM130m it hopes to raise from its private placement of new convertible redeemable preference shares (CRPS) announced early this month. Substantial shareholder and managing director Dr Kenneth Pereira said the targeted asset would generate cashflow and allow the group to complement the value cycle of exploration and development assets acquired since its listing in July 2011. Dr Pereira said Hibiscus is now aggressively seeking out placees, local and foreign. Its internal rate of return target for a producing asset is 12% and 20% for development assets. (Malaysian Reserve)
HB Global Ltd has executed and entered into land use rights agreements with Juxian National Land and Resources Bureau to buy the land use rights over four parcels of land for RM48.4m. HB Global, formerly known as Sozo Global Ltd, said that the acquisition allows the company to expand its commercial duck farming, parent duck farming and duck feedstock processing plant. “This is to ensure duck meat supply security, quality of duck meat, and pricing competitiveness for expanding into the ready-to-serve duck products business,” said HB Global. (BT)
Ingenuity Solutions Bhd has yesterday received an offer from Ninetology Marketing Sdn Bhd to acquire a 39.4% stake in the company at RM0.55/share and if the deal goes through, this would trigger a mandatory general offer to acquire all the remaining shares Ninetology has not already owned in Ingenuity.The offer price, at RM0.55/share, ,represented a 39.2% premium over the last traded share price of Ingenuity at RM0.39 before the counter was suspended yesterday prior to this announcement. (Starbiz)
Pasukhas Group Bhd has received an unusual market activity (UMA) query from Bursa Malaysia on its first trading day following a 404.1% surge in its share price to RM0.61. The last done price was 5x its IPO price of RM0.12. It was the most actively traded stock on Bursa Malaysia with 67m shares changing hands, which accounted for 5.3% of the total shares traded yesterday.It is the first company to receive an UMA query on its debut in recent times.(Starbiz)
Posted by MW Chong at 10:04 AM
Asia FX By Cornelius Luca - Wed 29 Aug 2012 17:04:34 CT (Source:CME/www.lucafxta.com)
The appetite for risk was limited on Wednesday despite hopes for signs of further easing by both the Fed and the ECB. The foreign currencies ended divergently after most of them advanced on Tuesday. Euro, yen and franc fell, the pound rose and the commodity currencies ended flat. Volume remains light near the end of the summer vacation. The US stock markets closed slightly higher, while gold, oil and silver ended down. The short-term outlook for most foreign currencies is sideways. The medium-term outlook for most of the foreign currencies is sideways. The LGR short-term model is long on most foreign currencies. Good luck!
US: The gross domestic product was upwardly revised to +1.7% from +1.5% initially reported in the second quarter.
US: The NAR's pending home sales index rose by 2.4% to 101.7 in July from 99.3 in June.
Today's economic calendar
Japan: Retail sales for July
Australia: Building permits for July
Recap Stock Index Market Report (CME)
The September S&P 500 inched higher in a choppy trading session, slightly taking out yesterday's high in the process. Trading volumes and price ranges have been subdued this week, partially from end of August vacations, as well as uncertainty ahead of Fed Chairman Bernanke's address in Jackson Hole on Friday. The market rallied during the early US session, fueled by well received Q2 GDP data that came in above preliminary estimates. July US Pending Homes Sales data came in above expectations and rose toward its highest level in two years. There were a couple of positive stock specific moves offering support, including a nearly 8.0% gain in the shares of WellPoint and a better than 18% rally in Yelp. Afternoon gains in the S&P 500 also came in response to the Fed's Beige Book report.
Recap Interest Rate Market Report (CME)
The Treasury market was mostly off balance to lower today as the scheduled data was slightly better than expected and that dampened fears of slowing and might have leveled easing expectations temporarily. The 5 Year note auction didn't seem to have much of an impact on bond prices but it is possible that the auction provided a minor delayed reaction rally of roughly 11 ticks. The bid to cover ratio today was 2.92, with indirect bids at 39.7% and direct bids at 11.0%.
Asian Stocks Drop to Four-Week Low Before Bernanke Speech (Bloomberg)
Asian stocks dropped, with the regional benchmark index heading for a four-week low, after Japan’s retail sales fell more than economists forecast and as investors doubt Federal Reserve Chairman Ben S. Bernanke will announce a third round of quantitative easing. Samsung Electronics Co. (005930), the world’s biggest mobile-phone maker by sales, slipped 1.4 percent in Seoul. Nissin Electric Co. fell 3.1 percent after the Japanese maker of electricity distribution equipment lowered its full-year profit forecast. Fortescue Metals Group Ltd. sank 3.3 percent as JPMorgan Chase & Co. said Australia’s third-largest iron-ore producer would need additional funding if the metal’s price continues to fall. The MSCI Asia Pacific Index (MXAP) fell 0.5 percent to 118.74 as of 9:31 a.m. in Tokyo, heading for its lowest close since Aug. 3, before markets in Hong Kong and China open.
The Fed said the U.S. economy continued to expand “gradually” in July, damping speculation Bernanke will announce further measures to support growth in a speech tomorrow at a meeting of central bankers in Wyoming. “Investors who expect Bernanke to deliver a clear commitment to QE3 might be disappointed, which could trigger some sort of sell-off in so-called risky assets,” said Mikio Kumada, a Singapore-based global strategist for LGT Capital Management, which oversees more than $20 billion. “This is still not a time to bet against major central banks’ ability to intervene in markets.” Japan’s Nikkei 225 Stock Average lost 0.7 percent. South Korea’s Kospi Index dropped 1.1 percent and Australia’s S&P/ASX 200 Index fell 0.9 percent.
Japanese Stocks Fall as U.S. Growth Damps Stimulus Hopes (Bloomberg)
Japanese stocks declined, with the Nikkei 225 Stock Average (NKY) falling to a two-week low, after the U.S. economy grew more than expected, damping speculation Federal Reserve Chairman Ben S. Bernanke may announce another round of quantitative easing in his speech tomorrow. Nissan Motor Co. (7201), a carmaker that gets almost a third of its sales from North America, slid 0.9 percent even after its price target was raised by Credit Suisse Group AG. Yamada Denki Co., a seller of consumer electronics, lost 2.5 percent after Japan’s retail sales fell more than estimated. Softbank Corp., the nation’s third-biggest mobile phone company, gained 2.1 percent after saying it plans to open Japan’s biggest solar park with Mitsui & Co. and sell the output to Chuguku Electric Power Co.
The Nikkei 225 Stock Average slid 0.7 percent to 9,006.16 as of 9:42 a.m. in Tokyo, with volume 4.2 percent below the 30- day average ahead of the Fed chairman’s speech tomorrow at an economic symposium in Jackson Hole, Wyoming. The broader Topix (TPX) Index lost 0.6 percent to 745.38, with about three shares dropping for each that gained. “Investors who expect Bernanke to deliver a clear commitment to QE3 might be disappointed, which could trigger some sort of sell-off in so-called risky assets,” said Mikio Kumada, a Singapore-based global strategist for LGT Capital Management, which oversees more than $20 billion. “This is still not a time to bet against major central banks’ ability to intervene in markets.” Futures on the Standard & Poor’s 500 Index slid 0.2 percent today. The gauge gained 0.1 percent yesterday on a report gross domestic product expanded at an annualized 1.7 percent from April through June, beating an initial estimate of 1.5 percent.
U.S. Stocks Rise on GDP Data as Investors Await Bernanke (Bloomberg)
U.S. stocks advanced, following a two-day decline in the Standard & Poor’s 500 Index, as the economy grew more than first estimated and investors awaited Federal Reserve Chairman Ben S. Bernanke’s speech in two days. WellPoint Inc. (WLP) increased 7.7 percent after Angela Braly resigned as chairman and chief executive officer of the insurer. Yelp (YELP) Inc. surged 23 percent as investor confidence in its growth prospects prevailed after a ban lifted on stock sales by some of the largest investors in the online review website. The S&P 500 added 0.1 percent to 1,410.49 at 4 p.m. New York time. The Dow Jones Industrial Average rose 4.49 points, or less than 0.1 percent, to 13,107.48. Volume for exchange-listed stocks in the U.S. was 4.4 billion shares, the lowest level since at least 2008 excluding days surrounding holidays.
“You are right in that narrow little lane where nothing needs to move at this point,” said Madelynn Matlock, who helps oversee about $14.7 billion at Huntington Asset Advisors in Cincinnati. “People are actually waiting if anything comes out of Bernanke’s speech that is totally not expected. I don’t see any big initiative out of the Fed at this point. The economy is good enough that it’s not a disaster, yet it is slow enough that there’s no reason to crank up the anti-inflation machine.” Gross domestic product climbed at a 1.7 percent annual rate from April through June, up from an initial estimate of 1.5 percent. Separate data showed Americans signed more contracts to purchase previously owned homes in July.
European Stocks Fall for Second Day; L’Oreal Leads Slide (Bloomberg)
European stocks fell for a second day as companies from L’Oreal SA to Bouygues (EN) SA retreated after reporting earnings and German Chancellor Angela Merkel clashed with Italian Prime Minister Mario Monti over whether to give the euro area’s permanent bailout fund a bank license. L’Oreal dropped the most in 2 1/2 years after the world’s largest cosmetics maker reported profit margins that missed estimates. Bouygues, the French building, television and telecommunications company, tumbled 9 percent after trimming the earnings forecast for its phone business. Banca Monte dei Paschi di Siena SpA plunged 8 percent after posting a loss. The Stoxx Europe 600 Index (SXXP) slipped 0.1 percent to 267.01 at the close of trading, having swung between gains and losses at least 12 times.
The measure has still risen 14 percent from this year’s low on June 4 as European Central Bank President Mario Draghi pledged to do whatever it takes to preserve the euro and the region’s political leaders agreed to ease repayment terms on loans to Spain’s banks. “Investors want Draghi to put the money where his mouth is,” said Witold Bahrke, a senior strategist at PFA Pension A/S in Copenhagen, where he helps oversee $55 billion. “The European Central Bank seems to have developed a strategy of issuing a policy statement and letting it linger for a long time before backing it up by action. People in the market are getting annoyed with that.”
Emerging Stocks Retreat for Fourth Day on Commodities, Earnings (Bloomberg)
Emerging-market stocks dropped for a fourth day, sending the benchmark index to a 3 1/2 week low, as falling commodities dragged down producers and Chinese companies from Air China Ltd. to Evergrande Real Estate Group Ltd. posted lower earnings. The MSCI Emerging Markets Index lost 0.1 percent to 955.71 at 12:55 p.m. in London. An MSCI Inc. gauge of raw-material shares fell for a sixth day, set for the longest losing streak since May, as Jiangxi Copper Co. dropped 5.1 percent. Air China and Evergrande sank at least 2.9 percent. Eurocash SA (EUR), Poland’s biggest seller of non-durable consumer goods, tumbled the most on record as its chief executive officer sought to sell a stake. Metals retreated before a report on American economic growth and a hurricane in the U.S. curbed demand for oil at refineries.
The MSCI emerging-market index’s valuation slid to 1.6 times net assets today, a 10 percent discount versus the MSCI World Index of developed-nation shares, the widest gap since January 2009, according to data compiled by Bloomberg. “Investors are taking a cautious stance as the threat of a global slowdown hasn’t really disappeared,” said Jonathan Ravelas, the chief market strategist at Manila-based BDO Unibank Inc. “The sentiment for some investors is that it might be better to stay on the sidelines and wait if the U.S. and Europe will announce additional stimulus plans.”
Dollar Stays Higher Versus Yen Before U.S. Spending Data (Bloomberg)
The dollar remained higher versus the yen following a gain yesterday before U.S. data forecast to show consumer spending climbed the most in five months. The greenback held a gain against the euro as investors weigh whether Federal Reserve Chairman Ben S. Bernanke will signal a new round of bond buying when he speaks in Jackson Hole, Wyoming tomorrow. The euro was 0.5 percent from reaching an eight-week high versus the yen after European Central Bank President Mario Draghi said it’s in Germany’s interest to consent to extraordinary steps to preserve the single currency. “The market is scaling back its expectations a little bit for another clear signal of imminent policy easing as early as this week,” said Ray Attrill, global co-head of foreign- exchange strategy at National Australia Bank Ltd. (NAB) in Sydney. “That’s why the dollar is just a little bit firmer.”
The greenback traded at 78.68 yen as of 9:58 a.m. in Tokyo after gaining 0.3 percent to 78.71 yesterday. It was unchanged at $1.2530 per euro following a 0.3 percent advance in New York. Europe’s shared currency was little changed at 98.59 yen after climbing to 99.18 on Aug. 21, the strongest since July 5. U.S. consumer spending probably rose 0.5 percent in July from a month earlier, the most since February, according to the median estimate of economists in a Bloomberg News survey. The Commerce Department releases the figure today.
Aussie, Kiwi Drop to One-Month Low as Fed Stimulus Bets Decline (Bloomberg)
The Australian and New Zealand dollars fell to one-month lows as signs the U.S. economy is improving dimmed prospects that Federal Reserve Chairman Ben S. Bernanke will signal further stimulus tomorrow. Demand for the South Pacific currencies was limited ahead of U.S. data forecast to show initial jobless claims fell and personal spending rebounded. Bernanke will speak at a conference in Jackson Hole, Wyoming, following a Fed report yesterday that said the world’s largest economy continued to expand “gradually.” The so-called Aussie dollar remained lower before reports predicted to show a drop in Australian building approvals and a slowdown in capital spending growth.
“The Aussie is looking very tired,” said Sean Callow, a senior currency strategist at Westpac Banking Corp. (WBC) in Sydney. “It’s too reliant on the Fed to start printing money again. I suspect what we will hear from Bernanke is a familiar line that they are prepared to take further action if needed, but that he is not going to declare action just yet.” The Australian dollar touched $1.0331, the weakest since July 26, as of 10:30 a.m. in Sydney. It dropped 0.2 percent yesterday to $1.0352. New Zealand’s dollar, also known as the kiwi, fetched 80.05 U.S. cents, unchanged from yesterday, after earlier falling as low as 80.01 cents, the weakest since July 27. Australian 10-year bond yields fell for a 10th straight day, poised for the longest stretch of declines since at least 1990, when Bloomberg began compiling daily data. The yield fell as much as four basis points, or 0.04 percentage point, to 3.15 percent, the lowest since Aug. 3.
FOREX-Euro hits session high vs dollar after Draghi comments
The euro hit a session high against the dollar after comments in a paper from European Central Bank President Mario Draghi cemented expectations the bank will soon announce measures to tackle the euro zone debt crisis.
Gross Says QE3 Likely Even if Bernanke Doesn’t Provide Hint (Bloomberg)
Pacific Investment Management Co.’s Bill Gross said the Federal Reserve will add to monetary stimulus even if Chairman Ben S. Bernanke fails to indicate additional measures during a speech in two days. Policy makers will announce more so-called quantitative easing “relatively soon,” Gross, who runs the world’s biggest bond fund, said in an interview on Bloomberg Television’s “Street Smart” with Trish Regan. The Fed signaled last week it’s ready to take further steps to spur the economic recovery. Many policy makers said additional stimulus probably will be needed soon unless the economy shows signs of a durable pickup, according to minutes released Aug. 22 of the central bank’s most recent meeting, on July 31-Aug. 1. Bernanke is scheduled to speak on Aug. 31 at the Kansas City Fed’s economic-policy conference in Jackson Hole, Wyoming.
“They have a dual mandate,” Gross said, referring to the Fed’s directive of price stability and maximum employment. “Unemployment is still above 8 percent and it’s obvious that the Fed isn’t comfortable, nor is the nation or the economy with 8 percent unemployment going forward.” Until the unemployment rate is in the low 7 percent range and inflation has risen above the Fed’s 2 percent target the fed is going to “ease quantitatively,” Gross said from Pimco’s headquarters in Newport Beach, California.
U.S. Grew Faster Than First Estimated in Second Quarter (Bloomberg)
The economy expanded more than previously estimated in the second quarter, reflecting gains in consumer spending and exports that are being threatened by costlier gasoline and a global slowdown. Gross domestic product climbed at a 1.7 percent annual rate from April through June, up from an initial estimate of 1.5 percent and following a 2 percent gain in the first three months of the year, revised Commerce Department figures showed today in Washington. The weakest gain in business investment in new equipment in almost three years restrained the pace of growth, which was the slowest since the third quarter. Consumers and companies may continue to curb spending in the second half of the year as rising fuel costs, unemployment and the prospect of tax changes and government budget cuts hurt confidence. Chairman Ben S. Bernanke this week may reaffirm the view of many Federal Reserve policy makers that more stimulus will be needed unless the expansion shows signs of strengthening.
“We are very much struck in a slow-growth mode,” said Mark Vitner, a senior economist at Wells Fargo Securities LLC in Charlotte, North Carolina, who correctly forecast the revision. “We still don’t see the economy breaking free of this 1.5 percent to 2 percent growth rate. A 1.7 percent pace is the personification of the Fed’s frustration.” Another report showed Americans signed more contracts to purchase previously owned homes in July, a sign housing will keep strengthening in the second half.
Profits May Dwindle as U.S. Productivity Wanes With Demand (Bloomberg)
Businesses in the U.S. may struggle to maintain the profit gains of the past three years as cost- cutting opportunities become scarcer and cooling global growth reduces demand, according to economists such as Harm Bandholz. Commerce Department data released today showed before-tax earnings at U.S. corporations increased by 0.5 percent in the second quarter after a 2.7 percent drop in the prior three months. Earnings climbed 6.1 percent from a year earlier, slower than the pace of the previous two quarters. Economic growth in the U.S. has cooled, European countries are heading into a recession and China is slowing, limiting opportunities for sales growth. At the same time, waning productivity gains mean American companies will be less able to offset rising costs of raw materials and parts.
“We were maybe a little bit spoiled by the profits we saw in the last one-and-a-half years,” said Bandholz, chief economist at UniCredit Group in New York. “We may now see a normalization. Businesses already cut costs to a significant extent, so they are just looking for higher revenues, which in this environment may not go up so easily.” Today’s report showed gross domestic product in the U.S. climbed at a 1.7 percent annual rate from April through June, down from a 2 percent gain in the first quarter and 4.1 percent in the final three months of 2011.
New York Fed Says Household Debt Fell 0.5% in Second Quarter (Bloomberg)
Household debt in the U.S. declined 0.5 percent in the second quarter, led by a drop in debt tied to real estate, according to the Federal Reserve Bank of New York. Consumer indebtedness shrank by $53 billion from the first quarter to $11.38 trillion as of the end of June, according to the quarterly report on household debt and credit released today by the district bank. Delinquency rates for mortgages, credit cards and car loans declined, while rates for student loans and home equity lines of credit rose, the report said. “The continuing decrease in delinquency rates suggests that consumers are managing their debts better,” Wilbert van Der Klaauw, a vice president and economist at the New York Fed, said in a statement today. “As they continue to pay down debt and take advantage of low interest rates, Americans are moving forward with rebalancing their household finances.”
Americans have cut household debt by $1.3 trillion since the peak in the third quarter 2008 amid signs of a rebound in the housing market at the center of the 18-month recession that ended in June 2009, according to the report. The lowest mortgage rates on record helped boost the S&P/Case-Shiller gauge of home prices in 20 U.S. cities, which rose 0.5 percent in June from a year earlier for the first gain since September 2010. About 256,000 consumers showed new foreclosures on their credit reports in the second quarter, a decrease of 12 percent since the first quarter and the lowest level since 2007, the New York Fed’s survey showed. About 399,000 consumers had a bankruptcy notation added to their credit reports, down 16 percent from the same quarter a year earlier, the report said.
Pending Sales of Existing Homes in U.S. Rebounded in July (Bloomberg)
Americans signed more contracts to purchase previously owned homes in July, a sign housing will keep strengthening in the second half. The index of pending home resales climbed 2.4 percent, exceeding the 1 percent gain median forecast of 39 economists surveyed by Bloomberg, figures from the National Association of Realtors showed today in Washington. The gauge rose to 101.7, the highest since April 2010. Home buying is coming within reach for more Americans as less expensive properties and record-low borrowing costs combine to stabilize the industry that helped trigger the recession. Faster hiring and easier access to credit are needed to reduce foreclosures, a hurdle to a more sustained recovery. “All the elements are in place for continued growth in the housing industry,” said Omair Sharif, a U.S. economist at RBS Securities Inc. in Stamford, Connecticut. “Housing is one of the bright spots in the economy.”
Stocks were little changed after the report as investors awaited comments from Federal Reserve Chairman Ben S. Bernanke in two days on the state of the economy. The Standard & Poor’s 500 Index rose 0.1 percent to 1,411 at 10:18 a.m. in New York. Estimates in the Bloomberg survey ranged from a drop of 1.5 percent to a rise of 6.6 percent. Signings rebounded from a 1.4 percent fall in June that was the same as previously estimated.
Republicans Embrace Gold to Hedge Non-Existent Inflation (Bloomberg)
The Republican Party is so concerned about inflation that it’s considering a return to the gold standard. While there’s little evidence those fears are justified, they could shape a Romney administration’s approach to the Federal Reserve. The platform the party adopted yesterday at its national convention in Tampa, Florida, calls for a commission to investigate a possible “metallic basis for U.S. currency.” The move is driven by supporters of Representative Ron Paul of Texas, the libertarian presidential candidate who has long criticized the Fed’s control of the money supply and wants to revive the gold-dollar link to preserve the currency’s value. “We have a fiat currency that’s backed by nothing,” said Eric Brakey, 24, who ran Paul’s campaign in Maine’s Republican primary. “It’s really only backed by the say-so of our government, and I think the government is losing credibility more and more. Inflation is going higher and higher.”
Yet inflation has been tame, with the personal consumption expenditures index, the Fed’s preferred inflation gauge, declining in three of the past four months. Since the June 2009 end of the recession, the average increase in the index has been 1.8 percent, below the central bank’s 2 percent target. Over the last 20 years, the index has risen 2.1 percent, according to data compiled by Bloomberg. “I’m not particularly worried,” said economist John Makin of the American Enterprise Institute in Washington. “It’s not as if we’re about to rocket higher.”
Republicans Vow to Transform Obama’s U.S. by Less Government (Bloomberg)
The Republican Party platform promises to replace what it criticizes as President Barack Obama’s debt-swollen entitlement society with “a roaring job market to match a roaring economy.” The platform reflects the influence of presidential candidate Mitt Romney, offering as the remedy for the nation’s economic ills a familiar recipe of low taxes, light regulation, expanded oil drilling and free enterprise. It vows to reduce personal and corporate taxes, repeal Obama’s health-care law, promote small businesses and avoid taxpayer bailouts of troubled financial institutions. The 62-page roadmap, approved by a voice vote of the delegates yesterday at the party’s national convention in Tampa, Florida, promotes expanded trade and accuses the Obama administration of “a virtual surrender” to commercial rival China. The Asian country is stealing American trade secrets, manipulating its currency to make its exports cheaper, and hampering U.S. firms trying to sell to Chinese customers, the Republicans say.
Republicans call for banks to be “well-capitalized” and pledge to repeal the 2010 Dodd-Frank financial-regulation law. Along with major economic policy shifts, the Republicans vow to transform the size and scope of government. Trillion- dollar annual budget deficits and mounting debt are harming job growth, they say. “The massive federal government is structurally and financially broken,” the platform says.
Japan Retail Sales Slide With End of Car Subsidies Looming (Bloomberg)
Japan’s retail sales fell more than economists forecast in July as a winding down of government subsidies for car purchases threatens to further damp consumer spending in coming months. The 0.8 percent decline from a year earlier was the first drop in eight months and compared with the median estimate of a 0.1 percent fall in a Bloomberg News survey of 13 economists. From a month earlier, sales slid 1.5 percent, according to data released by the trade ministry in Tokyo today. Weakness in consumer demand and declining exports may make it harder for the government to prevent the economic contraction forecast for this quarter by Bank of America Merrill Lynch and Credit Suisse Group AG. Most of 274.7 billion yen ($3.5 billion) of subsidies for purchases of fuel-efficient cars is spent, with RBS Securities Japan Ltd. saying the program may run out of money next month.
“We can expect a plunge in spending in the fourth quarter because of the end of eco-car subsidies,” Masamichi Adachi, a senior economist at JPMorgan Securities in Tokyo and a former central bank official, said before today’s report. The yen traded at 78.72 per dollar as of 9:07 a.m. in Tokyo, little changed from before the release. Smaller summer bonuses for workers this year may have contributed to the sales decline. Payouts by large companies, often equivalent to several months’ pay, fell 2.5 percent after rising in the previous two years, according to the Japan Business Federation, also known as Nippon Keidanren.
South Korean Manufacturer Confidence Stays Near Post-Crisis Low (Bloomberg)
South Korean manufacturers’ confidence stayed near the lowest level since the global financial crisis, maintaining pressure for an interest-rate cut to support growth. An index measuring expectations for September was at 75 from 70 the previous month, the Bank of Korea said in a statement in Seoul today. Those are the only readings below 80 since 2009, with any number below 100 indicating that pessimists outnumber optimists. China’s economic slowdown and Europe’s debt crisis are dragging down South Korea’s exports, weighing on prospects for Asia’s fourth-largest economy. The central bank’s next interest- rate decision is on Sept. 13, with bond yields indicating that investors are waiting for further reductions after a surprise cut last month. “Big uncertainties from Europe and China continue to cloud business conditions for Korean companies,” Lee Sung Kwon, an economist at Shinhan Investment Corp. in Seoul, said before the report. “Policy makers will need to make another rate cut.”
A measure of expectations at non-manufacturing companies was unchanged from August at 69, today’s report showed. The survey was conducted between Aug. 16 and Aug. 23 with responses from 1,424 manufacturers and 1,010 non-manufacturers. Lee Yong Sup, an opposition Democratic United Party lawmaker, said yesterday that his party will drop a push for an extra budget to spur growth, because it’s now too late in the year.
Brazil Cuts Rate to Record Low 7.5% on Slow Economic Rebound (Bloomberg)
Brazil lowered its benchmark interest rate for the ninth straight time to boost sluggish growth in the world’s second-biggest emerging market. Policy makers led by central bank President Alexandre Tombini reduced the Selic rate by a half-point from its previous record low to 7.5 percent, as forecast by all 60 economists surveyed by Bloomberg. The vote was unanimous. “Considering the cumulative and delayed effects of policy actions implemented so far, which are partially reflected in the ongoing economic recovery, the Copom considers that if the prospective scenario were to allow for an additional adjustment in the monetary conditions, this move should be carried out with maximum parsimony,” policy makers said in their statement.
Over the past year, Brazil has reduced borrowing costs by 500 basis points, pressured banks to boost lending and cut taxes on cars and consumer goods to revive the economy, which expanded at less than half the annualized pace of the U.S. in the first quarter. While inflation quickened to 5.37 percent this month, industrial output is down from a year ago, and economists are forecasting continued weakness when second-quarter gross domestic product figures are published this week. “The bank has made the assessment that inflation is not getting out of hand,” Fabio Akira, an economist at JP Morgan Chase & Co, said in a phone interview from Sao Paulo before the decision. “The economic recovery is still gradual.” While Brazil has lowered its benchmark rate more than any other Group of 20 nation over the past year, the stimulus is being offset by a slowdown in the global economy that has hurt exports and battered manufacturers.
ECB’s Draghi Takes on Bundesbank Orthodoxy in Crisis-Plan Plea (Bloomberg)
Countering arguments made by the German economics establishment since before the introduction of the euro, European Central Bank President Mario Draghi said it’s in Germany’s interest to consent to extraordinary steps to preserve the currency shared by 17 nations. Draghi used the pages of German weekly Die Zeit to plead for a more expansive role for the central bank and to say that the crisis-struck currency can be stabilized without sacrificing each country’s independence to a unified European political system. In tactical terms, Draghi sought to neutralize protests made by Germany’s top central banker, Jens Weidmann, against ECB proposals to buy Spanish or Italian bonds on the market in order to bring down their borrowing costs and prevent the debt crisis from spreading. Draghi made his appeal in the run-up to the ECB’s Sept. 6 discussion of bond-market interventions for Spain or Italy and a Sept. 12 ruling by Germany’s supreme court on the viability of the planned euro rescue fund.
“A new architecture for the euro area is desirable to create sustained prosperity for all euro-area countries, and especially for Germany,” Draghi wrote. “Yet this new architecture does not require a political union first. Economic integration and political integration can develop in parallel.” Draghi didn’t mention Weidmann, who last week broke more than a month of silence by telling Spiegel magazine that the bond-buying proposal is a “touchy” matter and the thought of interest-rate targets gives him “stomach pains.” Weidmann, head of the Bundesbank, summed up the idea as “addictive like a drug.”
Draghi Hits Back at German Criticism of ECB Bond Plan (Bloomberg)
European Central Bank President Mario Draghi hit back at German criticism of his plan to intervene in bond markets and reminded Europe’s largest economy of its responsibility to anchor the euro. The ECB “will always act within the limits of its mandate,” Draghi wrote in a commentary for German newspaper Die Zeit provided by the Frankfurt-based ECB today. “Yet it should be understood that fulfilling our mandate sometimes requires us to go beyond standard monetary policy tools.” Bundesbank President Jens Weidmann and some German politicians have lashed out at Draghi’s plan to resume government bond purchases to lower borrowing costs in countries such as Italy and Spain. Draghi’s riposte comes as Chancellor Angela Merkel, who has signaled broad support for ECB bond buying, hosts Italian Prime Minister Mario Monti in Berlin today.
“The ECB is not a political institution,” Draghi wrote. “But it is committed to its responsibilities as an institution of the European Union. As such, we never lose sight of our mission to guarantee a strong and stable currency. The banknotes that we issue bear the European flag and are a powerful symbol of European identity.” Weidmann has said he’s against ECB bond purchases because they risk increasing governments’ reliance on the central bank and won’t solve Europe’s debt crisis. “Such policy is too close to state financing via the money press for me,” he told German magazine Der Spiegel in an interview published on Aug. 26.
French Business Confidence Stays Close to Two-Year Low: Economy (Bloomberg)
French industrial confidence remained near its lowest in two years in August, increasing pressure on President Francois Hollande’s government to revive growth in the face of Europe’s debt crisis. Sentiment among factory executives rose to 90 after July’s reading was revised down to 89, national statistics office Insee in Paris said in a statement today. That’s in line with the median of 20 forecasts in a Bloomberg News survey. A gauge that includes retailers, builders and service industries was unchanged at 87, the lowest in almost three years. Weak confidence at businesses underlines Hollande’s challenge as he attempts to keep a commitment to reduce the budget deficit at a time when the economy has failed to grow for three straight quarters. Prime Minister Jean-Marc Ayrault will address business leaders on the economy later today near Paris.
“France, unlike Germany, might suffer from the sharp tightening in fiscal policy following measures implemented over the summer,” said Francois Cabau, an economist at Barclays Capital in London. “Ayrault already said that growth assumptions might have to be revised down from the current 1.2 percent for 2013.”
ECB may need exceptional measures, says Draghi (Reuters)
The European Central Bank needs to employ "exceptional measures" at times to ensure its monetary policy can be effective but will act within its mandate to deliver price stability, ECB President Mario Draghi said in a newspaper opinion piece on Wednesday.
Posted by MW Chong at 9:56 AM
Hurricane Isaac Offers Little Hope for Drought Relief (Bloomberg)
As Tropical Storm Isaac moves up the Mississippi River Valley with drenching rain, it will probably miss the drought-parched areas of the Midwest that need water most while ruining crops in other areas waiting for harvest. Flood warnings and watches reach across Louisiana, which may get up to 20 inches (51 centimeters) of rain, and through Arkansas, where as much as 5 inches may fall, according to the National Weather Service. After Isaac begins to break up, its remnants are expected to drift north into Missouri and then east across Illinois and Indiana. “It may put a dent in it, but it isn’t going to relieve” the drought, said Jeff Masters, co-founder of Weather Underground in Ann Arbor, Michigan. “It may knock them down one category.” Drought gripped 63.2 percent of the contiguous 48 states as of Aug. 21, according to the U.S. Drought Monitor in Lincoln, Nebraska. Of the four official categories of drought, the two worst covered 23.01 percent of the 48 states.
The dryness has left 38 percent of U.S. soybeans in poor or very poor condition, while 52 percent of corn was rated in the worst categories, the Department of Agriculture said. Terry Hayhurst, who farms in Vigo County, Indiana, 11 miles south of Terre Haute, spent most of this summer looking up at the sky, hoping for rain.
Now that Isaac is predicted to bring soaking showers to his 1,200 acres of corn, soybeans and sorghum-sudangrass, Hayhurst said the rain will mostly just delay the harvest of corn and feed for his cows. “For the most part” the rain is coming too late, Hayhurst said in an interview. “But we’ll take moisture this year, however we can get it.” The soybeans, which he feared could be a total loss a month ago, could benefit from a deluge. “Of course, we don’t want to get 20 inches,” he said. For the rain to do the most good, it needs to fall slowly and over a few days, said David Miskus, a meteorologist with the U.S. Climate Prediction Center in Camp Springs, Maryland. If the rain falls hard and fast, most of it will run off and won’t be absorbed by the soil.
“It’s definitely too late to help corn, and I am not sure about soybeans, but we can definitely use the moisture no matter what,” said Miskus, also an author of the U.S. Drought Monitor, which will be updated tomorrow. “A slow, steady rain would be nice for several days.” The lack of rain across the Midwest has also caused the shipping channel in the Mississippi River to shrink to where less freight can be carried by barges on the nation’s largest waterway and its tributaries, including the Ohio River. More than 566 million tons of freight valued at $180 billion moved through inland waterways in 2010, including 60 percent of U.S. grain exports, 22 percent of domestic petroleum and 20 percent of the coal used to generate electricity, said the National Waterways Foundation in Arlington, Virginia. At 2 p.m. local time, Isaac was about 50 miles (80 kilometers) west-southwest of New Orleans with top winds of 70 miles per hour, 4 mph below hurricane strength.
As Isaac moves north, the amount of rain it brings will fall, said Dan Pydynowski, a meteorologist with AccuWeather Inc. in State College, Pennsylvania. When Isaac leaves Arkansas, it’s forecast to drop 1 to 2 inches in Springfield, Missouri. The heavy rain expected in Mississippi, Arkansas and Louisiana may be more hindrance than help to farmers, said Joel Widenor, co-founder of Commodity Weather Group LLC in Bethesda, Maryland. Beans, rice and cotton have yet to be harvested. The rain can hurt the quality of cotton and gusty winds can knock the bolls off the plant, he said. “If it actually falls off, it may just be a total loss,” Widenor said by telephone. The rain in Louisiana also won’t affect the Mississippi River because there aren’t any large tributaries in the area to capture the flow, said Jeff Graschel, a service coordination hydrologist at the Lower Mississippi River Forecast Center in Slidell, Louisiana. “All this rain that we are getting here falls into the Gulf of Mexico,” Graschel said.
Heavy rain draining into the Ohio River is needed to help shippers on the Mississippi. Graschel said that isn’t likely to happen. “It really does appear it will be a short-term situation and not helping us in the long term,” Graschel said.
U.S. farmers want new Farm Bill, but time is running out (Reuters)
Congress needs to pass a new Farm Bill and fast or risk putting U.S. farmers in financial jeopardy as they need to decide on how much winter wheat to plant and how much to spend on corn and soybean seeds, plus make other decisions critical to American food production, a number of farming experts said this week.
DTN Closing Grain Comments 08/29 14:41 (CME)
Hurricane Isaac Sparks Sharp Rally
The year from hell continues for grains as maturing crops decimated by the 2012 drought now have to worry about heavy rain and high winds from Hurricane Isaac. The entire grain complex closed sharply higher with wheat finding support from increased talk of a Russian export ban.
UK wheat harvest runs late as France, Germany wind down (Reuters)
The wheat harvest in Britain, the European Union's third largest producer, remains bogged down with heavy rains heightening quality concerns as activity winds down in the top two growers France and Germany.
GRAINS: U.S. wheat rose, gaining for the first time in six sessions, on concerns key producer Russia may curb exports of the drought-hit grain at an agricultural ministry meeting later this week. Soybeans extended gains into a second session on export demand from China and corn edged up as damage to crop yields in the U.S. Midwest from the worst drought in more than 50 years continued to underpin prices. (Reuters)
Pro Farmer: After the Bell Wheat Recap (CME)
Wheat futures extended gains at the start of open outcry trade and then ahead of noon CT and ended near session highs. Nearby futures at all three exchanged ended around 30 cents higher. Early support came on spillover from neighboring pits, but wheat was the upside price leader at times in the grain markets as traders remain concerned about global supplies.
Wheat Market Recap Report (CME)
December Wheat finished up 30 1/4 at 905 3/4, 2 1/2 off the high and 31 3/4 up from the low. March Wheat closed up 26 3/4 at 913 1/4. This was 27 1/4 up from the low and 3 1/4 off the high.
December Chicago wheat exploded higher today and posted a new 3 day high. Kansas City and Minneapolis wheat closed sharply higher as well. A number of new wheat export tenders mixed with a highly anticipated meeting between Russian agricultural officials on Friday has sent a new wave of buying into the wheat market. Tunisia bought 150,000 tonnes of option origin soft milling wheat this morning. Saudi Arabia announced a 550,000 tonne hard wheat tender that ends Friday. Finally, Syria announced a tender for 100,000 of soft milling wheat. Russian officials will meet Friday to discuss their domestic grain supply and their export outlook. Many traders believe Black Sea grain exports could slow in the coming months after drought deteriorated corn and wheat production. Good rainfall from Hurricane Isaac will help soil moisture levels for soft wheat planting in the Eastern Corn Belt and there is a chance for the rain to shift west, hitting Hard Wheat areas. The prospects of better rainfall for wheat planting offered little influence on today's price action. December Oats closed up 13 1/2 at 396. This was 14 up from the low and 3/4 off the high.
Pro Farmer: After the Bell Corn Recap (CME)
Corn futures surged 13 1/4 to 20 3/4 cents in the September through July contracts, while farther deferred months saw lighter gains. Futures ended high-range. Traders shifted their attention back to the stressed corn crop today. The generally weak condition of corn stalks this year means heavy rain and especially wind that is expected in areas of the Corn Belt could further deplete yield potential.
Corn Market Recap for 8/29/2012 (CME)
December Corn finished up 18 at 813 1/2, 1 off the high and 20 1/4 up from the low. March Corn closed up 16 1/2 at 813. This was 18 1/2 up from the low and 1 3/4 off the high. December corn traded sharply higher to end the day and saw good support from an explosive wheat market. Heavy rains and wind from Hurricane Isaac are expected to affect Arkansas, Mississippi, Alabama, Tennessee, Missouri, Illinois, and Indiana this week and harvest delays will be seen. The high wind could also have a negative impact on weak, harvest ready corn or shake ears to the ground. Temperatures are forecasted to reach highs over 95 in areas of Kansas, Nebraska, Iowa, and Illinois today. The high heat will be of no benefit to corn but should move harvest progress along. Ethanol production for the week ending August 24 averaged 819,000 barrels per day. This is down 0.49% vs. last week and down 7.8% from last year. Corn used in last week's production is estimated at 87.3 million bushels vs. 87.67 last week.
This crop year's cumulative corn used for ethanol production is 4.87 billion bushels and usage needs to average 148.4 million bushels per week to meet this crop year's USDA estimate of 5 billion bushels. Corn basis was steady to weaker in the central US has traders anticipate an increase in new crop grain movement in the next couple days. November Rice finished down 0.155 at 15.52, equal to the high and equal to the low.
Dust Bowl Kansas Farmers Set to Plant Winter Wheat: Commodities (Bloomberg)
Kansas farmers are preparing to plant winter wheat into the driest soil since 1991 after three seasons of drought causes Dust Bowl conditions in the biggest growing state and global reserves fall to a four-year low. About 97 percent of fields in the state had too little moisture as of Aug. 19, U.S. Department of Agriculture data show. Kansas is having its hottest year ever, leaving all 105 counties as federal disaster areas. The worst U.S. drought since 1956 spread to wheat-growing Great Plains states after damaging corn and soybean yields in the Midwest and driving prices for both crops to a record.
The International Grains Council cut its stockpile forecast for the third time in as many months Aug. 23, and the United Nations said in July that grain prices drove the biggest monthly gain in food costs since 2009. Wheat reached a four-year high in July, boosting costs for Panera Bread Co. and Grupo Bimbo (BIMBOA) SAB, and may jump another 8.2 percent to $9.80 a bushel in three months as droughts limit output from the U.S., Russia and Ukraine, according to Goldman Sachs Group Inc. “We just have no subsoil moisture at all,” said David LeRoy, a 56 year-old who farms 3,000 acres about 10 miles west of Great Bend, Kansas, and plans to start sowing winter wheat next month for harvesting in June. “We’re going to have to have a wet winter to raise any wheat at all. When you have a small amount of rain, like we have, nothing wants to grow.”
Global 2012/13 sugar surplus may halve from year ago-Datagro (Reuters)
Smaller sugar output from No. 2 producer India will likely cause the global surplus of the sweetener to roughly halve from last year to 3.07 million tonnes in the 2012/13 season, sugar and ethanol analyst Datagro said on Tuesday.
SOFTS: Raw sugar futures on ICE dipped in choppy early dealings after hitting an 11-week low in the prior session, with upside potential capped by steady harvest progress in top producer Brazil. ICE arabica coffee eased and cocoa firmed in light dealings, standing just below Tuesday's nine-month high, underpinned by concerns over patchy weather in top producer Ivory Coast. (Reuters)
Natural Gas Drops a Fifth Day as Isaac Makes Landfall (Bloomberg)
Natural gas futures in New York gained for the first time in five days, rebounding from a two- month low, on forecasts of hotter-than-normal weather in the Southeast that may boost demand for the power-plant fuel. Gas advanced as much as 1.2 percent. The weather may be hotter than normal in the southern U.S. and Great Lakes region Sept. 3 through Sept. 7, according to Commodity Weather Group LLC in Bethesda, Maryland. Hurricane Isaac was about 45 miles (75 kilometers) southwest of New Orleans at 12 p.m. local time, the National Hurricane Center said. “We have a bit of heat scheduled for the next 10 days, but September and October will be more moderate,” said Gene McGillian, an analyst and broker at Tradition Energy in Stamford, Connecticut. “Traders may be covering short positions after prices fell to a two-month low.”
Natural gas for September delivery rose 2.3 cents, or 0.9 percent, to $2.637 per million British thermal units at 1:35 p.m. on the New York Mercantile Exchange. The futures have declined 12 percent this year. September gas expires today. The more actively traded October contract rose 5.1 cents, or 1.9 percent, to $2.684 per million Btu. October $2.25 puts, bets that prices will fall, were the most active gas options in electronic trading. They were down 0.7 cent to 3.1 cents on volume of 610 contracts at 1:41 p.m. Gas prices “could bounce off the weakness we have seen for the past few days,” said Brad Florer, a trader at Kottke Associates LLC in Louisville, Kentucky. The high in Dallas on Sept. 4 may be 99 degrees Fahrenheit (37 Celsius), 6 above normal, according to AccuWeather Inc. in State College, Pennsylvania. The high in Cleveland may be 84 degrees, 7 more than the usual reading.
COLUMN-Asian refiners should thank China for low run rates
--Clyde Russell is a Reuters market analyst. The views expressed are his own.--
LAUNCESTON, Australia, Aug 29 (Reuters) - If there's one group of people happy at China's slowing economic growth it's likely to be refiners in Asia, who continue to benefit from strong margins as Chinese competitors limit fuel exports.
The profit from making gasoil, or diesel, in Asia rose to the highest in 14 months on Tuesday as global supplies tightened with the shutdown of units in the U.S. Gulf ahead of Hurricane Isaac and a fire at Venezuela's biggest refinery.
OIL-Oil falls below $112 as Isaac misses oil platforms
LONDON, Aug 29 (Reuters) - Brent crude oil slipped below $112 per barrel as Hurricane Isaac, which hit land in Louisiana, left U.S. Gulf Coast oil production facilities without significant damage.
"It is expected that oil production in the Gulf of Mexico will quickly return to normal," said Carsten Fritsch, an oil analyst at Commerzbank in Frankfurt. "What is more, inventory data from the United States were disappointing."
Oil Declines for a Second Day as Stockpiles Rise, Storm Weakens (Bloomberg)
Oil dropped for a second day in New York after stockpiles unexpectedly rose and Hurricane Isaac weakened after making landfall, reducing the threat to offshore platforms and rigs in the Gulf of Mexico. Futures slipped as much as 0.4 percent after falling 0.9 percent yesterday. Crude inventories increased 3.8 million barrels last week, data from the Energy Department showed. They were forecast to decrease 1.75 million barrels, according to a Bloomberg News survey. Isaac was downgraded to a tropical storm after striking the Louisiana coast as a hurricane. Oil for October delivery slid as much as 34 cents to $95.15 a barrel in electronic trading on the New York Mercantile Exchange and was at $95.24 at 9:06 a.m. Sydney time. The contract yesterday dropped 84 cents to $95.49, the lowest close since Aug. 27. Prices are 8.2 percent higher this month and 3.6 percent lower this year.
Brent oil for October settlement fell 4 cents to $112.54 a barrel on the London-based ICE Futures Europe exchange yesterday. The European benchmark grade’s premium to West Texas Intermediate closed at $17.05. Companies halted about 95 percent of oil production in the Gulf and 72 percent of natural-gas output, the Bureau of Safety and Environmental Enforcement said. Six Louisiana refineries were shut and three were operating at reduced rates, idling at least 6.7 percent of U.S. capacity, according to data compiled by Bloomberg. Isaac will linger with heavy wind-driven rain for two days, according to the National Hurricane Center. It was 35 miles (56 kilometers) south of Baton Rouge with top winds of 70 miles per hour, down from 80 mph at landfall, and moving northwest at 6 mph, according to an NHC advisory at 4 p.m. local time yesterday.
US Gulf oil industry largely shut down as Isaac nears
HOUSTON, Aug 28 (Reuters) - U.S. Gulf of Mexico oil production dropped by more than 90 percent and coastal refineries shut down on Tuesday as Hurricane Isaac approached the Louisiana coastline.
Government figures showed offshore oil output down by 1.3 million barrels per day from normal levels. Offshore gulf natural gas output was curtailed by two-thirds, and refinery and port closures added to the storm-related supply disruptions.
Hurricane Isaac zeroes in on fortified New Orleans
NEW ORLEANS, Aug 28 (Reuters) - Hurricane Isaac surged ashore in southern Louisiana on Tuesday, packing high winds and heavy rains, and was set to hit New Orleans seven years to the day after Hurricane Katrina devastated the city.
Isaac is the first hurricane to make landfall in the United States this season. While not packing nearly the power of Katrina -- which was a Category 3 storm when it slammed the Crescent City on Aug. 29, 2005 -- Category 1 Isaac was nevertheless a powerful reminder of New Orleans' vulnerability.
G7 urges higher oil output, warns on reserves
WASHINGTON, Aug 28 (Reuters) - Finance ministers of the Group of Seven most industrialized nations urged oil-producing countries on Tuesday to raise output to ensure the market is well supplied, while warning that the West was ready to tap strategic oil reserves to offset rising prices that could hamper global growth.
"We stand ready to call upon the International Energy Agency to take appropriate action to ensure that the market is fully and timely supplied," the G7 said in a statement. "The current rise in oil prices reflects geopolitical concerns and certain supply disruptions. We encourage oil-producing countries to increase their output to meet demand."
White House: tapping oil reserves still an option
ON BOARD AIR FORCE ONE, Aug 28 (Reuters) - The White House said on Tuesday that tapping strategic oil reserves remained an option but it had nothing to announce on the subject despite concerns about supply disruptions resulting from Hurricane Isaac.
"That option has been on the table for some time, and remains on the table, but we have no announcements to make today," White House spokesman Jay Carney told reporters traveling to Iowa with President Barack Obama.
IEA: Iran outage, high price don't justify oil release
STAVANGER, Norway, Aug 28 (Reuters) - The head of the International Energy Agency on Tuesday voiced her strongest opposition yet to a release of emergency oil stocks, risking a rift with the IEA's most influential member, the United States, over strategic reserves policy.
Maria van der Hoeven, the Dutch executive director of the agency that represents 28 energy importing countries, said higher oil prices alone did not justify a release and world oil markets could cope with the loss of Iranian exports, hit hard by U.S. and European sanctions against Tehran.
Russia cuts gas export volume, price f'cast-govt source
MOSCOW, Aug 29 (Reuters) - The Russian Economy Ministry cut its 2012 gas export forecast to 193 billion cubic metres (bcm) from an earlier 212 bcm due to sluggish European demand, which also prompted it to reduce its average export price estimate, a government source told Reuters.
The the export price to countries outside the former Soviet Union was expected to fall to $393 per 1,000 cubic metres this year from an earlier projected $439. State-controlled Gazprom has a monopoly on Russian gas exports.
Pro Farmer: After the Bell Soybean Recap (CME)
Soybean futures built price strength through the session, rallying into the close to finish 24 3/4 to 30 3/4 cents higher in the September through March contracts. Farther deferred futures posted slightly lesser gains. Weather played a key role in price action in the soybean market today. Hot and dry conditions are stressing soybeans across the Corn Belt this week, raising concerns about further yield losses.
Soybean Complex Market Recap (CME)
November Soybeans finished up 30 3/4 at 1753, 1 off the high and 36 1/2 up from the low. January Soybeans closed up 28 at 1742 1/2. This was 32 1/2 up from the low and 3/4 off the high. December Soymeal closed up 8.2 at 530.0. This was 10.1 up from the low and 0.6 off the high. December Soybean Oil finished up 0.91 at 57.3, 0.3 off the high and 1.18 up from the low. November soybeans exploded higher and closed near the highs of the day. Spillover support was seen from a wave of new buying in corn and wheat futures as well. Continued buying interest by China and questionable new crop yields has been supportive to price action. Hurricane Isaac slammed into the New Orleans, LA coast with winds near 80-100 miles per hour. Heavy rains and wind are expected to affect Arkansas, Mississippi, Alabama, Tennessee, Missouri, Illinois, and Indiana. Harvest delays will be seen in the southern and eastern Midwest.
Heavy rainfall from Hurricane Isaac and blistering temperatures in the western Corn Belt were also seen as supporting factors in today's trade. Temperatures are forecasted to reach highs over 95 degrees in areas of Kansas, Nebraska, Iowa, and Illinois today. Spot soybean basis at two Indiana soybean processors jumped 10-15 cents a bushels on fears that the torrential rainfall forecasted for later this week could delay the arrival of new crop soybeans and damage quality.
Argentina to help fill global soy gap - farm chamber (Reuters)
Grain powerhouse Argentina will produce a near-record soy crop in the coming season, helping to fill supply gaps left by a U.S. drought that has sparked fear of a world food crisis by pushing prices to new highs, a local farm chamber said.
EDIBLES: Malaysian crude palm oil futures slipped to the lowest in nearly a fortnight, as traders booked profits with market focus shifting to rising stocks level in the world's second-largest producer. (Reuters)