Tuesday, September 4, 2012

20120904 1811 FKLI EOD Daily Chart Study.

FKLI closed : 1648.5 changed : +2.5 points, volume : lower.
Bollinger band reading : correction range bound little upside biased.
MACD Histogram : turned upward, seller stayed cautious.
Support : 1640, 1630, 1623, 1615 level.
Resistance : 1650, 1660, 1670, 1680 level.
Comment :
FKLI closed little higher with quiet volume traded doing 5 points discount compare to cash market that closed nearly unchanged. Overnight U.S. markets closed for Labor day holiday and today Asia markets ended mostly lower while European markets currently trading little lower.
Concern on lower earnings and further slowdown restores after EU economy outlook cut by Moody's Investors Services sent most markets traded lower while investor await U.S. manufacturing data.
However, FKLI daily chart reading remained calling a correction range bound little upside biased market development with immediate support stayed at middle Bollinger band 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.

20120904 1747 Regional Markets EOD Daily Chart Study.

 Hang Seng chart reading : pullback correction downside biased.
KLCI chart reading :  upside biased.

20120904 1642 Global Markets & Commodities Related News.

GLOBAL MARKETS: Asian shares eased on concerns over weakening regional and global economic activity, but expectations of more stimulus from central banks and hopes for progress in tackling Europe's debt crisis lent support. European stock futures pointed to a steady open, with investors staying cautious ahead of Thursday's policy meeting of the European Central Bank, which could announce some positive steps to ease borrowing costs of stressed countries. U.S. stocks rose on Friday after Federal Reserve Chairman Ben Bernanke, expressing "grave concern" for the stagnating U.S. job market, said the central bank was prepared to take further steps to strengthen the economy if necessary. (Reuters)

FOREX-Euro firmer on ECB hopes, holds nears 2-month high
SINGAPORE/SYDNEY, Sept 4 (Reuters) - The euro pushed higher against the dollar on Tuesday, nearing a two-month high hit last week, supported by hopes the European Central Bank will soon unveil details of a plan to tackle the region's debt crisis.
"I don't see a big drop in euro/dollar from here, given the anticipation ahead of the Fed meeting," said Mitul Kotecha, head of global foreign exchange strategy for Credit Agricole in Hong Kong.

FOREX: The euro rose against the dollar, nearing a two-month high hit last week, supported by hopes the European Central Bank will soon unveil details of a plan to tackle the region's debt crisis. (Reuters)

Germany in row with Brussels over banking supervision (Reuters)
Germany clashed with Brussels on Monday over plans to give the ECB new banking supervision powers, saying it was unrealistic for it to oversee more than the bloc's biggest institutions and wrong to expect the new body to be in place by year-end.

Factory gloom deepens, orders shrink: PMIs (Reuters)
A contraction in manufacturing business spread further around the world in August as the euro zone's troubles inflicted more damage on the global economy, business surveys showed on Monday.

Celeres holds forecast for record Brazil soybean crop  (Reuters)
Brazil's new 2012/13 soybean crop is seen producing a record 78.1 million tonnes, up 17.8 percent from last year and likely surpassing U.S. output for the first time, local analyst Celeres said on Monday.

GRAINS: Chicago soybeans climbed to a record high as declining exports from Brazil provided new evidence that global supplies were shrinking after poor production in South America and a historic drought in the United States.  (Reuters)

OIL: Brent futures rose for a fourth day in Asia, reaching more than $116 per barrel on persistent hopes for stimulus measures from central banks in the United States and Europe, with key policy meetings this week and next. (Reuters)

Most Louisiana refineries restarting; near 60 pct of oil output shut (Reuters)
Most of the oil refineries affected by Hurricane Isaac in the U.S. state of Louisiana were restarting on Monday, while nearly 60 percent of offshore crude oil production in the Gulf of Mexico remains offline, according to U.S. government reports.

S.Africa police fire teargas as mine unrest spreads (Reuters)
South African police fired teargas and rubber bullets to disperse striking miners at a gold mine near Johannesburg on Monday, the latest outbreak in a wave of labour militancy spreading from platinum mining into other parts of the sector.

Brazil iron mining outlook undimmed by price drop
RIO DE JANEIRO, Sept 3 (Reuters) - Investment in new Brazilian iron ore mining capacity will be strong for at least two to three years despite plunging prices and problems in China and Europe that could sap demand, according to Brazil's state development bank BNDES.
While the bank's total mine lending fell 45 percent in the first six months of the year, demand for credit by Brazilian and foreign companies suggest that final 2012 lending may be close to the 3 billion reais ($1.48 billion) loaned for mine projects in 2011, Guilherme Cardoso, chief of BNDES's basic industry department, and department manager Pedro Landim told Reuters late Friday.

BASE METALS: London copper edged lower on signs of flagging growth in top metals consumer China, though prices were supported by enduring hopes the European Central Bank (ECB) will this week kick off a round of global easing.  (Reuters)

PRECIOUS METALS: Gold edged higher to the highest level in more than five months as lacklustre manufacturing data from around the globe fanned speculation of imminent easing measures from central banks. (Reuters)

METALS-Copper edges lower, stimulus hopes limit losses
SINGAPORE, Sept 4 (Reuters) - London copper edged lower on Tuesday on signs of flagging growth in top metals consumer China, though prices were supported by enduring hopes the European Central Bank (ECB) will this week kick off a round of global easing.
"If (the ECB) came out with something that was pretty concrete - that they were going to buy bonds - then that would be a big trigger that people would get pretty bulled up on ... but equally if they don't do too much of anything, it could pile on some more pressure," said Credit Suisse metals analyst Ivan Szpakowski.

PRECIOUS-Gold hits 5-1/2 mth high on stimulus hopes, US silver rallies
SINGAPORE, Sept 4 (Reuters) - Gold edged higher on Tuesday to the highest level in more than five months after lacklustre manufacturing data from around the globe fanned speculation of imminent easing measures from central banks.
"Silver looks more at the stimulus implications of weak data," said Nick Trevethan, senior commodity strategist at ANZ in Singapore, adding that the strength in base metals had also helped underpin silver.

20120904 1139 Global Markets & Commodities Related News.

GLOBAL MARKETS-Asian shares steady in range, stimulus hopes support
TOKYO, Sept 4 (Reuters) - Asian shares steadied on Tuesday as investors saw weak regional and global economic data as raising the prospect for further stimulus from central banks to underpin growth, while Europe kept hopes for some progress in tackling its debt crisis.
"Yesterday's pattern is likely to be repeated today. Traders are watching to see if (ECB President Mario) Draghi comes out holding a definite card of action," said Chung Seung-jae, an analyst at Mirae Asset Securities.

Hedge funds prepare for another oil spike
(John Kemp is a Reuters market analyst. The views expressed are his own)
LONDON, Sept 3 (Reuters) - Hedge funds and other money managers have started to ready themselves for another big spike in oil prices in the next few months, according to positioning data from the U.S. Commodity Futures Trading Commission (CFTC).
By Aug. 28, hedge funds had accumulated a net long position in WTI-linked futures and options equivalent to 207 million barrels, up from 151 million a month earlier, the largest net long position since May.

OIL-Oil rises, stimulus hopes outweigh weak Chinese data
LONDON, Sept 3 (Reuters) - Oil rose on Monday, despite Chinese data showing a deepening slowdown in the world's biggest energy consumer, as investors focused on the possibility of more stimulus measures and other moves to try to revive economic growth.
"The Chinese data is very gloomy and suggests that the world economy is slowing," said Carsten Fritsch, an oil analyst at Commerzbank in Frankfurt.

EURO COAL-Prices steady, report shows coal's dominance over gas
LONDON, Sept 3 (Reuters) - Physical coal prices in Europe were steady to slightly higher on Monday, along with crude oil prices, while a report by Bank of America Merrill Lynch underlined coal's dominant position over natural gas as a feedstock for power generation.
"Coal is just hovering around the psychologically important $100 a tonne level and will continue to do that for the rest of the year," one analyst at a small trading house said.

20120904 1016 Local & Global Economy Related News.

Cross-border dimension of policy-making has not been as extensive globally despite the growing inter-dependence between economies, said Bank Negara Malaysia Governor Tan Sri Dr Zeti Akhtar Aziz. She said the increased connectivity of the world had been exemplified by the swift spread of financial and economic shocks throughout the global economy and international financial system in 2008 and the global supply chain disruption emanating from Japan last year.Despite these changes, institutional arrangements and governance for policy cooperation and coordination had yet to reach the levels that were commensurate with the degree of global economic and financial integration, she said. On Asia, the surges and reversals of capital flows continue to present a major challenge to policy. Specific policy strategies had also been adopted to reduce the prospect of being destabilized by these flows, she said. Apart from that, Asian governments had been addressing the significant rise in inequality within economies in their  policy-making at the national and regional level, she said. (Starbiz)

More Employees Provident Fund (EPF) contributors are opting for flexible withdrawals after reaching 55 years of age, either on a monthly basis or via partial withdrawals. In a statement Monday, EPF said this showed that more members were becoming financial savvy to better manage their retirement savings, in view of improvement in life expectancy for Malaysians. This is evident through the rise of the EPF Flexible Age 55 withdrawals in 2Q12 with total applications surged 43% to 37,602 compared with 26,313 in 2Q11, it said. EPF CEO, Tan Sri Azlan Zainol, said the total amount withdrawn under the flexible withdrawals jumped 53.99%, amounting to RM1.51bn, compared with RM981.37m in 2Q11. (Bernama)

The implementation of the revised National Automotive Policy (NAP) will not be rushed but will be done in stages, International Trade and Industry Minister Datuk Seri Mustapa Mohamed said. The government has already started the implementation of the revised policy since Jun 2012, and many more initiatives will be announced in due course. The revision includes incentives for production of energy-efficient vehicles and recently, Honda Malaysia Sdn Bhd benefited from the revised NAP. “We are currently talking to two or three more car makers to provide them with similar incentives, and to promote Malaysia as a regional hub for production of energy-efficient vehicles," Mustapa said. (Bernama)

World Bank: Global food costs may extend gains on El Nino
Global food prices that jumped in July may extend gains if an El Nino weather pattern develops or if importers begin hoarding supplies, the World Bank said. The World Bank’s Food Price Index rose 10% in July, after falling in the two previous months, according to a 30 Aug report that weighs US dollar prices of several commodities. Wheat and corn costs were up 25% each, while sugar rose 12% and soybean oil climbed 5%. Corn and soybeans surged to record highs last month on the Chicago Board of Trade, surpassing previous all-time highs set in 2008, as the worst Midwest drought in more than 50 years damaged crops. (Bloomberg)

Eurozone’s Markit manufacturing PMI contracted for a seventh month in a row in Aug, coming in at 45.1, down from a flash estimate of 45.3 (44.0 in Jul). (AFP)

European Central Bank chief Mario Draghi defended on Monday controversial measures taken to tame the eurozone debt crisis, including buying up government bonds, European MPs said. (AFP)

EU: Spanish unemployment to swell as public jobs vanish
Jerez de La Frontera, a Spanish town of 214,000 in southern Andalusia, is negotiating with unions to fire 13% of the 2,000 government workers who absorb 80% of its budget. “It’s not easy because these are people and families,” said deputy mayor Antonio Saldana. With a quarter of Spain’s workforce already jobless, Prime Minister Mariano Rajoy’s efforts to retain investor confidence by shaving over two-thirds of the nation’s budget deficit by 2014 will worsen the highest unemployment rate in the European Union. Ten-year yields at 6.9% mean “we can’t finance ourselves,” Rajoy said on 1 Sept. (Bloomberg)

The comments by European Central Bank (ECB)’s President Mario Draghi indicated that the ECB would be open to buying bonds with a maturity of two to three years, stressing that such purchases wouldn't break European Union treaties. (AWSJ)

Spain said it is urgently injecting EUR4.5bn (US$5.7bn) into  Bankia, a state-rescued lender still losing billions of euros. The state-backed Fund for Orderly Bank Restructuring (FROB) said its governing board had agreed to pump in the capital "with immediate effect" to restore its balance sheet. (CNA)

China’s official services PMI rose to 56.3 in Aug from 55.6 in Jul, whilst its official manufacturing PMI hit a nine-month low of 49.2 from 50.1 in Jul, chiming with its HSBC manufacturing PMI which slid to 47.6 in Aug from 49.3 in Jul, the lowest since Mar 2009 and the 10th straight monthly fall.(Reuters, AFP)

China's commercial banks are facing a  higher risk of increased bad loans, partly due to a lending spree to support massive economic stimulus three years ago, as 7 out of the 16 Chinese listed banks reported a rise in their Non-Performing Loan ratios in the first half of 2012. (Xinhua)

Japan’s sales of new cars, trucks and buses increased 7.3% yoy in Aug (36.1% in Jul), the  slowest pace in 11 months but the 12th straight month of growth. (WSJ)

Japanese capital spending in 2Q12 rose 7.7% yoy (3.3% in 1Q12), the third straight quarter of growth. (Reuters)

Japan: Yen near five-week highs versus Aussie, Kiwi on slowdown concerns
The yen traded within 0.3% of five-week highs against the Australian and New Zealand dollars as signs of a global economic slowdown increased the allure of the Japanese currency as a refuge. The yen held a three-day gain versus the greenback before data forecast to show US factory activity failed to expand in August, following reports yesterday that said manufacturing in the euro area and China contracted. The dollar remained lower against the euro on bets the Federal Reserve will consider a third round of so-called quantitative easing, which debases the US currency. (Bloomberg)

South Korea’s consumer prices rose 1.2% yoy in Aug, the lowest since the 1.1% of May 2000 (1.5% in Jul), whilst core inflation stood at 1.3% yoy in Aug (1.2% in Jul). (AFP)

India's manufacturing continued to expand, though the HSBC PMI ticked down to 52.8 in Aug from 52.9 in Jul. (WSJ)

Thailand’s  inflation inched down to 2.69% yoy in Aug from 2.73% in Jul. Analysts had expected Thai CPI to rise 2.65% last month. (Bloomberg)

Exports from  Indonesia fell 7.27% yoy in Jul, a fourth straight month of decline. But the slide was smaller than a forecast 9.2% drop.  Import growth slowed to just 0.7% versus a forecast of 6.6%. The trade deficit narrowed to US$177m from US$1,286m in Jun. (Jakarta Globe)

Indonesia’s inflation came in at 4.58% yoy in Aug, up from 4.56% in Jul. (Jakarta Globe)

HSBC's manufacturing purchasing managers' index for Indonesia rose to 51.6 in Aug from 51.4 in Jul, supported by a rise in new orders for the third straight month. (Dow Jones)

20120904 1016 Malaysia Corporate Related News.

ZAQ Construction Sdn. Bhd., the managing contractor for the Asia Petroleum Hub (APH) project, has filed a suit against: 1)  CIMB, 2) Lim San Pen, the receiver manager appointed by CIMB, and 3) Muhibbah Engineering. ZAQ is alleging Muhibbah's involvement in the APH restructuring scheme. Recall that the latest development on the APH saga in June 12 was that the restructuring scheme was called-off, as per Muhibbah's announcement that CIMB, the sole lender for the project, was withdrawing its support for the scheme. Management is of the view that the claim brought by ZAQ is "frivolous" and it will defend the case. The amount claimed against each of the defendants is unknown at this juncture. (BMSB)

Gas Malaysia Bhd has officially secured contracts for more than 80% of the additional natural gas volume that is coming on stream next year. Managing director Datuk Muhammad Noor Hamid said most of the 40 mmscfd increased allocation by Petronas next year had been allocated for new customers and existing ones that were undertaking expansion programs. While the additional gas will be sold at market rates instead of the subsidised price, Gas Malaysia said natural gas is still a very efficient fuel and the economies of gas is still cheaper than alternatives as users do not need to hold inventory.  (Star Biz)

The government is reviewing the palm oil export tax structure to remain competitive in the industry,  Deputy Plantation Industries and Commodities Minister Datuk Hamzah Zainudin said. "We need to be fair to all industry players and we need more time to consider all the factors before making any announcement," said Hamzah. He declined to disclose when the government would announce the new tax structure. (Bernama)

Come Sept 18, Bursa Malaysia and the  Singapore Exchange will be the region's first two exchanges to connect through the Asean Trading Link, the share trading system envisioned to eventually link 10 stock markets in the Southeast Asian region. This will be followed by the  Stock Exchange of Thailand. (Financial Daily)

Tenaga Nasional Bhd will increase its Employees Provident Fund (EPF) contribution for its workers aged between 56-60 years old. The utility company would also raise the retirement age of its staff from 55 years to 60 years old. Tenaga will be the first government linked corporation (GLC) to do so following the passing of the Minimum Retirement Age Act earlier this year. However, the quantum of the increase has not yet been decided. Currently Tenaga contributes 12% to its employees EPF accounts. (The Star)

Celcom continues to see growth in its voice segment even as it expands its non-voice operations. "We are possibly the only telco in Malaysia and one of the few in the world to see growth in the voice segment. This was driven by our new pricing strategy and contributions from the various products we have launched," said chief executive Datuk Seri Mohammed Shazalli Ramly, who believes that Celcom can sustain its mild growth in the segment. He attributed the sharp increase to in the minutes of usage to Celcom's new dynamic billing system, which allows the group to optimise its billing strategy. Unlike others that charge in one-minute or 30-sec blocks, Celcom is charging fees in 10-min blocks. He noted that only 20% of Celcom's customers use smartphones, although smartphone ARPU is almost double that of non-smartphone users. (Financial Daily)

Puncak Semangat has ditched plans to acquire Jaring Communications but has raided the government broadband company for top executives including chief executive Nik Abdul Aziz Nik Yaacob ahead of launching its 4G or LTE service next year, sources said. An industry source confirmed Nik Abdul Aziz’s departure from Jaring effective October, saying that several other Jaring executives are expected to join the exodus. Puncak Semangat is expected to start its LTE/4G operations in November but only roll out its services by the middle of 2013. The Edge reported last month that Puncak Semangat had made overtures to Tenaga Nasional for its 49% stake in wholesale broadband service provider Fibrecomm. “Puncak Semangat is said to have already made the offer to Tenaga to buy the stake,” said an industry executive. However, the exact pricing of the stake is not known at this point in time, the business weekly said. The remaining 51% in Fibrecomm is owned by Telekom Malaysia. (Malaysianinsider)

Zelan seems to have ended a dry spell on securing sizable contracts. The group announced it was awarded a RM215.2m contract by  Mudajaya Corp. The latest contract is for engineering design and construction works of the Tanjung bin 1x1,000MW coal-fired power plant project in Johor. The works are expected to be completed in August 2014. (Financial Daily)

Perdana Petroleum yesterday completed the divestment of a 26.9% equity interest in  Petra Energy to  Wah Seong for RM97m or RM1.68/share. (BMSB)

Singapore-listed Nam Cheong Ltd clinched two contracts for the sale of two Accommodation Work Barges (AWBs) worth US$59m (RM183m) to Perdana Petroleum Bhd.  With these contracts, the orderbook of Nam Cheong, Malaysia’s largest Offshore Support Vessel shipbuilder, has hit a high of RM1.06bn in contract value, surpassing last year’s figure of RM757m. (BT)

KKB Engineering Bhd’s subsidiary, Harum Bidang Sdn Bhd, yesterday signed a two-year contract, worth about RM74.4m, with CMS Infra Trading Sdn Bhd (CMSIT) for the supply of concrete-lined mild steel pipes and mild steel mechanical coup-lings. KKB said in a statement a written agreement will be entered into between Harum Bidang and CMSIT in due course. CMSIT is a subsidiary of Cahya Mata Sarawak Bhd, a major shareholder of KKB. (BT)

The new  National Automotive Policy (NAP), which aims to liberalise the local automotive industry, will encourage an open market and allow greater availability of vehicle models with the latest technologies in the country, said Malaysia Automotive Institute (MAI) chief executive officer Madani Sahari. Madani said the NAP would allow greater market forces through its policies to liberalise the local automotive sector, such as the emphasis to make Malaysia a regional, if not global, energy efficient vehicles (EEVs) hub. (StarBiz)

The proposed privatisation of Glenealy Plantations (M) Bhd has encountered opposition from a group of minority shareholders, led by Patrick Low, who are unhappy with the price offered by its major shareholder to take the company private. The group argued that the offer price was "too low" vis-a-vis the present market value of plantations land and unplanted land that Glenealy has in its portfolio. The group claimed that the offer price of RM7.50 per share was based on the valuation of RM25,000 per planted hectare of land, which it said was totally unrealistic with today's market. Recently transacted prices were close to RM70,000, they added. (StarBiz)

PTP attempts to block sale of APH
Tan Sri Syed Mokhtar Al-Bukhary is blocking a plan by CIMB Group Holdings to sell the financially-troubled Asia Petroleum Hub SB (APH) in Johor. Port of Tanjung Pelepas (PTP), which is 70% owned by Syed Mokhtar’s MMC Corp, is opposed to CIMB;s proposal to sell APH, and has made its objections known to the bank-appointed receivers of the failed petroleum venture, PwC. (Financial Daily)

Parkson pays RM98m for Melaka land
Parkson Holdings yesterday agreed to pay RM98m for 64.6% of a 23.22-acre (9.38ha) site in Melaka from a company effectively controlled by its major shareholder, Tan Sri William Cheng. Parkson said Megan Mastika SB has agreed to buy 6ha of the 9.38ha land in Melaka earmarked for a mixed development from Dimensi Andaman SB. Cheng controls Dimensi Andaman’s holding company, Ayer Keroh Resort SB, which is currently carrying out reclamation works on the tract. (Financial Daily)

IGB REIT’s USD266m IPO oversubscribed
The institutional tranche of IGB REIT’s USD266m (RM827.26m) listing is already oversubscribed, said two sources with direct knowledge of the matter, signaling strong demand for the deal. The deal is set to be Malaysia’s fourth largest IPO this year and the REIT may become Malaysia’s largest REIT with a possible market value of up to RM4.25bn, topping Pavilion REIT’s RM4.05bn. (Financial Daily)

20120904 1005 Global Markets Related News.

Asia Stocks Swing From Loss, Gain Before Europe Meetings
Asian stocks swung between gains and losses as the European Union’s outlook was cut by Moody’s Investors Service ahead of meetings of the region’s policy makers today. Energy companies rose after oil advanced. The MSCI Asia Pacific Index was little changed at 117.68 as of 10:12 a.m. in Tokyo after falling as much as 0.3 percent and adding less than 0.1 percent.

China’s Stock Futures Rise on Government Stimulus Speculation
China’s stock-index futures rose as speculation for more government stimulus overshadowed Societe Generale SA predicting a weaker growth outlook and Goldman Sachs Group Inc. cutting its estimates for Chinese earnings. Futures on the CSI 300 Index (SHSZ300) expiring in September gained 0.2 percent to 2,238.4 at 9:28 a.m. in Shanghai as a front-page commentary in the China Securities Journal outlined possible new government stimulus measures. China Eastern Airlines Corp. may gain after saying it will boost capacity growth. China Vanke Co. may be active after the Beijing News reported the city’s new home inventory fell. Angang Steel Co. may move after the government set production capacities for producers. For stocks to rise, “we will need either a stabilised global economy or the Chinese government’s macro policy addressing stimulus or structural reform,” Peggy Chan and Vincent Chan, analysts at Credit Suisse Group AG, wrote in a report today.
The Shanghai Composite Index (SHCOMP) added 0.6 percent to 2,059.15 yesterday. The CSI 300 Index rallied 1.1 percent to 2,228.37. The Hang Seng China Enterprises Index of Chinese companies traded in Hong Kong advanced 0.1 percent. Signs that China’s economic slowdown is deepening have dragged the Shanghai Composite down 7.5 percent this quarter. The gauge sank 2.7 percent in August, a fourth straight month of declines. That’s the longest streak since the five months through August 2004, according to data compiled by Bloomberg.

Japan Stocks Swing Between Gains, Losses on Euro Outlook
Japanese shares swung between gains and losses, with the Nikkei 225 (NKY) Stock Average trading near its lowest close in a month, after the European Union’s outlook was cut by Moody’s Investors Service and as Inpex Corp. led energy shares higher after it was rated a buy. Shimano Inc. (7309), a bicycle-parts maker that relies on Europe for about a third of its revenue, declined 1.2 percent. Inpex Corp. (1605), Japan’s biggest oil explorer, advanced 1.2 percent after Barclays Plc advised buying the shares and crude prices rose to the highest in a week. Toyota Motor Corp. sank 0.5 percent after the automaker’s sales in China dropped 15 percent last month. The Nikkei 225 fell 0.2 percent to 8,769.21 as of 10:30 a.m. in Tokyo, the lowest since Aug. 6. Volume was 14 percent above the 30-day average. The broader Topix Index lost 0.2 percent to 727.20 after rising as much as 0.2 percent.
The European Central Bank “is more likely to trigger action when they meet” in two days, said Matthew Sherwood, Sydney-based head of markets research at Perpetual Investments, which oversees about $25 billion. “Whether it’s comprehensive enough to keep sentiment strong and keep markets rallying is a different issue because in the end there’s not much central banks can do to address the global debt situation.” The Topix dropped 17 percent from this year’s peak on March 27 on concern Europe’s debt crisis is deepening as amid slowing economic expansion in China and the U.S. Stocks on the gauge were valued at 0.9 times book value, compared with 2.2 for the Standard & Poor’s 500 Index and 1.5 for the Europe Stoxx 600 Index. A number less than one means companies can be bought for less than the value of their assets.

Emerging Stocks Rise Most in Two Weeks on Stimulus Bets
Emerging-market stocks advanced, with the benchmark index posting the biggest gain in almost two weeks, as economic data from China to Poland fueled speculation central banks will take more steps to boost growth. The MSCI Emerging Markets Index rose 0.6 percent to 952.83 at 4:34 p.m. in New York, advancing the most since Aug. 21. Zijin Mining Group Co. (2899), China’s largest gold producer by market value, and OAO Severstal (CHMF), Russia’s second-biggest steel company, increased for the first time in seven days as stimulus speculation lifted metals. Brazil’s Bovespa Index rose 0.4 percent, snapping three days of losses. Chinese manufacturing shrank for the first time in nine months in August, while South Korea reported the slowest inflation in 12 years. Poland’s central bank has scope to cut interest rates, Governor Marek Belka said in a Bloomberg Television interview.
U.S. Federal Reserve Chairman Ben Bernanke signaled on Aug. 31 another round of bond purchases to support the world’s largest economy is possible. “More stimulus measures by the U.S., China and other countries will bolster investors’ sentiment in the equity markets,” saidVattana Vongseenin, chief executive officer of Bangkok-based Phillip Asset Management Co., which oversees about $20 million. “Still, the long-term global growth outlook remains very gloomy.”

European Stocks Advance With Metals on Stimulus Outlook
European stocks rose for a second day and copper advanced on speculation central banks will take more steps to boost growth as reports signaled the economic slowdown is deepening. Spain’s bonds gained and emerging-market shares climbed the most in two weeks. The Stoxx Europe 600 Index added 0.8 percent at 4:30 p.m. in New York, and the MSCI Emerging Markets Index jumped 0.6 percent. Standard & Poor’s 500 Index futures rose 0.3 percent and Brazil’s Bovespa Index snapped three days of declines. The U.S. market is closed for the Labor Day holiday. Spain’s two- year note yield fell 15 basis points to 3.51 percent. Sweden’s krona weakened against its 16 major peers. Copper gained 0.8 percent and nickel jumped 1.7 percent.
Euro-area manufacturing contracted more than initially estimated in August and China’s factory output unexpectedly shrank for the first time in nine months, according to reports from London-based Markit Economics today and a government survey in Beijing Sept. 1. Federal Reserve Chairman Ben S. Bernanke said Aug. 31 that he wouldn’t rule out more stimulus. European Central Bank President Mario Draghi may unveil details of his bond-purchase program after a policy meeting Sept. 6. “The door for further quantitative easing is clearly not shut and is very much dependent on what the near-term data tells us about the labor market trend,” Jim Reid, a strategist at Deutsche Bank AG in London, said in a research note. “Draghi’s press conference will likely be the highlight of the week with markets hoping for further guidance around the ECB’s bond purchasing program.”

Earnings Matter Most for U.S. Stocks as Economic Obsession Fades
Profits (SPX) are moving U.S. equity prices more than any time since the bull market began 3 1/2 years ago, rewarding investors for picking stocks based on company data instead of following the herd rocked by Europe’s debt crisis and the slowing U.S. economy. Companies in the Standard & Poor’s 500 Index rose or fell an average of 4.4 percent the day after releasing results since July, according to data compiled by Bloomberg. The last time they moved more was in the second quarter of 2009. Daily swings in the benchmark gauge narrowed to 0.4 percent last month from 2.2 percent a year ago, as economic and policy changes battered investors. More than 475 S&P 500 stocks moved in the same direction in six of the first nine days of August 2011, with all 500 down on Aug. 8.
Bulls say lockstep moves are diminishing because investors are changing their behavior, making choices based on corporate results at a time when analysts estimate profits for companies in the S&P 500 will rise almost 10 percent a year through 2014. Bears say the focus on earnings won’t bring back individuals who have drained more than $420 billion from U.S. equity mutual funds over the past four years even as stocks rallied 108 percent since March 2009 and net income was unchanged in the second quarter. “I’m not saying it’s an easy job to be a stock picker in this environment, but it’s certainly easier,” Sandy Lincoln, the Chicago-based chief market strategist with BMO Global Asset Management, which oversees about $100 billion, said in an Aug. 28 interview. “Stock selection does have the opportunity here to finally show a face with a smile.”

Yen Is Near 5-Week Highs Versus Aussie, Kiwi on Slowdown Concern
The yen traded within 0.2 percent of five-week highs against the Australian and New Zealand dollars as signs of a global economic slowdown increased the allure of the Japanese currency as a refuge. Japan’s currency held a three-day gain versus the greenback before data forecast to show U.S. factory activity failed to expand, following reports yesterday that said manufacturing in the euro area and China contracted. The dollar remained lower against the euro on bets the Federal Reserve will implement a third round of quantitative easing, which debases the U.S. currency. Demand for Australia’s dollar, the so-called Aussie, was limited before the Reserve Bank decides on policy today. “The yen tends to be bought in bids for safety,” said Junichi Ishikawa, a Tokyo-based analyst at IG Markets Securities Ltd. “The yen is strengthening against the Aussie on concerns China’s economy is slowing and it is strengthening against the dollar with the expectation of additional easing by the Fed.”
The yen traded at 80.19 per Australian dollar at 10:16 a.m. in Tokyo from 80.18 at the close yesterday, when it climbed to 80.07, the strongest since July 25. Japan’s currency touched 62.33 per New Zealand dollar, nicknamed the kiwi, the highest since July 26, before trading at 62.44. The yen fetched 78.37 per dollar from 78.26 in New York. It touched 78.19 on Aug. 31, the most since Aug. 13. Japan’s currency slid 0.2 percent to 98.71 per euro. The dollar was little changed at $1.2595 per euro. The Reserve Bank of Australia is forecast to keep the overnight cash-rate target at 3.5 percent today, according to all 24 economists surveyed by Bloomberg News.

Aussie-Yen to Drop on Retracement: Technical Analysis
The Australian dollar may be set for further declines against the yen as it tests a support area defined by a so-called Fibonacci retracement level, UBS AG said. The Aussie, as the currency is also known, has been testing 80.10 yen, the 38 percent Fibonacci retracement of its advance from a low of 74.48 on June 1 to a high of 83.58 on Aug. 21, Richard Adcock, head of fixed-income technical strategy in London, wrote in an e-mailed note to clients yesterday. The currency may head toward 79.54 yen to 79.03 yen, Adcock wrote. The 79.54 figure was the lowest level in July, while 79.03 is the Aussie’s 50 percent retracement level last seen on June 18, according to data compiled by Bloomberg. The Australian dollar-yen cross “has been under selling pressure,” Adcock wrote. “With the recent weakness seeing daily and weekly trending tools turn negative, the picture is bearish.”
Australia’s currency was little changed at 80.19 yen at 11:27 a.m. in Sydney from 80.18 yesterday, when it touched 80.07, the lowest since July 25. The Aussie has declined 1.8 percent since June 29 versus its Japanese counterpart, heading for its back-to-back quarterly losses since 2008. Fibonacci analysis is based on the theory that prices rise or fall by certain percentages after reaching a high or low. A break below support, as levels where there may be orders to buy are known, indicates it may decline to the next level. Resistance is an area on a chart where sell orders may be clustered,

South Korean Bond Yields Fall to Record Lows, Won Drops
South Korea’s bond yields declined to all-time lows and the won weakened as data signaled an economic slowdown, boosting speculation the central bank will cut interest rates. Overseas sales contracted for a second month in August, factory output declined in July from the previous month and inflation cooled to a 12-year low last month, data showed in the past week. Eight out of eleven economists expect the Bank of Korea to lower the benchmark rate by 25 basis points to 2.75 percent at the Sept. 13 meeting after last month’s pause, according to a Bloomberg survey. The rest expect no cut. “Inflation now is not an obstacle to cutting rates, and data we saw at the end of August were gloomy,” said Yum Sang Hoon, a fixed-income analyst at SK Securities Co.in Seoul. “Bonds will be supported until the next rate meeting, and if we see a cut this month, another one may come within the year.”
The yield on the government’s 3.5 percent bonds due March 2017 fell one basis point, or 0.01 percentage point, to 2.82 percent as of 9:35 a.m. in Seoul, Korea Exchange Inc. prices show. That’s the lowest for a benchmark five-year note on data compiled by Bloomberg going back to August 2000. The rate for 3.25 percent notes due June 2015 fell one basis point to 2.74 percent. Three-year debt futures advanced 0.05 to 106.40 and the one-year interest-rate swap slipped one basis point to 2.81 percent. The won weakened 0.1 percent to 1,132.40 per dollar in Seoul, after touching a more than a one-week high of 1,129.73 yesterday, according to data compiled by Bloomberg. One-month implied volatility, a measure of exchange-rate swings used to price options, slid 18 basis points, or 0.18 percentage point, to 7.50 percent. The Kospi (KOSPI) index of shares fell 0.2 percent.

Treasury Yields Touch Month Lows Before ISM Factory Data
Treasury yields touched one-month lows before U.S. data forecast to show manufacturing is struggling to recover, fanning speculation the Federal Reserve will expand monetary easing. Rates slid on Aug. 31 after Fed Chairman Ben S. Bernanke said he wouldn’t rule out a third round of bond buying in so- called quantitative easing to spur growth. The policy-setting Federal Open Market Committee will next meet on Sept. 12-13. “Treasury yields will decline.” said Hiromasa Nakamura, who invests in U.S. debt from Tokyo at Mizuho Asset Management Co., which oversees the equivalent of $41 billion. “The U.S. economy is very fragile.” The yield on 30-year debt reached 2.65 percent, the lowest since Aug. 7, and was at 2.66 percent as of 9:33 a.m. in Tokyo today, one basis point lower than the close on Aug. 31. The price of the 2.75 percent security maturing in August 2042 gained 6/32, or $1.88 per $1,000 face amount, to 101 25/32, according to Bloomberg Bond Trader prices.
The benchmark 10-year yield was little changed at 1.55 percent after falling to as low as 1.54 percent, a level unseen since Aug. 6. The Institute for Supply Management Inc.’s U.S. factory index for last month is estimated at 50, the dividing line between growth and contraction and compared with 49.8 in July, according to a Bloomberg News survey of economists. The report is due today. Speaking on Aug. 31 in Jackson Hole, Wyoming, Bernanke said the costs of “nontraditional policies” appear manageable when considered carefully. That implies Fed policy makers “should not rule out the further use of such policies if economic conditions warrant,” he said.

Obama Lays Foundation for Speech Stressing Choices
President Barack Obama was 1,600 miles away from delegates gathering at the Democratic National Convention, laying the foundation for a week in which he will draw sharp contrasts with Republican Mitt Romney. “They have tried to sell us this tired, trickle-down, you’re on your own, snake oil before,” Obama told 13,000 people gathered yesterday at the University of Colorado-Boulder. “Those ideas don’t work. They didn’t work then, they won’t work now. They did not create jobs. They did not cut the deficit.” For the incumbent, whose candidacy four years ago was fueled by a theme of hope and change, much of this week at the Democratic convention in Charlotte, North Carolina, will be about setting himself apart from Romney. “Nothing is going to be like 2008,” Obama’s chief political strategist David Axelrod said in an interview. Less about reigniting the enthusiasm of four years ago, the convention this week will focus more on sharpening the differences with Romney.
“Mitt Romney spoke for 45 minutes and never mentioned any of his proposals,” Axelrod said, referring to Romney’s convention speech last week in Tampa, Florida. Obama advisers insisted that the president’s focus won’t be predominantly negative and will reflect optimism that the economy will be better than the last four years.

Merkel, Monti Lead Diplomatic Push as Draghi’s Plan Takes Shape
European leaders are stepping up shuttle diplomacy this week as they brace for their central banker’s plan to defend the euro from bond-market turmoil. European Union President Herman Van Rompuy is traveling to Berlin for talks with German Chancellor Angela Merkel today as Italian Prime Minister Mario Monti welcomes French President Francois Hollande to Rome. They were all given a hint about what may be in store when European Central Bank President Mario Draghi told officials yesterday he would be comfortable buying three-year government bonds to bring down borrowing costs for nations in financial distress.
The stewards of the single currency, who have sparred as borrowing costs diverged in the 17 nation-euro area, have a chance to fall in line behind Draghi. Merkel, whose country shoulders the largest cost of bailing out weaker governments, has indicated she would back a more active crisis-fighting role at the ECB and yesterday told a crowd of beer drinkers in Bavaria that Germany must show solidarity with Europe. “I think there is broad agreement among these people,” said Luca Jellinek, head of European interest-rate strategy at Credit Agricole Corporate & Investment Bank in London. “Many people are realizing that monetary policy is broken in Europe, badly broken.”
The yield on Italian 10-year bonds declined 8 basis points yesterday to 5.77 percent. That was still 439 basis points more than the yield on similar maturity German bunds. Spain’s 10-year bond yields ended at 6.85 percent, near the 7 percent level that led Greece, Portugal and Ireland to seek bailouts.

Draghi Told Lawmakers ECB Can Buy Three-Year Bonds, MEP Says
European Central Bank President Mario Draghi told lawmakers he would be comfortable buying bonds with maturities of up to about three years, said Jean-Paul Gauzes, a member of the European Parliament. Purchasing short-dated bonds doesn’t constitute state financing, Draghi said during a closed-door parliamentary session in Brussels today, Gauzes told reporters afterwards. “He thinks it’s not a violation of the treaty and you can do it under the current legal framework,” said Gauzes, a French Christian Democrat. “He said for example three years is ok, 15 years no.” The euro rose against the dollar after the comments, which indicate Draghi may be in a position to announce details of the ECB’s new bond-purchase program after policy makers meet on Sept. 6. The European currency jumped more than a quarter of a cent to $1.2611 and traded at $1.2599 at 7:27 p.m. in Brussels, up 0.2 percent on the day.
Draghi said on Aug. 2 that the ECB was working on a bond- buying program to lower yields in countries such as Italy and Spain as long as they also ask Europe’s rescue fund to buy their debt. Germany’s Bundesbank opposes government bond purchases and the country’s constitutional court won’t rule on the legality of the permanent fund, the European Stability Mechanism, until Sept. 12.

Slowing Polish Economy May Force Tusk to Ease Budget Cuts
Poland’s slowing economy is putting pressure on Prime Minister Donald Tusk to ease deficit cuts to avoid the fate of other European Union nations where austerity measures to tackle the debt crisis helped suffocate growth. Tusk’s Cabinet will meet in Warsaw today to discuss a revised 2013 budget after the economy expanded at the slowest pace in 11 quarters in the three months through June. While Poland will stick to a plan to cut the 2012 budget gap within the EU’s limit of 3 percent of output, the slowdown means its “ambitious goal for a 2.2 percent deficit next year is out of the question,” Maja Goettig, a member of Tusk’s Council of Economic Advisers, said by phone on Aug. 31. “Everyone, including markets, would understand and maybe even appreciate it, if the government avoided excessively harsh austerity for the sake of growth, which is now key to financial stability,” said Goettig, who’s also a Warsaw-based strategist at KBC Securities.
Tusk, the first Polish premier to serve a second term since communism ended in 1989, must weigh EU deficit demands against concerns that further spending cuts may damp growth in the nation of 38 million people, whose GDP-per-capita is 40 percent below the 27-nation bloc’s average. While his Cabinet still enjoys broad support in polls, governments across Europe have collapsed after protests against austerity policies that helped plunge economies from Romania to Spain into recession.

London Luxury Homebuilding to Jump 70% on Foreigner Cash
Luxury-home builders plan to complete more than 15,000 houses and apartments in London over the next decade as demand from overseas encourages development outside the city’s traditional prime neighborhoods, according to EC Harris LLP. The 10-year development pipeline has increased 70 percent from a year earlier and companies now expect to construct homes with a sales value of 38 billion pounds ($60 billion), the consulting firm said in a report today. About 3,800 units are expected to be completed in 2016, more than seven times this year’s total of 500. “The pipeline now is pretty unprecedented,” Mark Farmer, head of residential property for EC Harris, said in an interview. “Follow where the money is and at the moment it’s in London prime.”
Home prices in London’s most expensive areas have gained 49 percent since a March 2009 low point and are now 14 percent above the previous peak in 2008, according to broker Knight Frank LLP. Investors from abroad, including the Middle East and mainland Europe, consider central London real estate a safe haven from economic and political unrest in their home markets. About 2 billion pounds worth of new luxury homes were sold in 2011 at developments such as One Hyde Park, Farmer said. The firm estimates sales of 10.2 billion pounds in 2016 and 8.5 billion pounds the following year.

Germany Sheltering Weary and Burdened Rejuvenates Siemens
After graduating from the National Technical University of Athens, Vlasios Ntizos spent months sending out as many as six resumes a day seeking work. His luck finally turned when he signed up for a apprenticeship at Siemens AG (SIE) in Berlin and nabbed a slot, beating more than other 1,000 compatriots to train for three years as an electrical engineer in the German capital. “I guess I am one of the chosen few,” Ntizos said during a break from dismantling electric plugs in the sprawling red- brick training center at Siemensstadt, the company’s main manufacturing complex. “For me, this is a great chance.” Ntizos, 25, is part of a team of 29 European youths who signed up at Germany’s biggest engineering company in search of a brighter future, the first time Siemens has made a concerted effort to add foreigners to its crop of apprentices in Germany. The European debt crisis has unleashed a wave of job seekers flocking to Germany, where a rigid trainee system churns out a steady stream of skilled professionals.
Germany’s apprenticeship programs and its renown as the standard bearer of quality manufacturing are helping companies rejuvenate their aging workforce with foreigners eager to escape economic malaise at home. Admitting foreigners promises to give German companies a reputational halo as Europe’s largest economy seeks to avoid the image of bullying laggards into austerity. The country’s vocational system combines practical training with classroom sessions and has companies pitching in, offering more than half a million high-school graduates annually hands-on education in hundreds of professions as a well-respected alternative to a university degree. With the government paying for the schools, the system has helped keep youth unemployment at 7.9 percent, the lowest rate in Europe, according to International Labor Organization data.

Euro-Area Manufacturing Output Contracts More Than Estimated
Euro-area manufacturing contracted more than initially estimated in August, suggesting the economy may struggle to avoid a recession in the third quarter. A gauge of manufacturing in the 17-nation euro area based on a survey of purchasing managers was revised lower to 45.1 from the reading of 45.3 estimated earlier, London-based Markit Economics said today. The index, which stood at 44 in July, has held for 13 months below 50, indicating contraction. European manufacturers are feeling the impact of the sovereign-debt crisis and tougher austerity measures that have undermined export and consumer demand. Euro-area economic confidence fell to a three-year low and inflation accelerated to 2.6 percent in August. The jobless rate held at a record 11.3 percent in July. “The euro-zone manufacturing sector remains firmly in contraction territory,” Rob Dobson, senior economist at Markit, said in the report. “The sector is on course to act as a drag on gross domestic product in the third quarter.”
The euro fell against the dollar on the purchasing-managers data and traded at $1.2569 at 10:44 a.m. in Brussels, down 0.1 percent on the day. The European currency has declined more than 11 percent in the past year.

Swedish Manufacturing Unexpectedly Shrinks as Orders Plunge
Sweden’s manufacturing unexpectedly shrank in August at the fastest pace since May 2009 as the krona’s appreciation sent export orders plunging amid sagging demand from debt-stricken Europe. The purchasing managers’ index fell to a seasonally adjusted 45.1 from 50.6 in July, Stockholm-based Swedbank AB (SWEDA), which compiles the gauge, said today. A reading below 50 signals a contraction. The index was seen falling to 50.1, according to the average estimate of 10 economists surveyed by Bloomberg. “Sweden won’t go unscathed through this period of an international slowdown,” said Roger Josefsson, chief economist at Danske Bank A/S in Stockholm. “In contrast to data that’s been published earlier, this is data that’s come in after the still recent strengthening of the krona.”
Sweden’s central bank, which is set to announce its next interest rate decision on Sept. 6, in July kept its key rate unchanged and pushed back tightening plans because of turmoil in Europe. The Nordic country relies on sales abroad for about half of its output and sends 70 percent of its exports to Europe where economies are contracting amid austerity measures. The krona fell 0.6 percent to 8.3893 per euro and 0.7 percent to 6.6724 per dollar as of 9:55 a.m. in Stockholm after strengthening more than 9 percent against the euro since May 17. The currency hit a 12-year high of 8.17 per euro last month as the largest Nordic economy emerged as a haven from Europe’s debt crisis. The PMI’s production sub-index fell to 45.8 from 54 while the order index fell to 41.1 from 51.2. The employment index declined to 45.1 from 47.7.
“This is an indication that things will look much weaker going forward,” Josefsson said. “This probably can’t be dismissed as a blip in the data since the reading was broad- based if one looks at the details of the release.”

20120904 1004 Global Commodities Related News.

Commodities Beat Stocks, Bonds for Second Month in August
Commodities beat equities, bonds and the dollar for a second consecutive month, the longest streak in more than a year, on mounting speculation policy makers will seek to rescue their economies. The Standard & Poor’s GSCI Total Return Index of 24 commodities rose 6.4 percent in August, led by silver, cocoa and heating oil. The MSCI All-Country World Index of equities gained 1.9 percent for a third straight advance, as the U.S. Dollar Index (DXY), a measure against six currencies, dropped 1.7 percent. Bonds of all types returned 0.2 percent on average, led by Europe’s most indebted nations, according to Bank of America Merrill Lynch’s Global Broad Market Index.
Gains in riskier assets show investors expect policy makers will succeed in bolstering growth. The Federal Reserve and European Central Bank are already holding borrowing costs at a record low, and more than two-dozen nations cut market interest rates this year. China has slowed for six quarters, the 17- nation euro area is contracting, and consumer confidence in the U.S. fell the most in 10 months in August. “The market has clearly already taken a very sanguine view,” said Bill O’Neill, the London-based chief investment officer for Europe, Middle East and Africa at Merrill Lynch Wealth Management, which oversees more than $1.8 trillion of assets. “The dollar has been weaker, and that’s one of the reasons why commodities are propelled higher. Part of it has been the easing expectations, and the conviction that the Fed would do something aggressive in early September.”

Cotton Glut Seen Extending Slump as Levi’s Costs Slide
Cotton warehouses from China to Australia are bulging with the biggest-ever glut, a year after record prices spurred farmers to expand output. Harvests will exceed demand for a third year, swelling stockpiles by 10 percent to 74.67 million 480-pound bales by August, the U.S. Department of Agriculture estimates. Inventories in China, the biggest user, will triple over two years to a record as domestic demand slumps to the lowest since 2005, USDA data show. Cotton may drop 12 percent to 67.87 cents a pound by the end of the year, according to the average of 20 analyst and merchant estimates compiled by Bloomberg. Slowing economic growth means the surplus will widen even as China, Australia, Brazil and India produce less this season, leading to the first global output decline in three years, the USDA predicts. Prices already plunged 65 percent from last year’s peak of $2.197 a pound, reducing costs for buyers from Hanesbrands Inc. (HBI), the maker of Champion apparel, to San Francisco-based Levi Strauss & Co.
“There’s an awful lot of cotton around,” said David Wookey, a managing director and trader at Isis Commodities Ltd., a cotton merchant in Boston, England, founded 17 years ago. “You’ve got a large stocks situation that’s been coupled with weaker global consumption.”

U.S. Shale Glut Means Gas Shortage for Mexican Industry: Energy
Mexico has begun cutting natural gas supplies to some of its largest customers by as much as 45 percent of their orders to cope with ballooning demand from households to steelmakers such as Ternium SA and ArcelorMittal. (MT) Monopoly supplier Petroleos Mexicanos, known as Pemex, started reductions on a case-by-case basis as the government studies forcing the measure on all companies. Pemex has already increased imports from the U.S. to records this year as its state-owned pipelines run at about 95 percent of capacity. The bottleneck in Latin America’s second-largest economy is the latest energy whiplash stemming from the U.S. shale gas boom. Mexican gas prices are tied to rates in its northern neighbor, where soaring supplies from shale fields drove gas to a 10-year low and reduced Mexico’s wholesale price 32 percent in the past year. Manufacturers can’t get enough of the energy.
“The shortage of natural gas is affecting companies economically and technically,” Octavio Rangel, the Mexico Steel Chamber chief, said without naming any, in a written response to questions. “In some plants, gas supply has been reduced 40 percent to 45 percent of what was originally agreed.” Pemex contacted all clients last month for the 15th time this year to recommend they cut consumption or face incomplete deliveries, compared with 18 times in all of 2011. The pinch illustrates how the global supply balance was rocked by advanced extraction techniques that have buyers in the U.S. paying about one-eighth the price Asian nations are charged for gas. At the same time, nations like Mexico that link prices to the U.S. Henry Hub benchmark are seeing rapid demand growth compared with Europe, where most rates are tied to oil.

Oil Rises to Highest in One Week on Stimulus Speculation
Oil rose to the highest intraday price in more than a week in New York on speculation central banks will take more steps to boost growth after reports signaled the economic slowdown is deepening. Futures gained as much as 0.9 percent from the Aug. 31 close. Euro-area manufacturing contracted more than initially estimated in August, a report from London-based Markit Economics showed yesterday. China’s factory output shrank for the first time in nine months, according to a government survey in Beijing released Sept. 1. European Central Bank President Mario Draghi told officials yesterday he would be comfortable buying three- year government bonds to bring down borrowing costs for nations in financial distress.
“The disappointing data from China emphasizes that waiting for central bank action is the name of the game,” said Carsten Fritsch, an analyst at Commerzbank AG in Frankfurt who predicts prices will stay above $90 a barrel this month. “Speculation of central bank intervention will keep prices supported despite bearish fundamentals of weak demand and abundant supplies.” Oil for October delivery increased as much as 83 cents to $97.30 a barrel in electronic trading on the New York Mercantile Exchange, the highest intraday price since Aug. 27, and was at $96.86 at 9:29 a.m. Sydney time. There was no floor trading yesterday because of the U.S. Labor Day holiday and transactions since the Aug. 31 close will be booked with today’s trades for settlement. Front-month prices are 2 percent lower this year.
Brent oil for October settlement rose $1.21, or 1.1 percent, to $115.78 a barrel on the London-based ICE Futures Europe exchange yesterday. The European benchmark grade’s premium to West Texas Intermediate closed at $18.10 on Aug. 31.