Friday, September 7, 2012
FCPO closed : 2927, changed : -21 points, volume : lower.
Bollinger band reading : correction range bound little upside biased.
MACD Histogram : falling lower, seller taking exposure.
Support : 2920, 2900, 2850, 2800 level.
Resistance : 2950, 2970, 3020, 3050 level.
FCPO closed recorded loss for the 4th day with declined volume traded. Soy oil currently trading weaker after overnight closed lower while crude oil price currently rising higher.
Price extended loss as picking up inventory concern persisted ahead on next Monday official MPOB Aug 2012 data and exports figure release by 2 cargo surveyors.
FCPO technical reading revised to suggesting a correction range bound little upside biased market development with MACD indicator having negative crossed down today.
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 6:26 PM
Bollinger band reading : pullback correction downside biased.
MACD Histogram : falling lower, seller in control.
Support : 1600, 1595, 1590, 1575 level.
Resistance : 1615, 1623, 1630, 1640 level.
FKLI closed rebounded little higher with lesser volume exchanged doing 9.5 points discount compare to cash market that also closed recorded gain. Overnight U.S. market closed rallied substantially higher and today Asia markets ended in positive zone while European markets currently trading higher.
World markets welcomed the latest development over ECB bond buying and debt reduction plan, more stimulus news from China with approved to build 2,018 kilometers of roads while investors awaits U.S. jobs and unemployment data.
FKLI daily chart study adjusted to calling a pullback correction downside biased market development after plunged more than 40 points in 3 days.
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 6:13 PM
DJIA chart reading : side way range bound.
Hang Seng chart reading : pullback correction downside biased.
LCI chart reading : pullback correction little downside biased.
Posted by MW Chong at 5:18 PM
VEGOILS-Palm oil extends losses on stock build; industry data eyed - RTRS
Futures on course for more than 3 pct loss this week Palm oil to drop to 2,867 ringgit -technicals Coming up: MPOB August stocks, production data on Monday Malaysia's Sept. 1-10 exports data on Monday
By Chew Yee Kiat
SINGAPORE, Sept 7 (Reuters) - Malaysian crude palm oil futures dropped on Friday, staying on track for their worst weekly performance since late July, with traders cautious ahead of data on Monday that could show high inventory in the Southeast Asian country.
Improving crop prospects in parts of the U.S. grain belt weighed on soybeans, which in turn hurt palm oil futures, down more than 3 percent so far this week. GRA/
"Lately palm oil has been rangebound and immediate support is at 2,900 ringgit," said a trader with a global commodity house in Singapore.
"Now everyone's looking for demand, only that can confrim the next firm direction for palm."
By the midday break, the benchmark November contract FCPOc3 on the Bursa Malaysia Derivatives Exchange had fallen 0.9 percent to 2,923 ringgit ($940) per tonne. The contract dropped to 2,913 ringgit on Thursday, its lowest level since Aug. 16.
Total traded volume stood at 20,217 lots of 25 tonnes each, much higher than the usual 12,500 lots.
Reuters analyst Wang Tao said that, based on a wave analysis, palm oil looked likely to drop to 2,867 ringgit per tonne.
Market players are focusing on a slew of data on Monday including the Malaysian Palm Oil Board's figures on August stocks, which could hit a 9-month peak as high production offsets demand growth.
Leading industry analyst Dorab Mistry said on Thursday that record southeast Asian palm oil stocks may weigh on prices.
Cargo surveyors Intertek Testing Services and Societe Generale de Surveillance also report Sept. 1-10 exports numbers on Monday after a strong showing in August. PALM/ITS PALM/SGS
Weather concerns have eased a little as a weak El Nino predicted by the U.S. government forecaster provided relief to Southeast Asian planters.
Brent futures fell below $113 per barrel on Friday ahead of a U.S. jobs report expected to give an indication of the economic health of the world's biggest oil consumer, and as the United States considered a release of emergency oil reserves, potentially much larger than the last. O/R
In other vegetable oil markets, U.S. soyoil for December delivery BOZ2 rose 0.3 percent and the most active January 2013 soyoil contract DBYF3 on the Dalian Commodity Exchange had gained 0.5 percent by 0537 GMT.
Posted by MW Chong at 4:26 PM
Global Markets: Asian shares were on track for their biggest daily gain in six weeks after the European Central Bank outlined its plan to calm the euro zone's debt crisis and firm U.S. data fed speculation of a strong jobs report later in the day. European shares were set to inch higher, adding to the previous session's sharp rally sparked by the ECB's bond buying programme, as investors bet all-important U.S. monthly payrolls data will show improvement in the jobs market.U.S. stocks closed at multi-year highs on Thursday, with the S&P 500 ending at its highest level since before the collapse of Lehman Brothers as investors hailed a new European bond-buying program aimed at stemming the region's debt crisis. (Reuters)
FOREX: The euro inched up versus the dollar and held near a two-month high while the safe haven yen nursed heavy losses as markets cheered the European Central Bank's plan to tackle the region's debt crisis. (Reuters)
FOREX-Euro hovers near 2-mth peak, cheered by ECB bond plan
SINGAPORE/SYDNEY, Sept 7 (Reuters) - The euro inched up versus the dollar and held near a two-month high while the safe haven yen nursed heavy losses as markets cheered the European Central Bank's plan to tackle the region's debt crisis.
"The ECB's actions afford time, allowing risk appetite to stage a comeback for now," said Vincent Chaigneau, a strategist at Societe Generale.
Draghi gets ECB backing for unlimited bond-buying (Reuters)
The European Central Bank agreed on Thursday to launch a new and potentially unlimited bond-buying programme to lower struggling euro zone countries' borrowing costs and draw a line under the debt crisis.
Lackluster U.S. economy shows stronger pulse (Reuters)
U.S. companies added staff in August at the fastest clip in five months and a gauge of employment in the service sector also improved, upbeat signals for a struggling labor market.
GRAINS: Chicago soybeans lost mChicago soybeans fell for a third straight session with rains improving crop prospects in parts of the U.S. grain belt which has been scorched by the worst drought in 56 years. (Reuters)
Egypt buys Black Sea wheat, seeks Russia export clarity (Reuters)
Egypt bought 475,000 tonnes of Black Sea origin wheat on Thursday, an unusually large purchase at a single tender which traders said was probably because it wanted to stock up in case Russia imposes any export restrictions.
China's coal, iron imports set to post drop for 3rd month
BEIJING/HONG KONG, Sept 7 (Reuters) - Chinese imports of coal and iron ore are likely to have fallen for the third month in a row in August, hit by protracted weakness in the world's second-biggest economy, while crude oil and copper cargoes last month could match July levels.
Few positives are expected from preliminary trade data due on Monday, with weak demand from the world's biggest importer of iron ore and coal bruising prices. Benchmark iron ore prices fell nearly a quarter in August, while coal prices are near two-year lows.
White House consults experts as it mulls tapping oil reserve (Reuters)
Obama administration officials met with a handful of oil market experts on Thursday as the White House considers the merits of another release of emergency oil reserves - potentially one much larger than the last.
OIL: Brent futures slipped towards $113 per barrel ahead of a U.S. jobs report that will gauge the economic health of the world's biggest oil consumer as it considers a release of emergency oil reserves, potentially much larger than the last. (Reuters)
China slowdown cuts deeper into Indonesia's coal sector
BALIKPAPAN, Indonesia, Sept 7 (Reuters) - The slowdown in China's economic growth is cutting deeper into Indonesia's coal sector, forcing producers to reduce output and slash costs, and testing the resilience of a commodity boom in Southeast Asia's largest economy.
Top Indonesian exporters PT Bumi Resources and PT Adaro Energy are feeling the pinch after a 20 percent fall in international benchmark coal prices this year. Moody's Investors Service said Indonesian in d ustry co s ts in 2012 will rise as much as 15 percent.
Euro Coal-Europe takes more S.African, prices dip again
LONDON, Sept 6 (Reuters) - Physical coal prices in Europe crept higher by 20-60 cents a tonne on Thursday.
Few trades were reported and those at levels barely changed from earlier this week, traders and utilities said.
"Prices rose slightly in early trade but by the afternoon, gas and power had weakened and coal lost some of the morning's gains," one European trader said.
Indonesia's August refined tin exports down 32 pct on mth -govt
JAKARTA, Sept 7 (Reuters) - Shipments of refined tin from Indonesia, the world's top exporter, fell 32 percent in August to 5,645.87 tonnes from 8,298.47 tonnes in July, a trade ministry official said on Friday.
Indonesian refined tin exports for August were 34 percent lower compared to 8, 5 59.61 tonnes in the same period last year.
China daily steel output dips 3 pct in late Aug -CISA
SHANGHAI, Sept 6 (Reuters) - China's average daily crude steel output fell 3 percent to 1.872 million tonnes between Aug. 21-31 from the preceding 10 days, data from the China Iron & Steel Association showed on Thursday, as steel mills trimmed output amid slumping prices.
Daily production was 1.930 million tonnes on average during the Aug. 11-20 period.
COLUMN-Iron ore and the last man standing game
--Andy Home is a Reuters columnist. The opinions expressed are his own--
LONDON, Sept 6 (Reuters) - It wasn't supposed to be like this.
The price of spot iron ore fell again today, touching a near three-year low of $86.70 per tonne, according to The Steel Index.
It has now fallen by 36 percent in the space of a couple of months and in doing so it has shredded the previous narrative for the iron ore market.
Iron Ore-Shanghai rebar rises 3 pct on infrastructure push
SINGAPORE, Sept 7 (Reuters) - Shanghai steel futures rose for the first time in six sessions on Friday, buoyed by news that China has approved infrastructure projects to revitalise a slowing economy which raised hopes for a recovery in steel demand.
China has given the go-ahead to 30 infrastructure projects, adding to 25 rail projects approved earlier, the official China Securities Journal reported. The total value of projects approved this week by the country's economic planner stands at above 1 trillion yuan .
BASE METALS: London copper edged higher and was set eke out a fourth week of gains in five, supported by the European Central Bank's plan to buy bonds to shore up the region's economy. (Reuters)
PRECIOUS METALS: Gold eased from a near six-month top hit in the previous session, as upbeat data from a struggling U.S. labour market dimmed hopes of more stimulus measures from the Federal Reserve. (Reuters)
METALS-Copper inches up after ECB, U.S. jobs eyed
SINGAPORE, Sept 7 (Reuters) - London copper edged higher and was set eke out a fourth week of gains in five, supported by the European Central Bank's plan to buy bonds to shore up the region's economy.
"There are still questions as to whether the ECB programme will help calm investors and whether you'll get QE from the Fed," said Credit Suisse metals analyst Ivan Szpakowski.
PRECIOUS-Gold retreats as U.S. jobs data dims stimulus hopes
SINGAPORE, Sept 7 (Reuters) - Gold eased from a near six-month high hit in the previous session as upbeat data from a struggling U.S. labour market dimmed hopes for more stimulus measures from the Federal Reserve.
"There is definitely long liquidation going on after the ADP number," said a Singapore-based trader. "People spent the whole of yesterday buying gold and it is a bit overcooked up here. Now we have good data and the market is struggling to see how it can get a bad payrolls data."
Baltic index down as capesize, panamax rates dip
Sept 6 (Reuters) - The Baltic Exchange's main sea freight index, tracking rates for ships carrying dry commodities, fell for the seventh straight session on Thursday as rates for both capesize and panamax vessels continued to weaken.
The main index, which factors in the average daily earnings of capesize, panamax, supramax and handysize dry bulk transport vessels, fell 9 points or 1.32 percent to 675 points.
Posted by MW Chong at 4:25 PM
GLOBAL MARKETS-Asia shares rise after ECB, focus on payrolls
TOKYO, Sept 7 (Reuters) - Asian shares rose and the euro steadied on Friday after the European Central Bank outlined its bond-buying scheme to help calm the euro zone's debt crisis, while firm U.S. data fed speculation of a strong jobs report later in the day.
"The ECB's action has been priced in after earlier reports and contained nothing new, but there was no 'selling the fact', probably because currencies followed the rally in stocks. It appears markets are warming up to a risk-on mode," said Hiroshi Maeba, head of FX trading Japan for UBS in Tokyo.
OIL-Oil settles higher on drop in U.S. inventory and ECB
NEW YORK, Sept 6 (Reuters) - Oil prices settled higher but well off the day's peaks on Thursday, supported by a drop in U.S. crude oil inventories, strong jobs data and the European Central Bank's announcement of a bond buying program.
"The drawdown in crude stocks was a one-time event due to Isaac and there was no damage done to the Gulf infrastructure so the inventory report was written off, and then I think the market digested the ECB bond issue and it doesn't seem to be as much of a game changer ...," said Gene McGillian, analyst at Tradition Energy.
White House consults experts as it mulls tapping oil reserve
WASHINGTON, Sept 6 (Reuters) - Obama administration officials met with a handful of oil market experts on Thursday as the White House considers the merits of another release of emergency oil reserves - potentially one much larger than the last.
The meeting, originally scheduled for August but delayed by summer vacations, did not center entirely on the Strategic Petroleum Reserve (SPR), according to non-government sources who attended the meeting.
U.S. crude stocks fall sharply following Hurricane Isaac-EIA
Sept 6 (Reuters) - U.S. crude oil stockpiles fell more sharply than forecasters had expected last week as Hurricane Isaac passed through the U.S. Gulf region and temporarily shut down production platforms, refineries and ports, government data showed on Thursday.
Domestic stocks of crude, excluding oil held in the Strategic Petroleum Reserve, fell 7.43 million barrels to 357.1 million barrels in the week ended Aug. 31, the Energy Information Administration reported. Analysts polled by Reuters had forecast a smaller drop of 5.3 million barrels.
NATURAL GAS-U.S. natgas futures end lower despite light storage build
NEW YORK, Sept 6 (Reuters) - U.S. natural gas futures ended lower on Thursday for the second straight day despite a smaller-than-expected weekly build to inventories, as weather forecasters predicted milder autumn weather for consuming regions.
"Today's natural gas inventory report was bullish on all counts for the short term and next week's report is also likely to be bullish as injections will underperform while the industry continues to recover from Isaac," said Energy Management Institute's Dominick Chirichella.
EURO COAL-Europe takes more S.African, prices dip again
LONDON, Sept 6 (Reuters) - Physical coal prices in Europe crept higher by 20-60 cents a tonne on Thursday.
"Prices rose slightly in early trade but by the afternoon, gas and power had weakened and coal lost some of the morning's gains," one European trader said.
Posted by MW Chong at 11:09 AM
Bank Negara Malaysia (BNM) has decided to maintain the overnight policy rate (OPR) at 3% yesterday. The decision was expected by all economists. In the statement, it said domestic demand will continue to support domestic economic growth. Headline inflation is expected to remain moderate for the remainder of 2012 and into 2013. However, it said, upside risks to inflation could emerge should supply disruptions resulted in higher global prices for commodities. The monetary policy committee will continue to carefully assess global conditions and their implications on the overall outlook for inflation and growth of the Malaysian economy, it said. (Bernama)
Motorists now have to pay RM3 per litre for RON97 petrol after a price increase of 30 sen, from RM2.70 from today. Malaysian Petrol Dealers Association president Datuk Hashim Othman said the price increase followed a hike in world fuel prices. (NST)
The My Rapid Transit project is on track to be delivered on time by July 2017, Mass Rapid Transit Corporation (MRT Corp) CEO Datuk Azhar Abdul Hamid said yesterday. He said MRT Corp had spent slightly over RM1bn so far while the total value of work packages awarded stood at about RM16.5bn as at end-Aug. Over 17 work packages worth RM7.6 billion have been awarded to Bumiputera companies up to end-July and this works out to 47% of the packages disbursed so far, which was higher than the 43% target. (BT)
Malaysia’s sovereign credit rating may be cut if the government does not deliver promised reforms to cut spending to reduce its fiscal deficits, Standard and Poor’s (S&P) has said in its latest report on the country, joining other global ratings agencies in warnings about the strains on the country’s credit profile. S&P said reforms the government should look at include the introduction of a goods and services tax (GST) and subsidy cuts. However, it also said: “We may raise the sovereign credit ratings if stronger growth and the government’s effort to reduce spending result in lower-than-expected deficits, as indicated in the 10th Malaysia Plan. With lower deficits, a significant reduction in government debt is possible.” (Malaysian Insider)
The government will have to continue spending on development while at the same time keeping national debt at a manageable level, said Deputy Finance Minister Datuk Donald Lim Siang Chai. Lim said a significant development phase was taking place currently involving several billion ringgit worth of projects including the Mass Rapid Transit (MRT) line. As at Dec 2011, the ratio of national debt to the GDP reached 51.8%. The government will work hard not to exceed the debt ceiling of 55% of GDP which was increased from 45% in July 2009. The country’s dependence on the oil and gas (O&G) sector will eventually reduce as the government has beefed up efforts to broaden its revenue base. The O&G sector supplies about 35% of government revenue (vs. as high as 50% in 1990s), followed by the commodity sector (palm oil and rubber), manufacturing, retail and tourism, he said. On the Goods and Services Tax (GST) Bill, he said the second reading will be tabled in Parliament as soon as feedback from the business community is received. (Bernama, Financial Daily)
The upcoming Budget 2013 is expected to reflect a significant change in the percentage structure of both personal and corporate income tax. Malaysian Association of Tax Accountants (Mata) president Abd Aziz Abu Bakar said yesterday although the tax reduction cannot be done drastically, he was confident the new budget will not disappoint the people and the business community. (The Sun)
US: Dow, S&P hit best levels since 2007
US stocks surged to new multi-year highs, helped by positive economic data and the ECB’s new plan to help ailing eurozone countries in the bond market. The S&P 500 and the Dow both registered their best closing levels since December 2007, holding onto strong gains achieved as soon as the markets opened. Banks led the march, with Bank of America putting on 5% and JPMorgan Chase gaining 4.3%. Key tech stocks also registered strong gains, with Microsoft rising 3%, Google adding 3%, and Cisco surging 4.4%. The boost came ahead of the release of Friday’s jobs numbers and set a positive background for President Barack Obama's Thursday night address at the Democratic Party's convention, which kicked off the final stretch of the presidential race. (The EconomicTimes)
The US information revenue gauge, focusing on information and technology-related service industries, rose 0.8% qoq in 2Q12 from a revised 0.8% in 1Q12, said the Census Bureau. (Bloomberg)
The US ISM non-manufacturing index rose to 53.7 in Aug, the best monthly rate of general growth since May, from 52.6 in Jul. The reading exceeds consensus of 53.0. (Bloomberg)
The US Federal Reserve said its holdings of US securities kept for overseas central banks rose US$6.26bn in the week ended 5 Sep to stand at US$3.574tr. (Reuters)
The US Challenger Job-Cut report revealed that announced layoffs stood at 32,239 in Aug (36,855 in Jul), the second lowest of the recovery. (Bloomberg)
US ADP private payroll employment rose to 201,000 in Aug from a revised 173,000 in Jul. Economists expected a level of 149,000. (Bloomberg)
US jobless claims fell 12,000 in the 1 Sep week to 365,000 (a revised 377,000 in the earlier week), the lowest level in 4 weeks and the biggest quantum of decline in 6 weeks. Economists were expecting a reading of 370,000. (Bloomberg)
The European Central Bank (ECB) introduced an unlimited bond-buying program that will provide "a fully effective backstop" against market volatility. The ECB said it would buy bonds with a residual maturity of one to three years. The ECB won't claim the status of a senior creditor if the bonds it buys subsequently have to be restructured. It will continue to offset its purchases in full by taking an equal amount of money out of circulation, and will only continue its purchases as long as the country in question is deemed to be complying with the conditions it has agreed with the euro zone. The new program, called "Outright Monetary Transactions", replaces the existing Securities Markets Program under which the central bank had bought some EUR209bn (US$263bn) in government bonds. The ECB will also conditionally reverse a recent tightening of its rules on collateral for its credit, saying it would again accept all bonds issued or guaranteed by euro-zone governments. This ruling will be subject to the terms of its European Union program. (Reuters, AWSJ)
Eurozone GDP fell by 0.2% qoq in 2Q12 following zero growth in the previous quarter. The yoy drop was revised to 0.5% from a previously reported 0.4%. The ECB cut its growth forecast for 2012 to a narrow range around -0.4%, and its forecast for 2013 to between -0.4% and +1.4%. (AWSJ)
The eurozone crisis poses the greatest risk to the global economy, the OECD said, and called for further action including government bond purchases being contemplated by the ECB. It also forecast 2.3% growth this year for the US, down marginally from an estimate of 2.4% in May. (CNA, Reuters)
China's GDP growth for 2011 has been revised upward by 0.1% pt to 9.3%. (Xinhua)
Chinese banks' rapid expansion of their assets in the first half of the year amid the current economic gloom might cause loan repayment problems and undermine their solvency, Fitch Ratings said. (Global Times)
China approved plans to build 2,018 kilometers (1,254 miles) of roads, its second major construction project announced this week. The National Development & Reform Commission also cleared plans for nine sewage treatment, two waterway and five port and warehouse projects, without disclosing the required investments. (Bloomberg)
The Bank of Japan needs to monitor more carefully negative effects of a strong yen on the economy amid global uncertainty, Governor Masaaki Shirakawa said. (Bloomberg)
South Korea’s debt rating was upgraded by Fitch Ratings to AA-, the same as Saudi Arabia and one level higher than Japan and China, 10 days after a similar move by Moody’s Investors Service. (Bloomberg)
The Bank of England has kept interest rates at 0.5% and held off from more stimulus measures. It decided not to increase its programme of quantitative easing (QE), having lifted it by £50bn in Jul to £375bn. (BBC)
Australia's jobless rate saw a surprise fall to 5.1% in Aug (5.2% in Jul; 5.3% expected by analysts), but the overall picture was not so bright, with 8,800 jobs shed and a drop in the participation rate and hours worked. (AFP)
India is likely to overshoot its target for this fiscal year's budget deficit, a senior finance ministry official said. The final deficit may remain close to the target of 5.1% of GDP in the year through Mar because of a number of steps the government is working on to improve its financial health. (WSJ)
Moody's Investors Service forecast debt issuance in Asia would likely remain slow for the rest of the year if uncertainty in the euro area continues after its Asian Liquidity Stress Index (LSI) deteriorated in Aug. (StarBiz)
Danareksa’s consumer confidence index for Indonesia climbed to 92.3 in Aug from 91.4 in Jul. (Bloomberg)
The World Economic Forum in its Global Competitiveness Index ranked Indonesia 50th of 144 nations in its 2012-13 report, down four places from the previous year’s position. China’s ranking dropped from the world's 26th in 2011 to 29th this year, its first decline since 2005. (Jakarta Globe, Xinhua)
Myanmar President Thein Sein is moving to counter lawmakers who inserted protectionist elements in a foreign investment bill that may impede overseas companies just as the US and European Union ease sanctions. (Bloomberg)
Energy-price restructuring will be implemented next year to reflect the actual cost, but subsidies will remain for low-income consumers, says Thai Energy Minister Arak Chonlatanon. (Bangkok Post)
The Energy Regulatory Commission (ERC) approved an increase of 18 satang per kilowatt-hour in the cost of electricity during the Sep-Dec round, with a promise of further hikes in the next three periods to reduce subsidies by the Electricity Generating Authority of Thailand. (The Nation)
WCT has proposed, in sequence, a (i) 3-for-20 bonus issue of 180.3m new shares, (ii) 1-for-5 free bonus warrants (warrant D) totalling 240.3m, and (iii) an increase in the authorised share capital from RM800m, comprising of 1.4bn shares and 1bn preference shares (10sen par) to RM1.1bn, comprising 2bn shares and 1bn preference shares. These exercises are expected to complete in 4Q12. (BMSB)
The Malaysian consortium comprising SP Setia Bhd, Sime Darby Bhd, and the Employee Provident Fund brushed aside scepticism and negativity by outlining an anticipated time line for the Battersea Power Station project and even shortening the 15-year duration of the project to 10 years. Battersea Power Station Development Company chief executive officer Robert Tincknell said "this time, it is going to happen" at a cocktail party. (StarBiz)
Sime Darby Bhd is waiting for final approvals from the Peruvian government to start planting oil palm in the Latin American state. Foreign Minister Datuk Seri Anifah Aman said Peru has identified 70,000ha where Sime Darby could undertake the project. He said the company is expected to invest between US$150m and US$300m (RM467.4m and RM934.9m) in the venture. (BT)
DRB-Hicom will not totally divest its stake in Bank Muamalat Malaysia to Affin Holdings but just paring down in accordance to the requirement of Bank Negara Malaysia (BNM). "As to what the scheme is and how, I'm not privy to it," Bank Muamalat Malaysia Bhd chief executive officer, Datuk Redza Shah Abdul Wahid, told reporters. He said this when asked on the status of the talks between Affin and DRB-HICOM for a possible acquisition of equity interest in Bank Muamalat and would these negotiations eventually lead to a merger and acquisition (M&A). "As part of the management team I believe the shareholders at some stage will be getting together to commence the negotiation," he said. (Bernama)
Malakoff Corp Bhd is expected to undertake an IPO by 1Q13 to raise fresh capital to revive its financial footing. RAM Ratings has put Malakoff's RM600m and RM5.6bn Islamic bond programmes on a rating watch with a negative outlook to reflect the power producer's weakening financial profile. Malakoff is currently in the midst of a corporate reorganisation whereby 100% owned Malakoff Power Bhd is expected to assume Malakoff's obligations on its senior sukuk. The proposed reorganisation will help improve the group's overall cash flow position and is expected to be concluded in the next few months. (Financial Daily, RAM Ratings)
Glove manufacturers are looking for higher public allocation for brand building in Budget 2013 to ramp up efforts to create a strong local brand internationally. Supermax Corp Bhd said that building a domestic brand in the international scene is not an easy task therefore concerted efforts and time need to be expanded. (Sun Biz)
KNM Group has proposed to list its unit Borsig Beteiligungsverwaltungsgesellschaft mb on the Main Board of the Singapore Exchange. It said it expected the proposed listing to be launched in 2013 with an indicative valuation for Borsig of between RM1.8bn and RM1.9bn. KNM said Borsig was acquired in 2008 for about RM1.7bn. It has appointed UOB Bank Ltd as the sole manager, underwriter and the placement agent for the proposed listing of Borsig. (StarBiz)
Padiberas Nasional Bhd (Bernas) expects rice prices to remain stable at current levels in the second half of the year, due to good weather conditions in producing countries which ensure ample supply, said its managing director Datuk Bakry Hamzah. He said rice prices have been relatively stable in the RM22 to RM23 per 10kg range, and government-subsidised rice at RM18 per 10kg. "There's not much disaster in rice-producing countries. We think the price of rice is going to be stable until year-end with ample supply," he said. (Sun)
Benalec Holdings Bhd has announced the signing of development agreements on its two Johor land reclamation concessions in Pengerang and Tanjung Piai for the construction of an oil terminal. Benalec said its 70% owned units - Spektrum Budi Sdn Bhd and Spektrum Kukuh Sdn Bhd - will bear all costs of reclaiming the two concession areas that span a gross area of 5,245 acres. (Financial Daily)
Brahim Holdings Bhd's plans to acquire Brahim's-LSG Sky Chef Holdings Sdn Bhd have been put on hold pending clarification from Malaysian Airline System Bhd (MAS) on the possible renegotiation of the catering contract between the two. Group executive chairman Datuk Ibrahim Ahmad said its shareholders had voted in favour of adjourning the deliberation of the resolution until further clarity is obtained. He added that MAS is unlikely to terminate the catering contract. (Financial Daily)
Total logistics services provider Kontena Nasional Bhd hopes to conclude third party logistics (3PL) services deal with a multinational tyre maker by year-end, its chief executive officer Hood Osman said. It is understood that the 3PL deal consists of a 10-year warehousing services contract and a five-year transportation contract and is one of the largest service contracts for the year. The deal will required Kontena Nasional to build new ware housing facilities, possibly in the Klang Valley, to support the requirement of the tyre manufacturer. (Malaysian Reserve)
Amcorp Properties Bhd will continue to invest in London properties to generate revenue growth for the company. It believes that it is well prepared to handle any currency fluctuation. "The weakening pound and transparent law in addition to the city being a financial centre with the most liquid property market in the world makes the UK a good place for us to invest," its managing director Lee Ken Pong said. (Malaysian Reserve)
AmCorp Prop still banks on local projects for growth
AmCorp Properties Bhd is banking on its local property development projects in Sibu, Sarawak, and Kayangan Heights, Shah Alam, Selangor, as well as its power and infrastructure businesses for earnings growth in the coming financial year. The group has finalised its shareholding agreement with NL Pollen Ltd and HPL(Mayfair) Pte Ltd to form a joint venture for the acquisition of a building block in Mayfair, London, for 23.8mil pounds. It plans to convert the building into high-end residential apartments, according to its CEO Lee. (Source: The Edge)
RM1.55bil MRT rolling stock award soon for Sungai Buloh-Kajang Line
MRT Corp is expected to award the rolling stock package for the first line of mass rapid transit (MRT) system, the Sungai Buloh-Kajang (SBK) Line, in a few weeks, said chief executive Datuk Azhar Abdul Hamid. “We have finished the evaluation of the bids and we are now preparing the report to be presented to the tender committee. Our budget for the rolling stock is about RM1.55bil. (Source: The Star)
IGB REIT IPO set to be 4th largest this year
IGB Real Estate Investment Trust (REIT) has priced its initial public offering (IPO) to institutional investors at the top of an indicative range in a deal that will raise about US$260mil in the buoyant Malaysian market, according to sources. The deal is set to be the fourth largest IPO this year in Malaysia, and follows high-profile share sales by planter Felda Global Ventures Holdings Bhd (FGVH) in June and IHH Healthcare Bhd in July. (Source: The Star)
Maybank targets RM250m from new plans
Malayan Banking Bhd (Maybank) is targeting RM250 million in premiums in the first year of its newly launched retirement plans.The bank's deputy president and head of community financial services, Lim Hong Tat, said the two plans - Smart Retirement and Golden Retirement - bring to the market additional alternatives for retirement savings. (Source: Business Times)
Bank Muamalat Q1 profit up 42%
Bank Muamalat Malaysia Bhd’s net profit for the first quarter ended June 30 surged 41.6% to RM45.2mil compared with a year ago, underpinned by a 14.5% rise in revenue, which increased to RM255.6mil. (Source: The Star)
TNB: No official word on Bangladesh job
Tenaga Nasional Bhd (TNB) has not received any official word from the Bangladeshi government’s power division in relation to the latter’s selection of the company for the development of a 1,320-MW coal-powered plant in Maheshkali, Cox’s Bazar. (Source: The Star)
Genting Bhd: Genting HK spends US$50m to refurbish cruise ships
As part of on-going efforts to expand its regional footprint, Genting Hong Kong Ltd is spending US$50m (RM155.85m) to refurbish Star Cruises’ “SuperStar Gemini” to ready the ship for a re-launch early next year from Penang, Malaysia. Star Cruises said the refurbished ship would be paraded in a series of inaugural cruises, starting with Penang to Krabi or Phuket between Jan 2 and Jan 24 next year. (Financial Daily)
Pestech International: In JV agreement to bid for Laos job
Pestech International’s unit has entered into a JV agreement to design and build a 115 kV transmission line to the Laos-Thailand border. In a filing Thursday, Pestech said its unit Pestech Sdn Bhd had entered into a JV agreement with VLV Soumpholphakdy Sole Co Ltd to cooperate on an exclusive basis to undertake the project which the JV is endeavoured to procure from Electricite Du Laos. It said a JV would be set up with the name of VLV Soumpholphakdy Sole and Pestech Sdn Bhd JV in the event that the project was successfully secured. Thereafter, it is the intention of the JV Entity to collaborate in project execution and transferring know-how between both parties regarding substation designs, civil works, secondary control and protection, tele-control, underground cable and transmission line works, it said. (Financial Daily)
Telecommunication: Rais asks local telcos to provide more info on 4G technology
Information, Communications and Culture Minister Datuk Seri Utama Dr Rais Yatim has asked local telecommunication companies to provide detailed information on 4G technology before the government approves its usage in Malaysia. He said the people must clearly understand the difference between 3G and 4G technology, particularly in terms of speed, coverage area and data available. Rais said there was not much difference between 3G and 4G technologies unlike the 2G technology with significant difference from the 3G technology. (Bernama)
Asia FX By Cornelius Luca - Thu 06 Sep 2012 17:37:41 CT (Source: CME/www.lucafxta.com)
The appetite for risk surged on Thursday, when the European Central Bank didn't ease borrowing costs but agreed on a new bond-buying programme to lower struggling euro zone countries' borrowing costs. ECB President Mario Draghi said this measure would serve as a "fully effective backstop". The European currencies and the commodity currencies rallied, while the yen fell. The US indexes, gold, oil and silver surged. The short-term outlook for the European and commodity currencies is sideways to slightly bullish. The medium-term outlook for most of the foreign currencies is slightly bullish. The LGR short-term model is long on most foreign currencies. Good luck!
US: ADP said private sector employment increased by 201,000 jobs in August following a revised increase of 173,000 jobs (from 163,000 jobs originally reported) in July.
US: Initial jobless claims declined to 365,000 in the week of September 1 from the upwardly revised 377,000 in the last week of August.
US: The ISM non-manufacturing index rose to 53.7 in August from 52.6 in July.
Today's economic calendar
Australia: AiG Performance of Construction Index for August
Australia: Trade balance for July
Japan: Leading / Coincident indexes for July
Asian Stocks Head for Biggest Gain in a Month on ECB Plan (Bloomberg)
Asian stocks rose, with the regional benchmark index headed for its biggest gain in a month, after the European Central Bank announced an unlimited bond-buying program to reduce the borrowing costs for the region’s most indebted nations, boosting demand for riskier assets. Camera maker Canon Inc. (7751), which gets 31 percent of its revenue in Europe, rose 3.4 percent. Toyota Motor Corp. (7203), a carmaker that depends on North America for a quarter of its sales, added 2.1 percent after data showed U.S. jobless claims fell. BHP Billiton Ltd. (BHP), Australia’s biggest oil producer, climbed 1.5 percent as crude rose. The MSCI Asia Pacific Index rose 1.2 percent to 117.38 as of 10:01 a.m. in Tokyo, headed for its biggest gain since Aug. 6, before markets in Hong Kong and China opened. About 10 stocks advanced for each that fell on the gauge, which has dropped 0.3 percent this week.
The bond plan is “another step towards a solution to the crisis,” said Andrew Pease, chief investment strategist at Russell Investment Group in Sydney, which manages about $150 billion. “It does minimize the tail risk in Europe. There’s no doubt about it.” The MSCI Asia Pacific Index fell 1.1 percent this quarter through yesterday as signs of a global economic slowdown outweighed expectations for further stimulus measures. The Asian benchmark traded at 12.1 times estimated earnings, compared with 13.8 times for the Standard & Poor’s 500 Index (SPXL1) and 11.9 times for the Stoxx Europe 600 Index.
Nikkei 225 Rises Most Since August on ECB Plan, U.S. Data (Bloomberg)
Japan stocks rose a second day, with the Nikkei 225 (NKY) Stock Average headed for its biggest gain since August, after the European Central Bank announced details of its bond-buying plan and falling jobless claims boosted optimism in the U.S. economy. Makita Corp. (6586), a power-tool maker that gets more than 40 percent of sales in Europe, advanced 2.5 percent. Honda Motor Co., an automaker that counts North America as its biggest market, gained 3.2 percent. Hitachi Construction Machinery Co., which relies on China for 17 percent of revenue, climbed 2.4 percent after the nation’s government approved a major road construction plan. The Nikkei 225 advanced 1.5 percent to 8,811.65 as of 10:31 a.m. in Tokyo, the most since Aug. 16. The equity benchmark is headed for a 0.3 percent drop on the week. The broader Topix Index climbed 1.3 percent to 728.53, with more than four shares rising for each that fell.
“We can see this rally extend for a little bit,” Guy Stear, the head of Asia Pacific research at Societe Generale SA in Hong Kong, said in a Bloomberg TV interview. “The fact that the ECB wants to absorb more risk and the fact that they managed to get it done despite the Bundesbank opposition -- all that in the short term is positive. In the short term Asian stocks are going to do better.” Stocks advanced after ECB President Mario Draghi yesterday said policy makers agreed to an unlimited bond-purchase program as they try to regain control of interest rates in the euro area. The program will target sovereign bonds with maturities of one to three years in its most ambitious plan yet to save the euro.
S&P 500 Climbs to Four-Year High as ECB Details Bond Plan (Bloomberg)
The Standard & Poor’s 500 Index climbed to its highest level since 2008 as the European Central Bank announced specifics of its bond-buying plan and data boosted optimism in the American economy. JPMorgan Chase & Co. (JPM), Bank of America Corp. (BAC) and Cisco Systems Inc. jumped at least 4.2 percent, leading gains in the Dow Jones Industrial Average. All 10 S&P 500 groups increased as Alcoa Inc. (AA) and Owens-Illinois Inc. (OI) climbed more than 2.8 percent to pace advances among raw-material shares. Chipmaker SanDisk Corp. (SNDK) rallied 8.4 percent after OCZ Technology Group Inc. (OCZ) blamed a shortage of certain flash-memory components for lower-than- estimated sales. The S&P 500 climbed 2 percent, the most since June, to 1,432.12 at 4 p.m. in New York. The Dow added 244.52 points, or 1.9 percent, to 13,292, its highest level since December 2007. The Nasdaq-100 Index (NDX) climbed 2.3 percent to almost a 12-year peak.
More than five shares rose for each that declined on U.S. exchanges, with volume at 7.1 billion shares, or 18 percent above the three-month average. “We are in a period where we are peeling away the onion little by little, all the uncertainties, what’s going to happen in Europe and what’s going to happen here,” Dan Veru, chief investment officer at Palisade Capital Management LLC in Fort Lee, New Jersey, said in a phone interview. His firm oversees $3.5 billion. “I think Draghi is serious about putting Europe on the positive path.” Draghi said policy makers agreed to an unlimited bond- purchase program as they try to regain control of interest rates in the euro area. He said the ECB will have a “fully effective backstop to avoid destructive scenarios with potentially severe challenges for price stability.” The bond plan is the most ambitious yet in the central bank’s fight to save the euro after nearly three years of turmoil.
S&P 500 Within 10% of Record as Birinyi Sees Bears Capitulating (Bloomberg)
The $1.9 trillion restored to U.S. equity prices in 2012 has pushed the Standard & Poor’s 500 Index within 10 percent of a record, more than 7 percentage points closer than any country among the world’s biggest stock markets. The benchmark gauge for American equities climbed 2 percent to 1,432.12 yesterday as the European Central Bank detailed its bond-buying plan and data boosted optimism in the labor market. More gains are likely as bearish investors give up and start buying, according to Laszlo Birinyi, president of Birinyi Associates Inc. in Westport, Connecticut. “They realize it isn’t working,” Birinyi, an equity trader for Salomon Brothers Inc. in the 1980s, said in a telephone interview. “The excuses of no volume and earnings aren’t going to be good -- that’s not happening, and maybe it’s time to join the party.”
U.S. equities are climbing as Federal Reserve Chairman Ben S. Bernanke’s policy of holding rates near zero helps profits and economic growth rebound from the first global recession since World War II. Gross domestic product in the U.S. is forecast to increase 2.2 percent this year while earnings in the S&P 500 may reach $103.48 a share, the most ever, according to the average of analyst estimates compiled by Bloomberg. Yesterday’s advance left the S&P 500 9.3 percent from its all-time high of 1,565.15 (SPX), reached Oct. 9, 2007. Among gauges in the 10 largest equity markets, the U.K.’s FTSE 100 Index is 17 percent away from its peak, while Canada’s S&P/TSX Composite has 24 percent to climb, according to data compiled by Bloomberg.
European Stocks Gain as ECB Agrees on Bond-Purchase Plan (Bloomberg)
European stocks rallied the most in a month after European Central Bank President Mario Draghi said policy makers agreed to an unlimited bond-purchase program as they try to regain control of interest rates in the euro area. UniCredit SpA (UCG) and Societe Generale SA (GLE) led gains in banks, climbing more than 7 percent. Lonmin Plc (LMI), the platinum producer whose main mine has been shut since Aug. 10 because of a strike that led to 44 deaths, soared 7.3 percent after agreeing to open wage talks with labor unions. Whitbread Plc (WTB) jumped 5.3 percent after sales climbed. The Stoxx Europe 600 Index (SXXP) surged 2.3 percent to 271.67 at the close, its biggest increase since Aug. 3. The gauge has rallied 16 percent from this year’s low on June 4 as Draghi pledged to do everything possible to preserve the euro. “We are having a relief rally,” said Alan Higgins, chief investment officer at Coutts & Co. in London. “There is relief that what Draghi has said is just in line with the rumors.
The new plan is essentially to help countries finance themselves at the front-end.” National benchmark indexes climbed in all 18 western- European markets, and all 19 industry groups in the Stoxx 600 advanced. Germany’s DAX rallied 2.9 percent and the U.K.’s FTSE 100 gained 2.1 percent. France’s CAC 40 jumped 3.1 percent. The ECB program “will enable us to address severe distortions in government bond markets which originate from, in particular, unfounded fears on the part of investors of the reversibility of the euro,” Draghi said at a press conference in Frankfurt. “Under appropriate conditions, we will have a fully effective backstop to avoid destructive scenarios with potentially severe challenges for price stability.”
Emerging Stocks Climb Most in Four Weeks on ECB Bond Plan (Bloomberg)
Emerging-market stocks rose the most in four weeks after European Central Bank President Mario Draghi said policy makers agreed to an unlimited bond-purchase program, easing concern the region’s debt crisis will curb exports from developing nations. The MSCI Emerging Markets Index advanced 1.2 percent to 950.45 in New York, the biggest gain since Aug. 6. Brazil’s Bovespa climbed 2.6 percent to a one-week high as oil companies Petroleo Brasileiro SA (PETR4) and OGX Petroleo & Gas Participacoes SA followed crude higher. Russia’s Micex Index (INDEXCF) jumped 2.4 percent and Mexico’s IPC (MEXBOL) index added 1 percent as Industrias CH SAB (ICHB), the country’s largest steelmaker, rose to an all-time high.
The ECB needs to be in a position to ensure the transmission of its interest rates in all euro-area countries, Draghi said after the bank held the benchmark at a record low of 0.75 percent. The central bank forecast a deeper economic contraction for 2012 than three months ago. Nations in the MSCI index send about 30 percent of their exports to the European Union, according to the World Trade Organization. “The markets generally believe the ECB stands ready to do whatever it takes,”Gavin Redknap, an emerging-markets strategist at Nikko Asset Management, said by phone from London. “While the bond buying is good news, the fact that they did not cut rates despite lower growth forecast is not so good.”
Korean Won Gains on Fitch Upgrade, ECB Plan; Bonds Fall (Bloomberg)
The won rose to a three-week high after Fitch Ratings upgraded South Korea and the European Central Bank stepped up efforts to tackle the euro region’s debt crisis. Government bonds fell as investors favored higher- yielding assets.
Fitch raised South Korea’s rating to AA-, one step above Japan and China, less than two weeks after a Moody’s Investors Service upgrade. ECB President Mario Draghi said yesterday unlimited debt purchases by the bank will help address “severe distortions” in sovereign bond markets that partly stem from unfounded fears about the euro. U.S. jobless claims fell last week and companies added more workers than forecast in August, reports showed yesterday. The Kospi (KOSPI) index rallied 1.9 percent.
“The ECB’s announcement was more or less expected in the market, but combined with good U.S. economic data and Fitch’s rating upgrade in Korea, sentiment toward risk assets improved,” said Ryoo Hyun Jung, chief currency dealer at Citibank Korea Inc. in Seoul.
The won strengthened 0.3 percent to 1.131.07 per dollar as of 10:21 a.m. in Seoul, according to data compiled by Bloomberg. It touched 1,129.03 earlier, the strongest since Aug. 14, and gained 0.3 percent this week. One-month implied volatility, a measure of exchange-rate swings used to price options, slid 75 basis points, or 0.75 percentage point today, to 6.83 percent.
Dollar, Yen Hold Drops Against Majors as ECB Plan Boosts Stocks (Bloomberg)
The dollar and the yen remained lower after dropping yesterday against most major peers as the European Central Bank’s announcement of a new bond-buying plan damped demand for haven assets and boosted equities. The dollar held declines against higher-yielding currencies before the U.S. government releases its monthly jobs report. The euro traded near a two-month high after ECB President Mario Draghi said policy makers agreed to the unlimited purchase of government debt to reduce interest rates for struggling nations and help prevent a break-up of the European currency bloc. “The markets turned risk-on after Draghi delivered what was expected,” said Marito Ueda, senior managing director in Tokyo at FX Prime Corp., a currency-margin company. “The dollar and yen are being sold.” The dollar was little changed at $1.2629 per euro as of 10:02 a.m. in Tokyo from $1.2631 yesterday, when it touched $1.2652, the weakest since July 2. It has dropped 0.4 percent this week.
The yen slid to 99.63 per euro from 99.60, poised for a 1.1 percent weekly decline. It yesterday touched 99.81, the weakest since July 5. The Japanese currency fetched 78.89 per dollar, compared to 78.86 yesterday and 78.39 on Aug. 31. The MSCI Asia Pacific Index (MXAP) of stocks gained 1.2 percent following a 1.9 percent jump in the MSCI World Index (MXWO) yesterday.
Aussie, N.Z. Dollars Hold Gains as Stocks Rise on ECB (Bloomberg)
The Australian and New Zealand dollars remained higher following gains yesterday as Asian stocks extended a global rally after the European Central Bank’s bond-buying plan spurred risk appetite. The so-called Aussie traded near the highest level in almost a week before the U.S. government releases its monthly jobs report amid speculation continued labor-market weakness will encourage the Federal Reserve to add stimulus. The South Pacific currencies held gains against most major peers after commodity prices yesterday climbed for the first day this week. “The Australian dollar is going to be well supported today,” said Andrew Salter, a strategist in Sydney at Australia & New Zealand Banking Group Ltd. “The decision by the ECB to engage in some form of asset-purchase program is going to underpin risk sentiment. That’s going to benefit the Australian dollar.”
The Aussie bought $1.0290 as of 10:13 a.m. in Sydney after climbing 0.9 percent to $1.0284 yesterday, when it touched $1.03, matching the strongest since Aug. 31. The currency traded at 81.17 yen from 81.10. The New Zealand dollar, known as the kiwi, fetched 80.11 U.S. cents following yesterday’s 0.9 percent advance to 80.15 cents. It was little changed at 63.20 yen. Both South Pacific currencies are poised for a 0.3 percent decline against the greenback this week. Australian government bonds dropped, pushing the yield on 10-year government debt to its highest level since Aug. 29. The rate advanced as much as 11 basis points to 3.20 percent.
Treasuries Set for Weekly Drop as Stocks Rally on ECB Bond Plan (Bloomberg)
Treasuries were set for the first weekly drop in three after European officials unveiled plans to buy bonds to curb the region’s sovereign-debt crisis, spurring a global stock rally and sapping demand for safer assets. Benchmark 10-year debt completed a three-day slide yesterday after European Central Bank President Mario Draghi said policy makers agreed to an unlimited bond-purchase program. Treasury losses were limited amid speculation a U.S. report today will show hiring wasn’t fast enough to lower the unemployment rate and reduce the probability that the Federal Reserve will expand monetary stimulus. “We expect a gain in Treasury yields,” said Yoshinori Shigemi, a strategist for non-yen debt at RBS Securities Japan Ltd. in Tokyo. “We see a higher chance that the risk-on environment will continue” after the ECB plan, he said.
The 10-year note yield was little changed at 1.68 percent at 10:01 a.m. in Tokyo. The 1.625 percent note due August 2022 traded at 99 17/32. The yield has risen 13 basis points since Aug. 31 after falling 26 basis points in the previous two weeks. The MSCI Asia Pacific Index of shares climbed 1.2 percent. The ECB’s bond-buying plan, called Outright Monetary Transactions, will focus on government notes with maturities of one to three years, Draghi said yesterday. The ECB will only intervene in the secondary market if a country has asked Europe’s bailout fund to buy its debt on the primary market, ensuring strict conditions are agreed to, he said. Labor Department data due today may show the U.S. added 130,000 jobs last month, trailing the 163,000 increase in July, economists in a Bloomberg News survey forecast. The jobless rate held steady at 8.3 percent, economists projected.
Jobless Claims in U.S. Fall as Companies Add Staff: Economy (Bloomberg)
Claims for unemployment benefits fell to the lowest level in a month and American companies added more workers than forecast, easing concern the labor market may be stagnating. Jobless claims decreased by 12,000 to 365,000 in the week ended Sept. 1, the Labor Department reported today in Washington. Private employers expanded payrolls by 201,000 in August, according to figures from Roseland, New Jersey-based ADP Employer Services, exceeding the 140,000 median gain forecast by economists in a Bloomberg survey. Another report showing U.S. services expanded at a faster pace boosted the outlook one day before the Labor Department releases data on a job market that Federal Reserve Chairman Ben S. Bernanke has said is cause for “grave concern.” Stocks rallied after the figures and as European Central Bank policy makers agreed to an unlimited bond-purchase program to ease the region’s debt crisis.
“We’re starting to see some stability in the labor market,” said Ward McCarthy, chief financial economist at Jefferies & Co. Inc. in New York, who correctly forecast the level of jobless claims. “The labor market is that it continues to move in the right direction, but probably not as fast as Fed officials would like. We’re going to get a better handle on that tomorrow.” The Standard & Poor’s 500 Index climbed 2 percent to a four-year high of 1,432.12 at the 4 p.m. close in New York. The yield on the benchmark 10-year Treasury note increased to 1.67 percent from 1.60 percent late yesterday.
Services in U.S. Expanded More Than Forecast in August (Bloomberg)
Service industries in the U.S. expanded in August at a faster pace than forecast, offering support to an economy that lost momentum in the first half of the year. The Institute for Supply Management’s non-manufacturing index climbed to a three-month high of 53.7 from 52.6 in July, the Tempe, Arizona-based group said today. Readings above 50 signal expansion, and economists projected 52.5 for August, according to the median estimate in a Bloomberg survey. A sustained pickup in service industries will help make up for three straight months of contraction in manufacturing and may create more employment opportunities as the jobless rate exceeds 8 percent. At the same time, FedEx Corp. (FDX) is among companies seeing waning demand as rising gas prices, cooling global economies and diminished business investment hold back U.S. growth.
“Services have held in there,” Stuart Hoffman, chief economist at PNC Financial Services Group in Pittsburgh, said before the report. “The service sector is actually doing better than manufacturing in terms of growth, which is a change from what’s been going on in the past few years.” Economists’ estimates in the Bloomberg survey ranged from 51 to 53.5. The gauge has averaged 53.3 since the recession ended in June 2009.
Harper Seeks More Gains From China in Exchange for Oil (Bloomberg)
Canadian Prime Minister Stephen Harper said his government will seek to correct trade imbalances with China as he manages a wave of takeover spending from the Asian country. Harper, speaking at the Bloomberg Canada-Asia Conference in Vancouver, said Canada needs to diversify trade to Asia because of sluggish growth in much of the rest of the world, adding that the relationship also needs to become reciprocal. “The Chinese are acutely aware, in my own experience, of the fact the trade and investment flows are disproportionately in their favor,” Harper said in an interview with Bloomberg Television’s Erik Schatzker. “They recognize that has to change,” he said, adding “we will also be seeking things from them.”
Harper’s ability to bolster economic relations with China, which he calls a national priority, is being tested by concern the Asian country may gain too much influence over Canada’s oil sands, the world’s third-largest pool of oil reserves. A poll by Sun News Network last week showed a majority of Canadians surveyed want him to reject a $15.1 billion takeover of Calgary- based oil company Nexen Inc. (NXY) by China’s Cnooc Ltd. Harper today said he’s aware Canadians are wary of Chinese investment and said it’s incumbent on China to show it can play by “the same rules” as Canadians.
China’s Goal of 10% Trade Growth Drifts Out of Reach (Bloomberg)
Chinese toy merchant Pan Junping says this is usually among his busiest times as customers in the U.S. and Europe load up on orders for Christmas. This year, he’s quieter than ever. “The situation is possibly worse than 2009, and confidence is zero,” said Pan, 39, who’s frozen salaries and expects a 30 percent decline in annual sales for his trading company in Yiwu city, in the eastern province of Zhejiang. “It’s not busy at all.” Europe’s debt crisis is diminishing China’s prospects for reaching a target of 10 percent trade growth this year and strengthening the case for investment stimulus, monetary easing and more tax relief for companies such as Pan’s. A report due Sept. 10 may show a 2.9 percent gain in exports in August from a year earlier, down from an average 18 percent growth over the past two years, based on the median estimate in a Bloomberg News survey.
The trade slowdown is weighing on companies such as Tianjin-based China Cosco Holdings Co. (1919), the country’s largest listed shipper, after the European Union this year slipped behind the U.S. as the nation’s biggest export market. “If you have some bad news, that growth is really bad, the government is likely to introduce some stimulus package,” said Helen Qiao, chief China economist with Morgan Stanley in Hong Kong. She forecasts 4.1 percent growth in overseas shipments in 2012, compared with 20.3 percent last year.
China Gets Worst Ranking in Global Poll Since 2010 (Bloomberg)
Global investors are losing faith in China, giving the country’s markets their worst rating in more than two years in the latest Bloomberg poll. About a quarter of those surveyed say they expect Chinese markets to be among the worst performers over the next year. That’s the highest negative reading that the country has received in the quarterly Bloomberg Global Poll since January 2010 and was second only to the 45 percent rating that the European Union received in the Sept. 4 survey. China “will suffer disproportionately from a global slowdown in growth,” said Benjamin Dunn, a poll participant and chief operating officer in Crested Butte, Colorado, for portfolio management company Alpha Theory, in an e-mail. It “will be unable to prevent a hard landing” of its economy.
The U.S. again came out on top in the poll of 847 investors, analysts and traders who are Bloomberg subscribers: 46 percent say its markets will be among those offering the best returns over the next year, the same as in the previous survey in May. Close to three-quarters expect the Federal Reserve to act next week to support the economy, either by extending its pledge of low interest rates, buying bonds, or by doing both. Commodities in general and gold in particular gained favor with investors in the poll. Eighteen percent of those surveyed expect commodities to offer the highest returns over the next year. That’s up from 13 percent in May and was second only to stocks, which won the backing of a third of investors. Gold came in third, with 16 percent, up from 11 percent in May.
China Approves Plan to Build New Roads to Boost Economy (Bloomberg)
China approved plans to build 2,018 kilometers (1,254 miles) of roads, its second major construction project announced this week, as the government boosts spending on infrastructure to help revive economic growth. The projects include highways in Zhejiang and Xinjiang provinces, according to statements on the National Development & Reform Commission’s website. The approvals were given during June-August period. The agency also cleared plans for nine sewage treatment, two waterway and five port and warehouse projects, without disclosing the required investments. The announcements came a day after the NDRC, the country’s top economic planner, backed plans for subway projects in 18 cities and after an increase in the rail-construction budget as the government tackles growth that has eased to the slowest pace in three years. The move will help accelerate infrastructure investment growth to more than 20 percent year-on-year from 15 percent, according to HSBC Holdings Plc.
“Beijing policy makers are stepping up efforts to speed infrastructure investment to hold up growth,” Qu Hongbin and Sun Junwei, economists at HSBC, said in a note yesterday. “We expect a fast filtering-through process to generate a modest growth recovery in the coming months.” The approvals on Sept. 5 for a total of 25 new subway and inter-city rail projects are worth more than 800 billion yuan ($126 billion), or 1.7 percent of 2011 gross domestic product, they said. The spending will run from the second half of the year to 2018.
China Price War Draining Jobs in Germany’s Solar Valley: Energy (Bloomberg)
When Thomas Behling returned to his home state of Saxony-Anhalt in 2006, he was drawn by a job in the solar industry and the chance to participate in Germany’s renewable energy boom. He was fired in July. Behling’s employer, Sovello GmbH, produced its last solar panel on Aug. 26, sending 1,000 workers home after attempts to find an investor to save the seven-year-old company failed. Next door, Q-Cells SE (QCE), once the world’s largest solar-cell maker, is being acquired by Hanwha Group of South Korea as soaring debt brought it to the brink of bankruptcy. At least 12 German solar companies filed for protection from creditors in the past year.
Their demise, fueled by price competition from China and a cut in German subsidies from April, has hobbled Saxony-Anhalt’s effort to turn a 350-hectare (1.4 square miles) business park near the town of Bitterfeld-Wolfen into Europe’s solar-power nucleus. Even as Chancellor Angela Merkel pins Germany’s exit from nuclear energy on power derived from the sun and wind, a global glut of solar panels is killing the fledgling firms. “I believed that I was working in an industry with a future,” Behling, a 31-year-old industrial mechanic, said in an interview. “That it’s over now is very sad.” The European Union yesterday threatened to impose tariffs on solar panels from China, echoing a similar move by the U.S., as it opened a probe into whether Chinese manufacturers are selling them below cost, a practice known as dumping. Tariffs however will come too late for Sovello and many German firms.
Brazil to Seek New Tax Cuts to Help Fuel Growth, Rousseff Says (Bloomberg)
Brazilian President Dilma Rousseff said she’ll seek new tax cuts while maintaining fiscal discipline in a bid to fuel faster growth in Latin America’s biggest economy. Brazil will push banks to lower lending rates and cut electricity rates for producers and households, she said in a national address today.
Brazil Signals Record-Low Interest Rates Are Here to Stay (Bloomberg)
Brazil’s central bank signaled it’s ready to keep interest rates at a record low, rejecting the view that a jump in food prices and faster economic growth will lead to an acceleration in inflation. Policy makers, in the minutes to their Aug. 28-29 meeting at which they cut interest rates for a ninth straight time, said that bad weather in the U.S. and Brazil is weighing on the price of food and beverages. All the same, the supply shock is less intense than one in 2010 and the country’s long-term price outlook remains favorable with inflation slowing toward the 4.5 percent target, the bank said.
While traders remain split on whether Brazil will reduce its benchmark rate a quarter point in October, they have trimmed bets central bank President Alexandre Tombini will be forced to increase borrowing costs early next year to keep inflation in check. The bank’s board voted unanimously last week to cut the Selic rate 50 basis points to a record 7.5 percent and has lowered borrowing costs 500 basis points over the past year, more than any other Group of 20 nation, to revive an economy that has been stagnant for the past year. “The name of the game is to stop cutting the Selic in the short term, but keeping it low in the future,” Andre Perfeito, chief economist at Gradual Investimentos, said in a phone interview from Sao Paulo. The swap rate on the contract maturing in January 2014, the most traded in Sao Paulo, fell four basis point to 7.78 percent at 9:55 a.m. local time. The real, which has declined 8.5 percent this year against the greenback, was little changed at 2.0392 per U.S. dollar.
Draghi Lured by Fractious EU Leaders to Build Bridge to Euro 2.0 (Bloomberg)
The European Union’s 19th crisis summit was winding down when European Central Bank President Mario Draghi made an unusual request. He wanted some alone time with EU President Herman Van Rompuy to thank him for charting the path toward a shock-proof euro zone. Only later did the significance of the blueprint sketched out at the June summit in Brussels emerge. The commitment to tighter bank supervision, budget coordination and a nebulous “political union” was instrumental in persuading Draghi that governments are putting the currency on a sounder footing, leading to yesterday’s ECB decision to buy bonds to help them get there. “We need two legs,” Draghi said in presenting the new tactics. “Governments have to undertake the policy reforms. There is no intervention by the central bank, by any central bank, that is actually effective without concurrent policy action by the governments.”
While it relaunched the crisis management after 2 1/2 years of trial-and-error and bickering between creditor and debtor governments, the ECB’s strategy bore traces of the compromises and half-measures that continue to gnaw at the currency union. The next moves are out of the bank’s control. They depend on decisions in places like Madrid and Rome. And the leaders of the 17 governments locked into the supposedly unbreakable euro don’t yet have a roadmap for remaking Economic and Monetary Union, only a pledge to come up with one.
Recession Indicator Unreliable With Fed Rates: Cutting Research (Bloomberg)
The bond market indicator that has predicted every U.S. recession since 1970 may have lost its forecasting prowess, thanks to the Federal Reserve. Two rounds of quantitative easing by the U.S. central bank mean the gap between the 10-year Treasury bond yield and the rate on the three-month bill “has been severely distorted and therefore can no longer be relied on to convey a truthful assessment of the risks of recession,” wrote Stephen Jen and Fatih Yilmaz, founders of London-based SLJ Macro Partners LLP, in an Aug. 29 report. The yield curve’s traditional and consistent reactions to Fed policy changes and investor expectations about inflation and the economy have made it a tool for prognosis in the past. For instance, an inverted yield curve, in which short-term securities yield more than those with longer maturities, is seen as a recession gauge because it reflects expectations for higher interest rates and slowing inflation.
What’s changed is the Fed’s ultra-easy monetary policy, which has brought interest rates close to zero. That has “significantly distorted the shape of the yield curve,” SLJ said. Other business cycle indicators also have “pretty serious shortcomings,” the authors said. That’s because they are not well equipped to capture the growing impact of the financial sector and its wealth effect, the U.S.’s reliance on services, supply-side shocks in the labor market and globalization. The SLJ report proposed an alternative approach, based on the idea that expansions have a “natural cycle” in which the chance of recession increases the longer growth runs. That suggests the risk of a downturn could be closer to 50 percent in coming quarters compared to the zero chance ascribed by the yield curve.
Wealthy Unmoved by U.K. Tax Increase as Luxury-Home Sales Surge (Bloomberg)
The British government’s plan to raise a tax on luxury-home purchases sparked a last-minute dash by real-estate brokers to wrap up deals before the deadline hit in March. They needn’t have bothered. Sales of homes valued at 2 million pounds ($3.2 million) more than doubled in May from a year earlier, according to the most recent data available from the Land Registry. After a 40 percent decline in April, sales rebounded as overseas investors took advantage of the U.K.’s status as a haven from economic and political turmoil. “Money is leaving the euro zone and being spent on a safe asset,” Matthew Pointon, an economist at researcher Capital Economics, said. “Safe-haven flows outweigh the increase in the stamp duty.” Luxury homes have held their value better than cheaper residential properties in the U.K. because of a scarcity of prime real estate for sale, particularly in London. That has led to record prices paid for homes in the city’s Mayfair, Kensington and Knightsbridge districts.
Chancellor of the Exchequer George Osborne’s annual budget targeted luxury-home purchases to help narrow Britain’s record deficit. He raised a transaction tax known as stamp duty on homes sold for more than 2 million pounds to 7 percent from 5 percent. The use of corporations set up in offshore tax havens such as the Cayman Islands to avoid the tax spawned a 15 percent levy on purchases of homes by companies.
Draghi to deliver bond plan at crunch ECB meeting (Reuters)
European Central Bank chief Mario Draghi faces the most decisive moment of his presidency on Thursday when he tries to heal divisions among policymakers and deliver on his promise to save the euro.
Hurricane Leslie Slows on Track East of Bermuda (Bloomberg)
Hurricane Leslie is moving at a crawl in the Atlantic south of Bermuda and probably won’t start strengthening until tomorrow on a path past the islands. The storm’s top winds have remained about 75 miles (121 kilometers) per hour since yesterday and it’s 430 miles south- southeast of Bermuda, moving north at 2 miles per hour, the U.S. National Hurricane Center said. “Leslie has barely moved since last night,” the center said in an advisory at 11 a.m. New York time. “No significant change in strength is expected today.” High wind shear has been tearing at Leslie and the storm has been pulling up colder ocean water, according to the center. That has been holding the system’s strength down. Eventually, Leslie, now a Category 1 hurricane on the Saffir-Simpson scale, is expected to develop top winds of 105 mph, which would bump it up a level to a Category 2, the center said. The storm’s current track would take it east of Bermuda this weekend and possibly into Newfoundland next week.
Newfoundland was hit hard in 2010 by Hurricane Igor, which followed a similar path. Winds of 105 mph were recorded, and 90 cities and towns were isolated after 9.4 inches of rain fell, washing out roads, according to a provincial report. The Fire and Emergency Services of Newfoundland and Labrador are monitoring Leslie’s track, according to a statement from the agency.
DTN Closing Grain Comments 09/06 14:37 (CME)
Wheat Surges Ahead Thursday
Wheat received a strong shot in the arm from another wave of Russian rumors. Corn followed along while soybeans were stuck in directionless trade, closing fractionally lower.
Pro Farmer: After the Bell Wheat Recap(CME)
Wheat futures posted strong gains at all three exchanges. Chicago wheat closed 22 1/4 to 26 1/4 cents higher in the September through May contracts, with far-deferred contracts advancing about half that much. Kansas City wheat was mostly 21 to 25 cents higher, although far-deferred contracts were around 9 cents higher. Minneapolis wheat finished 13 1/2 to 19 3/4 cents higher. Wheat futures were boosted by demand news today as Egypt bought 475,000 metric tons (MT) of Black Sea origin wheat -- 300,000 MT from Russia, 120,000 MT from Romania and 55,000 MT from Ukraine.
Wheat Market Recap Report(CME)
December Wheat finished up 24 at 891 3/4, 2 3/4 off the high and 24 1/4 up from the low. March Wheat closed up 23 1/4 at 903 3/4. This was 23 3/4 up from the low and 2 off the high. December Chicago wheat traded sharply higher into the close and extended gains against the corn market. Kansas City and Minneapolis wheat were higher as well. The midday surge in wheat futures kicked off after Egypt bought 475,000 tonnes of wheat from Russia, Romania, and Ukraine. The trade reacted bullishly to the news on thoughts that world demand is increasing and Black Sea stocks will continue to dwindle later this year which could force more export demand to the US. Following the results of the tender, Iraq announced a tender to buy 50,000 tonnes of wheat from any origin. It is also being reported that Russia could begin importing wheat from Kazakhstan later this year if domestic food prices continue to rise. The commodity complexes, as well as outside markets, saw widespread support today following this morning's ECB meeting. December Oats closed up 4 at 391. This was 3 3/4 up from the low and 3 1/2 off the high.
Pro Farmer: After the Bell Corn Recap(CME)
Corn futures closed 3 1/4 to 10 3/4 cents higher, which was in the upper end of today's range, but off session highs. Corn futures were supported by fresh demand news today as USDA reported daily export sales of 217,424 metric tons -- 184,912 MT for 2012-13 and 32,512 MT for 2013-14 -- to unknown destinations. While traders were curious if "unknown" was China, the key is that end-user buying surfaced following recent price pressure, signaling there's still solid demand under the market.
Corn Market Recap for 9/6/2012(CME)
December Corn finished up 7 3/4 at 798 1/2, 3 1/2 off the high and 10 1/2 up from the low. March Corn closed up 6 3/4 at 801 1/2. This was 9 1/2 up from the low and 3 3/4 off the high. December corn closed higher on the day on support from explosive wheat market. Corn began the day with a subdued tone as harvest picks up it's pace and on a steady to slightly weaker cash market in the Gulf of Mexico. Domestic basis rose in specific regions later this afternoon with an ethanol plant in Linden, IN raising bids 17 cents per bushel, citing tight local supplies. The USDA announced that private exporters sold 217,424 tonnes of US corn to an unknown destination this morning. The shipment periods for the sale included the 2012/13 and 2013/14 marketing years. Corn also saw support on thoughts that the USDA could reduce the average US corn yield and production in next week's report. Ethanol production for the week ending August 31 averaged 829,000 barrels per day. This is up 1.2% vs. last week and down 7.50% vs. last year. This crop year's cumulative corn used for ethanol production for this crop year is 4.96 billion bushels which falls just short of the 2011/12 USDA estimate. Commodity markets saw broad-based support following the ECB meeting this morning which turned the US dollar lower midsession and offered a positive tilt to commodity markets. November Rice finished down 0.295 at 14.625, 0.145 off the high and equal to the low.
Wheat Production in Australia Seen Missing Government Estimate (Bloomberg)
Wheat production in Australia, the world’s second-biggest shipper, may be less than a government forecast after dry weather curbed yield prospects just as drought from the U.S. to Russia threatens crops. Output may be 23.25 million metric tons in 2012-2013, according to the median estimate of six analysts and traders in a Bloomberg survey. That’s 3.5 percent less than the 24.1 million tons predicted by the Australian Bureau of Agricultural and Resource Economics and Sciences, and compares with a record 29.5 million tons a year earlier. The U.S. Department of Agriculture estimates the harvest at 26 million tons.
Wheat has climbed 35 percent this year, reaching a four- year high in July, as the worst U.S. drought since 1956 and dry conditions in Russia shrink global supplies. The world needs swift, coordinated action to avoid another food crisis in the face of rising prices, the heads of three United Nations agencies said Sept. 4. Surging grains and oilseeds prices drove the biggest monthly gain in food costs in July since 2009, according to the UN. “Colder and drier-than-ideal conditions in much of Western Australia and some parts of the east coast have really eroded the potential for the wheat crop,” said Graydon Chong, senior grains and oilseed analyst at Rabobank International. “The next two-to-four weeks will be crucial from a weather perspective.”
Abares is set to update its production forecast on Sept. 11 followed by the USDA on Sept. 12. Australian grain farmers begin harvesting from about November.
Wheat rose about one percent, with the market steadying after a four-session fall as it awaited the outcome of a tender by Egypt. (Reuters)
Corn ticked up after losing almost 2 percent on Wednesday, with operators already looking ahead to next week's monthly crop estimates from the U.S. Department of Agriculture for a clearer picture of the impact on supply and demand from the worst U.S. drought in 56 years. (Reuters)
Russia says G20 to hold urgent meeting on grain in Oct (Reuters)
Deputy Agriculture Minister Ilya Shestakov said on Thursday that the G20 countries will hold a rapid response meeting on the grain market next month, at which Russia will outline its view of the situation.
ICE cocoa futures touched a fresh 10-month high in early trading supported by concerns over possible damage to the West African crop. (Reuters)
Raw sugar bounced in a technical correction above a three-month low touched in the prior session. (Reuters)
Sugar vs. corn syrup: sweeteners at center of bitter food fight (Reuters)
A group of U.S. food companies that includes conglomerate Cargill Inc has sued a sugar industry trade group, claiming high fructose corn syrup is being unfairly maligned by promoters of "natural" sugar.
Indonesia to lift grain, sugar stocks to cap food prices (Reuters)
Indonesia's state procurement agency Bulog plans to lift rice stocks up to four-fold from current levels and boost sugar, soybean and corn stocks to defend against food inflation due to rising commodities prices, a junior government minister said.
Oil Drops From One-Week High on Speculation Crude Demand to Slow (Bloomberg)
Oil fell from the highest close in almost a week as investors speculated prices may have risen too far before a report forecast to show jobs growth slowed last month in the U.S., the world’s biggest crude consumer. Futures slid as much as 1 percent, declining for the first time in three days and heading for the first weekly drop in six weeks. U.S. employment probably rose by 130,000 in August after gaining 163,000 in July, according to a Bloomberg News survey before a Labor Department report today. West Texas Intermediate has technical resistance along its 200-day moving average, at $96.61 a barrel, according to data compiled by Bloomberg. “Oil has now arrived at a situation where prices are probably fairly well priced,” said Ric Spooner, a chief market analyst at CMC Markets in Sydney. “It doesn’t seem likely that we’re going to see a situation where we will see significant growth in oil demand in coming months.”
Crude for October delivery declined as much as 98 cents to $94.55 a barrel in electronic trading on the New York Mercantile Exchange and was at $94.72 at 11:24 a.m. Sydney time. The contract climbed 17 cents yesterday to $95.53, the highest close since Aug. 31. Front-month prices are down 1.8 percent this week and 4.2 percent this year. Brent oil for October settlement decreased 81 cents, or 0.7 percent, to $112.68 a barrel on the London-based ICE Futures Europe exchange. The European benchmark grade’s premium to West Texas Intermediate was at $17.96, unchanged from yesterday.
Saudi oil price rise to Asia reverses discount
-- Clyde Russell is a Reuters market analyst. The views expressed are his own. --
LAUNCESTON, Australia, Sept 6 (Reuters) - At first glance it may appear that Saudi Aramco has been a little mean to its Asian customers by raising its oil prices for them while cutting for refiners in Northwest Europe.
But an analysis of moves in official selling prices (OSP) and the underlying crude costs over the past three months shows that what's happened is the relative discount Asian refiners were receiving has been unwound.
OIL-Oil rises on expectations of new ECB bond programme
LONDON, Sept 6 (Reuters) - Oil futures rose above $114 per barrel, buoyed by expectations the European Central Bank will manage to ease its debt crisis with a new programme of bond purchases.
"Investors are pricing in (hopes for) the ECB meeting tonight," said Natalie Rampono, a commodity strategist at ANZ.
U.S. crude stocks fall sharply after hurricane-API
NEW YORK, Sept 5 (Reuters) - U.S. crude stocks fell sharply last week as Hurricane Isaac's passage through the Gulf of Mexico shut in production and closed ports, data from the industry's American Petroleum Institute showed on Wednesday. Crude inventories fell by 7.2 million barrels in the week to Aug. 31, compared with analysts' expectations for a drawdown of 5.3 million barrels.
The API-reported inventory drop was the largest since the week to July 27, when stocks fell by almost 12 million barrels. Traders attributed that earlier inventory drop in part to fog in the Houston Ship Channel, which at the time may have delayed imports.
Copper Trade Most Bullish Since October on Stimulus: Commodities (Bloomberg)
Copper traders are the most bullish in almost 11 months on mounting speculation central banks will do more to bolster growth, strengthening demand for metals. Twenty-one analysts surveyed by Bloomberg said they expect prices to gain next week and five were bearish. A further four were neutral, making the proportion of bulls the highest since Oct. 14. Hedge funds are betting on higher prices for the first time since May and stockpiles in warehouses monitored by the London Metal Exchange, the largest metals bourse, dropped to the lowest level in almost four years.
Commodities, which entered a bull market last month, may rise another 10 percent, Jeffrey Currie, the head of commodities research at Goldman Sachs Group Inc., said in an interview. The European Central Bank yesterday held interest rates at a record low and President Mario Draghi said policy makers agreed to an unlimited bond-purchase program. Federal Reserve Chairman Ben S. Bernanke pledged in an Aug. 31 speech to promote growth with “additional policy accommodation as needed.” “It’s really expectations of what the next round of initiatives will do for global growth,” said Carole Ferguson, an analyst at Fairfax IS in London. “It’s a good indicator of industrial activity. If there’s any recovery in demand, copper should go up quite a lot.”
Mitsui’s 200% Copper Mine Premium Signals More Codelco Deals (Bloomberg)
Mitsui & Co. (8031), Japan’s second-largest trading house, paid three times as much as Codelco for a stake in a Chilean copper asset last month as it seeks to build a foundation for future deals with the largest copper producer. A joint venture between Codelco and Tokyo-based Mitsui agreed to buy a 29.5 percent stake in Anglo American Sur SA, which owns the world’s fifth-largest copper mine, for $2.8 billion last month. Codelco’s 24.5 percent stake was priced at $73 million per 1 percent, compared with Mitsui’s at $220 million per 1 percent, according to Bloomberg calculations based on the terms of the deal. Mitsui, which has the most cash of the Japanese traders, is seeking to benefit as state-owned Codelco plans to spend $20 billion to almost double copper output, expand abroad and into other metals. Codelco has 132 million metric tons of copper resources valued at $1 trillion based on today’s prices.
“We’d like to be co-investor, to be jointly involved in the upstream” with Codelco, Daiki Sato, head of projects at Mitsui’s base metals division, said in an interview in Tokyo. Codelco has mining rights across South America and attractive lithium and molybdenum assets, he said. The move mirrors investments Mitsui made in BHP Billiton Ltd. (BHP)’s iron ore mines in the 1960s, which propelled it to become Japan’s biggest importer of the material. A 2003 purchase of shares in Vale SA (VALE3)’s holding company for $830 million the last fiscal year alone accounted for 75 billion yen ($958 million) of profit. The stake, equivalent to 5 percent of Vale, the world’s largest iron ore miner, is worth about $4.25 billion today.
Platinum Buying Expands as Mining Strikes Escalate: Commodities (Bloomberg)
Investors are buying platinum at the fastest pace since 2010 after disruptions at South African mines caused the biggest loss of supply in at least seven years. Strikes and pit closures meant mining companies extracted 380,000 ounces less than they could have this year, equal to about 6 percent of global output, Deutsche Bank AG estimates. Metal purchases through exchange-traded products were the most in 20 months in August, data compiled by Bloomberg show. Prices will average $1,625 an ounce in the fourth quarter, the highest in more than a year, according to the median of 12 analyst estimates compiled by Bloomberg.
The lost production is diminishing a glut that drove prices to within 0.4 percentage point of a bear market in July and below the cost of extracting the metal. The rebound accelerated after police killed 34 strikers at Lonmin Plc (LMI)’s Marikana complex last month. It was the worst mine violence since the end of apartheid in 1994 in South Africa, which accounts for about 75 percent of global output. Hedge funds are now their most bullish since March, U.S. government data show. “Supplies are going to be challenged,” said Nic Johnson, who helps manage $30 billion of commodity assets at Pacific Investment Management Co. in Newport Beach, California. Platinum “moved very close to the marginal cost of production which should put an upward pressure on prices. Any type of outages in South Africa will make it more attractive.”
Palm-Oil Exports From Indonesia May Climb for Third Month (Bloomberg)
Palm-oil exports from Indonesia, the largest producer, will probably increase for a third month in September as rising output and a lower tax boost purchases of the commodity used in everything from candy to biofuel. Shipments may advance to 1.6 million metric tons this month after gaining an estimated 1.4 percent to 1.4 million tons in August from July, according to the median estimates of five plantation executives in a Bloomberg News survey. While output may have dropped to 1.9 million tons last month from an estimated 2 million tons in July, it will rise to 2.1 million in September, four of the respondents said. The executives didn’t provide forecasts for inventories.
Palm oil in Malaysia, the benchmark price in the second- largest producer, has lost 7.2 percent this year even as soybeans in Chicago rallied to an all-time high on damage from a drought in the U.S. Stockpiles in Indonesia may total 4 million tons, twice as much typically estimated, according to Godrej International Ltd., which forecast a rise in Malaysian reserves to a record. That may cut prices and hurt profits at companies such as Golden Agri-Resources Ltd. (GGR), the second-biggest planter. “September exports will gain because of lower duty,” said Joko Supriyono, secretary-general of the Indonesian Palm Oil Association. “Output will pick up as activities resume after the Eid al-Fitr holidays in August,” said Supriyono, who’s also a director at PT Astra Agro Lestari. (AALI) The association, which doesn’t issue stockpile and production figures, will release export data for August in the last week of this month.
Palm-oil futures closed 1.4 percent lower at 2,948 ringgit ($946) a ton on the Malaysia Derivatives Exchange yesterday. Soybeans, which can be crushed to produce a rival oil, reached a record $16.89 a bushel on the Chicago Board of Trade on Sept. 4. Soybean oil was $324.21 a ton more costly than palm, the biggest premium since 2008, data tracked by Bloomberg showed. Indonesia cut its tax on exports to 13.5 percent this month, the lowest rate this year, from 15 percent in August, Deddy Saleh, director general of foreign trade at the trade ministry, said Aug. 29. The base price was lowered to $918 a ton from $950. The country’s exports rose 21 percent to 1.38 million tons in July, the highest level since April, the palm oil association said Aug. 28. That compared with the median estimate of 1.4 million tons in a Bloomberg survey on July 31.
Stockpiles in Malaysia probably climbed 7 percent to 2.14 million tons in August, the highest in 11 months, according to a Bloomberg survey published Sept. 5. Output rose 0.5 percent to 1.7 million tons and exports climbed 9.5 percent to 1.42 million tons, the survey of two analysts and three plantation companies showed. The Palm Oil Board releases the data on Sept. 10. Gains in prices will be curbed because of the reserves, slower economic growth and rising output, Dorab Mistry, a director at Godrej International, told a conference in Singapore yesterday. The tropical oil may trade between 2,900 ringgit and 3,300 ringgit a ton this month and next, he said.
Pro Farmer: After the Bell Soybean Recap (CME)
Soybean futures ventured into positive territory at times today, but bears had control most of the session. Futures ended high-range with fractional to 3 1/2-cent losses in most contracts. Soymeal ended mostly slightly higher while soyoil closed moderately lower. A lack of fresh fundamental news led to additional profit-taking in the soybean market today. Traders expect harvest will soon weigh on the bean market, regardless of the pitiful state of the crop.
Soybean Complex Market Recap(CME)
November Soybeans finished down 1/2 at 1747, 6 3/4 off the high and 21 1/2 up from the low. January Soybeans closed down 1/2 at 1745 3/4. This was 21 1/2 up from the low and 5 1/2 off the high. December Soymeal closed up 3.1 at 528.1. This was 8.6 up from the low and 1.7 off the high. December Soybean Oil finished down 0.59 at 57.38, 0.78 off the high and 0.24 up from the low.
November soybeans struggled to find support throughout the day and settled slightly lower into the close. Soybeans found marginal support midday after the US Dollar turned lower and wheat surged to new session highs. However, a better than expected private estimate for the 2012/13 soybean yield and production triggered profit taking last night, and the pressure leaked over to today's session. Basis remains weak in domestic markets and steady to weaker in the Gulf of Mexico. Some traders are expecting farmers to sell new crop bushels right away due to the historically high futures levels. Underlying support continues to come from thoughts that current price levels have not rationed demand and on the assumption that while soybean plants look good from the road, recent crop tours have suggested that pod counts are very low.
U.S. soy at 1-week low on harvest pressure; wheat firms (Reuters)
Chicago soybeans lost more ground on Thursday, sliding to a one-week low as the start of the U.S. harvest weighed on prices amid reports of rains improving yields of the late planted crop.
U.S. soybean futures eased further from record highs as harvesting got underway amid hopes rain may salvage some drought-hit soy crops in the United States. (Reuters)
Malaysian crude palm oil futures fell to a 3-week low as traders booked profits after U.S. soybeans dropped from a record high and a leading industry analyst warned of a looming supply glut of the tropical oil. (Reuters)
Posted by MW Chong at 10:43 AM