Tuesday, October 9, 2012
Bollinger band reading : pullback correction downside biased.
MACD Histogram : recovering, seller closing position.
Support : 2400, 2350, 2300, 2250 level.
Resistance : 2450, 2490, 2520, 2550 level.
FCPO closed recorded gains with decreasing volume transacted. Soy oil currently registering more than 1% gain after overnight closed lower while crude oil price currently trading higher.
Price traded higher as traders eye possible lower exports tax change, news on Malaysia and Indonesia will form a joint body to support palm oil price, reducing stocks and controlling supplies while awaits tomorrow official September export, output and stocks data plus 2 cargo surveyor exports figures.
Chart reading adjusted to calling a pullback correction downside biased market development.
When to buy : buy at support or weakness with quick cut loss and profit target.
When to sell : sell at resistant or strength with quick cut loss and profit target.
Posted by MW Chong at 6:12 PM
FKLI closed : 1660.5 changed : -3 points, volume : higher.
Bollinger band reading : pullback correction upside biased.
MACD Histogram : weakening, buyer taking profit.
Support : 1660, 1657, 1651, 1645 level.
Resistance : 1670, 1680, 1690, 1700 level.
FKLI closed recorded small loss with better volume participation doing about 3 points discount compare to cash market that closed little higher. Overnight U.S. market closed little lower and today Asia markets ended mixed while European markets currently trading little lower.
World markets traded mostly lower except China and Hong Kong as IMF cuts global growth outlook, continue concern over Europe debt crisis development as EU finance ministers meet, investors expecting lower U.S. corporate earnings and hope on further stimulus measures from China.
Daily daily chart wise, FKLI is still having pullback correction within an upside biased market development.
When to buy : buy at support or weakness with quick cut loss and profit target.
When to sell : sell at resistance or strength with quick cut loss and profit target.
Posted by MW Chong at 5:33 PM
STOCKS: Asian shares rose but gains were moderated by concerns over global growth prospects, especially in the world's second-biggest economy China, and expected weak U.S. corporate earnings. European stock index futures pointed to a higher open, with shares set to rebound from the previous session's sell-off on mounting expectations of further stimulus measures from China. U.S. stocks slipped in light trading on Monday, pulling back from recent five-year highs ahead of an earnings season expected to be weak. (Reuters)
IMF warns global economic slowdown deepens, prods U.S., Europe (Reuters)
The IMF said the global economic slowdown is worsening as it cut its growth forecasts for the second time since April and warned U.S. and European policymakers that failure to fix their economic ills would prolong the slump.
FOREX: The euro was on the back foot as uncertainty about Spain persisted after euro zone ministers said the country did not need a bailout yet, dashing investors' hopes they might inch closer to a resolution of the debt problems of the region's fourth largest economy. (Reuters)
FOREX-Euro under pressure on Spain bailout uncertainty
TOKYO, Oct 9 (Reuters) - The euro was on the back foot on Tuesday as uncertainty about Spain persisted after euro zone ministers said the country did not need a bailout yet, dashing investors' hopes they might inch closer to a resolution of the country's debt problems.
Caution on company earnings also kept risk assets, including the euro, in check, as investors weighed the impact of the global slowdown on corporate earnings due out this week.
Commodity ETP assets hit record $207 bln in Q3 (Reuters)
Assets in exchange-traded products (ETPs) in the commodity sector reached a record of $207 billion in the third quarter, driven by gold products as central banks launched new stimulus programmes, ETF Securities said on Monday.
GRAINS: U.S. corn rose for the first time in three sessions as the market readied for a U.S. Department of Agriculture report this week that is expected to show further cuts in yield projections, reducing harvest pressure that had squeezed prices. (Reuters)
Ideal growing conditions mark start of Ivory Coast cocoa harvest (Reuters)
Sunny skies and abundant rainfall across most of Ivory Coast's main cocoa regions accompanied the start last week of the 2012/13 harvesting season in the world's top grower, farmers and analysts said on Monday.
California gasoline prices set to plunge as spike ends (Reuters)
The unprecedented price spike that added more than 50 cents a gallon to California pump prices last week ended as quickly as it began, market analysts said, and consumers should see prices fall dramatically in the coming week.
OIL: Brent crude futures rose towards $113 a barrel after two days of losses, with supply fears due to escalating tensions in the Middle East prevailing over a sluggish outlook for global demand. (Reuters)
BHP to cut iron ore jobs as mining slowdown bites (Reuters)
Top global miner BHP Billiton said it plans to shed an undisclosed number of jobs in iron ore, its most profitable business, as it battles weaker demand and higher costs, adding to mining job losses in Australia.
BASE METALS: London copper bounced off one-week lows, boosted by expectations that top metals consumer China could roll out more pro-growth policies, ahead of a key leadership congress next month, to stabilise its economy. (Reuters)
PRECIOUS METALS: Gold inched up after two days of decline, but persistent worries about the euro zone debt crisis and global growth could weigh on bullion, as these concerns keep the dollar strong. (Reuters)
METALS-London copper rises from one-week low, China equities boost
SHANGHAI, Oct 9 (Reuters) - London copper bounced off one-week lows, boosted by expectations that top metals consumer China could roll out more pro-growth policies, ahead of a key leadership congress next month, to stabilise its economy.
Still, copper prices are likely to stay in a tight range ahead of a slew of key economic data releases from China this week, while nagging euro zone debt woes and a gloomy report from the OECD on the world's major economies is set to cap gains.
PRECIOUS-Gold inches up after two-day slide; growth worries weigh
SINGAPORE, Oct 9 (Reuters) - Gold inched up after two days of decline, but persistent worries about the euro zone debt crisis and global growth could weigh on bullion, as these concerns keep the dollar strong.
Speculative interest in gold remained strong, as stimulus measures launched by key central banks in September drive investors to gold, a hedge against inflation and currency debasement caused by looser monetary policy.
Posted by MW Chong at 4:04 PM
VEGOILS-Palm oil gains on possible Malaysia tax change, stocks may weigh
Tue Oct 9, 2012 1:30am EDT
* Palm oil to edge up to 2,503 ringgit -technicals
* Felda eyes Philippines after peace deal
* Coming Up: Malaysia Sept stocks, output on Wednesday
(Updates prices, adds details)
By Chew Yee Kiat
SINGAPORE, Oct 9 (Reuters) - Malaysian palm oil futures
edged up on Tuesday, supported by a possible export tax change
and traders taking positions ahead of key industry data due this
The market made some headway after a Malaysian government
minister said on Monday the country will discuss possible
changes to its crude palm oil export tax regime on Friday.
"We believe the current crude palm oil (CPO) price is still
unjustifiably low. we expect prices to rebound further by
year-end, as post high production, we expect CPO price to climb
higher," said Hong Leong Investment Bank's Chye Wen Fei in a
But stocks could still weigh on the market for now. The
Malaysian Palm Oil Board is set to announce record stocks in
September on Wednesday.
"The upcoming Malaysian Palm Oil Board (MPOB) inventory
level should see it reaching an all-time high of 2.43 million
tonnes, capping any strong price upside potentials," Kenanga
Investment Bank analyst Alan Lim said in a note.
By the midday break, the benchmark December contract
on the Bursa Malaysia Derivatives Exchange jumped 2.2
percent to 2,419 ringgit ($789) per tonne.
Total traded volumes stood at 10,383 lots of 25 tonnes each,
slightly lower than the usual 12,500 lots.
Palm oil may edge up to 2,503 ringgit per tonne, said
Reuters market analyst Wang Tao based on a wave analysis.
Palm oil futures plunged to their near 3-year lows last week
on concerns over rising stocks and slowing demand, but analysts
expeced prices to recover by year-end.
Malaysia's Felda Global Ventures will develop oil
palms in the southern Philippines after Manila agreed on a
historic peace deal with Muslim rebels that could open up tracts
of farm land, chief executive Sabri Ahmad said.
In a bullish sign for palm oil, Brent crude futures rose on
Tuesday after two days of losses, with supply fears due to
escalating tensions in the Middle East prevailing over a
sluggish outlook for global demand.
In other vegetable oil markets, U.S. soyoil for December
delivery gained 1.2 percent in Asian trade.
The most active January 2013 soybean oil contract
on the Dalian Commodity Exchange edged up 0.9 percent by the
midday break, recovering from previous day's 4-month low.
Posted by MW Chong at 2:36 PM
GLOBAL MARKETS-Asian shares rise, growth worries cap
TOKYO, Oct 9 (Reuters) - Asian shares rose but were capped by concerns over global growth prospects, especially in the world's second-biggest economy China, and expected weak U.S. corporate earnings.
"Asian equities markets are feeling the positive effects from the recent global easing, prompting investors to buy the region's stocks which have remained undervalued," said Hirokazu Yuihama, a senior strategist at Daiwa Securities.
OIL-Oil dips on growth concerns; Middle East fears support
Oil prices eased on Monday in choppy trading on concerns that slower economic growth in China and the debt crisis in Europe will curb demand for petroleum, while the potential for Middle East turmoil to disrupt supplies limited losses.
"The situation between Turkey and Syria and some German export data, that was unexpectedly supportive, helped pull prices off lows hit because of concerns about China's slowing and Europe's debt crisis," said Phil Flynn, analyst at Price Futures Group in Chicago.
NATURAL GAS-US natural gas futures end slightly up on early cold
NEW YORK, Oct 8 (Reuters) - U.S. natural gas futures ended higher on Monday, backed by forecasts for mostly chilly U.S. weather this week that should stir more heating demand despite concerns about record high supplies and an outlook for milder mid-month forecasts.
"We ended up a little on the day because there's some cold weather around this week that is impacting demand, but expectations for above-average temperatures (in the extended forecasts) were weighing on the market," said Eric Bickel, analyst at Summit Energy in Kentucky.
EURO COAL-Swaps rally on strike fears, boosting physical
LONDON, Oct 8 (Reuters) - Prompt physical coal prices rose slightly by 25-75 U.S. cents a tonne on Monday, in line with stronger coal swaps values that were supported by concerns about possible strike action in South Africa.
"The possibility of the strikes spreading has been mentioned in some broker reports, it's a factor in the swaps market rather than physical," one European trader said.
Posted by MW Chong at 11:31 AM
Malaysia: 2012 growth forecast raised
The World Bank has raised its growth outlook for the Malaysian economy from 4.6% to 4.8% in 2012. However, it lowered the growth outlook for 2013 from 5.1% to 4.6%. The revised outlook follows the Asian Development Bank which has also changed its Malaysian outlook to 4.6% for 2012. In April, the World Bank projected Malaysia was likely to grow at 4.6% in 2012 and, assuming global recovery continues, 5.1% in 2013. In its latest East Asia and Pacific Economic Data Monitor which was released in Singapore yesterday, it said economic growth in the East Asia and Pacific region may slow down to 7.2% this year before recovering to 7.6% in 2013. The new report says that weak exports and lower investment growth will cut down China's gross domestic product (GDP) growth from 9.2% in 2011 to 7.7% this year. (Bloomberg)
Global: IMF sees ‘alarmingly high’ risk of deeper global growth slump
The International Monetary Fund (IMF) cut its global growth forecasts as the euro area‟s debt crisis intensifies and warned of even slower expansion unless officials in the U.S. and Europe address threats to their economies. The world economy will grow 3.3% this year, the slowest since the 2009 recession, and 3.6% next year, the IMF said yesterday, compared with July‟s predictions of 3.5% in 2012 and 3.9% in 2013. The Washington-based lender now sees “alarmingly high” risks of a steeper slowdown, with a one-in-six chance of growth slipping below 2%. (Bloomberg)
India: Growth to drop to decade low amid high inflation, IMF says
Indian growth may weaken to a decade-low this year after investment stalled, the International Monetary Fund said, as it called for interest rates to remain unchanged until the nation‟s high inflation rate eases. Gross domestic product will rise 4.9% in 2012, less than a July forecast of 6.1%, the Washington-based lender said in its World Economic Outlook report yesterday. The expansion will accelerate to 6% next year, it said, helped by improving overseas markets and a boost to confidence from a recent government policy revamp. (Bloomberg)
Europe: Starts USD648bn aid fund, rules out immediate use
European governments set up a full- time EUR500bn (USD648bn) fund to aid debt-swamped countries and, not for the first time in the three-year crisis, expressed confidence that the extra financial muscle won‟t be needed anytime soon. Finance ministers from the 17 euro countries declared the European Stability Mechanism operational, while saying that Spain, its biggest potential near-term customer, isn‟t on the verge of tapping it. Decisions were also put off on Greece‟s next aid payment and on an assistance program for Cyprus. (Bloomberg)
UK: House price index rises to six-month high on credit plan
A UK house-price index rose to its highest in six months in September as measures to boost credit prompted real-estate agents to become less pessimistic about the outlook, the Royal Institution of Chartered Surveyors said. The gauge rose to -15 from -18 in August, London- based RICS said in an e-mailed report yesterday, citing a monthly poll of property surveyors. A result below zero means more saw values drop than increase last month. A measure of price expectations also climbed to its highest since March. The Bank of England started its Funding for Lending plan in August to boost credit by giving banks access to cheaper finance. Still, Britain‟s property market remains under pressure as the economy struggles to recover from a recession and the euro-area debt crisis undermines consumer confidence. (Bloomberg)
US: Business hiring calms concerns about US fiscal cliff
Business hiring is holding up, allaying concerns about a U.S. economic downdraft in the face of a looming fiscal cliff. Companies added an average 121,000 workers a month in the third quarter, up from 88,000 in the second quarter, according to Labor Department figures released on 5 Oct. Total payrolls, including government, increased an average of 146,000 a month, compared with 67,000 in the prior period. (Bloomberg)
Posted by MW Chong at 9:45 AM
Mudajaya to bid for Pengerang power plant pre-Q
Mudajaya Group will submit its bid for the pre-qualification (pre-Q) call by national oil company Petroliam Nasional (Petronas) for the latter‟s power plant at its Rapid project in Pengerang, Johor. Group managing director and CEO Anto Joseph told the press that it would tie up with another "one or two" foreign partners for the contract. "The submission for the pre-Q will close by 24 or 25 Oct, with another four to five parties expected. This could open up recurring income opportunities on top of the potential civil works worth estimated RM800m to RM1bn, going by the values of the group's existing power plan civil work jobs." he said. (Financial Daily)
Semperit to buy out Latexx
Austria-based rubber and plastics products maker Semperit AG Holding wants to buy out Latexx Partners at RM2.30 per share, in a deal that will propel the former into the world's second largest glove manufacturer. The offer price is at a 28.5% premium to Latexx's last traded price of RM1.79 before trading was suspended yesterday. Semperit is also offering to acquire all warrants at RM1.77 a unit, which were last transacted at RM1.30. Semperit CEO Thomas Fahnemann said it had already secured a 47.3% stake in Latexx from substantial shareholders, and is optimistic that Semperit will get over 50% acceptances. (Financial Daily)
BIMB gets BNM nod for talks with Dubai Financial Group
BIMB Holdings has received Bank Negara Malaysia's (BNM) consent to start negotiations with Dubai Financial Group LLC (DFG) and Lembaga Tabung Haji over the proposed acquisition of DFG's stake in Bank Islam Malaysia. BIMB said on Monday it had received a letter from BNM that it "has no objection in principle" for the negotiations which "are to be completed on or before March 31, 2013". According to Bloomberg data, Lembaga Tabung Haji is the largest shareholder of BIMB with a 51.8% stake or 552.6m shares while the Employees Provident Fund owns 9.5% or 101.7m. (StarBiz)
Hua Yang plans mixed development with GDV of RM1.52bn
Hua Yang is acquiring 29.20 acres of land in Puchong, Selangor from Mentaru Hari Sdn Bhd for RM158m and plans to undertake mixed development with an expected gross development value of RM1.52bn. It said on Monday it had entered into a conditional sale and purchase agreement with Mentari Hari to acquire five vacant plots of leasehold land in the Petaling district. The lease expires in December 2110. Hua Yang said the group's strategy is to acquire and continue to expand its current land bank which is about 766 acres and are in the Klang Valley, Perak, Seremban and Johor. (StarBiz)
PNB sells 5m Bonia shares at RM2.59 per unit
Permodalan Nasional (PNB) has sold 5m shares in retailer Bonia Corp for RM2.59 per share in the open market, according to an exchange filing. PNB holds some 21% stake in Bonia, which has received an unconditional takeover offer of RM2.04 per share from major shareholders of Freeway Team SB, Chiang Sang Sew and Chiang Fong Yee. (Malaysian Reserve)
1MDB tipped to clinch Prai power plant project
Malaysia‟s Energy Commission (EC) shortlisted several companies for the tender process to build the power plant, expected to be ready for commercial operations by March 2016. Among those shortlisted are Pendekar Power SB, a unit of Powertek (which is being taken over by 1MDB), Sime Darby, Tenaga Nasional (TNB) and Mastika Lagenda SB (also being taken over by 1MDB). The others are 1Malaysia Development-Hyundai Engineering & Construction, YTL Power International-Marubeni Corp, and the MMC Corp-Mitsubishi Corp venture. 1MDB is likely to win the Prai power plant project, having submitted the lowest bid. (BT)
Maybank raises RM3.66bn via private placement
Malayan Banking (Maybank) said it raised RM3.66bn through a private placement of new shares, the country‟s largest ever, to support its growth in the region, prompting speculation that it may be keen to bid for a stake in Thailand‟s Bank of Ayudhya (BAY). BAY, the fifth largest lender there, is a good vehicle for either Maybank or rival CIMB Group to expand their exposure to Thailand, given the former‟s high net interest margin and niche in consumer loans. Bloomberg reported that CIMB and Oversea-Chinese Banking Corp were interested in GE‟s stake and had inked non-disclosure agreements (NDAs) to enable them to examine BAY‟s accounts. (BT)
Ingress lands RM51.6m Proton deal
Ingress Corp has clinched a RM51.6m contract from Perusahaan Otomobil Nasional SB (Proton) to supply heatshield mufflers for a new model through its unit, Ingress Engineering Sdn Bhd (IESB). The project is forecast to generate a total revenue of RM3.16m while the total investment is expected to cost RM250,000, it told Bursa Malaysia yesterday. The company, through its unit in Indonesia, also landed a deal for the supply of brackets for a new model by PT Asahimas Flat Glass Tbk. (BT)
Muhibbah received a notice from the International Court of Arbitration (ICC) in respect of an alleged claim by UEM Group amounting to RM26.5m. This is in relation to the Salwa Road construction project in Qatar. The project, in which Muhibbah was the subcontractor to UEM, was completed several years ago. Muhibbah is disputing and challenging the claim. The group is currently taking legal advise about the matter. (BMSB)
Although it had been earlier speculated that Maybank was gunning for Bank of Ayudhya, reports are now saying that CIMB Group is also considering the latter. Singapore's OCBC is also looking to take up GE's 25% equity holdings in Thailand's fifth largest lender at a price tag of some US$1.6bn. A Bloomberg report said that both CIMB and OCBC had signed non-disclosure agreements that allowed them to examine in closer detail the accounts of Bank of Ayudhya. (Star Biz)
Maybank's fund raising private placement exercise, which hit a record RM3.66bn has been taken up largely by Permodalan Nasional Berhad and the Employees Provident Fund. Local funds had taken up about 70% of the placement shares, with the balance 30% or so going to foreign parties such as pension funds. (Star Biz)
Syabas' lawsuit claiming RM1.1bn in compensation from the Selangor government over a water tariff dispute will go on trial at the KL High Court on Oct 30. It will be based on the initial formula of RM1.89 per cu m sought by the plaintiff. Syabas claims that based on the concession agreement dated 15 DeC 2004, signed by the Federal government, Selangor government and the company, it was given a 30-year concession to buy treated water from water treatment operators and supply the water to the distribution areas. In 2008 Syabas sent an application to the Selangor government to raise water tariff from RM1.39 per cu m to RM1.89 per cu m. Syabas claimed that the Selangor government failed to inform the company whether it has agreed to the increase. (Financial Daily)
The Securities Commission Malaysia (SC) has issued the Guidelines for Registered Persons which provides for two new classes of registered persons, namely Trading Representative and Introducing Representative.The introduction of these two new categories of registered persons will widen the opportunities for fresh talent to join the stockbroking industry and ensure sustainable growth of the industry, the SC said in a statement released yesterday. The guidelines, it said, will strengthen the role of dealers and dealers' representatives by facilitating provision of specialised services, allowing focus on client servicing and enabling access to a wider client base.The move is set to increase the productivity of over 6,000 licensed representatives and provide new job opportunities in the Malaysian capital market for thousands of young Malaysian. CEO of CIMB Investment Bank Bhd, Datuk Charon Wardini Mokhzani, lauded the move. "This is positive for the industry. It eases the entry of new talent and grows the industry talent pool in the long run," Charon said. (BT)
Felda Global Ventures (FGV) is the first foreign investor to show interest in the southern Philippines after Manila agreed on a historic peace deal with Muslim rebels, potentially opening up tracts of farm land. Conflict-wracked Mindanao has the most suitable land in the Philippines for oil palms, FGV chief executive officer Sabri Ahmad said. "We will go there for oil palms," Sabri said. "There is ample area for oil palms to meet strong local demand," he added. While Sabri did not give an estimate for how many hectares FGV was looking to develop, he said plantation companies would need to invest in at least 10,000ha to gain economies of scale. (Reuters)
Tenaga Nasional Bhd is said to have won the Energy Commission's 1.0-1.4GW Prai (Penang) combined cycle gas turbine power plant project. An announcement by the regulator will be made today. An executive close to Tenaga has confirmed the news. Earlier in July the Edge Financial Daily reported that Tenaga and a consortium comprising Pendekar Power Sdn Bhd and Mitsui & Co. Ltd. had put in the lowest bids for the project. (Financial Daily)
Celcom and the Royal Malaysian Police (PDRM) have agreed to share their telecommunications sites nationwide, as a move to save operating and capital expenditures. The sharing will help Celcom save some RM3m in operating expenditure annually, while the initial sharing of 200 sites will help save RM10m in capital expenditure. At the initial stage, the sharing will involve 200 sites, but this may be expanded to 1,600 sites in the future. This means Celcom will be allowed to build its base stations at selected PDRM sites, while PDRM will also have access to identified Celcom sites. "This is the beginning of more collaborations to come," said Celcom CEO Datuk Seri Shazalli Ramly. Among other areas that Celcom and PDRM can collaborate include customised services such as closed-circuit television surveillance, broadband Internet, vehicle-mounted police cameras, fleet and asset tracking management, and location-based services. It also introduced special packages for the police force - a new dedicated Celcom First voice plan for all members of the PDRM. (BT)
Sunway REIT is likely to see an asset injection today from the medical or education properties owned by its sponsor Sunway Bhd. Sunway REIT Management will hold a press conference this morning with its CEO Datuk Jeffrey Ng Tiong Lip. CFO Wai Sow Fun had in August named Sunway University, Monash University Sunway, Sunway Giza and Sunway Medical Centre as candidates to be added into Sunway REIT's portfolio of 11 properties. (Star Biz)
AirAsia remains coy about a move to KLIA2, the new LCC terminal due to be completed in seven months. AirAsia Malaysia chief executive Aireen Omar said the decision will be based on whether the new airport is safe and functional and can facilitate the carrier's low-cost operation. However, there are other ways that AirAsia can manage itself should the new airport prove unsuitable for its low-cost model, she said. Ms Aireen said the carrier has hubs in other Asean cities but declined to elaborate on the possibility of AirAsia relocating its Malaysia operations to one of its regional hubs. (BT)
AirAsia: AirAsia X suspend flights to Teheran
Foreign airlines, including Malaysia's AirAsia X and Britain's BMI, are ceasing services to Iran amid its mounting economic problems spurred on by Western sanctions. AirAsia X announced on Monday the current four times weekly flights between Kuala Lumpur and Teheran will be suspended with the last flight on October 14. The long-haul arm of budget carrier AirAsia said the suspension of its services to Tehran Imam Khomeini Airport was due to challenging economic and business conditions including the volatility of the Iranian currency. The statement did not say when services would be resumed. (Business Times)
Sentoria Group: Eyes higher revenue from leisure, hospitality segment
Sentoria Group Bhd is eyeing higher revenue from the leisure and hospitality segment, with the commencement of the RM80.4m 868-room Arabian Bay Resort. Arabian Bay Resort, coupled with the existing 998-room Caribbean Bay Resort, brings Bukit Gambang Resort City's room inventory to 1,866, one of the largest in Kuantan. The revenue from Bukit Gambang Resort City constituted RM44.3m or about 33% of the total group revenue for the 9 months ended June 30. This segment contributed RM48.4m or 30% of the group revenue in FY11. (Bernama)
Posted by MW Chong at 9:44 AM
Asia FX By Cornelius Luca - Mon 08 Oct 2012 16:52:14 CT (Source:CME/www.lucafxta.com)
The financial markets were adverse to risk on Monday amid renewed concern about the Eurozone peripherals and expected weak earnings for the third quarter in the US. Political and economic uncertainty in Greece and Spain continue despite the launch of Eurozone's permanent bailout fund, the European Stability Mechanism. The foreign currencies ended divergently, but opposite of the way they closed on Friday. The European currencies fell, while the yen and the commodity currencies rose. The US stock markets fell. Gold, oil and silver closed down as well. The short-term outlook for the major currencies is sideways. The medium-term outlook for most of the foreign currencies is slightly bullish. The LGR short-term model is short on all foreign currencies. Good luck!
Today's economic calendar
UK: BRC retail sales monitor for September
UK: RICS housing price balance for September
Japan: Current account for August
Japan: Eco watchers survey: outlook / current for September
Australia: National Australia Bank's business confidence for September
Asian Stocks Decline as IMF Cuts Global Growth Forecasts (Bloomberg)
Asian stocks dropped, with the regional benchmark index heading for its second day of decline, after the International Monetary Fund cut its global growth forecasts as its member countries convene in Tokyo this week. Honda Motor Co. (7267), Japan’s second-biggest carmaker by market value, slid 1.4 percent in Tokyo. Altech Co. slumped 6.3 percent after the Japanese distributor of industrial machinery lowered its full-year net income forecast. Oil Search Ltd., Papua New Guinea’s biggest oil producer, climbed 3.1 percent in Sydney after signing exploration license agreements with Total SA affiliates. The MSCI Asia Pacific Index (MXAP) fell 0.1 percent to 122.03 as of 9:29 a.m. in Tokyo, before markets in China and Hong Kong open. The regional benchmark index gained 4 percent last month amid speculation China will add to measures to boost growth in the world’s second-largest economy, following moves by central banks in the U.S. and Japan.
“Asia is of course a world major trader and major exporter, and it’s suffering from not only a slowdown in China, but also across all of Europe,” said Matthew Sherwood, Perpetual Investments’ head of investment markets research in Sydney. Perpetual manages about $25 billion. “We are looking at balance-sheet risks in each individual company because we are in a capital-constrained world. Therefore, companies that can fund their own balance sheets are in a very strong relative position.”
Japan Stocks Decline After IMF Cuts Global Growth Outlook (Bloomberg)
Oct. 9 (Bloomberg) -- Japanese shares fell as markets opened after a public holiday, with the Nikkei 225 (NKY) Stock Average headed for its first loss in three trading days, after the International Monetary Fund cut its global growth outlook. Komatsu Ltd. (6301), a construction-machinery maker that gets 80 percent of its sales overseas, dropped 2.3 percent. Honda Motor Co. (7267) paced losses among automakers on a report it plans to cut Chinese production along with Toyota Motor Corp. and Nissan Motor Co. (7201) Daiichi Chuo Kisen Kaisha slid 3 percent after saying it may cancel ship orders, pare its fleet and sell new stock. CellSeed Inc., which develops regenerative medicine, soared 14 percent after a Japanese professor won the Nobel Prize for his research on stem cells. The Nikkei 225 dropped 0.4 percent to 8,829.95 as of 9:47 a.m. in Tokyo. The broader Topix Index retreated 0.2 percent to 735.82, with 21 out of the 33 industry groups falling.
Shares also fell after a report showed expansion of Japan’s current account surplus slowed in August. “Asia is of course a world major trader and major exporter, and it’s suffering from not only a slowdown in China, but also across all of Europe,” said Matthew Sherwood, Sydney-based head of markets research for Perpetual Investments, which oversees about $25 billion. “We are looking at balance-sheet risks in each individual company because we are in a capital-constrained world. Therefore, companies that can fund their own balance sheets are in a very strong relative position.”
U.S. Stocks Drop on Apple Slump as Europe Ministers Meet (Bloomberg)
U.S. stocks retreated, following last week’s advance in benchmark indexes, after Apple (AAPL) Inc. paced a decline in technology companies and as European finance ministers met to discuss the region’s government debt crisis. Apple, the world’s most valuable company, slumped 2.2 percent and dropped below $600 billion in market value. Facebook Inc. (FB), operator of the biggest social networking company, slid 2.4 percent after being downgraded at BTIG LLC. Netflix Inc. (NFLX), the world’s largest video-subscription service, advanced 10 percent after the shares were raised at Morgan Stanley. The Standard & Poor’s 500 Index slid 0.3 percent to 1,455.88 at 4 p.m. New York time, after climbing 1.4 percent last week. The Dow Jones Industrial Average fell 26.50 points, or 0.2 percent, to 13,583.65. Volume for exchange-listed stocks in the U.S. was 4.1 billion shares, the lowest since July 3.
“We’re back to dealing with the issues in Europe,” Bruce McCain, chief investment strategist at the private-banking unit of KeyCorp (KEY) in Cleveland, said in a phone interview today. His firm oversees $20 billion. “We’re going back to a period where investors become less enthusiastic as they realize the problems of the world have not gone away.” European finance ministers met in Luxembourg today to discuss Spain’s overhaul effort and closer banking cooperation, while German Chancellor Angela Merkel visits Greece tomorrow for the first time since the crisis erupted. The World Bank said policy makers in Asia’s emerging economies have room to provide more fiscal stimulus as China’s slowdown drags the region’s growth to an estimated 11-year low in 2012.
Bank Profit Leading S&P 500 as U.S. Income Growth Falters (Bloomberg)
As third-quarter earnings season begins, the companies analysts are most bullish about are the ones whose stock prices are farthest below their highs -- banks. While financial institutions in the Standard & Poor’s 500 Index climbed 24 percent in 2012 for the biggest rally in nine years, they remain 58 percent below the record of February 2007, according to data compiled by Bloomberg. Signs of a housing recovery prompted Wall Street firms to raise estimates for profit growth to 21 percent for the third quarter and 32 percent in the fourth, the most of 10 S&P 500 industries. Bulls say banks will continue to rally as Federal Reserve stimulus boosts earnings and helps companies from BB&T Corp. to KeyCorp and Wells Fargo & Co. (WFC) rebound from the 84 percent drop during the financial crisis. Bears say gains will be limited to traditional lenders and increased regulation will drag down firms that depend on trading and underwriting for revenue.
“As transactional volume increases for consumer, housing and business credit, there is an opportunity to increase earnings” among regional lenders, said Michael Shaoul, chairman of New York-based Marketfield Asset Management, which oversees $3 billion. Firms outside of the “purer banking model” face too much regulation, he said in an Oct. 3 e-mail.
Earnings Growth Disappears as Spending Cuts Hit Limit (Bloomberg)
Profit gains earned through job cuts and factory closings in the absence of a global economic recovery are starting to reach their limit. Third-quarter profits and sales for the Standard & Poor’s 500 Index (SPX) probably fell in unison for the first time in three years, according to analysts’ estimates compiled by Bloomberg. Per-share earnings may have dropped 1.7 percent on average after they were little changed in the second quarter. Sales may have slipped 0.6 percent, the data show. While most companies plan to keep a lid on spending, lower expenses aren’t leading to the same kinds of increases they reported earlier this year. Hewlett-Packard Co., the world’s largest personal-computer maker, already forecast full-year profit that trailed analysts’ estimates, FedEx Corp. (FDX) cut its annual earnings forecast and Intel Corp. (INTC) projected lower third- quarter sales, with all three citing softening demand.
“A lot of the earnings growth that we’ve seen has been related to cost reductions,” said Peter Jankovskis, co-chief investment officer for Oakbrook Investments in Lisle, Illinois, which manages more than $3 billion. “Now many of those cost reduction efforts have run their course. Without revenue growth, there is no room for profit to expand further.” Alcoa Inc. (AA), the largest U.S. aluminum maker, kicks off the third-quarter earnings season tomorrow and is projected by analysts to report a 13 percent drop in sales, the biggest drop in three years, on plunging prices for the commodity. That may wipe out per-share earnings, according to estimates.
European Stocks Retreat Most This Month; Cookson Sinks (Bloomberg)
European stocks dropped the most this month as the World Bank cut its East Asian growth forecast and investors awaited a meeting of euro-area finance ministers for signs on how they will tackle the debt crisis. Cookson Group Plc (CKSN) sank 12 percent as the world’s biggest maker of ceramic linings for metal smelters said annual results will miss its forecasts. KBC Groep NV (KBC) retreated 5.2 percent as the bank’s strategy update disappointed investors. Eurobank Ergasias SA advanced 5.1 percent after a takeover offer from National Bank of Greece SA. (ETE)
The Stoxx Europe 600 Index (SXXP) lost 1 percent to 271.43 at the close of trading, the largest decline since Sept. 28. The measure climbed 2.1 percent last week as the U.S. unemployment rate dropped to the lowest level since 2009 and stress tests bolstered confidence in Spanish banks. The gauge has advanced 11 percent in 2012 as the European Central Bank approved a plan to buy bonds of the most-indebted euro-area members and the Federal Reserve unveiled a third round of stimulus measures. “Europe is still short of showing any indications of growth,” Jakup Petur Baerentsen and Mikkel Petersen, equity advisers at Nordea Private Bank in Copenhagen, wrote in a report. “Any good news this week will most likely have to come from Spain -- if the nation makes a formal request for a bailout from the euro zone and the International Monetary Fund.”
Emerging Stocks Fall as Europe Says Spain Won’t Tap Rescu (Bloomberg)
Emerging-market stocks fell, spurring the biggest decline in the benchmark index (VXEEM) in over a week, as commodities fell and as European leaders said Spain isn’t on the verge of asking for a rescue. The MSCI Emerging Markets Index (MXEF) lost 1.1 percent to 997.93 at the close of trading in New York, slipping for the first time in three days. The BSE India Sensitive Index sank the most since July 26 while the Shanghai Composite Index (SHCOMP) slid 0.6 percent as China’s markets re-opened after a week-long break. Brazil’s Bovespa Index rose 1.3 percent with Vale SA (VALE3), the world’s largest producer of iron ore, gaining the most since Sept. 10.
European finance ministers set up a full-time 500 billion- euro ($648 billion) fund to aid debt-swamped countries while saying that Spain, its biggest potential near-term customer, isn’t on the verge of tapping it. Decisions were put off on Greece’s next aid payment and on an assistance program for Cyprus. German Chancellor Angela Merkel visits Greece tomorrow for the first time since the crisis erupted. The 21 nations in MSCI’s developing-nations gauge send about 30 percent of their exports to the European Union on average, according to data compiled by the World Trade Organization. Crude and copper fell amid speculation the region’s slowdown will curb demand. “Markets are very nervous regarding the growth outlook and they are waiting on any information from the political sphere as a driver,” Michael Ganske, head of emerging-market research at Commerzbank AG, said by phone from London.
Treasuries Rise Most in Almost Two Weeks (Bloomberg)
Treasuries rose the most in almost two weeks after the International Monetary Fund cut its economic forecasts and said there is an “alarmingly high” risk of a steeper slowdown. U.S. government securities also gained after stocks fell around the world yesterday, increasing demand for the relative safety of debt. The yield on benchmark 10-year notes fell four basis points, or 0.04 percentage point, to 1.70 percent as of 9 a.m. in Tokyo, based on Bloomberg Bond Trader data. The price of the 1.625 percent security due in August 2022 gained 3/8, or $3.75 per $1,000 face amount, to 99 10/32. It was the steepest increase since Sept. 26. The U.S. is scheduled to sell three-year notes today, the first of three sales of coupon-bearing Treasuries this week totaling $66 billion.
Euro Remains Lower After IMF Cuts Europe’s 2013 Forecast (Bloomberg)
The euro remained lower following a decline yesterday after the International Monetary Fund slashed its growth forecast for the currency bloc as European leaders struggle to contain the region’s debt crisis. The shared currency maintained a drop against the yen before data from Italy tomorrow that economists say will show the nation’s industrial production decreased the most in more than two years. German Chancellor Angela Merkel visits Greece today for the first time since the crisis began in 2009. “The euro is struggling to strengthen,” said Kengo Suzuki, a currency strategist in Tokyo at Mizuho Securities Co., a unit of Japan’s third-largest bank by market value. “The economic outlook is not bright in Europe.” The euro was unchanged from yesterday at $1.2968 as of 8:07 a.m. in Tokyo after losing 0.6 percent in New York. It was little changed at 101.54 yen following a 1 percent drop, the biggest slide on a closing basis since July 20. The dollar was at 78.32 yen from 78.33.
The 17-country euro area economy will expand 0.2 percent in 2013, down from the projection of 0.7 percent three months ago, the Washington-based IMF said in its World Economic Outlook report today. The region’s economy will contract 0.4 percent this year, the fund forecast. The world economy will grow 3.3 percent this year, the slowest since the 2009 recession, and 3.6 percent next year, the IMF said, compared with July predictions of 3.5 percent in 2012 and 3.9 percent in 2013. The IMF now sees “alarmingly high” risks of a steeper slowdown. Industrial production in Italy dropped 9.7 percent in August from a year earlier, according to the median estimate of economists in a Bloomberg News survey, which would be the biggest decline since October 2009. Italy is the euro area’s third-largest economy.
World Bank cuts East Asia GDP outlook, flags China risks (Reuters)
The World Bank cut its economic growth forecasts for the East Asia and Pacific region on Monday and said there was a risk the slowdown in China could worsen and last longer than many analysts have forecast.
IMF Sees ‘Alarmingly High’ Risk of Deeper Global Slump (Bloomberg)
The International Monetary Fund cut its global growth forecasts as the euro area’s debt crisis intensifies and warned of even slower expansion unless officials in the U.S. and Europe address threats to their economies. The world economy will grow 3.3 percent this year, the slowest since the 2009 recession, and 3.6 percent next year, the IMF said today, compared with July predictions of 3.5 percent in 2012 and 3.9 percent in 2013. The Washington-based lender now sees “alarmingly high” risks of a steeper slowdown, with a one-in-six chance of growth slipping below 2 percent. “A key issue is whether the global economy is just hitting another bout of turbulence in what was always expected to be a slow and bumpy recovery or whether the current slowdown has a more lasting component,” the IMF said in its World Economic Outlook report. “The answer depends on whether European and U.S. policy makers deal proactively with their major short-term economic challenges.”
The IMF’s 188 member countries convene in Tokyo this week as low growth damped by fiscal consolidation in the richest economies hurts developing counterparts from China to Brazil. As the IMF urged measures to boost confidence, uncertainties out of Europe show no sign of abating, with leaders still divided over a banking union and Spain resisting a bailout. “Confidence in the global financial system remains exceptionally fragile,” the IMF said. “Bank lending has remained sluggish across advanced economies” and increased risk aversion has damped capital flows to emerging markets, it said.
Shift in Global Growth Engines Signals Gain After Pain (Bloomberg)
A revolution in the world economy targeted at revving up new growth engines ultimately will produce gain after pain. Three years into recovery, with economies lumbered by debt and limited bank credit, policy makers are trying to segue to a more balanced expansion from the drivers and excesses that caused the worst recession in six decades. The U.S. is further along as it spurs manufacturing and exports, while trading giants Germany and China seek to fan domestic demand. Europe’s struggling states want to swap government largess for trade. While the aim is more-sustainable growth -- and current- account trade data suggest a rebalancing is under way -- the rebirth is leaving the world low on power for now and still could fail if any of the regions don’t pull their weight. The International Monetary Fund will underscore the risks when it revises down its outlook tomorrow.
“As you go through these adjustments, it’s quite painful,” said Jim O’Neill, chairman of Goldman Sachs Asset Management in London. “But coming out the other side with a different structure, we should have a much stronger world economy.” A more even keel after the last credit-powered expansion would help the stocks of companies biased toward emerging-market consumers and U.S. manufacturing over those tied to commodities and infrastructure, said John Bilton, European investment strategist at Bank of America Merrill Lynch in London.
Business Hiring Calms Concerns About U.S. Fiscal Cliff (Bloomberg)
Business hiring is holding up, allaying concerns about a U.S. economic downdraft in the face of a looming fiscal cliff. Companies added an average 121,000 workers a month in the third quarter, up from 88,000 in the second quarter, according to Labor Department figures released on Oct. 5. Total payrolls, including government, increased an average 146,000 a month, compared with 67,000 in the prior period. “We’re not seeing a further loss of momentum, and that’s a very important positive,” said Bruce Kasman, chief economist for JPMorgan Chase & Co. in New York. A pullback in business investment had fanned concerns that companies would begin to pare hiring in anticipation of $600 billion in government spending cuts and tax increases at the start of 2013. The Congressional Budget Office has warned the economy will fall into recession if Congress allows the fiscal squeeze to go ahead.
The jobs numbers suggest the economy is expanding at a “trend-like pace” of around 2 percent, Kasman said. That would be in line with the 2.2 percent average quarterly growth rate of gross domestic product since the 18-month recession ended in June 2009. Job gains have averaged 146,000 a month so far this year, compared with the 153,000 average last year. In an effort to speed up the recovery, the Federal Reserve last month announced a third round of asset purchases and extended its horizon for near-zero interest rates at least through the middle of 2015.
India Growth to Drop to Decade Low Amid High Inflation, IMF Says (Bloomberg)
Indian growth may weaken to a decade- low this year after investment stalled, the International Monetary Fund said, as it called for interest rates to remain unchanged until the nation’s high inflation rate eases. Gross domestic product will rise 4.9 percent in 2012, less than a July forecast of 6.1 percent, the Washington-based lender said in its World Economic Outlook report today. The expansion will accelerate to 6 percent next year, it said, helped by improving overseas markets and a boost to confidence from a recent government policy revamp. “The outlook for India is unusually uncertain,” the IMF said. “Monetary policy should stay on hold until a sustained decrease in inflation materializes.” India’s government began the policy overhaul last month to boost the economy and avert a credit-rating downgrade, snapping months of political gridlock. The steps to curb expenditure on subsidies, contain a fiscal deficit and permit more investment from abroad triggered a surge in the rupee and buoyed stocks.
“There is an urgent need to reaccelerate infrastructure investment, especially in the energy sector, and to launch a new set of structural reforms, with a view to boosting business investment and removing supply bottlenecks,” the IMF said. “Structural reform also includes tax and spending reforms, in particular, reducing or eliminating subsidies, while protecting the poor.” The government’s recent policy changes are “very welcome,” the fund also said. Its forecast for economic growth in 2013 compares with an estimate of 6.5 percent in July. Indian inflation probably accelerated to 7.71 percent in September, a nine-month high, according to a Bloomberg News survey before a report due Oct. 15. The Reserve Bank of India has left interest rates unchanged since a cut to 8 percent from 8.5 percent in April, the first reduction since 2009.
Record Crash Prompts Indian Exchanges to Seek New Limits (Bloomberg)
Indian exchanges asked the market regulator to narrow the range it allows some stocks to trade after erroneous orders caused a record plunge in the S&P CNX Nifty (NIFTY) Index, according to officials familiar with the proposal. Price limits for 216 of the biggest and most liquid stocks should be lowered from 20 percent to 9 percent, the three officials said. The measure was proposed to the Securities & Exchange Board of India by exchange executives at a meeting in Mumbai on Oct. 6, said the people, who asked not to be identified as the talks were private. Trading in the benchmark Nifty and some stocks stopped for 15 minutes on Oct. 5 after the 50-stock gauge sank 16 percent. The incident, which briefly erased $58 billion in value, is the latest in a series of mishaps that has put pressure on regulators globally to prevent market errors.
Bad trades sent Kraft Foods Group Inc. (KRFT) up as much as 29 percent on Oct. 3, and in May, the Nasdaq Stock Market blamed software for delays in order confirmations in the debut of Facebook Inc. “Everyone is very sensitive to these electronic errors,” Adam Mattessich, head of international trading at Cantor Fitzgerald LP, said by phone from New York on Oct. 5. “It’s the kind of thing that could be nothing or it could become a financial calamity.”
ECB May Need to Cut Rates Given Deflation Risk, IMF Says (Bloomberg)
The European Central Bank should keep interest rates low for the foreseeable future and may need to cut them further given the risk of deflation, the International Monetary Fund said. Euro-area inflation will slow to 1.6 percent in 2013 “and risks from domestic wages and profits are to the downside,” the Washington-based IMF said in its World Economic Outlook today. “The probability of falling prices is unusually high, reaching almost 25 percent. This projection gives the ECB ample justification for keeping policy rates very low or cutting them further.” While the Frankfurt-based ECB cut its benchmark interest rate to an historic low of 0.75 percent on July 5 and took its deposit rate to zero, President Mario Draghi signaled last week that further easing may have only a limited effect on the economy. The IMF warned that Europe’s sovereign debt crisis, now in its third year, could escalate and that the economic outlook has worsened.
The IMF cut its forecast for growth in the euro area next year to 0.2 percent from its July prediction of 0.7 percent and said the economy will contract 0.4 percent this year as governments continue to reduce spending. It lowered its 2013 growth forecast for Germany, the region’s largest economy, to 0.9 percent from 1.4 percent.
Europe Salutes Greek Budget-Cutting Will, Raising Aid Prospects (Bloomberg)
European finance ministers hailed Greece’s determination to cut the budget and reshape its recession-wracked economy, raising the chances that aid will keep flowing to stop the country from careening out of the euro. European officials paired the encouragement with a demand that Greece commit to a list of 89 policy steps before an Oct. 18-19 leaders’ summit, and left open whether the next 31 billion-euro ($40 billion) loan installment would be paid out in one go or dribbled out in smaller pieces. Creditors muffled doubts about Greece’s fiscal health hours before German Chancellor Angela Merkel, the dominant figure in Europe’s bailout politics, set off on her first trip to Athens since the crisis broke out in October 2009.
“I’m impressed by the performance of the Greek government, by the willingness of the coalition parties in Greece to undertake whatever will have to be undertaken in order to respond to our wishes,” Luxembourg Prime Minister Jean-Claude Juncker told reporters in Luxembourg late yesterday after chairing a meeting of euro finance chiefs. Juncker’s cheerleading and Merkel’s impending visit marked a show of support for Greek Prime Minister Antonis Samaras, who campaigned against deeper budget cuts, only to embrace them after taking office in July as the only way to keep Greece in the 17-nation euro zone.
Rajoy’s Deepening Budget Black Hole Outpaces Spain Deficit Cuts (Bloomberg)
The black hole in Spain’s budget has grown faster than Prime Minister Mariano Rajoy’s attempt to cut it, portending the same dynamic that has squeezed Greece. The harshest austerity since the return to democracy in 1978 has failed to contain the deficit as the economy sinks deeper into recession. The shortfall rose in the first half of the year, as it did in the previous 12 months. Even after a sales-tax increase and health-care cuts kick in this quarter, it may still approach last year’s 9.4 percent of gross domestic product, said Ignacio Conde-Ruiz, an economist at the independent Applied Economic Research Foundation in Madrid. The fiscal and political consequences of demanding austerity in a shrinking economy highlight the dilemma facing Rajoy. To trigger a European financial lifeline, he may have to impose yet more cuts, repeating the pattern seen in Greece, Portugal and Ireland.
“There is no chance that Spain will hit its targets,” Megan Greene, director of European economics at Roubini Global Economics LLC, said in a telephone interview. “The deficit targets are economic suicide.” Rajoy, who meets French President Francois Hollande tomorrow in Paris, has introduced more than 100 billion euros ($130 billion) of tax increases and spending curbs amid a slump that is hollowing out his revenue base and pushing unemployment to 25 percent. The 57-year-old premier is also facing a secession threat from Catalonia, mounting popular protests and unrest from regions forced to rein in their own spending.
Euro Finance Chiefs to Give Positive Greece View, Rehn Says (Bloomberg)
Euro-zone finance ministers meeting today are likely to make a positive statement on Greece’s progress toward meeting austerity targets needed to free the nation’s next bailout payment, European Union Commissioner for Economic and Monetary Affairs Olli Rehn said. “It’s important that this can be concluded in the coming weeks,” Rehn said in an interview in Helsinki on Oct. 6. “Negotiations have progressed well in the past few days and last night. This is why I assume and expect the euro-group to give a positive and supportive statement on Greece’s progress.”
Negotiations between the government of Prime Minister Antonis Samaras and Greece’s official lenders stalled amid Greek reluctance to sign off on more pension and wage cuts as the nation suffers a fifth year of recession. Greece needs to find spending cuts to maintain access to 240 billion euros ($313 billion) in rescue funds and is trying to reach an agreement with its official lenders to release the next payment of 31 billion euros. The funds would primarily be used to recapitalize Greek banks and boost liquidity in the cash-starved economy. “It will take some time before the report can be finalized as it takes more work than simply an agreement over the measures Greece commits to balance its budget and carry out structural reforms,” Rehn said.
Europe Starts $648 Billion Aid Fund, Rules Out Immediate Use (Bloomberg)
European governments set up a full- time 500 billion-euro ($648 billion) fund to aid debt-swamped countries and, not for the first time in the three-year crisis, expressed confidence that the extra financial muscle won’t be needed anytime soon. Finance ministers from the 17 euro countries declared the European Stability Mechanism operational, while saying that Spain, its biggest potential near-term customer, isn’t on the verge of tapping it. Decisions were also put off on Greece’s next aid payment and on an assistance program for Cyprus. Creation of the ESM “makes the strategy of member states credible and equips the euro area with much better tools to appropriately respond to future crises,” Luxembourg Prime Minister Jean-Claude Juncker told reporters in Luxembourg today before a meeting of euro finance chiefs that began at 5 p.m.
The fund’s birth was eased by the European Central Bank’s offer in August to buy bonds of fiscally struggling countries, which has driven down interest rates in Spain and Italy and bought European governments time to address the root causes of the crisis. Spanish 10-year bonds yielded 5.71 percent today, down from a peak of 7.62 percent on July 24. Italian 10-year yields have fallen to 5.08 percent from 6.60 percent and the euro has risen 7.6 percent to $1.2971 over the same period. The ESM will replace the temporary European Financial Stability Facility, which has spent 192 billion euros of its 440 billion euros on loans to Ireland, Portugal and Greece. The two funds will run in parallel until the EFSF is phased out in mid- 2013.
Controlled by euro finance ministers, the ESM can lend directly to governments, intervene on bond markets, offer credit lines and provide loans that can be used to recapitalize banks. It would be authorized to pump capital into banks directly only once the euro zone sets up a central supervisor, possibly in 2013. The ESM inherited those powers from the temporary fund. For now, it will go without two other EFSF tools that have yet to be used: debt-insurance certificates and co-investment vehicles that were designed to use leverage to multiply their impact. Finance ministers touted Spain’s economic overhaul, declined to press the Spanish government for more budget cuts and said a bank-aid program set up in July will cost far less than the 100 billion euros allocated for it. Payouts under that program will be handled by the ESM starting in November.
DTN Closing Grain Comments 10/08 14:31 (CME)
Corn, Beans Continue Slide
Corn and beans extended their respective downtrends on continued noncommercial long-liquidation. Wheat was able to close higher, albeit modestly in a quiet day.
Russia's Deputy PM sees 2012 grain crop at 70 mln tones (Reuters)
Russia, one of the world's key wheat exporters, is expected to harvest about 70 million tonnes of grain this year, Deputy Prime Minister Arkady Dvorkovich said during a government meeting on Monday.
France cuts wheat crop estimate to 35.9 mln tonnes (Reuters)
The French farm ministry on Monday reduced its estimate of this year's soft wheat crop in France to 35.9 million tonnes from 36.5 million tonnes seen last month.
Sugar ships stranded off Iraq as government axes contract (Reuters)
Up to 150,000 tonnes of refined sugar is marooned and deteriorating off Iraq's main cargo port Umm Qasr over a trade spat with the government, as the country struggles to untangle bureaucratic turmoil that has dogged its economy.
Informa ups U.S. corn, soy harvest view after rains-trade (Reuters)
Private analytical firm Informa Economics expects the U.S. government to raise its forecasts for domestic corn and soybean production in its monthly crop report next week, trade sources said on Friday.
Pro Farmer: After The Bell Wheat Recap (CME)
Wheat futures favored a firmer tone in light and choppy trade today and finished slightly higher in most contracts at all three exchanges. Wheat futures were supported by global crop and weather concerns. Dryness remains an issue in several key production areas, including U.S. winter wheat areas and in Western Australia.
Wheat Market Recap Report (CME)
December Wheat finished up 3 1/2 at 861, 6 1/2 off the high and 6 up from the low. March Wheat closed up 2 1/2 at 871 1/4. This was 4 1/2 up from the low and 7 off the high.
December Chicago wheat ended the day in positive territory but well off session highs. Kansas City and Minneapolis wheat traded higher as well with KC leading all three wheat markets on the day. Support was linked to fears that freezing temperatures in parts of Oklahoma, Nebraska, and Colorado may have damaged emerging wheat and some replanting may be needed. Furthermore, nearly a quarter of the Hard Red Winter wheat growing area remains drier than normal. Long term support in wheat continues to come from thoughts that the world wheat balance sheet is tightening which could spur on US exports later this year. US wheat continues to be overpriced in the world market as France and Australia step in to cover business in the Middle East. Iraq made no purchase on their 50,000 tonne wheat tender and it's estimated that Russia exported 10.29 million tonnes of wheat in the first 8 months of 2012. Outside markets added a slightly negative tilt to commodity complex throughout the day with US stocks trading lower and the US Dollar higher on the day.
December Oats closed up 3 1/4 at 370 1/2. This was 5 up from the low and 1 off the high.
Pro Farmer: After The Bell Corn Recap (CME)
December through July corn futures softened into the close to finish 6 to 7 3/4 cents lower. Deferred contracts settled narrowly mixed. Strength in the U.S. dollar index and a lack of fresh news due to USDA being closed for Columbus Day kept corn on the defensive into the close. Traders are also more actively evening positions ahead of Thursday's reports, which could result in choppy price action ahead of the report as traders look for USDA to lower carryover.
Corn Market Recap for 10/8/2012 (CME)
December Corn finished down 6 at 742, 6 off the high and 2 up from the low. March Corn closed down 6 1/2 at 742. This was 1 3/4 up from the low and 6 1/4 off the high.
December corn ended the day slightly lower in what was a low volume session and the weaker trade was linked to profit taking ahead of this Thursday's USDA report. Marginal support was seen from a higher wheat market but this was largely offset by a surging US Dollar and weaker soybean market. Weekend rainfall was extensive in growing regions of Argentina which should benefit early planted corn. Argentina's government believes that 4.97 million hectares of corn will be planted this year vs. 5 million in 2011/12. The weather outlook also included better rainfall for central Brazil by this weekend and again in the 11-15 day forecast. This should benefit dry areas in Brazil and early planted corn. The US forecast looks favorable for harvest progress with showers limited to the southern plains later this week and the trade believes corn harvest is close to 70% complete. Corn basis was steady throughout the day as futures declined but farmers have been reluctant sellers of anymore cash corn in hopes that prices will move higher later this quarter.
November Rice finished up 0.26 at 15.365, equal to the high and 0.045 up from the low.
Traders Eye Grain Prices Rebound as Supply Set to Tighten (Bloomberg)
Grain prices that tumbled in recent weeks may rebound as demand stays robust while global stockpiles tighten after drought hurt crops from the U.S. to Russia. Corn on the Chicago Board of Trade, the global benchmark, has slipped 13 percent since reaching a record $8.49 a bushel on Aug. 10, and wheat traded in Paris is down 4.8 percent from a 14-month high in July. While farmers are harvesting crops across the Northern Hemisphere, temporarily inflating supplies, world corn and soybean stockpiles as a percentage of consumption may drop to a 37-year low after dry weather in the U.S., South America and Europe, U.S. Department of Agriculture data show.
Corn may rally to $10 before this time next year because cattle and hog producers haven’t culled herds even as feed costs rose, Hussein Allidina, head of commodities research at Morgan Stanley, said Oct. 3 in an interview at Bloomberg News offices in London. Wheat prices also will be supported as livestock farmers substitute more of the grain in feed for high-cost corn, he said. Barclays Plc analyst Sudakshina Unnikrishnan expects CBOT soybean prices to rally to $18 a bushel, above the all-time high of $17.89 set Sept. 4. “It’s a time to keep your nerve and wait for the markets to rebound, because they probably will,” said David Sheppard, managing director at Gainsborough, England-based grain exporter Gleadell Agriculture Ltd. “We’re in the calm before the storm with world grain markets. Russia and Ukraine are running out of exportable surpluses. France is selling quite aggressively into recent tenders, and if it carries on at the same rate they’ll probably be overselling.”
GRAINS: U.S. corn slid for a second consecutive session as investors took into account analyst forecasts estimating higher production ahead of a key U.S. government report on supply and demand of agricultural products due out later this week. Wheat rose 0.6 percent, recouping some of Friday's losses, as forecasts of dry weather this week in much of Australia's grain belt raised concerns about a further reduction in yields in the world's second largest exporter. (Reuters)
SOFTS: Worries over the outlook for the global economy weighed on sugar, coffee and cocoa futures prices on ICE in light volumes in early trading. (Reuters)
Natural Gas Futures Drop as Warmer Weather to Cut Heating Demand (Bloomberg)
Natural gas futures fell for the third time in four days as forecasts for warmer-than-normal weather signaled reduced demand for the heating fuel. Gas declined as much as 2 percent. Temperatures will be above normal in the central U.S. from Oct. 13 through Oct. 17 before spreading to the East Coast over the next 11 to 15 days, according to Commodity Weather Group LLC in Bethesda, Maryland. The Energy Department expects gas stockpiles to rise to a record before demand begins to rise with colder weather. “Winter is one of the main events in the natural gas market, it’s just not there yet,” said Tom Saal, senior vice president of energy trading at INTL Hencorp Futures LLC in Miami. “We have a lot of inventory. It’s keeping the market actually a little bit below where it was a year ago.” Natural gas for November delivery dropped 3.1 cents, or 0.9 percent, to $3.365 per million British thermal units at 9:55 a.m. on the New York Mercantile Exchange. The futures are down 3.3 percent from a year ago.
The low temperature in Chicago on Oct. 17 may be 49 degrees Fahrenheit (9 Celsius), 4 above normal, and Detroit may be 6 above normal at 50 degrees, according to AccuWeather Inc. in State College, Pennsylvania. New York’s low on Oct. 22 will be 54 degrees, 6 above the usual reading. Heating needs in the lower 48 states will be 59 percent below normal Oct. 14 through Oct. 18, data from Weather Derivatives in Belton, Missouri, show. The months from November through March make up the peak period for U.S. gas consumption. U.S. inventories totaled 3.653 billion cubic feet in the week ended Sept. 28, 8.3 percent above the five-year average for the period, the department said last week. Record gas demand from electricity generators because of an unusually hot summer and decade-low seasonal prices reduced the supply surplus from a six-year high of 61 percent on March 30.
The department expects stockpiles to reach an all-time high of 3.95 trillion cubic feet by the end of October before the heating season, according to its monthly Short-Term Energy Outlook Sept. 11.
Oil Rises First Time in Three Days as Discount to Brent Widens (Bloomberg)
Oil rose for the first time in three days in New York, rebounding from a decline that sent the benchmark U.S. grade to the biggest discount versus European futures in almost a year. West Texas Intermediate crude gained as much as 1 percent after sliding 2.6 percent in the prior two days. Prices advanced after reaching technical-support levels. The contract’s discount to London’s Brent oil widened to $22.49 yesterday, the largest gap since Oct. 20, 2011. The U.S. Energy Department releases its weekly report on production and stockpiles tomorrow. Crude for November delivery climbed as much as 89 cents to $90.22 a barrel in electronic trading on the New York Mercantile Exchange and was at $90.20 at 11:38 a.m. Sydney time. The contract dropped 55 cents to $89.33 on Oct. 8, the lowest close since Oct. 3. Prices are down 8.7 percent this year.
Brent oil for November settlement climbed 95 cents, or 0.9 percent, to $112.77 a barrel on the London-based ICE Futures Europe exchange. Prices are up 5 percent this year. The premium to WTI was at $22.57. Oil is rising in New York after rebounding from its lower Bollinger Band for a second day yesterday, signaling technical support, according to data compiled by Bloomberg. This indicator is at $88.03 a barrel today. Buy orders tend to be clustered near chart-support levels. Crude’s 30-day stochastic oscillators have been below 30, a reading that indicates futures have fallen too far for further losses to be sustained.
Recap Energy Market Report (CME)
After an early morning push down toward last week's low of $87.70, November crude oil spent most of the US trading session trending higher. Early weakness in the market came on the latest downwardly revised Asian growth forecast from the World Bank that put pressure on the global oil demand outlook. However, relative strength in the Brent crude oil market helped WTI rally more than $1 from the morning low. Another source of support for the crude oil market came as officials in Turkey requested international support with its conflict in Syria.
China’s Copper Consumption Set to Drop 8.5% in 2012, Hunt Says (Bloomberg)
Copper consumption in China will contract this year for the first time since 2008 as demand falters and inventories climb in the largest user, before rebounding in 2013, according to Simon Hunt Strategic Services. Consumption will decline about 8.5 percent to 5.6 million metric tons in 2012, said Simon Hunt, chief executive officer of the Weybridge, Surrey-based consultancy, which compiles research and analysis on the global market. Next year, usage may expand about 5.6 percent to 5.9 million tons, Hunt said in an interview in Singapore after visiting China for two weeks last month.
Hunt’s assessment adds to signs that China’s slowdown is hurting demand for commodities. Copper, used in wires and cables, helps set the pace for other base metals and the drop in China’s consumption may hurt prices and cut profits at mining companies including Freeport-McMoRan Copper & Gold Inc. (FCX) Copper rose 6.8 percent last quarter as central banks in the U.S., China, Japan and Europe expanded stimulus to try to revive economic growth. “The safety valve of exports has gone, the domestic economy is slowing down, they have a problem of surplus capacity and cash is extraordinarily tight,” said Hunt, who estimated total copper reserves in China at 3.5 million tons, including reported and unreported stockpiles. “There are no signals of a recovery in heavy industry and manufacturing.”
Three-month copper futures on the London Metal Exchange, which tumbled 21 percent last year as Europe’s debt crisis hurt global growth, traded at $8,186 a ton yesterday. The price touched $8,422 on Sept. 19, a week after the U.S. Federal Reserve announced a third round of so-called quantitative easing. The U.S. is the world’s second-largest copper user.
Gold Falls for Second Straight Session on Dollar Rally (Bloomberg)
Gold futures fell for the second straight session as the dollar’s advance curbed demand for the metal as an alternative investment. The greenback rose as much as 0.5 percent against a basket of major currencies amid speculation that Spain is struggling to avoid a bailout from mounting sovereign debt. On Oct. 5, gold reached the highest in almost 11 months after the U.S. unemployment rate fell to the lowest since January 2009, easing pressure on the Federal Reserve to expand monetary stimulus. “The dollar is keeping the market quiet,” Pratik Sharma, a fund manager at Miami-based Atyant Capital, said in a telephone interview. “There is also some profit-taking.” Gold futures for December delivery fell 0.3 percent to settle at $1,775.70 an ounce at 1:41 p.m. on the Comex in New York. On Oct. 5, the metal reached $1,798.10, the highest for a most-active contract since Nov. 9.
In September, gold advanced 5.1 percent as stimulus programs in the U.S., Europe and Japan and low interest rates enhanced the appeal of the metal as an alternative to currencies. Silver futures for December delivery slumped 1.6 percent to $34.017 an ounce on the Comex, the biggest drop since Sept. 24. Platinum futures for January delivery fell 0.5 percent to $1,698.80 an ounce on the New York Mercantile Exchange. Palladium futures for December delivery declined 0.9 percent to $656.95 an ounce.
Silver Market Recap Report (CME)
The silver market forged a massive range of trade today but unfortunately for the bull camp most of that action favored the downward tilt. The bull camp might suggest that silver was able to hold together somewhat impressively given the early pressure and also in the face the weakness seen in a number of outside markets. While adverse currency market action probably added some additional pressure to silver prices today, silver probably outdistanced gold on the downside today because of weakness in equities and because of weakness in other industrial/Physical commodity prices.
Gold Market Recap Report (CME)
The gold market started out sharply lower today but the bull camp was able to manage a somewhat impressive recovery off the initial lows. Like other commodity markets, gold was probably a little overbought technically and it is also possible that many gold longs were overly confident in the prospect of additional easing and with the controversial unemployment report from last Friday the debate over additional easing has heated up significantly. Gold was probably undermined as a result of slackening global growth expectations and gold might also have been undermined by weakness in a number of physical commodity markets.
Palm Oil Exports From Indonesia to Sink Most in Four Months (Bloomberg)
Palm oil shipments from Indonesia, the world’s largest producer, are poised to tumble the most in four months in October because of weak demand from importers. Exports may slump 12 percent to 1.41 million metric tons from 1.6 million tons in September, according to the median of estimates from four plantation executives, a refiner and an analyst compiled by Bloomberg. That’s the biggest drop since June when shipments fell 13 percent. Output may climb to 2.43 million tons from 2.05 million, the survey showed. Stockpiles are about 2.6 million tons, according to three respondents. Palm oil has plunged 21 percent since the end of August as the global slowdown hurt demand for the oil used in everything from candy to biofuel amid an increase in production in Indonesia and Malaysia. Buyers are monitoring prices to see what the export tax will be in November, said Sahat Sinaga, executive director at the Indonesian Vegetable Oil Industry Association.
“The tax will probably decline if the price direction stays the same, by how much we will have to see,” Sinaga said on Oct. 4. Indonesia kept the tax for crude palm oil exports at 13.5 percent in October and will decide the November rate at the end of this month, using average prices in Rotterdam, Kuala Lumpur and Jakarta from Sept. 20 to Oct. 19. For now, the price decline may prompt buyers to renegotiate contracts or defer fresh orders, Sinaga said last week. Some buyers in India, the biggest importer, may default or review contracts as purchases are unprofitable, according to Atul Chaturvedi, chief executive officer of Adani Wilmar Ltd.
Stockpiles in Indonesia may be higher than estimated in the survey. Inventories have hovered between 3.5 million tons and 4 million tons since 2010 compared with popular estimates in the range of 1.5 million tons to 2 million tons, said Dorab Mistry, director at Godrej International Ltd., on Sept. 6. Overseas buyers have yet to take about 600,000 tons of crude palm oil piled up in storage tanks at Belawan port and at mills in North Sumatra province, Bisnis Indonesia reported last week, citing Timbas Prasad Ginting, secretary at the local branch of the Indonesian Palm Oil Association. Reserves in Malaysia, the second-largest producer, probably climbed 15 percent in September to a record as production surged and demand slowed. Inventories increased to 2.43 million tons from 2.12 million tons in August, according to the median of estimates from five analysts and two plantation companies compiled by Bloomberg. The previous record was 2.27 million tons in 2008, Palm Oil Board data show.
The contract for December delivery on the Malaysia Derivatives Exchange traded at 2,396 ringgit a ton at 5:18 p.m. today. Futures fell 8.5 percent to close at 2,255 ringgit on Oct. 2, the lowest settlement in almost three years.
Pro Farmer: After The Bell Soybean Recap (CME)
Soybean futures faced pressure throughout the day and ended mid- to low-range with losses of 1/4 to 11 cents through the September 2013 contract; farther deferred months were firmer. Soymeal closed mixed while soyoil ended with slight losses for the day. Today was a quiet news day. Thus, dollar strength allowed bears to take control of the soybean market.
Soybean Complex Market Recap (CME)
November Soybeans finished down 1/2 at 1551, 10 off the high and 13 1/2 up from the low. January Soybeans closed down 3 at 1548. This was 12 3/4 up from the low and 11 off the high. December Soymeal closed up 1.4 at 472.6. This was 6.8 up from the low and 1.5 off the high. December Soybean Oil finished down 0.26 at 50.93, 0.62 off the high and 0.08 up from the low.
November soybeans traded slightly lower into the close while the March 2013 contract saw double digit losses. Soybean oil ended the day lower but soybean meal was able to rally at the closing bell to close in positive territory. Profit taking added a negative tilt to today's price action as outside markets slid lower and the US Dollar moved higher on the day. Underlying support continues to come from a steady appetite of US soybeans from China and the fact that new farmer sales continue to be slow as many await higher prices later this quarter. Many in the market feel harvest was close to 60% complete as of Sunday. Traders reported that bull spreading was active throughout today's session and basis was steady to firm as processors attempt to drum up movement of cash soybeans in the country. Weekend weather in South America was favorable with rainfall in areas of Argentina and Brazil. More precipitation is expected to spread to Brazil soybean growing regions later this week which should benefit early planted crops and ease stress.
EDIBLE OIL: Malaysian palm oil futures closed down 2 percent as traders braced for rising inventory levels, offseting bargain-hunting seen earlier in the market after steep declines last week to a near three-year low. (Reuters)
It was reported that Indonesia and Malaysia had agreed to set up a supply mechanism to stabilise the prices of CPO. Citing Indonesia's Agriculture Minister Suswono, Bloomberg reported that the agreement came following a meeting between him and Plantation Industries and Commodities Minister Tan Sri Bernard Dompok. In a separate report by Reuters, Dompok was quoted as saying that there were two possibilities in Malaysia's cooperation with Indonesia. "First, reducing oil palm plantation expansion. The other possibility is to increase palm oil use (and) consumption in Malaysia by promoting biodiesel usage," Dompok said. Replanting of oil palm that were more than 25 years old in Malaysia, was one way of doing this, Dompok added.It was also reported that Malaysia will consider possible changes to its CPO export tax regime to support falling prices. (StarBiz)
Posted by MW Chong at 9:39 AM