Thursday, October 11, 2012
Bollinger band reading : pullback correction downside biased.
MACD Histogram : rising higher, buyer testing market.
Support : 2520, 2490, 2450, 2400 level.
Resistance : 2550, 2570, 2600, 2620 level.
FCPO closed recorded gains for the 3rd day with slower volume transacted. Soy oil currently registering more than 1.5% gain after overnight closed lower by more than 1% while crude oil price advancing higher.
Price continue to soar higher after government decided to lower palm oil exports tax.
FCPO daily chart reading still suggesting 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 6:23 PM
FKLI closed : 1657 changed : -4 point, volume : higher.
Bollinger band reading : pullback correction upside biased.
MACD Histogram : weakening, buyer taking profit.
Support : 1657, 1651, 1645, 1640 level.
Resistance : 1660, 1670, 1680, 1690, 1700 level.
FKLI closed recorded loss with little improved volume changed hand doing 1.5 point premium compare to cash market that closed lower. Overnight U.S. markets closed weaker and today Asia markets ended mostly lower while European markets currently trading little higher.
Negative sentiment still dominate Asia markets today after news on Spain credit rating downgrade by Standard & Poor and slower Japan machinery orders data.
FKLI daily chart study remained suggesting a pullback correction upside biased market development.
When to buy : buy at support or weakness with quick cut loss and profit target.
When to sell : sell at resistance or strength with quick cut loss and profit target.
Posted by MW Chong at 5:49 PM
STOCKS: Asian shares tracked Wall Street lower as weak forecasts from U.S. corporate bellwethers underscored concern over global demand, particularly from China, while rising tensions in the Middle East pulled oil prices off lows. European markets opened lower. (Reuters)
FOREX: The euro fell as uncertainty over Spain's bailout prospects continued to spook sentiment, which was also dented by a drop in share markets due to worries about slowing global growth. (Reuters)
FOREX-Euro falls as worries over Spain, growth dent risk appetite
TOKYO, Oct 11 (Reuters) - The euro fell as uncertainty over Spain's bailout prospects continued to spook sentiment, which was also dented by a drop in share markets due to worries about slowing global growth.
"Given that the S&P still kept Spain's investment grade, the reaction was much more than expected, suggesting how players would rather enter the market short than long the euro," said Kimihiko Tomita, head of foreign exchange for State Street Global Markets in Tokyo.
"The market was waiting for fresh news with some weight to push the euro lower as the currency has remained quite resilient to negative news recently," Tomita said.
IMF calls for action as euro zone crisis festers (Reuters)
The IMF prodded the world's rich countries for swifter action on Thursday as Europe's debt crisis drags on while the United States and Japan show scant progress handling their budget deficits.
S&P cuts Spain credit rating to BBB-minus, near junk (Reuters)
Standard & Poor's on Wednesday cut Spain's sovereign credit rating to BBB-minus, just above junk territory, citing a deepening economic recession that is limiting the government's policy options to arrest the slide.
GRAINS: Chicago soybeans rose more than 1 percent, recovering from a one-week low hit the day before, while corn gained after marking its lowest in almost two weeks as traders adjusted positions ahead of a key supply-demand report. (Reuters)
French wheat stocks may hit lowest in 13 years (Reuters)
Farm office FranceAgriMer on Wednesday cut its forecast of French soft wheat stocks at the end of this season to the lowest level in at least 13 years as it raised its export outlook.
U.S., OPEC cut global oil demand estimates (Reuters)
Global oil demand is looking weaker than previously forecast as the slowing economy continues to weigh on consumption, according to monthly reports released on Wednesday by the U.S. government and OPEC.
OIL: Brent crude climbed toward $115 a barrel as rising tensions in the Middle East stoked supply fears, keeping prices less than a dollar away from their highest in almost a month, although forecasts of lower demand capped gains. (Reuters)
Indonesia's Sept refined tin exports up 75 pct on mth -govt
JAKARTA, Oct 11 (Reuters) - Shipments of refined tin from Indonesia, the world's top exporter, gained 75 percent in September to 9,874.47 tonnes from 5,645.87 tonnes in August, a trade ministry official said on Thursday.
August shipments of refined tin were hit after firms in the top tin-producing region of Bangka-Belitung announced operations had stopped at all but two of the 28 licensed smelters there. Operations have since resumed.
Global steel demand growth to slow next year - Worldsteel (Reuters)
Global demand for steel, used in car making and construction, will slow next year because of weaker consumption growth in China and uncertainties from the European debt crisis, the World Steel Association said.
China crude steel output falls in Sept, may rebound in Oct
SHANGHAI, Oct 11 (Reuters) - China's average daily crude steel output fell to 1.843 million tonnes between Sept 21-30, down 0.74 percent from the preceding 10 days, data from the China Iron & Steel Association (CISA) showed on Thursday.
A steep decline in steel prices in August and early September forced Chinese steel mills to cut production to minimise losses, as the slowing economy in the world's top steel-producing region hit demand.
Global steel demand growth to slow next year - Worldsteel
NEW DELHI, Oct 11 (Reuters) - Global demand for steel, used in car making and construction, will slow next year because of weaker consumption growth in China and uncertainties from the European debt crisis, the World Steel Association said.
World steel consumption will grow 2.1 percent to 1.409 billion tonnes this year and 3.2 percent to 1.455 billion tonnes in 2013, the World Steel Association (Worldsteel) said on Thursday. That compares with 6.2 percent growth last year.
BASE METALS: Copper steadied from two-week lows in line with a rebound in the euro, but more weak forecasts from U.S. companies and a downgrade to Spain's credit rating eroded risk appetite, capping the metals' advance. (Reuters)
PRECIOUS METALS: Gold traded steady after dropping more than 1 percent over the last four sessions, although a gloom over the euro zone debt crisis that is supporting the dollar is expected to take some shine off bullion. (Reuters)
POLL-ANALYSTS' VIEW-Reuters Q3 precious metals price poll
LONDON, Oct 10 (Reuters) - Precious metals analysts have become more bullish for the prospects for gold and silver than they were three months ago, but their outlook for platinum and palladium has darkened in line with the outlook for global growth, a Reuters poll showed on Wednesday.
The impact of the euro zone debt crisis on the global economy is expected to keep global monetary policy loose, which should favour gold, while restricting demand for the more industrial metals like silver and the platinum group metals.
POLL-Gold experts turn bullish for Q4, 2013
LONDON, Oct 10 (Reuters) - Gold analysts have turned increasingly bullish on the outlook for prices in the final quarter of 2012, unanimously expecting a record-high average, and further gains next year, a Reuters poll showed on Wednesday.
The world's major central banks this year have pledged to pump more cash into the financial markets to lower borrowing costs in an attempt to beat a slowing global economy.
METALS-Copper steadies from two-week low, growth woes cap gains
SINGAPORE, Oct 11 (Reuters) - Copper steadied from two-week lows in line with a rebound in the euro, but more weak forecasts from U.S. companies and a downgrade to Spain's credit rating eroded risk appetite, capping the metals' advance.
"The mining companies and Alcoa are saying they're expecting reduced demand, the IMF and World Bank have said growth is going lower ... There's too much negative news out there. It's an issue until we get some concrete earnings that tell us there's an improvement," said Jonathan Barratt, chief executive of Barratt's Bulletin, a Sydney-based commodity research firm.
"When it comes to demand for primary (copper) imports, tell me what is positive out there, for copper there has been a supply issue, but people are happy to buy only what they need, when they need it," he added.
PRECIOUS-Gold steady after 4-day loss; euro zone gloom weighs
SINGAPORE, Oct 11 (Reuters) - Gold traded steady after dropping more than 1 percent over the last four sessions, although a gloom over the euro zone debt crisis that is supporting the dollar is expected to take some shine off bullion.
"The continuously rising ETF holdings show that investors are still confident in gold in the longer term, even though the euro zone trouble may have some short-term impact," said Chen Min, an analyst at Jinrui Futures in the southern Chinese city of Shenzhen.
"The Fed's QE (quantitative easing) and low interest rate policy has put a floor under gold, and we probably won't see a sharp pullback," he said.
Posted by MW Chong at 4:43 PM
GLOBAL MARKETS-Asian shares weak on growth woes, euro on backfoot
HONG KONG, Oct 11 (Reuters) - Asian shares tracked Wall Street lower as weak forecasts from U.S. corporate bellwethers underscored concern over global demand, particularly from China, and kept oil and other commodity prices under pressure.
"With U.S. stocks falling, and IMF and World Bank raising alarms about the Chinese growth slowdown, market sentiment is against risk - and growth-sensitive or high-yielding currencies are prone to downside risks," said Yuji Saito, director of foreign exchange at Credit Agricole in Tokyo.
U.S. heating oil futures ripe for short squeeze
By Robert Campbell
NEW YORK, Oct 10 (Reuters) - Get ready for another oil products price spike: U.S. heating oil looks like a juicy target. Inventories are at record low levels and infrastructure constraints that impede relief are getting worse.
The fuel is a niche product with a shrinking customer base but because the New York Harbor heating oil futures contract is the basis of diesel prices throughout the Americas, any surge in prices will be felt well beyond the U.S. East Coast.
OIL-Oil falls as economic worries, stock market pressure
NEW YORK, Oct 10 (Reuters) - Oil prices fell in volatile trade on Wednesday as ongoing concerns about the economy and a weak kick off to the earnings season weighed on stock markets.
"Although (U.S. crude) managed to further yesterday's Middle East driven price spike early in the session, it subsequently succumbed to a triple digit slide in the (Dow Jones industrials) that sent off further caution flags regarding global economic recovery," Jim Ritterbusch, president at Ritterbusch & Associates, said in a note.
POLL-US crude stocks seen rising on higher imports last week
Oct 10 (Reuters) - U.S. crude oil inventories were expected to have risen last week on additional imports, after two straight weeks of declines, an expanded Reuters poll of analysts showed on Wednesday.
The poll of 12 analysts' forecast weekly U.S. stockpiles data would show crude inventories up 800,000 barrels for week ended Oct. 5. Nine analysts predicted a build in stockpiles in the data, delayed by one day this week because of the Columbus Day holiday on Monday.
NATURAL GAS-US natural gas futures end mixed, fronts gain
NEW YORK, Oct 10 (Reuters) - Front-month U.S. natural gas futures ended higher on Wednesday for a third straight day, with chilly U.S. weather this week stirring demand, but milder Northeast and Midwest weather forecasts for next week helped limit the upside.
"I think we're seeing a lot of defensive buying (or hedging) by end users before winter, and there's been a lot of fresh buying from speculators, but we're looking for a pullback," Gelber & Associates analyst Aaron Calder said, adding he expected milder weather to pressure prices.
Posted by MW Chong at 11:03 AM
Malaysia: Short-term rates stable on Bank Negara intervention
Short-term rates remained stable on Bank Negara’s intervention to absorb excess liquidity from the financial market. The liquidity surplus in conventional operations was reduced to RM10.2bn from the RM18.3bnl estimated yesterday morning, while the surplus in the Islamic system eased to RM2.2bn from RM5.0bn. The central bank conducted seven tenders comprising a range maturity auction, one repo, four Al-Wadiah and one commodity murabahah programme. The bank also issued a RM10.2bn late conventional tender and a RM2.2bn Al-Wadiah tender, both for one-day money. Overnight rate stood at 2.96%. (Bernama)
Japan: Noda says Japan prepared to act on JPY as strength hurts
Japanese Prime Minister Yoshihiko Noda said his government will act against any disorderly gains for the JPY, and urged policy makers around the world to follow through on pledges to rebalance global demand. “We have to observe the market closely to see whether there are excessive or disorderly moves in the currency market”, Noda, 55, said in an interview today. The world’s third-largest economy will shrink in the last two quarters of the year, according to forecasts from Morgan Stanley and BNP Paribas in Tokyo, hampered by weakening export demand in China and Europe and strength in the JPY. (Bloomberg)
EU: S&P downgrades Spain to one level above junk on growing risks
Spain’s debt rating was cut to one level above junk by Standard & Poor’s, which cited mounting economic and political risks as the government considers a second bailout. The country was lowered two levels to BBB- from BBB+, New York-based S&P said in a statement yesterday. S&P assigned a negative outlook to the nation’s long-term rating and lowered the short-term sovereign level to A-3 from A-2. The downgrade comes after Spain announced a fifth austerity package in less than a year and published details of stress tests of its banks. (Bloomberg)
Brazil: Cuts rate to record low amid focus on fueling growth
Brazil reduced its benchmark interest rate for the 10th straight time as government officials increase stimulus to spur economic growth in the world’s second-largest emerging market. Policy makers led by central bank President Alexandre Tombini cut the Selic rate by a quarter-percentage point today from its previous record low to 7.25%, as forecast by 35 of 73 economists surveyed by Bloomberg. Thirty-eight analysts forecasted no change. The bank board voted five to three, to cut the rate. (Bloomberg)
US: Fed says economy grows ‘modestly’ as housing, autos improve
The Federal Reserve said today that the US economy was expanding “modestly” last month, supported by improvements in housing and auto sales, even as the labor market showed little change. “Consumer spending was generally reported to be flat to up slightly since the last report,” the Fed said in its Beige Book business survey, which is based on accounts from the 12 district Fed banks. A Labor Department report last week showed that while the unemployment rate unexpectedly declined in September, payroll growth slowed.. (Bloomberg)
Posted by MW Chong at 9:33 AM
US stocks fall on earnings; Alcoa weighs on Dow
US stocks fell sharply on Wednesday, with the S&P 500 Index ending lower for a fourth consecutive trading session, after aluminum producer Alcoa Inc cut its global demand outlook and Chevron Corp warned of lower earnings. The S&P 500 declined 8.92 points or 0.6% to close at 1,432.56, with energy as the greatest laggard and financials the best performer of its major industry groups. The Dow Jones Industrial Average fell 128.56 points, or 1%, to close at 13,344.97, dropping for a third trading session. (Market Watch)
Berjaya buys 60% in Algaetech
Berjaya Corp (BCorp)’s wholly-owned subsidiary, Berjaya Group, has acquired a 60% stake in Algaetech International SB, comprising 900,000 shares, from LM Greentech SB for RM1m cash. BCorp said that after the acquisition, it would advance RM300,000 on a quarterly basis over a year to Algaetech for working capital. “The acquisition allows BCorp to invest in green technology and bio-technology projects with potential applications in health products, environmental management and renewable energy,” it said in a filing with Bursa Malaysia yesterday. (Financial Daily)
Fernandes to raise RM1bn via IPOs
Tan Sri Tony Fernandes is planning a back-to-back listing of his privately-held entities – Tune Insurance Malaysia and AirAsia X SB – with IPOs that will raise at least RM1bn early next year. Financial executives familiar with the plans said the Tune Group, controlled by Fernandes and his partner Datuk Kamarudin Meranun, had submitted an application for the listing of Tune Insurance in end-Sept. Meanwhile, the submission for AirAsia X’s IPO application was planned for as early as this week. (Financial Daily)
Malton-Batu Kawan JV for RM3.8bn project
Malton has entered into a joint venture with Batu Kawan Development SB for a proposed joint development of 300 acres in Batu Kawan, Penang, with an estimated gross development value (GDV) of RM3.8bn. “The JV is in line with the company’s expansion of its core business arms of property development and construction, and is expected to contribute to the medium and long-term profitability of Malton and its subsidiaries,” Malton said. (BT)
Green light for CPO export tax cut
The Cabinet has agreed to lower the crude palm oil (CPO) export tax from the current 23% as a means to stem falling palm oil prices, the Plantation Industry and Commodities Minister Tan Sri Bernard Dompok said. CPO prices had been on a downtrend for months but suddenly plunged three weeks ago. On 2 Oct, palm oil posted its biggest loss in nearly three years, tumbling 9% to RM2,255 per tonne - its steepest daily drop since the 2008 financial crisis. However, since news reports of a possible cut in CPO tax surfaced a week ago, palm oil prices have risen and begun to stabilize at around RM2,400 per tonne. (BT)
Johore Tin rectifies rights, warrants prices
Johore Tin yesterday clarified that the company has resolved the price issue concerning its planned renounceable rights issue of 23.3m new shares together with detachable warrants of the exact amount, on the basis of one-for-three. In an exchange filing, Johore Tin said the issue price of the rights shares has been fixed at RM1.28 each, representing a discount of approximately 31.6% to the theoretical ex-rights price of RM1.87 per share, calculated based on the five-day volume weighted average market price up to and including 9 Oct 2012, of RM2.07. The exercise price of the warrants has been fixed at RM2.28 each and has a tenure of five years. (Malaysian Reserve)
ING Agrees to Sell Malaysia Unit to AIA Group (Bloomberg)
AIA Group Ltd. (1299), the third-largest Asia-based insurer, agreed to buy ING Groep NV (INGA)’s insurance business in Malaysia for about 1.3 billion euros ($1.7 billion). The purchase will boost the percentage of profit AIA gets from Malaysia to 13 percent from 8 percent, it said in a statement. Separately, AIA said its value of new business rose 22 percent in the third quarter to a record $300 million. AIA Chief Executive Officer Mark Tucker has sought to revive new business growth after the Hong Kong-based insurer was hurt during the financial crisis because of woes at its bailed- out former parent American International Group Inc. (AIG) Tucker today said the strength of AIA’s balance sheet means it can grow its existing business as well as buy new assets. “It’s a terrific asset and I think very complementary to our own,” Tucker said in an interview with Bloomberg TV. “We can always look at growing the business organically and if there are compelling acquisitions then we will look at them.”
The purchase includes ING’s life-insurance and employee- benefits businesses in Malaysia, as well as its 60 percent stake in ING Public Takaful Ehsan Berhad. The deal values the operations at 16.9 times 2011 earnings and 2.2 times book value in the first half of 2012, ING said. The transaction, which may be completed in the first quarter, is expected to lead to a gain of about 780 million euros, Amsterdam-based ING said. AIA fell 1 percent at yesterday’s close in Hong Kong, crimping this year’s gains to 22 percent. ING lost 0.2 percent to 6.38 euros in Amsterdam.
Automotive: Special Perodua package for undergrads. Perusahaan Otomobil Kedua Sdn Bhd (Perodua) has offered a "cheap" package for students at higher learning institutions to own a Perodua car. They can buy a Perodua car by paying a monthly instalment of as low as MYR299, with no downpayment. (Source: Business Times)
AirAsia expects to complete its negotiations with Airbus to buy an additional 100 A320 aircraft for the airline's expansion in a month's time, said Tan Sri Tony Fernandes. "100 should be enough but we will supplement it with aircraft leases. We also need to take more of the A320 Neos aircraft," he said.(Star Biz)
The government will bear the holding cost for the rubber industry if exporters need to stop selling, in a move to support the price of SMR 20. Minister of Plantation Industries and Commodities, Tan Sri Bernard Dompok said the price mechanism would kick in should the tyre-grade SMR20 fall below US$2.70 (RM8.31 as at midday) per kg. "The tripartite agreement between Thailand, Indonesia and Malaysia would cut off 300,000 tonnes to the market, and the portion that Malaysia would take is at 39,000 tonnes in proportion with the rubber we produced," he said. The three countries had agreed in August to cut down rubber trees and trim exports by 300,000 tonnes, or about 3% of global production this year in an attempt to curb declining global rubber prices. The move came into effect on Oct 1. (StarBiz)
Brahim's Holdings says the catering agreement between its unit LSG Sky Chefs-Brahim's Sdn Bhd (LSGB) and Malaysian Airline System (MAS) remains intact. It said any operational issues will be reviewed and resolved progressively within the framework of the existing catering agreement. "Upon discussions with the representatives of MAS, Brahim's is pleased to inform that there are no substantial issues at the shareholders' level with MAS in respect of the catering agreement," it said. Brahim's said that LSGB is committed to continue supporting MAS' efforts to enhance its branding and improve its service delivery platform. The company will reconvene its extraordinary general meeting to relay the clarification with MAS to its shareholders. (BT)
The retail chain industry is expected to achieve growth of 5% this year and 5.5% next year, said Malaysian Retailer-Chains Association (MRCA) president Datuk Nelson Kwok. "Retailers consist of many types of businesses. Thus, some saw growth while others saw a drop in sales during the last quarter," he said. "Having said that, our members are prepared to face the challenges ahead. Some are moving overseas to expand and counter the slowdown in domestic businesses. Locally, retailers are coming up with ways and means to increase their sales and bottomline," he added. The coming months will be better. "The budget (2013) is already out and some funds have been put back into the market. We hope this will stimulate business activities in the domestic market," Kwok said. Its vice-president Valerie Choo said the last two quarters were slow due to subdued consumer sentiment with many consumers adopting a "wait and see" attitude, especially for big ticket purchases in anticipation of the 13th general election. "But we're confident that the fourth quarter (of 2012) will be good because of the festive seasons and school holidays. I believe we'll be able to catch up and maintain a 5% retail sales growth projected for the full year," she said. She said for 2013, it is cautiously optimistic driven by funds pumped by the government and mega projects introduced this year. "This will translate into more money in the system and more consumer spending. 2013 will be slightly better at 5.5% growth," she added. (Sun)
The Forest Research Institute Malaysia (FRIM) launched Malaysia's first carbon offset conservation programme with the collaboration and sponsorship from Bumi Armada. The project involves the conservation of carbon stored at Field 11, a 5.6ha of rich, biologically diverse forest site within FRIM's 544ha campus in Kepong. Field 11 has the capacity to store 3,938.6 tonnes of carbon equivalent annually and Bumi Armada's contribution of RM107,000 will cover the carbon credits from the conservation of the forest within the project site for a period of five years. (BT)
The share price of Asia Media was among the biggest losers yesterday when it shed 28%, prompting a query for unusual market activity (UMWA) from Bursa Malaysia. In its reply to the stock exchange, Amedia said it was unaware of any development which could have contributed to the UMA save for its previous announcements pertaining to a proposed transfer of its listing to the main board and a proposed bonus issue and free warrants issue. (Star Biz)
RAM Rating Services has reaffirmed the long-term rating of AA3 for Mukah Power Generation Sdn Bhd's senior Sukuk Mudharabah programme of up to RM665m (2006/2021) with a stable outlook. Mukah Power is an independent power producer incorporated to construct, own, operate and maintain a 270-MW coal-fired power plant in Mukah, Sarawak, under a 25-year power purchase agreement (PPA) with Syarikat SESCO Bhd. (StarBiz)
Tenaga Nasional: Malaysia-Indonesia companies to supply coal to Malaysia
Aditia1Energy Sdn Bhd, a potential coal supplier to TNB Fuel Services Sdn Bhd (TNBF), which is a wholly-owned subsidiary of Tenaga Nasional Bhd (TNB), Wednesday signed a Memorandum of Understanding (MoU) with Southdale Resources Sdn Bhd and PT Exploitasi Energi Indonesia Tbk, for the supply, delivery and sale of coal to Malaysia. Executive Director of Aditia1Energy, Datuk Ahmad Mukriz said the 3 companies planned to forge a close and active relationship to supply, deliver and sell up to 3m metric tonnes of the commodity to TNBF each year for the purpose of generating electricity. (Bernama)
Berjaya Corporation: Buys 60% of Algaetech
Berjaya Corporation Bhd's wholly-owned subsidiary, Berjaya Group Bhd, has acquired 60% stake in Algaetech International Sdn Bhd, comprising 900,000 shares, from LM Greentech Sdn Bhd for RM1m cash. Berjaya Corporation said following the acquisition, Algaetech will be a 60%-owned subsidiary of the company and Berjaya Corp will advance a sum of RM300,000 on quarterly basis for a year to Algaetech for working capital. It said the acquisition allows the company to invest in green technology and bio-technology projects with potential applications in health products, environmental management and renewable energy. (Business Times)
Malton: Legal tussle for Pusat Bandar Damansara buildings
A court case has started involving companies believed to be linked to property group Malton Bhd and Johor Corp (Jcorp) concerning an old agreement to sell the prized Pusat Bandar Damansara (PBD) buildings. The case is drawing some level of interest because the parties involved are significant corporations and the fact that PBD is an inconic building in the Klang Valley. Top lawyers are also representing the respective parties. Tan Sri Cecil Abraham is part of the team fighting for the companies linked to Malton while Tommy Thomas is representing the parties linked to JCorp. In essence, the case involves 2 units linked to Malton, which has initiated action against JCorp over a piece of land that the latter was supposed to have sold some years ago. They are now demanding that JCorp hand over the land and buildings worth RM700m. (StarBiz)
UAC Bhd: Privatisation by Boustead Holdings approved
Boustead Holdings has received overwhelming approval from UAC’s shareholders for its proposal to take the company private. At UAC’s EGM on Wednesday, shareholders approved Boustead’s selective capital reduction and repayment exercise, along with UAC’s proposed dividend. (Financial Daily)
Harrisons Holdings: Customs Department rejects request for extension over RM91.7m due The Customs Department has rejected Harrisons Holdings unit's request for an extension of 3 weeks over payment for RM91.75m. Harrisons said on Wednesday its unit Harrisons Trading (Sabah) Sdn Bhd (HTSB) had on Monday received a letter from the Customs Department rejecting HTSB's request. It said the Customs Department has advised HTSB to settle the amount demanded (RM91.75mil) on an urgent basis. However, it said the board was seeking legal advice on HTSB's options and response to Customs' latest letter as HTSB was not liable to pay as previously announced. (StarBiz)
Golsta Synergy: Mulls selling non-profitable overseas business
Golsta Synergy plans to sell its non-profitable overseas businesses in Indonesia and China, it said in a reply to a Bursa Malaysia Securities on Wednesday. The company, which was queried over the recent surge in the share price, said the board had held preliminary discussion on the proposed sale of these businesses. They included cultivation of oil palm seeds and seedlings in Indonesia and rubber processing and trading of rubber related products in China. It said the details of the proposal have not been finalised and is yet to be approved by the board. Golsta closed 5.5 sen higher at RM1.01. There were 789,200 shares done at prices ranging from 97 sen to RM1.12. The company said its major shareholder Messrs GS Capital Sdn Bhd, had on Sept 25, disposed 6.09m shares to public investors. (StarBiz)
Glove: Government to bear holding cost for rubber industry
The government will bear the holding cost for the rubber industry if exporters need to stop selling, in a move to support the price of SMR 20. Minister of Plantation Industries and Commodities, Tan Sri Bernard Dompok said on Wednesday the price mechanism would kick in should the tyre-grade SMR20 fall below US$2.70 (RM8.31 as at midday) per kg. He said the tripartite agreement between Thailand, Indonesia and Malaysia would cut off 300,000 tonnes to the market, and the portion that Malaysia would take is at 39,000 tonnes in proportion with the rubber we produced. The three countries had agreed in August to cut down rubber trees and trim exports by 300,000 tonnes, or about 3% of global production this year in an attempt to curb declining global rubber prices. (StarBiz)
Plantation: Malaysia can have B5 biodiesel nationwide by Dec to cut CPO stocks
Malaysia is ready to have nationwide implementation of the B5 biodiesel by year-end and have allocated the funds to do so, said Plantation, Industries and Commodities minister Tan Sri Bernard Dompok on Wednesday. He said the government has allocated the funds for the building of blending facilities. In Malaysia, B5 biofuel is a blend of 5% palm methyl ester and 95% regular diesel. A speedier nationwide implementation of the B5 biodiesel programme could help speed-up the take-up of oil palm in the country. Some RM42m has reportedly been set aside to fund in-line blending facilities at 6 petroleum depots with another RM200m earmarked to set-up blending facilities nationwide. (Business Times)
Posted by MW Chong at 9:32 AM
Asia FX By Cornelius Luca - Wed 10 Oct 2012 15:29:27 CT (Source:CME/www.lucafxta.com)
The appetite for risk remained limited on Wednesday, as the theme of expectations for weak third quarter earnings in the US stayed with the market and the Fed acknowledged only modest improvement in the economic activity. Most of the foreign currencies ended off their lows; only the loonie fell. The US stock markets dived again. The short-term outlook for the major foreign 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!
US: The Fed's Beige Book showed that the housing market has shown widespread improvement, but economic activity has improved only modestly in recent months.
Today's economic calendar
Japan: Bank lending for September
Japan: BoJ Monetary policy meeting minutes
Japan: Machinery orders for August
Japan: Consumer confidence index for September
Australia: Consumer inflation expectation for October
Australia: Unemployment rate for September
Asia Stocks Drop on Japan Machine Orders, Spain Downgrade (Bloomberg)
Asian stocks dropped, with the regional benchmark index heading for a fourth day of decline, after Japanese machinery orders fell and Standard & Poor’s downgraded Spain’s debt rating. Fanuc Corp. (6954), the world’s largest maker of controls that run machine tools, slipped 2.6 percent in Tokyo. Nippon Sheet Glass Co., a supplier of glass used in automobiles and buildings that gets about 41 percent of sales from Europe, decreased 1.7 percent. Lynas Corp. slumped 17 percent in Sydney after a court ruling further delayed the development of its rare-earth refinery in Malaysia.
The MSCI Asia Pacific Index (MXAP) slipped 0.2 percent to 120.39 as of 9:24 a.m. in Tokyo before markets in China and Hong Kong open. About three shares fell for every two that rose on the gauge. The measure is heading for its biggest weekly decline since August after the International Monetary Fund this week cut its global growth forecasts and warned of a steeper slowdown unless policy makers in the U.S. and Europe address threats to their economies. S&P’s downgrade of Spain “reminds people that the situation remains difficult,” said Angus Gluskie, managing director at White Funds Management in Sydney who manages more than $350 million. “Investors need to remain cautious, and it’s not a time to bet big. It’s worth keeping an eye on how the U.S. election is shaping up as well as how the European development is shaping up.”
Japan Stocks Fall on Spain Rating Cut, Machinery Orders (Bloomberg)
Oct. 11 (Bloomberg) -- Japanese shares fell, with the Nikkei 225 Stock Average (NKY) headed for an 11-week low, after Spain’s debt rating was cut by Standard & Poor’s and Japan’s machinery orders dropped the first time in three months, renewing concern about global demand. Nippon Sheet Glass Co. (5202), which gets 41 percent of its sales in Europe, dropped 3.4 percent. Fanuc Corp. (6954), Japan’s biggest maker of factory robotics, fell 2.3 percent. Sumitomo Metal Mining Co. slid 1.7 percent after metal prices dropped. The Nikkei 225 Stock Average dropped 0.6 percent to 8,547.99 as of 9:20 a.m. in Tokyo, its lowest since July 26. The broader Topix Index slid 0.5 percent to 713.54, with more than two stocks falling for each that rose.
S&P’s downgrade of Spain “reminds people that the situation remains difficult,” said Angus Gluskie, managing director at White Funds Management in Sydney who oversees more than $350 million. “Investors need to remain cautious, and it’s not a time to bet big. It’s worth keeping an eye on how the U.S. election is shaping up as well as how the European development is shaping up.”
U.S. Stocks Fall as Alcoa Slumps Amid Earnings Concern (Bloomberg)
U.S. stocks fell, sending the Standard & Poor’s 500 Index to the lowest level in a month, as Alcoa (AA) Inc.’s forecast fueled concern over corporate earnings and global economic growth. Alcoa, the largest U.S. aluminum producer, lost 4.6 percent after cutting its outlook for global demand for the metal. Chevron Corp. slid 4.2 percent after saying third-quarter earnings were “substantially” lower than the previous period. Wal-Mart Stores Inc. paced gains with consumer stocks, rising to a record price after saying it had a “very strong” back-to- school season and will add U.S. stores. Yum! Brands Inc. (YUM) rallied 8 percent after profit beat analyst estimates. The S&P 500 slipped 0.6 percent to 1,432.56 in New York. The benchmark gauge fell 1 percent yesterday, and is down 2 percent over four days. The Dow Jones Industrial Average lost 128.56 points, or 1 percent, to 13,344.97. More than 5.9 billion shares changed on U.S. exchanges today, about 1.5 percent below the three-month average.
“The fear is that this is going to be a really bad earnings season,” Hank Smith, chief investment officer at Haverford Trust Co. in Radnor, Pennsylvania, said in a telephone interview. His firm oversees $6.5 billion in assets. “If S&P 500 (SPX) earnings come in better than expectations, the markets are going to view that positively. We’re off to a good start but we’ve got a long way to go.”
European Stocks Decline for a Third Day; AB InBev Falls (Bloomberg)
European stocks declined for a third day as investors speculated that economic fundamentals don’t justify current stock valuations and Alcoa Inc. (AA) cut its forecast for global aluminum demand. Anheuser-Busch InBev NV slipped 1.2 percent after a report that the U.S. may block its $20 billion takeover of Grupo Modelo SAB. BAE Systems Plc (BA/) fell after abandoning plans to merge with European Aeronautic, Defence & Space Co. Imagination Technologies Group Plc (IMG) lost 9.4 percent as analysts recommended selling the shares. The Stoxx Europe 600 Index (SXXP) dropped 0.6 percent to 268.71 at the close of trading, the lowest level since Sept. 28. The benchmark gauge has still surged 15 percent from this year’s low on June 4 as the European Central Bank unveiled an unlimited bond-purchase plan and the Federal Reserve started a third round of quantitative easing.
“We are probably in the upper range in terms of equity indices and it is difficult to see the catalysts for further upside,” said Peter Garnry, an equity strategist at Saxo Bank A/S in Copenhagen. “The recent rally was not based on changes in the underlying economic expectations and as such something has to give.” The Stoxx 600 is trading at 11.9 times the estimated earnings of its companies, higher than its five-year average of 11.5, data compiled by Bloomberg show. The gauge last month reached a price multiple of 12.3, the highest since 2010.
Emerging Stocks Head for Two-Week Low on Europe Concerns (Bloomberg)
Emerging-market stocks slid to the lowest level in two weeks, led by technology companies, on concern Europe’s debt crisis and slowing global growth will hurt exporters’ earnings. The MSCI Emerging Markets Index (VXEEM) lost 0.5 percent to 992.09, the weakest close since Sept. 26. Technology companies sank the most among 10 industry groups. Usinas Siderurgicas de Minas Gerais slumped to the lowest in a month in Sao Paulo while Samsung Electronics Co. (005930) fell the most since August in Seoul, pacing declines by exporters. Russia’s Micex gauge retreated for a third day and South Korea’s Kospi slid to the lowest in a month.
European banks may need to sell as much as $4.5 trillion in assets through 2013 if policy makers fall short on pledges to stem the fiscal crisis, according to a report from the International Monetary Fund, which cut its 2012 global growth forecast yesterday to 3.3 percent. The projection compares with a $3.8 trillion estimate in April. China’s economic expansion slowed in the second quarter to 7.6 percent, as trade and manufacturing decelerated. The IMF report was “an official reminder” that global growth is faltering, Marc Chandler, the global head of currency strategy at Brown Brothers Harriman & Co., said by phone from New York today. “The IMF downward revisions to growth forecast, the pessimism that’s still near about Europe in a recession, China slowing -- those are still baked in the cake, and it weighs on sentiment.”
The iShares MSCI Emerging Markets Index exchange-traded fund, the ETF (EEM) tracking developing-nation shares, slid 0.6 percent. The Chicago Board Options Exchange Emerging Markets ETF Volatility Index, a measure of options prices on the fund and expectations of price swings, rose 0.9 percent. 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.
High Frequency Trading of High Concern, ASIC Says (Bloomberg)
Australian regulators are considering requiring all trading algorithms to have an inbuilt “kill switch” to immediately disable them if they malfunction, Australian Securities and Investments Commission Chairman Greg Medcraft said at a conference in Sydney. ASIC is also mulling a mandate that any trades done through a dark pool, an off-exchange venue that doesn’t display prices or the identity of buyers and sellers, have meaningful price improvement from public platforms, Medcraft said. Australia’s latest consultation paper on electronic trading closed for comments Sept. 14. Final rules are expected this month.
Electronic trading has come under scrutiny globally after the practice was blamed for a May 2010 incident that saw the Dow Jones Industrial Average briefly lose almost 1,000 points in less than 20 minutes. An algorithm malfunction on Aug. 1 cost Knight Capital Group Inc. (KCG) $440 million, driving the company to the brink of bankruptcy. Traditional exchanges worldwide are losing market share to dark pools and other alternative venues. “People are still looking for an answer on high-frequency trading,” Medcraft said. “While I know that some high- frequency trading provides liquidity, I also know that some senior bankers and fund managers have privately described it as providing phantom liquidity. The reason for that is that it’s phantom because it only stays there for a few seconds, or micro seconds.”
Euro Weakens Against Most Peers After S&P Lowers Spain’s Rating (Bloomberg)
The euro weakened against most of its major counterparts after Standard & Poor’s cut Spain’s debt rating to one level above junk. The 17-nation currency dropped for a fourth day versus the yen before Italy sells bonds today amid concern Europe’s debt crisis is deepening. Australia’s dollar fell before data today that may show payrolls aren’t growing enough to keep the nation’s unemployment rate from climbing to a three-month high. “I can see further weakness to the euro from here,” said Imre Speizer, a strategist in Auckland at Westpac Banking Corp. (WBC), Australia’s second-largest lender. “If the fiscal outlook is much worse in Spain, it could fall to junk status.” Europe’s shared currency slid 0.2 percent to $1.2854 as of 9:12 a.m. in Tokyo from yesterday. It lost 0.3 percent to 100.36 yen. The dollar dropped 0.1 percent to 78.08 yen.
The single currency traded 0.1 percent from its lowest level in more than a week after S&P lowered Spain’s rating by two levels to BBB- from BBB+ and assigned a negative outlook to the country’s debt. Spain’s deepening recession is limiting the government’s policy options and social discontent is likely to intensify, the rating company said in a statement yesterday. Moody’s Investors Service on Aug. 30 said that Spain’s credit rating remains on review for possible downgrade from Baa3, the lowest investment grade. “Because of S&P’s downgrade, people can’t help thinking about Moody’s next action,” said Daisuke Karakama, a market economist in Tokyo at Mizuho Corporate Bank Ltd., a unit of Japan’s third-largest banking group by market value. Italy will auction government bonds today maturing in 2015, 2016, 2018 and 2025.
In Australia, the jobless rate probably rose to 5.3 percent in September from 5.1 percent the prior month, according to the median estimate of economists surveyed by Bloomberg News. That would be the highest since June. Australia’s dollar slid 0.1 percent to $1.0222 and declined 0.3 percent to 79.81 yen.
Aussie Drops Before Jobs Report, After Spain Rating Cut (Bloomberg)
Australia’s dollar fell before data today that may show payrolls aren’t growing enough to keep the nation’s unemployment rate from climbing to a three-month high. The so-called Aussie slid versus most of its 16 major counterparts after Standard & Poor’s lowered Spain’s credit rating, adding to concern the euro area’s debt crisis is deepening. New Zealand’s currency, nicknamed the kiwi, failed to rally following a two-day drop after a gauge indicated that manufacturing contracted for a third-straight month. “There’s no doubt the Aussie labor market is softening; the key question is how much,” said Mike Jones, a currency strategist at Bank of New Zealand in Wellington. “The headwinds facing the Aussie are going to remain in place. We’re looking for a slow decline to parity by year-end.”
The Australian dollar lost 0.1 percent to $1.0222 at 10:22 a.m. in Sydney after rising 0.5 percent in the previous three days. It fell 0.2 percent to 79.85 yen. New Zealand’s currency bought 81.71 U.S. cents from 81.63 yesterday, when it completed a 0.4 percent two-day drop. It was little changed at 63.84 yen. Australia’s 10-year note yield dropped six basis points to 3.02 percent. New Zealand’s swap rate, a fixed payment made to receive floating rates, lost two basis points to 2.60 percent. The jobless rate in Australia probably rose to 5.3 percent in September from 5.1 percent in the previous month, according to the median estimate of economists surveyed by Bloomberg News before the statistics bureau releases the report today. If confirmed, that would be the highest since June. The number of people employed may have increased by 5,000 after falling by 8,800 in August, the poll showed.
S&P said in a statement yesterday it cut Spain’s credit score two levels to BBB- from BBB+, one level above junk. The ratings company assigned a negative outlook to the nation’s long-term rating and lowered the short-term sovereign level to A-3 from A-2, citing “significant risks to Spain’s economic growth and budgetary performance.”
Wholesale Inventories in U.S. Rose More Slowly as Sales Gained (Bloomberg)
Inventories at U.S. wholesalers rose in August at a slower pace as sales advanced from the previous month. The 0.5 percent increase in stockpiles followed a revised 0.6 percent rise in July, Commerce Department data showed today in Washington. The median forecast in a Bloomberg survey called for a 0.4 percent August gain. Sales increased 0.9 percent from a 0.2 percent drop the previous month. Companies are tempering stockpiles as the impasse over U.S. fiscal policy clouds the outlook for demand through the end of the year, showing inventories may contribute less to economic growth. Wholesalers had goods on hand to last 1.20 months at the current sales pace. “Business is usually pretty good about bringing inventories back in line pretty quickly” after an “involuntary buildup” in the last few months, Ryan Wang, an economist at HSBC Securities USA Inc. in New York, said before the report. “Slower inventory accumulation is another reason why growth will probably stay pretty modest in the second half of the year.”
The median forecast for wholesale inventories was based on a Bloomberg survey of 28 economists. Estimates ranged from no change to an increase of 0.8 percent.
Fed Says Economy Grows ‘Modestly’ on Housing, Autos (Bloomberg)
The Federal Reserve said today that the U.S. economy was expanding “modestly” last month, supported by improvements in housing and auto sales, even as the labor market showed little change. “Consumer spending was generally reported to be flat to up slightly since the last report,” the Fed said in its Beige Book business survey, which is based on accounts from the 12 district Fed banks. Conditions in manufacturing were “somewhat improved,” according to the report, which provides anecdotal evidence on the health of the economy two weeks before the Federal Open Market Committee meets in Washington on Oct. 23-24. The Beige Book provides support for Fed Chairman Ben S. Bernanke’s view that economic growth isn’t strong enough to bring about a quick healing of the labor market. A Labor Department report last week showed that while the unemployment rate unexpectedly declined in September, payroll growth slowed.
The Fed on Sept. 13 announced a third round of quantitative easing, with purchases of $40 billion a month of mortgage debt, and said its benchmark interest rate was likely to stay low through the middle of 2015. The report’s description of the economy is not as positive as Beige Books earlier in the year, which used the word “moderate” to describe the pace of expansion, said Dana Saporta, U.S. economist at Credit Suisse Group AG in New York. “In Fed parlance, modest is a step down from moderate,” she said.
Drop in Openings Signals Limited U.S. Job Growth: Economy (Bloomberg)
Job openings in the U.S. dropped for a second straight month in August, indicating companies are reluctant to beef up payrolls through year-end without faster economic growth. The number of positions waiting to be filled fell by 32,000 to 3.561 million from a revised 3.593 million the prior month that was less than previously estimated, the Labor Department said today in a statement. Hiring increased at the same time firings rose to a three-month high. Companies such as Foot Locker Inc. are facing a weakening global economy and the possibility of automatic tax increases and government cutbacks, helping explain limited payroll growth. At the same time, a jobless rate that fell below 8 percent last month for the first time in more than three years shows some progress in the labor market.
“A lot of firms may be back on their heels, reluctant to go out and expand,” said Scott Brown, chief economist at Raymond James & Associates Inc. in St. Petersburg, Florida. “There is uncertainty due to the election, the fiscal cliff and Europe. We are definitely still adding jobs. The key question is how much more restraint we’re going to see from businesses.” Today’s report helps illuminate the dynamics behind the government’s monthly employment figures. Payrolls rose by 114,000 workers, the fewest in three months. While job openings eased in August, they were still 409,000 higher than the same month last year. In September, the jobless rate fell to 7.8 percent from 8.1 percent the prior month, the Labor Department said Oct. 5.
U.S. Sets Anti-Dumping Duties on China Solar Imports (Bloomberg)
The U.S. Commerce Department set anti-dumping duties ranging from 18.32 percent to 249.96 percent on solar-energy cells imported from China, reducing preliminary penalties imposed on Trina Solar Ltd. (TSL) and raising them slightly on Suntech Power Holdings Co. The duties, the result of a complaint brought by the American unit of Bonn-based SolarWorld AG (SWV), may worsen trade relations between the U.S. and China, the world’s largest economies. The countries have sparred over government support for clean energy as President Barack Obama and Republican challenger Mitt Romney each pledge tough action on China ahead of next month’s U.S. election. “Commerce’s decision raises the industry’s chances of reclaiming equal footing,” said Gordon Brinser, president of SolarWorld Industries America, based in Hillsboro, Oregon. “Only fair competition can provide sustainable gains in technological efficiency, cost reduction and end-user pricing.”
The Commerce Department said in a statement today that it will impose duties of 18.32 percent on the value of Trina Solar imports after finding its goods were sold -- or “dumped” -- in the U.S. below cost. The department in May set 31.14 percent preliminary penalties on the company’s merchandise. Suntech, the world’s largest solar-power equipment maker, faces anti-dumping duties of 31.73 percent, compared with a rate of 31.22 percent set in May.
China Economy to Improve After Leadership Change, BlackRock Says (Bloomberg)
China’s economic growth is poised to recover after the country’s once-in-a-decade leadership transition, bolstering the outlook for stocks across Asia, said BlackRock Inc., the world’s biggest money manager. Vice President Xi Jinping is forecast to succeed President Hu Jintao as head of the ruling Communist Party at a congress that starts Nov. 8 in Beijing. “Once we get through the leadership change, both in the U.S. and also in this part of the world, I think we’re going to see a much healthier base from which we can have growth within the expectations of China,” said Mark McCombe, BlackRock’s Asia-Pacific chairman, during Bloomberg Television’s Titans At The Table program which aired yesterday.
BlackRock joins Citigroup Inc. in saying policies to boost China’s growth, which was the slowest in three years in the second quarter, will be clearer after the leadership change. Other analysts, including Haitong Securities Co.’s Chen Ruiming and Bank of Communications Co.’s Hao Hong, say China will struggle to reverse the slowdown. China’s economy grew 7.6 percent in the April-June quarter as the European debt crisis sapped demand for exports and a campaign to rein in home prices eroded domestic consumption. The economy may expand 7.7 percent this year, according to the median forecast of 45 economists in a Bloomberg survey, which would be the slowest annual rate since 1999.
Noda Calls for China Talks as Island Dispute Threatens Growth (Bloomberg)
Japanese Prime Minister Yoshihiko Noda called for talks to contain economic damage from a diplomatic dispute with China as Japan’s largest trading partner downgraded its delegation to an annual gathering in Tokyo. “These are the second and third largest economies in the world and our interdependence is deepening,” Noda, 55, said yesterday in an interview at his office in Tokyo. “If our ties cool, particularly economic ones, then it isn’t a question of one or the other country suffering. Both countries lose out.” Noda’s call reflects rising concern that tensions over Japan’s nationalization last month of islands claimed by both nations will hurt trade. The International Monetary Fund, holding its annual meetings in Tokyo this week, said an escalation in strains may affect world growth. China’s central bank governor and finance minister are skipping the gathering.
China’s backlash against the move saw Toyota Motor Corp. (7203) and Nissan Motor Co. suffer their biggest month drop in Chinese car sales since at least 2008 in September. JPMorgan Chase & Co. sees a 0.8 percentage-point hit to Japan’s gross domestic product from the China dispute this quarter. “We need talks through various channels to make sure there is no effect on the broader relationship,” Noda said. “There has been an effect on individual industries. The overall effect will depend on the talks we have going forward and the efforts we make.”
Japan Calls China PBOC Chief Skipping IMF Meeting ‘Regrettable’ (Bloomberg)
A decision by the Chinese central bank chief and finance minister not to attend International Monetary Fund meetings in Tokyo this week is “regrettable,” Japan’s finance minister said, as tensions lingered over an island dispute. “We will take a wide view on communication with China,” Finance Minister Koriki Jojima said today after he was informed that his Chinese counterpart Xie Xuren and People’s Bank of China Governor Zhou Xiaochuan wouldn’t attend. He called China- Japan economic relations “very important.” The Chinese move follows Japan’s decision last month to buy the islands from their private owner, a purchase that sparked protests in China and clouded a $340 billion trade relationship. The protests occurred as China, which begins a leadership transition next month, has been more forceful in making its territorial claims across the region.
“It’s a signal that the dispute is very serious to China, and that it will impact relations with Japan in all areas,” said Dariusz Kowalczyk, senior economist and strategist at Credit Agricole CIB in Hong Kong. “China is becoming more assertive with the historical territorial issues.” Yi Gang, a deputy governor of the People’s Bank of China, and Vice Finance Minister Zhu Guangyao will lead the country’s delegation, the Xinhua News Agency reported last night. The Chinese central bank didn’t immediately respond to faxed questions today seeking comment, and calls to the Chinese finance ministry’s news department went unanswered. China’s four biggest state-owned banks have said they won’t go to the Oct. 9-14 meetings, which will be attended by about 10,000 participants, according to Xinhua. Zhou’s name was earlier listed on schedules to speak at IMF and Institute of International Finance events in Tokyo.
Brazil Cuts Rate to Record Low Amid Focus on Fueling Growth (Bloomberg)
Brazil reduced its benchmark interest rate for the 10th straight time as government officials increase stimulus to spur economic growth in the world’s second- largest emerging market. Policy makers led by central bank President Alexandre Tombini cut the Selic rate by a quarter-percentage point today from its previous record low to 7.25 percent, as forecast by 35 of 73 economists surveyed by Bloomberg. Thirty-eight analysts forecast no change. The bank board voted 5-3 to cut the rate. “Considering the balance of risks for inflation, the recovery of domestic activity and the complexity surrounding the global environment, the committee understands that the stability of monetary conditions for a sufficiently prolonged period of time is the most adequate strategy to guarantee the convergence of inflation to target, even if not in a linear fashion,” policy makers said in their statement posted on the central bank’s website.
President Dilma Rousseff’s administration has expanded policy actions aimed at reviving the $2.5 trillion economy, which is growing at the slowest pace among major developing countries.
Spain Downgraded to One Level Above Junk by S&P on Risks (Bloomberg)
Spain’s debt rating was cut to one level above junk by Standard & Poor’s, which cited mounting economic and political risks as the government considers a second bailout. The country was lowered two levels to BBB- from BBB+, New York-based S&P said in a statement yesterday. S&P assigned a negative outlook to the nation’s long-term rating and lowered the short-term sovereign level to A-3 from A-2. “The negative outlook on the long-term rating reflects our view of the significant risks to Spain’s economic growth and budgetary performance, and the lack of a clear direction in euro-zone policy,” S&P said. “The deepening economic recession is limiting the Spanish government’s policy options.”
Lagarde Signals IMF Role in Europe Rescues May Not Need Cash (Bloomberg)
The International Monetary Fund doesn’t need to lend money to Spain to help the country tackle its fiscal crisis, Managing Director Christine Lagarde indicated in an interview today. “Some people say unless you have skin in the game, meaning money, you are not really respected, you are not heard,” Lagarde said in a Bloomberg Television interview with Sara Eisen in Sendai, Japan. “I am not so focused on that as I am on the monitoring. I think we would rather act in our framework, use one of the tools that is frequently used, but as I said we can be flexible.” The fund is helping monitor a 100 billion-euro ($128.8 billion) bailout of Spanish banks and is co-financing rescue packages for Greece, Ireland and Portugal. While the European Central Bank has said the IMF should be involved in overseeing the economic programs of countries asking the central bank to buy their bonds, the fund’s exact role has not yet been defined.
Spain has been reluctant to ask for a bailout from Europe’s rescue mechanism, which comes with economic measures attached. The IMF said this week it sees a one-in-six chance of global economic growth slipping below 2 percent. Whether Europe can deal “proactively” with its debt crisis will in part determine the severity of any slowdown, the fund said in its World Economic Outlook report. The Stoxx Europe 600 Index slipped 0.3 percent at 7:22 a.m. in New York today on signs China is yet to reverse its slowdown.
Posted by MW Chong at 9:23 AM
Drought Cuts U.S. Crops Below Demand First Time in 38 Years (Bloomberg)
Drought damage to corn and soybean fields in the U.S., the world’s top grower and exporter, is eroding supplies of the nation’s two largest crops to below year-earlier consumption levels for the first time since 1974. The government probably will say tomorrow that the U.S. corn harvest and inventories on Sept. 1 will be a combined 11.604 billion bushels, less than the 12.33 billion consumed and exported last year, according to a Bloomberg survey of 31 analysts. Soybean supplies will be 2.932 billion bushels, below the 3.157 billion used in 2011. Supplies failed to top usage from the previous year only twice since 1960 for corn and five times for soybeans, U.S. Department of Agriculture data show.
Record heat in June and July sparked the worst drought since 1956, sending corn and soybeans prices to record highs. Morgan Stanley predicted corn may rally 35 percent in a year, while Barclays Plc sees soybeans gaining 16 percent. Higher costs for dairies, grain processors and livestock producers helped send global food prices in September to the highest since March, United Nations data show. “Supplies of both corn and soybeans will be tight, and we expect prices to rebound after the report,” said Bill Tierney, the chief economist for Chicago-based AgResource Co. and a former USDA grain analyst. “There is no evidence that current prices are rationing soybean supplies, and there will be less supply relief for corn” from South American harvests that start in February, he said.
Corn futures have jumped 15 percent this year through yesterday on the Chicago Board of Trade, and soybeans surged 28 percent. The 24 commodities tracked by the Standard & Poor’s GSCI Spot Index rose 3.5 percent in the period, led by wheat’s gain of 33 percent. The MSCI All-Country World Index of equities climbed 11 percent, and Treasuries returned 1.9 percent, a Bank of America Corp. index shows. Corn fell 0.8 percent today to $7.36 a bushel at 11:40 a.m. on the CBOT, and soybeans dropped 1.4 percent to $15.28 a bushel. In its report tomorrow at 8:30 a.m. in Washington, the USDA probably will cut its domestic corn-production forecast to a nine-year low of 10.616 billion bushels, down 1 percent from 10.727 billion estimated in September and the fourth straight monthly reduction, according to the average of estimates in the Bloomberg survey. As recently as June, the government predicted a record harvest of 14.79 billion bushels.
Combined with the government’s Sept. 1 estimate of reserves at 988 million bushels, total U.S. supply will 6.3 percent below estimated consumption last year. Inventories before next year’s harvest may fall to 656 million bushels, the lowest since 1996, a Bloomberg survey showed. About 25 percent of the corn crop was in good or excellent condition as of Sept. 30, compared with a five-year average of 52 percent, USDA data show. The dry weather also sped up the harvest, which was 69 percent complete as of Oct. 7, compared with a five-year average of 28 percent. Plunging output in the U.S. is expected to erode global corn reserves before the Northern Hemisphere harvest to the lowest since 2007, a separate Bloomberg survey showed. The average U.S. cash price was $7.3027 on Oct. 8, 26 percent higher than a year earlier, boosting costs for meat companies including Sanderson Farms Inc. (SAFM) and ethanol makers including Valero Energy Corp. (VLO)
Prices have dropped from the record of $8.49 on Aug. 10, as exports slowed and farmers increased sales from newly-harvested fields. Corn futures for December delivery touched $7.05 on Sept. 28, the lowest since July 12. Soybean futures that reached an all-time high of $17.89 on Sept. 4 slipped as low as $15.04 on Oct. 3.
There are still signs that farmers will store more of their remaining supply in a bet prices will increase. Premiums paid on Oct. 9 above Chicago futures for corn delivered to export terminals near New Orleans and in Decatur, Illinois, were the highest since at least 2008, a sign that grain merchants are increasing inventories from this year’s harvest, said Tim Emslie, the research manager for Country Hedging Inc. in Inver Grove Heights, Minnesota. “The cash markets are already reflecting tightening supplies and will lead the rally to slow usage,” said Emslie, who predicted corn would reach $8.50 in the next six months. Corn, the primary source of livestock feed in the U.S., may reach $10 before this time next year because cattle and hog producers may not have 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.
With the drop in prices during the past two weeks, cattle and hog producers could have bought corn and sold livestock futures to lock in small profits, the Chicago-based Linn Group said in a report Oct. 5. Domestic feed, food and fuel production will account for almost 89 percent of total usage, the highest in 40 years, USDA data show. Corn exports by the U.S. may fall to the lowest since 1975 as overseas buyers shift to other grains and suppliers, the government estimates. World inventories as a percentage of use before next year’s harvest will drop to the lowest since 1974, government data show. “Exports are less important for corn prices than the demand for feed and ethanol,” AgResource’s Tierney said.
Soybean farmers may see a smaller reduction in their harvest than the USDA predicted last month, after August rain improved yields. Production may be 2.763 billion bushels, or 4.9 percent more than the 2.634 billion estimated a month earlier, the Bloomberg survey of analysts showed. That’s still below the 2011 harvest of 3.093 billion.
Rising export demand will erode reserves before next year’s harvest to 135 million bushels, down from the 169 million the USDA estimated for Sept. 1, the survey showed. U.S. exporters sold 1.297 million metric tons of soybeans in the week ended Sept. 27, the most since Nov. 25, 2010, the USDA said Oct. 4. Sales commitments for delivery before Aug. 31 rose to 23.47 million tons, 40 percent higher than a year earlier and equal to 82 percent of what the government forecast last month for the marketing year, USDA data show. Sales of soy-based animal feed for delivery in the year that began Oct. 1 rose 54 percent to 2.53 million tons from 1.64 million a year earlier, the USDA said last week. Last month, the government said reduced production would cut U.S. exports 28 percent this year and soymeal sales by 17 percent.
“USDA export projections are too low, and possibly significantly too low,” said Randy Mittelstaedt, the director of research at R.J. O’Brien & Associates in Chicago. “Demand is not slowing, and any increase in production will be offset by an increase in export projections.” He predicted soybeans will rise to a record.
DTN Closing Grain Comments 10/10 14:54 (CME)
Corn, Beans Drift Lower; Wheat Rallies Again
Corn and soybeans continued their recent slide with the latter falling through technical price support. Wheat was able to close higher for a third straight day, tied to ongoing concerns over global production and tightening supplies.
Pro Farmer: After The Bell Wheat Recap (CME)
Wheat futures at all three locations favored a firmer tone most of the day and ended mid- to high-range. Chicago and Minneapolis wheat ended mostly 5 1/4 to 6 1/4 cents higher. Kansas City wheat saw slightly higher gains. Futures benefited from some spread trading with corn today as traders bet on a rise in wheat prices.
Wheat Market Recap Report (CME)
December Wheat finished up 5 1/2 at 869 3/4, 7 off the high and 6 1/4 up from the low. March Wheat closed up 5 1/4 at 881. This was 6 up from the low and 7 off the high.
December Chicago wheat traded slightly higher on the day along with KC and Minneapolis wheat. Early support came from a lower US Dollar and additional momentum due to dry conditions for a portion of the western plains, and some suggest that North America may see better export demand in the second half of the crop year. Wheat markets found a bit of bullish news overnight after the French Farm office cut its estimate for French soft wheat stocks to 1.8 million tonnes, which was down 600,000 from their September estimate and the lowest level in 13 years. France exported 1.4 million tonnes of soft wheat in August which brings the total for this marketing year to 2.2 million tonnes. The market expects this pace to increase over the next quarter as they sell wheat to customers that were previously supplied by the Black Sea shippers. Traders will keep a close eye on cuts in production for world exporters and the impact those cuts will have on world ending stocks in tomorrow's USDA report. World ending stocks for 2012/13 are estimated at 176.71 million tonnes and most in the trade estimate the report will show ending stocks just under 173. Traders anticipate cuts in production of 2-4 million tonnes in Australia and the USDA currently has the crop pegged at 26 million tonnes.
December Oats closed up 5 1/2 at 383 1/2. This was 8 up from the low and 3 off the high.
Pro Farmer: After The Bell Corn Recap (CME)
Corn futures closed 3 1/2 to 5 1/4 cents lower in the December through July 2013 contracts, which was in the lower half of today's range but off session lows. Far-deferred futures closed mostly 2 to 3 cents higher. Buying interest was limited as traders await USDA's October crop reports tomorrow morning, which caused futures to drift lower today.
Corn Market Recap for 10/10/2012 (CME)
December Corn finished down 5 1/4 at 736 3/4, 6 3/4 off the high and 4 1/2 up from the low. March Corn closed down 4 1/2 at 737 3/4. This was 4 3/4 up from the low and 5 3/4 off the high.
December corn traded slightly lower on the day and saw pressure from a sharply lower soybean market. Modest support was provided by a stronger wheat market throughout the day. The trade is expecting a US average corn yield near 123 bushels per acre vs. the September estimate of 122.80 in tomorrow's USDA report. Production is expected to fall near 10.600 billion bushels vs. 10.727 in September. The market is also assuming beginning stocks of 988 million bushels which was revised lower from 1.181 billion bushels on the September 1st Quarterly stocks report. The stocks report suggested that US corn domestic feed usage may need to be adjusted higher by 100 million bushels or more. Corn basis in the Gulf of Mexico fell today as weak export demand continues to limit gains. Basis in the interior of the Corn Belt was steady as harvest finishes up in various regions and farmers have lost interest in selling more grain due to the recent slide in prices. Outside markets were mixed on the day with US Stocks lower, crude oil lower, and the US Dollar steady. November Rice finished down 0.205 at 15.025, equal to the high and equal to the low.
Oil Trades Near Two-Day Low as U.S. Crude Stockpiles Increase (Bloomberg)
Oil traded near the lowest close in two days in New York after an industry-funded report showed stockpiles increased a fifth week in the U.S., the world’s biggest crude consumer. Futures were little changed after slipping for a third day in four yesterday. Crude inventories rose 1.6 million barrels last week, according to the American Petroleum Institute. An Energy Department report today may show supplies gained 1.5 million, according to a Bloomberg News survey. The department lowered its 2012 estimates for U.S. gasoline demand and the price of West Texas Intermediate oil. “The market is factoring in an inventory build and a little bit more demand destruction,” said Jonathan Barratt, chief executive officer of Barratt’s Bulletin, a commodity newsletter in Sydney.
Crude for November delivery rose 9 cents to $91.34 a barrel in electronic trading on the New York Mercantile Exchange at 10:16 a.m. Sydney time. The contract yesterday declined 1.2 percent to $91.25, the lowest close since Oct. 8. Prices are down 7.6 percent this year. Brent oil for November settlement slid 17 cents to $114.33 a barrel on the London-based ICE Futures Europe exchange yesterday. The European benchmark grade’s premium to WTI closed at $23.08, the widest since October 2011. U.S. gasoline consumption will average 8.72 million barrels a day this year, down from 8.75 million in 2011 and a projection last month of 8.73 million, the Energy Department’s Energy Information Administration said yesterday in its monthly Short- Term Energy Outlook. WTI will average $95.55 a barrel this year, down from the September forecast of $95.66, the report showed.
Recap Energy Market Report (CME)
November crude oil prices rallied to their highest level since September 21st early in the session and reversed to close down more than $1.00. Early support for the crude oil market seemed to come from lingering uncertainty surrounding conflict between Syria and Turkey. There were also reports that the US sent troops to Jordan to help manage the Syrian situation. It is also possible that the crude oil complex drafted support from a turn lower in the US dollar. A monthly report from OPEC this morning lowered their global oil demand forecast for 2013, and the EIA followed suit in their monthly report. Latter in the session, it seemed that weakness in the crude oil market came on slowing economic growth concerns, which pressured equity markets lower. Expectations for this week's EIA crude inventory report are for a build in the range of 1.25 million barrels last week.
Silver Market Recap Report (CME)
The bull camp in silver has to be somewhat cheered by silver's initial capacity to avoid a new low for the move in the face of the new low for the move in the gold market this morning. Like gold, silver was probably undermined by the reversal in the equity markets as stocks at times fell down to the lowest levels of the month. With weakness in the rest of the metals complex and weakness in grain and equity prices the risk-off crowd probably felt they had the advantage of the outside market environment today.
Gold Market Recap Report (CME)
The gold market ultimately favored the downside tilt in the action today. Clearly gold was able to reject the initial weakness and recover back into positive ground but with a fresh new low for the move into mid day it certainly seemed as if gold was tracking tightly with the US equity markets. Apparently periodic rallies in the Euro today were not given that much credence perhaps because gold was seeing weakness in a long list of physical commodity markets. Some traders were discouraged in the lack of fresh stimulus or easing talk, while others were growing concerned about a return of European debt problems.
Posted by MW Chong at 9:22 AM
Palm Oil Stockpiles in Malaysia Surge to Record on Output (Bloomberg)
Palm-oil stockpiles in Malaysia, the world’s second-largest producer, jumped to a record as a surge in output and an economic slowdown in China and Europe weakened demand for the commodity used in food and biofuel. Inventories jumped 17.4 percent to 2.48 million metric tons in September from a revised 2.11 million tons in August, the Malaysian Palm Oil Board said in a statement today. That is higher than the median estimate of 2.43 million tons in a Bloomberg survey last week and surpassed the previous all-time high of 2.27 million tons in November 2008. Output surged 20 percent to 2 million tons, a monthly record, while exports rose 4.5 percent to 1.51 million tons.
Rising supplies may pressure futures which plunged to the lowest level in almost three years in Kuala Lumpur last week as a deepening economic slowdown hurt demand. Stockpiles will continue to expand in October, November and December and may reach as high as 3 million tons by January, Dorab Mistry, director at Godrej International Ltd., said Sept. 23. “This is definitely going to weigh on prices,” Abah Ofon, an analyst at Standard Chartered Plc, said by phone from Singapore today. “Policy makers in Malaysia are a little bit more proactive with regards to trying to mop up some of this inventory. This is going to limit the downside.”
Malaysia’s Plantations Industries and Commodities Minister Bernard Dompok today said that the cabinet had agreed to review the export tax structure for crude palm oil and the country will work with Indonesia to stabilize prices. The extent of the cut has yet to be decided, said Dompok, who will present to the cabinet a proposal on Oct. 12. He proposed a cut to between 8 percent and 10 percent from 23 percent on Oct. 3. Indonesia reduced taxes last year to boost shipments of processed oil, increasing competition for Malaysia. Palm oil for December delivery gained 0.8 percent to 2,457 ringgit ($799) a ton on the Malaysia Derivatives Exchange, the highest price at close for the most-active contract since Oct. 1. Futures dropped 5.2 percent last week after falling on Oct. 2 to the lowest close since November 2009.
“I would expect to see demand coming back in strongly at these levels,” said Ofon. “With Indonesia now such a fierce competitor, the issue whether demand actually goes into Malaysia is arguable, a lot of that demand may just actually veer off to Indonesia instead.” Malaysian output may increase this month before declining sharply as the high production season ends, Ofon said. Output typically peaks between July and October, before tapering off from November onwards. Exports from Malaysia fell 1 percent to 448,624 tons in the first 10 days of October from 453,302 tons in the same period in September, surveyor Intertek said.
Pro Farmer: After The Bell Soybean Recap (CME)
Soybean futures sharply extended losses in mid-morning trade and posted a low-range close, finishing 12 to 26 3/4 cents lower in November through May contracts. Early pressure was limited by news China bought 120,000 MT of soybeans for 2012-13, as it signals prices have yet to ration use. But selling picked up as traders turned their focus to forecasts for rains in Brazil and tomorrow morning's USDA reports.
Soybean Complex Market Recap (CME)
November Soybeans finished down 26 3/4 at 1523 1/4, 26 3/4 off the high and 5 1/4 up from the low. January Soybeans closed down 25 1/2 at 1523 3/4. This was 5 3/4 up from the low and 25 1/4 off the high. December Soymeal closed down 8.4 at 462.6. This was 2.8 up from the low and 8.1 off the high. December Soybean Oil finished down 0.62 at 50.63, 0.92 off the high and 0.07 up from the low.
November soybeans traded sharply lower and made a new low for the week as traders took profits ahead of a USDA report that many feel will show an increase in the average US soybean yield and production. The trade is expecting a US average soybean yield near 37 bushels per acre vs. the September estimate of 35.3. Production is expected to rise to near 2.75 billion bushels vs. 2.63 in September. Despite the lower trade midday, many in the market believe that any increase in the average soybean yield and production will be offset slightly by increases in demand. Soybean demand continues to be robust and it the USDA announced this morning that US private exporters sold 120,000 tonnes of soybeans to China for 2012/13 delivery. Soybean basis has held steady to firm in the Gulf of Mexico despite the selloff in futures, however basis bids in areas of Corn Belt have declined as harvest advances. Outside markets were mostly negative on the day with US stocks trading lower along with crude oil.
EDIBLE OIL: Malaysian palm oil futures edged up to their highest in more than a week, tracking other vegetable oil markets, although gains were limited by record stockpiles. (Reuters)
Posted by MW Chong at 9:21 AM