Tuesday, October 16, 2012

20121016 1816 FCPO EOD Daily Chart Study.

FCPO closed : 2466, changed : -4 points, volume : lower. 
Bollinger band reading : pullback correction downside biased. 
MACD Histogram : rising higher, buyer testing market. 
Support : 2450, 2400, 2350, 2300 level.
Resistance : 2490, 2520, 2550, 2570 level.
Comment :
FCPO closed recorded marginal loss with lesser volume changed hand. Soy oil currently registering gains after overnight closed lower by more than 1% while crude oil price currently trading little higher after yesterday advance. 
Price traded higher during morning session and reserved downward after lunch break as traders awaits industry outlook by 3 key experts(Please refer to palm oil update posting  below). 
Chart wise, FCPO is still trading within a pullback correction downside biased market development testing resistance near middle Bollinger band level. 
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.

20121016 1737 FKLI EOD Daily Chart Study.

FKLI closed : 1653 changed : -4 points, volume : lower.
Bollinger band reading : correction range bound upside biased. 
MACD Histogram : falling lower, seller testing market. 
Support : 1651, 1645, 1640, 1635 level.
Resistance : 1657, 1660, 1670, 1680 level.
Comment :
FKLI closed recorded loss with quiet volume transacted doing 0.5 discount compare to cash market that closed marginally lower. Overnight U.S. markets closed higher and today Asia markets ended mostly recorded gains while European markets currently trading in positive zone. 
Overnight beats consensus U.S. retail sales data send most of the world markets higher. Back home, KLCI market closed in negative territory weighed down by some index link plantation counters due to continue weaket crude palm oil price.
FKLI daily chart reading suggesting a corrention range bound upside biased market development with MACD indicator having negative cross down. 
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.

20121016 1643 Palm Oil Related News.

Malaysia palm stocks to fall as low prices, tax cuts lure energy demand 0#FCPO: GODI.NS - RTRS
16-Oct-2012 16:32
For conference highlights, see (Full Story) Palm oil could fall to 2,200 rgt in next 4-6 wks -Mistry Tax reform could help spur demand - analysts
By Niluksi Koswanage
KUALA LUMPUR, Oct 16 (Reuters) - Record stocks of palm oil in No.2 producer Malaysia could fall if prices 0#FCPO: drop further, stepping up demand from the biofuel industry at a time when Brent crude remains well above $110 per barrel, analysts at an industry meeting said.
Palm oil prices have fallen by a fifth since the start of the year as weak fundamentals, aided by bleak global economic prospects, weighed on sentiment.
But they could drop from 2,465 ringgit ($810) per tonne now as stockpiles could reach as much as 3 million tonnes by the start of 2013, swelled by strong output and slowing exports, the analysts said in the Malaysian capital on Tuesday.
Food demand for Malaysia's palm oil has slowed because top buyers India and China have built up large stocks of imported oils, they said. Malaysian refiners are also losing business to Indonesian rivals who offer cheaper cargoes after Jakarta cut taxes on the grade last year.
But help for exports could also come from a plan by Malaysia to remove a quota on shipments of tax-free crude palm oil and cut export duties by January 2013 to help refiners become more competitive, the analysts said.
"This, together with the emergence of price-sensitive biofuel demand, should stop stocks rising from December, pulling up the premium for palm oil over Brent crude," James Fry, head of commodities consultancy LMC International, told a palm oil trade seminar.
Rising prices of Brent crude oil LCOc1, which rose above $116 on Tuesday, driven by Western sanctions on Iran and its nuclear programme, could burnish the appeal of biodiesel, although Fry says current levels of crude oil are not very sustainable, given slowing global economic growth. O/R
Fry's view on stocks were shared by Dorab Mistry, head of edible oil trading with Indian conglomerate Godrej International, who said Malaysian palm oil futures should fall to 2,200 ringgit in the next 4 to 6 weeks to reflect fundamentals and a draw in energy demand.
Palm oil could then be competitive for blending into fuel for electricity generation or biodiesel, and within three months potentially reduce Malaysian stocks from a record of 2.48 million tonnes hit in September, he said.
"If prices are held artificially high, it will be counter-productive and stocks on Jan. 1 could be much higher and could remain at 3 million tonnes until March 1, 2013," Mistry said.

The industry had long awaited Malaysia's move to reform its export taxes more than a year after Indonesia changed its structure, the analysts said, though Mistry said both producers should abolish all export taxes and quotas to boost shipments.
"Malaysia and Indonesia will enjoy a level playing field," Mistry said. "With better infrastructure and more efficient ports, there is no doubt Malaysia will win a greater share of the export business. It is a win-win situation for all."
With Malaysia reducing taxes on crude palm oil shipments next year to 4.5 percent to 8.5 percent from 23 percent, Mistry said it was a matter of time before top buyer India imposed import duties to safeguard its domestic oilseed growers.
"This will happen but not immediately," he said. "Indian domestic prices for soybeans have fallen and farmers are not happy."
The Indian government will wait for inflation, which hit a 10-month high of 7.8 percent in September, to recede, a scenario Mistry foresees, as the rupee has appreciated against the dollar and commodity prices are falling.

Rising palm oil output puts the sector in a position to attract more demand next year as supply of competing edible oils tightens, thanks to limited crushings and acreage for oilseeds, Thomas Mielke, editor of industry newsletter Oil World, said.
"World production of all other oilseeds, except soybean, is declining this season by 5 million tonnes in contrast to a 10 million tonnes increase last season. It will force a decline in crushing, by a combined 3.5 million tonnes," Mielke said.
"Palm oil will fill some of this supply gap. I am of the opinion that palm oil prices are undervalued and present a good buying opportunity," he added.
Fry was more cautious, saying that soybean production was expected to rise strongly in South America in the coming year, which would narrow soyoil's current premium of around $200 per tonne over palm oil products.
"But more important than all these influences is knowing when Brent crude finally falls back to more sustainable levels," he said, though he gave no timeframe for the declines that could make margins for palm oil-based biodiesel less attractive. ($1=3.0570 Malaysian ringgit)

HIGHLIGHTS-Key palm oil analysts call the market - RTRS
16-Oct-2012 16:32
(Adds analyst)
KUALA LUMPUR, Oct 16 (Reuters) - Following are comments by key analysts at a palm oil industry conference in Kuala Lumpur:

"After over a year of hesitating, Malaysia has finally reacted with its own export tax reform. This, together with the emergence of price-sensitive biofuel demand, should stop stocks rising from December, pulling up the premium for palm oil over Brent crude."
"At that time, as South American soybean crop approach, the soy-palm oil premium should shrink, but more important than all these influences is knowing when Brent crude finally falls back to more sustainable levels."

"2012 output is now benefiting from the good rains in most regions in 2011 and early this year, but there is still a legacy of dry conditions in a couple of Indonesian regions."
"Since oil palms take three years to start producing and eight years to reach peak output, we can expect a rising wave of Indonesian palm oil output."

"My short term forecast for crude palm oil prices is a level of 2,200 ringgit on the Bursa Malaysia Derivatives third month sometime in the next four to six weeks."
"Prices must enable energy demand to kick in and for vast tonnages to be contracted and shipped out. In the New Year we could look at higher prices."

"I have also been asked about the chances of India imposing an import duty on crude palm oil and raising the import duty on refined palm oil and RBD Olein. I believe this will happen but not immediately. Indian domestic prices for soybeans have fallen and farmers are not happy."
"However, the Indian government will wait until local inflation numbers turn lower. This will happen soon because the rupee has got stronger and commodity prices have fallen. Once inflation numbers are lower, the government will be in strong position to give some small protection to oilseed farmers."

"The current anti-dumping inquiry launched by the EU in the case of biodiesel exporters from Indonesia and from Argentina will take about a year to complete."
"At the end, if the EU finds a case for levying an anti- dumping duty, it can be levied with retrospective effect. Therefore, it will remain a cloud overhanging the use of palm products in biodiesel for export."

"Malaysian production will peak in October, it is generally expected that Indonesia will enjoy an extended double peak, that is October and November."
"My expectation is that Malaysia will produce 18 to 18.2 million tonnes of crude palm oil in 2012. I confirm Indonesian crude palm oil production looks like it is exceeding 27.5 million tonnes this year."

"At that price level, $749 CIF Rotterdam or Bursa Malaysia Derivatives at 2,200 Ringgits on the 3rd position, palm will be so competitive that energy demand will come back strongly.
"Palm oil will be competitive for blending into fuel for electricity generation. Palm biodiesel will also be super competitive and will go for discretionary blending without requiring a mandate or any subsidy. This is the way stocks can be reduced within three months."

"Given the current fundamentals, Bursa Malaysia futures on the 3rd position should be at 2,200 ringgit. CPO CIF Rotterdam should be US$ 749."
"Malaysia should immediately remove all export taxes and export quotas. Malaysian refiners will be very competitive and will be able to work at full capacity. With zero export duty, palm exports will expand. At this level, the Indonesian export tax also becomes nil."
"Indonesian growers and millers will actually be better off than at present. Malaysia and Indonesia will enjoy a level playing field. With better infrastructure and more efficient ports, there is no doubt Malaysia will win a greater share of the export business. It is a win-win situation for all."

"It now appears fairly certain that Malaysian palm oil stocks will reach or exceed 3 million tonnes on January 1 2013. If prices are held artificially high, it will be counter-productive and stocks on 1st January could be much higher and could remain at 3 million tonnes until March 1 2013."
"The recent difficulty in boosting exports must serve as a warning. Malaysia and Indonesia began a major export push from August onwards.
"The result is high stocks and full pipelines in all destination markets. Even India, which was the best performing market until last month, is now suffering acutely from high priced heavy inventory and a lack of storage. "

"Production of the ten oils and fats will not increase for the first time in 20 years. For the new season, we are going see a slight decline in the total crushings of oilseed."
"World production of seed oils to decline in 12 months. Palm oil has to fill part of this demand. Palm oil is in the situation to do this."
"For 2012, Indonesian production is expected to hit 26 million tonnes. Malaysian production is seen at 18.5 million tonnes for the same year.
"Indonesia's production will increase by 2.0 million tonnes, while Malaysia production will be lower by 0.4 million tonnes from a year ago. Total production in this calendar year is 52 million tonnes worldwide."

"World production of all other oilseeds except soybean is declining this season by 5 million tonnes in contrast to a 10 million tonnes increase in last season. It will force a decline in crushing -- by a combined 3.5 million tonnes."
"Palm oil will fill some of this supply gap. I am of the opinion that palm oil prices are undervalued and present a good buying opportunity."

"I see palm oil undervalued for several reasons. Palm oil stocks are at a record high in Indonesia and Malaysia, and have are totally discounted in prices. There are indications that palm oil has started to recover in the second week of October."
"What is most striking is the RBD palm olein's discount to soyoil $250 per tonne. This is unsustainable. Palm oil prices in Rotterdam CIF have for a time fallen below Brent crude oil, about $10-15 per tonne. I believe consumers will take advantage of the current, attractive prices. Exporters are ready sellers owing to the currently large stocks."

20121016 1612 Global Markets & Commodities Related News.

STOCKS: Asian shares rose as investor sentiment improved thanks to an overnight rally in U.S. stocks that was fuelled by better than expected earnings from Citigroup Inc, the third-largest U.S. bank, and above forecast retail sales data. European stocks opened higher. U.S. stocks climbed on Monday, rebounding from last week's losses after Citigroup's earnings and retail sales sharply exceeded expectations. (Reuters)

US retail sales point to stronger economic growth
WASHINGTON, Oct 15 (Reuters) - U.S. retail sales rose in September as Americans stepped up purchases of everything from cars to electronics, a sign that consumer spending is driving faster economic growth.
Other U.S. data on Monday pointed to an economy feeling the effects of cooling global growth, with New York state factory activity shrinking in October.

FOREX: The dollar hit a one-month high against the yen and tested a key resistance level after U.S. retail sales data came in stronger than expected. (Reuters)

FOREX-Dollar hits 1-month high vs yen, tests resistance
TOKYO, Oct 16 (Reuters) - The dollar hit a one-month high against the yen on Tuesday and tested a key resistance level after U.S. retail sales data came in stronger than expected.    
"Dollar/yen is near sensitive levels. Speculative accounts are trying to test the upside now," said Teppei Ino, currency analyst at the Bank of Tokyo-Mitsubishi UFJ.

U.S. retail sales point to stronger economic growth (Reuters)
U.S. retail sales rose in September as Americans stepped up purchases of everything from cars to electronics, a sign that consumer spending is driving faster economic growth.

Spanish aid request from euro zone seen in November (Reuters)
Spain could ask for financial aid from the euro zone next month and if it does the request would likely be dealt with alongside a revised loan programme for Greece and a bailout for Cyprus in one big package, euro zone officials said.

U.S. corn harvest 79 pct complete, soy harvest at 71 pct (Reuters)
U.S. farmers had harvested 79 percent of their corn crop and 71 percent of their soybean crop as of Sunday, their pace slowing down from previous weeks due to rainy conditions, a U.S. Agriculture Department report said on Monday.

GRAINS: U.S. soy rose 0.8 percent, recovering from its lowest in more than three months on expectations China will step up imports with prices easing from record highs.  (Reuters)

POLL-U.S. crude stocks seen up on higher imports last week (Reuters)
U.S. crude oil inventories were expected to have risen for the week to Oct. 12 due to an anticipated rise in imports, while weak demand was seen lifting gasoline stockpiles, a preliminary Reuters poll of analysts showed on Monday.

OIL: Brent futures rose above $116, underpinned by supply concerns after the European Union slapped more sanctions on Iran, while ample supplies and healthy inventory in top consumer the United States capped gains.  (Reuters)

LME's buyer aims "bazooka" at warehouse delays (Reuters)
The head of the Hong Kong bourse, buyer of the London Metal Exchange, promised to aim "a bazooka" at the problem of long queues which clients endure to withdraw material like copper and zinc from warehouses regulated by the LME.

BASE METALS: Copper prices firmed, lifted as equities and the euro were buoyed by better-than-expected corporate earnings from Citigroup Inc, positive U.S. data and hopes for progress in battling Europe's debt crisis. (Reuters)

PRECIOUS METALS: Gold held steady above a one-month low hit in the previous session, as upbeat U.S. retail sales data appeared to undermine the necessity for stimulus measures and dented gold's appeal as a hedge against monetary easing.  (Reuters)

POLL-Analysts boost long-term base metal f'casts
LONDON, Oct 15 (Reuters) - Analysts revised up their long-term price forecasts for copper and most other base metals, saying rising production costs and a modest demand increase would be the main factors pushing prices higher in the next 10 years, a Reuters survey showed.
The survey of 11 analysts showed the average price forecast for copper  rose 3.6 percent from last year's Reuters poll figure to $6,420.90 a tonne, also supported by a finite supply outlook.

POLL-Analysts slightly less bearish on copper, wary over China
LONDON, Oct 15 (Reuters) - Analysts moderated their downbeat views of copper prices in the final quarter of this year and in 2013, after central banks provided stimulus, but they expect uncertainty over China to prevent a quick return to bullishness, a Reuters poll showed.
The 27 market participants surveyed last week called for cash copper prices  to average $8,019.80 a tonne in 2012, rising to $8,267.30 in 2013. The forecasts are up marginally from a similar poll conducted in July.

METALS-Copper lifted by stronger equities, euro
SHANGHAI, Oct 16 (Reuters) - Copper prices firmed on Tuesday, lifted as equities and the euro were buoyed by better-than-expected corporate earnings from Citigroup Inc , positive U.S. data and hopes for progress in battling Europe's debt crisis.  
"Today's modest rally in stocks and the euro gave investors an opportunity to buy into London copper and keep prices range-bound after yesterday's dip," said a Shanghai-based trader.

PRECIOUS-Gold hovers above 1-month low; U.S. data weighs
SINGAPORE, Oct 16 (Reuters) - Gold inched up on Tuesday, off a one-month low hit in the previous session, but upbeat U.S.  retail sales data appeared to undermine the necessity for  stimulus measures and dented gold's appeal as a hedge against  monetary easing.
"The support from QE3 (third round of quantitative easing)  is fading," said Li Ning, an analyst at Shanghai CIFCO Futures.  "And if the economy keeps improving, investors will wonder about the length and scale of QE3."

20121016 1437 Palm Oil Related News.

VEGOILS-Palm oil edges up, industry outlook in focus
Tue Oct 16, 2012 2:01am EDT
* Market players eye comments from key industry speakers at
    * Palm oil neutral in 2,361-2,528 ringgit range -technicals
    * Malaysia palm oil exports higher than month ago

    By Anuradha Raghu
    KUALA LUMPUR, Oct 16 (Reuters) - Malaysian palm oil futures
inched up on Tuesday, although gains were capped by concerns
over rising stockpiles as investors digested news that export
tax cuts will only take effect next year.
    Traders were also waiting for top industry analysts Dorab
Mistry, Thomas Mielke and James Fry to give their outlooks for
palm oil prices at a seminar in Malaysia later in the day, as
well as any comments they make on the recently announced tax
    The government last week said it would slash crude palm oil
export taxes to boost shipments and ease stocks as well as grab
market share from neighbouring Indonesia, but that these reforms
would only be implemented in January.
    "The market is still trying to get a grip on how big stocks
can get in Malaysia, as well as digesting news that the export
taxes are not going to come through until early January," said
ANZ agricultural commodity strategist Victor Thianpiriya.
    "In the short term this will probably depress prices a
little bit, as consumers would prefer to wait until January and
potentially source from Indonesia to bridge that gap."
    By the midday break, the benchmark January contract
on the Bursa Malaysia Derivatives Exchange had risen 1.3 percent
to 2,502 ringgit ($819) per tonne.
    Total traded volumes stood at 13,345 lots of 25 tonnes each,
slightly higher than the usual 12,500 lots.
    Technical analysis showed palm oil will be neutral until it
gets out of a range of 2,361-2,528 ringgit per tonne, said
Reuters analyst Wang Tao.
    Palm oil stocks in Malaysia hit a record 2.48 million tonnes
in September, but strong export data in the first 15 days of
October could help support prices.
    Exports of Malaysian palm oil products for Oct. 1-15 rose
13.1 percent to 769,534 tonnes from 680,112 tonnes last month,
cargo surveyor Intertek Testing Services said on Monday.

    Another cargo surveyor Societe Generale de Surveillance
showed exports in the same period surged 16.3 percent to 768,550
    In a bullish sign for palm oil, Brent futures held steady
above $115, underpinned by supply concerns after the European
Union slapped more sanctions on Iran, while ample supplies and
healthy inventory at top consumer the United States capped
    In other vegetable oil markets, U.S. soyoil for December
delivery inched up 1.2 percent in early Asian trade.  
The most active January 2013 soybean oil contract on the
Dalian Commodity Exchange rose 1.2 percent.

20121016 1114 Global Markets & Energy Related News.

GLOBAL MARKETS-Asian shares higher after U.S. data, Citi results
TOKYO, Oct 16 (Reuters) - Asian shares rose after rallies in U.S. stocks and positive U.S. data cheered investor mood, with hopes for some progress in the euro zone debt crisis also helping to underpin sentiment.  
"Citigroup's earnings yesterday reinforced the confidence in the health of big firms, and the markets responded. U.S. investors had been extremely cautious, but with the stream of good data, such as in retail sales data and corporate earnings, fears seem eased for now," said Ryoo Yong-suk, an analyst at Hyundai Securities.

U.S. crude oil exports may be inevitable
--John Kemp is a Reuters market analyst. The views expressed are his own--
LONDON, Oct 15 (Reuters) - Requests from Shell, BP and Vitol, among others, to start sending substantial amounts of U.S. crude to refineries in Canada have hit the headlines, as oil producers try to find outlets for surging production of light oil from North Dakota and elsewhere by easing decades-old restrictions on exporting domestically produced crude .
Less well-known is that record volumes of light hydrocarbons such as propane, butane and pentane are already being exported, as oil and gas producers seek alternative markets for the prodigious quantity of natural gas liquids (NGLs) now being produced alongside oil and gas from shale formations.

POLL-U.S. crude stocks seen up on higher imports last week
Oct 15 (Reuters) - U.S. crude oil inventories were expected to have risen for the week to Oct. 12 due to an anticipated rise in imports, while weak demand was seen lifting gasoline stockpiles, a preliminary Reuters poll of analysts showed on Monday.
The poll of seven analysts forecast a 1.5 million barrel build in weekly U.S. crude stockpiles for the week ended Oct. 12. All but one analyst estimated an increase in crude inventories.

OIL-Nearing expiry, Brent Nov. crude rises on N. Sea delay
NEW YORK, Oct 15 (Reuters) - Brent crude Prices rallied on Monday on support from North Sea production delays and skepticism about an offer from Iran to negotiate the halting of higher grade uranium enrichment that put pressure on oil prices during the session.
"The talk that Iran might be ready to halt uranium enrichment to get out of sanctions provided some pressure, but skepticism about any talks and the stock market moving higher pulled U.S. crude back up," said Mark Waggoner, president at Excel Futures Inc.

NATURAL GAS-U.S. gas futures end down 4 pct, first loss in six sessions
NEW YORK, Oct 15 (Reuters) - U.S. natural gas futures slid n early 4 percent on Monday, pressured for the first time in six tr ading days by milder weather forecasts and profit-taking afte r the front month rose to a 201 2 high last week.
"Natural gas is under selling pressure based on moderating temperatures and considering it's had a nice run of late," said Jay Levine, broker at enerjay, LLC in Portland, Maine.

EURO COAL-Prices fall to fresh lows, seen dropping more
LONDON, Oct 15 (Reuters) - Prompt physical coal prices fell by around $2 a tonne on Monday although few trades were reported.
"November loading Richards Bay cargoes were offered at $80 after the trade. There are several firms offering," one European trader said.

20121016 1007 Malaysia Corporate Related News.

Although current news of  Maybank‟s merger and acquisition (M&A)  aspirations, post its mega fund-raising exercise, seem to be focused on Thailand,  some industry experts do not rule out that the banking giant may be casting its  eye on targets closer to home. And one name that keeps cropping up as a  potential merger target is  RHB Capital. Said one banker: “Don't rule out a  potential merger with RHB Bank. After all, the major shareholders in both the  banks need to lower their stakes. And creating a giant banking group will bode  well for both parties.” (StarBiz)

Tenaga Nasional Bhd (TNB) has signed a joint development agreement (JDA)  with PT PLN, the Indonesia state-owned utility company and PT Bukit Asam  (PTBA), a coal producer, on the development of a coal-fired power plant project,  a coal mine project and a high-voltage, direct current (HVDC) interconnection  project.  TNB will be taking the material role in the procurement relating to the  HVDC interconnecting project. PLN will lead in the development of the  coal fired power plant and PTBA will develop the coal mine project. The  JDA will not have any effect on TNB's issued and paid-up share capital  and it will not have any material effect on TNB's earnings, net assets or  shareholding structure. (BT, BMSB)

Gas Malaysia Bhd has signed a MoU with IEV Energy Sdn Bhd to conduct  a feasibility study to review the prospects of cooperating and successfully  undertaking projects to transport and market liquefied natural gas to industrial  consumers who are not connected to Gas Malaysia‟s natural gas pipeline system.  IEV, which is part of  IEV Holdings Ltd listed on the SGX, has  developed and operated mobile infrastructure to transport and  distribute natural gas in Southeast Asia since 2007. The feasibility study  is scheduled to be completed within ninety days from the date of MOU.  (BMSB)

Putrajaya has to spend an extra RM3.6bn for land acquisition, compensation  and other costs for the RM12.5bn  Ipoh-Padang Besar double-tracking  project, which has faced two time extensions, according to the Auditor  General's Report 2011. The extra costs were due to land acquisition  (RM698.2m), squatter compensation (RM37.6m), consultancy charges  (RM256.9m), TNB re-connection charges (RM203.5m), other and legal fees  (RM1.4m), deferred payment scheme processing fees (RM10.1m) and Bank  Pembangunan Malaysia Berhad (BPMB) interest charges (RM2.4bn). The  Auditor-General‟s Report also revealed that the Finance Ministry wanted the  processing and legal fees to be paid by the contractor MMC-Gamuda JV but  the Transport Ministry went ahead and included the costs under the “associated  cost and expenses” category in the additional agreement as it cropped up after  the contract negotiations were done. (Malaysian Insider)

The export of Malaysian palm oil is expected to register a shortfall this year  from the record RM80.4bn in 2011. Minister of Plantation Industries and  Commodities Tan Sri Bernard Dompok said while there would be a shortfall,  it also depends on how the market reacts for the next two months of this year.  For the first nine-months of this year, Malaysian palm oil exports stood at  RM54bn. (StarBiz)

Malaysia can store 5.2m tonnes of palm oil, according to Plantation Industries  and Commodities Minister Tan Sri Bernard Dompok, puncturing  speculation that capacity may be fully used after holdings advanced to a  record.  That figure is more than twice the reserves held last month. Palm oil has  tumbled 23% this year as slowdown in Europe and China has curbed growth in  overseas demand for the edible oil.  "Although prices have not been upbeat  over the last few weeks, demand remains strong," Dompok added. (BT)

Maybank  plans to become a leading "cross-border" solutions bank in the  context of Asean-China by 2015, said its President and Chief Executive Officer,  Datuk Seri Abdul Wahid Omar. "Maybank was looking to expand to other  big cities in China in an organic manner without involving any merger and  acquisition," he said at a press conference in conjunction with the opening of its  Beijing branch, the third branch after Shanghai and Hong Kong. Apart from targeting Malaysian and Asean clients with investments and  business in China, Maybank was looking at supporting profitable  Chinese state-owned enterprises that have approval to borrow in foreign  currencies, he said. (Bernama)

Gamuda's substantial shareholders have been  trimming their stakes in the  construction outfit. The EPF pared down its stake in Gamuda to 5.37% as at Oct  11 from 5.76% earlier this month. Director  Raja Datuk Seri Eleena Azlan  Shah had sold a total of 1.9m shares on the open market between RM3.52 and  RM3.57 each. Executive director  Datuk Ng Kee Leen also disposed off 6m  shares or a 0.3% stake in a direct off-market trade last week. (Financial Daily)

Scomi Group Bhd said that its board has decided not to proceed with its  proposed offer for the sale of up to 283.2m shares in Scomi Marine Bhd. In  July, Scomi Group planned a renounceable offer for sale of up to 283.2m shares  in Scomi Marine at RM0.45/share held by Scomi Group to its shareholders, on  the 1:5 basis.  The offer for sale is part of the company's plan to dispose of its 76.1% in  Scomi Oilfield Ltd for RM776.0m, its entire stake in Scomi Sosma Sdn  Bhd for RM6.7m and 48% stake in Scomi KMC Sdn Bhd for RM0.8m.  (BT).

Parts of the plaster ceiling of the ground floor of the  Penang International  Airport came crashing down, injuring an employee. Several portions of the  plaster ceiling near the Malaysia Airlines ticketing office and the KL Airport  Services (KLAS) office gave way as gallons of water poured down from the  ceiling.  “The staff was not seriously injured, she‟s just been sent to the hospital  for check-up and observation,” said MAHB senior manager Mohd Arif  Jaafar. He said the unusually heavy downpour caused the gutters to  overflow and the water flowed to the ceiling. (Malaysian Insider)

It was good value, according to  Tan Sri Tony Fernandes and his partner  Datuk Kamarudin Meranun, that prompted them to raise their stake in  AirAsia when the share price fell in reaction to the establishment of Malindo  Airways. Fernandes and Kamarudin added 0.86% stake to bring their total  stake (indirect) in the company to 24.12%. (Star Biz)

Firefly is eyeing the possibility of expanding its services between Singapore and  Sabah and Sarawak and reinstating the flights between the city-state and  Terengganu. CEO  Ignatius Ong said Firefly would seek new and exciting  destinations, most importantly, profitable routes. (Bernama)

Dialog Group has incorporated Dialog IPS Marine (Labuan) Ltd, which will be  involved in the provision of logistic services for the marketing of specialist  products in the oil, gas and petrochemical industry. (BMSB)

DRB-Hicom is tipped to win this week a contract worth between  RM800m-900m to lay railway tracks for the  Sungai Buloh-Kajang MY  Rapid Transit (SBK MRT) project, people familiar with the matter said. The  contract is part of several jobs worth more than RM1.2bn that Mass Rapid  Transit Corp Sdn Bhd (MRT Corp) will be awarding soon.  The contract for track laying works had three shortlisted bidders  including Balfour Beatty Rail Sdn Bhd and Leighton-Lion Pacific.  DRB-Hicom had bid for the job with Mitsubishi Heavy Industries Ltd.  (BT)

MK Land Holdings Bhd is planning to launch exclusive hilltop developments  and commercial projects in prime locations to meet demand, says Group CEO  Lau Shu Chuan. Tthe hilltop developments will feature luxury bungalows and  town villas.MK Land currently has nine projects in Selangor, Perak and Kedah.  Its flagship project is Bandar Damansara Perdana, a 303.5ha township  development in Petaling Jaya, comprising landed commercial and  residential properties. The Damansara Perdana project is expected to  take another 10 years to be completed and is destined to be a premier  centre for business and living in Petaling Jaya. (BT)

The insurance arm of Tune group, Tune Insurance Malaysia, is expected to  offer up to 210.2m shares for its proposed initial public offering (IPO). The  shares to be offered comprise 143.4m new shares and 66.9m existing shares. Its  biggest shareholder Tune Money plans to offer the 66.9m or 8.9%  of Tune  Insurance shares under the listing exercise which will see its 80% direct stake  reduced to 55.85%. AirAsia‟s 20% direct stake in the no-frills insurance  company will shrink to 16.19% due to the issuance of new shares. (StarBiz)

Tradewinds Corp Bhd said it has exercised the option to enter into  agreements with Northern Gateway Free Zone Sdn Bhd and Benua Perdana Sdn  Bhd for the exchange of the Malay reservation status of several pieces of land for  a total consideration of over RM28.7m. These lands, measuring more than  40.5ha, are calculated at RM5psf. (BT)

Governments' interest compromised
The terms of the contracts for the two of Malaysia's largest railway projects were not in the government's favour and a minister in the Prime Minister's Department was told in June 2006 that such project should be awarded on a competitive basis. According to the Auditor General's (AG) Report for 2011, the contract terms were such that the interest of the government was compromised should there be a dispute in the double tracking projects for the Ipoh-Padang Besar and Seremban-Gemas stretches. (Financial Daily)

20121016 1003 Local & Global Economy Related News.

The financial management of government agencies for 2011 recorded a  better performance compared with 2010, said  Auditor-General Tan Sri  Ambrin Buang. He said of all the government agencies that were evaluated,  111 agencies or 31.4% of them were rated 'very good' (four stars), compared with  77 agencies (21.6%) in 2010 and 48 agencies (12%) in 2009.  "This remarkable achievement shows implementation of the  accountability index has motivated the Controlling Officers to take  measures towards improving their financial management," he said. Auditor-General also said the government’s revenue collection had  grown to RM185.42bn, an increase of RM25.77bn from RM159.65bn in  2010. The increase in the world price of crude oil, strong domestic  economic growth, as well as continuous enforcement activities by the  Inland Revenue Board and the Customs Department contributed to the  increasing revenue. The government deficit dropped to 4.82% of GDP or RM42.51bn last  year from 5.64% in 2010. (Bernama, Malaysian Insider)

Malaysia has surpassed the overall  key performance index (KPI) target  under the Economic Transformation Programme  (ETP) for this year,  Minister in the Prime Minister's Department Datuk Seri Idris Jala  said yesterday. Overall, on aggregate, Malaysia achieved 69% of the target from  Jan to Aug this year, he said.  The private and public investments grew by 28% and 24% respectively  during the period.  Domestic consumption contributed about 69% to the national GDP and  it achieved 8% growth from Jan to Aug this year, he said.  Investments were also another important sector, contributing 20-22%  to the GDP, he added. (Bernama)

US retail sales  expanded 1.1% mom in Sep (a revised 1.2% in Aug), beating  consensus of 0.7%. Excluding autos and gas, the measure gained 0.9% mom  (a revised 0.3% in Aug), again overshooting consensus of 0.5%. (Bloomberg)

US business inventories  rose 0.6% mom in Aug (a revised 0.8% in Jul),  higher than consensus of 0.5%. (Bloomberg)

China's foreign exchange reserves rose slightly to US$3.29tr by the end of  Sep from US$3.24tr at the end of Jun, amid continuing trade surplus and  resumption of yuan appreciation. (Global Times)

Consumer prices in  China rose 1.9% yoy in Sep, slightly below Aug‟s 2%  pace. Meanwhile, the producer price index declined 3.6% yoy in Sep, a little  lower than Aug‟s 3.5% fall. (FT)

Japan’s factory output fell a revised 1.6% mom in Aug (-1.3% in the  preliminary estimate), whilst capacity utilisation slipped 2.6% mom in Aug,  reversing the earlier estimate‟s 0.5% growth. (AFP, RTTNews)

India’s wholesale-price index rose 7.81% yoy in Sep, a 10-month high, after  climbing 7.55% in Aug. Economists were expecting a reading of 7.7%. (Bloomberg)

Retail sales in Singapore increased a subdued 0.9% mom in Aug (0.4% in  Jul), boosted by sales of recreational goods and clothes. This was below  expectations of a 1.5% mom increase. Excluding motor vehicles, retail sales rose  0.4%. (Bloomberg, Straits Times)

A total of 2,621 new private-residential units were sold in Singapore in  Sep, 84% mom more than a revised 1,427 units in Aug, when sales were down  27%. (WSJ)

Overseas remittances to the Philippines rose 7.6% yoy to US$1.8bn in Aug  (5.4% in Jul), ahead of forecasts of a 5% increase. (Bloomberg)

Indonesia‟s Sep auto sales were 102,111 vehicles, up 28% yoy and 34% mom  from August, according to data from the Indonesia Automotive Industry  Association. (Reuters)

The  Stock Exchange of Thailand became the third member after Bursa  Malaysia and Singapore  Exchange to connect to the  ASEAN Trading Link.  (AFP)

Bank of Thailand Governor Prasarn Trairatvorakul said Thailand‟s exports  are coming down but domestic demand is still very strong to compensate. He  said the central bank will consider the magnitude of the impact of the global  slowdown on the Thai economy and credit growth when deciding to cut interest rates. (Bloomberg)

20121016 0956 Global Market Related News.

Asian Stocks Rise as Exporters Gain on U.S. Retail Sales (Bloomberg)
Asian stocks rose, with the regional benchmark index headed for a second-day of gains, as exporters advanced after the U.S. reported better-than-expected retail sales. Samsung Electronics Co. (005930), which gets a fifth of its sales in America, rose 2.2 percent in Seoul. Commonwealth Bank of Australia advanced 1.1 percent, pacing gains among lenders after Citigroup Inc. reported results that beat estimates. Softbank Corp. (9984) gained 9.7 percent after Japan’s third-largest mobile- phone company agreed to acquire 70 percent of Sprint Nextel Corp.’s stake. The MSCI Asia Pacific Index gained 0.6 percent to 121.52 as of 9:46 a.m. in Tokyo before markets in Hong Kong and China opened. About three stocks rose for each that fell on the measure.
“It does feel like there’s some momentum there in the economy,” said Matt Riordan, a portfolio manager who helps manage about $6.5 billion in Sydney at Paradice Investment Management Pty. “We’ve got a reasonable rebound. But the problem is whether we will start seeing a recovery, particularly out of China.” The MSCI Asia Pacific Index rebounded 11 percent through yesterday from this year’s low reached on June 4 as stimulus measures from Europe to the U.S. and China boosted market sentiment amid a global economic slowdown and Europe’s debt crisis. The Asian benchmark traded at 12.8 times estimated earnings on average, compared with 13.7 times for the Standard & Poor’s 500 Index and a multiple of 12 for the Stoxx Europe 600 Index.

Japanse Stocks Advance on U.S. Retail Sales, Weaker Yen (Bloomberg)
Japanese stocks rose, with the Nikkei 225 (NKY) Stock Average heading for the biggest gain in almost two weeks, as exporters gained after U.S. retail sales beat estimates and the yen weakened. Sony Corp., Japan’s biggest exporter of consumer electronics, rose 1.4 percent. Nissan Motor Co. (7201) gained 1.2 percent after the automaker and Renault SA said they aim to double cost savings from their alliance by 2016. Softbank Corp., the nation’s third-biggest mobile-phone carrier, soared 6.9 percent after agreeing to buy about 70 percent of Sprint Nextel Corp. for $20.1 billion. The Nikkei 225 gained 0.8 percent to 8,648.78 as of 9:15 a.m. in Tokyo, set for the steepest advance since Oct. 4. Volume on the gauge was 7.3 percent above the 30-day average. The broader Topix climbed 0.8 percent to 728.42, with almost three times as many shares rising as falling.
“Personal consumption in the U.S. is getting more solid than expected,” said Fumiyuki Nakanishi, a strategist at Tokyo- based SMBC Friend Securities Co. Stronger retail sales “will likely encourage expectations for year-end sales and favorable October-December corporate earnings.”

U.S. Stocks Rise as Retail Sales, Citigroup Top Estimates (Bloomberg)
U.S. stocks rose, as the Standard & Poor’s 500 Index (SPX) rebounded from its biggest weekly drop in four months, after American retail sales and Citigroup (C) Inc.’s earnings topped estimates. Citigroup soared 5.5 percent, the most since March, as results were helped by a surge in bond-trading revenue. Texas Instruments Inc. (TXN) rose 3.5 percent on a report Amazon.com Inc. (AMZN) may buy its mobile chip unit. PulteGroup Inc. (PHM) and KB Home jumped more than 4.9 percent as homebuilders rallied. Apple Inc. (AAPL) added 0.8 percent after falling as much as 0.9 percent earlier. The S&P 500 climbed 0.8 percent to 1,440.13 at 4 p.m. in New York. The Dow Jones Industrial Average (INDU) rose 95.38 points, or 0.7 percent, to 13,424.23. About 5.9 billion shares traded hands on U.S. exchanges, 2 percent below the three-month average.
“The retail sales report looked a little bit better than expected,” Dan Veru, who oversees $3.5 billion as chief investment officer at Palisade Capital Management LLC in Fort Lee, New Jersey, said in a phone interview. “The big question regarding earnings is whether expectations have come down enough so that companies can beat guidance.” U.S. stocks rose as the Commerce Department said retail sales climbed 1.1 in September following a revised 1.2 percent increase in August that was the biggest since October 2010 and larger than previously reported. The median forecast of 77 economists surveyed by Bloomberg called for a 0.8 percent rise. A separate report showed manufacturing in the New York region contracted for a third straight month in October as shipments and employment declined.

Recap Stock Index Market Report (CME)
The December S&P 500 trended higher throughout the US trading session, supported by a boost in risk-taking sentiment, better than expected earnings from Citigroup and favorable Retail Sales data. This helped the December S&P make a run back up toward Friday's high. However, concerns over when Spain might request an EU bailout and New York Manufacturing data that showed a third consecutive month of contraction limited the upside charge. The morning gains also seemed hamstrung by a more than 2% drop in crude oil and weakness in related energy shares. Crude oil prices were able to pare their morning deficits, and that along with solid gains in Citigroup and Eli Lilly helped the December S&P 500 register a higher afternoon high. Most of the major S&P sectors were in positive territory, led by health care-related shares.

European Stocks Rise Amid M&A Deals; Orkla, Dougles Gain (Bloomberg)
European (SXXP) stocks climbed amid an increase in mergers-and-acquisition activity and as a U.S. report showed retail sales rose more than forecast in September. Orkla ASA (ORK) jumped 3.4 percent after agreeing to combine units with Norsk Hydro ASA. (NHY) Douglas Holding AG (DOU) jumped 8.1 percent after Advent International Corp. made a 1.5 billion euros ($1.9 billion) bid for the retailer. Vivendi SA (VIV) gained 2.8 percent on a report the company is in talks to merge its mobile- phone unit SFR with Numericable. The Stoxx Europe 600 Index advanced 0.5 percent to 270.8 at the close in London, after falling 1.7 percent last week. The benchmark gauge has rallied 16 percent from this year’s low on June 4 boosted by bond-purchasing programs from the European Central Bank and the Federal Reserve.
“We have been in a bit of a phase of consolidation; the question is ‘do you buy into that?’ and I think you do,” Giles Keating, head of research for private banking and asset management at Credit Suisse Group AG said on Bloomberg Television in London. “If we look at the economic data coming through, it’s on the positive side. I believe we are seeing an underlying global upswing. It’s slow and grinding, but it’s happening.” Stocks fell in Europe last week after the International Monetary Fund and the World Bank lowered economic-growth forecasts and companies predicted their earnings will miss estimates.

Emerging Stocks Drop as Policy Makers Disagree on Growth Plan (Bloomberg)
Emerging-market stocks fell for the first time in three days as global policy makers clashed on ways to boost economic growth and Chinese companies from ZTE Corp. (000063) to Yunnan Copper (000878) Industry Co. predicted losses. The MSCI Emerging Markets Index slid 0.1 percent to 995.22 at the close of trading in New York. ZTE, China’s second-largest maker of telephone equipment, sank the most in three months in Hong Kong while Yunnan Copper lost 2.4 percent in Shenzhen. Cosan SA Industria e Comercio, the world’s biggest sugar-cane processor, tumbled in Brazil after IstoE magazine said the government wants gasoline stations to lower prices. Vakiflar Bankasi TAO (VAKBN), a Turkish state-run lender, snapped a six-day rally as Goldman Sachs Group Inc. recommended selling the stock.
Finance chiefs at the International Monetary Fund meeting left Tokyo over the weekend at odds, with South Korea’s central bank chief urging Asia to add stimulus as Russia and Brazil called on rich nations to fix their own challenges. At stake is a world economy Bank of Israel Governor Stanley Fischer calls “awfully close” to recession. “Messages from the IMF and other policy makers are more negative,” Christian Keller, an emerging-markets analyst at Barclays Capital in London, said by telephone. “People have a little bit more doubt whether things will come together in Europe.” Eight of the 10 industry groups in the MSCI Emerging Markets Index slumped, led by consumer discretionary stocks. The developing-nations measure has climbed 8.6 percent this year, trailing an 11 percent increase by the MSCI World Index (MXWO) of developed countries. The emerging-markets index trades at 11.4 times estimated earnings, compared with the MSCI World’s multiple of 13.2, data compiled by Bloomberg show.

Yen Drops for 4th Day as U.S. Outlook Saps Safety Demand (Bloomberg)
The yen fell for a fourth day against the dollar before U.S. data this week forecast to show industrial production and housing starts increased last month, reducing demand for safety. The Japanese currency declined against most of its major peers after U.S. stocks rose on signs of improvement in the economy and as Federal Reserve Bank of St. Louis President James Bullard said domestic growth will pick up next year and push down the unemployment rate. New Zealand’s dollar declined after annual inflation grew at the slowest pace in more than 12 years. “We’re looking for further improvement in U.S. data,” said Mike Jones, a currency strategist at Bank of New Zealand in Wellington. “The U.S. economy is set to outperform Japan and Europe and that should see some support for the U.S. dollar and weakness in the yen.” The yen weakened 0.2 percent to 78.79 per dollar as of 8:56 a.m. in Tokyo. Japan’s currency slid 0.3 percent to 102.18 per euro from 101.84 yesterday. The euro bought $1.2968 from $1.2949 yesterday.
In the U.S., industrial production probably increased 0.2 percent in September from the previous month, when it declined 1.2 percent, according to the median estimate of economists surveyed by Bloomberg News before the Federal Reserve releases the figures today. Economists in a separate Bloomberg poll predict that Commerce Department data due Oct. 17 will show new housing construction climbed 20,000 from August to a 770,000 annual rate last month, the most since October 2008. The Commerce department reported yesterday retail sales increased 1.1 percent last month, following a revised 1.2 percent gain in August that was the biggest since October 2010.

N.Z. Dollar Drops on Slowing Inflation; Aussie Advances (Bloomberg)
New Zealand’s dollar fell against all its major counterparts after data showed inflation slowed to the weakest pace in more than 12 years. Australia’s dollar climbed for a second day. New Zealand consumer prices rose 0.8 percent in the third quarter from a year earlier, the statistics office said in Wellington today. That was the lowest level since the fourth quarter of 1999, boosting speculation the country’s Reserve Bank will reduce interest rates. The Australian dollar extended a gain from yesterday. The Reserve Bank of Australia publishes minutes today of its Oct. 2 meeting, when policy makers cut the overnight cash-rate target by a quarter point to 3.25 percent. “The market is going to think that the RBNZ will cut” because data showed slower growth in inflation, said Andrew Salter, a currency strategist in Sydney at Australia & New Zealand Banking Group Ltd. “That means that the currency should be weaker.”
The New Zealand dollar, nicknamed the kiwi, dropped 0.2 percent to 81.68 U.S. cents as of 10:51 a.m. in Sydney. It was little changed at 64.37 yen. The Australian dollar rose 0.1 percent to $1.0262, from $1.0253 yesterday. The so-called Aussie rose 0.3 percent to 80.87 yen. New Zealand’s two-year swap rate, a fixed payment made to receive floating rates, declined eight basis points, or 0.08 percentage point, to 2.5 percent. That’s the lowest level since June 7.

Goldman Joins Wall Street Firms in Seeing S&P at Record in 2013 (Bloomberg)
The Standard & Poor’s 500 Index may climb to a record 1,575 next year, Goldman Sachs Group Inc.’s David Kostin predicts, joining four other Wall Street firms in forecasting the benchmark gauge will exceed its 2007 peak. The strategist’ projection implies a 10 percent gain in the S&P 500 from the Oct. 12 close of 1,428.59. The advance would take the index above its all-time high of 1,565.15 reached on Oct. 9, 2007. Kostin, chief U.S. equity strategist at New York- based Goldman Sachs, reiterated his estimate for S&P 500 earnings to reach $107 a share next year. “S&P 500 faces near-term political risk in the form of the ‘fiscal cliff’ but has long-term policy support from QE3,” Kostin wrote in a note dated Oct. 12, referring to automatic deficit cuts that could go into effect starting in January and a third round of bond purchases from the Federal Reserve to stimulate economic growth.
Wall Street strategists so far are unanimous in predicting the S&P 500 will reach a record next year, according to the five firms that have made predictions out of 15 tracked by Bloomberg. Kostin’s estimate was shared by Bank of Montreal’s Brian Belski while lower than predictions of 1,600 by Bank of America Corp.’s Savita Subramanian, 1,615 by Tobias Levkovich at Citigroup Inc. and 1,585 by Oppenheimer & Co.’s John Stoltzfus. Kostin’s profit forecast is higher than the average estimate of $106.27 from the strategists tracked by Bloomberg.

Global Economy Distress 3.0 Looms as Emerging Markets Fall (Bloomberg)
The global economy is facing its third major brake on expansion in five years as emerging markets slow from China to Brazil, provoking debate about how much policy makers should respond. Three years after industrializing nations led the world out of the U.S. mortgage meltdown-induced recession, the reliability of the power source is waning as Europe’s debt crisis persists. The International Monetary Fund sees them growing an average 5.8 percent in the half-decade through 2016, almost two percentage points less than the five years before the 2009 slump. Finance chiefs at the IMF and World Bank annual meetings left Tokyo this weekend at odds over how to address the issue, with South Korea’s central bank chief urging Asia to add stimulus as Russia and Brazil called on rich nations to fix their own challenges. At stake is a world economy Bank of Israel Governor Stanley Fischer calls “awfully close” to recession.
“There is a concern that in the near term the engine of growth that provided such a great support seems to be slowing,” said Jacob Frenkel, chairman of JPMorgan Chase International and Fischer’s predecessor in Israel. “They still continue to grow, but we’re seeing a slower pace than anticipated all over the world.”

Retail Sales Beating Forecasts Support U.S. Growth (Bloomberg)
Americans snapped up goods from cars to iPhones in September at a faster pace than forecast by economists, showing consumer demand was heading into the year- end holidays on a high note. The 1.1 percent advance followed a revised 1.2 percent increase in August, the best back-to-back showing since late 2010, Commerce Department figures showed today in Washington. The median forecast of 77 economists surveyed by Bloomberg called for a 0.8 percent rise. “This keeps the economic expansion moving forward,” said Dean Maki, New York-based chief U.S. economist at Barclays Plc. “Consumer spending is continuing to grow solidly.” Gains were broad-based, with 12 of 13 retail categories showing an improvement, as shoppers were heartened by higher stock prices and home values. Faster payroll growth would further boost the consumer spending that’s needed to offset a slowdown in business investment, Maki said.
Maki raised his tracking estimate of third-quarter consumer spending to 2.1 percent from 1.8 percent, and for gross domestic product to 2 percent from 1.8 percent after the report. Shares climbed as the retail sales report and earnings from Citigroup Inc. overshadowed a slump in commodity prices. The Standard & Poor’s 500 Index rose 0.8 percent to 1,440.13 at the close in New York. Other reports today showed that inventories in the U.S. rose at a slower pace in August, indicating that unexpected strength in sales may be starting to drain stockpiles, and manufacturing in the New York region contracted in October for a third straight month.

Business Economists Reduce U.S. GDP Growth Forecasts (Bloomberg)
Business economists cut their U.S. growth outlook for next year to 2.4 percent as companies and consumers restrain spending, a survey released today showed. The growth estimate was lowered from 2.8 percent forecast in May, the survey by the Washington-based National Association for Business Economics showed. The prediction for this year was reduced to 1.9 percent from 2.4 percent. Economists responding to the survey “expect economic growth to be tepid overall in 2012 and 2013, but predict growth to slowly accelerate through 2013,” Shawn DuBravac, chief economist at the Consumer Electronics Association in Arlington, Virginia, who analyzed the results, said in a statement. The world’s largest economy is likely to skirt the worst damage from the so-called fiscal cliff, the more than $600 billion of federal spending cuts and tax increases that will automatically take effect at the start of next year unless Congress acts, the survey showed.
While business leaders don’t see that scenario playing out, the risk that it may is a reason they are bracing for slower growth, said Ken Simonson, NABE president-elect for 2012-2013 and chief economist at the Associated General Contractors of America, a trade group based in Arlington, Virginia. “I’ve heard repeatedly from business executives saying this uncertainty is causing us to hold back on investment,” Simonson told reporters today at NABE’s annual meeting in New York. “There’s certainly worry, and just having a small chance of a major disaster does cause people to be more cautious in their investment and hiring.”

Fed’s Bullard Says 3.5% 2013 Growth Will Cut Unemployment (Bloomberg)
Federal Reserve Bank of St. Louis President James Bullard said U.S. economic growth will probably pick up to 3.5 percent next year, pushing the unemployment rate down to close to 7 percent. “I still think it is reasonable to expect faster growth as we go forward,” Bullard said in a speech in St. Louis. “The normal expectation would be the effects start to dissipate” from headwinds that have included the European debt crisis and the slow housing recovery, he said. The regional Fed bank president last week said he was still weighing what position to advocate at next week’s Federal Open Market Committee meeting, at which Fed officials will consider whether to make adjustments to their purchases of $40 billion of mortgage debt a month in a third round of quantitative easing. He didn’t comment on monetary policy in his prepared remarks.
Bullard told reporters after the speech the meeting would allow the committee to “review our current policy and see how that is performing against expectations” and that changes in asset purchases would be made over time in response to changes in the economic outlook. “How far you think the Fed will go depends in part on what your view of the economic outlook of the U.S. is over the next couple of years,” he said, making a comparison to changes in interest rates in normal times. “The whole idea is to say this is going to be outcome based, not based on a fixed amount or fixed date.”

Manufacturing in New York Region Contracts for Third Month (Bloomberg)
Manufacturing in the New York region contracted for a third straight month in October as shipments and employment declined, indicating the economy will get less support from factories. The Federal Reserve Bank of New York’s general economic index rose to minus 6.2 from minus 10.4 in September, which was the lowest since April 2009. The median forecast of 46 economists in a Bloomberg survey called for minus 4. Readings of less than zero signal contraction in New York, northern New Jersey and southern Connecticut. Manufacturing, a mainstay of the three-year economic expansion, has been cooling as overseas demands slows. Companies have also been curbing investment on concern that Congress will fail to avert more than $600 billion of automatic federal tax increases and spending cuts scheduled to go into effect early next year, slowing the economy.
“Manufacturing is stuck in neutral,” said Thomas Simons, an economist at Jefferies Group Inc. in New York, which had forecast minus 6 for the so-called Empire State index. Another report today showed retail sales in the U.S. rose more than projected in September, reflecting broad-based gains that indicate household spending helped bolster economic growth last quarter. The 1.1 percent increase followed a revised 1.2 percent increase in August that was the biggest since October 2010 and larger than previously reported, Commerce Department figures showed. The median forecast of 77 economists surveyed by Bloomberg called for a 0.8 percent rise.

Dudley Says Fed Won’t Make ‘Hasty’ Exit From Stimulus (Bloomberg)
Federal Reserve Bank of New York President William C. Dudley said the central bank won’t cut back record monetary stimulus too quickly when the economy begins to gain strength. “If we were to see some good news on growth I would not expect us to respond in a hasty manner,” Dudley said in a speech today in New York. Policy makers last month increased accommodation to boost an economy that central bankers said still faces “significant downside risks.” Fed officials announced a third round of asset purchases, agreeing to buy $40 billion of mortgage-backed bonds each month, and extended the horizon for record-low interest rates through at least the middle of 2015. The Fed may have not used enough stimulus measures to support the recovery in the aftermath of the financial crisis, Dudley said to the National Association for Business Economics.
“With the benefit of hindsight, monetary policy needed to be still more aggressive,” he said. “Consequently, it was appropriate to recalibrate our policy stance, which is what happened at the last” meeting of the Federal Open Market Committee. Monetary policy may have been “less powerful than normal” because of the impairment of the housing market, and because the “impetus from a given level of monetary accommodation likely has become attenuated -- that is, less powerful -- over time,” said Dudley, who is vice chairman of the FOMC. The Fed has kept its benchmark interest rate near zero since December 2008.

Business Inventories in U.S. Grew at a Slower Pace in August (Bloomberg)
Inventories in the U.S. rose at a slower pace in August, indicating that unexpected strength in sales may be starting to drain stockpiles. The 0.6 percent increase in goods on hand followed a 0.8 percent gain in July, Commerce Department data showed today in Washington. Sales at factories, wholesalers and retailers climbed 0.5 percent after advancing 0.9 percent the prior month. The biggest back-to-back gains in retail sales in almost two years may be making it difficult to keep shelves and warehouses stocked as companies reined in spending ahead of looming year-end tax and government spending changes in the U.S. The need to replenish depleted inventories may help give manufacturing a boost in the last three months of the year.
“Businesses are operating in a fairly lean environment right now,” Carl Riccadonna, a senior U.S. economist at Deutsche Bank Securities Inc. in New York, said before the report. “Definitely there’s hesitancy about these other economic issues that I think is weighing on inventory accumulation.” The gain in inventories compared with a 0.5 percent gain median forecast of 47 economists surveyed by Bloomberg. Estimates ranged from gains of 0.2 percent to 0.7 percent. At the current sales pace, businesses had enough goods on hand to last 1.28 months, the same as in July.
A separate Commerce Department report today showed retail sales rose more than projected in September, reflecting broad- based gains that indicate household spending helped bolster economic growth last quarter.

Consumers Paying Down Debt Helps Boost U.S. Expansion (Bloomberg)
Anita Bullock-Morley was $57,000 in debt on 27 credit cards and close to filing for bankruptcy in 2007. With help from an Atlanta counseling service, the 37-year- old says she paid about $1,400 a month and cleared her balances. Now she’s used cash to buy an $800 iPad and upgrade her iPhone. Three-plus years into a recovery from the worst financial crisis since the Great Depression, Americans finally are getting their finances back into shape, Federal Reserve figures show. Household debt as a share of disposable income sank to 113 percent in the second quarter from a record high of 134 percent in 2007 before the recession hit. Debt payments on that basis are the smallest in almost 18 years, while the delinquency rate for credit cards is the lowest since the end of 2008. “The household deleveraging process is largely over,” said Mark Zandi, chief economist at Moody’s Analytics Inc. in West Chester, Pennsylvania. “Credit use should soon go from being a significant headwind to the economy to a tailwind.”
The progress that consumers have been making will allow gross domestic product to absorb stepped-up deficit reduction by the federal government next year and keep on expanding, Zandi said. He sees GDP growing 2.1 percent in 2013, a bit slower than this year’s projected 2.2 percent, as Congress allows some, but not all, of the scheduled year-end tax increases and spending cuts to go ahead. The GDP number will mask stronger growth for the private side of the economy, to 3.6 percent from 3.1 percent, he said.

China Inflation Cools Amid Signs of Stable Economy Growth (Bloomberg)
China’s inflation was close to the slowest pace in two years in September, giving the government room to ease policies should the economy deteriorate. Consumer prices rose 1.9 percent from a year earlier while the producer-price index dropped 3.6 percent, the National Bureau of Statistics said on its website today. China’s imports increased 2.4 percent from a year earlier while overseas shipments climbed 9.9 percent, the customs administration said on Oct. 13. A report this week may show the nation’s expansion slid to 7.4 percent in the third quarter from a year earlier, the seventh straight deceleration, underscoring International Monetary Fund warnings that weakening growth in developed economies is spreading to emerging markets. At the same time, there are signs China’s economy is stabilizing after exports exceeded estimates in September and money supply grew at the fastest pace in 15 months.
“Muted inflation pressure will provide more room for the government to introduce additional policy easing or stimulus measures,” said Lu Ting, chief China economist at Bank of America Corp. in Hong Kong. “The top task for the central bank now is to prevent growth from slowing further while stemming the rebound in home prices, which is the major constraint for easing in 2012.” Asian stocks swung between gains and losses as concern the global economic slowdown is deepening was countered by China’s easing inflation and better-than-expected export data. The regional benchmark MSCI Asia Pacific Index (MXAP) was unchanged at 3:25 p.m. in Tokyo.

India’s Inflation Accelerates to 10-Month High (Bloomberg)
Indian inflation accelerated to a 10-month high in September after an increase in diesel prices, limiting room for an interest-rate cut to revive the economy. The wholesale-price index rose 7.81 percent from a year earlier, after climbing 7.55 percent in August, the Commerce Ministry said in a statement in New Delhi today. The median of 35 estimates in a Bloomberg News survey was 7.7 percent. India’s central bank has refrained from joining countries such as Brazil and South Korea in extending rate cuts, saying inflation exceeds a comfort zone of about 5 percent. At the same time, the nation’s finance officials are seeking lower borrowing costs to back an economic-policy revamp that included a rise in subsidized diesel tariffs last month to pare a fiscal deficit.
“Increasing diesel prices was a necessary step to control the budget deficit and, therefore, curb inflation in the medium to long term,” said Suvodeep Rakshit, an economist at Kotak Securities Ltd. in Mumbai. “It will cause a rise in inflation in the short term and the Reserve Bank will wait until inflation comes down into its comfort zone.” The policy overhaul since Sept. 13, which snapped months of political gridlock over how to boost the economy, also included measures to open industries such as retailing to more foreign investment, helping the rupee to rebound from a record low.

India Government Seeks Lower Rates as More Overhauls Planned (Bloomberg)
India’s finance officials are seeking lower interest rates from the central bank to revive growth as the government plans adding to its overhaul of economic policies. Inflation may slow to within the Reserve Bank of India’s comfort level by March as the rupee rises and the fiscal gap shrinks, Economic Affairs Secretary Arvind Mayaram said in an interview yesterday. Finance Minister Palaniappan Chidambaram said two days earlier he plans reform measures for capital markets, insurance, banking and infrastructure within weeks. “We hope that the RBI will be more benevolent with its policy” if it’s convinced the government is taking credible steps to lower the fiscal deficit and contain inflation, Mayaram said in Tokyo, where he participated in annual meetings of the International Monetary Fund along with Chidambaram. “They should give” some signals before March, he said.
Indian policy makers are trying to bring growth back from near the lowest in three years, with the International Monetary Fund saying last week the outlook for Asia’s third-largest economy is unusually uncertain. The government has revamped economic policy since Chidambaram, 67, became finance minister on July 31, opening up to more investment from abroad and raising subsidized diesel prices to tackle a budget deficit. The push snapped months of gridlock over how to revive the economy, helping the rupee rebound from a record low.

Zeti Says Malaysia Can Withstand Capital Flows: Southeast Asia (Bloomberg)
Malaysia can manage capital inflows due to quantitative easing in advanced economies, central bank Governor Zeti Akhtar Aziz said, as Asian nations take steps to prevent asset bubbles after the U.S. boosted stimulus. The country has policy tools and the flexibility to absorb any excess liquidity, said Zeti, who oversaw Malaysia’s response to capital outflows during the Asian financial crisis more than a decade ago. The Malaysian economy is withstanding the impact of weakening global growth, with gross domestic product forecast to expand about 5 percent this year, Zeti said in an Oct. 14 interview in Tokyo. “We certainly are the recipient of capital flows but the Malaysian financial system has reached a level of maturity in terms of development and in its functioning that is able to intermediate these flows, both surges of inflows as well as reversals,” Zeti said. “The effects are disbursed through the financial system rather than concentrated.”
Malaysia joins Brazil among emerging markets signaling confidence they can counter any surge in fund flows stemming from the U.S. Federal Reserve’s third round of quantitative easing. Fed Chairman Ben S. Bernanke two days ago rebutted concern that the central bank’s decision to purchase $40 billion in mortgage-backed bonds a month will cause a destabilizing influx of capital into developing economies. Brazil’s central bank President Alexandre Tombini said yesterday his country will defend itself from short-term capital flows that bring financial instability and inflation risks amid an easing push from major economies. “We have the conditions to protect ourselves and we are doing that,” he said.

20121016 0956 Global Commodities Related News.

DTN Closing Grain Comments 10/15 14:48 (CME)
Grains Struggle Once Again
The collapsing soybean market led the other grains lower again Monday as noncommercial long-liquidation remains the driving force.

Pro Farmer: After The Bell Wheat Recap (CME)
Wheat futures closed mostly around 8 cents lower in Chicago, mostly around 7 to 9 cents lower in Kansas City and mixed with a downside bias in Minneapolis. Wheat futures faced constant spillover pressure from the corn and soybean markets today. In addition, the U.S. dollar index was mildly firmer for much of the day, which encouraged speculative-based selling, especially given the active fund selling in the corn and soybean markets.

Wheat Market Recap Report (CME)
December Wheat finished down 8 1/2 at 848 1/4, 12 off the high and 8 up from the low. March Wheat closed down 8 3/4 at 860 1/2. This was 7 1/2 up from the low and 11 off the high.
Chicago wheat traded lower throughout today's session but was able to climb off session lows to end the day. KC and Minneapolis wheat ended the day weaker as well. The wheat market saw a brief period of support this morning on news that a large US investment back reiterated its $10.25 price target for wheat by the end of this year. The bank also said they estimate global wheat production at 648 million tonnes vs. the current USDA forecast of 653. Additional support was added after reports surfaced that the farm ministry in the United Kingdom lowered their wheat production estimate to 13.31 million tonnes which is down 12.8% from last year and yields fell to a 23 year low due to detrimental weather and disease. Export tenders are beginning to hit the market once again as prices trend lower. Iraq issued a tender to buy 50,000 tonnes of wheat with the US included in its acceptable origins. Algeria has also issued a tender for 50,000 tonnes of milling wheat for December shipment. Export inspections for the week ending October 11th disappointed the market with only 7 million bushels reported. Inspections needed each week to reach this year's USDA forecast are 24.75 million bushels. December Oats closed down 4 at 388. This was 3 1/2 up from the low and 4 1/2 off the high.

Pro Farmer: After The Bell Corn Recap (CME)
Corn futures faced pressure throughout the day and softened late in the session to end around 15 cents lower through the July contract, while deferred months were roughly 5 to 11 cents lower for the day. Futures lacked fresh fundamental news today, which left it vulnerable to spillover pressure from heavy soybean losses and fund-based selling amid a firmer U.S. dollar index. Adding to the negative tone, traders still have last week's reports that livestock and poultry producers in southeastern regions of the U.S. are importing corn from South America as a cheaper alternative to U.S. supplies on their minds.

Corn Market Recap for 10/15/2012 (CME)
December Corn finished down 15 1/2 at 737 1/4, 14 1/4 off the high and 4 3/4 up from the low. March Corn closed down 15 1/2 at 737 1/4. This was 5 up from the low and 14 1/4 off the high.
December corn got caught up in the heavy liquidation in the soybean market and ended the day lower but was able to bounce off lows from last week. December corn failed to make a new high for the move last Friday which may have triggered a fresh round of long liquidation. Unstable outside markets along with evidence that may suggest demand rationing is taking place has resulted in a lower trade. News that the US livestock industry had imported 600,000 tonnes of Argentina corn which is the second major import deal signed in recent weeks added to the demand woes in the corn market. Export inspections for the week ending October 11th were disappointing and were reported at 17.2 million bushels vs. 17.3 last week. Inspections needed each week to reach this year's USDA forecast is pegged at 24.7 million bushels and the current export pace is 9% of this year's USDA estimate. Additional pressure was linked to broad-based commodity liquidation as funds exit commodity markets on fears that global economic growth is slowing. November Rice finished down 0.015 at 15.01, 0.01 off the high and 0.03 up from the low.

Corn Belt Shifts North With Climate as Kansas Crop Dies (Bloomberg)
Joe Waldman is saying goodbye to corn after yet another hot and dry summer convinced the Kansas farmer that rainfall won’t be there when he needs it anymore. “I finally just said uncle,” said Waldman, 52, surveying his stunted crop about 100 miles north of Dodge City. Instead, he will expand sorghum, which requires less rain, let some fields remain fallow and restrict corn to irrigated fields. While farmers nationwide planted the most corn this year since 1937, growers in Kansas sowed the fewest acres in three years, instead turning to less-thirsty crops such as wheat, sorghum and even triticale, a wheat-rye mix popular in Poland. Meanwhile, corn acreage in Manitoba, a Canadian province about 700 miles north of Kansas, has nearly doubled over the past decade due to weather changes and higher prices.
Shifts such as these reflect a view among food producers that this summer’s drought in the U.S. -- the worst in half a century -- isn’t a random disaster. It’s a glimpse of a future altered by climate change that will affect worldwide production. “These changes are happening faster than plants can adapt, so we will see substantial impacts on global growing patterns,” said Axel Schmidt, a former senior scientist for the International Center for Tropical Agriculture now with Catholic Relief Services. While there is still debate about how human activity is altering the climate, agriculture is already adapting to shifting weather patterns.

Sugar Glut Extending to Longest in More Than Decade: Commodities (Bloomberg)
The global sugar glut is extending into a third year, the longest stretch in more than a decade, as Brazil and Australia expand output and imports contract to the smallest since 2008. Production will exceed demand by 5.9 million metric tons in the year that began Oct. 1, more than the U.S. consumes in six months, the International Sugar Organization estimates. Global supply including inventories will be the highest ever, the London-based group says. Raw-sugar futures traded in New York may drop 9 percent to 18 cents a pound by the end of the year, according to the median of 15 estimates from traders and analysts compiled by Bloomberg. Futures fell 45 percent since reaching an all-time high of 36.08 cents in February 2011 as farmers from Russia to Thailand planted more crops. The drop is moderating global food prices that the United Nations says rose 7.7 percent in the past three months as drought and heat waves wilted U.S. and European wheat, corn and soybeans.
Lower prices are helping to cut costs for food companies including Nestle SA (NESN), which spent about 1.5 billion Swiss francs ($1.6 billion) last year on sugar. “The surplus is probably getting worse,” said Jonathan Kingsman, the chief executive officer of Lausanne, Switzerland- based research company Kingsman SA who has traded sugar for more three decades. “More sugar will have to be stockpiled on lack of demand and we would expect prices to stay under pressure.”

Natural Gas Slides on Forecasts for Above-Normal Temperatures (Bloomberg)
Natural gas futures dropped for the first time in six days on forecasts of warmer-than-normal weather that would reduce consumption of the heating fuel. Gas declined 3.5 percent after forecasters including MDA EarthSat Weather predicted normal or above-normal temperatures across most of the lower 48 states through Oct. 24. Heating demand may be 28 percent below normal from Oct. 21 through Oct. 25, according to Weather Derivatives in Belton, Missouri. “Without early heating-season demand, the market is starting to balance out,” said Gene McGillian, an analyst and broker at Tradition Energy in Stamford, Connecticut. “The buyers are bailing out.” Natural gas for November delivery fell 12.5 cents to settle at $3.486 per million British thermal units on the New York Mercantile Exchange. The futures are down 5.9 percent from a year ago. Gas rose to $3.611 per million Btu on Oct. 12, the highest settlement price since Dec. 1.
November $3.80 calls, bets that prices will rise, were the most active gas options in electronic trading. They were 2.5 cents lower at 1.3 cents on volume of 564 contracts as of 1:59 p.m. Calls accounted for 59 percent of options volume. The low in New York on Oct. 24 may be 45 degrees Fahrenheit (7 Celsius), 3 below normal, according to AccuWeather Inc. in State College, Pennsylvania. About 50 percent of U.S. households use gas for heating, Energy Department data show.

Oil Trades Near Three-Day Low; Brent Premium at Widest in a Year (Bloomberg)
Oil traded near the lowest level in three days in New York before a report that may show U.S. stockpiles climbed a second week. Brent oil’s premium to West Texas Intermediate increased to the widest in a year. Futures were little changed after dropping one cent yesterday. Crude inventories in the U.S., the world’s biggest user of the commodity, probably rose by 1.5 million barrels last week, according to a Bloomberg survey before a government report tomorrow. Brent’s premium gained as the European Union tightened sanctions on Iran’s energy exports to intensify pressure on the nation to curb its nuclear program. Crude for November delivery fell 23 cents to $91.62 a barrel in electronic trading on the New York Mercantile Exchange at 10:25 a.m. Sydney time. The contract yesterday closed at $91.85, the lowest settlement since Oct. 10. Prices are down 7.3 percent this year.
Brent oil for November settlement climbed $1.18, or 1 percent, to $115.80 a barrel on the London-based ICE Futures Europe exchange yesterday. The contract expires today. The more- active December future gained 79 cents to $114.40. The European benchmark grade’s premium to WTI closed at $23.95, the widest gap since Oct. 14, 2011. EU foreign ministers in Luxembourg yesterday approved extra curbs on trade with Iran and on its finance, energy and transport industries following an oil embargo and a central-bank asset freeze earlier this year. The ministers also froze the assets of 34 Iranian entities to hinder the Iranian government’s ability to raise funds for its atomic program, which the U.S. and EU say is aimed at producing weapons.

Oil recovers most of its early session losses (CME)
Another wide trading range session with WTI dropping below the $90/bbl level on concerns about the slowing economy only to recovery the majority of its earlier day losses on better than expected US economic data and growing geopolitical concerns. As has been the case for about a month the oil price battle continues with the main headwind still the slowing global economy. Last week several agencies highlighted the negative impact on global oil demand growth from the slowing of the global economy. On the tailwind side of the equation the combination of the evolving geopolitical situation in the middle east... especially around Iran's nuclear program coupled with the regional imbalances in refined products as well as the perception that the quantitative easing programs will eventually result in an inflation surge in oil and commodity prices (so far the inflation surge has not been the case).
As bad as the global economy was looking last week so far this week there have been a few bright spots from both China and the US. Out of China (starting over the weekend) exports came in better than expected and lending figures were also positive. In addition many analysts are expecting both industrial and investment data due out later in the week to also be positive. Possibly China may be stabilizing and if one extrapolates the export growth data it could be an early sign that China's main export markets... US and Europe may also be starting to stabilize. From an oil perspective any sign that the Chinese economy is bottoming out is a direct signal that oil demand growth will start to grow at a faster pace than it has been growing over the last year or so.
On the geopolitical front mixed signals over the last few days. On the bullish for oil side of the equation an article in a German magazine over the weekend revealed a plan by Iran to block the Straits of Hormuz by creating a massive oil spill which provided a bit of support to oil prices. However, on the other hand there were indications today that Iran might be willing to come to the negotiating table if the West guaranteed a supply of 20% enriched uranium to Iran for peaceful use in the country and if so then Iran would limit their own enrichment program. A positive sign and thus bearish for oil. So for today the Straits story seemed to override the negotiating story for the moment. As I have been saying for weeks I think eventually the Iranians will come to the negotiating table and agree to a plan that eases the concerns of the west while allowing the Iranians not to lose "face". I still believe that the geopolitical support for oil prices will drift lower as the likelihood of any military intervention by the Israeli's is in the background and not likely until next year at the earliest (if at all).
Global equities gained ground over the last twenty four hours as shown in the EMI Global Equity Index table below. So far the Index has recovered all of last week's losses and then a little but more. The Index is up by 0.5% for the week resulting in the year to date gain widening to 7.2%. China remains the only bourse in the Index that is still in negative territory for the year. However, the China bourse is currently off of its lows for the year and if the above discussed improvement in some of the data out of China continues we could see this Index starting to recover. Global equities have been a positive for oil prices so far this week and certainly helped to push oil prices well above their intraday lows on Monday.
The weekly inventory cycle will be back to its normal schedule. The weekly oil inventory cycle will begin with the release of the API inventory report on Tuesday afternoon and with the more widely followed EIA oil inventory report being released Wednesday morning at 10:30 AM EST. With the global economy and oil fundamentals becoming more the focus of the trading and investing community this week's oil inventory report could be a price catalyst especially if the actual outcome shows a large deviation from the projections. However, any inventory reaction could be short lived if the macroeconomic data remains the main focus of most market players.
My projections for this week's inventory report are summarized in the following table. I am expecting the US refining sector to increase marginally as the refining sector begins the process of returning from fall maintenance programs.. I am expecting a modest build in crude oil inventories, and a build in gasoline and another draw in distillate fuel stocks as the weather was colder than normal over the east coast during the report period. I am expecting crude oil stocks to increase by about 1.5 million barrels. If the actual numbers are in sync with my projections the year over year comparison for crude oil will now show a surplus of 35 million barrels while the overhang versus the five year average for the same week will come in around 35.6 million barrels.I am expecting a modest draw in crude oil stocks in Cushing, Ok as the Seaway pipeline is now pumping and refinery run rates are continuing at high levels in that region of the US. This would normally be bearish for the Brent/WTI spread in the short term but the spread is currently trading at the highest premium to Brent in over a year. The slow return from maintenance in the North Sea has been the main driver that has resulted in the Nov Brent/WTI spread now trading over the $24/bbl level as of this writing. The widening of the spread should begin to ease once the North Sea returns to a more normal production level over the next month or two.
With refinery runs expected to increase by 0.2% I am expecting a build in gasoline stocks. Gasoline stocks are expected to increase by 1 million barrels which would result in the gasoline year over year deficit coming in around 9.9 million barrels while the deficit versus the five year average for the same week will come in around 8.2 million barrels.
Distillate fuel is projected to decrease by 1 million barrels. If the actual EIA data is in sync with my distillate fuel projection inventories versus last year will likely now be about 29.9 million barrels below last year while the deficit versus the five year average will come in around 30.3 million barrels.
The following table compares my projections for this week's report (for the categories I am making projections) with the change in inventories for the same period last year. As you can see from the table last year's inventories are not in directional sync with this week's projections. As such if the actual data is in line with the projections there will be a significant change in the year over year inventory comparisons. The oil complex has breached all of its current support levels and as such I am keeping my view at neutral for today as crude oil continues to trade within a wide trading range (see above for more comments). The battle continues between the negativity from the slowing of the global economy compared to what global stimulus programs might do to the economy going forward while geopolitics has continued to remain an issue for market participants. I am keeping my Nat Gas price view at neutral with bias to the bullish side as the fundamentals and technicals are quickly catching up the current price levels. As I mentioned above the market appears to be moving into a buy the dip mode
Markets are higher heading into the Asian trading session as shown in the following table.
Best regards,
Dominick A. Chirichella

Recap Energy Market Report (CME)
November crude oil prices experienced a volatile session that first broke down to a new four day low, with a loss of more than 2%, before bouncing to close near unchanged levels. Early weakness in the crude oil market came on sluggish demand prospects following a decline in September China crude oil imports. The market came under added pressure following Empire State Manufacturing data that showed the third month of contraction. Meanwhile, reports of further delays in North Sea crude production and further widening in the Brent vs. WTI crude oil spread offered a measure of support. It is also possible that the crude oil market garnered support after EU leaders agreed to pursue tougher sanctions against Iran's nuclear program.

Indian Ore Plunging With Eagle Bulk Seen at Record Low: Freight (Bloomberg)
The biggest slump in Indian iron-ore exports on record is driving rates for ships hauling the cargoes to the lowest since at least 2005, extending losses for Eagle Bulk Shipping Inc. (EGLE) and other owners. Supramaxes, each hauling enough ore to make about 33,000 metric tons of steel, will earn an average of $8,500 a day in 2013, 15 percent less than this year, based on forward freight agreements traded by brokers and used to bet on shipping costs. That’s 13 percent less than New York-based Eagle Bulk, the largest U.S. owner of the ships, says it needs to break even.
Goa, India’s top exporting state, banned all production last month to curb illegal mining, and shipments from the world’s fourth-largest supplier will decline 36 percent this year, according to Clarkson Plc (CKN), the biggest shipbroker. Supramaxes take about 40 percent of the nation’s cargo, Drewry Maritime Research estimates. That’s curbing demand at a time when owners are contending with record fleet capacity and ore prices are slumping because of weaker global consumption. “The loss of Indian iron ore is eating away at Supramax demand,” said Marc Pauchet, an analyst at ACM Shipping Group Plc, a London-based shipbroker founded three decades ago and now with offices in 10 cities from New York to Shanghai. “In this environment, every lost cargo hurts.”

Gold, Silver Drop Most in Three Months on Economy, China (Bloomberg)
Gold and silver futures fell the most in three months amid concern that the global economy is slowing and China may refrain from additional economic stimulus. Bank of Israel Governor Stanley Fischer said the world is “awfully close” to a recession. People’s Bank of China Deputy Governor Yi Gang said that while policy makers will provide “appropriate” stimulus to stabilize growth, the central bank’s main task is price stability, citing bubble risks in housing. “There are no clear signals from China whether there will be more stimulus,” Phil Streible, a senior commodity broker at R.J. O’Brien & Associates in Chicago, said in a telephone interview. “Also, overall slowdown concern is sending all commodities, including precious metals, down.” Gold futures for December delivery tumbled 1.3 percent to settle at $1,737.60 an ounce on the Comex at 1:47 p.m. in New York, the biggest drop for a most-active contract since July 6. The metal fell 1.2 percent last week.
Silver futures for December delivery declined 2.8 percent to $32.743 an ounce, the largest decline since June 21. The Standard & Poor’s GSCI Spot Index of 24 raw materials slipped as much as 1.4 percent to a one-week low. Gold declined before tomorrow’s second U.S. presidential debate because investors are concerned that Republican Mitt Romney may cut government spending if elected, Streible said. “Romney strength is negative for gold as he is anti- government spending,” Streible said. Some polls showed that Romney gained momentum following the first debate against President Barack Obama on Oct. 3. The election is on Nov. 6. On the New York Mercantile Exchange, platinum futures for January delivery slumped 1.6 percent to $1,632.30 an ounce. Palladium futures for December delivery slipped 1 percent to $632.60 an ounce.

Gold Market Recap Report (CME)
News of unresolved South African labor problems were given little if any credence today as gold was a physical commodity disappointed with reduced odds of US easing or gold was simply a commodity that came under follow through technically orientated selling. While the Euro was weaker today the magnitude of the moves in the currency markets did not seem to be responsible for the hard washout in gold prices. Perhaps some gold longs decided to bank profits in the wake of the most recent COT positioning report figures or maybe gold was simply pressured because of sagging economic views toward China. In the end, reduced QE benefits were mostly likely the main theme emboldening the bear camp today.

Silver Market Recap Report (CME)
Like gold, the silver market was under noted pressure today and in retrospect a moderate portion of the losses today might have been knock on selling from weak chart action. However, silver did see a long list of physical commodities under attack today and that in turn probably gave added credence to talk of reduced US easing ahead. With December silver at times reaching down to the lowest level since September 13th it would appear that the mostly bearish track from the prior week was pulled forward into the new trading week.