Friday, October 19, 2012
FCPO closed : 2501, changed : +5 points, volume : higher.
Bollinger band reading : correction range bound little downside biased.
MACD Histogram : rising higher, buyer taking exposure.
Support : 2490, 2450, 2400, 2350 level.
Resistance : 2520, 2550, 2570, 2600 level.
FCPO closed recorded marginal gain with slightly better volume transacted. Soy oil currently declining little lower after overnight closed recorded more than 2% gain while crude oil price registering small gain.
Price traded mostly in positive territory on possible flood concern and better exports prospect ahead of cargo surveyor exports figure.
Daily chart reading continue to calling a correction range bound little downside biased market development.
When to buy : buy at support or weakness with quick cut loss and profit target.
When to sell : sell at resistant or strength with quick cut loss and profit target.
Posted by MW Chong at 6:08 PM
VEGOILS-Palm oil edges up on demand view, set for weekly gain
Fri Oct 19, 2012 1:55am EDT
* Palm oil futures up on demand from India ahead of festive
* Futures on track for 0.6 percent weekly gain
* Prices capped by high inventories -analyst
By Anuradha Raghu
KUALA LUMPUR, Oct 19 (Reuters) - Malaysian palm oil futures
rose on Friday, with market players confident of a recovery in
demand thanks to strong Malaysian exports in the first half of
the month and a major festival next month.
Friday's light trade was enough to put palm oil on track for
a second weekly gain, buoyed by expectations of stronger demand
that could ease record stocks.
"There are more purchases from India and China - India
especially - because Deepavali is coming soon. They need to
stock up more on palm oil," said Malaysia's Public Investment
Bank analyst Chong Hoe Leong, referring to the Hindu festival of
lights set for Nov. 13.
"The current crude palm oil price is quite attractive for
purchase because it's at the low base," he said, but warned that
inventory levels are expected to stay consistently high for the
remainder of the year.
By the midday break the benchmark January contract
on the Bursa Malaysia Derivatives Exchange rose 0.7 percent to
2,514 ringgit ($825) per tonne. Prices have lost one-fifth so
far since the start of the year.
Total traded volumes stood at 6,374 lots of 25 tonnes each,
much thinner than the usual 12,500 lots as investors stayed on
the sidelines ahead of the weekend.
Despite hopes for an improved exports trend, analysts say
inventories, which hit a record high in September, remain
worrying as palm oil production shows no signs of slowing, and
Malaysia struggles to push out shipments quicker amid weaker
global economic growth.
"For next year, it is a bit challenging for palm oil because
we can see a slowdown in market activity especially in the major
consuming countries," Chong said.
"That will be the major concern for the palm oil market,
despite Malaysia recently imposing a lower tax structure
starting from next year," he added, referring to the tax cut
from the current level of 23 percent of the export price per
Brent blend crude oil, an important indicator for the palm
oil biofuel market, held above $112 a barrel on Friday, but
remained on track for its third weekly fall in five weeks as
supply concerns diminished with the imminent restart of
Britain's largest oilfield.
In other vegetable oil markets, U.S. soyoil for December
delivery fell 0.8 percent in early Asian trade. The
most-active May 2013 soybean oil contract on the Dalian
Commodity Exchange were up 0.2 percent by the midday break.
U.S. officials to visit Indonesia for palm oil emissions talks
By Michael Taylor and Yayat Supriatna
JAKARTA | Fri Oct 19, 2012 4:21am EDT
(Reuters) - The U.S. Environmental Protection Agency will visit Indonesia next week, officials said on Friday, in what may prove a crucial step in the battle to meet green standards and open up a potentially huge market for the world's top palm oil producer.
Indonesia is seen as a key player in the fight against climate change and is under intense international pressure to curb its rapid deforestation rate and destruction of carbon-rich peatlands.
A recent blow to the Southeast Asian palm oil industry, which supplies more than 90 percent of world supplies of the edible oil, came in late January when it failed to meet greenhouse gas saving standards to qualify for the U.S. renewable fuels program.
The U.S. EPA said palm oil converted into biofuels in Indonesia and Malaysia cut up to 17 percent of climate warming emissions, falling short of a 20 percent requirement to enter the world's largest energy market.
Next week an EPA delegation will visit a palm oil plantation in Riau province, opposite Singapore on Sumatra island, and then meet the Indonesian agriculture minister in Jakarta, Gamal Nasir, director general of plantation at the ministry told Reuters.
"The visit is very important for both the EPA, American people and the Indonesian government and its people," Nasir added. "This is a good step to prove what EPA claims and Indonesia argues.
"We will be open up to them and prove our arguments in the field."
A senior spokeswoman at the EPA said that the group had been invited and would visit Southeast Asia next week, but was unable to give any further details.
Palm industry figures, including the Indonesian Palm Oil Board (IPOB) are due to be part of next week's EPA visit. The IPOB declined to comment.
In the last few years, Indonesia has seen rapid growth in production of palm oil, with output this year expected to be between 23 million and 25 million tonnes, with around 18 million tonnes exported.
In 2012, palm oil estates will sprawl across 8.2 million hectares of Indonesian land, and is expected to rise about 200,000 hectares each year for the next decade.
Green groups have been critical of expansion in the palm sector.
Plantation expansion is projected to pump more than 558 million metric tons of carbon dioxide into the atmosphere in 2020, an amount greater than all of Canada's current fossil fuel emissions, a study by Yale and Stanford University researchers said last month.
Plantation expansion in Kalimantan alone is projected to contribute 18-22 percent of Indonesia's 2020 CO2-equivalent emissions, the study added.
For their part, Indonesian government officials and palm industry figures have lobbied the U.S. government on the issue.
Indonesia's President Susilo Bambang Yudhoyono signed off on a two-year forest moratorium in May last year, although critics say breaches still occur.
Although the U.S. is not a large palm oil market at present, with India, China and Europe the top buyers, this could change in the future, say Indonesia-based traders.
Both Malaysia and Indonesian government officials have agreed to work together to improve the palm industry's record on environmental issues.
Posted by MW Chong at 5:37 PM
FKLI closed : 1662 changed : -5.5 points, volume : lower.
Bollinger band reading : correction range bound upside biased.
MACD Histogram : turned downward, buyer seller battling.
Support : 1660, 1657, 1651, 1645 level.
Resistance : 1670, 1680, 1690, 1700 level.
FKLI closed recorded loss with quiet volume traded doing 4 points discount compare to cash market that edge up marginally. Overnight U.S. markets closed declined little lower and today Asia markets ended mixed while European markets currently trading lower.
Slower China foreign direct investment data and overnight lower than estimated Google and Microsoft earnings reports resulted world markets to trade mostly negative ahead of the weekend while awaits further news from Europe region leaders meeting.
FKLI daily chart study adjusted to calling a correction range bound upside biased market development as Bollinger band started to turned narrowing.
When to buy : buy at support or weakness with quick cut loss and profit target.
When to sell : sell at resistance or strength with quick cut loss and profit target.
Posted by MW Chong at 5:28 PM
STOCKS: European stocks are set to dip, halting their sharp four-session rally, with tech shares set to feel the pinch while Asian shares eased, with technology stocks hit by disappointing earnings from Google Inc and Microsoft Corp. U.S. stocks fell on Thursday. (Reuters)
FOREX: The euro hovered below one-month high against the dollar, looking for a fresh impetus to retest last's month peak while the yen wobbled near a two-month trough against the dollar as speculators bet on another stimulus from the Bank of Japan. (Reuters)
FOREX-Euro hovers below 1-month high, yen under pressure
TOKYO, Oct 19 (Reuters) - The euro hovered below its one-month high against the dollar having been left unmoved by the European summit, while the yen wobbled near a two-month low against the dollar as speculation mounted over the possibility that the Bank of Japan will take fresh stimulus measures.
"It seems like investors are coming back to the euro zone (bonds). There's a sense of ease that the European Central Bank will buy and support the market," said a trader at a European bank.
Europe advances towards single banking supervisor (Reuters)
European Union leaders took a big stride towards establishing a single banking supervisor for the euro zone, agreeing it would enter into force next year, opening the way for the bloc's rescue fund to inject capital directly into ailing banks.
China trade recovery not confirmed by Sept data -MOFCOM
BEIJING, Oct 19 (Reuters) - China's September trade data, which showed a surge in exports at twice the rate expected and a return to import growth, are not yet enough to confirm that a recovery trend is in place for the external sector, the Commerce Ministry said on Friday.
Ministry spokesman Shen Danyang told a news conference it was still too early to draw such a conclusion.
China trade recovery not confirmed by Sept data -MOFCOM (Reuters)
China's September trade data, which showed a surge in exports at twice the rate expected and a return to import growth, are not yet enough to confirm that a recovery trend is in place for the external sector, the Commerce Ministry said on Friday.
U.S. jobless claims hint labor market improving slowly (Reuters)
The number of Americans filing new claims for jobless benefits spiked last week, reversing a sharp decline in the prior week but still pointing to a labor market that is slowly healing.
U.S. commodity inflows strong again in Sept; gold shines-Lipper
NEW YORK, Oct 18 (Reuters) - U.S. commodity products and funds saw another strong month of inflows in September as stimulus by global central banks led to a flood of new money, particularly into gold and precious metals offerings, Lipper data showed on Thursday.
Nearly $2.37 billion in net inflows were noted across some 230 U.S.-regulated commodity products and funds tracked by Lipper last month. Precious metals funds drew most of the money as investors sought to hedge against currency weakening from central bank stimulus or monetary easing.
GRAINS: U.S. soybeans slid half a percent after three straight sessions of gains, although the market is on track for its first weekly gain in more than a month, supported by strong demand and slow selling by farmers. (Reuters)
Sugar prices seen encouraging producers to expand area (Reuters)
Even as world sugar prices encourage producers to expand area to meet an expected steady rise in consumption over the next decade, yields will need to rise to keep pace.
OIL: Brent crude held above $112 a barrel, but remained on track for its third weekly fall in five weeks, as supply concerns diminished with the imminent restart of Britain's largest oilfield. (Reuters)
Exxon seeks to quit flagship Iraq oil project (Reuters)
Exxon Mobil wants to leave its giant oilfield project in southern Iraq, diplomatic sources said, in a move likely to aggravate the country's internal tensions and hamper Baghdad's ambitious energy expansion plans.
BASE METALS: London copper edged down, but was on track to post a 0.6 percent weekly rise following data that suggested China's economy is stabilising and recovery in the United States is slowly gaining traction. (Reuters)
Japan's crude steel output dips in Sept, first fall in 7 mths
TOKYO, Oct 18 (Reuters) - Japan's crude steel output fell one percent in September from a year earlier, marking its first drop in seven months, after the government ended subsidies for environmentally friendly cars, causing the first dip in new car sales in 12 months.
Crude steel output fell to 8.8 million tonnes, the Japan Iron and Steel Federation said on Wednesday. Output, which is not seasonally adjusted, fell 4.4 percent from August.
Iron ore steadies, but China buyers may resurface
SINGAPORE, Oct 19 (Reuters) - Spot prices of iron ore steadied but may end the week with modest gains that could stretch to next week, when buyers resume purchases on expectations that Chinese steel mills will keep up strong production.
Price offers for imported iron ore cargoes in top consumer China were little changed, although quotes for Brazilian material rose by a dollar per tonne, according to Beijing-based consultancy Umetal.
PRECIOUS METALS: Gold gave up early gains as shares in Asia slipped following a three-day rally and investors took a breather ahead of the outcome of a euro zone summit to solve the region's debt crisis, which could offer support to the euro. (Reuters)
METALS-Copper set for weekly gain after China, U.S. data
SHANGHAI, Oct 19 (Reuters) - London copper edged down but was on track to post a 0.6 percent weekly rise following data that suggested China's economy is stabilising and recovery in the United States is slowly gaining traction.
"Now that the Chinese and U.S. economies appear to be stable, traders are focusing more on base metals' fundamentals, which are still weak," said CIFCO Futures analyst Zhou Jie.
PRECIOUS-Gold tracks equities lower, heads for 2nd weekly fall
SINGAPORE, Oct 19 (Reuters) - Gold gave up early gains as shares in Asia slipped following a three-day rally and as investors took a breather ahead of the outcome of a summit on solving the euro zone debt crisis, which could support the euro.
"There's some disappointment after (gold) could not pass through $1,754 to $1,755. And then a stronger dollar dragged down the market," said Ronald Leung, director of Lee Cheong Gold Dealers in Hong Kong, adding that dealers were also waiting for the outcome of the euro zone summit.
Baltic index down as capesize, panamax rates drop
Oct 18 (Reuters) - The Baltic Exchange's main sea freight index, tracking rates for ships carrying dry commodities, fell on Thursday, snapping a 13-day rising streak as rates for capesize and panamax ships fell.
The overall index, which reflects daily freight market prices for capesize, panamax, supramax and handysize dry bulk transport vessels, fell 1 percent to 989 points.
Posted by MW Chong at 4:32 PM
GLOBAL MARKETS-Asian shares ease, consolidate recent gains
TOKYO, Oct 19 (Reuters) - Asian shares eased as markets consolidated gains from a three-day rally, while the euro remained underpinned by easing tension over the euro zone's debt crisis.
"The Kospi is likely to take a rest after the recent rises, as the U.S. markets did following Google's disappointing results," said Bae Sung-yung, an analyst at Hyundai Securities, referring to Korean equities.
OIL-Oil slips but pares loss on shut Canada-U.S. pipeline
NEW YORK, Oct 18 (Reuters) - Oil prices fell on Thursday on the approaching restart of a North Sea oil field and weak U.S. jobless claims data, but with losses pared after news a pipeline carrying Canadian crude oil to the United States had shut.
"The market is in a phase where there is a strong reaction to infrastructure issues, although refinery snags are of greater import given low refined product storage levels," said John Kilduff, partner at Again Capital LLC in New York.
NATURAL GAS-US natgas futures end up for 2nd day, EIAs seen bearish
NEW YORK, Oct 18 (Reuters) - Front-month U.S. natural gas futures, shrugging off a slightly bearish weekly inventory report, ended up sharply on Thursday, underpinned by technical buying after prices tested and held support early in the session.
"The market held support on the initial sell-off after the (EIA storage) number. It (the build) was bigger than expectations, but the friendly factor is that injections have been considerably smaller than last year and mostly below average," said Tom Saal at INTL FCStone in Miami.
EURO COAL-Prices steady, more trades seen
LONDON, Oct 18 (Reuters) - Prompt physical coal prices were little changed again on Thursday but activity picked up significantly, due partly to the return of many coal market players from the major annual industry conference in Istanbul this week.
"Prices haven't really changed but there were many more names in the market, people seem to have come back from Istanbul ready to do some business," one European trader said.
Posted by MW Chong at 11:07 AM
Bursa Malaysia Securities has completed the final phase of its CDS (Central Depository System) Straight Through Processing initiative for market participants, allowing them to automate voluminous depository- related transactions, from their back office straight into CDS. The exchange holding company said subscribing brokers were now able to reduce manual data entry, shorten turnaround times and facilitate faster data capturing for market participants’ back office operations. (Bernama)
Telekom Malaysia Bhd is seeking approval from the Finance Ministry to make a RM1.8bn bid for Green Packet Bhd's wireless broadband unit, Packet One Sdn Bhd (P1). Business Times understands that the company sought the approval yesterday. Speculation has been rife that Green Packet is looking to dispose of P1 but the company was noncommital in a statement to the stock exchange on Wednesday. But late yesterday, Green Packet came out with another reply. This time, it told Bursa Malaysia that it is exploring strategic alternatives for P1, including the possibility of a merger, consolidation, sale of stake and other options to maximise shareholders' value. "To date, we have not received any bids to purchase our shareholdings in P1," Green Packet added. However, an influential shareholder of Green Packet told Business Times that selling P1 will be of strategic interest. The shareholder also confirmed that the company has received several offers for P1. (BT)
The cost of the Sungai Buloh-Kajang MY Rapid Transit (SBK MRT) project will not exceed the RM40bn mark, says Mass Rapid Transit Corp Sdn Bhd (MRT Corp) strategic communications director Amir Mahmood Razak.The final value of the 51km SBK MRT Line 1 will be determined by the end of this year, when all the 85 contracts are awarded. So far, MRT Corp has awarded 47 packages worth around RM20bn. Between now till the end of the year, it will award 38 new contracts worth a combined RM2bn. An initial estimate for the SBK MRT project was pegged at around RM37bn. Speculation has been rife that the project cost would go up to as high as RM50bn. "The 85 packages add up to around RM22bn. If you include other costs like land acquisition and compensation, it will be less than RM40bn and not as speculated," Amir said.(BT)
Mass Rapid Transit Corp Sdn Bhd (MRT Corp) expects to call tenders for the Klang Valley MY Rapid Transit (MRT) Line 2 (Circle Line) and Line 3 packages by the end-2013. MRT Corp strategic communications director Amir Mahmood Razak said firms that previously won contracts for Line 1 from Sungai Buloh to Kajang can bid for the packages. "If the contractors have been pre-qualified for Line 1, they should have no problems bidding for Line 2 and 3," Amir said yesterday after announcing the start of the viaduct work package by Gadang Engineering (M) Sdn Bhd. The MRT Line 2 and 3 are currently under final planning and evaluation. Amir said the government will announce the alignment and station locations in the first half of next year, after which, there would be three months of public display for feedbacks. "We are not sure how much it would cost to build Line 2 and 3. We will have an idea once we know where the alignments run, the geographic's of it and the number of stations required," Amir said."The government is still conducting studies. If the new lines are announced by early next year, we will be able to award some of the contracts by end-2013. That would be a fair estimate," Amir said.The MRT project comprising Line 1, 2 and 3 fall under the Greater KL/Klang Valley Land Public Transport Master Plan. (BT)
RHB Capital Bhd says there is no ongoing merger talks between its subsidiary, RHB Bank Bhd, and Malaysia's largest lender, Maybank Bank Bhd. Group MD Kellee Kam said RHB has not been approached by Maybank on a possible merger that could potentially create the region's biggest bank. "No, there has not been any discussion with Maybank," Kam told reporters after the launch of RHB Evo card here yesterday. "All in all, RHB, as a standalone organisation, has shown that it is capable of growing and growing very well," he added. (BT)
CIMB Thai Group posted net profit of RM1.05bn for the third quarter, more than triple of the RM322m in the previous corresponding quarter. CIMB Thai Group's consolidated net profit surged boosted by the shared gains from Thai Asset Management Corporation and gain on sale of investment in a CIMB Thai Bank's subsidiary. (Financial Daily)
Archer Daniels Midland Co and Wilmar International Ltd said they completed regulatory approvals for a partnership in the global fertiliser and European vegetable oil sectors. To be based in Rolle, Switzerland, the partnership along with another in global ocean freight will collaborate on purchasing and distributing fertiliser globally, and in selling and marketing vegetable oils and fats in Europe. (Reuters)
Lembaga Tabung Haji is close to disposing its Indonesian plantations to Alexander Thaslim's PT Borneo Pacific in a deal worth US$1.3bn. The plantations total 83,879ha (73,650ha planted) in Sumatra and are managed by TH Plantations. The deal will be financed with US$300m equity and the rest in loans. (Financial Daily)
Malaysian Airlines (MAS) will offer full-service direct connectivity from Kota Kinabalu to Perth and Osaka and increase frequencies to Hong Kong beginning December. The company will operate its 160-seater B737-800 aircraft for the services. (Malaysian Reserve)
TH Plantations may sell 95% stake in Indonesian estates
TH Plantations may be selling its 95% stake in its plantations in the Indonesian province of Riau to Indonesia’s PT Borneo Pacific, who will be forking out as much as USD1.3bn (RM3.95bn) for the estates. Indonesian businessman and president director of Borneo Pacific Alexander Thaslim was bidding for what might be the largest contiguous plantation concession in Indonesia at 83,879 ha, according to Reuters. A total of 73,650 ha had been planted while other assets included six mills, a kernel crushing plant and biomass power plant. PT Borneo would buy TH Plantations’ 95% stake for USD910m (RM2.8bn) and is expected to buy the remaining 5% owned by PT Primasakti Rizki Pertiwi. (StarBiz)
Mah Sing to develop RM1.1bn GDV project in Iskandar Malaysia
Mah Sing will develop The Meridin@Medini in Iskandar with an estimated GDV of RM1.1bn under a 99-year lease purchase agreement with Iskandar Investment. Group MD and CEO Tan Sri Leong Hoy Kum said 10% of the total consideration of RM74.7m, with confirmed gross floor area of 2.14m sq ft, will be paid upon signing of the lease agreement, with the remaining balance to be paid over five years. All will be funded with internally generated funds. The project is expected to take off in 2H2013 and will be completed in five years.(Malaysian Reserve)
DRB-Hicom to sell power unit to Malakoff for RM575m
To pare down its debt, DRB-Hicom has proposed to sell Hicom Power SB to Malakoff Power for RM575m. The disposal of its power unit is expected to realise a net income of about RM446.2m. The proceeds, which will be received in cash via four staggered payments, will be used to repay its RM495m loan taken to finance its Proton acquisition. DRB-Hicom’s borrowings have grown to RM3.0bn after taking on loans for the Proton purchase. (Malaysian Reserve)
Motor vehicle sales up 3.3% in September
Motor vehicle sales in September rose by 3.3% to 45,872 units y-o-y. The passenger car segment recorded sales of 40,232 units (+1.5% y-o-y), and commercial vehicles rose to 5,640 units (+18.0% y-o-y). Sales volume fell 11.5% m-o-m, however, as consumers adopted a wait-and-see attitude pending the Budget 2013 announcement. (Financial Daily)
TH Heavy seeks early exit from PN17
TH Heavy Engineering is seeking an early lifting of its PN17 status after being profitable for three consecutive quarters. It has submitted to Bursa Malaysia its 3QFY12 results, which are subject to a limited review by an external auditor, in its application to be removed from PN17 classification. Bursa listing requirements require two consecutive quarters of profits following the submission of its regularisation plan. (Financial Daily)
Astro opens up one percent after $1.5 billion Malaysia IPO
By Yantoultra Ngui
KUALA LUMPUR | Thu Oct 18, 2012 9:49pm EDT
(Reuters) - Shares of Astro Malaysia Holdings Bhd (ASTR.KL), the country's biggest pay-TV firm, opened 1 percent higher in their trading debut on Friday, underperforming other recent big listings in Kuala Lumpur's booming IPO market amid concerns about their expensive valuation.
The stock was trading at 3.03 ringgit as of 0132 GMT, compared with the 3.00 ringgit price set for Malaysia's third-biggest initial public offering this year.
"It reflects the valuation of the stock, it is priced quite expensive. As such it is not moving as much as the previous big IPOs," said an analyst at the research arm of a local bank, who declined to be identified.
Astro, controlled by Malaysia's second-richest man Ananda Krishnan, raised $1.5 billion in its IPO, bolstered by its position as the top player in the pay-TV market and by strong demand from cornerstone investors such as U.S. hedge fund Och-Ziff Capital Management (OZM.N).
The IPO followed Felda Global Ventures Holdings Bhd's (FGVH.KL) $3.3 billion offering in June and IHH Healthcare Bhd's (IHHH.KL) $2.1 billion flotation in July, and has pushed Malaysia's 2012 IPO tally to about $7.9 billion - or nearly one-quarter of all new listings in Asia-Pacific.
By comparison, Felda, a palm oil firm, closed up 16.5 percent on its debut in June, while hospital operator IHH gained 10.5 percent on its first trading day in July.
Four analysts in a Reuters survey had expected Astro to gain between 6 and 10 percent in their debut on Friday.
"On a price-to-earnings (PE) valuation basis, we do find the issue price of 3.00 ringgit per share rather expensive as it would translate to a PE of 32 times based on FY2013 estimated earnings per share," Kuala Lumpur-based TA Securities said in a note ahead of Friday's share debut.
"However on a longer-term basis we believe the premium is justified due to Astro's dominant position within the industry, expected double-digit bottom line growth, and decent bottom line margin for the next five years at least."
Astro, which also counts state investor Khazanah Nasional Bhd KHAZA.UL as a major shareholder, has a near-monopoly in Malaysia's residential pay-TV market and a subscriber base of 3.1 million. It is returning to public markets after it was taken private in 2010.
At the offer price of 3.00 ringgit per share, Astro would have a market value of 15.6 billion ringgit ($5.1 billion), nearly double the 8.3 billion ringgit it was worth when it was taken private.
Astro's IPO is being handled by CIMB Group Holdings Bhd (CIMB.KL), Malayan Banking Bhd (MBBM.KL) and RHB Capital Bhd (RHBC.KL). Several foreign banks are also advisers, including UBS AG (UBSN.VX), Credit Suisse Group AG (CSGN.VX), Goldman Sachs Group Inc (GS.N) and JPMorgan Chase & Co (JPM.N).
Posted by MW Chong at 10:01 AM
Mier’s Consumer Sentiments Index (CSI) added 3.4 pts qoq to 118.3 pts at the end of 3Q12 while Business Conditions Index (BCI) fell 15.5 pts qoq to 96 pts. “On balance, taking into account the results of Mier surveys and the fact that domestic demand remains resilient despite negative development overseas, we are upgrading our 2012 and 2013 growth forecast for the Malaysian economy to 4.9% and 5.4% respectively (vs. previous’ forecast of 4.2% and 4.7% respectively),” said Mier ED Zakariah Abdul Rashid. He added that the central bank was likely to keep the benchmark interest rate at 3% for the remainder of the year. He also expects the ringgit to “slowly appreciate” to the 2 May rate of RM3.02/US$1 by year-end. (Starbiz)
China’s home prices gained just 0.01% mom in Sep, following monthly gains of 0.1% in both Aug and Jul. Yoy, home prices fell 1.3%. Home prices rose in 31 of 70 cities in Sep versus 35 in Aug. Jan-Sep property investment +15.4% yoy, lower than 15.6% in Jan-Aug. Meanwhile Sep property sales revenues grew 4.9% yoy, down from 20.4% yoy in Aug. (Reuters)
China’s industrial production rose 9.2% yoy in Sep (8.9% in Aug). That compared with the 9% median forecast. (Bloomberg)
China’s fixed-asset investment excluding rural households increased 20.5% yoy in the Jan to Sep period. That compared with the 20.2% median estimate and a 20.2% gain in the first eight months. (Bloomberg)
Retail sales in China in Sep rose 14.2% yoy (13.2% in Aug). The median forecast was for an increase of 13.2%. (Bloomberg)
China’s business climate index fell to 122.8 in 3Q12 from 126.9 in the previous quarter. (Bloomberg)
China: GDP shows pickup signs after seven-quarter slowdown
China’s industrial production, retail sales and fixed-asset investment accelerated in September, reducing the urgency for added stimulus to support the economy after a seven-quarter slowdown. GDP expanded 7.4% in the third quarter from a year earlier. GDP rose 2.2% from the prior period, a four-quarter high. (Bloomberg)
Spain: Banks’ worst-case scenario turning real
Spain’s banks face more loan losses as the pace of an economic slump risks turning a worst-case scenario dismissed in stress tests into reality. Bad loans as a proportion of total lending jumped to a record 10.5% in August from a restated 10.1% in July as EUR9.3bn of loans were newly classified as being in default, according to data published by the Bank of Spain. The ratio has climbed for 17 straight months from 0.7% in December 2006, before Spain’s property boom turned to bust. (Bloomberg)
EU: Leaders commit to bank supervisor design by year-end
European leaders committed to their goal of creating a euro-area bank supervisor by year-end, pushing divisive questions on cost-sharing into 2013. Pressed by counterparts from France to Austria to move quickly on breaking the link between banks and governments in the euro area’s financial crisis, German Chancellor Angela Merkel demanded a “thorough” approach as the 27 European Union leaders met for two days of talks in Brussels. (Bloomberg)
US: Initial jobless claims jump to 388,000
The number of Americans who applied for unemployment benefits last week shot up to a three-month high, reversing a sharp decline in the government’s prior report caused by a seasonal quirk that showed first-time claims at a four-year low. New jobless claims jumped by 46,000 to a seasonally adjusted 388,000 in the week ended 13 Oct. Economists surveyed by MarketWatch had forecast claims would rise to 365,000. (MarketWatch)
US: Housing revival boosts economic outlook
Consumer confidence rose to a six-month high and an index of US leading indicators climbed as a nascent housing recovery started to ripple through the world’s largest economy. The Bloomberg Consumer Comfort Index rose to minus 34.8 in the week ended 14 Oct, the highest level since April, from minus 38.5 the previous week. The Conference Board’s gauge of the outlook for the next three to six months increased 0.6% in September after a revised 0.4% drop in August. (Bloomberg)
The US Conference Board’s index of leading indicators gained 0.6% mom in Sep (a revised -0.4% in Aug), three times the consensus estimate of 0.2%. (Bloomberg)
Posted by MW Chong at 10:00 AM
Asia FX By Cornelius Luca - Thu 18 Oct 2012 17:06:06 CT (Source:CME/www.lucafxta.com)
The appetite for risk soured on Thursdays, when the expected slowdown of the Chinese GDP was followed by the Google's exceptional slide. All foreign currencies fell after the European and commodity currencies surged on Wednesday. The US stock markets slipped. Gold, oil and silver ended lower. The short-term outlook for the European and commodity currencies is sideways to slightly bearish. The medium-term outlook for most of the foreign currencies is slightly bullish. The LGR short-term model is short on yen, sterling and Canadian dollar, and long euro, franc and Australian dollar. Good luck!
US: Initial jobless claims surged to 388,000 from the previous week's revised figure of 342,000 (from the 339,000 originally reported for the previous week).
US: The leading indicator rose 0.6% in September, but the August reading was revised to -0.4% from -0.1%.
US: The Philadelphia Fed manufacturing survey surged to 25.7 in October from -1.9 in September.
Canada: Wholesale sales rose 0.5% in August after falling 0.7% in July.
Today's economic calendar
Japan: All industry activity index for August
Japan: Leading economic index / coincident index for August
Asian Stocks Fall as Earnings Drag Down Technology Shares (Bloomberg)
Asian stocks fell as worse-than- expected earnings results from Google Inc. and Microsoft Corp. weighed on technology shares. Losses were limited after consumer confidence and an index of leading indicators in the U.S. rose. Yahoo Japan Corp., a provider of online information, declined 2.9 percent in Tokyo. James Hardie Industries SE (JHX), a building-materials supplier that gets 67 percent of sales from the U.S., added 0.3 percent in Sydney. Bids to buy GrainCorp Ltd. (GNC) outnumbered offers to sell by about four-to-one as a person familiar with the matter said Wilmar International Ltd. bought a stake in eastern Australia’s largest grain handler. The MSCI Asia Pacific Index dropped less than 0.1 percent to 123.84 as of 9:48 a.m. in Tokyo before markets in Hong Kong and China opened. The measure has risen 2.5 percent this week.
“Earnings reflect the economic weakness we saw a few months ago, and therefore you could argue it’s somewhat outdated,” said Shane Oliver, Sydney-based head of investment strategy at AMP Capital Investors Ltd., which has almost $100 billion under management. “You end up in a standoff in the share market between focus on economic data, which is more forward-looking, and focus on earnings, which are not as good.” The MSCI Asia Pacific Index rebounded about 14 percent through yesterday from this year’s low on June 4 as stimulus measures in Europe, the U.S., Japan and China boosted market sentiment amid a global economic slowdown and Europe’s debt crisis. The Asian benchmark traded at 13.1 times estimated earnings on average, compared with 13.9 for the Standard & Poor’s 500 Index and 12.3 for the Stoxx Europe 600 Index.
Japanese Stocks Swing From Gains, Losses as Yen Weakens (Bloomberg)
Japanese shares swung between gains and losses as exporters rose on the yen’s seven-day advance, while Japan Tobacco (2914) Inc. fell on a report the Russian government is cracking down on smoking. Canon Inc., a camera maker that gets 80 percent of its revenue overseas, rose 0.8 percent. Japan Tobacco, the leader in Russia’s cigarette market, sank 2 percent. NEC Corp. jumped 9.7 percent on a report the electronics maker’s operating profit beat its forecast. Internet portal Yahoo Japan Corp. lost 2.8 percent after Google Inc.’s third-quarter profit missed estimates. The Nikkei 225 Stock Average (NKY) rose 0.1 percent to 8,993.02 as of 10:00 a.m. in Tokyo after falling as much as 0.5 percent. The gauge is headed for a 5.4 percent weekly gain, its biggest such advance this year. Volume was almost 15 percent above the 30-day average today. The broader Topix Index added 0.1 percent to 753.19.
U.S. Stocks Fall as Google Results Pull Down Tech Shares (Bloomberg)
U.S. stocks fell, snapping a three- day advance in the Standard & Poor’s 500 Index (SPX), as Google Inc. pulled down technology shares after reporting third-quarter profit and sales that missed estimates. Google dropped 8 percent after the earnings report was filed inadvertently during regular trading hours. Technology shares had the biggest decline among 10 groups in the S&P 500. Philip Morris International Inc. (PM) dropped 4.2 percent as earnings trailed analysts’ estimates. Travelers Cos. gained 3.6 percent as earnings more than doubled on lower claims costs tied to natural disasters. The S&P 500 fell 0.2 percent to 1,457.34 at 4 p.m. in New York. The index gained as much as 0.2 percent earlier as a rise in jobless claims was offset by better-than-estimated data on leading indicators and Philadelphia manufacturing. The Dow Jones Industrial Average slid 8.06 points, or 0.1 percent, to 13,548.94 today. The Nasdaq-100 Index tumbled 1.1 percent to 2,744.17.
About 6.9 billion shares traded hands on U.S. exchan ges, 14 percent above the three-month average. “Google failed to meet expectations and then also mistakenly released in the middle of the day,” Giri Cherukuri, a portfolio manager for Oakbrook Investments LLC, which manages $3 billion, said in a telephone interview. “Google is a big company and on top of the fact that they missed estimates, they talked about advertising in the online world not doing as well as previously thought.”
Recap Stock Index Market Report (CME)
The December S&P 500 entered the US trading session on an upward track, helped by overnight economic data in China that hinted at a possible rebound. However, this morning's weaker than expected labor market data and net loss reported by Morgan Stanley seemed to trigger a measure of profit-taking after this week's impressive gains. The downside action seemed to stabilize following better than expected report on mid-Atlantic business conditions. The major indices reversed in afternoon trading and registered a new low for the session in the wake of disappointing Google earnings that came out earlier than expected. Some of the downside in the S&P 500 might have been tempered by gains in the shares of Verizon and Travelers. The market receives the latest earnings from Microsoft and Capital One after the close.
U.K. Stocks Climb to Seven-month High as EU Leaders Meet (Bloomberg)
The U.K.’s FTSE 100 Index climbed for a fourth day, reaching a seven-month high, as European Union leaders gathered in Brussels to tackle the region’s debt crisis. Mining companies pushed the benchmark gauge higher in late afternoon trading as shares of Kazakhmys Plc (KAZ) and Rio Tinto Group rallied more than 2 percent. Man Group Plc (EMG) dropped the most in almost 11 months after the hedge-fund manager reported a 57 percent increase in outflows. SABMiller Plc (SAB) declined 2.1 percent after sales fell short of estimates. The FTSE 100 Index advanced 0.1 percent to 5,917.05 at the close in London. Two shares rose for each that declined in the measure, which has gained 2.1 percent so far this week, boosted by a pick-up in U.S. housing and retail data. The index has climbed 12 percent from its 2012 low on June 1. The FTSE All- Share Index added 0.1 percent today, while Ireland’s ISEQ Index fell 0.3 percent.
“I worry if we are getting a little bit ahead of ourselves,” Karen Olney, head of thematic equity strategy at UBS AG, said on Bloomberg Television in London. “There are a lot of things that still need to be sorted out in Europe. Expectations are high so maybe as earnings come down a bit and we get a couple of bumps along the way after the summit, the markets will sell off a bit.” EU leaders gathered this afternoon in Brussels for the summit as French President Francois Hollande warned that efforts to stem the debt crisis may unravel if the EU fails to deliver on its promises. He called on the euro area to press ahead with banking union. Chinese data today showed gross domestic product expanded 7.4 percent in the third quarter from a year earlier, matching the median estimate in a Bloomberg News survey. GDP rose 2.2 percent from the prior period, a four-quarter high.
European Stocks Rise for a Fourth Day as EU Leaders Meet (Bloomberg)
European (SXXP) stocks climbed for a fourth day as a measure of U.S. manufacturing beat estimates, while investors awaited the outcome of a two-day summit of the European Union’s leaders. Wincor Nixdorf AG (WIN), Europe’s biggest maker of automated teller machines, rallied 11 percent. Nestle SA (NESN) retreated 1.7 percent as the world’s biggest food company reported nine-month sales growth that missed analysts’ estimates. Remy Cointreau SA (RCO) sank the most in 3 1/2 years after France’s second-biggest distiller posted an improvement in first-half sales that fell short of forecasts. The Stoxx Europe 600 Index added 0.2 percent to 276.18 at the close, after earlier retreating as much as 0.3 percent. The equity benchmark has rallied 18 percent from this year’s low on June 4 as European Central Bank policy makers agreed on an unlimited asset-purchase program and the Federal Reserve announced a third round of quantitative easing.
“U.S. figures supported the cause of the bulls who remain in the ascendancy,” said Angus Campbell, head of market analysis at Capital Spreads in London. “With the EU summit underway, investors are content to stick with equities as the situation in Europe is showing a few signs of improvement.” The Stoxx 600 climbed to its highest level since Sept. 25 yesterday as Moody’s Investors Service left unchanged its investment-grade debt rating on Spain and house building surged to a four-year high in the U.S.
Emerging Stocks Jump to Month High on China Prospects (Bloomberg)
Emerging-market stocks rose, driving the benchmark index to the strongest level in a month, on prospects the slowdown in the world’s second-largest economy has reached a bottom. The MSCI Emerging Markets Index added 0.2 percent to 1,013.36 at the close of trading in New York, the highest close since Sept. 14. Sany Heavy Equipment International Holdings Co. (631) jumped after data showed Chinese industrial production accelerated last month. The yuan climbed beyond 6.25 per dollar for the first time in 19 years. Brazil’s Vale SA dropped after third-quarter iron-ore output fell. Russia’s OAO Gazprom, the world’s biggest natural-gas producer, declined.
Chinese Premier Wen Jiabao said the country’s economic growth has started to stabilize, a message underlined by data today showing the nation’s industrial output rebounded from a three-year low and retail sales surged the most in six months. Emerging stocks pared gains after a report showed U.S. jobless claims exceeded analysts’ estimates. The 21 countries in the MSCI index send about 13 percent of exports to the U.S. on average, according to the World Trade Organization. “There is an improvement of the sentiment on China,” Martial Godet, head of strategy at BNP Paribas CIB in London, said by e-mail. “The long-awaited stabilization of the Chinese economy has finally arrived, with maybe even a mild pick-up.”
Treasuries Snap Four-Day Loss Before Existing Home Sales (Bloomberg)
Treasuries snapped a four-day decline before an industry report economists said will show sales of existing homes fell in September, highlighting an uneven recovery in the U.S. housing market. Government securities still headed for their steepest weekly loss in a month, after a report two days ago showed an unexpected surge in housing starts. Treasuries slid yesterday and an auction of $7 billion in 30-year inflation-indexed bonds sold at a record-low yield of 0.479 percent as investors paid a premium to guard against the threat of rising consumer prices. U.S. 10-year yields declined one basis point, or 0.01 percentage point, to 1.82 percent as of 10:04 a.m. in Tokyo, according to Bloomberg Bond Trader data. The price of the 1.625 percent security due in August 2022 was 98 1/4. The yield climbed 16 basis points this week, the most since the seven days ended Sept. 14. Yesterday’s high yield of 1.83 percent was the most in a month.
“The current level is a buying opportunity,” said Hiromasa Nakamura, who invests in U.S. debt from Tokyo at Mizuho Asset Management Co., which oversees the equivalent of $41.5 billion. “It will take time for housing to significantly recover.” Existing home sales probably fell 1.7 percent in September from the month before, according to the median forecast of 78 economists before the National Association of Realtors reports the figure today. The figure rose 7.8 percent in August. Housing starts advanced 15 percent in September from August, a government report showed Oct. 17. The difference between yields on 10-year notes and same- maturity Treasury Inflation Protected Securities, a gauge of trader expectations for consumer prices over the life of the debt, was 2.56 percentage points. The average over the past decade is 2.17 percentage points.
Aussie Set for Weekly Gain on Signs of Improving Economy (Bloomberg)
Australia’s dollar headed for its biggest weekly gain in a month as signs of improvement in the global economy supported demand for riskier assets. The so-called Aussie traded 0.3 percent from its strongest in three weeks before data today forecast to show U.S. sales of existing homes hovered near a two-year high. Figures yesterday showed gains in industrial production, retail sales and fixed- asset investment in China, Australia’s largest trading partner and New Zealand’s second-biggest export market. Buying of the “kiwi” was limited as Asian stocks pared a weekly advance. “Recent data have been easing pessimism over growth in the U.S. and China, supporting the Aussie,” said Kumiko Gervaise, an analyst at Gaitame.com Research Institute Ltd. in Tokyo. “There is a risk that the Australian dollar has gained too much in a short period of time.”
The Australian currency added 0.1 percent to $1.0377 as of 11:09 a.m. in Sydney from the close yesterday, when it reached $1.0412, the highest since Sept. 28. It has appreciated 1.4 percent this week. The Aussie rose 0.1 percent to 82.28 yen, after yesterday touching 82.52, the strongest since Sept. 19. New Zealand’s dollar, nicknamed the kiwi, fetched 81.93 U.S. cents, 0.1 percent higher than yesterday’s close. The MSCI Asia Pacific Index of regional shares dropped 0.3 percent, paring this week’s gain to 2.3 percent. U.S. purchases of previously owned houses slid 1.7 percent to a 4.74 million annual rate in September, after they increased to the most since May 2010 in the previous month, according to the median forecast of economists in a Bloomberg News survey. The National Association of Realtors will release the figures today. A separate report due Oct. 24 is expected to show a 2.7 percent gain in new home sales in September.
Korean Won Set for Weekly Gain, Bonds Fall on U.S. Data (Bloomberg)
South Korea’s won was headed for its biggest weekly gain of the month and government bonds fell as signs the U.S. economy is improving brightened the outlook for exports and spurred demand for emerging-market assets. Retail sales in the U.S., the world’s biggest economy, increased 1.1 percent in September while housing starts climbed 15 percent to a four-year high, reports showed this week. European leaders committed to their goal of creating a euro-area bank supervisor by year-end, according to officials at a European Union summit in Brussels ending today. South Korea’s economy probably expanded 1.7 percent in the third quarter from a year earlier, the slowest pace in three years, a Bloomberg News survey showed before data next week. The won appreciated 0.5 percent this week to 1,105.60 per dollar as of 9:31 a.m. in Seoul, according to data compiled by Bloomberg. The currency weakened 0.1 percent today, snapping a six-day rally. It touched 1,102.50 on Oct. 17, the strongest level since 0ct. 31, 2011.
“The won was strong this week on positive data from the U.S., but it seems some overseas investors are covering their short positions on the dollar,” said Lee Jung Hyun, a Seoul- based currency trader for Industrial Bank of Korea. (024110) A short position is a bet an asset may decline in value. One-month implied volatility for the won, a measure of exchange-rate swings used to price options, slipped 28 basis points, or 0.28 percentage point this week, to 5.80 percent. The yield on the government’s 3.25 percent bonds due June 2015 climbed six basis points this week to 2.83 percent, Korea Exchange Inc. prices show. The rate slipped one basis point today. The one-year interest-rate swap advanced four basis points this week to 2.83 percent.
Yen Falls Against Most Peers Amid BOJ Easing Speculation (Bloomberg)
The yen fell against most of its major peers amid speculation that the Bank of Japan (8301) will boost stimulus measures, reducing the demand for the nation’s assets as a haven. Japan’s currency traded 0.1 percent from the weakest level since August versus the dollar as the premium two-year U.S. Treasuries offered relative to their Japanese peers reached the highest in two months. The yen was poised for the biggest five- day decline in nine weeks against the greenback. The euro headed for a weekly gain against the U.S. currency as European leaders committed to their goal of creating a regional bank supervisor by year end at a summit in Brussels ending today. “There’s growing speculation that the Bank of Japan is going to ease monetary policy further,” said Janu Chan, economist at St. George Bank Ltd. in Sydney. “That’s likely to keep the yen under a bit of pressure.”
The yen slid 0.2 percent to 79.40 per dollar as of 10:17 a.m. in Tokyo from 79.28 yesterday, when it touched 79.47, the weakest since Aug. 21. It was set for a 1.2 percent decline this week, the biggest since the five days ended Aug. 17. The Japanese currency slid 0.2 percent to 103.76 per euro from yesterday, when it depreciated as much as 0.6 percent to 104.14, the weakest since May 8. The shared currency bought $1.3069 from $1.3067, headed for a 0.9 percent weekly advance.
Housing Revival Boosts Outlook for U.S.: Economy (Bloomberg)
Consumer confidence rose to a six- month high and an index of U.S. leading indicators climbed as a nascent housing recovery started to ripple through the world’s largest economy. The Bloomberg Consumer Comfort Index rose to minus 34.8 in the week ended Oct. 14, the highest level since April, from minus 38.5 the previous week. The Conference Board’s gauge of the outlook for the next three to six months increased 0.6 percent in September after a revised 0.4 percent drop in August. Rising property prices in some parts of the country are bolstering household finances and lifting the moods of shoppers, whose spending accounts for 70 percent of the economy. Stock- market gains are also making Americans feel wealthier and contributed to the increase in the leading index, along with a jump in permits for home construction.
“This is just an echo of yesterday’s very strong permits numbers, which were very encouraging,” said Lou Crandall, chief economist at Wrightson ICAP LLC in Jersey City, New Jersey, who correctly forecast the increase in the leading index. In addition, “the change in the tone of the housing sector seems to be what’s driving the improvement in consumer sentiment,” he said. Building permits, among the six of 10 indicators that boosted the leading index, jumped to highest level since July 2008, Commerce Department data showed yesterday. Housing starts climbed 15 percent in September to reach a four-year high.
Manufacturing in Philadelphia Area Grows More Than Forecast (Bloomberg)
Manufacturing in the Philadelphia region expanded in October for the first time in six months, a sign the industry may be starting to stabilize. The Federal Reserve Bank of Philadelphia’s general economic index rose to 5.7 from minus 1.9 in September, a report today showed. A reading of zero is the dividing line between expansion and contraction. The median forecast of 61 economists surveyed by Bloomberg was for an increase to 1. The report, contrasting with data showing New York-area factories shrank for the third straight month, indicates that a pillar of the recovery is starting to regain its footing. Gains in confidence and household wealth mean consumer spending may help cushion manufacturing at a time when business investment and exports are hurt by slowing global growth and uncertainty about U.S. tax changes.
“Manufacturing has troughed in terms of the declines in activity,” Russell Price, senior economist at Ameriprise Financial Inc. in Detroit, said before the report. “As the recession in Europe becomes less severe, it will take the pressure off exports. There is some demand” in the U.S. The Philadelphia Fed’s report covers eastern Pennsylvania, southern New Jersey and Delaware. Estimates in the Bloomberg survey ranged from minus 2.7 to 5.8.
Other reports today showed more Americans than forecast filed applications for unemployment benefits last week, consumer confidence rose to a six-month high and the index of leading indicators climbed more than forecast in September. Jobless claims increased by 46,000 to 388,000 in the week ended Oct. 13, reflecting an unwinding of adjustments for seasonal swings at the start of a quarter, from a revised 342,000 the prior period that was the lowest since February 2008, according to Labor Department data. The Bloomberg Consumer Comfort Index rose to minus 34.8 in the week ended Oct. 14, the highest level since April, from minus 38.5 the previous week. The monthly expectations gauge improved to minus 7 in October, the best reading since May.
The Conference Board’s gauge of the outlook for the next three to six months increased 0.6 percent last month after a revised 0.4 percent drop in August that was bigger than initially reported, the New York-based group said. Economists projected the gauge would climb 0.2 percent, according to the median estimate in a Bloomberg survey.
U.S. Jobless Claims Rise 46,000 on Seasonal Shift (Bloomberg)
More Americans than forecast filed applications for unemployment benefits last week, reflecting an unwinding of adjustments for seasonal swings at the start of a quarter. Jobless claims increased by 46,000 to 388,000 in the week ended Oct. 13 from a revised 342,000 the prior period that was the lowest since February 2008, Labor Department figures showed today in Washington. The median forecast of 49 economists surveyed by Bloomberg called for a rise in claims to 365,000. The typical pattern of large increases in unadjusted claims at the start of the quarter seems to have shifted by a week in one state, causing the adjusted data to become volatile, a Labor Department spokesman said as the figures were released to the press. Through the ups and downs, the level of firings has been little changed, indicating that a lack of hiring is the main reason payrolls have failed to strengthen.
“When you get to the turn of a quarter, the seasonals jump a lot,” said Brian Jones, a senior U.S. economist at Societe Generale in New York, who projected claims would rise to 375,000. “The labor market is getting better, but at a glacial pace. Claims are going sideways.” Stock-index futures extended earlier losses after the report. The contract on the Standard & Poor’s 500 Index maturing in December dropped 0.2 percent to 1,453.6 at 8:48 a.m. in New York.
Index of U.S. Leading Indicators Rose 0.6% in September (Bloomberg)
The index of U.S. leading economic indicators rose in September by the most in seven months, boosted in part by a jump in permits for home construction that’s helping underpin the expansion. The Conference Board’s gauge of the outlook for the next three to six months increased 0.6 percent after a revised 0.4 percent drop in August that was bigger than initially reported, the New York-based group said today. Economists projected the gauge would climb 0.2 percent, according to the median estimate in a Bloomberg survey. A recovery in the housing market and a surge in stock prices may also be fueling optimism among consumers, whose spending accounts for about 70 percent of the economy. At the same time, the so-called fiscal cliff -- $607 billion in federal spending cuts and tax increases scheduled to take effect in January unless Congress acts -- is a hurdle for business investment and hiring.
“The residential housing market is in the very early stages of a durable recovery,” Joe Lavorgna, chief U.S. economist at Deutsche Bank Securities Inc. in New York, said in a research note before today’s report. “Housing is a leading indicator of underlying domestic demand; thus, continued improvement in the former bodes well for some acceleration over time in the latter.” Estimates from 52 economists in the Bloomberg survey ranged from a decrease of 0.1 percent to an increase of 0.6 percent in the Conference Board’s leading index. The August figure was revised from a previously reported 0.1 percent drop, reflecting weaker orders from consumer goods and capital equipment during the month.
China Investment Drives Pickup in Challenge to Leaders (Bloomberg)
The accelerating investment that helped to drive a pickup in China’s economy last month shows how Communist Party officials have failed to shift the nation’s growth model, leaving a challenge for new leaders. Fixed-asset investment rose 22.6 percent in September from a year earlier, up from 19.1 percent growth in August, Bank of America Corp. estimated after yesterday’s release of data for the first three quarters of 2012. Spending on projects from the government’s budget also accelerated in September. Industrial output and retail sales picked up last month even as the economy decelerated for the seventh straight quarter. Faster investment approvals and increased railway spending show officials are using similar channels to support growth while being careful not to repeat the size of the stimulus response to the global financial crisis in 2008. Relying more on investment than consumption for expansion may exacerbate overcapacity and increase risks of a deeper slowdown later.
“Just because you have avoided a hard landing doesn’t change the fact that the growth model is unsustainable,” said Alistair Thornton, an economist in Beijing at IHS Global Insight. “We’re still relying on the old tools and that means far too much reliance on investment and not nearly enough reliance on consumption. It will take a huge amount of reform over the next few years to bring about the consumption-driven growth that China’s leaders aspire to have.”
China Won’t Provide Big Stimulus, PBOC Adviser Song Says (Bloomberg)
China’s government won’t provide big economic stimulus and a strong rebound in growth is unlikely, said Song Guoqing, an adviser to the People’s Bank of China. Local-government investment plans probably won’t materialize quickly because they’re reliant on the central government and banks for funding, Song said in a speech at Tsinghua University in Beijing yesterday. “I have the desire to drive my private jet, but that doesn’t mean I can” fly one, Song said. “The same goes for local governments’ ambitious investment plans.” Still, slowing inflation gives China’s central bank room for “tweaking” monetary policy, said Song, an academic member of the central bank’s monetary policy committee.
China’s industrial production, retail sales and fixed-asset investment accelerated in September, reducing the urgency for added stimulus to support the economy after a seven-quarter slowdown, according to data released yesterday. Gross domestic product rose 2.2 percent in the third quarter from the previous three months, a four-quarter high. Inflation last month was close to the slowest pace in two years and producer prices fell the most since 2009, government data showed on Oct. 15, giving authorities more room to ease policy. China’s nine-month fiscal revenue gained 11 percent to 9.06 trillion yuan and fiscal spending rose 21 percent to 8.4 trillion yuan, the Ministry of Finance said yesterday. “Policy makers in China still have room to act if they need to, both on the monetary and the fiscal side,” said Mark Williams, Asia economist at Capital Economics Ltd. in London. “But as things stand, it is not obvious why Chinese policy makers would want to act forcefully now.”
China’s nominal urban per capita disposable income in the first nine months of the year rose 13 percent from a year earlier to 18,427 yuan, the National Bureau of Statistics said in Beijing yesterday. In real terms, incomes rose 9.8 percent, the bureau said.
Pimco Buying Aussie, N.Z. Assets; Sees Further Rate Cuts (Bloomberg)
Pacific Investment Management Co., manager of the world’s biggest bond fund, has boosted holdings in Australia and New Zealand as it expects policy makers to cut interest rates to combat currency gains and weaker world growth. Decisions in larger developed economies to keep policy rates close to zero and engage in currency market intervention have helped push the Australian and New Zealand dollars higher, according to Scott Mather, head of global portfolio management at Pimco, which oversees $1.8 trillion in assets. The Newport Beach, California-based company’s holdings in the region are at the highest levels “in a very long time,” he said at a briefing in Auckland. “Rates will continue to fall in this region, in Australia and New Zealand,” Mather said in a conference call from Auckland. “It’s partially the reflection of weak global growth and partially in response to an abnormal amount of currency strength relative to what history would tell you we should have.”
The Reserve Bank of Australia has the highest benchmark rate among major developed economies, even after reducing it by 1.5 percentage points over the past year to 3.25 percent. The Reserve Bank of New Zealand’s key rate is a record-low 2.5 percent. Higher yields, safe-haven flows and buoyant global commodities demand have helped push the South Pacific currencies above their 20-year averages.
EU Leaders Commit to Bank Supervisor Design by Year End (Bloomberg)
European leaders committed to their goal of creating a euro-area bank supervisor by year-end, pushing divisive questions on cost-sharing into 2013. Leaders will seek to agree on a framework to establish the European Central Bank as the main supervisor by Jan. 1, according to officials at a European Union summit in Brussels. The new system, intended to break the link between banks and governments at the root of the region’s financial crisis, will phase in over a year and cover all 6,000 euro-area banks by Jan. 1, 2014, a French official said. Progress on the so-called banking union dominated talks at leaders’ 20th crisis-fighting European summit. The common supervisor would put the euro zone a step closer to being able to provide direct bank aid from its firewall fund, a tool sought by Spain and other nations that have received bailouts.
The draft summit statement showed leaders “agreeing to the legislative framework” by year-end, according to an EU official who has seen the document. The goal of political consensus contrasts with an earlier draft calling for “completing” work on the plan to give the ECB supervisory powers by year-end. The decisions don’t settle the question of when the European Stability Mechanism will be able to recapitalize banks directly. The plan calls for the supervisor to take charge of big banks and bailed-out institutions first, while also saying direct assistance requires “effective” supervision in place.
Spain Banks Face More Pain as Worst-Case Scenario Turns Real (Bloomberg)
Spain’s banks face more loan losses as the pace of an economic slump risks turning a worst-case scenario dismissed in stress tests into reality. Bad loans as a proportion of total lending jumped to a record 10.5 percent in August from a restated 10.1 percent in July as 9.3 billion euros ($12.2 billion) of loans were newly classified as being in default, according to data published by the Bank of Spain on its website today. The ratio has climbed for 17 straight months from 0.72 percent in December 2006, before Spain’s property boom turned to bust. Spanish bank stress tests by management consultants Oliver Wyman have factored in an economic contraction totaling 6.5 percent from 2012 to 2014 in an adverse scenario that the government and Bank of Spain said has a probability of about 1 percent. Analysts at Nomura and Citigroup (C) Inc. disagree, saying spending cuts and economic conditions mean the worst-case outcome already looks feasible.
“You can’t attach a 1 percent probability to a scenario that already looks realistic,” Silvio Peruzzo, a European area economist at Nomura in London, said in a telephone interview yesterday. Spain’s gross domestic product will shrink by 6.2 percent from 2012 to 2014, he estimated. Spain’s request for 100 billion euros of European Union financial aid to shore up its banks is increasing concern about the nation’s growing liabilities. Standard & Poor’s downgraded the country’s debt rating by two levels to BBB-, one step above junk, from BBB+ on Oct. 10, saying it wasn’t clear who will bear the cost of recapitalizing banks. It cut the ratings of 11 lenders including Banco Santander SA (SAN) and Banco Bilbao Vizcaya Argentaria SA (BBVA), Spain’s largest, two days ago, citing the sovereign downgrade.
Posted by MW Chong at 9:58 AM
DTN Closing Grain Comments 10/18 14:32 (CME)
Grains Rally Sharply Thursday
Grains surged ahead on a strong inflow of investment buying and follow-through commercial interest. Beans were the leader again, supporting the argument a technical bottom has been formed, thereby allowing bullish fundamentals to take control.
Pro Farmer: After the Bell Wheat Recap (CME)
Wheat futures finished roughly 7 to 12 cents higher in Chicago, mostly 8 to 9 cents higher in Kansas City and 3 to 8 cents higher in Minneapolis. That was a mid-range close at all three exchanges. Wheat rode the coattails of strong gains in the soybean market today. Also supportive was the long-term weather outlook from the government, which calls for above-normal temps and below-normal rainfall for much of the Plains through January.
Wheat Market Recap Report (CME)
December Wheat finished up 12 1/4 at 868 1/2, 7 1/2 off the high and 13 up from the low. March Wheat closed up 12 at 880 3/4. This was 12 3/4 up from the low and 7 1/2 off the high. December Chicago wheat traded sharply higher on the day and support spilled over to KC and Minneapolis wheat as well. Surging corn and soybean prices helped support. Additional strength was linked to reports that plunging temperatures in areas of southern Australia may have caused serious damage to wheat crops and on news that Argentina's Ag Ministry pegged their wheat crop at 11.50 million tonnes vs. 13.2 last year. This morning's weekly export sales report may have given a boost to prices after beating market expectations. Total net weekly export sales for wheat, came in at 410,000 tonnes and as of October 11th and cumulative wheat sales stand at 44% of the USDA forecast for 2012/2013 marketing year vs. 5 year average of 59%. Plenty of export tenders are set to hit the market next week which could add further support to futures depending on who does the business and how completive US prices are compared to France. Rainfall looks limited for the western plains with some forecasts calling for warm and dry pattern over the next 10 days. South Dakota saw precipitation yesterday which should help moisture deficits. Overall, more rainfall is needed in the west while the eastern Soft Red Wheat areas remain more favorable. This could be positive for prices in the KC and Minneapolis wheat markets over time. December Oats closed down 1 3/4 at 394. This was 2 1/2 up from the low and 10 1/2 off the high.
Pro Farmer: After the Bell Corn Recap (CME)
Corn futures ended near session highs with gains of 12 to 15 1/4 cents through the September contract. Deferred months were around 8 cents higher. Strong gains in the soybean market encouraged corn traders to shift their attention back toward the supply side of the market today. Recent improvement in corn basis around the country remind traders that corn supplies are limited.
Corn Market Recap for 10/18/2012 (CME)
December Corn finished up 15 1/4 at 760 3/4, 1 1/4 off the high and 16 1/4 up from the low. March Corn closed up 14 1/2 at 759 1/4. This was 15 1/4 up from the low and 1 3/4 off the high. December corn surged higher on the day seeing double digit gains and closing near the highs of the day. The firm basis across the US Midwest and in South America added to the positive tone of the market. The stronger demand picture in the ethanol and livestock market in the US offset the ongoing sluggish trend to US exports. Net weekly export sales for corn, came in at 166,700 tonnes for the current marketing year which was slightly below market expectations but well above levels seen last week. As of October 11th, cumulative corn sales stand at 36% of the USDA forecast for 2012/2013 marketing year vs. a 5 year average of 41%. The bull camp is beginning to point to the fact that Ukraine and South America may not be able to supply global importers through the crop year which could add export demand to the US in 2013. This, along with a sharply higher soybean market added additional support to corn market throughout the day. November Rice finished down 0.21 at 14.925, 0.275 off the high and equal to the low.
Sugar Declines in New York on Indications of Ample Supply (Bloomberg)
Sugar fell to a four-week low on signs of increasing production in Brazil, the world’s biggest grower. Cocoa rose, while orange juice dropped. Sugar-cane output in Brazil’s center south, the main growing region, may climb to 538 million metric tons next season, compared with 512 million tons in the previous year, Jonathan Kingsman, the founder of Kingsman SA, said today at a conference in London. In an interview, Kingsman said he may revise his forecasts next week, with production in the 2013-2014 crop year as large as 575 million tons. Traders “worry about prices as everyone anticipates a larger Brazilian crop,” Michael McDougall, the head of the Brazil desk at Newedge Group in New York, said in an e-mailed report today. “Other countries appear to be producing large crops, even though prices have slid.” Raw-sugar for March delivery declined 1.6 percent to close at 19.79 cents a pound at 2 p.m. on ICE Futures U.S. in New York, after touching 19.67 cents, the lowest since Sept. 19.
Global supplies will outpace consumption by 6 million tons this year, according to Julio Borges, the director of JOB Economia & Planejamento, a researcher. Effective Nov. 5, the daily trading session for sugar futures and options contracts will be reduced by an hour, with trading starting at 2:30 a.m. New York time instead of 1:30 a.m., ICE said today in a statement. No changes were made to settlement hours. Cocoa futures for December delivery gained 2.2 percent to $2,438 a ton in New York. Also on ICE, orange-juice futures for January delivery declined 2 percent at $1.1425 a pound.
Peru Coffee Output May Gain 20% on Higher-Yield Crop (Bloomberg)
Coffee output in Peru, the third- largest producer in South America, may rise 20 percent next year as trees enter the higher-yielding cycle of the biennial crop, an industry group said. “Production may increase to 4.56 million bags from 3.8 million estimated for this year,” Eduardo Montauban, the head of Peru’s Coffee and Cocoa Chamber, said yesterday in a telephone interview from Lima. In 2011, output rose to a record 5 million bags, he said. Coffee-export income in 2012 may drop to $950 million from the all-time high of $1.578 billion last year, Montauban said. Germany is the biggest buyer, followed by the U.S., Belgium and Colombia, he said. Peruvian farmers typically collect the bulk of the harvest from March through September. A bag weighs 60 kilograms, or 132 pounds. Brazil is the world’s top producer, and Colombia is the second-biggest South American grower, according to the London- based International Coffee Organization.
This week, Peru started an agricultural census, the first since 1994, Montauban said. That may determine the size of the coffee crop and the number of farmers. “This could help the sector secure funds to increase productivity and the quality of beans” amid efforts to expand exports in Asia, Montauban said. He is an agent/broker for the local representative of Pully, Switzerland-based Ecom Agroindustrial Corp., one of the largest coffee traders. Arabica coffee for December delivery declined 0.8 percent to $1.615 a pound yesterday on ICE Futures U.S. in New York. This year, the price has tumbled 29 percent, the most among the 24 raw materials in the Standard & Poor’s GSCI Spot Index, partly because roasters are using more of the cheaper robusta beans.
Oil Heads for Weekly Gain; TransCanada Shuts Keystone Pipeline (Bloomberg)
Oil headed for a second weekly gain in New York. TransCanada Corp. (TRP) shut the Keystone pipeline that transports oil from Canada to the midcontinent. Futures were little changed after dropping 2 cents yesterday. TransCanada shut the 590,000 barrel-a-day line for three days for repairs after finding a “small anomaly” in a section running from Missouri to Illinois. The work cut oil flows to Midwestern refineries and Cushing, Oklahoma, the delivery point for New York futures. Crude for November delivery was at $92.11 a barrel, up 1 cent, in electronic trading on the New York Mercantile Exchange at 9:09 a.m. in Tokyo. Prices are up 0.3 percent this week and down 6.8 percent this year. Futures prices in New York have changed less than 25 cents in each of the past five trading days, the longest streak of moves that small in more than a decade.
Brent oil for December settlement rose 20 cents to $112.62 a barrel on the London-based ICE Futures Europe exchange. The front-month European benchmark grade’s premium to the corresponding West Texas Intermediate was at $20.09. It settled at $23.95 on Oct. 15, the widest gap since reaching a record on Oct. 14, 2011.
Recap Energy Market Report (CME)
December crude oil prices experienced another choppy session, trading down to the low of the session during the US morning hours but reversed to close just fractionally lower. The crude oil market came under pressure following weakness in equity markets and US labor market data that showed a larger than expected increase. Further downside came in response to reports that a key North Sea oil field would come back on line this weekend. Around midday, there were reports that TransCanada shut down its Keystone pipeline, which brings roughly 600,000 barrels per day of supply from Alberta Canada into the Midwestern US. The pipeline is expected to be out of operation for three days.
Copper Bears Cede to Bulls as Economy Seen Gaining: Commodities (Bloomberg)
Copper traders who a week ago were the most bearish in four months are now the most bullish in a year after economic reports signaled accelerating growth from China to the U.S. Seventeen analysts surveyed by Bloomberg said they expect prices to gain next week and four were bearish. A further three were neutral, making the proportion of bulls the highest since October 2011. They were the most negative since June 1 last week. Hedge funds’ bets on a rally are near the biggest in 14 months, U.S. Commodity Futures Trading Commission data show. China had accelerating industrial production, retail sales and fixed-asset investment last month, reports showed yesterday. After slowing for seven quarters, its growth will gain for the following four quarters, based on the median of estimates from 24 economists compiled by Bloomberg. New-home construction in the U.S. rose to a four-year high in September. China consumes about 40 percent of the world’s copper and North America 11 percent, according to Barclays Plc.
“The market has been way too pessimistic on China,” said Christin Tuxen, an analyst at Danske Bank A/S in Copenhagen. “China will eventually stabilize and avoid a hard landing and we’ve got some clear signals that it is actually happening. We will see commodities, and metals in particular, get some support in the coming months.”
Silver Market Recap Report (CME)
Like gold silver started out weak, fell somewhat aggressively into the first set of US data and then prices made several stair step recovery moves through the rest of the trading session. In general, silver spent a lot of time today trading modestly lower and with the rest of the metals complex weak, the silver market appeared to be put off balance by a partial risk-off vibe.
Gold Set for Second Weekly Drop as Data Damp Stimulus Outlook (Bloomberg)
Gold is poised for a second weekly decline as an improvement in economic data from the U.S. to China damped speculation of more stimulus around the world, reducing demand for bullion as an alternative investment. Spot gold was little changed at $1,742.70 an ounce at 9:02 a.m. in Singapore, 0.7 percent lower this week. The metal for December delivery was little changed at $1,743.30 an ounce on the Comex. Holdings in exchange-traded funds, which hit a record 2,582.98 metric tons on Oct. 11, are little changed this week at 2,580.589 tons yesterday, data compiled by Bloomberg show. Data this week showed China’s industrial production, retail sales and fixed-asset investment accelerated in September after a seven-quarter slowdown. U.S. reports showed housing starts jumped to a four-year high and an index of leading economic indicators rose in September by the most in seven months. Gold gained 11 percent in the last quarter after central banks in the U.S., China, Japan and Europe took action to stimulate growth.
“Gold is under a bit of pressure in the near term as economic data, while still uneven, are showing signs of improvement,” said Huang Fulong, an analyst at CITICS Futures Co., a unit of China’s largest brokerage by market value. “The longer-term outlook for higher gold prices remains intact as Europe’s problems still exist and this is evidenced by the resilience we’ve seen in ETF holdings.”
European leaders conclude a two-day meeting in Brussels today after yesterday committing to their goal of creating a regional bank supervisor by year-end, putting the region closer to being able to provide direct bank aid from its firewall fund. That will set the stage for talks on how to handle failing banks and exploration of cost-sharing strategies, said European Union Economic and Monetary Affairs Commissioner Olli Rehn. Spot gold of 99.99 percent purity fell 0.3 percent to 351.05 yuan a gram ($1,748.11) on the Shanghai Gold Exchange. Volumes slipped to 2,555 kilograms yesterday from 3,759 kilograms on Oct. 17. Cash silver climbed 0.2 percent to $32.8475 an ounce, set for a third weekly drop. Spot platinum gained 0.2 percent to $1,644.50 an ounce, trimming a second weekly decline. Palladium rose 0.2 percent to $644.50 an ounce, set for a weekly advance.
Gold Market Recap Report (CME)
While gold violated some close-in support levels today and the market probably saw some initial spillover pressure from stocks and action in the Euro, the market might have seen some residual support from news that some South African gold mining workers were probably fired by not returning to work today. Therefore, the prospect of violence and uncertainty toward supply off labor issues probably gave some would-be shorts pause today. In retrospect, today's US scheduled data flow was countervailing as prices broke ahead of the early US data, recovered in the wake of that data and then prices clawed higher until the later data fostered a mid morning peak. However, into mid session gold prices recovered and that might have been the result of labor headline news flow for South Africa.
Soybeans Gain Most in Five Weeks on Demand Signs; Corn Advances (Bloomberg)
Soybeans rose the most in five weeks on signs that demand is increasing for supplies from the U.S., the world’s biggest grower and exporter. Corn also gained. Soybean exports from the start of the marketing year on Sept. 1 through Oct. 11 totaled 4.7 million metric tons, up 57 percent from the same period a year earlier, U.S. Department of Agriculture data show. Exporters sold 523,382 tons in the week through Oct. 11, up 4.5 percent from the prior seven days, according to the USDA. “Our export business is looking good,” Mark Schultz, the chief market analyst at Northstar Commodity Investment Co., said by telephone. “There’s still a lot of business being done.” Soybean futures for November delivery climbed 2.4 percent to settle at $15.455 a bushel at 2 p.m. on the Chicago Board of Trade, the biggest gain since Sept. 12. Futures have surged 18 percent since mid-June as the worst U.S. drought since 1956 curbed production.
Corn futures for December delivery gained 2 percent to $7.6075 a bushel in Chicago. The price is up 50 percent since June 15 because of dry weather in the U.S.
Pro Farmer: After the Bell Soybean Recap (CME)
Soybean futures strengthened as the day progressed and ended 30 1/2 to 38 cents higher in the November through May contracts. Deferred months saw gains in the teens to 20s. Soybean futures benefited from short-covering today amid recent signs more rationing is needed as well as ideas the downside has been overdone. Today's rally was especially impressive considering strength in the U.S. dollar index.
Soybean Complex Market Recap
November Soybeans finished up 36 1/4 at 1545 1/2, 2 1/4 off the high and 38 up from the low. January Soybeans closed up 38 at 1546 1/4. This was 39 1/2 up from the low and 1 3/4 off the high. December Soymeal closed up 8.6 at 463.3. This was 8.6 up from the low and 2.5 off the high. December Soybean Oil finished up 1.27 at 52.3, 0.09 off the high and 1.44 up from the low. November soybeans posted its largest daily gain since September 12th and ended near the highs of the day after trader sentiment turned positive overnight following the release of China's GDP rating of 7.4%. Cash markets were firm across the Corn Belt as farmer sales slowed and harvest inched closer to the finish line. Rumors that China has been in the market buying US soybean cargos this week also added to the positive tilt. Export sales were impressive this morning but failed to meet market expectations. Net weekly export sales for soybeans came in at 523,400 tonnes for the current marketing year and 1,800 for the next marketing year for a total of 525,200 tonnes. As of October 11th, cumulative soybean sales stand at an impressive 71% of the USDA forecast for current marketing year vs. a 5 year average of 47%. Total net meal sales came in at 146,000 tonnes and cumulative soybean meal sales stand at 49% of the USDA forecast vs. a 5 year average of 30%. Finally, total net oil sales came in at 24,500 tonnes and cumulative sales stand at 42% of the USDA forecast for the current marketing.
EDIBLE OIL: Malaysian palm oil futures climbed on emerging concerns of floods in key growing regions curbing output and a slew of economic data from the U.S. and China that showed global growth trends were intact. (Reuters)