Friday, November 2, 2012
FCPO closed : 2496, changed : -41 points, volume : lower.
Bollinger band reading : side way range bound.
MACD Histogram : weakening, buyer closing position.
Support : 2520, 2490, 2450, 2400 level.
Resistance : 2550, 2570, 2600, 2620 level.
FCPO closed recorded loss surrendered all yesterday gains with higher volume transacted. Soy oil price currently trading lower by more than 1% after overnight closed little firmer while crude oil price currently falling lower.
Higher inventories level concern returned to the market send price falling lower ahead of the weekend.
FCPO daily chart reading remained suggesting a side way range bound market development with middle Bollinger band support broken today.
When to buy : buy at support or weakness with quick cut loss and profit target.
When to sell : sell at resistant or strength with quick cut loss and profit target.
Posted by MW Chong at 6:04 PM
FKLI closed : 1649 changed : -23 point, volume : higher.
Bollinger band reading : correction range bound little downside biased.
MACD Histogram : falling lower, buyer reducing exposure.
Support : 1645, 1640, 1635, 1627 level.
Resistance : 1651, 1657, 1660, 1670 level.
FKLI closed plunged substantially lower with higher volume participation doing 7 points discount compare to cash market that also closed recorded significant loss. Overnight U.S. markets closed higher and today Asia markets ended positively while European markets currently trading little lower.
Overnight positive data from U.S. manufacturing, consumer confident and lower jobless claim send today Asian markets trading higher. Back home, FBMKLCI fall lower as some blue chips counter like BAT and Dutch Lady slumped down.
FKLI daily chart wise, reading revised to suggesting a side way 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 resistance or strength with quick cut loss and profit target.
Posted by MW Chong at 5:51 PM
STOCKS: European shares looked set to open lower while Asian shares advanced with returning risk appetite as overnight data suggested some stabilisation in the global recovery trend, particularly in the United States and China. U.S. stocks closed higher on Thursday. (Reuters)
FOREX-Yen droops to near 4-month low, Aussie hits 1-month high
TOKYO/SYDNEY, Nov 2 (Reuters) - The yen sagged to near a four month-low while commodity currencies held firm as investors bet on an upbeat U.S. payrolls report after private employers added jobs at the fastest pace in eight months.
"The Japanese electronics industry is collapsing. Auto exports to China will be falling sharply. So Japanese exporters' dollar selling will be dwindling... There's no reason to be bullish on the yen," said a trader at a Japanese brokerage.
U.S. data points to slow healing in labor market
WASHINGTON, Nov 1 (Reuters) - U.S. companies added jobs in October at the fastest pace in eight months, a sign of modest healing in the labor market just days before a presidential election that could hinge on the economy.
Other data on Thursday showed a drop in new claims for jobless benefits, a sharp improvement in consumer confidence, while there were mixed signals regarding the health of U.S. manufacturing.
U.S. jobless rate seen rising, offering Obama no relief (Reuters)
The U.S. unemployment rate probably rose in October as employers stepped up hiring only slightly, underscoring President Barack Obama's vulnerability in next week's presidential election.
U.S. data points to slow healing in labor market (Reuters)
U.S. companies added jobs in October at the fastest pace in eight months, a sign of modest healing in the labor market just days before a presidential election that could hinge on the economy.
CFTC majority supports commodity-limit ruling appeal-commissioner (Reuters)
A majority of the Commodity Futures Trading Commission supports appealing a judge's ruling against limits on commodity-market speculation, Commissioner Mark Wetjen said on Thursday.
GRAINS: U.S. soybeans edged lower, giving back some gains from the previous two sessions, as traders' appetite for risk in commodity markets ebbed ahead of U.S. non-farm payrolls data. Corn fell for the second straight session but remains on course for its biggest weekly gain in three months, while wheat slid, giving up all the gains it achieved on Thursday. (Reuters)
U.S. crude stocks fall, products mixed last week - EIA (Reuters)
U.S. crude stocks fell unexpectedly last week as imports dropped sharply, while oil product inventories were mixed as refinery utilization rose, the U.S. Energy Information Administration reported on Thursday.
POLL-Analysts see record 81 mln tonne Brazil soy crop (Reuters)
Brazil should produce a record 81 million tonnes of soybeans in the 2012/13 crop year as farmers drastically expand area planted in a race to become the world's top soybean producer, a Reuters poll found on Thursday.
OIL: Brent crude slipped below $108 a barrel as investors look ahead to key jobs data from the United States for more signs of economic recovery, which would boost fuel demand. (Reuters)
Euro Coal-Prices dip, no impact from U.S. storm
LONDON, Oct 31 (Reuters) - Prompt South African coal prices slipped by around 50 cents a tonne on Wednesday as weak demand encouraged bearish sentiment, traders and utilities said.
Two December-loading South African cargoes traded today at $77.25 and $77.85 a tonne FOB, down 50 cents from the previous day's bid level and over $1 lower than Tuesday's offer level, and there are still more potential sellers than buyers, traders said.
India's H1 2012/13 coal output up 8.19 pct y/y-govt data
NEW DELHI, Nov 1 (Reuters) - India produced 240.32 million tonnes of coal in the first half of the current fiscal year, u p 8.19 percent from a year earlier, figures provided by a government official showed, but the output was 95 percent below target.
Coal production typically slows during the monsoon months of June to September and the first half output is 41.6 percent of I n dia's estimated production of 578.10 million tonnes for the 2012/13 fiscal year.
Iron ore at 3-month high, eyeing fourth weekly gain
SINGAPORE, Nov 2 (Reuters) - Iron ore hit three-month highs and is poised to stretch its winning streak to a fourth straight week as Chinese steel mills replenished stockpiles on hopes a modest revival in steel demand will keep prices firm and preserve margins.
Expectations that steel prices in top consumer China will at least remain at current levels or edge higher ahead of the country's once in a decade leadership change that kicks off next week is also encouraging iron ore buyers.
METALS-LME copper edges down; U.S. jobs data eyed
SHANGHAI, Nov 2 (Reuters) - London copper fell snapping three days of gains, on caution ahead of the release of U.S. jobs data and uncertainty about Chinese copper demand despite encouraging manufacturing data.
"Overall, investors are bearish about copper due to the weak physical demand in China, which many thought should have improved by now," said a Shanghai-based trader.
PRECIOUS-Gold slips lower on technical selling ahead of U.S. jobs data
SINGAPORE, Nov 2 (Reuters) - Gold edged down towards $1,700 an ounce after a fall through an important support level triggered some stop-loss selling as investors anxiously await a key U.S. labour market report.
"If the nonfarm payrolls data is very good, it will be bearish for gold, as it will cut expectations for any additional quantitative easing, and it will be fairly positive for the dollar as well," said Nick Trevethan, a senior commodity strategist at ANZ in Singapore.
Baltic index drops as capesize rates weaken further
Nov 1 (Reuters) - The Baltic Exchange's main sea freight index, which tracks rates for ships carrying dry commodities, fell on Thursday as capesize rates weakened for the third straight day.
The overall index, which reflects daily freight market prices for capesize, panamax, supramax and handysize dry bulk transport vessels, fell 2.53 percent to 1,000 points.
Posted by MW Chong at 4:49 PM
VEGOILS-Palm oil slips as stocks weigh, set for weekly loss
Fri Nov 2, 2012 1:24am EDT
* Market players expect record-high stocks for October
* Futures on track for 2.9 percent loss for the week
* Palm oil to retest support at 2,497 ringgit - technicals
(Updates prices, adds details)
By Chew Yee Kiat
SINGAPORE, Nov 2 (Reuters) - Malaysian palm oil futures
edged down on Friday and were on track to post a weekly loss, as
investors remained cautious on market expectations of
record-high stocks in October.
Prices were locked in a tight range as traders looked for
fresh trading cues, although bearish sentiment seemed to
dominate despite strong export numbers that could help ease
"The market is still stuck within a range and finding
direction," said a dealer with a foreign commodities brokerage
in Malaysia. "End stocks in October are going to hit higher,
around 2.63-2.65 million tonnes. With record-high stocks, the
market can't be bullish."
By the midday break, the benchmark January contract
on the Bursa Malaysia Derivatives Exchange had fallen 0.4
percent to 2,527 ringgit ($828) per tonne, after trading in a
range of 2,520 to 2,533 ringgit.
Total traded volumes were light at 6,708 lots of 25 tonnes
each, compared to the usual 12,500 lots.
For the week, the edible oil is on track to post a 2.9
percent loss as prices came under pressure on lower November
taxes in top producer Indonesia and as Sandy, one of the worst
storms to hit the United States in years, triggered fears of
slower commodity demand.
Technicals showed palm oil will retest a support at 2,497
ringgit per tonne, with a good chance of breaking it and falling
to 2,469 ringgit, said Reuters market analyst Wang Tao.
Malaysian October palm oil exports surged to 1.6 million
tonnes, the highest so far this year, thanks to significantly
stronger European demand.
But concerns remained that stocks could still climb above an
all-time high of 2.48 million tonnes in September on seasonally
high output. Industry regulator, the Malaysian Palm Oil Board,
will release official data for October inventory levels on Nov.
In a bearish sign for palm oil, Brent crude slipped below
$108 a barrel on Friday as investors eye key jobs data from the
United States for more signs of economic recovery, which would
boost fuel demand.
In other vegetable oil markets, U.S. soyoil for December
delivery slipped 0.6 percent in early Asian trade. The
most-active May 2013 soybean oil contract on the Dalian
Commodity Exchange also fell, down 1.3 percent by the midday
Posted by MW Chong at 3:34 PM
GLOBAL MARKETS-Asian shares rise as positive data buoys risk appetite(Reuters)
Asian shares rose as investor risk appetite returned after overnight data suggested some stabilisation in the global recovery trend, particularly in the world's top two economies, the United States and China. "Asian economic indicators are consistent with a risk-on strategy, but we remain risk selective," said Morgan Stanley in a research note.
U.S. crude stocks fall, products mixed last week – EIA(Reuters)
U.S. crude stocks fell unexpectedly last week as imports dropped sharply, while oil product inventories were mixed as refinery utilization rose, the U.S. Energy Information Administration reported on Thursday.
OIL-Brent slips, U.S. crude higher as stockpiles drop(Reuters)
Brent crude prices fell on Thursday on returning North Sea supply and euro-zone concerns, while U.S. gasoline edged higher as support from supply disruptions after super storm Sandy countered any pressure from data showing rising inventories.
NATURAL GAS-Most US natgas futures end higher, storage hits record(Reuters)
Most U.S. natural gas futures ended slightly higher on Thursday, with the front contract propped up by colder weather forecasts for the next two weeks despite bearish concerns about a government report showing inventories hit record highs. "The (EIA) build was not far off the mark, but we're expecting a little cold coming in, so that's holding us up," a Pennsylvania-based trader said.
Posted by MW Chong at 12:29 PM
SapuraKencana gets RM836m new jobs
SapuraKencana Petroleum has bagged two new jobs totaling RM835.8m. One of the jobs, worth RM700m, is from Petronas Carigali SB. The company said its wholly-owned subsidiary, Allied Marine & Equipment SB, received a letter of award from Petronas Carigali for underwater services, including inspection, repair and maintenance services utilising specialized vessels, equipment and personnel covering Petronas Carigali’s offshore oil and gas fields in Malaysia. (Financial Daily)-
UEM Group bids for infrastructure privatisation in Turkey
UEM Group has emerged as part of a consortium bidding for the privatisation of two bridges and seven motorways across Turkey. The other participants in the consortium are Turkish industrial conglomerate Koc Holdings and Gozde Girisim Sermayesi Yatirim Ortakligi, a Turkish financial services company. According to a Reuters report, Gozde has a 20% stake in a JV, with Koc and UEM each having a 40% stake. (Financial Daily)
Aeon Co buys Carrefour operations in Malaysia on its own, to rebrand outlets
Japan’s largest retailer Aeon Co Ltd will swallow Carrefour’s Malaysian operations on its own without the involvement of its locally-listed entities Aeon Co (M) and Aeon Credit Service (M). The deal thus has no financial impact on Aeon Co’s Malaysian subsidiaries as they will be run separately from the newly-acquired Carrefour Malaysia, said Aeon Co CEO for Asean Nagahisa Oyama, but it is expected to produce synergies in aspects such as IT, distribution network and product development. (StarBiz)
CB Industry buys firm in Indonesia
CB Industrial Product Holding has agreed to buy a 94% stake in PT Kurun Sumber Rezeki for RM7.38m cash to expand its plantation business. “The acquisition provides an opportunity for the group to further expand its plantation business. The additional landbank pursuant to the acquisition would enable the group to develop its existing plantation business into a sizeable plantation segment and provide further sustainable long-term earnings,” said the company. (BT)
Posted by MW Chong at 9:22 AM
China: Manufacturing gains signal fourth-quarter rebound
China’s manufacturing expanded for the first time in three months as output and new orders climbed, adding to signs that growth in the world’s second-biggest economy is rebounding after a seven-quarter slowdown. The Purchasing Managers’ Index climbed to 50.2 in October from 49.8 in September. (Bloomberg)
US: Consumer confidence gauge highest since 2008
Led by brighter views on present employment and business conditions, the Conference Board’s gauge of consumer confidence jumped in October to the highest level since February 2008, the New York-based research group said Thursday. The consumer-confidence index increased to 72.2 last month from a downwardly revised 68.4 in September. (MarketWatch)
US: Sandy damage estimate raised to as much as USD50bn
Superstorm Sandy caused as much as USD50bn in economic damage, with about USD10bn to USD20bn of insured losses, more than double previous estimates, said Eqecat Inc, a provider of catastrophic risk models. Major failures of electric and utility systems, which caused business interruptions, spurred the company to increase its estimate for insured losses while subway and tunnel outages also led to “higher expectations of loss amplifications”. (Bloomberg)
US: Initial jobless claims decrease by 9,000 to 363,000
Fewer Americans than forecasted filed first-time claims for unemployment insurance last week, an indication that demand is strong enough to maintain current staff levels. Applications for jobless benefits fell 9,000 to 363,000 in the week ended 27 Oct, the fewest in three weeks. Economists forecast 370,000 claims, according to the median estimate in a Bloomberg survey. (Bloomberg)
US: Manufacturers grow a little faster in October
American manufacturers grew at slightly faster pace in October as orders showed marked improvement, according to a closely followed survey. The Institute for Supply Management’s index of purchasing managers edged up to 51.7% from 51.5% in September and a three-year-low of 49.6% in August. (MarketWatch)
US stocks rally most in seven weeks amid economic optimism
US stocks rose, giving benchmark indexes their biggest advance in seven weeks, as reports on employment and manufacturing topped estimates while consumer confidence climbed in October to a more than four-year high. The S&P 500 gained 1.1% to 1,427.59 in New York. The Dow advanced 136.16 points, or 1%, to 13,232.62. Both gauges posted their biggest advance since 13 Sept. Volume for exchange-listed stocks in the US was about 6.8bn shares, or 14% above the three-month average. (Bloomberg)
Posted by MW Chong at 9:21 AM
Predicting the Next Shock to the Global Economy (Bloomberg)
The growing gulf between the behavior of investors enamored with monetary and fiscal largess and the reality of globally weakening economies -- a phenomenon I call the Grand Disconnect -- is profoundly unhealthy.
It will end, sooner or later, in any case. One way it could be eliminated is through the rapid expansion of economies globally. The past and current massive monetary and fiscal stimulus or other forces might rekindle growth. Some investors point to the recent stabilization of U.S. house prices as the beginning of a revival.
I have my doubts. The huge deleveraging in the private sector in the U.S. and abroad; the unresolved odd-couple tensions between the Teutonic North and the Club Med South in the euro zone; and the needed shift in China from an export-led economy to one powered by domestic consumption suggest that “risk on” investments will collapse to meet recessionary and chronically slow-growing economies.
What will cause the agonizing reappraisal by bullish investors? Probably a shock, as was the case in limited ways with the euphoria over the first two rounds of quantitative easing by the Federal Reserve and Operation Twist. The Greek debt crisis in early 2010 ended the QE1 stock rally. The QE2- spawned bull market ended in early 2011 with the second flare-up of Greek worries and the widening European financial and economic woes. The optimism generated by Operation Twist concluded with the realization that Europe’s travails may be unsolvable, and with worries about the fiscal cliff in the U.S.
Forecasting specific jolts is hazardous, though I can list several possibilities.
A hard landing in China might do the job, with growth slowing to between 5 percent and 6 percent, especially after the effect is felt in world trade, commodities demand and prices and commodity producers’ currencies. There is a growing consensus that this is in the cards. That view could account for the recent embryonic shift from “risk on” positions -- the quartet of short Treasury bonds, long stocks, short the U.S. dollar and long commodities -- to the reverse “risk off” trades.
A fall off the fiscal cliff is another possibility. If Congress and the administration don’t act by the end of this year, the Bush-era tax cuts will expire, the payroll tax on employees reverts to 6.2 percent from 4.2 percent, unemployment benefits drop from a 99-week maximum to 26 weeks, and $1.2 trillion in mandatory federal-spending cuts and tax increases over 10 years begin to kick in. The nonpartisan Congressional Budget Office estimates that the fiscal cliff will cut 2013 gross domestic product by 4 percent. In itself, that has the makings of a major recession, and its effects would be compounded in an already recessionary economy.
I believe that the U.S. government will avoid the fiscal cliff, at least temporarily. Even the representatives and senators affiliated with the Tea Party want to be re-elected, and telling their constituents that austerity is good for their souls won’t garner them many votes. With the current Congress and administration gridlocked, they could use a so-called lame- duck session after the election to postpone the tax increases and spending cuts, leaving the next Congress and administration to deal with the mess. That’s what happened last December --when they negotiated a three-month respite -- and again in February, when they delayed action for the rest of this year.
Or they could wait for a new administration to be sworn in and tackle the fiscal cliff retroactively.
One way or the other, I doubt the economy will go off the fiscal cliff. An old friend, former Representative Barber Conable of New York, who served as the ranking Republican on the House Ways and Means Committee and later as president of the World Bank, often told me that “Congress ultimately does the necessary thing, but only when forced to and as late as possible.”
Few in Washington are likely to stand on principle and let the economy fall into an abyss.
I doubt that many U.S. businesspeople and consumers believe the fiscal cliff won’t be averted, even though many cite the threat as a rationale for the general uncertainty that is retarding spending and capital investment. Note, however, that defusing the fiscal-cliff menace won’t add stimulus to the economy. It will simply keep existing government spending and tax rates intact.
Another possibility is that a surge in the price of oil, possibly triggered by an Iran-related crisis in the Middle East, shatters investor euphoria. That’s what happened with the oil embargo in 1973 and Iran’s Islamic Revolution in 1979. To be sure, the U.S. is becoming less dependent on imported energy, and little of the imported oil is from the Middle East. But petroleum is fungible and price increases elsewhere will affect the U.S., along with Europe and China. A huge energy-cost increase would be a debilitating tax on already-stressed consumers.
There also is the danger that a major European bank will fail, generating a global financial crisis. Banks are so intertwined through loans, leases, derivatives and other instruments that a blow in Europe would be felt around the world.
Banks normally look at their derivatives exposure on a net basis after hedges and other offsets are accounted for. But the gross or notional value of derivatives is 26 times the net, according to the Bank for International Settlements, and if a bank goes belly up, the counterparties are stuck with the notional amount.
Add major corporate-earnings disappointments to the list of possible shocks. Ever-optimistic Wall Street analysts believe Standard & Poor’s 500 (SPX) operating earnings fell slightly in the third quarter compared with the year-earlier period, but a 14 percent revival is expected in the fourth quarter. Yet suppose my forecast is correct and operating earnings drop to $80 per share over four consecutive quarters, due to recession-induced declines in corporate revenues, a narrowing of profit margins from record levels and currency-translation losses as the dollar strengthens. That $80 is more than 20 percent lower than analysts’ estimates, and would be a big disappointment to many bullish investors.
QE1, QE2 and Operation Twist got increasingly larger bangs for the buck. But that isn’t the case with QE3 and recent actions by the European Central Bank, at least so far. Each successive announcement by the Fed and ECB got less pop in the S&P 500. Since peaking Sept. 14, the day after QE3 was announced, that index has been relatively flat, in contrast to gains in comparable days of trading after the three earlier quantitative easings. Treasuries, which changed little after the first rounds of easing, had a brief rally.
It’s early into QE3, but does this suggest that investors are getting cautious and wary, and believe the Fed has gone back to the well one time too often? Are investors anticipating a hard landing in China or one of the other shocks I outlined?
This series makes clear that I disagree with the “It’s so bad, it’s good” crowd. Conditions are so bad, they are just plain bad. The huge monetary and fiscal stimulus in the U.S. and elsewhere in the past five years has failed to offset the gigantic deleveraging in global private sectors. And such measures are unlikely to do so until that process is completed in another five to seven years.
Posted by MW Chong at 9:20 AM
Asian Stocks Advance on U.S. Employment, Manufacturing (Bloomberg)
Asian stocks rose after reports on U.S. employment and manufacturing topped estimates and consumer confidence in the world’s largest economy climbed last month to a more than four-year high. BHP Billiton Ltd. (BHP), the world’s largest mining company, climbed 1.9 percent. Komatsu Ltd. (6301), the second-biggest maker of construction and mining equipment, rose 2.8 percent. Sharp Corp. (6753) slumped 4.1 percent after the TV maker forecast a record loss and said there was “material doubt” about its survival. The MSCI Asia Pacific Index (MXAP) gained 0.5 percent to 122.46 as of 9:08 a.m. in Tokyo before markets the open of markets in China and Hong Kong. The gauge climbed 7 percent this year through yesterday as central banks around the world boosted stimulus to support economic growth. The measure has risen 0.8 percent this week.
“Global indicators are starting to show an improvement in momentum, particularly in the U.S.,” said Nader Naeimi, Sydney- based head of dynamic asset allocation at AMP Capital Investors Ltd., which manages almost $100 billion. “This can be sustained if central banks keep supporting growth.” Japan’s Nikkei 225 Stock Average (NKY) gained 1.2 percent, Australia’s S&P/ASX 200 Index rose 0.4 percent and South Korea’s Kospi climbed 1.1 percent.
Japanese Stock Futures Climb on U.S. Jobs, Manufacturing Data (Bloomberg)
Japanese stock futures and Australian equities rose after reports on U.S. employment and manufacturing topped estimates and consumer confidence in the world’s largest economy climbed last month to a more than four-year high. BHP Billiton Ltd. (BHP), the world’s largest mining company, climbed 1.8 percent to lead gains among companies whose earnings are most tied to economic swings. American Depositary Receipts of Komatsu Ltd. (6301), the second-biggest maker of construction and mining equipment, rose 1.7 percent. ADRs of Sharp Corp. (6753) slumped 11 percent after the TV maker forecast a record loss and said there was “material doubt” about its survival. Futures on Japan’s Nikkei 225 Stock Average expiring in December closed at 9,055 in Chicago yesterday, up from 8,950 in Osaka. They were bid in the pre-market at 9,050 in Osaka, at 8:05 a.m. local time. Australia’s S&P/ASX 200 Index (AS51) advanced 0.3 percent today, while New Zealand’s NZX 50 Index retreated 0.3 percent in Wellington.
“Global indicators are starting to show an improvement in momentum, particularly in the U.S.,” said Nader Naeimi, Sydney- based head of dynamic asset allocation at AMP Capital Investors Ltd., which manages almost $100 billion. “This can be sustained if central banks keep supporting growth.” Futures on the Standard & Poor’s 500 Index were little changed today. The gauge yesterday gained 1.1 percent, its biggest advance in seven weeks.
U.S. Stocks Rally Most in 7 Weeks Amid Economic Optimism (Bloomberg)
U.S. stocks rose, giving benchmark indexes their biggest advance in seven weeks, as reports on employment and manufacturing topped estimates while consumer confidence climbed in October to a more than four-year high. Eight of 10 groups in the Standard & Poor’s 500 Index advanced. Caterpillar Inc., Microsoft Corp. and Bank of America Corp. (BAC) climbed more than 3.4 percent to lead gains in the Dow Jones Industrial Average. Visa Inc. (V) rose 3.7 percent after reporting fourth-quarter profit that beat analysts’ estimates. Macy’s Inc. (M) climbed 6.4 percent after raising its sales forecast. Pfizer (PFE) Inc. lost 1.3 percent after the world’s largest drugmaker narrowed its forecast for 2012. The S&P 500 (SPX) gained 1.1 percent to 1,427.59 in New York. The Dow advanced 136.16 points, or 1 percent, to 13,232.62. Both gauges posted their biggest advance since Sept. 13. Volume for exchange-listed stocks in the U.S. was about 6.8 billion shares, or 14 percent above the three-month average.
“One of the major concerns of the market is a deceleration of growth,” Mark Freeman, who oversees about $14 billion as chief investment officer at Westwood Holdings Group Inc. in Dallas, said in a phone interview. “The data is actually saying that deceleration has basically stopped and the growth rate has stabilized. When we look at fundamentals, the economy still supports earnings growth going into next year.”
Recap Stock Index Market Report (CME)
The December S&P 500 trended higher throughout the US trading session and broke out of recent congestion in the process. Stocks drafted support during the initial morning hours following a round of upbeat economic readings. Further upside action above 1420.00 came from data that showed a greater than expected rate of expansion in US manufacturing, as well as a jump in Consumer Confidence to a new four year high. Some traders noted strong gains in the shares of Allstate and Visa following yesterday's better than expected earnings reports as another source of support. It also seemed that this morning's US favorable labor market data bolstered the case for a positive October Non-Farm Payroll report tomorrow. Upside leadership during the session came from solid gains in industrial and material-related shares. The market receives the latest earnings from Starbucks after the close.
European Stocks Rise Most in Two Weeks on U.S. Reports (Bloomberg)
European (SXXP) stocks advanced the most in two weeks amid better-than-forecast U.S. economic reports and a rebound in Chinese manufacturing. Etablissements Maurel & Prom led the rally, surging 8.3 percent after three people familiar with the matter said China Petrochemical Corp. is considering a takeover offer for the French oil explorer. British Sky Broadcasting Group Plc climbed 7.1 percent after first-quarter operating profit beat analyst estimates. Croda International Plc (CRDA), the world’s second-largest maker of cosmetic ingredients, dropped 1.3 percent. The Stoxx Europe 600 Index rose 1.3 percent to 273.7 at the close in London, its biggest gain since Oct. 16. The benchmark completed its fifth monthly rally yesterday and has surged 17 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.
“October is behind us and as the new month begins, market sentiment may get more positive again in terms of price action,” said Serge Berger, a Zurich-based trader at Blue Oak Advisors LLC. “With the U.S. earnings season mostly behind us, any news here such as today’s decent economic data should help support prices.” Labor Department data showed fewer Americans than forecast filed first-time claims for unemployment insurance last week, while a private report based on payrolls showed U.S companies expanded payrolls in October by the most in eight months.
Most Emerging Stocks Rise After China PMI Data (Bloomberg)
Emerging-market stocks rose the most in a week as data showed manufacturing in China and the U.S. expanded, boosting the outlook for the world’s largest economies. Petrochemicals maker Braskem SA led Brazilian producers higher amid a rally in global commodities prices. Titan Industries Ltd. (TTAN), India’s largest branded-jewelry maker, surged to a record high after second-quarter profit beat estimates. Zoomlion Heavy Industry Science & Technology Co., China’s second-biggest maker of construction equipment, gained 3.4 percent in Hong Kong. Hyundai Motor Co. (005380) slid to the lowest in almost eight months on speculation it may need to recall some vehicles in the U.S.
The MSCI Emerging Markets Index gained 0.4 percent to 999.63 at the close of trading in New York. A purchasing managers’ index in China signaled that manufacturing expanded for the first time in three months, adding to signs the economy is rebounding after a seven-quarter slowdown. The Institute for Supply Management’s U.S. factory index rose to 51.7 in October from 51.5 a month earlier, surpassing a median estimate of 51 by 88 economists surveyed by Bloomberg. “The Chinese PMI was better than expected, above 50, which is the threshold between contraction and expansion. The market is looking to China, and the PMI came in handy,” said Darwin Dib, the chief strategist at CM Capital Markets Asset Management in Sao Paulo. The U.S. PMI and jobs numbers were also “slightly above forecast,” Dib said. Fewer Americans than forecast filed for jobless claims last week, and companies expanded payrolls in October by the most in eight months, data from the Labor Department and the ADP Research Institute showed today.
ETF Surges as Manufacturing Index Propels Gains (Bloomberg)
The iShares FTSE China 25 Index Fund, the biggest Chinese exchange-traded fund in the U.S., climbed to a six-month high as expanding factory output added to signs the economy is awakening from a seven-quarter slowdown. The iShares FTSE China ETF rallied 2.6 percent to $37.75 yesterday, the strongest since May 3. Qihoo 360 Technology Co. (QIHU) drove a 2.1 percent surge in the Bloomberg China-US Equity Index (CH55BN) of the most-traded Chinese stocks in New York. AsiaInfo-Linkage Inc. (ASIA), a software developer mulling a buyout proposal, soared 6.5 percent after issuing a fourth-quarter forecast that beat analysts’ estimates. China Petroleum and Chemical Corp. traded at the widest premium to its Hong Kong shares since September.
Chinese manufacturing expanded for the first time in three months in October as output rose and new orders came in, a purchasing managers’ index released yesterday by the government and the China Federation of Logistics and Purchasing showed. Coupled with reports last month showing industrial production rebounded and retail sales rose the most in six months, the data bolsters the outlook for the world’s largest exporter. “Investors were looking for some signs of stabilization in the growth, and the purchasing managers’ index is one of those signs,” Audrey Kaplan, lead manager of the $532 million Federated InterContinental Fund at Federated Global Investment Management, said by phone in New York yesterday. “People’s confidence in Chinese equities is picking up. It looks like the beginning of a rally.”
Dollar Climbs as Data Support Economic Outlook (Bloomberg)
The dollar gained against the yen and euro as U.S. initial jobless claims declined to the fewest in three weeks and a measure of manufacturing activity rose more than forecast, adding to evidence the economy is recovering. The pound climbed to the highest level in two weeks versus the dollar as a report showed U.K. house prices rebounded in October and Britain’s biggest business lobby raised its economic forecasts for this year and next. The Japanese currency earlier weakened for a third day against the euro before the Bank of Japan (8301) releases tomorrow the minutes of the central bank’s Oct. 4-5 meeting. “Better data means the Federal Reserve isn’t going to buy forever,” Michael Gapen, senior U.S. economist at Barclays Plc in New York, said of the central bank’s asset-purchasing efforts in an interview on Bloomberg Television’s “Lunch Money” with Sara Eisen. “That is how the dollar can outperform lower- yielding currencies like the yen.”
The dollar gained 0.4 percent to 80.12 yen per dollar at 5 p.m. in New York. It gained 0.1 percent to $1.2943 per euro. The yen declined 0.3 percent to 103.71 per euro. The Dollar Index, which IntercontinentalExchange Inc. uses to track the greenback against the currencies of six U.S. trading partners, climbed 0.1 percent to 80.022.
Aussie Climbs to Highest Since September Before U.S. Jobs Report (Bloomberg)
Australia’s dollar climbed to the highest level in more than a month on speculation U.S. employment data today will boost demand for riskier assets. The so-called Aussie headed for a fourth weekly advance, the longest winning streak since August, as signs of a recovery in the world’s largest economy spurred a global rally in stocks. Gains in the Australian and New Zealand currencies were limited as Greek lawmakers squabbled over austerity measures needed to secure a bailout and keep the nation in the euro. “Investors are getting more optimistic about the outlook for the U.S. economy,” said Marito Ueda, senior managing director in Tokyo at FX Prime Corp. (8711), a currency-margin company. “The risk-on tone across the market is supporting the Aussie.”
The Australian dollar touched $1.0420, the highest since Sept. 28, before trading at $1.0410 as of 10:50 a.m. in Sydney from $1.0401 at the close yesterday. It was set for a 0.4 percent advance this week. The Aussie rose 0.2 percent to 83.48 yen, after reaching 83.53, the strongest since Aug. 21. The New Zealand dollar bought 82.76 U.S. cents from 82.70, having appreciated 0.6 percent since Oct. 26. The Standard & Poor’s 500 Index (SPX) of U.S. shares climbed 1.1 percent yesterday, while the Stoxx Europe 600 Index rallied 1.3 percent. Australian bonds declined today for the first time this week, pushing the yield on the 10-year note up by five basis points, or 0.05 percentage point, to 3.17 percent. In the U.S., data yesterday showed manufacturing expanded more than forecast, consumer confidence rose to a four-year high and fewer Americans filed claims for unemployment benefits, pointing to resilience in the U.S. economy.
Figures from the U.S. Labor Department today are likely to show nonfarm payrolls increased by 125,000 workers in October and the jobless rate rose to 7.9 percent, according to the median projections of economists surveyed by Bloomberg.
Aussie Strength Allows Economy to Run Lower Rates, Swan Says (Bloomberg)
Australia’s economy can operate with lower interest rates than it has in the past as overseas investors buttress the local currency that is helping contain inflation, Treasurer Wayne Swan said. “Australia is now seen as a necessary part of any portfolio, whether it be private or public investors -- and these investment flows have propped up our sustained high dollar,” Swan said in a speech in Melbourne yesterday. “This, combined with our fiscal consolidation and contained inflation, has all meant that our economy has more room to run lower rates than we have in the past.” By highlighting the benefits of an elevated local dollar, Swan is pivoting from his past concern about the impact of its strength on industries including manufacturing and tourism. The change of focus coincides with a rebound in the government’s ratings in opinion polls and follows the steepest rate cuts among major developed economies in the past year.
Swan and other ministers have pressed the central bank to lower borrowing costs and stimulate the economy as the government bids for a A$44 billion ($46 billion) swing back to the black in time for an election due by late next year. There has been “a rebalancing in monetary and fiscal policy, which has not been widely remarked upon,” Swan said in the speech to the 2012 Economic and Social Outlook conference before he heads to a Group of 20 meeting in Mexico.
Dollar Set for Weekly Gain Versus Yen Before U.S. Jobs (Bloomberg)
The dollar was set for a third weekly advance versus the yen, the longest streak in more than seven months, before U.S. data that may signal the job market is improving in the world’s biggest economy. The greenback is 0.3 percent from a four-month high against the Japanese currency after U.S. initial jobless claims declined to the fewest in three weeks. The euro remained lower following a slide yesterday before a report that economists say will confirm the region’s manufacturing contracted for a 15th month in October. “The dollar-yen is edging up because of improved risk sentiment and relatively good U.S. economic indicators,” said Yuki Sakasai, a currency strategist at Barclays Plc in New York. “As for the direction of the dollar-yen, much depends on the U.S. employment report.”
The dollar fetched 80.16 yen as of 7:35 a.m. in Tokyo after climbing 0.4 percent to 80.12 yesterday. It reached 80.38 on Oct. 26, the highest since June 25. The yen was little changed at 103.73 per euro. The 17-nation currency traded at $1.2941 following a 0.1 percent drop to $1.2943. The Standard & Poor’s 500 Index climbed 1.1 percent, while the Stoxx Europe 600 Index advanced 1.3 percent.
Greek Stocks Tumble Amid Concerns on Government Stability (Bloomberg)
Greek stocks are headed for the biggest weekly retreat in four years as coalition government lawmakers squabble over austerity that a Bundesbank official warned must be enforced to keep bailout funds flowing. The country’s benchmark ASE Index (ASE) dropped 5 percent yesterday, taking its decline so far this week to 13 percent after the government unveiled debt forecasts falling further behind its targets. Shares extended declines after a Greek court ruled that planned pension cuts may be unconstitutional. Prime Minister Antonis Samaras’s bid to please lenders from the European Union and International Monetary Fund with a 13.5 billion-euro ($17.5 billion) austerity package and unlock vital funds ran into renewed obstacles this week from coalition partners. A law on state asset sales that is key to reducing debt scraped through Parliament this week, raising concerns on whether Samaras’s coalition will be able to muster requisite support to pass the measures.
“Politicians and the EU are willing to assist Greece, but Greece must, first and foremost, help itself,” Andreas Dombret, a board member at the German central bank, said in New York late yesterday. Greece is “way behind the program goals due to the standstill in consolidation and basic structural reforms.” The yield on Greece’s benchmark 10-year bond increased 40 basis points to 18.17 percent yesterday, widening the spread on similar-maturity German bunds to 16.7 percentage points. On the stock exchange, National Bank of Greece SA (ETE), the Mediterranean nation’s largest lender, plummeted 12 percent. Public Power Corp. tumbled 11 percent and Opap SA (OPAP) fell 6.9 percent.
Initial U.S. Jobless Claims Decrease by 9,000 to 363,000 (Bloomberg)
Fewer Americans than forecast filed first-time claims for unemployment insurance last week, an indication demand is strong enough to maintain current staff levels. Applications for jobless benefits fell 9,000 to 363,000 in the week ended Oct. 27, the fewest in three weeks, the Labor Department reported today in Washington. Economists forecast 370,000 claims, according to the median estimate in a Bloomberg survey. Data for New Jersey and the District of Columbia were estimated because those offices were closed due to Hurricane Sandy, a spokesman said as the figures were released. Fewer firings may mean companies are poised to boost hiring should the economy avert damage from the package of tax increases and spending cuts that will take effect next year if lawmakers fail to act. A Labor Department report tomorrow may show employers took on 125,000 workers in October, not enough to keep the jobless rate from rising to 7.9 percent from 7.8 percent, according to the Bloomberg survey median.
“Claims have been on a mildly improving trajectory,” said Gennadiy Goldberg, a U.S. strategist at TD Securities Inc. in New York who forecast the number of applications would drop to 365,000. “We’re definitely getting fewer firings, but hirings are picking up very gradually, and that’s why you’re only seeing gradual improvement in the labor market.”
Manufacturing in U.S. Expands at Faster Pace in October (Bloomberg)
Manufacturing expanded more than forecast, consumer confidence rose to a four-year high and fewer Americans filed claims for unemployment benefits, pointing to resilience in the U.S. economy heading into the fourth quarter. The Institute for Supply Management’s factory index rose to a five-month high of 51.7 in October from 51.5, the Tempe, Arizona, group reported today. The Conference Board’s sentiment index increased to 72.2, the highest since February 2008. Applications for jobless benefits fell by 9,000 to 363,000 in the week ended Oct. 27, the Labor Department said in Washington. “We’re getting a sense of stabilization, we’re no longer slipping,” said Michael Feroli, chief U.S. economist at JPMorgan Chase & Co. in New York. “This should ease concerns that we were feeling two or three months ago about the state of the economy.”
Stocks rose on optimism the world’s largest economy is weathering a global slowdown and the prospect of $607 billion in federal spending cuts and tax increases set to kick in early next year unless Congress acts. At the same time, a report tomorrow on the labor market, the last before the presidential election, may show employers are keeping a tight rein on hiring. The Standard & Poor’s 500 Index gained 1 percent to 1,425.70 12:46 p.m. in New York. The yield on the 10-year Treasury note rose to 1.72 percent from 1.69 percent late yesterday. Elsewhere, indexes from Britain to Sweden showed manufacturing contracted in October, while factory output expanded in China for the first time in three months, underscoring the diverging speeds of the global recovery.
Consumer Confidence in U.S. Rises to Highest Since 2008 (Bloomberg)
Confidence among American consumers climbed in October to a more than four-year high, which may help drive bigger gains in the largest part of the economy. The Conference Board’s sentiment index increased to 72.2, the highest since February 2008, from a revised 68.4 in September, figures from the New York-based private research group showed today. The figure was projected to rise to 73, according to the median estimate of economists surveyed by Bloomberg. The percent of respondents who say jobs are currently plentiful rose to the highest level since September 2008, indicating that a decline in joblessness is brightening Americans’ moods. Lower gasoline prices and a budding housing recovery are also contributing to the improvement in confidence.
“The lower unemployment rate and firming of housing prices has made consumers feel a little bit more confident,” Richard Moody, chief economist at Regions Financial Corp. in Birmingham, Alabama, said before the report. “Household net worth is slowly but surely rebounding, particularly with house prices starting to go up. So that may be making consumers feel a little bit more confident about taking on bigger ticket expenditures.” Stocks rose as reports today showed that initial claims for unemployment benefits declined more than forecast last week, companies expanded payrolls in October by the most in eight months and manufacturing expanded more than forecast. The Standard & Poor’s 500 Index rallied 1 percent to 1,426.62 at 12:21 p.m. in New York. The yield on the 10-year Treasury note rose to 1.72 percent from 1.69 percent late yesterday.
Consumer Comfort in U.S. Held Close to Six-Month High Last Week (Bloomberg)
Consumer confidence last week held close to a six-month high as U.S. households became less pessimistic about the state of the economy. The Bloomberg Consumer Comfort Index was minus 34.7 in the period ended Oct. 28 after improving the previous week to minus 34.6, the highest since mid-April. The measure has been above minus 40, a level associated with recessions and their aftermath, for the past six weeks. Cheaper fuel and a budding housing recovery are underpinning confidence, with less than a week before the presidential election. While superstorm Sandy may darken spirits this week following widespread power outages, flooding and at least 50 deaths along the East Coast, the drop will probably prove temporary as Americans’ views of the economy become less downbeat.
“Stabilization of the home prices, a strong equity market and falling gasoline prices has bolstered consumer sentiment over the past several weeks,” said Joseph Brusuelas, a senior economist at Bloomberg LP in New York. “While the impact of Hurricane Sandy may temporarily derail that improvement in coming weeks, the underlying trend in overall sentiment should reassert itself shortly.” In a separate report today, the Labor Department said the number of Americans filing first-time applications for unemployment benefits fell last week. Jobless claims dropped by 9,000 to 363,000, the department reported. The agency is scheduled to issue its monthly report on employment tomorrow. Payrolls rose by 125,000 in October, while the jobless rate climbed to 7.9 percent from 7.8 percent, according to the median forecasts of economists surveyed by Bloomberg.
Companies in U.S. Sustain Productivity to Cut Labor Costs (Bloomberg)
The productivity of U.S. workers held up in the third quarter as companies focused on cutting labor expenses to preserve profits as sales cool. The measure of employee output per hour climbed at a 1.9 percent annual rate, the same as in the prior three months, a Labor Department report showed today in Washington. The median forecast in a Bloomberg survey of 60 economists called for a 1.8 percent rise. Costs per worker unexpectedly dropped at a 0.1 percent rate. The decrease in expenses reflects concern about cooling overseas markets and the so-called fiscal cliff of tax increases and government spending cuts that may take effect next year if lawmakers fail to act. Lower labor costs mean companies can hold the line on prices, giving Federal Reserve policy makers scope to keep pumping money into the economy to spur growth.
“Companies are just very uncertain about the future,” said Stephen Stanley, chief economist at Pierpont Securities LLC in Stamford, Connecticut, who projected labor costs would drop 0.2 percent. “Demand isn’t particularly strong, so companies aren’t eager to raise prices. Since you can’t raise prices, you better be careful about costs.” Economists’ productivity estimates ranged from 0.5 percent to 3 percent. The increase in efficiency for the second quarter was revised down from a previously reported 2.2 percent gain.
ADP Says U.S. Companies Add Most Workers in Eight Months (Bloomberg)
Companies expanded payrolls in October by the most in eight months, an indication the U.S. labor market was on the upswing at the start of the fourth quarter, according to a private report based on payrolls. The 158,000 increase followed a revised 114,000 gain in September, data from the Roseland, New Jersey-based ADP Research Institute showed today. This is the first ADP report derived using a larger sample and new methodology. Quicker job creation suggests confidence among businesses is holding up in the face of the so-called fiscal cliff, an onslaught of tax increases and spending cuts in place for next year should Congress fail to act. A Labor Department report tomorrow may show private payrolls increased by 124,000 in October while the unemployment rate rose to 7.9 percent, according to the median estimate in a Bloomberg survey.
“Businesses are adding consistently to their payrolls,” Mark Zandi, chief economist at Moody’s Analytics Inc., said in a statement accompanying the report, which he helped produce. “Businesses have turned more cautious in recent months, but that has yet to impact their hiring and firing decisions.” Fewer Americans than forecast filed first-time claims for unemployment insurance last week, a Labor Department report showed today. Applications for jobless benefits fell 9,000 to 363,000 in the week ended Oct. 27, the fewest in three weeks.
Bernanke Depression Guru Seeks Roosevelt Well-Being (Bloomberg)
Ben S. Bernanke argued for 15 years that the Federal Reserve should announce a numerical inflation target. When he finally got his way in January, the victory allowed the central bank to elevate its other mandate: full employment. By adopting a 2 percent inflation goal, the Fed chairman sought to cement the central bank’s hard-earned credibility for keeping prices low after a 30-year fight against inflation. Bernanke calculated that doing so would anchor expectations for price changes, giving policy makers greater freedom to unleash new stimulus targeted at creating jobs. So far, the move has worked: The Fed embarked on a third round of quantitative easing in September without unhinging inflation expectations.
Bernanke’s shift to emphasizing employment goals is one of the hallmarks in a grueling two-term chairmanship that spanned the worst financial crisis and recession since the Great Depression and a slow labor-market recovery that pinned joblessness above 8 percent for 43 months. The presidential campaign has put the Fed in transition as Republican candidate Mitt Romney said he’d replace Bernanke, though former colleagues doubt he will stay on, no matter who wins. Bernanke has explicitly returned the U.S. central bank to the broader, more balanced goal that Franklin Roosevelt described in 1937 as seeking “the greatest attainable measure of economic well-being, the largest degree of economic security and stability” when the then-president inaugurated the Fed’s Beaux Arts-inspired Washington headquarters.
Rosengren Calls for QE3 Until Unemployment Falls to 7.25% (Bloomberg)
Federal Reserve Bank of Boston President Eric Rosengren said the Fed should buy mortgage bonds until the jobless rate falls to 7.25 percent and hold the target interest rate near zero until hitting 6.5 percent unemployment. “As long as inflation and inflation expectations are expected to remain well-behaved in the medium term, we should continue to forcefully pursue asset purchases,” Rosengren said today in a speech in Wellesley, Massachusetts. The Boston Fed chief’s proposal would set “a threshold, not a trigger,” he said at Babson College. Once achieved, “the assessment of continued asset purchases would commence.”
Rosengren joined fellow Fed regional bank presidents Charles Evans of Chicago and Narayana Kocherlakota of Minneapolis in proposing numerical thresholds the Fed should reach before beginning to reverse record accommodation. Many Fed officials advocate similar policy objectives focused on inflation and the labor market, according to minutes of a Sept. 12-13 policy meeting. They haven’t agreed on such thresholds. Kocherlakota has said interest rates should stay low until unemployment falls below 5.5 percent, so long as the outlook for inflation does not breach 2.25 percent. Evans has said the central bank should promise to keep rates low until the unemployment rate falls to 7 percent, so long as inflation doesn’t exceed 3 percent.
Sandy Damage Estimate Raised to as Much as $50 Billion (Bloomberg)
Superstorm Sandy caused as much as $50 billion in economic damage, with about $10 billion to $20 billion of insured losses, more than double previous estimates, said Eqecat Inc., a provider of catastrophic risk models. Major failures of electric and utility systems, which caused business interruptions, spurred the company to increase its estimate for insured losses, it said today in a statement. Subway and tunnel outages also led to “higher expectations of loss amplifications,” the report said. Eqecat, which has offices in Hackensack, New Jersey, and Oakland, California, had estimated damages of as much as $20 billion, including $5 billion to $10 billion of insured losses, in an Oct. 30 report. The company later today will release additional details, including state-by-state damage calculations, Charlene Goodwin, an Eqecat vice president, said in an e-mail. Some of the analysis will be based on news footage of the Jersey Shore, Eqecat President Bill Keogh said in an interview yesterday.
“You can see in several neighborhoods, the first block has basically been destroyed by the storm surge,” Keogh said in a telephone interview from his vacation home in Litchfield, Connecticut, where he had taken refuge because power was off in the company’s Hackensack office. “Storm surge is extremely violent and water is a very heavy thing. You get 10-, 12-feet of storm surge, and it changes the shoreline really.” Reis Inc. (REIS), a real estate research firm, gave a preliminary estimate of total damage of $30 billion to $40 billion from Sandy. In its Oct. 30 estimate, the New York-based company valued reconstruction efforts at $25 billion to $30 billion. That would result in a $10 billion to $15 billion economic loss, Reis said.
China Poised for Growth Rebound as Luggage Maker Puts Lid on ’12 (Bloomberg)
Months before China closes the lid on the Year of the Dragon, Guangzhou Aoking Leather Co. is ramping up luggage production, adding to signs that the slowdown in the world’s second-largest economy is poised to ease. “People’s sentiment and confidence in the economy and in their income prospects are improving,” says Song Chunhong, a deputy marketing manager at the company in coastal Guangdong. Sheng Laiyun at the National Bureau of Statistics sees broader signs of recovery in the more-developed seaboard provinces that are usually first to register shifts in the economy’s prospects. “The duck knows first when the river becomes warm in spring,” he said last month, quoting an 11th-century Chinese poem.
While China’s years of 10 percent growth may be behind, a stabilization around 8 percent would help counter what the International Monetary Fund last month called an “alarmingly high” risk of a steeper drop in global expansion. Overseas firms from computer-maker Dell Inc. (DELL) to Hong Kong jewelry makers see sales in China improving in coming months, and domestic manufacturers are more confident, a release showed yesterday. “We have seen an increasing amount of evidence for green shoots” in China, said Lu Ting, head of Greater China economics at Bank of America Corp. in Hong Kong who this week raised his fourth-quarter forecast for economic growth to 7.8 percent from 7.5 percent. The nation’s gross domestic product will rise 8.1 percent in 2013, up from 7.7 percent in 2012, he said.
Hong Kong Taxing Homebuyers in Bubble Fight: Mortgages (Bloomberg)
The Hong Kong government’s toughest efforts yet to curb a growing asset bubble in the city’s property market probably won’t be the last as record-low mortgage rates drive demand for the world’s priciest homes. Policy makers last month imposed an extra 15 percent tax on all home purchases by companies and non-permanent residents, adding to steps to boost the supply of housing and tighten lending as an influx of buyers from other parts of China underpin soaring prices. Untouched is the major stimulant fuelling prices: borrowing costs tied to the U.S. because of the Hong Kong dollar peg and growth linked to China.
Pledges by Hong Kong Chief Executive Leung Chun-ying and his predecessor to rein in the property market have so far done little to stem a three-year surge that almost doubled prices in the city with Asia’s biggest wealth gap. Leung has imposed three rounds of curbs, including accelerating new home sale approvals and tightening banks’ mortgage lending, since taking over in July. His government in the past week has signaled it won’t rule out additional measures. “These are all buy-time policies,” said Vincent Cheung, national director for valuation and advisory at property broker Cushman & Wakefield Inc. “The government’s doing this because new housing supply won’t come in for another two, three years. And between now and then, the forces that push prices up will always be here because the Hong Kong dollar stays cheap.”
Hong Kong’s banks, including HSBC Holdings Plc and Standard Chartered Plc, are charging homebuyers an average 2.15 percent for loans, less than half of its level six years ago, according to Hong Kong-based mReferral Mortgage Brokerage Services. The city’s consumer prices rose 3.8 percent in September from a year earlier, according to the government.
Indonesian Growth Seen Exceeding 6% Reduces Need for Rate Cut (Bloomberg)
Indonesia’s economic growth probably held above 6 percent last quarter, as domestic spending and rising investment countered falling exports, giving the central bank room to refrain from cutting interest rates. Gross domestic product probably grew 6.2 percent in the three months through September from a year earlier, according to the median estimate of 12 economists surveyed by Bloomberg News ahead of a government report due Nov. 5. The economy expanded 6.37 percent in the previous quarter. Bank Indonesia will probably keep its benchmark rate at 5.75 percent on Nov. 8, according to all 11 economists in a separate survey. Policy makers in Southeast Asia’s biggest economy have avoided adding to a February rate cut even as neighbors from Thailand to the Philippines extended monetary easing to counter faltering global growth. The rupiah is Asia’s worst-performing currency this year, boosting import costs and pushing inflation to a 13-month high in October.
“There’s less need to ease because the domestic economy is running quite hot,” said Eugene Low, a Singapore-based economist at DBS Group Holdings Ltd. “Indonesia will be resilient and all the indicators so far in terms of consumption have been supportive,” said Leow, who expects a 75 basis-point increase in interest rates by the end of 2013. The rupiah has fallen almost 6 percent against the dollar this year, the biggest decline among 11 widely-traded Asian currencies tracked by Bloomberg. The benchmark Jakarta Composite index has gained about 13 percent.
DTN Closing Grain Comments 11/01 14:46 Corn Loses Momentum (CME)
Renewed commercial selling pressured the corn market, wiping out a solid day. Beans and Chicago wheat were able to close higher with the former seeing solid double-digit gains.
Corn Market Recap for 11/1/2012 (CME)
December Corn finished down 4 3/4 at 751, 12 1/4 off the high and 1 up from the low. March Corn closed down 3 1/2 at 753 1/2. This was 1 up from the low and 9 3/4 off the high. December corn posted highs of the day in the overnight session and saw choppy to lower trade for much of the day and traded lower on the day late in the trading session to close near 4-5 cents lower. News of corn sales to Israel from Ukraine plus more talk that South America corn is still cheaper than the US helped spark some of the long liquidation selling. The spread has narrowed but traders fear more weeks of sluggish export news just ahead. Brazil exported 3.66 million tonnes of corn in October as compared with 3.15 million in September and from 1.52 million tonnes last year. Traders see weekly export sales for release in the morning near 225,000 tonnes as compared with 406,500 necessary each week to reach the USDA projection and from 142,300 tonnes last week. The market was trading 3 1/2 cents higher into the mid-session with continued concerns for the planting progress in South America, strength in wheat and a slight improvement in ethanol demand helping to provide support. Strong cash market and bullish spread activity has occurred in recent weeks in spite of sluggish demand from the export and ethanol sectors and this has helped to provide underlying support as well. Ideas that there could be a further revision lower in corn yield for next week's USDA crop production report is also seen as supportive. Ethanol production for the week ending October 26th averaged 825,000 barrels per day. This is up 3% from the previous week but down 9.9% vs. last year. The USDA is estimating ethanol usage at down 10% from last year for the entire season. Corn used in last week's production is estimated at 86.6 million bushels as compared with an average weekly total near 86.55 million bushels to meet this crop year's USDA estimate of 4.5 billion bushels. Stocks were 19.2 million barrels, up 2.4% vs. last week and up 11.7% vs. last year. November Rice finished down 0.065 at 14.765, equal to the high and equal to the low.
Wheat Market Recap Report (CME)
December Wheat finished up 4 at 868 1/2, 9 off the high and 5 up from the low. March Wheat closed up 4 at 883 1/4. This was 5 1/4 up from the low and 8 1/4 off the high. December Chicago wheat closed just 4 cents higher on the day and 9 cents off of the highs. Weakness in corn, a strong US dollar and sluggish US export news helped to spark the set-back from the overnight highs. The market jumped higher into the mid-session as traders seemed to react to news that only 40% of the freshly planted winter wheat crop was in good to excellent condition which is the lowest since at least 1986 and compares with the 20-year average of 61%. Oklahoma conditions showed only 27% good/excellent from 60% as the 20-year average and Kansas was 37% good/excellent from 68% as the 20-year average. New crop Kansas City wheat is hovering near 17-month highs. Nebraska good to excellent readings were just 9% with 49% of the crop rated poor to very poor. A whopping 61% of the South Dakota crop is rated poor to very poor. Dry conditions in the western and northern plains and fears that some of the crop may not see germination ahead of dormancy has also helped to support. Traders see weekly export sales for release in the morning near 425,000 tonnes as compared with 525,200 necessary each week to reach the USDA projection and from 571,900 tonnes last week. December Oats closed down 8 3/4 at 380 1/4. This was 1 up from the low and 11 1/2 off the high.
U.S. corn harvest 91 percent complete, soy 87 percent (Reuters)
The world's largest corn harvest limped along toward the finish line last week amid rain delays in the Midwest farm belt, but it remained tied with 2010 as the fastest ever, U.S. government data showed on Wednesday.
Commodities Post Biggest Loss in 5 Months to Trail Stocks (Bloomberg)
Slumping energy and metal prices sent commodities to their biggest monthly loss since May, lagging behind stocks, bonds and the dollar, as the global economy grew at the slowest pace since the 2009 recession. The Standard & Poor’s GSCI Total Return Index (MXAP) of 24 raw materials fell 4.1 percent, erasing gains for the year. The MSCI All-Country World Index of stocks slid 0.6 percent, including dividends, while the U.S. Dollar Index slid 0.02 percent. Bonds of all types gave positive returns, according to Bank of America Merrill Lynch’s Global Broad Market Index. Investor optimism dimmed as the International Monetary Fund cut its global growth forecast and the Federal Reserve said strains on the world economy present “significant downside risks.” China reported the seventh straight quarter of slowing growth, while services and manufacturing in the 17-nation euro area last month contracted more than economists forecast.
“Europe is a complete and total disaster and doesn’t appear to be solved,” John Stephenson, who helps manage $2.7 billion at First Asset Investment Management Inc. in Toronto, said in a telephone interview. “China clearly seems to be slowing. You essentially have a situation where investors just have very little optimism.” The S&P GSCI Total Return Index fell for a second month, leaving the gauge down 0.7 percent for 2012. Commodities are headed for a second consecutive annual loss for the first time since 1998. The total return gauge was up 0.2 percent today.
China Suspends Coal Mines for Congress, Boosting Prices (Bloomberg)
China, the world’s biggest producer and user of coal, is suspending operations at smaller mines in a bid to improve safety before the nation’s once-in-a-decade leadership transition this month. Ahead of the 18th Party Congress, which begins Nov. 8 in Beijing and runs for at least a week, the State Administration of Work Safety has sent inspectors to mines to “spot hazards” and accelerate shutdowns over the next month, it said in an Oct. 24 statement on its website. The congress is where China’s next generation of leaders will be formally anointed. Datuhe (Shanxi) Coking & Chemical Co. and Yongning Coal Co., a unit of Yongning Coal & Coking Group, have both had operations halted, according to company officials who declined to be identified because they aren’t authorized to speak publicly.
The suspensions could affect mines in provinces such as Inner Mongolia, Shanxi and Shaanxi. The three combined account for 60 percent of the nation’s output. China has been working to improve safety in an industry in which accidents killed 1,973 people last year and 2,433 in 2010, according to the State Administration of Work Safety. That compares with 48 deaths in 2010 in the U.S., the world’s second-biggest coal producer. “Improving mining safety is a direction of China’s coal policy. The recent fatal accidents highlight the urgency”, said Helen Lau, a Hong Kong-based analyst with UOB-Kay Hian Ltd. “Government officials are severely punished for coal mine accidents now. So, maintaining social and political stability is important in this leadership transition.”
China’s regions, departments and companies should “firmly prevent big coal mine accidents to create a safe, stable working environment for the opening of the Party Congress,” the work safety administration said, following a video conference with provincial officials on Sept 4.
Recap Energy Market Report (CME)
December crude oil traded higher throughout the session and registered a new six day high in the process. Early morning support for the crude oil market came from gains in global equity markets and favorable Chinese manufacturing data. Crude oil prices garnered more support following economic data that showed improvement in the US labor market, as well as manufacturing sector. This morning's EIA report revealed an unexpectedly large decline in US crude supplies of 2.045 million barrels last week, and that propelled December crude oil back above the $87.00 level. Some of the supply decline came from a drop in import activity. The refinery operating rate was up 0.5% to 87.7%.
Oil Trades Near Two-Week High on Unexpected Drop in Stockpiles (Bloomberg)
Oil traded near the highest level in almost two weeks after U.S. crude stockpiles unexpectedly declined and reports signaled the nation’s economic growth may be accelerating. Futures were little changed after rising 1 percent yesterday. Crude inventories slid 2 million barrels last week, the Energy Department said. Analysts surveyed by Bloomberg News forecast an increase of 1.8 million. The Institute for Supply Management’s factory index climbed to a five-month high and the Conference Board’s consumer sentiment reading advanced to the most since February 2008. Oil is headed for its first weekly gain in three. Crude for December delivery was at $86.90 a barrel, down 19 cents, on the New York Mercantile Exchange at 7:19 a.m. Singapore time. It advanced 85 cents to $87.09 yesterday, the highest close since Oct. 22. Prices are down 12 percent this year and up 0.7 percent this week.
Brent crude for December settlement dropped 53 cents, or 0.5 percent, to $108.17 a barrel on the London-based ICE Futures Europe exchange yesterday. The European benchmark crude grade was at a $21.08 premium to West Texas Intermediate. The Institute for Supply Management’s factory index rose to 51.7 in October from 51.5, the Tempe, Arizona, group said yesterday. The New York-based Conference Board’s sentiment gauge increased to 72.2, while the Labor Department in Washington said applications for jobless benefits fell by 9,000 to 363,000 in the week ended Oct. 27.
Copper Rises Most in Two Weeks on China, U.S. Economic Signals (Bloomberg)
Copper futures jumped the most in two weeks on signs that economies are stabilizing in China, the top consumer of industrial metals, and the U.S., the second-biggest. An official Chinese purchasing managers’ index released today rose to 50.2 in October from 49.8 in September, indicating the first expansion in three months. Readings above 50 signal growth. Manufacturing in the U.S. last month expanded more than economists forecast, and construction spending in September climbed to the highest in almost three years. Prices are up 2 percent since reaching a seven-week low on Oct. 29. “We’re seeing somewhat better economic data, and it looks like the worst may be behind us for the most part,” Frank Cholly, a senior commodity broker at RJO Futures in Chicago, said in a telephone interview.
Copper futures for December delivery climbed 1 percent to settle at $3.552 a pound at 1:15 p.m. on the Comex in New York, the biggest gain for a most-active contract since Oct. 17. Last month, the metal fell 6.4 percent, the most since May. The metal also climbed after a report showed companies expanded payrolls in the U.S. last month by the most in eight months. The increase of 158,000 followed a revised 114,000 gain in September, ADP Research Institute data showed. Labor Department figures tomorrow may show employers took on 125,000 workers in October, not enough to keep the jobless rate from rising to 7.9 percent from 7.8 percent, according to the median estimate in a Bloomberg survey of economists.
“The market is focusing on numbers that are better than expected today, but we’ll have to wait for the payroll numbers tomorrow” to see if the gains hold, Adam Klopfenstein, a senior market strategist at Archer Financial Services Inc. in Chicago, said in a telephone interview. “Copper is probably going to be stuck in a trading range until after the election.” The U.S. presidential election is on Nov. 6. On the London Metal Exchange, copper for delivery in three months rose 0.9 percent to $7,826 a metric ton ($3.55 a pound). Aluminum, nickel, lead, zinc and tin also advanced.
Gold Futures Slide for First Time in Three Days as Dollar Gains (Bloomberg)
Gold futures declined for the first time in three days as the dollar’s rebound reduced demand for the metal as an alternative investment. The greenback gained against a basket of major currencies after U.S. initial jobless claims fell to the lowest in three weeks and a measure of manufacturing activity rose more than forecast, adding to evidence that the economy is recovering. The dollar advanced 0.6 percent last week, while gold declined 0.7 percent. “The stronger dollar is putting pressure on gold,” Phil Streible, a senior commodity broker at R.J. O’Brien & Associates, said in a telephone interview. “The dollar is the winner today.” Gold futures for December delivery fell 0.2 percent to settle at $1,715.50 an ounce at 1:40 p.m. on the Comex in New York. Earlier, the metal reached $1,727.50, the highest since Oct. 23. The price advanced 0.6 percent in the previous two days. Silver futures for December delivery declined 0.2 percent to $32.248 an ounce on the Comex.
Platinum futures for January delivery fell 0.2 percent to $1,573.20 an ounce on the New York Mercantile Exchange. Palladium futures for December delivery advanced 0.4 percent to $612.45 an ounce. The price climbed for the third straight day, the longest rally in almost a month.
Gold Traders Most Bullish in 10 Weeks on Stimulus: Commodities (Bloomberg)
Gold traders are the most bullish in 10 weeks and investors are hoarding a record amount of bullion as central banks pledge to do more to spur economic growth. Eighteen of 27 analysts surveyed by Bloomberg expect prices to rise next week and five were bearish. A further four were neutral, making the proportion of bulls the highest since Aug. 24. Holdings in gold-backed exchange-traded products gained the past three months, the best run since August 2011, data compiled by Bloomberg show. They reached a record 2,588.2 metric tons on Oct. 31, valued at $143 billion, the data show.
The Bank of Japan (8301) expanded its asset-purchase program on Oct. 30 for the second time in two months, increasing it by 11 trillion yen ($137 billion). The Federal Reserve said last week it plans to continue buying bonds and central banks from Europe to China have pledged more action to boost economies. Gold rose 70 percent as the Fed bought $2.3 trillion of debt in two rounds of quantitative easing from December 2008 through June 2011. “Central banks are all very concerned about a depression, so they’re keeping monetary policies as loose as possible,” said Mark O’Byrne, the executive director of Dublin-based GoldCore Ltd., a brokerage that sells and stores everything from quarter-ounce British Sovereigns to 400-ounce bars. “People are buying gold as a store of value to protect against currency depreciation.”
Silver Market Recap Report (CME)
The silver market generally outperformed the gold market today. With the sharp morning rally the December silver contract managed to reach up to the highest level since October 19th and that in turn might have prompted technical short covering buying and perhaps a measure of fresh outright buying. Silver might also drafted off the residual strength in copper and clearly silver saw some positive spillover from the rather sharp gains in US equities. The bull camp might also play up the rise in open interest as a sign of increased bullish activity in silver but silver is still a physical commodity and it might need to see something positive from the US non farm payrolls on Friday to extend this week's gains.
Gold Market Recap Report (CME)
Favorable Consumer Confidence readings, a decline in initial claims and a sharp range up attempt in US equities should have lifted gold and other physical commodity markets but instead today's developments seemed to prompt long profit taking in gold prices. Perhaps traders were squaring positions ahead of the US payroll report as many traders think the results from Payrolls will have a major impact on the election results. Perhaps gains in the Greenback undermined gold or perhaps some gold players think the recent trend of improving numbers is starting to reduce the odds of additional US Fed easing action. All things considered action in the currency markets today weren't that significant and that would seem to increase the odds that today's action was technically inspired.
Soybeans Rise on Improving Demand for U.S. Supplies; Corn Falls (Bloomberg)
Soybeans rose for a third straight day on speculation that planting delays in South America will boost demand for supplies from the U.S., the world’s biggest exporter. Corn declined the most in a week. Much of Argentina, the largest shipper of soy-based animal feed, has received about four times the normal rainfall during the past two months with another storm expected Nov. 7, QT Weather in Chicago said in a report. China, the top soybean consumer, may boost imports after manufacturing growth improved last month. “The planting delays in Argentina are a growing concern and leading to consumers buying ahead in case the situation continues to deteriorate,” Mark Schultz, the chief analyst for Northstar Commodity Investment Co. in Minneapolis, said in a telephone interview. “The Chinese economy is showing signs of improvement and should increase soybean imports.”
Soybean futures for January delivery gained 0.7 percent to close at $15.60 a bushel at 2 p.m. on the Chicago Board of Trade. The oilseed fell 3.3 percent in October, after rains pared yield losses in the U.S. caused by the worst drought since 1956. Corn futures for December delivery slid 0.6 percent to $7.51 a bushel on the CBOT, the biggest drop since Oct. 25. Prices have retreated 12 percent since touching a record $8.49 on Aug. 10 as demand slowed from meat and fuel producers. Corn is the biggest U.S. crop, valued at $76.5 billion in 2011, followed by soybeans at $35.8 billion, government figures show.
Soybean Complex Market Recap (CME)
November Soybeans finished up 11 1/2 at 1558 1/2, 11 3/4 off the high and 11 3/4 up from the low. January Soybeans closed up 11 1/4 at 1560. This was 12 up from the low and 11 1/2 off the high. December Soymeal closed up 2.1 at 484.3. This was 2.0 up from the low and 5.7 off the high. December Soybean Oil finished up 0.27 at 50.43, 0.48 off the high and 0.33 up from the low. January soybeans closed moderately higher on the session but still well down from the highs. The market was trading 17 cents higher into the mid-session which is about 5 cents off of the overnight highs as mixed outside market forces kept trade a bit choppy and the market continued to trend lower into the close which was near 12 cents off of the highs. Strong meal prices in Europe, a strong stock market and firm trade in energy was offset by weakness in gold and a firm US dollar. Continued hefty deliveries against the November contract was seen as a slight negative but this has been offset by firm cash markets and a lack of producer selling at the tail end of harvest. South America weather is considered mixed as current weather is too wet in southern Brazil and Argentina for planting while production areas of central and northern Brazil are still in a stressful period of hot and dry weather. Into next week, however, cooler and wetter weather is expected for central and northern Brazil and drier and warmer weather for the previous wet areas in the south. Traders see Brazil production at a record high 81 million tonnes this coming season (same as the USDA) as compared with 66.5 million this past season. Continued talk of a stronger US economy in China plus talk that China was a more active buyer of US soybeans this week helped to provide underlying support. Traders see weekly export sales for release in the morning near 625,000 tonnes as compared with 207,300 necessary each week to reach the USDA projection and from 522,200 tonnes last week. Brazil exported 906,900 tonnes of soybeans in October as compared with 1.68 million in September and from 1.41 million tonnes last year.
INTERVIEW-Possible removal of EU palm import tax may hurt planters (Reuters)
Small farmers growing oil palms in Papua New Guinea may be less inclined to stick to costlier eco-friendly practices if Europe abolishes an import tax only for green palm oil that has previously lifted prices of such cargoes.
EDIBLE OIL: Malaysian palm oil futures climbed as strong Chinese demand for soybeans fuelled expectations for more edible oil orders in the weeks to come. (Reuters)
Posted by MW Chong at 9:18 AM