Tuesday, November 6, 2012
FCPO closed : 2372, changed : -39 points, volume : lower.
Bollinger band reading : little downside biased with possible pullback correction.
MACD Histogram : falling lower, seller taking exposure.
Support : 2400, 2350, 2300, 2250, 2230 level.
Resistance : 2400, 2450, 2490, 2520, 2550 level.
FCPO closed recorded loss again with declined volume transacted. Soy oil price currently rebounding higher after overnight closed lower by nearly 2% again while crude oil price currently trading range bound between positive and negative zone.
Price continue to trade weaker after latest Reuters survey result shows inventory level continue to reach new high.
FCPO daily chart study revised to suggesting a little downside biased market development with possible pullback correction.
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 : 1641.5 changed : -6 points, volume : higher.
Bollinger band reading : little downside biased with possible pullback correction.
MACD Histogram : falling lower, seller taking exposure.
Support : 1640, 1635, 1627, 1623 level.
Resistance : 1645, 1651, 1657, 1660 level.
FKLI closed weaker recorded loss for the 3rd day with increasing volume changed hand doing 4 points discount compare to cash market that also closed lower. Overnight U.S markets closed little higher and today Asia markets ended mostly lower while European markets currently swing between gains and losses.
Global market traded lower as investors focus on today U.S. presidential election.
FKLI daily chart study revised to suggesting a little downside biased market development with possible pullback correction.
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 5:22 PM
STOCKS: European shares index futures pointed to a higher open, although gains were seen limited as many investors remain on the sidelines, waiting for the outcome of the tight U.S. presidential election, amid fresh concerns about the uncertainty over the Greek parliamentary vote to push through severe fiscal reforms. Most Asian shares fell while U.S. stocks closed slightly higher on Monday. (Reuters)
FOREX-Euro dogged by worries about Greece; Aussie climbs on RBA
SINGAPORE, Nov 6 (Reuters) - The euro languished near a two-month low versus the dollar with its outlook clouded by uncertainty over a Greek parliamentary vote on austerity steps needed for Athens to secure international aid.
"Everyone is nervous because of all the uncertainty over what might happen tomorrow," said Satoshi Okagawa, senior global markets analyst for Sumitomo Mitsui Banking Corporation in Singapore, referring to the looming parliamentary vote in Greece.
China factory, investment data seen cementing modest growth recovery
BEIJING, Nov 6 (Reuters) - China's factory output and investment may have gained steam in October as government pro-growth policy steps gain traction, a Reuters poll showed, limiting the chances of aggressive stimulus even as inflation stays benign.
The median forecast by 26 economists showed China's factory output in October probably grew 9.4 percent from a year earlier, accelerating from the annual pace of 9.2 percent in September and a three-year low of 8.9 percent in August.
U.S. voters to render verdict in close White House race (Reuters)
President Barack Obama and Republican challenger Mitt Romney face the verdict of U.S. voters on Tuesday after a long and bitter White House campaign, with polls showing them deadlocked in a race that will be decided in a handful of states where it is extraordinarily close.
G20 carves out some more wiggle room on austerity plans (Reuters)
The world's leading economies gave themselves a bit more wiggle room on Monday to meet targets for cutting budget deficits rather than risk worsening a slowdown in many countries, chief among them the United States.
GRAINS: Chicago wheat rose half a percent, gaining for a second straight session as the market was underpinned by U.S. crop ratings sliding to a record low with dryness in key producing states. Soybeans rose after two days of losses but the market is trading not far from Monday's 2-1/2 week low on forecasts of crop-friendly weather in South America. (Reuters)
POLL-US winter wheat ratings seen down; corn 95 pct harvested (Reuters)
A lack of rain in the southern Plains likely reduced the portion of the winter wheat crop in good-to-excellent condition last week, according to a Reuters poll of analysts.
POLL-US crude inventories seen up, products down due to Sandy (Reuters)
U.S. crude oil inventories are forecast to have risen while product stocks fell last week after disruptions to pipelines, imports and refineries caused by Hurricane Sandy upended trade, a preliminary Reuters poll of analysts showed on Monday.
OIL: Brent oil traded in a tight range below $108 per barrel, caught between uncertainty ahead of the U.S. elections and renewed worries about Greece and the euro zone crisis, which could delay a global economic recovery and hurt oil demand. (Reuters)
Indonesia court upholds challenge to raw mineral export ban (Reuters)
Indonesia's supreme court has upheld a challenge to a government ban on the export of unprocessed minerals, a decision that could pave the way for a resumption of exports by junior miners who have been hit hard by the restriction imposed in May.
BASE METALS: London copper ticked up, after hitting a two-month low in the previous session, although gains were capped as uncertainty ahead of the U.S. elections curbed investors' appetite for riskier assets. (Reuters)
PRECIOUS METALS: Gold traded little changed as investors awaited potential policy spinoffs from the U.S. presidential election, while China's upcoming leadership transition and Greece's strike over a new austerity package also kept sentiment cautious. (Reuters)
German steel industry sees higher output next year
DUESSELDORF, Germany, Nov 5 (Reuters) - The German steel association sees crude steel production in Europe's biggest economy returning to growth in 2013 after an expected decline of 4 percent this year.
It said on Monday it expected investment to pick up next year as manufacturing benefits from a gradual recovery of the global economy, but warned that any improvement depended on politicians resolving the European debt crisis.
Gold rush: China jewellers go west for growth
SINGAPORE/ZHENJIANG, China, Nov 6 (Reuters) - The smart young women and coiffured housewives browsing for rings and necklaces at a shiny new mall in a city on the Yangtze River could breathe fresh life into China's boom in gold consumption.
With jewellery stores already flooding shopping districts in Beijing and Shanghai, retailers are shifting their focus to smaller cities in hope of mining a rich seam of appetite for products which make up the bulk of gold-buying in a nation eclipsing India as the No.1 consumer of the precious metal.
METALS-LME copper comes off 2-month low, capped by US vote
SHANGHAI, Nov 6 (Reuters) - London copper rose recovering from a two-month low hit in the previous session, although gains were capped as uncertainty ahead of the U.S. elections curbed investors' appetite for riskier assets.
"Copper prices have rebounded today after falling over the past two sessions because there is support at yesterday's trough from recent signs that the U.S. and Chinese economies are improving," Great Wall Futures analyst Li Rong said.
PRECIOUS-Gold flat after coming off 2-mth low; US election in focus
SINGAPORE, Nov 6 (Reuters) - Gold traded little changed as investors awaited potential policy spinoffs from the U.S. presidential election, while China's upcoming leadership transition and Greece's strike over a new austerity package also kept sentiment cautious.
"Clients are holding back ahead of the U.S. election," said Brian Lan, managing director at GoldSilver Central Pte Ltd in Singapore, adding that the recent price dip in gold had attracted retail investors in the region.
Posted by MW Chong at 4:57 PM
Reuters Survey :
Malaysia Oct 2012 Crude Palm Oil
- Exports seen up 12% at 1.69 million tonnes from Sep 2012
- Stocks seen up 7.5% at 2.67 million tonnes from Sep 2012
- Output seen down 2.2% at 1.96 million tonnes from Sep 2012
VEGOILS-Palm oil recovers from 3-wk low, stockbuild caps gains
Tue Nov 6, 2012 12:55am EST
* Prices recover from Monday's low at 2,381 ringgit, weakest
since Oct. 12
* Gains capped by stockpile concerns, U.S. elections
* Palm oil to rebound to 2,470 ringgit -technicals
(Updates prices, adds details)
By Chew Yee Kiat
SINGAPORE, Nov 6 (Reuters) - Malaysian palm oil futures
edged up on Tuesday, recovering from their lowest in more than
three weeks the previous day, although gains were capped by
concerns over stockpiles and uncertainty ahead of the U.S.
Investors also turned their focus to the risk from floods in
Malaysia that could hamper production and ease pressure on
swelling stocks in the world's No.2 producer, but fears remained
that inventory could still climb to a fresh high.
Industry regulator the Malaysian Palm Oil Board (MPOB) will
issue October stocks data on the coming Monday.
"Everybody is looking at the MPOB number that is expected to
reach 2.7 million tonnes, and the market is reacting badly to
that," said James Ratnam, an analyst with Malaysia's TA
"So far I have not heard of any big impact from the flood.
This is still a very early stage. The flood usually happens at
the end of the year, and depending on the strength, it could
disrupt supply and support prices."
By the midday break, the benchmark January contract
on the Bursa Malaysia Derivatives Exchange edged up 0.2 percent
to 2,416 ringgit ($789) per tonne. Prices on Monday fell to
2,381 ringgit, the weakest since Oct. 12.
Total traded volumes stood at 10,025 lots of 25 tonnes each,
a touch lower than the usual 12,500 lots, as traders were
cautious ahead of the U.S. elections.
President Barack Obama and Republican challenger Mitt Romney
were essentially deadlocked on election eve, polls show, raising
concerns of a cliff-hanger delaying the outcome and roiling
markets, as it did during the extended presidential battle in
Technicals showed palm oil could stage a rebound to 2,470
ringgit as a fall from the Oct. 25 high of 2,615 ringgit has
temporarily ended, said Reuters market analyst Wang Tao.
In related markets, Brent oil traded in a tight range below
$108 per barrel on Tuesday, caught between uncertainty ahead of
the U.S. elections and renewed worries about Greece and the euro
zone crisis, which could delay a global economic recovery and
hurt oil demand.
Other vegetable oil markets also recovered from the previous
day's losses. U.S. soyoil for December delivery edged up
1.2 percent in early Asian trade, while the most active May 2013
soybean oil contract on the Dalian Commodity Exchange
inched up 0.4 percent.
Monthly palm oil exports from Indonesia fall 2 pct m/m in Sept
JAKARTA, Nov 6 (Reuters) - Palm oil exports from Indonesia, the world's top producer, slipped 2 percent to 1.381 million tonnes in September compared to the previous month, industry data showed on Tuesday.
This year, palm oil output will be between 23 million and 25 million tonnes, with around 18 million tonnes exported.
Indonesia's top customers for the edible oil include India, China and Europe.
In January-September, exports to India totalled 4.143 million tonnes, with China shipping 2.183 million tonnes, the European Union 2.849 million tonnes and Pakistan 611,390 tonnes.
Posted by MW Chong at 2:47 PM
GLOBAL MARKETS-Asian shares steady in range, wary before US election
TOKYO, Nov 6 (Reuters) - Asian shares steadied with investor risk appetite curbed by uncertainty over the outcome of Tuesday's tight U.S. presidential election and renewed doubts over Greece's political ability to push fiscal reforms.
"The main focus is the U.S. election, and uncertainty ahead of that is going to keep markets, including Japanese stocks, in a range," said Kenichi Hirano, operating officer at Tachibana Securities.
OIL-Brent crude jumps nearly 2 pct as US gasoline rallies
NEW YORK, Nov 5 (Reuters) - Brent crude jumped nearly 2 percent on Monday, snapping a string of five lower settlements as stronger U.S. gasoline futures helped oil to rally while storm-ravaged areas of the East Coast continued to grapple with the aftermath of Hurricane Sandy.
"The complex popped near the close reportedly on a flare up of Middle East tensions along the Yemeni border," Jim Ritterbusch, president at Ritterbusch & Associates, said in a research note.
POLL-US crude inventories seen up, products down due to Sandy
Nov 5 (Reuters) - U.S. crude oil inventories are forecast to have risen while product stocks fell last week after disruptions to pipelines, imports and refineries caused by Hurricane Sandy upended trade, a preliminary Reuters poll of analysts showed on Monday.
Crude inventories were seen up 0.9 million barrels for the week ended Nov. 2. Five of the seven analysts polled forecast a build in crude stockpiles, while one analyst saw them unchanged and two forecast a draw.
NATURAL GAS - Front U.S. natgas futures end flat, cold snap supports
NEW YORK, Nov 5 (Reuters) - Front-month U.S. natural gas futures ended flat on Monday, as prices garnered support from some chilly weather this week that should boost demand for heating despite ongoing concerns about record-high supplies.
"We've got some good (cold) weather for the next couple of days, but the forecast after that is near to above normal. With inventories at record highs, it's hard to talk about a significant rally," said Tom Saal at INTL FCStone in Miami.
Posted by MW Chong at 11:26 AM
SapuraKencana has entered into a non-binding agreement to acquire Seadrill’s tender rig business for an enterprise value of US$2.9bn to be satisfied by a mix of shares and cash, a move that will see the former becoming a leading global player in the tender rigs and semi-tender rigs market. Seadrill will receive a minimum of US$350m in new shares of SapuraKencana that will double up Seadrill's stake in the company to 13% from the current 6.4%. Seadrill will further have the right to nominate two members to the SapuraKencana board of directors (including one alternate). Seadrill's chairman John Fredriksen is expected to be one of those members. The enlarged tender rig business under SapuraKencana will comprise 16 tender rigs in operation (including the KM1 rig currently owned by SapuraKencana), five of which are already 51%-owned and managed through its existing joint venture with Seadrill in Varia Perdana and Tioman Drilling Company and an additional five units currently under construction (newbuilds). SapuraKencana will also be offered the righst to be the manager for three further tender rigs which are not part of the transaction. The operating rigs and newbuilds are all currently contracted under long-term fixed price contracts with companies such as Chevron, Shell, PTTEP, and Petronas Carigali. The total order backlog amounts to US$1.55bn as of end-Oct where the majority of the operating rigs are currently deployed in South-East Asian waters. (Star)
Malayan Banking officially opened its first branch in Laos yesterday, marking the completion of its footprint in all 10 Asean member countries. Prime Minister Datuk Seri Najib Razak officiated the opening in the capital city Vientiane's main financial centre known as Chanthabouly District. The branch will offer a full range of services, including retail and business banking, foreign exchange, remittances, treasury services as well as automated teller machines. (BT)
For CIMB Group Holdings’ proposed acquisition of selected investment banking businesses of The Royal Bank of Scotland (RBS), the purchase of RBS’ selected cash equities, equity capital markets and M&A corporate finance businesses in Australia has been completed on 2 Nov 12. (BMSB)
Alam Maritim (M) Sdn Bhd, a wholly-owned subsidiary of Alam Maritim Resources, has received a letter of award from Carigali Hess Operating Company for the provision of one unit anchor handling tug supply vessel. The contract is valued at USD7.04m and will commence in Mar 2013. The contract is for a firm period of 21 months with no specific provision for extension option. (BMSB)
MRT Corp said Bumiputera initiative for the MRT SBK line is firmly on track. To date, 45% of the total value of work packages, which have been awarded to Bumiputera companies, exceeded the initial target of 43%. Haris Fadzilah Hassan, director of Stakeholders and Land Relations of MRT Corp, said to date contracts to the value of RM8.8bn have been awarded to Bumiputera contractors. To date, 53 of the 85 MRT works packages have been awarded, with a total value of RM19.8bn. The remaining 32 packages are expected to be awarded by the end of the year. (BT)
UMW Singapore Ventures Pte Ltd, a wholly owned subsidiary of UMW Holdings is divesting its entire 60% stake in Offshore Construction Services Pte Ltd (OCS) to Mr Neo Teck Seng for a total consideration of SGD7.1m. The valuation is based on NTA plus 5%. OCS provides fabrication services to the marine industry. Mr Neo is a Director of OCS and currently holds the remaining 40% of the company. The disposal is in line with UMW's strategy to rationalise
its Oil & Gas investments and it will not have any material effect to 2012 earnings and NTA of the group. (BMSB)
Muhibbah Engineering (M) Bhd, the main subcontractor of the failed Asia Petroleum Hub (APH) venture, will meet the official receiver (OR) appointed by the court next Monday, said its managing director Mac Ngan Boon. Mac said it will meet the OR together with other contractors and some 20 creditors of the RM2bn project, which may include CIMB Bank Bhd, previously the lead financier of the project. "We will meet with the OR, who will talk to the creditors and see what can be done," he said. Mac believes that the APH project is still viable, saying many interested parties are keen to participate in it and that Muhibbah is confident in Southern Johor as an oil and gas storage terminal. "The project will go on in some form or another. If everyone and the banks (creditors) agree, restructuring is the best way for us. "We want to see a restructuring and finish the job. We are willing to be a shareholder (of APH)," he added. He said Muhibbah is willing to inject money and take initiative to revive the project, but the amount of money needed would depend on the parties that would want to participate. "We hope they would look towards a restructuring, but if they (creditors) decide to sell, we can't do anything." (Sun)
Malaysian Airline System (MAS) is close to finalising its RM9bn funding plan with a somewhat similar arrangement made in 2002 when it embarked on its Widespread Asset Bundling (WAU) to keep the airline afloat. Industry sources say the government, through Ministry of Finance, has set up a special purpose vehicle (SPV) to absorb the airline's six new Airbus A330s valued at RM5.3bn. The SPV will raise RM5.3bn to purchase the aircraft and lease them back to the national carrier. (Financial Daily) Malaysia Airports (MAHB) will create a new brand identity - "Sama-Sama" - for all the hotels it owns and grow the commercial business as outlined in its five-year business direction. MAHB said the immediate plan for the brand creation will involve three hotels - the existing landside hotel, KLIA Air Transit Hotel and KLIAS2 Air Transit Hotel that will be ready in May. (Bernama)
Tan Sri Tony Fernandes has teamed up with Renault to design, develop and build future sports vehicles including SUV and city cars that are affordable to the mass market. The first car will roll out from production line in 2015. Fernandes' Caterham Group and Renault ASA signed a deal in which both parties would have equal stake in a new JV. There will be two manufacturing hubs, one each in France and Malaysia. (Star Biz)
Malaysian company Giant Consolidated Ltd (GCL) is set to play a major role in transforming the face of Laos' transportation system with the construction of a 220km electrified double track railway. The project is estimated to cost US$5bn. This will be the largest investment made so far by a Malaysian company in Laos. GCL director Tock Min Kin said the company has been awarded a 50-year concession to construct and operate the railway project. (Star Biz)
The Ministry of Plantation Industries and Commodities will set up a committee with France's Agriculture Ministry to help Malaysia's palm oil products gain access to the French market. Minister Tan Sri Bernard Dompok said he had been in Correspondence with France's Agriculture Minister and was still waiting for a response. (Financial Daily)
Prominent corporate lawyer Datuk E Sreesanthan, who was in the news recently for seeking re-election to the board of Sime Darby despite facing insider trading charges, said he was doing so because he has a lot to contribute to the company. He said he was also driven by an interest to see the conglomerate reach its full potential. (StarBiz)
REDTone, a postpaid mobile virtual network operations (MVNO) company, expects to get 100,000 new customers next year, supported by its news business partnership with Ezzy Mobile Sdn Bhd. Its COO Ben Teh said 20% will come from its soon-to-be launched product in collaboration with Ezzy Mobile, namely Ezy2Duosim. “Since the re-launch of REDTone in June, we have managed to get 10,000 customers and we are confident that the numbers will grow in time." said its COO. Meanwhile, Ezzy Mobile CEO Sivalingam Thechinamoorthy said the company was also in the midst of talks with regional telcos to implement the same technology. “Under this plan, we expect to provide the ability for consumers to have seven different countries’ numbers regionally in one SIM card with local rates. We expect this plan to be concluded by next year,” he added. (StarBiz)
Ayamas Food Corporation has clarified that it does not use chloramphenicol or any other banned antibiotics in its products. Rosniza Baharum, General Manager, Group Corporate Communications, expressed surprise at the suspension of the importation of certain Ayamas poultry products into Sarawak by the State Veterinary Authority following the detection of chloramphenicol in a sample of an Ayamas chicken frankfurter. "Our routine internal tests also do not reveal any evidence of usage of such antibiotics in the raw materials we use," she said in a statement. (Bernama)
Shareholders of KFC Holdings (M) Bhd (KFCH) have voted in favour of its privatisation, with some 99.1% agreeing to the sale of its business to Massive Equity at its EGM on Monday. KFCH also received 99.7% acceptances for the proposed capital repayment of RM4 per share and RM1 per warrant. All votes were counted by poll. A second EGM commenced at 2.30pm for the warrant holders to vote on the proposed RM1 capital repayment. A spokesperson from Massive
Equity told journalists on the sidelines of the EGM that the board of KFCH might "revisit" the possibility of a dividend payout if the capital repayment is not completed by year-end. However, this would not affect the offer price from Massive Equity, the spokesman said. Both minority shareholders and the Minority Shareholder Watchdog Group raised the issue of dividends at the meeting this morning, saying the offer from Massive Equity had put a "straight jacket" on KFCH's share price for the past one year, while peers such as Berjaya Food Bhd had seen its shares appreciate over the same period. (Starbiz)
Malaysian Biotechnology Corp (BiotechCorp) CEO Datuk Dr Mohd Nazlee Kamal said the industry, now in its commercialisation phase, had been progressing at a steady rate. It has mobilised most of its potentials to ensure the transformation of the nation into a stable high-income nation by 2020, he said. “The targeted investment for phase 2 is RM9bn. However, I am happy to say that we have indeed surpassed the investment target for phase 2. Just for 2011 and 2012, we’ve successfully attracted a total of RM12.72bn in investments for the biotechnology industry,” he told. (Bernama)
Plans are under way for electronics manufacturer Ya Horng Electronic (M) (YHE) to be taken private via a proposed selective capital-reduction and repayment exercise to all shareholders at cash consideration of RM1.10 per share. “The proposed selective capital-reduction and repayment exercise will be funded via internally-generated funds from YHE and its subsidiaries based on its available cash and cash equivalent,” it said. Accordingly, the entitled shareholders would receive a total capital repayment in cash of RM25.4m. (StarBiz)
Posted by MW Chong at 9:30 AM
More than 20 banks have applied to Bank Negara Malaysia for licences to become mega-Islamic banks. Deputy Finance Minister Datuk Donald Lim Siang Chai said of the number, 10 were local banks, six foreign banks registered in Malaysia, and five international banks. (NST)
Europe must get its act together to recover fast from the economic and financial meltdown before it affects other parts of the world, particularly Asia. PM Datuk Seri Najib Tun Razak said even though Asian economies were relatively free from the problem, with most recording growth of 5-7% compared to only 1% growth recorded by European nations, all countries were interdependent. (The Star)
The US ISM services index eased to 54.2 last month from 55.1 in Sep, shy of economists' forecasts for 54.5. (Reuters)
Greek lawmakers will hold an emergency vote on 7 Nov on a new austerity bill, which proposes €18.5bn (US$23.6bn) in new cuts and other reforms by 2016, in order to get a creditor lifeline. (AFP)
HSBC’s China services PMI slid to 53.5 in Oct (54.3 in Sep), but remained in expansionary mode. (Bloomberg)
Indonesia’s economy grew 6.2% yoy in the third quarter (6.4% in 2Q12), in line with forecasts. (FT)
Indonesia’s retail sales index rose 22% yoy in Sep, having risen by a revised 10.6% in Aug. (Jakarta Globe)
Indonesia’s supreme court has upheld a challenge to a government ban on the export of unprocessed minerals, a decision that could pave the way for a resumption of exports by junior miners who have been hit hard by the restriction imposed in May. The verdict effectively annulled parts of new mining regulations introduced on May 6. The ruling is likely to prompt further uncertainty in a US$93bn sector reeling from a series of regulatory changes this year, although it is unclear whether it will lead to an immediate increase in exports. (Jakarta Globe)
Singapore’s manufacturing PMI was 48.3 points in Oct, compared with 48.7 in Sep due to further declines in new orders, new export orders and production output. The electronics index registered a 2.5 point drop over the previous month to reach 47.5. (CNA)
The HSBC's Services Purchasing Managers Index for India declined to 53.8 in Oct from 55.8 in Sep. (Dow Jones Newswires)
Australia’s trade deficit narrowed to -A$1.47bn in Sep from -A$1.88bn in Aug. (Bloomberg)
Australia’s retail sales climbed 0.5% mom to A$21.6bn (US$22.4bn) from Aug, when they rose a revised 0.3%. (Bloomberg)
Posted by MW Chong at 9:29 AM
Asia FX By Cornelius Luca - Mon 05 Nov 2012 16:11:40 CT (Source:CME/www.lucafxta.com)
The appetite for risk improved eventually on Monday ahead of the US presidential elections. While President Obama is likely to be re-elected, challenger Romney is close enough in the polls to potentially win, thus triggering market volatility. The foreign currencies traded divergently; the European currencies fell, the Canadian dollar was mixed, while the yen the Australian dollar advanced. The US stock markets ended mixed and the gold/oil ratio closed a little lower. The short-term outlook for the most of the foreign currencies is sideways. The medium-term outlook for most of the foreign currencies is still slightly bullish. The LGR short-term model is short on yen and Canadian dollar, and long European currencies and Australian dollar. Good luck!
US: The ISM's non-manufacturing index dipped to 54.2 in October from 55.1 in September.
Canada: Building permits contracted 13.2% in September after expanding 9.5% in August.
Today's economic calendar
UK: BRC retail sales monitor - all for October
Australia: House price index for the third quarter
Australia: The RBA interest rate decision – possible rate cut from 3.25% to 3.00%
Japan: Leading economic index / coincident index for September
Asian Stocks Drop Before U.S. Election, RBA Decision (Bloomberg)
Asian stocks dropped for second day ahead of the U.S. presidential election and before the Reserve Bank of Australia releases an interest-rate decision. NTN Corp. (6472), a Japanese bearing maker, slumped 6.6 percent in Tokyo after it forecast a loss, reversing its previous estimate for a full-year profit. Sankyo Co. lost 7 percent as the slot- machine maker lowered cut its earnings forecast. Australia & New Zealand Banking Group Ltd., Australia’s third-largest bank by market value, gained 0.4 percent before the RBA statement. The MSCI Asia Pacific (MXAP) Index slid 0.1 percent to 122.18 as of 9:13 a.m. in Tokyo. U.S. voters decide today between giving President Barack Obama another four years in office or changing course with Republican challenger Mitt Romney.
“It’s literally a dead heat,” E. William Stone, chief investment strategist at PNC Wealth Management in Philadelphia, said in a Bloomberg Television interview. His firm manages about $112 billion. “The market in a lot of ways just reflects that. It frankly doesn’t know which way it’s going to go. That’s why everyone seems to be waiting more than normal on things.’ Asia’s regional benchmark gained 12 percent through yesterday from this year’s low on June 4 as central banks added stimulus amid a slowdown in global economic growth and the European debt crisis.
Japan Stock Futures Little Changed Before U.S. Election (Bloomberg)
Japanese stock futures and Australian equities were little changed ahead of a presidential election in the U.S. and before the Reserve Bank of Australia releases its interest-rate decision. American Depositary Receipts of Toyota Motor Corp. gained 1.7 percent as Japan’s largest manufacturer raised its profit forecast. Shares of NTN Corp., a bearing maker, may be active in Tokyo after it forecast a loss, reversing its previous estimate for a full-year profit. Australia & New Zealand Banking Group Ltd. (ANZ), Australia’s third-largest bank by market value, advanced 0.4 percent before the RBA statement. Futures on Japan’s Nikkei 225 Stock Average expiring in December closed at 9,015 in Chicago yesterday, down from 9,020 in Osaka, Japan. They were bid in the pre-market at 9,000 in Osaka at 8:05 a.m. local time. Australia’s S&P/ASX 200 Index was little changed today and New Zealand’s NZX 50 Index rose 0.4 percent in Wellington.
“Market participants are struggling to pick a direction ahead of the U.S. presidential elections,” said Stan Shamu, market strategist at IG Markets in Melbourne. “Whatever the outcome of today’s rate decision in Australia, the statement will probably carry more weight.” Interest-rate swaps data compiled by Bloomberg indicate traders see a 53 percent chance RBA Governor Glenn Stevens will lower the overnight cash rate target by 25 basis points today. Twenty of 27 economists in a Bloomberg survey forecast a quarter-percentage point reduction. The decision is due at 2:30 p.m. Sydney time.
U.S. Stocks Rise Before American Presidential Elections (Bloomberg)
U.S. stocks advanced, rebounding from an earlier decline in the Standard & Poor’s 500 Index, as Americans prepared to vote in the presidential election. Apple Inc. rose 1.4 percent as it sold 3 million units of its iPad mini and fourth-generation iPad during the debut weekend, saying demand for the smaller version of its tablet outstripped supply. KBW Inc. added 7.2 percent as Stifel Financial Corp. agreed to buy the boutique investment bank in a cash-and-stock transaction valued at $575 million. Time Warner Cable Inc. declined 6.4 percent amid disappointing earnings. The S&P 500 added 0.2 percent to 1,417.26 at 4 p.m. New York time. It fell 0.4 percent earlier today. The Dow Jones Industrial Average rose 19.28 points, or 0.2 percent, to 13,112.44. Volume for exchange-listed stocks in the U.S. was 5.1 billion shares, or 13 percent below the three-month average.
“People are more like holding their breath and turning blue,” said Madelynn Matlock, who helps oversee about $14.7 billion at Huntington Asset Advisors in Cincinnati. She spoke in a phone interview. “There’s the election in the U.S. That keeps investors on the sidelines.” U.S. voters decide tomorrow between giving President Barack Obama another four years in office or changing course with Republican challenger Mitt Romney. Earlier losses were driven by concern about a worsening of Europe’s debt crisis. Greek Prime Minister Antonis Samaras will this week battle to win political support for measures to obtain aid.
Recap Stock Index Market Report (CME)
After a gap lower open Sunday evening, the December S&P 500 showed positive recovery action throughout the US trading session. Some of the overnight weakness came amid soft Chinese service sector data, renewed concerns over Greek austerity and uncertainty ahead of the US presidential election. There were a couple of positive earnings from Humana and Transocean that offered early morning support. Shares of Apple were higher and lent support to the major indices following reports that it sold 3 million iPad minis and 4G iPads over the weekend. The major S&P sector indices were evenly split between gains and losses in late afternoon trade. The clear laggards on the session were utilities, with upside leadership coming from energy and material-related shares.
European Stocks Fall on Company Earnings; HSBC Retreats (Bloomberg)
European stocks dropped by the most in two weeks after HSBC Holdings Plc (HSBA) and CGGVeritas reported earnings that disappointed investors and amid concern that Greece will struggle to get further aid. HSBC lost 1.3 percent as Europe’s largest bank by value also said it will likely face criminal charges from U.S. anti- money laundering probes. CGGVeritas retreated 3.1 percent after third-quarter profit missed analyst estimates. PostNL (PNL) sank 11 percent after saying full-year earnings will be at the bottom half of forecasts and on concern the proposed sale of TNT Express NV (TNTE) may be held up by regulators. The Stoxx Europe 600 Index fell 0.6 percent to 273.21 at the close of trading, its lowest level since Oct. 23. The gauge has still climbed 17 percent from its low on June 4, boosted by stimulus program announcements from the European Central Bank and U.S. Federal Reserve as well as better-than-forecast economic data.
“There is no way really that you can paint a positive picture on third-quarter earnings,” Bob Parker, senior adviser at Credit Suisse Asset Management in London, said on Bloomberg Television. “That has been one of the reasons why we’ve had a stop-start market. Expectations for profitability for the third quarter both in the U.S. and Europe were extremely negative.” Profit has topped analysts’ forecasts at 53 percent of the companies on the Stoxx 600 that have reported results since Oct. 9, according to data compiled by Bloomberg. Revenue has beaten estimates at 50 percent of companies, down from 60 percent in the previous quarter, the data shows.
Emerging Stocks Slump as Brazil’s Eletrobras Leads Drop (Bloomberg)
Emerging-market stocks fell for the first time in five days, led by Brazilian utilities, as the government provided less compensation for power rate cuts than analysts predicted. Hyundai Motor Co. sank after promising to remunerate U.S. customers for overstating fuel efficiency. Centrais Eletricas Brasileiras SA (ELET6), South America’s largest power producer, slid to a seven-year low, the second-worst performer of the MSCI Emerging Markets Index. Hyundai Motor Co. and Kia Motors (000270) Corp. tumbled in Seoul after saying they will compensate U.S. customers for overstating the fuel efficiency of their latest models. Turkey’s lira and bonds rallied after Fitch Ratings upgraded the country to investment grade for the first time since 1994.
The MSCI gauge fell 0.4 percent to 1000.80 at the close of trading in New York, halting a four-day, 1.5 percent advance. Brazil’s government proposed compensating utilities a total of about 19 billion reais ($9.3 billion) for the renewal of electricity concessions due to end by 2017, trailing analyst estimates. Emerging stocks also declined as Americans prepared to vote for president. “Utilities are obviously weak in Brazil as they’ve been pressured by regulatory headwinds,” Tim Hall, who helps manage about $750 million at Deltec Asset Management, said by phone from New York. “You have a big election in the U.S. tomorrow, and people are not excited to do a lot ahead of that.”
Treasuries Advance, Euro Slips as U.S. Stocks Climb (Bloomberg)
Treasuries rose and the euro traded at an almost two-month low as the U.S. prepared to vote for president and concern grew Greece will fail to win a bailout. U.S. stocks closed higher after fluctuating during the day.
Treasury 10-year notes gained for a second day, with the yield dropping three basis points to 1.68 percent as of 4 p.m. in New York. The euro slid 0.4 percent to $1.2789, the lowest since Sept. 11. The Standard & Poor’s 500 Index increased 0.2 percent to 1,417.26 after losing 0.4 percent. Germany’s two-year yield reached minus 0.014 percent, negative for the first time since Sept. 6. Oil rebounded from a four-month low.
Trading volume for S&P 500 companies was 19 percent below the 30-day average before U.S. voters decide between giving President Barack Obama another four years in office or replacing him with Republican challenger Mitt Romney. U.S. service industries kept growing last month, a report showed. Greek Prime Minister Antonis Samaras will this week battle to win political support for measures needed to obtain aid.
“People are more like holding their breath and turning blue,” said Madelynn Matlock, who helps oversee about $14.7 billion at Huntington Asset Advisors in Cincinnati. She spoke in a phone interview. “There’s concern about Europe. The market is looking like there’s some worry in Greece. There’s also the election in the U.S. That keeps investors on the sidelines.”
Australian Dollar Stays Higher Before RBA Interest-Rate Decision (Bloomberg)
Australia’s dollar stayed higher as investors weighed whether the Reserve Bank will cut interest rates at a policy meeting today. The so-called Aussie maintained a gain versus the yen as swaps traders see a 52 percent chance that the central bank will lower the key rate a quarter percentage point to 3 percent. Twenty of 27 economists in a Bloomberg survey forecast a reduction. Demand for the Australian and New Zealand currencies was limited as the U.S. prepared to vote for the next president today and concern grew Greece will fail to win a bailout. “We are expecting a 25-point rate cut, but we certainly acknowledge that the decision is a line-ball call,” said Mike Jones, a currency strategist at Bank of New Zealand in Wellington. “The risks around the Aussie dollar are really symmetric going into the RBA decision.”
Australia’s dollar added 0.1 percent to $1.0373 as of 10:10 a.m. in Sydney from the close yesterday, when it rose 0.3 percent. The currency was little changed at 83.24 yen, following a 0.1 percent gain yesterday. The New Zealand dollar, nicknamed the kiwi, fetched 82.62 U.S. cents from 82.52. Australian bonds advanced for a second day, with the yield on the 10-year note falling three basis points, or 0.03 percentage point, to 3.13 percent.
G-20 Tells U.S. to Avoid Fiscal Cliff as Focus Widens (Bloomberg)
Global finance chiefs pressed the U.S. to avoid harming the fragile world economy with excessive austerity, widening their focus on fiscal challenges beyond concerns over Europe’s debt woes. On the eve of the U.S. presidential election, Group of 20 finance ministers and central bankers meeting in Mexico City pushed for swift action to prevent the $607 billion in tax increases and spending cuts that will hit in January unless lawmakers act. As President Barack Obama and Republican Mitt Romney tussle for the White House, the fear of foreign officials is that failure to limit the damage of the so-called fiscal cliff would tip the world’s largest economy into recession and drag their countries down with it. Europe, the subject of the G-20’s ire for the past three years, remained under pressure amid calls to take promised crisis-fighting steps.
“I expect each country to voice its hopes for firm efforts toward a resolution of the fiscal cliff problem,” Bank of Japan (8301) Governor Masaaki Shirakawa told reporters late yesterday. “It’s important for each country to work toward stabilizing its own economy.” A draft of the statement to be issued by the G-20 today identifies the potential for a sharp fiscal pullback in the U.S. and Japan as a danger to an already modest expansion, said an official from one of the countries who declined to be identified because the text hasn’t been finalized.
Service Industries in U.S. Show Expansion’s Resilience (Bloomberg)
Service industries in the U.S. kept growing in October, a sign the biggest part of the economy is withstanding a global slowdown. The Institute for Supply Management’s non-manufacturing index declined to 54.2 last month from 55.1 in September, the Tempe, Arizona-based group said today. A measure above 50 signals expansion in industries that account for almost 90 percent of the economy. The October figure exceeded the third- quarter average. A gauge of services employment rose to a seven-month high, corroborating a report last week that showed a stronger labor market may provide more fuel for the economy. Macy’s Inc. (M) and Kohl’s Corp. (KSS) are among those that stand to benefit from more hiring at the same time homebuilders enjoy a rebound in demand that’s helping make up for a slowdown in manufacturing.
“We should see continued modest improvement in the economy,” said Yelena Shulyatyeva, U.S. economist at BNP Paribas in New York, who correctly forecast the October non- manufacturing figure. “If you’re expanding you have to have manpower. If you can’t do it with more hours worked, you have to hire.” The Tempe, Arizona-based ISM’s services report is the last piece of economic data before tomorrow’s election, when voters decide between giving President Barack Obama another four years and changing course with Republican challenger Mitt Romney. Stocks gained following last week’s advance in the Standard & Poor’s 500 Index. The S&P 500 climbed 0.2 percent to 1,417.26 at the close in New York. The yield on the benchmark 10-year Treasury note dropped to 1.68 percent from 1.72 percent late Nov. 2.
Jack Welch Again Sees Something ‘Wacky’ in U.S. Jobs Data (Bloomberg)
Jack Welch isn’t backing down. One day before the presidential election, the former General Electric Co. chief executive officer again suggested that government figures on employment are being manipulated for political gain. “Every fact says we don’t have a booming economy,” Welch said today in an interview on CNBC. “Something’s wacky here. I didn’t think it was right.” An Oct. 5 Labor Department report showed the jobless rate dropped to 7.8 percent in September, the lowest since President Barack Obama took office in January 2009, from 8.1 percent the month before. Economists had forecast the rate would rise to 8.2 percent, according to the median estimate in a Bloomberg survey. “Unbelievable jobs numbers. . . these Chicago guys will do anything. . . can’t debate so change numbers,” Welch wrote in a Twitter message immediately after the report on Oct. 5. The Obama campaign is based in Chicago.
Welch renewed his criticism even after economists such as Charles Plosser, president of the Federal Reserve Bank of Philadelphia, and Douglas Holtz-Eakin, former director of the Congressional Budget Office, said the numbers are sound and defended the Bureau of Labor Statistics. Welch wasn’t available to comment further, said his assistant, Rosanne Badowski. The unemployment rate rose again last month to 7.9 percent, according to the Labor Department’s Nov. 2 report. Employers added 171,000 workers to payrolls, up from 148,000 in September and exceeding the most optimistic forecast in a Bloomberg News survey of economists.
Romney Threatens Pimco’s Gross With Bernanke-Dumping Plan (Bloomberg)
Mitt Romney’s pledge to dump Federal Reserve Chairman Ben S. Bernanke is threatening Bill Gross with losses on his Mexican bonds. Yields on peso bonds due in 2024 fell 1.04 percentage points this year to 5.62 percent as the Fed’s effort to suppress borrowing costs at record lows caused fixed-income investors to pile into the debt to boost returns. Gross’s Pacific Investment Management Co., the biggest holder of the notes, called Mexican debt one if its favorites Oct. 3, three months after he said he preferred them over German bunds. Mexican bonds returned 19.2 percent this year through last week, twice the average for emerging markets. Romney, the Republican Party candidate in tomorrow’s U.S. presidential election, has vowed to replace Bernanke when his term ends in January 2014 because “the amount of currency that he’s created” with his purchases of Treasuries and other debt securities have failed to create jobs.
Bank of America Corp. says that a Romney win could spark a selloff in Treasuries that will be mirrored in Mexican notes, the most correlated to U.S. government bonds of any debt in Latin America. “They’ll want a much tighter monetary policy, removing a lot of these accommodative measures which Bernanke has been putting in place, so that’s negative for Treasuries in the short term,” Kevin Daly, who helps oversee about $10 billion of emerging-market debt at Aberdeen Asset Management Plc, said by telephone from London. “The initial reaction to Treasury yields going up is that Mexican peso bond yields could go higher too.”
China Most Threatening Cyberspace Force, U.S, Panel Says (Bloomberg)
China is “the most threatening actor in cyberspace” as its intelligence agencies and hackers use increasingly sophisticated techniques to gain access to U.S. military computers and defense contractors, according to the draft of an annual report mandated by Congress. Chinese hackers are moving into “increasingly advanced types of operations or operations against specialized targets,” such as sensors and apertures on deployed U.S. military platforms, according to the report. “China’s persistence, combined with notable advancements in exploitation activities over the past year, poses growing challenges to information systems and their users,” the U.S.- China Economic and Security Review Commission said in the draft obtained by Bloomberg News. “Chinese penetrations of defense systems threaten the U.S. military’s readiness and ability to operate.”
A U.S. intelligence official, speaking on the condition of anonymity to discuss classified matters, described as relentless China’s efforts to blind or disrupt U.S. intelligence and communications satellites, weapons targeting systems, and navigation computers. The commission’s draft report bolsters warnings by U.S. officials that cyberattacks pose growing risks to the military and to critical industries such as electric utilities, pipelines, and telecommunications. Defense Secretary Leon Panetta cited Chinese and Russian capabilities in an Oct. 11 speech, saying cyber threats could become as devastating as the Sept. 11, 2001, terrorist attacks.
China’s Non-Manufacturing Industries Signal Rebound Ahead (Bloomberg)
China’s services industries rebounded from the slowest expansion in at least 19 months, adding to manufacturing gains that indicate the world’s second-biggest economy is recovering from a seven-quarter slowdown. The purchasing managers’ index rose to 55.5 in October from 53.7 the previous month, the National Bureau of Statistics and China Federation of Logistics and Purchasing said in Beijing on Nov. 3. A separate services index released today by HSBC Holdings Plc and Markit Economics in Beijing fell to 53.5 in October from 54.3. Growth in services along with two reports last week that showed a pickup in manufacturing industries may ease pressure on China’s leaders to roll out more stimulus as they start a once- a-decade power transfer Nov. 8. The nation’s central bank said the economy is expected to maintain “steady and relatively rapid growth” as earlier government policies to support expansion take effect.
“Investors expecting a big stimulus package after the Party Congress will likely be disappointed, although the new leaders will probably introduce some new projects,” said Huang Yiping, chief economist for emerging Asia at Barclays Plc in Hong Kong. Indicators including employment and inflation “suggest that even today, growth is probably not significantly below its potential,” he said. The Shanghai Composite Index (SHCOMP), the nation’s benchmark stock gauge, fell 0.1 percent, snapping four days of gains, after the HSBC survey damped optimism for the economy. The MSCI Asia Pacific Index of stocks was down 0.3 percent as of 6:39 p.m. in Tokyo.
Xi Climbs to Power Mixing Father’s Capitalism With Mao Communism (Bloomberg)
Days after Xi Jinping became chief in 2002 of Zhejiang, China’s hotbed of private enterprise, he set out on a tour of the province. His message: more capitalism. Promoted five years later to the party’s top policy making body in Beijing, and heir-apparent to President Hu Jintao, Xi lectured students at the Communist Party’s main school, by the Imperial Summer Palace. His plea this time: more Marxism. His ascent to the country’s most powerful position, including becoming party general secretary later this month, will put the 59-year-old in a position where he has to reconcile those opposing faces of China’s transformation. On one side are businesses and politicians calling for a revival of the market- opening policies pioneered by Xi’s father in the 1970s. On the other are powerful state-owned monopolies and local governments that prospered under Hu and resist change.
“The next administration doesn’t have a lot of time to dilly-dally,” said James McGregor, author of the book “No Ancient Wisdom, No Followers: The Challenges of Authoritarian Capitalism,” published this month. “To keep this economy going and keep this restive population happy, reform is the only answer. The party’s entire legitimacy is based on growth and making people’s lives better.” Xi, scheduled to take over the presidency in March, may face economic growth of 7 percent in 2013, the slowest in 23 years, according to Pacific Investment Management Co., which runs the world’s largest bond fund. Standard Chartered Plc sees a risk of annual growth slumping to between 3 percent and 4 percent within 10 to 15 years without market-driven change to introduce more competition for state enterprises.
Hong Kong Volatility at Year Low Versus VIX: China Overnight (Bloomberg)
The cost of protecting against losses in Chinese stocks relative to U.S. equities fell to a one-year low on prospects the slowdown in the world’s second-largest economy will ease. The AlphaShares Chinese Volatility Index, derived from options on companies listed in Hong Kong, traded at 18.61 on Oct. 31, 1 percentage point above the Chicago Board Options Exchange Volatility Index and the smallest gap since September 2011. The premium has narrowed from as much as 1.43 percent on Sept. 9. Both the Hang Seng China Enterprises Index (HSCEI) and the iShares FTSE China 25 Index Fund, the biggest Chinese exchange- traded fund in the U.S., touched the highest level since May last week. The yuan strengthened to a 19-year high on Oct. 29 and monetary authorities in Hong Kong intervened to curb gains in their dollar as flows into Chinese equity funds surged to the most since 2008 in the week to Oct. 24, EPFR Global data showed.
Improving reports on industrial production, manufacturing and retail sales since Oct. 18 have bolstered prospects the world’s second-largest economy may be recovering after a seven-quarter slowdown. “The fear indexes such as volatility are down as some real optimism about the Chinese economy appears to be coming back,” Kevin Carter, co-founder and chief executive officer of Baochuan Capital Management LLC, which oversees about $325 million, said by phone from San Francisco on Nov. 2. “Over the last eight weeks a switch got turned on regarding China and as the market has gone higher, it reinforced a more favorable outlook.”
Unlimited Japan Lending May Help Weaken Yen, BOJ Executive Says (Bloomberg)
A senior Bank of Japan (8301) official said that a new unlimited lending program may help revive the yen carry trade and further weaken the nation’s currency after it sank to a six-month low against the dollar last week. A weaker yen “isn’t our main objective but it’s a common understanding that an accommodative policy eventually leads to the depreciating of one’s own currency,” Executive Director Hideo Hayakawa, 58, the official in charge of overseeing the financial system, said in an interview in Tokyo yesterday. The central bank unveiled a program of low-interest loans last week in a bid to boost demand for credit and spur growth as the nation’s economic recovery flags. The yen touched 80.68 per dollar on Nov. 2, three days after the announcement of the initiative and an 11 trillion yen ($138 billion) expansion of an asset-purchase program. The currency was at 80.23 as of 8:41 a.m. in Tokyo.
Hayakawa, the BOJ’s former Osaka branch manager and chief economist, said that the BOJ isn’t “100 percent confident yet” that the lending program will succeed, and is aware of the “possibility” that it will cut banks’ profits by lowering lending rates. Introducing the new program is part of BOJ efforts to prop up an economy hit by the global slowdown and currency gains as the government presses for “visible results” to end deflation.
Indonesia’s Economic Growth Exceeds 6% as Investment Climbs (Bloomberg)
Indonesia’s economic growth held above 6 percent for an eighth quarter as domestic consumption and rising investment countered an export slump, reducing the need for the central bank to cut interest rates. Gross domestic product rose 6.17 percent in the three months ended Sept. 30 from a year earlier, the Central Bureau of Statistics said in Jakarta today. That compares with a 6.37 percent gain in the second quarter, and matched the median estimate of 16 economists surveyed by Bloomberg News. 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. President Susilo Bambang Yudhoyono has pledged to build more highways, airports and ports to improve infrastructure and meet a growth target of an average 6.6 percent by the end of his second term in 2014.
“Indonesia remains resilient compared with other emerging countries,” Edimon Ginting, a deputy country director at the Asian Development Bank’s Indonesian resident mission based in Jakarta, said in a telephone interview. “We expect growth to improve slightly in the fourth quarter to bring 2012 growth to 6.3 percent to 6.4 percent, as the negative impact of declining exports experienced in the first three quarters will wind down gradually, and the government boosts infrastructure spending.”
Australia’s Swan Backs Major Economies’ Growth Revival Policies (Bloomberg)
Australian Treasurer Wayne Swan endorsed measures in Japan, Europe and the U.S. to revive domestic growth, undercutting claims that those efforts punish smaller countries by elevating their currencies. The European Central Bank, the U.S. Federal Reserve and the Bank of Japan (8301) “have brought stability and will help support growth,” Swan said in a statement at a Group of 20 finance ministers’ meeting in Mexico. “I know some question the spillover impacts from these central bank actions, but there is nothing more important to the global economy than to lift growth in the world’s major advanced economies.” With benchmark interest rates near record lows, the Fed, ECB and Bank of Japan have expanded their balance sheets since 2008 to try to resuscitate growth. The fallout from the measures has included surging currencies in export-driven economies from Scandinavia to South Korea.
The Swiss central bank imposed a ceiling on the franc for the first time in more than three decades in September 2011, a year after Brazilian Finance Minister Guido Mantega said the world faced a “currency war.” The Australian currency has soared 72 percent against the U.S. dollar from a 2008 low during the global financial crisis. Declines in the so-called Aussie in 2008, 2001 and 1998 helped Australia maintain its recession-free record since the early 1990s.
Europe, Asia Call for Open Markets to Boost Trade, Growth (Bloomberg)
European and Asian leaders called for unfettered commerce and warned against protectionism as the debt crisis threatens to undermine trade ties between the world’s fastest and slowest-growing regions. “We must open our markets,” French President Francois Hollande said today in a speech in Vientiane, Laos, where he is attending the Asia-Europe Meeting along with leaders from about 50 countries. “The biggest threat is protectionism.” Europe’s economic woes may exacerbate protectionist tendencies that make it harder to expand trade with its biggest commerce partner at a time when the U.S. and Australia are forging new agreements, according to Fredrik Erixon, head of the European Centre for International Political Economy in Brussels. Apart from a trade deal with South Korea, the 27-member European Union has seen talks lag with China, Japan, India and Southeast Asian countries since 2007.
“Europe needs to improve its policy toward the entire Asian region in order to take up a greater part of Asia’s economic expansion, but we’re not really seeing it,” Erixon said by phone. “The train is about to leave the station and Europe certainly isn’t on it.” Europe’s leaders face pressure to boost ties with Asia after U.S. President Barack Obama declared a pivot to the region and Australian Prime Minister Julia Gillard unveiled a strategy last week to make her country “a winner in the Asian century.” At stake is safeguarding links that European economies are increasingly counting on, with the 19 Asian nations participating in a summit starting in Laos today accounting for 38 percent of the EU’s total trade last year, up from 30 percent a decade ago.
BOE Tests Faith in Funding for Lending as QE Loses Bite: Economy (Bloomberg)
The Bank of England might need to take a leap of faith on an untested credit plan to do what quantitative easing is failing to achieve. With both of its deputy governors questioning the effectiveness of asset purchases, and economists forecasting a halt to that stimulus, that leaves the so-called Funding for Lending Scheme as officials’ primary policy tool. Policy makers begin a two-day meeting on Nov. 7 to decide on QE’s future. “We are in unchartered territory,” said Steven Bell, chief economist at hedge fund GLC Ltd. in London and a former U.K. Treasury official. “The search for alternatives to QE is gathering pace” and with the FLS, the central bank is “trying new ways as the economy fails to respond to the medicine.”
The Bank of England’s three-month-old plan encourages banks to provide cheap credit to companies and households, which contrasts with the trickle-down effect of gilt purchases through QE. A rethink by policy makers will reach a climax this week as they assess new forecasts and the impact of a program that’s left them with almost a third of the gilt market. The nine-member Monetary Policy Committee will probably leave the target for asset purchases at 375 billion pounds ($602 billion) on Nov. 8, according to 35 of 45 economists in a Bloomberg News survey. Six forecast a 50 billion-pound increase, and four anticipate a 25 billion-pound expansion.
Italian GDP to Shrink as Unemployment Gains, Istat Says (Bloomberg)
The Italian economy won’t start recovering until the second half of 2013 as foreign demand fails to offset the effect of a decline in household spending, the national statistics institute said. Gross domestic product will shrink 2.3 percent in 2012 and 0.5 percent in 2013, Rome-based Istat said today in an e-mailed report. In May, Istat projected a 1.5 percent contraction this year and a 0.5 percent expansion next. Household consumption will fall 3.2 percent in 2012 and 0.7 percent in 2013, Istat said today. The euro region’s third-biggest economy will experience an “easing of unfavorable pressures and a modest recovery in the second half” of next year, according to the report. Still, household “spending will remain negative due to the persistent difficulties in the labor market.”
Italy’s jobless rate will rise to 10.6 percent this year, before climbing to 11.4 percent in 2013, Istat said. Its GDP projections are subject to downward revisions should “global trade slow down and tensions on financial markets sharpen,” the statistics agency said. Istat’s forecast for this year is more optimistic than those of Prime Minister Mario Monti’s government. The Rome-based Treasury said on Sept. 20 that the economy will contract 2.4 percent in 2012 and 0.2 percent in 2013. The International Monetary Fund predicted last month in its World Economic Outlook the Italian economy will contract 2.4 percent this year and 0.7 percent next.
Greek Rally Derailed as Austerity Undermines Valuations (Bloomberg)
The four-month rally in Greek shares that turned the ASE Index (ASE) into the most expensive national benchmark in western Europe is ending as lawmakers squabble over austerity measures needed to ensure the flow of bailout funds. Greek stocks tumbled 8.3 percent last week, the biggest decline in five months. The ASE had surged 88 percent from a two-decade low on June 5 through Oct. 22 as Public Power Corp. and Eurobank Ergasias SA more than tripled, pushing the gauge’s valuation to 51 times estimated 2012 earnings, data compiled by Bloomberg show. That was the highest on record and compares with the five-year average of 11.7 times projected profit.
Politicians in Greece’s coalition government are debating debt-reduction measures demanded by the European Union as the nation completes its fifth year of recession. Inspectors from the so-called troika of the European Central Bank, the International Monetary Fund and the EU are negotiating with the government over budget cuts and economic reforms, before a Nov. 12 decision on whether Greece will win a bailout that allows it to stay in the euro. “Greece’s political problems have come back, and that’s what drives the market,” Gerard Lane, a strategist at Shore Capital Group Ltd., an investment bank and stockbroker in Liverpool, England, said by phone. “The economy shows limited sign of healing, if any, and the desire for austerity seems to be lacking.”
Posted by MW Chong at 9:16 AM
Hedge Funds Reduce Bullish Bets Most in Five Months: Commodities (Bloomberg)
Hedge funds cut bullish wagers on commodities by the most since June as prices retreated to a three-month low on mounting concern that Europe’s debt crisis will worsen and U.S. growth slow. Money managers reduced combined net-long positions across 18 U.S. futures and options in the week ended Oct. 30 by 11 percent to 1.05 million contracts, the lowest since July 10, Commodity Futures Trading Commission data show. Copper holdings fell to an eight-week low, and gold wagers are now the smallest since September. Gasoline bets declined for a fourth week, and those in oil reached the lowest level in four months as Hurricane Sandy forced U.S. East Coast refineries to shut.
The Standard & Poor’s GSCI Spot Index of 24 raw materials fell a third week, the longest contraction since June. Greece cut its economic outlook for 2013 on Oct. 31, and Spain delayed asking for a bailout. U.S. lawmakers are at an impasse over tax rises and spending cuts, and the presidential election takes place tomorrow. Sales trailed analyst estimates at 59 percent of U.S. companies that released third-quarter results through Nov. 2, data compiled by Bloomberg show. “It’s hard to see upward price pressures in commodities when we’re still seeing such slow growth,” said Rob Haworth, a senior investment strategist at U.S. Bank Wealth Management in Seattle, which oversees about $111 billion in assets. “Supplies are sufficient for current demand.”
Storm Threatens Sandy-Devastated Northeast With Cold Rain (Bloomberg)
A nor’easter may bring gusty winds, heavy rain and even snow this week across much of the U.S. East Coast that was hit by Hurricane Sandy last week, complicating cleanup efforts and possibly snarling air traffic. Winds of 45 to 55 miles (72 to 88 kilometers) per hour are expected to accompany coastal flooding and precipitation in New Jersey as the storm moves up the coast from Nov. 7 to 9, according to Mitchell Gaines, a meteorologist at the National Weather Service in Mt. Holly, New Jersey. “This nor’easter will have greater impact than usual because of the impacts of coastal storm Sandy,” Gaines said by telephone. “It’s another storm on top of an area that really doesn’t need another storm.”
The winds from the storm may crack and topple branches weakened by Sandy and coastal flooding may hit areas that were inundated last week. Sandy hit New York and New Jersey killing at least 90 and leaving about 8.5 million homes and businesses without power at its peak. The storm may have caused $10 billion to $20 billion in insured damage, according to Hiscox Ltd. (HSX), the biggest Lloyd’s of London insurer by market value. The cold from the new storm may boost energy demand as people turn up thermostats to heat homes and businesses. About 1.37 million customers were still without power today, according to the U.S. Energy Department. The storm has the potential to delay restoration efforts and may even bring about more blackouts, according to a statement from Consolidated Edison Inc., which provides service to New York City and Westchester County.
DTN Closing Grain Comments 11/05 14:39 Beans Continue to Slide (CME)
Pressure from both sides of the market kept bean contracts on the defensive to start the week on the improved weather pattern for Brazil and Argentina. Corn followed along, but withstood a test of key support, while wheat held to the plus side on concerns over domestic production.
Wheat Market Recap Report (CME)
December Wheat finished up 1 1/2 at 866, 9 3/4 off the high and 3 up from the low. March Wheat closed up 3/4 at 879 1/4. This was 2 1/2 up from the low and 9 3/4 off the high. December Chicago wheat ended the day in positive territory along with KC and Minneapolis wheat. Traders added risk premium to prices due to dry weather in the western plains and on hopes that demand may be picking up for high protein hard wheat classes. The USDA will release an updated crop condition report this afternoon and the trade expects Good/Excellent ratings to be near 37-39% which is down from 40% last week. The dry conditions in the western and northern plains are raising concerns that some of the crop may not germinate ahead of winter dormancy. Additional support was linked to thoughts that Argentina and Australian wheat production may decline in this week's USDA report. Most analysts feel global wheat production may be slashed again which offers a bullish bias long term. Export inspections for the week ending November 1st were reported at 13.9 million bushels which was up from 9.7 million last week. The sluggish shipment pace helped the bear camp the second half of the trading session. The US needs to average a whopping 25.9 million bushels each week to reach the USDA goal and cumulative inspections are just 35% of the current USDA estimate vs. the 5 year average of 45%. December Oats closed down 9 at 358. This was 1/2 up from the low and 10 off the high.
Corn Market Recap for 11/5/2012 (CME)
December Corn finished down 4 at 735 1/2, 9 1/2 off the high and 2 1/2 up from the low. March Corn closed down 4 1/2 at 738. This was 2 1/4 up from the low and 9 1/4 off the high. December corn traded a quarter cent lower at the midpoint of today's session but technical sell pressure picked up in the second half of the day to push futures 3-4 cents lower into the close. Support came from a stronger wheat market but gains were limited due to a weaker soybean market. The corn markets sluggish pace of export sales continues to be a drag on futures in the short term but a worse than expected start to the US wheat planting season helped to support grain prices to start the week. Export inspections for the week ending November 1st were reported at 14.7 million bushels vs. 15.5 last week and 26.3 million bushels are needed each week to reach this crop years USDA export estimate. The cumulative inspection pace for 2012/13 is now 12% of the USDA export goals vs. the 5 year average of 16.5%. Money flow by hedge funds could be key to price direction this week and many large fund traders have stepped to the sideline until the Presidential election is over. The USDA will release an updated Supply and Demand report on Friday and some analysts believe the government could trim US corn production which is supportive to the price outlook long term. November Rice finished up 0.15 at 14.86, equal to the high and 0.17 up from the low.
Japan to Lift Corn Reserves as Imports Rise From Ukraine (Bloomberg)
Japan, the world’s largest corn importer, is set to spend $20 million to help feed mills boost stockpiles and safeguard food security as the nation shifts purchases from the U.S. to Ukraine and Brazil. Feed makers will probably expand inventories to 750,000 metric tons in the 12 months starting April 1, or about 7 percent of consumption, from 450,000 tons this year, said Ryosuke Hirooka, deputy director for the feed division of the Ministry of Agriculture, Forestry and Fisheries. The government may spend 1.62 billion yen to meet part of the cost, he said in an interview in Tokyo. Japan purchased a record amount of corn from Brazil and Ukraine this year, cutting U.S. supplies to the lowest level in at least two decades, as drought sent Chicago futures to a record. Shipments from South America and Europe were delayed, forcing feed mills to draw on stockpiles, Hirooka said.
“Diversification of supply raises the risk of instability in shipments” because transport facilities in some emerging markets are not as good as the U.S., said Tetsuhide Mikamo, director at Marubeni Research Institute. “Holding higher stockpiles is one option for managing the risk.” An increase in inventories may curb the decline in corn imports, which have slumped to a 26-year low as feed mills use more wheat. The U.S. was the top corn exporter in the 2011-2012 marketing year, followed by Brazil, Argentina and Ukraine, U.S. Department of Agriculture data show.
Typhoon No Bar to Third Record Chinese Corn Harvest: Commodities (Bloomberg)
Chinese farmers are reaping a third record corn harvest even after a typhoon wiped out some of the crop, easing demand for imports at a time when the U.S. drought is driving sales from the biggest exporter to a four-decade low. The harvest rose 3.6 percent to 199.74 million metric tons, according to a survey of farmers in China’s seven biggest producing provinces by Geneva-based SGS SA (SGSN) for Bloomberg. The country’s stockpiles last month were at a nine-year high, and the U.S. Department of Agriculture expects a 64 percent drop in imports. The agency will raise its estimate for U.S. reserves by 2.4 percent when it reports Nov. 9, the average of 29 analyst estimates compiled by Bloomberg shows.
Consumers are paying the most ever for corn this year after drought parched U.S. and European crops, contributing to a 7.7 percent rise in United Nations-tracked global food prices since June. Chinese farms planted more acres and used hybrid seeds to supply feed to the world’s biggest hog herd after the country shipped in more corn in the past three years than it had in the previous 22. Prices will drop 12 percent by March, according to U.S. Commodities Inc. in West Des Moines, Iowa. “China’s best investment has been to boost its corn production,” said Jeff Hainline, the president of Advance Trading Inc. in Bloomington, Illinois, who has been buying and selling grain since 1977. “China has more than enough corn to last until the next harvest.”
Oil Rises From Four-Month Low as Refineries Restart (Bloomberg)
Oil rose from the lowest level in almost four months as refineries restored production after Hurricane Sandy tightened fuel supplies. Prices snapped a three-week loss as four of the six Northeast refineries that were forced to close because of Sandy resumed output. Gains accelerated in the final 15 minutes of floor trading as gasoline jumped and Brent oil in London climbed on unprecedented delays in North Sea Forties shipments. “Refineries are kicking back up and it’s a little supportive for oil in the short term,” said Kyle Cooper, director of commodities research at IAF Advisors in Houston. “Market’s sold off quite a bit and you probably have value investors coming in.” West Texas Intermediate oil for December delivery rose 79 cents, or 0.9 percent, to settle at $85.65 a barrel on the New York Mercantile Exchange. The contract ended at $84.86 a barrel on Nov. 2, the lowest settlement since July 10. Prices have dropped 13 percent this year.
Brent oil for December settlement increased $2.05, or 1.9 percent, to end the session at $107.73 a barrel on the ICE Futures Europe exchange. Three refineries in New Jersey, Delaware and Pennsylvania with a total capacity of 527,200 barrels a day returned to normal operations last week and Philadelphia Energy Solutions’ 335,000-barrels-a-day plant in Philadelphia was producing at reduced rates as of today, according to the Energy Department.
Iron Ore Transport Rates Seen Surging as Ships Scrapped: Freight (Bloomberg)
The beaches of Bangladesh are filling with unwanted ships waiting to be scrapped, driving up prices for transporting iron ore and halting losses for STX Pan Ocean Co. (028670), South Korea’s biggest owner of the carriers. The cost of shipping iron ore in Capesize vessels will increase almost sixfold to $14,900 a day in December from the 2012 low, according to prices of swaps used by traders to hedge freight costs that reveal the direction of the market accurately about 60 percent of the time. Prices are rising as the fleet shrank 0.6 percent last month, its first contraction since November 2008, according to data from IHS Inc. (IHS), an Englewood, Colorado-based research company.
Earnings for Capesizes tumbled 94 percent from the 2008 record after the supply of vessels rose three times faster than demand, leading owners to sell ships. Carriers with total capacity of 12.8 million deadweight tons -- enough iron to build 150 Empire State Buildings -- will be dismantled this year, estimates Clarkson Plc (CKN), the world’s largest shipbroker. So many ships are being broken up that Bangladesh, the world’s second- largest recycler, is low on space on its beaches. “Yards are pretty close to capacity and Bangladesh is running out,” according to Anil Sharma, chief executive officer of Global Marketing Systems Inc. in Cumberland, Maryland, the largest buyer of obsolete carriers. “This is the biggest boom for scrapping of Capesizes we have seen in history.”
Silver Market Recap Report (CME)
The silver market was able to reject an initial thrust downward on the charts and in turn the market was able to regain the $31.00 level on the charts. Silver had to fight adverse currency market action, weaker copper and platinum prices as some soft US scheduled data to return to positive ground today. Apparently silver is taking most of its direction from gold and not from the rest of the metals complex. Uncertainty ahead of an austerity vote in Greece, anxiety into the US election and an ongoing lack of clarity toward the situation in China, might continue to limit commodities like silver in the days ahead.
Gold Market Recap Report (CME)
The gold market initially managed to forge a fresh downside breakout on the charts before rebounding rather definitively ahead of mid session. Clearly gold and silver diverged from the action in platinum and copper today and that would seem to suggest that some metals markets were tracking flight to quality developments, while others were following classic physical commodity market fundamentals. Adverse currency market action might have held back gold but the December gold contract was able to forge a low to high bounce of roughly $13 an ounce. Unfortunately some gold players remained concerned about the length of the non-commercial and non-reportable net spec long positioning perhaps because the figures released Friday didn't account for the slide in prices at the end of last week.
Soybean Complex Market Recap (CME)
November Soybeans finished down 22 3/4 at 1504 1/4, 20 3/4 off the high and 3/4 up from the low. January Soybeans closed down 23 1/2 at 1503 1/4. This was 1 1/4 up from the low and 21 off the high. December Soymeal closed down 6.9 at 469.0. This was 0.6 up from the low and 8.4 off the high. December Soybean Oil finished down 0.94 at 48.32, 0.9 off the high and 0.07 up from the low. January soybeans registered double digit losses today as bulls took profits ahead of a USDA report that many expect will show an increase in the US average soybean yield and production. Additional pressure was linked to a less than stellar outside market performance ahead of the Presidential election tomorrow. Traders noted that commercial and end user buying was active on the setback today as the US continues to export soybeans at a staggering pace. Export inspections for the week ending November 1st were reported at 59.4 million bushels vs. 63.3 last week. Only 17 million bushels are needed each week to reach this crop years USDA export estimate. Cumulative export inspections are 33% of the current USDA export goal vs. the 5 year average of 19%. The weaker tone in futures today was also linked to a more favorable weather forecast for South America this week. Drier conditions are expected for Southern Brazil and Argentina while Northern Brazil is expected to see better rainfall. Both weather events could help summer planting progress and could be considered a short term negative to prices if they develop.
EDIBLE OIL: Malaysian palm oil futures tumbled to their lowest in more than three weeks as traders continued to worry over large stockpiles in the world's No.2 producer of the tropical oil. (Reuters)