Thursday, January 3, 2013
FCPO closed : 2475, changed : -26 points, volume : higher.
Bollinger band reading : pullback correction upside biased.
MACD Histogram : turned downward, buyer taking profit.
Support : 2450, 2400, 2350, 2300 level.
Resistance : 2490, 2520, 2550, 2570 level.
FCPO closed recorded loss with rising volume transacted. Overnight soy oil closed rallied higher by more than 2% and currently slipping little lower while crude oil price also having pullback correction.
FCPO daily chart reading revised to suggesting a pullback correction upside biased market development.
When to buy : buy at support or weakness with quick cut loss and profit target.
When to sell : sell at resistant or strength with quick cut loss and profit target.
Posted by MW Chong at 6:14 PM
FKLI closed : 1697.5 changed : +13.5 points, volume : higher.
Bollinger band reading : upside biased.
MACD Histogram : turned upward, buyer still in control.
Support : 1690, 1680, 1670, 1660 level.
Resistance : 1700, 1710, 1720, 1730 level.
FKLI closed rallied higher with improved volume changed hand doing about 5 points premium compare to cash market that also advanced higher. Overnight U.S. markets surged higher while European markets continue to trade firmer while European markets recording small decline.
Daily chart study revised to suggesting an upside biased market development.
When to buy : buy at support or weakness with quick cut loss and profit target.
When to sell : sell at resistance or strength with quick cut loss and profit target.
Posted by MW Chong at 5:18 PM
STOCKS: European stock index futures pointed to a slightly lower open a day after hitting 20-month highs, becoming vulnerable to sell-offs in overbought trading conditions as euphoria over the U.S. fiscal deal wanes. Most Asian stock markets edged higher on hopes of a steady economic revival in China. U.S. stocks kicked off the new year with their best day in over a year on Wednesday. (Reuters)
Bigger fights loom after U.S. 'fiscal cliff' deal (Reuters)
President Barack Obama and congressional Republicans face even bigger budget battles in the next two months after a hard-fought "fiscal cliff" deal narrowly averted devastating tax hikes and spending cuts.
China services growth adds to economic revival hopes (Reuters)
Growth in China's increasingly important services sector accelerated in December at its fastest pace in four months, adding to signs of a modest year-end revival in the world's second-largest economy.
FOREX: The yen edged higher but remained near a 29-month low versus the dollar and looked fragile, weighed by expectations of more forceful monetary stimulus by the Bank of Japan. (Reuters)
FOREX-Dollar rises to 3-week high versus Swiss franc
LONDON, Jan 3 (Reuters) - The dollar rose to a three-week high against the Swiss franc on Thursday as waning euphoria over a U.S. budget deal prompted investors to buy back the more liquid dollar and on talk of weak Swiss data.
The Swiss KOF indictor, due at 0800 GMT, is forecast to fall to 1.35 in December from 1.50 previously.
Good weather seen for last leg of Argentine soy, corn sowing (Reuters)
Dry weather that has allowed Argentine farmers to speed soy and corn planing over recent weeks is expected to last until mid-January, setting the stage for big harvests as early-season flooding gives way to a blazing Southern Hemisphere summer sun.
OIL: Brent crude traded around $112 a barrel after positive data reinforced hopes of an economic recovery in China, but the prospect of more budget battles in the United States and rising oil supply weighed on prices. (Reuters)
POLL-US Crude stocks seen down last week on lower imports (Reuters)
U.S. commercial crude oil stockpiles likely fell last week due to lower imports as refiners drew down for year-end tax purposes, a preliminary Reuters poll of eight analysts showed on Wednesday.
BASE METAS: London copper prices traded around the two-month top hit in the previous session as relief over a last-minute deal to avert a U.S. fiscal disaster continued to underpin prices. (Reuters)
PRECIOUS METALS: Gold traded around $1687.00 an ounce, holding near its highest level in two weeks hit in the previous session following a last-minute deal to avert a U.S. fiscal disaster, although caution remained over upcoming tough budget negotiations. (Reuters)
S.Africa's Harmony Gold delays restart of Kusasalethu mine (Reuters)
South African bullion producer Harmony Gold said on Wednesday it would delay the post-holiday restart of its Kusasalethu mine following year-end violence and protests.
METALS-London copper near 2-1/2 month top as US deal underpins
SINGAPORE, Jan 3 (Reuters) - London copper edged up towards the 2-1/2-month high hit in the previous session as relief over a last-minute deal to avert a U.S. fiscal disaster continued to underpin prices.
"The sentiment on base metals is turning more positive, especially now the U.S. fiscal crisis has been kicked down the road," said Nick Trevethan, senior commodity strategist at ANZ in Singapore.
PRECIOUS-Gold holds near 2-week high after U.S. fiscal deal
SINGAPORE, Jan 3 (Reuters) - Gold inched up holding near its highest level in two weeks hit in the previous session following a last-minute deal to avert a U.S. fiscal disaster, although caution remained over upcoming tough budget negotiations.
"Precious metals are currently tracking equities, however they are stuck within the next trading range. For gold, it will need to breach $1,695 before it can actually have another upward trend to break above $1,700," said Brian Lan, managing director of GoldSilver Central Pte Ltd in Singapore.
Posted by MW Chong at 4:06 PM
VEGOILS-Palm oil inches lower; demand hopes limit losses
Thu Jan 3, 2013 1:19am EST
* Investors focus on impact of zero export tax, Jan export
* Palm oil seen retracing to 2,452 ringgit -technicals
* Prices should trade in a range of 2,450-2,550 ringgit
(Updates prices, adds detail)
By Chew Yee Kiat
SINGAPORE, Jan 3 (Reuters) - Malaysian palm oil futures
edged lower on Thursday as traders booked profit after prices
climbed to a two-month high in the previous session, although
losses were limited by hopes that a revised export tax structure
would boost demand.
The tropical oil started the year strongly by jumping to its
highest since Nov. 2 on Wednesday after the United States
reached a fiscal deal that prevented the world's largest economy
from slipping into recession.
Market players are now keeping a close eye on Malaysia's
Jan. 1-10 exports data to gauge the impact of the country's zero
export tax on demand.
"We see a bit of profit-taking coming in. Every time we go
above 2,500 ringgit, there's no strong follow through," said a
trader with a foreign commodities brokerage in Malaysia.
"The important issue now is with the new export tax
structure and traders want to see how Malaysian exports will be
for the first 10 days. Prices should be trading in a range of
By the midday break, the benchmark March contract
on the Bursa Malaysia Derivatives Exchange had lost 0.6 percent
to 2,486 ringgit ($820) per tonne. Prices touched a two-month
top of 2,524 ringgit on Wednesday.
Total traded volumes stood at 14,701 lots of 25 tonnes each,
higher than the usual 12,500 lots.
Technicals turned bearish as palm oil is expected to retrace
to 2,452 ringgit based on a wave analysis, Reuters market
analyst Wang Tao said.
But prices may find support as lower December production and
disruption to supply due to heavy rains could help ease
record-high stocks of 2.56 million tonnes, traders said.
Industry regulator the Malaysian Palm Oil Board will release
official data on December's stocks and output next week.
Investors are also watching closely for the impact of
China's stricter quality measures on edible oil imports, as that
could hurt demand for palm oil due to higher refining costs.
Brent crude pared earlier losses to stay above $112 a barrel
on Thursday as positive data reinforced hopes of an economic
recovery in China, but the prospect of more U.S. budget battles
and rising oil supply weighed on prices.
In competing vegetable oil market, U.S. soyoil for March
delivery rose 0.1 percent in early Asian trade. China's
Dalian Commodities Exchange is closed for the New Year holiday
and will resume trading on Friday.
Posted by MW Chong at 2:40 PM
GLOBAL MARKETS-Asia stocks, oil take breather after rally
HONG KONG, Jan 3 (Reuters) - Many Asian stocks were set to start with mild gains while oil eased following the previous session's rally as investors look ahead to negotiations on the U.S. debt limit and spending cuts.
FOREX-Yen edges up after hitting 29-month low vs dollar
SINGAPORE, Jan 3 (Reuters) - The yen bounced after hitting a 29-month low versus the dollar, having come under pressure earlier after U.S. lawmakers forged a deal to avoid huge tax increases and spending cuts, fueling demand for riskier investments.
"Technically dollar/yen looks somewhat overbought here. It's gone a long way in a very short time," said Callum Henderson, global head of FX research for Standard Chartered Bank in Singapore, adding that the dollar could see some consolidation in the near term before heading higher.
United States avoids calamity in 'fiscal cliff' drama
WASHINGTON, Jan 1 (Reuters) - The United States averted economic calamity on Tuesday when lawmakers approved a deal to prevent huge tax hikes and spending cuts that would have pushed the world's largest economy off a "fiscal cliff" and into recession.
The agreement hands a clear victory to President Barack Obama, who won re-election on a promise to address budget woes in part by raising taxes on the wealthiest Americans. His Republican antagonists were forced to vote against a core tenet of their anti-tax conservative faith.
U.S. manufacturing ends 2012 up despite 'cliff' fear
NEW YORK, Jan 2 (Reuters) - U.S. manufacturing ended 2012 on an upswing despite fears about the "fiscal cliff," data showed on Wednesday.
U.S. factories returned to growth in December after contracting the previous month, the Institute for Supply Management said. Its index of national factory activity rose to 50.7 up from 49.5 in November, narrowly beating the consensus forecast in a Reuters poll. The ISM index had fallen to a 40-month low in November.
OIL-Oil rises on US fiscal deal, hits highest since Oct
NEW YORK, Jan 2 (Reuters) - Oil prices rose to 11-week highs on Wednesday as part of a cross-market rally after the U.S. Congress approved a deal to avert tax hikes and spending cuts that threatened economic growth.
"There was the fiscal cliff euphoria, but the markets are a little overdone and people realize you still have the debt ceiling battle, social security taxes going up and dealing with spending sequestration and budget cuts," said Mark Waggoner, president at Excel Futures Inc.
POLL-US Crude stocks seen down last week on lower imports
Jan 2 (Reuters) - U.S. commercial crude oil stockpiles likely fell last week due to lower imports as refiners drew down for year-end tax purposes, a preliminary Reuters poll of eight analysts showed on Wednesday.
The survey, taken ahead of weekly inventory reports from industry group the American Petroleum Institute (API) and the U.S. Department of Energy's Energy Information Administration (EIA), forecast that crude stocks had dropped by 600,000 barrels on average for the week ended Dec. 28.
Posted by MW Chong at 11:28 AM
Fire at Notion VTec’s manufacturing plant
Notion VTec announced yesterday that a fire occurred at the rear building of its manufacturing plant in Klang, Selangor, which affected its wholly-owned subsidiaries, Kaiten Precision (M) SB (KPSB) and Notion Venture SB (NVSB). The company said a site examination revealed that a section of the factory premises was gutted by the fire. About 100 computer numeric control (CNC) machines were lost. “There is also substantial damage to goods belonging to KPSB and NVSB that needs to be ascertained. Nonetheless, these assets (CNC machines and goods) are adequately covered by insurance,” said the company. (Financial Daily) Please see accompanying report
Finally, WCE gets the nod
The West Coast Expressway, a project that has been on the drawing board for the last 17 years, will finally take off after the company undertaking the RM7.1bn highway signed a concession agreement (CA) with the government yesterday. In an announcement, West Coast Expressway SB (WCESB), a 80% subsidiary of Kumpulan Europlus (KEuro), yesterday disclosed that it had signed a CA with the government to build the 233km highway that will stretch from Banting in Selangor to Taiping in Perak. Road Builder (M) Holdings, a wholly-owned subsidiary of IJM Corp, holds the remaining 20% equity interest in WCESB. IJM also has a 22.7% interest in KEuro. (Financial Daily) Please see accompanying report
Eversendai to raise stake in Technics to at least 20%
Eversendai Corp is strengthening its position in Singapore-listed Technic Oil & Gas by making the latter an associate company and securing a board position. Eversendai’s head honcho and major shareholder, Datuk A.K. Nathan, said the target was to raise its stake to at least 20% in Technics, which, in turn, would enable the construction and structural steel fabricator to equity account the profits of its Singapore unit. The board seat, he reckoned, should come about by February. (StarBiz)
Maybank gets more time from Bapepam
Maybank has received further time extension from Bapepam, Indonesia’s banking authority, to fulfil the selldown requirement and complete the selldown exercise by 1 Jun 2013 of its Indonesian banking arm. In a filing with Bursa Malaysia, the country’s largest bank said it had received a letter dated 27 Dec granting the group more time to undertake the exercise. (StarBiz)
Capital Markets: Business trust framework launched. The Securities Commission (SC) has released the much-awaited business trust guidelines, a new avenue for stable cash generating companies looking to raise funds and a new asset class to woo investors, as part of the broader Capital Markets and Services (Amendment) Act 2012 (CMSA 2012) which came into force on Dec 28, 2012. (Source: TheEdgeDaily)
Oil & Gas: UOP, Petronas in natural gas processing tech tie-up. UOP LLC, a Honeywell company, will team up with Petroliam Nasional Bhd (Petronas) on natural gas processing technology, particularly to improvefuture floating liquefied natural gas (FLNG) and remove carbon dioxide offshore and onshore. A UOP spokesperson said the two companies signed a joint technology development agreement recently. (Source: Business Times)
Automotive: Automobiles Citroen appoints Naza as distributor. French carmaker Automobiles Citroen has appointed Naza Euro Motors, a subsidiary of the Naza Group, as the official distributor for the Citroen brand in Malaysia. In a statement yesterday, Naza Euro said the appointment was effective Tuesday. (Source: Business Times)
Steel: Indonesia's BAJA to export steel products to Malaysia. Indonesian steel manufacturer, PT Saranacentral Bajatama (BAJA), is planning to market its products in Malaysia, Myanmar and Thailand to take advantage of the low import tariffs established under the Asean Free Trade Agreement (Afta). BAJA president director Handaja Susanto said with the market expansion, he expected exports to account for about 20 per cent of the company's sales. (Source: Business Times)
Indonesia: Inflation slowed for a second month in December
Indonesia’s inflation slowed for a second month in December, supporting the central bank’s decision to hold off interest rate increases as exports slump. Consumer prices climbed 4.3% from a year earlier last month, after a previously reported 4.32% gain in November, the statistics bureau said. The median estimate in a Bloomberg News survey of 15 economists was 4.2%. (Bloomberg)
Thailand: Inflation quickens to 13-month high on food prices
Thailand’s inflation accelerated to a 13-month high in December, exceeding economists’ estimates, as subsidies failed to counter rising prices of food and fuel. An index of consumer prices rose 3.63% last month from a year earlier, the Ministry of Commerce said, compared with a 2.74% increase reported earlier for November. The median estimate of 12 economists in a Bloomberg News survey was 3.22%. (Bloomberg)
UK: Manufacturing revives as Euro factories struggle
UK manufacturing unexpectedly expanded at the fastest pace in 15 months in December as domestic demand improved, indicating some strength in the economy at the end of 2012. A gauge of factory activity rose to 51.4 from a revised 49.2 in November, Markit Economics and the Chartered Institute of Purchasing and Supply said. The median forecast of 29 economists in a Bloomberg News survey was for a reading of 49.1, unchanged from November’s initially reported level. (Bloomberg)
EU: December manufacturing shrinks more than estimated
Euro area manufacturing output contracted more than initially estimated in December, adding to signs a recession in the currency bloc may extend into this year as leaders struggle to tackle the sovereign debt crisis. A gauge of manufacturing in the 17-nation euro area fell to 46.1 from 46.2 in November, London-based Markit Economics said. That’s below an initial estimate of 46.3 on 14 Dec. A reading below 50 indicates a contraction. The gauge has been below 50 for 17 months. (Bloomberg)
US: Outlook for 2013 improves as manufacturing climbs
Manufacturing picked up in December, reflecting growth in orders, employment and exports that indicate the US expansion will be sustained in 2013 following the budget deal. The Institute for Supply Management’s manufacturing index climbed to 50.7 from a three-year low of 49.5 in November, the Tempe, Arizona-based group reported. 50 is the dividing line between expansion and contraction. (Bloomberg)
US stock indexes start 2013 with big rally
US stocks surged on Wednesday, with the Dow industrials notching their largest first-session-of-the-year-point rise ever, as Wall Street welcomed an 11th-hour deal to avoid steep spending cuts and tax increases and pondered deficit moves still ahead. The measure approved by the House of Representatives just after 11pm on Tuesday undid tax hikes for all but one to two percent of US households, with the bipartisan vote ending a lengthy standoff over how to avoid more than USD600bn in tax hikes and spending cuts viewed as likely to push the economy back into a recession. The Dow Jones Industrial Average rose 308.41 points, or 2.4%, at 13,412.55 and the S&P 500 climbed 36.2 points, or 2.5%, to 1,462.42. (MarketWatch)
Asia FX By Cornelius Luca - Wed 02 Jan 2013 17:23:23 CT (CME/www.lucafxta.com)
The appetite for risk soared only intraday during the first trading day in 2013 because the Congress, in a well timed move, finally approved a deal to avert a "fiscal cliff". However, the next two months will see further negotiations over the debt ceiling, so the mood for risk soured quickly in FX. As I had already warned you, this so-called success will be in reality a mixed success at best because no grand deal was achieved. The European and commodity currencies futures gave up early gains, the commodity currencies ended off their best levels, while the yen dug to new lows (to the happiness of the Japanese exporters). The US stock markets surged. Gold, oil and silver closed up. The short-term outlook for the European and commodity currencies is sideways. The medium-term outlook for most of the foreign currencies is sideways. The LGR short-term model is long on European and commodity currencies. Good luck!
US: The ISM's purchasing managers index climbed to 50.7 in December from 49.5 in November.
US: Construction spending fell by 0.3% in November after rising 0.7% in October.
Today's economic calendar
China: Non-manufacturing PMI for December
Stocks, Commodities Rally as Treasuries Drop on Budget (Bloomberg)
U.S. stocks surged, sending the Standard & Poor’s 500 Index to its biggest rally in a year, and commodities jumped after Congress passed a bill averting most of the tax increases and spending cuts threatening the recovery in the world’s biggest economy. Treasury yields gained.
The S&P 500 rose 2.5 percent to 1,462.42 at 4 p.m. in New York and has increased 4.3 percent in the past two sessions. The Stoxx Europe 600 Index (SXXP) climbed 2 percent to the highest since February 2011 as equities added to last year’s 13 percent global rally. Industrial metals led commodities up and oil advanced to a three-month high. The Dollar Index (DXY) reversed an early slide, while Treasury 10-year yields climbed eight basis points.
President Barack Obama said he will sign into law the bill undoing tax increases for more than 99 percent of households as Republicans vowed to fight him for spending cuts in exchange for raising the debt ceiling. An industry report today showed American manufacturing expanded in December at a pace that shows the industry is stabilizing after reaching a three-year low a month earlier.
“Short-term, a deal is good for the market,” Thomas Garcia, head of equity trading at Santa Fe, New Mexico-based Thornburg Investment Management Inc., said by telephone. His firm oversees about $80 billion. “Long-term, more has to be done in the way of spending cuts before we can declare victory.”
Most Asian Stocks Rise After U.S. Manufacturing Expands (Bloomberg)
Most Asian stocks rose, pushing a regional equities index to its highest level in 17 months, after a gauge of U.S. manufacturing added to optimism that the outlook for economic growth is improving.
Rio Tinto Group, the world’s second-largest mining company, climbed 1.7 percent in Sydney as metals prices rose. Australian miner Aquarius Platinum Ltd. (AQP) soared 16 percent, the most in four years, amid speculation that South African supply of the metal will be lower during the first quarter. Samsung Electronics Co. fell 1.3 percent in Seoul after being named in a new patent- infringement complaint filed in Washington by InterDigital Inc. over technology related to the latest mobile-phone standards.
The MSCI Asia Pacific Excluding Japan Index (MXAPJ) rose 0.1 percent to 476.55 as of 11:29 a.m. in Sydney, adding to yesterday’s biggest gain in three months. Almost three shares gained for each that fell. A close at this level would be the highest since August 2011. Standard & Poor’s 500 Index futures fell 0.2 percent today after the gauge jumped 2.5 percent yesterday. Markets in mainland China and Japan are closed today for holidays and Hong Kong’s market is yet to open.
“We expect growth to accelerate through 2013,” said Gerard Minack, global strategist at Morgan Stanley in Sydney. Asia’s “recovery isn’t as tethered to policy makers and structural headwinds. Equities look cheap relative to the past 30 years.”
Australia’s S&P/ASX 200 Index gained 0.5 percent, as did New Zealand’s NZX 50 Index. South Korea’s Kospi Index slid 0.1 percent, dragged lower by Samsung, which accounts for 20 percent on the gauge.
S&P 500 Rallies Most in One Year as Lawmakers Pass Budget (Bloomberg)
U.S. stocks rallied, giving the Standard & Poor’s 500 Index its biggest gain in more than a year, as lawmakers passed a bill averting spending cuts and tax increases threatening a recovery in the world’s biggest economy.
All 10 groups in the S&P 500 (SPX) rose at least 1.8 percent and the 30 stocks in the Dow Jones Industrial Average rallied. Apple (AAPL) Inc. and Facebook Inc. (FB) jumped more than 3.2 percent, pacing gains with technology companies. U.S. Steel Corp. climbed 8.6 percent after the shares were upgraded at Credit Suisse Group AG. Zipcar Inc. soared 48 percent after Avis Budget Group Inc. agreed to buy the company.
The S&P 500 jumped 2.5 percent to 1,462.42 at 4 p.m. in New York. The benchmark index is up 4.3 percent over two days, the most since November 2011. The Dow climbed 308.41 points, or 2.4 percent, to 13,412.55 today. The Nasdaq Composite Index soared 3.1 percent to 3,112.26. About 7.9 billion shares traded hands today, or 29 percent above the three-month average. U.S. exchanges were closed yesterday for the New Year’s holiday.
“We sold off on the uncertainty of what it means to go over the fiscal cliff and that’s been removed,” James Paulsen, the chief investment strategist at Minneapolis-based Wells Capital Management, which oversees about $325 billion, said in a telephone interview. “We’re re-valuing the market based on what’s closer to the underlying economy and most of the economic reports have been pretty good.”
The House of Representatives passed a bill just after 11 p.m. in Washington yesterday by a vote of 257-167, undoing income tax increases for more than 99 percent of households. The S&P 500 surged 1.7 percent on Dec. 31, the biggest rally on the final day of a year since 1974, as Republican and Democratic lawmakers made last-minute concessions to finalize the deal.
European Stocks Jump to 22-Month High on U.S. Budget Deal (Bloomberg)
European stocks rallied to the highest in 22 months as U.S. lawmakers passed a budget bill that avoided most scheduled tax increases threatening a recovery in the world’s largest economy.
Rio Tinto Group and Volkswagen AG (VOW) climbed at least 4 percent each to lead mining companies and automakers higher as Chinese manufacturing grew. ArcelorMittal gained the most in 11 weeks after selling a stake in its Canadian unit for $1.1 billion. BAE Systems Plc (BA/) soared 4 percent as the U.S. budget deal delayed defense spending cuts.
The Stoxx Europe 600 Index (SXXP) jumped 2 percent to 285.33 at the close of trading, the highest level since Feb. 28, 2011. The gauge posted the biggest annual rally in three years in 2012, rising 14 percent, as the European Central Bank’s program to purchase bonds of the region’s weakest economies helped ease concern the euro area will fracture.
“It’s good to get the U.S. budget deal resolved and to get the details, as it’s been dragging on for a while,” said Andrea Williams, head of European equities at Royal London Asset Management, which oversees about $1.1 billion. “Politics were a real ball last year; this year started well.”
The number of shares changing hands in Stoxx 600 companies today was 29 percent higher than the 30-day average, according to data compiled by Bloomberg. Germany’s DAX Index advanced 2.2 percent to a five-year high and the U.K.’s FTSE 100 (UKX) climbed above 6,000 for the first time since July 2011. The Swiss market was closed for a holiday.
Emerging Stocks Jump as BRICs Set for Bull Market on U.S. (Bloomberg)
Developing-nation stocks rose to a 10-month high, pushing the MSCI BRIC Index of the largest emerging markets up 22 percent from last year’s low, after U.S. lawmakers passed a bill that averted spending cuts and tax gains that had threatened the world’s largest economy.
Samsung Electronics Co. (005930), the world’s biggest maker of televisions and mobile phones, rallied 3.6 percent to a record, pushing an index of emerging-market technology stocks to the highest in more than 12 years. China Pacific Insurance (Group) Co. (267) jumped to a 17-month high after Credit Suisse Group AG included the stock among its 2013 top picks. Brazil’s Bovespa Index (IBOV) surged to the highest since April, boosted by Vale SA.
The MSCI Emerging Markets Index jumped 2.1 percent to 1,078.16 in New York, the highest since March 2. The MSCI BRIC Index (MXBRIC) rose 2.6 percent to close in a bull market. The House of Representatives voted in favor of budget law as Republicans abandoned efforts to add spending cuts, boosting confidence in the U.S. economy. The 21 nations in the developing-nations gauge send about 17 percent of their exports to the U.S. on average, data compiled by the World Trade Organization show.
“The fiscal cliff was one of the big drags on the market at the end of the last year, so I suspect that for the next few days and weeks we’re going to see markets run up further,” Neil Shearing, the chief emerging markets economist at Capital Economics Ltd., said by phone from London.
Yen Stays Lower Versus Euro Before BOJ’s Nishimura Speaks (Bloomberg)
The yen remained lower following a decline versus the euro yesterday before Bank of Japan Deputy Governor Kiyohiko Nishimura speaks tomorrow amid speculation policy makers will boost cash infusions to end deflation.
The dollar reached the highest in more than two years versus the Japanese currency before data that economists say will signal improvement in the U.S. job market. New Zealand’s currency held a gain after milk powder prices climbed to a six- week high at an auction.
“The Japanese yen is very overvalued still,” said Thomas Averill, managing director in Sydney at Rochford Capital, a currency and interest-rate risk management company. “There’s quite a lot of weakness in the yen to come.”
The yen traded at 115.05 per euro as of 8:49 a.m. in Singapore after losing 0.6 percent to 115.17 yesterday. The dollar touched 87.36 yen, the strongest since July 29, 2010, before trading little changed from yesterday at 87.24 yen. The greenback was at $1.3188 per euro from $1.3186.
Japan’s newly installed Prime Minister Shinzo Abe said in a New Year statement on Jan. 1 that the most urgent issue for his country was to break out of currency appreciation and deflation. “Bold” monetary policy is one of the three prongs of his economic measures, he said.
The nation’s markets are shut today for a holiday.
ADP Research Institute may say today that companies in the U.S. added 140,000 workers in December, up from a 118,000 increase the prior month, according to the median estimate of economists surveyed by Bloomberg News. The data will be followed by a government report tomorrow projected to show payrolls rose 150,000 workers last month, the most since August.
Aussie Near 2-Week High, Bond Yields Rise on U.S. Outlook (Bloomberg)
The Australian dollar was near a two- week high as the passage of U.S. budget legislation improved prospects for the world’s largest economy and supported demand for higher-yielding assets.
Australian bonds fell, pushing the 10-year yield to the highest in more than four months, before a private report that may show gains in U.S. employment. Growing investor appetite for risk also lifted global equities. The New Zealand dollar, also known as the kiwi, was near its strongest level in two weeks after milk powder prices climbed to a six-week high at auction.
The budget agreement “brightens the outlook for the U.S. economy in the first quarter and removes one of the roadblocks to a strong start to the year,” said Sean Callow, a senior currency strategist at Westpac Banking Corp. in Sydney. “For the time being, we’re probably running with a pretty positive view on risk appetite that supports the Aussie dollar and the kiwi.”
The Australian dollar bought $1.0496 as of 11:25 a.m. in Sydney from $1.0504 at the close yesterday when the currency touched $1.0524, the strongest since Dec. 19.
The yield on 10-year Australian debt was at 3.39 percent after earlier climbing as much as three basis points, or 0.03 percentage point, to 3.44 percent, the highest since Aug. 21.
The Standard & Poor’s 500 Index (SPX) of U.S. shares surged 2.5 percent yesterday, the biggest advance in a year. The Stoxx Europe 600 Index jumped 2 percent.
Treasury Futures Stay Lower Before Jobs Reports (Bloomberg)
Treasury 10-year futures contracts stayed lower after falling yesterday as economists said reports this week will show hiring picked up.
U.S. government securities fell 0.5 percent in the past month, the biggest loss among 26 debt-market indexes tracked by Bloomberg and the Federation of Financial Analysts Societies. Bonds tumbled yesterday after U.S. lawmakers agreed on a plan to avert most of the tax increases and spending cuts scheduled to start this year that threatened the world’s biggest economy. Treasuries were closed in Japan today for a holiday.
Ten-year futures contracts for March delivery were little changed at 132 1/8 today as of 8:48 a.m. in Singapore. They dropped 5/8 yesterday, the most in 11 weeks. Trading of bonds, notes and bills is scheduled to take place as usual today in the U.K. and the U.S., according to the Securities Industry and Financial Markets Association website.
“Yields will go a little higher,” said Marc Fovinci, the head of fixed income in Portland, Oregon at Ferguson Wellman Capital Management Inc., which has $3.2 billion in assets. “The partial resolution of our fiscal cliff has taken an immediate recession off the table, and that has reduced the flight-to- quality bid in the market.”
Ten-year yields may rise to 2.25 percent in a year from today’s 1.84 percent, he said. Ferguson Wellman is favoring U.S. corporate bonds over Treasuries, he said.
Bipartisan House Backs Tax Deal Vote as Next Fight Looms (Bloomberg)
The fiscal bill passed by Congress solves an immediate dilemma, averting income-tax increases for most Americans while taxing top-earners more, yet leaves unanswered a longer-term question of taming the federal debt.
Republicans have immediately turned to their next battle -- counting on the need to raise the nation’s $16.4 trillion debt ceiling to try to force President Barack Obama to accept cuts in entitlement programs such as Medicare. Congress must act as early as mid-February to prevent a default and the dispute may reprise a similar 2011 episode that led to a downgrade of the U.S. credit rating.
“Without meaningful reform of entitlements, real spending controls, and a fairer, cleaner tax code, our debt will continue to grow, and our economy will continue to stumble,” House Speaker John Boehner said in a statement after the vote.
Obama said he’s “very open to compromise.” Medicare spending can be reduced, he said, yet “we can’t simply cut our way to prosperity.”
The deal that cleared the House and Senate yesterday falls short of any “grand bargain” on fixing the debt that some leaders had hoped to achieve. Former Senator Alan Simpson, a Wyoming Republican, and Erskine Bowles, a chief of staff to former President Bill Clinton, co-chairmen of Obama’s deficit commission that proposed a $4 trillion solution of tax increases and spending cuts, today called the legislation “truly a missed opportunity.
Outlook for 2013 Improves as U.S. Manufacturing Climbs (Bloomberg)
Manufacturing picked up in December, reflecting growth in orders, employment and exports that indicate the U.S. expansion will be sustained in 2013 following the budget deal.
The Institute for Supply Management’s manufacturing index climbed to 50.7 from a three-year low of 49.5 in November, the Tempe, Arizona-based group reported today. Fifty is the dividing line between expansion and contraction. Other data showed fewer outlays for non-residential projects pushed down construction spending in November for the first time in eight months.
A rebound in housing and stabilization in global growth point to a pickup in sales that will boost companies such as General Electric Co. (GE) Stocks surged, sending the Standard & Poor’s 500 Index to its biggest rally in a year, as Congress passed a bill averting spending cuts and tax increases that threatened to push the world’s largest economy into a recession.
“We are starting the new year on at least a fairly firm note,” said Tim Quinlan, an economist at Wells Fargo Securities LLC in Charlotte, North Carolina, who projected the ISM index would climb to 51. While some manufacturers have been holding back because of the budget debate, he said, “there is demand in this economy. As soon as businesses are able to take advantage of this, we’ll see a bigger contribution from manufacturing to overall economic growth.”
The S&P 500 advanced 2.5 percent, the biggest gain since Dec. 20, 2011, to 1,462.42 at the close in New York. Commodities surged and Treasuries fell after Congress passed a bill preventing tax increases for more than 99 percent of households.
Budget Deal Seals Breaks for Wind Farms, Puerto Rico Rum (Bloomberg)
Wind farms, motorsports tracks, global banks and other businesses won revived tax breaks in a $75.3 billion package included in a last-minute budget deal Congress passed yesterday.
he package of tax extensions survived attempts to curb them to reduce the U.S. budget deficit that has exceeded $1 trillion for four years. Their beneficiaries and lobbyists received a reprieve and a chance to bargain for another extension this year.
The breaks are “generally economically useless or harmful,” lowering General Electric Co. (GE)’s tax bill, padding accounting firms’ research-credit business and letting lawmakers repeatedly tap lobbyists and companies for donations, said Bob McIntyre, director of Citizens for Tax Justice. The Washington group favors higher taxes on companies.
“If you make them permanent, you get the campaign contribution once,” McIntyre said. “You do it every year or two, they have to ante up again and again.”
The tax-break extensions, mostly for companies, made it into the bill past Republican demands for spending cuts and Democratic resistance to benefits for businesses. Both parties have complained for years about some of the special-interest provisions.
Most of the tax breaks had expired at the end of 2011 and will be extended through 2013. The companies that benefit say the on-again, off-again breaks are important though the uncertainty makes it almost impossible to use them to plan business investments.
Congress Budget Pact Would Crimp Not Crush U.S. Growth (Bloomberg)
The U.S. economic expansion probably will be crimped without being halted by the budget deal that won approval by the House of Representatives last night after being forged by the Senate and White House.
The agreement permanently reinstates the income tax cuts for most workers that ended Dec. 31, continues expanded unemployment benefits and delays automatic spending cuts for two months. It would let a two percentage point payroll tax cut expire.
The elimination of the payroll tax cut, coupled with higher income taxes on the wealthy, will help clip growth in the first quarter to 1 percent, from 3.1 percent in 2012’s third quarter, the latest data available, according to economists at JPMorgan Chase & Co. (JPM) and Bank of America Corp. The expansion will strengthen later in the year as the housing market continues to rebound, they forecast.
“It’s going to definitely present a headwind for the economy,” Michael Feroli, chief U.S. economist for JPMorgan Chase in New York, said. “We’re looking for a downdraft in growth in the first half of the year, with the economy coming back in the second.”
The package isn’t the grand bargain on deficit reduction that lawmakers wanted when they created the tax-and-spending deadlines over the past three years. Instead, it would avert most of the immediate pain and postpone Congress’ fiscal feud for two months -- until a February fight over raising the $16.4 trillion debt limit.
Construction Spending in U.S. Unexpectedly Fell in November (Bloomberg)
Spending on U.S. construction projects unexpectedly dropped in November, restrained by declines in non-residential building and public works.
Outlays fell 0.3 percent to $866 billion annual rate after increasing a less-than-previously estimated 0.7 percent in October, the Commerce Department reported today in Washington. The median forecast of 41 economists surveyed by Bloomberg called for a 0.6 percent increase. Housing climbed to the highest level in more than four years.
The residential real-estate market will probably continue to drive spending as record-low mortgage rates, an increasing population and dwindling inventory boost construction. At the same time, the damage from superstorm Sandy and government budget battles that raise concern about the outlook for growth may curb the rest of the industry.
“There’s good, solid momentum story in the residential sector,” said Julia Coronado, chief economist for North America at BNP Paribas in New York. “We now have a construction sector that’s a modest contributor to GDP rather than a drag. This is a very gradually healing story, not a boom story.”
Also today, the Institute for Supply Management’s factory index rose to 50.7 in December from 49.5 a month earlier, the Tempe, Arizona-based group said. Economists in a Bloomberg survey projected a reading of 50.5.
Bond Tab for Biggest Economies Seen Falling $220 Billion (Bloomberg)
The world’s leading economies will have $220 billion less sovereign debt to refinance in 2013, cutting supply after every major government bond market rallied for the first time since the 2008 financial crisis.
The amount of bills, notes and bonds coming due for the Group of Seven nations plus Brazil, Russia, India and China will drop to $7.38 trillion from $7.60 trillion in 2012, according to data compiled by Bloomberg. Japan, the U.K., Germany, France, Italy and Brazil will see a decline, while the U.S., Canada, Russia, India and China will face an increase.
While high debt loads are blamed for curbing global economic growth, bond investors are encouraged by signs that some nations are starting to rein in spending as they extend the average maturity of their obligations. Instead of rising, borrowing costs are falling as supply decreases, inflation remains in check and central banks from the U.S. to Europe cut interest rates to record lows.
“The progress made in fiscal adjustments has been quite significant in a number of countries, perhaps more than the market is realizing,” said Mohit Kumar, the London-based head of European interest-rate strategy at Deutsche Bank AG, Germany’s biggest bank. “Policy will remain accommodative. I don’t expect to see a selloff in core government bonds. There will be enough demand.”
N. Korea’s 2011 China Trade Grew More Than 60 Percent (Bloomberg)
North Korea’s trade with China expanded more than 60 percent to $5.63 billion in 2011, as the totalitarian regime deepened its dependence on its main political and financial backer.
Commerce with China accounted for 70.1 percent of the North’s total $8 billion trade in 2011, up from 57 percent in the previous year, South Korea’s national statistics office, Statistics Korea, said in its annual report today in Seoul. North Korea does not report economic data. Inter-Korean trade amounted to about $1.71 billion in the same year.
China provides North Korea economic aid and serves as its diplomatic shield at the United Nations Security Council. As a veto-wielding permanent member of the Security Council, China has resisted efforts to impose fresh punishment against North Korean leader Kim Jong Un over a Dec. 12 missile launch that demonstrated a heightened ballistic capability.
Excluding a dip in 2009, trade between the two countries has increased every year since the start of 2000, when the statistics bureau started releasing estimates. Data for 2012 will be released around the end of next year.
North Korea’s economy expanded 0.8 percent in 2011 and gross national income per capita was 1.33 million won ($1,239), nearly one nineteenth that of South Korea’s 25 million won, according to the Bank of Korea. South Korea’s total nominal gross national income was 38.2 times that of the North’s 32.44 trillion won.
The regime imported 3.8 million barrels of crude oil for 2011. Power generation capacity was 6.9 million kilowatts, less than one-10th that of South Korea. Steel production was 1.23 million tons and production of chemical fertilizer production was 471,000 tons.
North Korea’s population rose to 24.3 million in 2011 from 24.2 million the previous year -- about half of South Korea’s. Population estimates were based on North Korea’s 1993 and 2008 censuses.
Singapore’s Private Home Prices Climb to Record on Sales (Bloomberg)
Singapore home prices climbed to a record in the fourth quarter after developers sold more homes, a government report showed.
The island state’s private residential property price index rose 1.8 percent to 211.90 points in the three months ended Dec. 31, according to preliminary estimates released by the Urban Redevelopment Authority today. The index advanced 0.6 percent in the previous quarter, which was also a record. Prices rose 2.8 percent in the year, compared with a 5.9 percent gain in 2011, data from the authority showed.
Prices of non-landed private residential properties increased 0.8 percent in prime districts in the quarter, the data showed. In suburban areas, prices climbed 3.4 percent.
The benchmark property index, which tracks 40 developers, gained 1 percent to 791.48 at the close of trading in Singapore, the biggest advance since Dec. 7. CapitaLand Ltd. (CAPL), Southeast Asia’s biggest developer, rose 1.6 percent to S$3.76, while City Developments Ltd. (CIT), Singapore’s second-largest developer, added 0.9 percent to S$12.99.
“Private property prices saw a rebound with the price increase in the fourth quarter contributing to more than 50 percent for the entire year,” Mohamed Ismail, chief executive officer of PropNex Realty, said in an e-mailed statement. “It is expected that the trend will continue and prices will further increase resulting in an overall 4 percent to 5 percent growth in the private property price index in 2013.”
Singapore GDP Topped Survey Last Quarter, Avert Recession (Bloomberg)
Singapore’s economy expanded more than economists estimated last quarter, averting a recession even after the central bank refrained from monetary stimulus as it sought to contain elevated inflation.
Gross domestic product rose an annualized 1.8 percent in the three months to Dec. 31 from the previous period, when it contracted a revised 6.3 percent, the Trade Ministry said in a statement today. The median of 11 estimates in a Bloomberg News survey was for a 1.6 percent expansion. The economy grew 1.2 percent last year, less than a quarter of 2011’s pace.
The World Bank last month raised its outlook for emerging East Asia nations, citing China’s recovery, even as the export- dependent region faces risks from Europe’s protracted sovereign debt crisis. The Monetary Authority of Singapore, which allowed faster currency gains in 2012 to curb price gains, may maintain its appreciation policy after last quarter’s expansion as the island grapples with persistent inflation pressures.
“Global economic conditions will remain challenging in the foreseeable future, and we are not likely to see a notable improvement” until the second half even as China may provide some support, said Leif Eskesen, an economist for HSBC Holdings Plc in Singapore. “This does not mean that the MAS is ready to pull the trigger. Despite the muted growth print and some easing in inflation over the past few months, inflation remains firm and capacity is still very tight.”
Kim Signals Warmer North Korea Ties With South (Bloomberg)
North Korea’s Kim Jong Un named improving the economy and better relations with South Korea as top policy goals for his second year as leader, signaling he may ease his country’s confrontational approach toward Seoul.
“The building of an economic giant is the most important task that comes to the fore in the present stage of building a thriving socialist country,” Kim said yesterday in a New Year address carried by the official Korean Central News Agency. “The reunification of the country is the greatest national task that brooks no further delay.”
Kim departed from the past year’s saber-rattling against South Korean President Lee Myung Bak as Lee’s successor Park Geun Hye prepares to take office Feb. 25. Park has repudiated Lee’s hard-line North Korea policy, expressing her willingness to talk to Kim and help the North join global organizations to thaw ties.
“Kim’s speech mentioned the importance of the economy at far greater frequency than the military,” Cheong Seong Chang, senior research fellow at the Seoul-based Sejong Institute, said in an e-mail yesterday. “The success of the Dec. 12 missile launch has given Kim enough confidence to not have to rely on his father’s military-first policy to garner support.
‘‘The urgency of economic issues also compounds to the North’s need to better ties with South Korea, which makes it likely that Pyongyang will aggressively engage in efforts to resume dialogue,” Cheong said.
Indonesia inflation slows a second month (Bloomberg)
Indonesia’s inflation slowed for a second month in December, supporting the central bank’s decision to hold off interest-rate increases as exports slump.
Consumer prices climbed 4.3 percent from a year earlier last month, after a previously reported 4.32 percent gain in November, the statistics bureau said in Jakarta today. The median estimate in a Bloomberg News survey of 15 economists was 4.2 percent.
Bank Indonesia has kept borrowing costs unchanged for 10 straight meetings as exports tumbled and the rupiah weakened. Price pressure in Southeast Asia’s largest economy may rise as a planned increase in electricity tariffs and minimum wages take effect, with a possible reduction in fuel subsides also weighing.
“Inflation has stabilized at its current rate,” Aninda Mitra, head of Southeast Asia economics at Australia & New Zealand Banking Group Ltd., said after the data was released. “We think that inflation is headed higher on account of several factors such as low base effects, higher wages, and impending electricity and fuel price hikes.”
Price gains may accelerate to 4.9 percent in 2013, central bank official Perry Warjiyo said last month.
The rupiah weakened 0.5 percent to 9,685 per dollar as of 2:59 p.m. in Jakarta, after reaching a three-year low of 9,785 earlier, according to prices from local banks compiled by Bloomberg. The currency declined about 6 percent last year, the worst performance in Asia after the yen among 11 most-active Asian currencies tracked by Bloomberg.
Consumer prices rose 0.54 percent last month from November. The core inflation rate was 4.4 percent, the same as the 4.4 percent pace the month before.
U.K. Manufacturing Revives as Euro Factories Struggle: Economy (Bloomberg)
U.K. manufacturing unexpectedly expanded at the fastest pace in 15 months in December as domestic demand improved, indicating some strength in the economy at the end of 2012.
A gauge of factory activity rose to 51.4 from a revised 49.2 in November, Markit Economics and the Chartered Institute of Purchasing and Supply said in London today. The median forecast of 29 economists in a Bloomberg News survey was for a reading of 49.1, unchanged from November’s initially reported level. The pound stayed higher against the dollar after gaining to its strongest level in 16 months.
The report reduces the chance the U.K. will succumb to triple-dip recession after the economy resumed expansion in the third quarter and tensions related to the euro-region debt crisis eased. Still, Markit noted that companies remain “cautious” and the Bank of England has forecast only a gradual recovery through 2013. A separate report showed euro-area manufacturing continued to shrink last month.
“The sector found some stability at the very end of 2012,” said Samuel Tombs, an economist at Capital Economics Ltd. in London. Still, “with the recession in the euro zone set to deepen and consumers at home on course to be hit by a further bout of relatively high inflation, 2013 is shaping up to be another tough year for U.K. manufacturers.”
Today’s report showed that U.K. factory output increased for a second month, with growth accelerating to a 20-month high. The improved performance was mainly due to an improvement in domestic demand, with the sharpest gains in consumer and partly finished goods. Still, Markit said the increase in the index in December “does little to change the view that the sector contracted over the fourth quarter as a whole.”
Euro-Area December Manufacturing Shrinks More Than Estimated (Bloomberg)
Euro-area manufacturing output contracted more than initially estimated in December, adding to signs a recession in the currency bloc may extend into this year as leaders struggle to tackle the sovereign-debt crisis.
A gauge of manufacturing in the 17-nation euro area fell to 46.1 from 46.2 in November, London-based Markit Economics said today. That’s below an initial estimate of 46.3 on Dec. 14. A reading below 50 indicates contraction. The gauge has been below 50 for 17 months.
The euro-area economy has shrunk for two successive quarters and economists foresee a further decline in gross domestic product in the final three months of last year. The European Central Bank forecasts contractions of 0.5 percent and 0.3 percent in 2012 and 2013.
“The euro-zone manufacturing sector remained entrenched in a steep downturn at the end of the year,” Chris Williamson, chief economist at Markit, said in the report. “The region’s recession therefore looks likely to have deepened, possibly quite significantly, in the final quarter.”
The euro was little changed after today’s report and traded at $1.3258 at 10:32 a.m. in Brussels.
With euro-area unemployment at a record, economists project the region’s GDP decreased 0.3 percent in the fourth quarter, according to the median of 22 forecasts in a Bloomberg survey.
“Manufacturers look to be in for another tough year in 2013, though prospects have brightened a little as producers should benefit from signs of stronger demand in key export markets such as the U.S. and China,” Williamson said.
Posted by MW Chong at 9:34 AM
DTN Closing Grain Comments 01/02 14:28 Grains On the Defensive Again Wednesday (CME)
After a higher start to the day, grain contracts quickly collapsed as heavy investment selling hit the sector.
Corn closed 7 1/2 cents lower in the March and 6 3/4 cents lower in the May.
Soybeans closed 17 1/4 cents lower in the March and 15 cents lower in the May.
Wheat closed 22 3/4 cents lower in the March Chicago, 20 cents lower in the
March Kansas City, and 24 cents lower in the March Minneapolis. The U.S. dollar
index is 0.068 higher at 79.839. February gold is $12.70 higher at $1,688.50
while March silver is $0.828 higher and March copper is $.0810 higher. The Dow
Jones Industrial Average is 235 points higher at 13,339. February crude oil is
$1.04 higher at $92.86. February heating oil is $.0129 higher while February
RBOB gasoline is $.0356 higher and February natural gas is $0.114 lower.
Corn Market Recap for 1/2/2013 (CME)
March Corn finished down 7 1/2 at 690 3/4, 16 1/2 off the high and 3 up from the low. May Corn closed down 6 3/4 at 693 1/2. This was 3 up from the low and 15 1/2 off the high.
March corn trade lower into the closing bell after an initial surge higher. Weaker trade in the soybean and wheat markets helped to pressure corn. Outside markets were mostly supportive throughout the session with crude oil, copper, and stocks trading higher after Congress reached a deal on the "Fiscal Cliff". The US Dollar erased early losses and traded higher midday which added pressure to the grain complex. South American weather remains most favorable with drier conditions in Argentina this week and showers are expected in growing regions of Brazil. Traders continue to see Brazil production near 70 million tonnes, right in line with the USDA forecast but Argentina estimates remain near 22.5-23.0 million tonnes as compared with the USDA estimate of 27.50 million tonnes. More than 20% of the crop still needs to be planted in Argentina but harvest for earlier planted corn is expected to begin in about two weeks. The trade ministry in Brazil estimated December corn exports of 2.8 million tonnes vs. 3.91 in November. Corn basis in the Gulf is slightly higher but still lower from levels Monday as farmer sales come to a halt. Export demand remains sluggish.
January Rice finished down 0.105 at 14.755, equal to the high and equal to the low.
Wheat Market Recap Report (CME)
March Wheat finished down 22 3/4 at 755 1/4, 32 3/4 off the high and 2 3/4 up from the low. May Wheat closed down 21 3/4 at 766. This was 3 1/4 up from the low and 31 off the high.
Kansas City and Chicago wheat rallied on the pit open but the market saw sell pressure shortly thereafter to close down 19-20 cents on the day. The US Dollar turned higher midday which helped to pressure the grain markets. US wheat exporters are looking ahead to Iraq's 50,000 tonne option-origin tender and Syria issued a 100,000 tonne soft wheat tender overnight. The US has a chance of doing both bits of business which could be supportive to price. Kansas and Oklahoma released state crop condition ratings on Monday. Kansas was at 24% good/excellent vs. 29% last month. Poor/very poor was reported at 31%. Oklahoma was pegged at 11% good/excellent vs. 14% last month. The western plains are expected to dry out this week after seeing decent rain and snowfall last week. Conditions have not improved for most of the growing region but significant accumulation was seen in the central third of KS which will help protect crops from winterkill.
March Oats closed down 12 at 335 1/2. This was 3 1/4 up from the low and 13 off the high.
Wheat Slumps to Six-Month Low on Slowing Exports by U.S. (Bloomberg)
Wheat futures fell to a six-month low on mounting concern that export demand is slowing for supplies from the U.S., the world’s biggest shipper.
Export sales totaled 13.2 million tons from June 1 through Dec. 20, down 13 percent from the same period a year earlier, U.S. Department of Agriculture data show. While shipments jumped 55 percent in the most recent week, the most since January 2011, more gains are needed to change market sentiment, said Frank J. Cholly, a senior commodities broker at RJO Futures in Chicago. Short positions, or bets on lower prices, exceeded longs by 11,899 wheat futures and options as of Dec. 24, the most-bearish since May, government data show.
“We need a more compelling demand story to move the market higher,” Cholly said by telephone. “Buyers have to step up to the plate sooner or later. It’s cheap enough now.”
Wheat futures for March delivery fell 2.9 percent to settle at $7.5525 a bushel at 2 p.m. on the Chicago Board of Trade, the biggest decline since Dec. 11, after touching $7.525, the lowest for a most-active contract since June 29. Prices tumbled 9.9 percent in December, the biggest drop since September 2011.
Even with the decline last month, the grain ended 2012 up 19 percent for the year, and reached a four-year high of $9.4725 on July 23 as drought cut output in countries including the U.S. and Russia.
Wheat’s fourth-quarter slump makes the commodity an attractive investment because drought conditions persist in the U.S. and may affect production next year, Cholly said.
“I’d like to own wheat after this type of correction,” he said. “We don’t have any snow here, and we’re still in a drought. We planted into dry soils. If I’m an end-user, now’s a good time to be buying.”
Wheat is the fourth-largest U.S. crop, valued at $14.4 billion in 2011, behind corn, soybeans and hay, government data show.
Soybeans Slump to Six-Week Low on South America Outlook (Bloomberg)
Soybean futures fell to a six-week low on speculation that South America will harvest a record crop this year and boost exports. Corn dropped.
A unit of the U.S. Department of Agriculture said today in a report that Brazil will harvest 83 million metric tons this year, surpassing the U.S. as the world’s largest grower and exporter. Rain expected in the next two weeks may boost yields in Brazil, while dry weather in Argentina firms muddy soils for farmers to finish planting, Overland Park, Kansas-based World Weather Inc. said.
“South American weather remains very conducive for reaching current USDA crop forecasts,” Greg Grow, the director of agribusiness at Archer Financial Services Inc. in Chicago, said in a telephone interview. “Harvesting is just beginning in Brazil and will increase available supplies.”
Soybean futures for March delivery dropped 1.2 percent to close at $13.9225 a bushel at 2 p.m. on the Chicago Board of Trade. Earlier, the price touched $13.8625, the lowest for a most-active contract since Nov. 20. In 2012, the oilseed rose 17 percent after drought cut U.S. production to the lowest in four years.
In Argentina, output may jump 34 percent to a record, the USDA said on Dec. 10.
Corn futures for March delivery fell 1.1 percent to $6.9075 a bushel in Chicago. Earlier, the price touched $6.8775, the lowest since Dec. 20. Last year, the grain advanced 8 percent, the fourth straight increase.
In the U.S., corn is the biggest crop, valued at $76.5 billion in 2011, followed by soybeans at $35.8 billion, government figures show.
Sugar Climbs on Economic Outlook; Coffee, Cotton, Cocoa Rise (Bloomberg)
Sugar advanced to an almost one-month high on speculation that demand for commodities will rise after U.S. lawmakers reached a budget deal. Coffee, cotton and cocoa also gained, while orange juice fell.
The vote in the House of Representatives broke a yearlong impasse over how to avert $600 billion in tax increases and spending cuts that threatened to send the economy back into recession. The Standard & Poor’s GSCI Spot Index of 24 raw materials jumped as much as 1.6 percent.
Commodities “are going to enjoy a nice bounce after the majority of fiscal-cliff worries are now behind us,” Phil Streible, a senior commodity broker at R.J. O’Brien & Associates, said in an e-mail.
Raw sugar for March delivery climbed 0.9 percent to settle at 19.69 cents a pound at 2 p.m. on ICE Futures U.S. in New York, after touching 19.75 cents, the highest for a most-active contract since Dec. 4. Prices tumbled 16 percent last year.
Also on ICE, arabica-coffee futures for March delivery rose 3.9 percent to close at $1.494 a pound, the biggest gain since Sept. 10. Prices dropped 37 percent last year.
Cocoa futures for March delivery advanced 1 percent to close at $2,259 a metric ton in New York, capping the first increase since Dec. 14. Prices rose 6 percent last year.
Cotton futures for March delivery added 0.3 percent to settle at 75.36 cents a pound on ICE. The fiber fell 18 percent in 2012.
Orange-juice futures for March delivery slid 0.6 percent to close at $1.166 a pound in New York. Prices are down 19 percent since reaching a seven-month high on Dec. 19.
Florida “didn’t get cold,” Sterling Smith, a market specialist at Citigroup Inc. in Chicago, said in an e-mail. “The market is taking out most of the frost premium. Also, the good weather in Brazil is helping crops there, adding to the bearishness.”
Brazil is the world’s largest orange grower, followed by Florida.
Natural Gas Drops Most in 5 Weeks on Forecasts of Warmer Weather (Bloomberg)
Natural gas futures in New York tumbled the most in five weeks on forecasts of moderating temperatures that may reduce demand for the power-plant fuel.
Gas fell as much as 9 percent, the biggest intraday drop in more than three years, after Commodity Weather Group LLC said cold weather in most of the U.S. this week would give way to above-normal temperatures from Jan. 7 through Jan. 11. The low in New York on Jan. 10 may be 37 degrees Fahrenheit (3 Celsius), 10 higher than usual, AccuWeather Inc. said.
“We’re going to see some warm weather across the primary gas-consuming regions,” said Gene McGillian, an analyst and broker at Tradition Energy in Stamford, Connecticut. “As we get into the new year without signs of sustained cold weather, the fundamental picture is going to force us lower.”
Natural gas for February delivery fell 11.8 cents, or 3.5 percent, to settle at $3.233 per million British thermal units on the New York Mercantile Exchange. On a settlement basis, the drop was the biggest since Nov. 26. The intraday percentage decline was the most since Sept. 11, 2009. The futures have risen 8.2 percent from a year ago.
Trading volume was 297,874 contracts at 3:19 p.m., 3.8 percent below the 100-day average.
February $3.10 puts were the most active gas options in electronic trading. They were 3 cents higher at 6.6 cents on volume of 1,270 contracts as of 3:16 p.m. Puts accounted for 53 percent of options volume.
Gas slid to $3.05 in electronic trading, the lowest price since Sept. 26, before rebounding. A 900-contract sell order at 7:52 p.m. yesterday caused the “scary” drop, Drew Wozniak, vice president of market research and analysis at ICAP Energy LLC in Louisville, Kentucky, said in a note to clients today.
Oil Slips From Highest in Three Months on Signs Gains Excessive (Bloomberg)
Oil slid for the first time in three days in New York on speculation that its surge to the highest level in three months yesterday may have been excessive.
Futures lost as much as 0.5 percent after rallying 2.6 percent in the two days through yesterday as U.S. lawmakers passed a bill to undo automatic tax increases and spending cuts that had threatened growth in the world’s biggest oil-consuming country. Crude slipped today as a technical indicator showed futures may have risen too quickly for further gains to be sustainable, according to data compiled by Bloomberg.
“We’re getting a mild sell signal and the coincidence of those levels mean that some traders will be bailing out,” said Michael McCarthy, a chief strategist at CMC Markets in Sydney. “What we’re seeing is longs closing out, taking some profit.”
West Texas Intermediate for February delivery dropped as much as 42 cents to $92.70 a barrel in electronic trading on the New York Mercantile Exchange and was at $92.75 at 8:08 a.m. in Singapore. The contract yesterday advanced 1.4 percent to $93.12 a barrel, the highest settlement since Sept. 18. The volume for WTI oil contracts was 60 percent below the 100-day average for the time of day.
Brent for February settlement rose $1.36, or 1.2 percent, to $112.47 a barrel on the London-based ICE Futures Europe exchange yesterday. The North Sea grade advanced 3.5 percent in 2012, a fourth annual gain.
New York oil’s 14-day relative strength index rose to 68.1 yesterday, the highest level since Sept. 14. A reading above 70 is a signal to investors that price gains may have been excessive. It was 66 today.
Recap Energy Market Report (CME)
February crude oil prices trended higher throughout the early US trading hours, registering a new 2.5 month high in the process. The market drafted support on reports that US lawmakers were temporarily able to avert the fiscal cliff, and that was seen boosting risk sentiment. Early weakness in the US dollar and gains in global equity markets to start 2013 were seen benefiting the crude oil market. Some traders indicated that February crude oil challenged its 200 day moving average early on, but seemed to back track from those levels into the close.
Brent Crude Oil Market Report (CME)
February Brent crude oil prices trended higher throughout Wednesday's trading session, climbing to their highest level since October 17th. The market garnered an overnight lift on reports that US lawmakers agreed on a bill to temporarily avert the fiscal cliff. This was seen as a positive for risk-taking sentiment, boosted global equity markets and pressured the US dollar. Reports that China's manufacturing sector expanded for a third consecutive month was also seen as a positive demand force. The nearby Brent calendar spread expanded its backwardated pricing structure another nickel on the session.
Gold Reaches Two-Week High as Commodities Gain on Budget (Bloomberg)
Gold futures rose to a two-week high as commodities gained after U.S. lawmakers passed a budget accord. Palladium advanced to the costliest in 10 months, and silver jumped the most in eight weeks.
The Standard & Poor’s GSCI Spot Index of 24 raw materials gained as much as 1.6 percent after the House of Representatives approved a bill that prevents income taxes from rising for most U.S. workers. Industrial metals also jumped, while equities rallied.
“Markets reacted positively to news that a deal of sorts has been reached,” Steve Scacalossi, a New York-based vice president at TD Securities Inc., said in an e-mail.
Gold futures for February delivery rose 0.8 percent to settle at $1,688.80 an ounce at 1:38 p.m. on the Comex in New York. Earlier, the price reached $1,695.40, the highest for a most-active contract since Dec. 18. Floor trading was closed yesterday for the New Year’s holiday.
In 2012, the metal gained 7 percent, advancing for the 12th straight year, as central banks from the U.S. to China pledged more steps to bolster their economies.
President Barack Obama said he will sign the bill passed by Congress that makes the George W. Bush-era income tax cuts permanent for most workers while letting them expire for top earners.
The bipartisan vote in the House broke a yearlong impasse over how to head off $600 billion in tax increases and spending reductions that had been set to begin taking effect at the start of this year. Those measures may have triggered a recession, the Congressional Budget Office said.
Palladium futures for March delivery rose 0.7 percent to $707.95 an ounce on the New York Mercantile Exchange. Earlier, the price reached $718.85, the highest since March 2.
Silver futures for March delivery surged 2.6 percent to $31.007 an ounce on the Comex, the biggest increase since Nov. 6.
Platinum futures for April delivery gained 1.7 percent to $1,568 an ounce on the Nymex, the biggest gain since Nov. 23.
Copper Advances in New York Following U.S. Budget Accord (Bloomberg)
Industrial metals rallied to a three- month high, leading commodities higher, as a U.S. budget agreement that averted higher taxes and spending cuts brightened the outlook for demand.
The House approved a measure skirting income-tax increases for most households in the country, the world’s second-largest metals consumer. President Barack Obama said he would sign the bill into law. Global equities advanced, and lead, aluminum and nickel led gains on the Standard & Poor’s GSCI Spot Index (LMEX) of 24 raw materials. Copper rose the most in more than three months.
“This does help growth prospects, because if the tax increases went into play, it definitely would have taken a huge chunk out of gross domestic product,” Bill O’Neill, a partner at Logic Advisors in Upper Saddle River, New Jersey, said in a telephone interview. “We’re looking for improved demand this year for industrial metals.”
Copper futures for delivery in March increased 2.3 percent to settle at $3.736 a pound at 1:22 p.m. on the Comex in New York, the biggest gain since Sept. 14. China is the largest metals consumer.
On the London Metal Exchange, copper for delivery in three months climbed 3.5 percent to $8,209 a metric ton ($3.72 a pound).
The metal advanced 4.4 percent in 2012 on the LME, the third gain in four years, helped by forecasts for supply to lag demand. Copper inventories tracked by the exchange declined 14 percent in 2012, the third straight contraction.
The LMEX Index, which tracks the six primary metals on the exchange, settled at 3,581.7, the highest since Sept. 14.
Tin surged as much as 4.7 percent today, rising to the highest since February and leading gains among the London exchange’s six main metals. Lead reached $2,439 a ton, the highest since September 2011. Aluminum, zinc and nickel also increased.
Silver Market Recap Report (CME)
The silver market began the year with a significant rally, with prices climbing far above their late December trading range by the close of Wednesday's session. Some traders felt that silver has acted more as a physical commodity than as a safe-haven asset this week, so the removal of fiscal cliff anxiety is widely felt to have provided significant strength to silver prices. Other traders noted that March silver was able to climb back above its 200-day moving average, which they felt may provide additional support for the market.
Gold Market Recap Report (CME)
The gold market was able to build on overnight strength, and started out 2013 by posting sizable gains and by rallying up to a new 2-week high. Last night's approval of the fiscal cliff bill was seen by many traders to have provided a sharp early boost to global risk sentiment that lifted gold and other metals markets, although some traders felt that gold's flight-to-quality status at the end of last year may have limited further gains during today's trading. A report that India may enact additional curbs on gold imports was seen by some traders as an additional positive factor for the market. A recovery rally in the Dollar due to ongoing Euro zone anxiety was seen by other traders to have weighed on gold prices later on during today's session.
Soybean Complex Market Recap (CME)
January Soybeans finished down 13 1/4 at 1405 1/2, 38 3/4 off the high and 7 up from the low. March Soybeans closed down 16 1/2 at 1393. This was 6 3/4 up from the low and 42 off the high.
January Soymeal closed down 13.5 at 407.1. This was 2.1 up from the low and 17.9 off the high.
January Soybean Oil finished up 1.36 at 50.52, 0.6 off the high and 0.45 up from the low.
March soybeans saw double digit losses on the day after the bear camp quickly sold into this morning's initial rally. Outside markets were mostly supportive with gains seen in crude oil, copper, and stocks. The US Dollar erased all of its earlier losses which helped to pressure grain markets. Soybean meal traded lower but oil saw sharp gains after Congress passed a $1 per gallon tax credit for biodiesel producers through 2013. Central and Southern Brazil continues to see light showers while the northeastern region is trending slightly drier. Argentina will dry down this week. Early harvest has begun in areas of Mato Grosso and early yields are reportedly near year ago levels but most expect improvement by the middle of January with some estimates coming in at 50 or more bushels per acre. Planting in Argentina was pegged at 82% last week, up 6 1/2% from the week prior. Some traders still view the current USDA estimates for production in Brazil and Argentina at 81 and 55 million tonnes respectively as a bit too high but given the mostly favorable weather, some traders are pushing Brazil production above 81 million tonnes.
VEGOILS-Palm hits 2-month high on U.S. fiscal deal, demand outlook
Wed Jan 2, 2013 5:17am EST
* Malaysia's zero tax structure may boost demand
* China's stricter import rule may hurt
* Traders eye Malaysia palm oil inventory data due next week
(Updates prices, adds milestone)
By Chew Yee Kiat
SINGAPORE, Jan 2 (Reuters) - Malaysian palm oil futures rose
to a 2-month high on Wednesday as the United States averted a
fiscal crisis and as traders look forward to better demand for
the edible oil on a lower export tax structure.
Investors were relieved after U.S. lawmakers approved a deal
preventing huge tax hikes and spending cuts that would have
pushed the world's largest economy into recession and hurt
global commodity demand.
Market players were also betting on Malaysia's zero export
tax in January to spur demand and help clear record-high stocks.
"The zero export tax will be long-term positive. But the
short-term impact may be neutralised by tighter edible oil
import rules by China," said Alan Lim Seong Chun, research
analyst with Malaysia's Kenanga Investment Bank.
Stricter quality measures set to be enforced by Beijing on
Jan. 1 could hurt demand for palm oil.
At market close, the benchmark March contract on
the Bursa Malaysia Derivatives Exchange gained 2.7 percent to
2,503 ringgit ($825) per tonne, off its intraday high at 2,524
ringgit, a level last seen since Nov. 2.
Total traded volumes stood at 33,431 lots of 25 tonnes each,
higher than the usual 25,000 lots.
Traders are looking out for official data on Malaysia's palm
oil December inventory level due next week, which is expected to
ease slightly from November's record-high 2.56 million tonnes.
But they said the drop could be limited as Malaysian palm
exports during December fell as much as 7.9 percent from a month
ago, according to cargo surveyor data.
Brent crude oil hit a one-month high above $112 per barrel
on Wednesday after the U.S. Congress approved a deal to avert a
fiscal crisis, while promising data from top energy consumer
China also supported prices.
Soybean oil markets in the U.S. and China were closed for
the New Year holiday.
Malaysia's Felda Global appoints new CEO
KUALA LUMPUR | Wed Jan 2, 2013 6:58am EST
Jan 2 (Reuters) - Malaysian palm oil-to-sugar producer Felda Global Ventures Holdings Bhd has appointed Mohammed Emir Mavani Abdullah to replace Sabri Ahmad as chief executive once his contract ends in July 15.
A former adviser to the United Arab Emirates' finance minister, Mohammed Emir now holds directorships in government linked Malaysia Nuclear Power Corporation and the Malaysian Petroleum Resource Corporation.
"The appointment is part of succession planning and to ensure smooth phasing in of the new leadership after the expiry of contract of the current Group President/CEO," Felda Global told the stock exchange on Wednesday.