20121210 1001 Global Markets Related News.

Asia FX By Cornelius Luca - Sun 09 Dec 2012 17:28:51 CT (CME/www.lucafxta.com)
The appetite for risk is limited ahead of the Asian open. The European currencies open further down after diving on Friday, but the commodity currencies start higher. The US non on-farm payrolls report was mixed, so all eyes remain on the lack of progress in the "fiscal cliff" game of politics. The short-term outlook for the European and commodity currencies is sideways with various biases. The medium-term outlook for most of the foreign currencies is sideways. The LGR short-term model is short on all European currencies. Good luck!

Overnight
US: The non-farm payroll employment increased by 146,000 jobs in November following a downwardly revised increase of 138,000 jobs (171,000 jobs originally reported) in October. The unemployment rate fell to 7.7% in November from 7.9% in October.
US: The preliminary University of Michigan-Thomson Reuters consumer sentiment index fell to 74.5 in December from 82.7 in November.Canada: The unemployment rate declined to 7.2% in November from 7.4% in October.
Canada: Labor productivity came in at -0.5% in the third quarter vs. -0.4% in the second quarter.

Today's economic calendar
China: Consumer Price Index for November
China: Industrial production for November
China: Retail sales for November
Japan: Bank lending for November
Japan: BSI Large manufacturing for the third quarter
Japan: Current account for October
Japan: Gross Domestic Product for the third quarter
Japan: Consumer confidence index for November
Japan: Eco watchers survey: current for November AU Home loans for October
Australia: Investment lending for homes for October

Asian Stocks Rise to Eight-Month High on China, U.S. Data (Bloomberg)
Asian stocks rose, with the regional benchmark index extending its advance to an eight-month high, after China’s factory output and retail sales topped forecasts and the U.S. unemployment rate unexpectedly fell. Samsung Electronics Co., the world’s biggest maker of smartphones, gained 1.4 percent in Seoul. Rio Tinto Group (RIO), the world’s No. 2 mining company that gets about 31 percent of sales from China, climbed 1.8 percent in Sydney. Advantest Corp., the largest producer of semiconductor-testing devices, jumped 6.9 percent in Tokyo after its President Haruo Matsuno said he expects new orders to rise 20 percent this quarter. The MSCI Asia Pacific Index (MXAP) gained 0.2 percent to 126.33 as of 9:35 a.m. Tokyo time. Markets in China and Hong Kong have yet to open.
The measure advanced in the past three weeks, the longest such winning streak since the period ended Aug. 17., amid signs of recovery in the world’s two largest economies and optimism U.S. lawmakers will agree on a budget deal to avert the so-cal led fiscal cliff. “We could see a more sustained recovery in equity markets as China’s economy shows signs of gradual recovery,” said Yoji Takeda, who oversees about $1.2 billion as Hong Kong-based head of Asian equities at RBC Investment Management (Asia) Ltd. “There’s underlying uncertainties in Europe amid political maneuvering in Italy ahead of elections.” Italian Prime Minister Mario Monti said he intends to resign, renewing concern nations in the currency bloc are grappling with a deepening debt crisis.

Nikkei 225 Heads for Seven-Month High on U.S, China Data (Bloomberg)
Japan stocks rose, with the Nikkei 225 Stock Average headed for its highest close since April, after data in the U.S. and China added to signs of recovery in the world’s two biggest economies. Gains were limited as revised estimates showed Japan’s economy shrank last quarter. Komatsu Ltd. (6301), a maker of construction machinery that gets 37 percent of its sales in the Americas and China, added 1 percent. Advantest Corp. (6857), the world’s biggest maker of memory- chip testers, rose 6.4 percent after President Haruo Matsuno said he expects new orders to rise 20 percent this quarter. Panasonic Corp. (6752) advanced 3.3 percent on a report the electronics company is considering selling a building in Tokyo. The Nikkei 225 Stock Average (NKY) added 0.3 percent to 9,555.92 at 9:49 a.m. in Tokyo, headed for the highest close since April 26. The broader Topix Index advanced 0.1 percent to 790.93, with more than nine stocks rising for every six that fell.
“Speaking of the U.S., jobs and housing are recovering gradually and surely, providing confidence to the economy,” said Ichiro Yamada, general manager of equities who helps manages about 300 billion yen ($3.63 billion) at Fukoku Mutual Life Insurance Co. “There’s a sense that Japanese stocks will extend gains toward this year’s high around 10,200.”

U.S. Stocks Cap Longest Weekly Gain Since August on Jobs (Bloomberg)
U.S. stocks rose a third week, giving the Standard & Poor’s 500 Index its longest winning streak since August, as employment growth topped forecasts and investors weighed prospects for a budget agreement in Washington. Citigroup Inc. (C) surged 8.9 percent on plans to cut more than 11,000 jobs and scale back in some emerging markets to drive down costs. Netflix Inc. (NFLX) jumped 5.2 percent after the online video service signed a multi-year agreement with Walt Disney Co. Apple Inc. (AAPL) sank 8.9 percent, the most since 2010, on concern the company will lose ground in smartphones to Nokia Oyj (NOK) in China and give up market share to Google Inc. in tablets. The S&P 500 (SPXL1) increased 0.1 percent to 1,418.07 for the week. The benchmark measure for American equities extended its advance from a three-month low on Nov. 15 to 4.8 percent and finished at the highest level since Election Day. The Dow Jones Industrial Average added 129.55 points, or 1 percent, to 13,155.13.
“The market took the jobs report as an encouraging sign,” said Brad Sorensen, director of market and sector analysis at San Francisco-based Charles Schwab Corp. His firm has $1.9 trillion in client assets. “There’s also a bit of Washington fatigue. It seems like Congress and the administration have managed to come through with a deal at the last minute multiple times before. We’re relatively neutral at this point in time.” The S&P 500 is down 0.7 percent since President Barack Obama was re-elected on Nov. 6 as he seeks a deal with Republican lawmakers to prevent more than $600 billion of automatic tax increases and spending cuts from coming into effect next year.

European Stocks Rally for Third Week on China, U.S. Talks (Bloomberg)
European stocks rallied for a third week, climbing to an 18-month high, amid increasing optimism that China’s economy will sustain its recovery and U.S. lawmakers will reach a compromise to avoid a fiscal deadlock. Rio Tinto Group led commodity shares higher. Nokia Oyj (NOK1V) gained 14 percent after winning a deal to sell its flagship smartphone in China. European Aeronautic, Defence & Space Co. jumped 15 percent after announcing a new shareholder structure and unveiling a share buyback. GDF Suez (GSZ) SA slid to a record low after saying earnings will decline next year. The benchmark Stoxx Europe 600 Index (SXXP) advanced 1.2 percent to 279.17 this week, the highest since May 2011. The gauge has rallied 19 percent from this year’s low on June 4 as the European Central Bank and the Federal Reserve expanded bond purchases and U.S. economic data beat estimates.
“Markets are hopeful that a sensible conclusion can be reached on the U.S. fiscal cliff,” Jeremy Batstone-Carr, head of research at Charles Stanley Group Plc in London, said in a telephone interview. “There is a sense of investors adding to risk, but only mildly.”  Republican defectors joined Democrats in signing a letter that called upon President Barack Obama and House Speaker John Boehner to explore “all options” to end an impasse over taxes on top earners. Congress must strike a budget deal before the New Year to prevent $607 billion of automatic tax increases and spending cuts from coming into effect. Obama said he is willing to make concessions in the talks if Republicans agree to consider taxes on the rich. “We have the potential of getting a deal done,” he said in an interview on Bloomberg Television on Dec. 4.

U.S. Yields Are Highest Versus G-7 Peers in Eight Months (Bloomberg)
Treasury yields were the highest versus their Group-of-Seven peers in eight months on speculation quickening U.S. jobs growth and Federal Reserve bond purchases will support the world’s biggest economy in 2013. Bonds in an index of G-7 debt excluding Treasuries yielded 37 basis points more than U.S. government securities, according to data compiled by Bloomberg. The difference was the least since April. Data yesterday showed China’s factory output and retail sales topped economists’ forecasts last month. “Yields will start to rise,” said Hiroki Shimazu, an economist in Tokyo at SMBC Nikko Securities Inc. “The two largest economies are recovering.”
Benchmark 10-year notes yields were little changed today at 1.62 percent as of 9:52 a.m. in Tokyo, according to Bloomberg Bond Trader data. The price of the 1.625 percent security due in November 2022 was 100 2/32. The rate climbed four basis points, or 0.04 percentage point, on Dec. 7 after the Labor Department said the U.S. added 146,000 jobs in November, exceeding all estimates in a Bloomberg News survey of economists. Dealers that trade with the Fed expect the central bank to begin buying as much as $45 billion of Treasuries a month at its Dec. 12 meeting and keep benchmark interest rates about zero into 2015, Bloomberg surveys show. The purchases would come on top of the $40 billion per month of mortgage securities announced in September, under the central bank’s strategy of trying to fuel the expansion by putting downward pressure on interest rates.
China’s industrial production climbed 10.1 percent in November from a year earlier and retail sales growth accelerated to 14.9 percent, the statistics bureau said yesterday. U.S. 10-year yields will increase to 2.23 percent by the end of 2013, according to a Bloomberg survey of banks and securities companies, with the most recent projections given the heaviest weightings.

Euro Near 2-Week Low on Monti Resignation Plan (Bloomberg)
The euro traded 0.3 percent from its lowest level in two weeks after Italy’s prime minister said he intends to resign, rekindling concern that a change in government will upend efforts to rein in debt. The euro slid versus most of its 16 major counterparts ahead of a Dec. 13-14 summit of European Union leaders to debate a road map for the overhaul of the 17-nation currency bloc. Demand for the dollar was limited amid speculation the Federal Reserve may announce this week additional bond purchases. The yen remained lower after data showed Japan’s economy contracted more than economists estimated. The news out of Italy “impacts the euro because it’s evidence of more political instability within the zone,” said Imre Speizer, a strategist in Auckland at Westpac Banking Corp. (WBC) “In the near term at least, it does look like the euro wants to go lower.”
The euro fell 0.2 percent to $1.2907 as of 9:36 a.m. in Tokyo after touching $1.2877 on Dec. 7, the weakest since Nov. 23. It slid 0.1 percent 106.56 yen. The dollar fetched 82.56 yen from 82.49 at the end of last week, when it climbed to 82.83, the highest since Nov. 22. Italy’s Mario Monti will try to corral his coalition, which includes his predecessor Silvio Berlusconi’s People of Liberty Party, for a vote to pass the budget before handing in his “irrevocable resignation,” Italian President Giorgio Napolitano’s office said in an e-mailed statement on Dec. 8. Monti, 69, will quit immediately if his allies won’t comply, the premier’s spokeswoman, Elisabetta Olivi, said in a telephone interview.

Aussie Dollar Holds Gains on China Rebound Signs; Kiwi Rises (Bloomberg)
Australia’s dollar traded 0.3 percent from the highest in more than two months amid signs economic growth in China is rebounding, boosting the South Pacific nation’s prospects for exports. The so-called Aussie held gains from last week before Chinese trade figures today, following reports that showed retail sales and industrial production topped economists’ forecasts. New Zealand’s kiwi dollar advanced against most major peers after data showed the nation’s manufacturing volumes rose. The South Pacific currencies touched the highest in more than three weeks against the euro after former Italian Prime Minister Silvio Berlusconi pledged to topple Mario Monti. “The data from China continues to show improvement and a gradual re-acceleration,” said Peter Dragicevich, a currency economist in Sydney at Commonwealth Bank of Australia. (CBA) “It hasn’t pushed the Aussie or the kiwi too much, but it is providing support to these currencies.”
The Australian dollar traded at $1.0482 as of 12:13 p.m. in Sydney from $1.0488 on Dec. 7, when it capped a 0.6 percent weekly gain. On Dec. 6, it touched $1.0516, the highest since Sept. 21. The Aussie slid 0.1 percent to 86.45 yen. It gained 0.1 percent to 81.22 euro cents, after touching 81.48, the strongest since Nov. 20. The kiwi rose 0.1 percent to 83.36 U.S. cents and 0.1 percent to 68.75 yen. New Zealand’s currency touched 64.63 euro cents, the highest since Nov. 13, before trading at 64.58, 0.3 percent above the Dec. 7 close. Australian government bonds fell, with the 10-year yield rising three basis points, or 0.03 percentage point, to 3.15 percent.

Fed Exit Plan May Be Redrawn as Assets Near $3 Trillion (Bloomberg)
A decision by the Federal Reserve to expand its bond buying next week is likely to prompt policy makers to rewrite their 18-month-old blueprint for an exit from record monetary stimulus. Under the exit strategy, the Fed would start selling bonds in mid-2015 in a bid to return its holdings to pre-crisis proportions in two to three years. An accelerated buildup of assets would also mean a faster pace of sales when the time comes to exit -- increasing the risk that a jump in interest rates would crush the economic recovery. “There is certainly an issue about unwinding the balance sheet” in a way that “is effective and continues to support the recovery without creating inflation,” St. Louis Fed Bank President James Bullard said in an interview in October. The central bank might have to “revisit” the 2011 strategy, he added.
The Fed is already buying $40 billion a month in mortgage- backed securities to boost the economy, and policy makers meeting Dec. 11-12 will consider whether to purchase more assets. John Williams, president of the San Francisco Fed, has proposed adding $45 billion of Treasury securities a month. The bigger the balance sheet, “the riskier the exit becomes,” Richmond Fed President Jeffrey Lacker said during a Nov. 20 speech in New York. “That is something we need to think carefully about.” Krishna Memani, director of fixed income at OppenheimerFunds Inc., said a too-rapid sale of assets risks disrupting the $5.2 trillion market for agency mortgage debt.

Retail Sales in U.S. Probably Rose on Automobile Demand (Bloomberg)
Sales at U.S. retailers probably rose in November as the holiday shopping season got under way and demand for automobiles rebounded after superstorm Sandy, economists said before a report this week. The projected 0.4 percent gain would follow a 0.3 percent drop in October, according to the median forecast of 60 economists surveyed by Bloomberg before Dec. 13 figures from the Commerce Department. Other reports may show a gain in industrial production, while cheaper gasoline helped push down the cost of living. Vehicle sales last month jumped to the fastest pace since February 2008 after slowing in the wake of Sandy’s destruction along the eastern seaboard. While job gains are helping sustain consumer spending, fiscal tightening slated for early next year threatens growth and may set back employment, one reason Federal Reserve policy makers will weigh increasing stimulus when they meet this week.
“A good holiday shopping season could be mitigated to some extent by the weakness observed early in the month,” said Tom Porcelli, chief U.S. economist at RBC Capital Markets LLC in New York. “The path of economic activity is suggestive to us that the Fed will continue to upsize” its stimulus programs. Cars and light trucks sold in November at a 15.5 million annual rate, up from 14.2 million a month earlier when Sandy kept East Coast shoppers away during auto dealers’ busiest time of the month, according to Ward’s Automotive Group. Ford Motor Co. (F) deliveries of cars and light trucks climbed 6.4 percent and General Motors Co. (GM) sales gained 3.4 percent, the companies said Dec. 3.

Treasuries Trade in Tightest Range Since July on Fed Speculation (Bloomberg)
Treasury 10-year note yields traded within a quarter-percentage point of a record low as stronger- than-forecast job growth failed to blunt speculation the Federal Reserve will announce another round of bond purchases. Yields on benchmark 10-year notes rose from the least in more than two weeks yesterday after Labor Department figures showed the U.S. added 146,000 jobs in November and the unemployment rate fell to 7.7 percent. Fed officials, who said after September’s policy meeting that they will buy bonds until the job market improves substantially, gather for the final time this year Dec. 11-12. The Fed “easing is going to continue,” Mohamed El-Erian, chief executive officer at Newport Beach, California-based Pacific Investment Management Co., the world’s biggest manager of bond funds, said yesterday in an interview on Bloomberg Television’s “In the Loop” with Betty Liu. “We will see more balance-sheet operations and maybe even see a tweak to the communications. The Fed will remain hyper active.”
Ten-year note yields rose less than one basis point, or 0.01 percentage point, to 1.62 percent this week, according to Bloomberg Bond Trader data. The price of the 1.625 percent notes maturing in November 2022 fell 2/32, or 63 cents per $1,000 face value, to 100. The yield traded within a range of 9.3 basis points this week, the narrowest amount since the five days ended July 20. The yield, which dropped to a record low of 1.38 percent July 25, touched 1.56 percent on Dec. 6.

IMF’s Lagarde Says U.S. Fiscal Agreement Should Be Comprehensive (Bloomberg)
International Monetary Fund Managing Director Christine Lagarde said a political agreement on the U.S. budget should be comprehensive because a minimal deal would fail to provide certainty for investors. Markets would sink without measures to avoid more than $600 billion in spending cuts and tax increases due to come into force next year, Lagarde said, according to a transcript of a taped interview for today’s “CNN’s State of the Union” program. Still, an agreement that would only extend tax cuts for the middle class without addressing spending or entitlements would be insufficient to reassure the rest of the world, she said. “I don’t think that is enough because there is still that degree of uncertainty that fuels doubt, that prevents investors, entrepreneurs, households from making decisions, because they don’t know what tomorrow will be,” Lagarde said when asked about such an option. “It would be much better to actually have a more comprehensive approach and to deal with all the issues.”
U.S. House Speaker John Boehner and President Barack Obama appear no closer to a budget agreement with three weeks left to avert the so-called fiscal cliff. Obama this week insisted that no deal is possible without letting income tax rates rise for high earners, while Boehner said the administration needs to get “serious” about spending cuts. Lagarde, who at the IMF helm has been consumed by the European debt crisis, said the turmoil there is less of a risk for the U.S. economy than the fiscal cliff. The Washington-based IMF expects U.S. growth of about 2.1 percent next year, and no growth without a broad ranging fiscal agreement, she said. “The real threat that we have at the moment is really here with us,” Lagarde said. “We can be our own best friend or our own best enemy.”

China’s Factory Output Tops Forecasts as Rebound Picks Up (Bloomberg)
China’s industrial output and retail sales exceeded forecasts last month while inflation rebounded from a 33-month low in signs the economic recovery is accelerating. Factory production climbed 10.1 percent in November from a year earlier, the National Bureau of Statistics said today in Beijing, compared with the 9.8 percent median estimate of analysts surveyed by Bloomberg News. Retail sales growth accelerated to 14.9 percent, while the consumer price index rose 2 percent from a year earlier. Today’s reports may reassure China’s new leadership under Communist Party chief Xi Jinping that growth in the world’s second-largest economy, which has slowed for seven quarters, will exceed the government’s target this year. The data may also reduce the odds of additional fiscal or monetary easing to support expansion.
“The Chinese economy is now in a sweet spot and can stay in the sweet spot” through the first half of 2013, Lu Ting, head of Greater China economics at Bank of America Corp. in Hong Kong, said in a note today. “The current macro backdrop should bolster asset prices from equities to commodities.” The nation’s benchmark stock gauge, the Shanghai Composite Index, rose 4.1 percent last week, the most in a year, on expectations the recovery will gather pace and as the ruling Politburo signaled an increased focus on urban development.

China Rebounding as Xi Confronts 8.1% Unemployment Rate: Economy (Bloomberg)
China’s factory output and retail sales topped forecasts last month in signs that an economic recovery is accelerating, improvements that may pare a jobless rate newly estimated at almost double the official figure. Industrial production climbed 10.1 percent in November from a year earlier and retail sales growth accelerated to 14.9 percent, while inflation was 2 percent, the statistics bureau said yesterday. Trade data is due today. The urban unemployment rate exceeded 8 percent this year, a central bank-backed research center said yesterday in Beijing, citing a survey. China’s economic revival and inflation running at half the pace of this year’s target may help the Communist Party’s new leadership maintain public support after a once-a-decade power transition. Xi Jinping, the party chief who last week retraced a 1992 tour by Deng Xiaoping that spurred economic opening, faces a wealth gap that is now 50 percent higher than a risk level for social unrest, according to the same survey.
“China’s economy has bottomed and is rebounding, with expansion likely to reach 8 percent this quarter,” said Ren Xianfang, a Beijing-based analyst with IHS Global Insight. “A stabilizing economy is a prerequisite for the new leadership to push reform and tackle social problems such as the public discontent about the widening wealth gap.” The MSCI Asia Pacific Index rose 0.1 percent as of 9:54 a.m. in Tokyo.

China Survey Shows Wealth Gap Soaring as Xi Pledges Help  (Bloomberg)
China’s wealth gap is now 50 percent higher than a risk level for social unrest, according to a central bank-backed survey, underscoring new Communist Party chief Xi Jinping’s warning that corruption may endanger its rule. The Gini coefficient, an index measuring income inequality, was 0.61 in 2010, based on a survey of 8,438 households by the Survey and Research Center for China Household Finance, a body set up by the Finance Research Institute of the People’s Bank of China and Southwestern University of Finance and Economics. The survey also estimated the urban jobless rate in July 2012 was 8.05 percent, almost double the official figure. The ruling Communist Party pledged during a once-a-decade power transition last month to narrow the gap between rich and poor and address corruption that’s fueling discontent in the world’s second-biggest economy.
Reducing inequality is one of the main challenges facing China, the World Bank said in a February report that outlined policies to help the nation make the transition to a high-income country. “China’s wealth gap is so prevalent between regions, sectors, and urban and rural that it’s impossible to see a meaningful decline in the Gini coefficient in the short term,” Gan Li, director of the Chengdu-based center and a professor at Texas A&M University in College Station, Texas, said at a briefing in Beijing today. “Depending on market forces alone can’t resolve the gap and China must change the structure of income distribution and rely on massive fiscal transfers to narrow such a yawning disparity.”

Xi Travels to China’s Guangdong Echoing Deng Xiaoping 1992 Visit (Bloomberg)
Xi Jinping visited the southern province of Guangdong in his first trip since taking over the Communist Party, drawing parallels to a 1992 tour by paramount leader Deng Xiaoping that spurred economic opening. The visit included stopping Dec. 8 to lay a wreath at a statue of Deng built in the city of Shenzhen to commemorate the late leader’s visit two decades earlier, according to footage broadcast by Phoenix Television. Xi was shown telling members of his entourage, which Phoenix said included retired officials who had accompanied Deng on his trip, that China’s reforms were correct and must continue. Xi, 59, who succeeded Hu Jintao as the Communist Party’s general secretary last month, confronts economic growth this year forecast to be the lowest since 1999. The trip may signal that his tenure will follow that of Deng, whose 1992 visit to Guangdong was credited with helping rekindle China’s push to overhaul its economy after growth plummeted following the 1989 Tiananmen Square crackdown.
“Now is the time to remind people that only by continuing the Deng-style reform can China continue to cross the river by touching on the next stone,” said Huang Jing, a political science professor at the National University of Singapore, in reference to a phrase Deng made famous at the outset of his push to open China’s economy starting in 1978. Deng, who oversaw China’s economic rise after Mao Zedong’s death in 1976, championed the idea of testing policies locally and adopting them more broadly if they succeeded.

Japan Sinks Into Technical Recession With Two Contractions (Bloomberg)
Japan unexpectedly maintained its estimate for the economy’s contraction in the third quarter, against forecasts for a smaller drop, underscoring opposition calls for stronger measures to stoke demand. Gross domestic product shrank an annualized 3.5 percent in the three months through September, the Cabinet Office’s second estimate showed in Tokyo today, matching a preliminary reading. The median estimate of 21 economists surveyed by Bloomberg News was for a 3.3 percent drop. The government revised down the previous quarter’s figure to a annualized 0.1 percent contraction, matching the textbook definition of a recession. The figures add to evidence that the world’s third-largest economy will shrink again this quarter as exports fall and domestic demand stays weak. Opposition leader Shinzo Abe, whose party is leading in polls to win national elections on Dec. 16, has called for more fiscal stimulus and “unlimited” monetary easing to boost growth.
“There’s almost no doubt that Japan’s economy will contract again this quarter,” Yoshimasa Maruyama, chief economist at Itochu Corp. (8001) in Tokyo, said before the report. “Exports and consumer spending remain weak, and companies may find it difficult to increase investment in this environment.” The yen was trading at 82.58 per dollar at 9:15 a.m. in Tokyo after touching 82.64, an eight-month low, earlier in the day. The Nikkei 225 Stock Average was 0.4 percent higher, heading for its highest close since April after U.S. and Chinese data showed signs of recovery in the world’s two biggest economies.

Abe Says Japan Sales Tax Increase Depends on April-June Economy (Bloomberg)
Japan’s Liberal Democratic Party Leader Shinzo Abe said he would decide whether to increase a sales tax next year based on economic conditions in the second quarter. “It’s impossible to raise the tax if deflation deepens,” Abe said during a Fuji television program today. A decision will be made after data on economic conditions from April to June become available next August, he said. Polls show the LDP, the largest opposition party, is on track to return to power it lost in 2009 after the Dec. 16 election, with an absolute majority in the Diet’s lower house. Abe, in line to become prime minister, has called for “unlimited” monetary easing to end more than a decade of falling prices. Japanese Prime Minister Yoshihiko Noda won parliamentary approval in August for his bill to raise the country’s sales tax for the first time in 15 years.
The bill raises the tax to 8 percent in April 2014 and to 10 percent in 2015, and a clause allows for implementation to be canceled based on an assessment of economic conditions. The last sales tax increase in 1997 contributed to pushing the economy into a 20-month recession, costing then-premier Ryutaro Hashimoto his job.

Italy Vote Will Test EU Nobel Winners After Greek Buyback (Bloomberg)
The imminent end of Italian Prime Minister Mario Monti’s government threatens to open a new front in Europe’s crisis fight before a year-end summit, as Greece wraps up a six-month effort to secure a new bailout payment. European Union leaders, gathering in Oslo today to collect the Nobel Peace Prize, were set to check an item off their to-do list with the completion of a 10 billion-euro ($13 billion) Greek debt buyback. At the same time, former Italian Prime Minister Silvio Berlusconi’s pledge to topple Monti with his German-skeptic, anti-austerity message may rattle investors. Greece is using bailout funds to repurchase bonds with a face value of about 30 billion euros in a move that EU leaders said puts the nation on the path to debt sustainability. In Italy, where 10-year bond yields widened last week for the first time in nearly a month, Monti said Dec. 8 he will resign due to parliamentary opposition from Berlusconi and his allies, who’d previously backed the government.
“The underlying cracks within the euro zone are actually widening,” Georg Grodzki, head of credit research at Legal & General Investment Management in London, which has about $290 billion of bond funds, said in an interview yesterday. “Investors will be reading Italian politicians’ lips very, very closely.”

Italian Bonds Decline as Berlusconi Threatens Government (Bloomberg)
Italian 10-year government bonds posted their first weekly drop in four after former Premier Silvio Berlusconi threatened to withdraw his party’s support for Prime Minister Mario Monti’s coalition government. Declines yesterday pushed the yield to the most since Nov. 28 as Berlusconi’s top political deputy called for an “orderly end” to Monti’s government, saying the administration failed to develop a strategy to halt the recession. Germany’s two-year notes advanced amid speculation the European Central Bank will cut interest rates after a report yesterday showed the country’s industrial production declined in October. Finnish and Dutch two-year yields fell below zero yesterday. The drop in Italian bonds “gives us a good clue as to how much the market doesn’t like the idea of the politicians being back in power,” said Marc Ostwald, a rates strategist at Monument Securities Ltd. in London. There may be “a drift higher in yields,” he said.
Italian 10-year yields rose three basis points, or 0.03 percentage point, to 4.53 percent at 5 p.m. London time yesterday, after being as high as 4.65 percent. The 5.5 percent bond due November 2022 dropped 0.23, or 2.30 euros per 1,000- euro ($1,294) face amount, to 108.11. German yields fell as three officials with knowledge of ECB deliberations said a majority of policy makers were open to a rate cut. The central bank lowered growth forecasts this week.

Greece Is Close to Reaching Debt Buyback Target, Official Says (Bloomberg)
Greece is near to reaching its target in a buyback of sovereign debt that will unlock aid from the International Monetary Fund and the European Union, according to a Greek government official. The amount offered in the buyback of Greece’s bonds is close to 30 billion euros, the official at the Finance Ministry said on condition of anonymity, referring to the face value of the securities. The transaction went “very well,” Prime Minister Antonis Samaras told reporters in Munich late yesterday after meeting leaders of the German state of Bavaria. Domestic and overseas investors offered to sell back to Greece as much as 27 billion euros of their holdings of the nation’s bonds, state-run NET TV reported. Greek banks submitted offers of around 10 billion euros, while foreign investors, including hedge funds, offered as much as 16 billion euros, Kathimerini newspaper said.
Greece is using a 10 billion-euro loan from Europe’s bailout fund to repurchase debt it sold earlier this year and secure funds that have been blocked since June as the government tries to get its bailout program back after two elections and a deepening recession. The buyback was part of a package of measures approved by euro-area finance ministers on Nov. 27 to lower the nation’s debt to 124 percent of gross domestic product by 2020 from a projected 190 percent in 2014.

20121210 1001 Global Commodities Related News.

Speculators Cut Bullish Bets as U.S. Talks Stall: Commodities (Bloomberg)
Investors cut bullish commodity bets for the first time in three weeks as U.S. lawmakers appeared no closer to an agreement to avert more than $600 billion in automatic tax increases and spending cuts and Europe cut its growth outlook. Speculators and money managers decreased net-long positions across 18 U.S. futures and options by 3.4 percent to 898,380 contracts in the week ended Dec. 4, U.S. Commodity Futures Trading Commission data show. Gold holdings fell 25 percent, the biggest drop since March, as Goldman Sachs Group Inc. said the longest winning streak in at least nine decades will peak next year. Wheat bets fell for the second time in three weeks.
The Standard & Poor’s GSCI Spot Index of 24 raw materials tumbled 2.6 percent last week, the most since September. U.S. House Speaker John Boehner said Dec. 7 that it had been a “wasted week” in talks with President Barack Obama to avoid the so-called fiscal cliff. The European Central Bank said a day earlier that it’s now expecting a contraction instead of growth next year, and President Mario Draghi said the region won’t start to emerge from the slump until the second half of 2013. “There’s an overriding fear of the fiscal cliff,” said Jeffrey Sica, who helps oversee more than $1 billion of assets as the president and chief investment officer at Sica Wealth Management LLC in Morristown, New Jersey. “One of the main causes for the selloff is we have this incredible discrepancy regarding growth in general. Not only growth in the U.S., but also growth in Europe and Asia.”

Wheat Market Recap Report (CME)
March Wheat finished down 1 at 861, 3 3/4 off the high and 8 1/4 up from the low. May Wheat closed down 3/4 at 870 1/4. This was 8 1/2 up from the low and 3 1/2 off the high.
March Chicago and KC wheat traded slightly lower on the day but managed to hold up rather well against sharp declines in corn and soybeans. A better than expected jobs report sent the US Dollar higher but negative political rhetoric in regards to yearend tax reform kept outside markets shaky. Light rainfall moved across Illinois, Indiana, Ohio, and Pennsylvania today which should help soil conditions. The updated Drought Monitor showed dry conditions spreading east into Illinois, southern Indiana, Kentucky, and Arkansas. Extreme drought conditions are showing up in areas of the southeast and Carolinas. Good precipitation from December through April will be needed. The west remains extremely dry with little to no relief in sight. Additional downside was due to profit taking as some expect export demand could be slashed in next week's USDA report which could increase the domestic carryout significantly. Some in the trade expect a modest uptick of just over 710 million bushels vs. 704 currently.
March Oats closed down 6 3/4 at 391 1/4. This was 3 3/4 up from the low and 10 3/4 off the high.

Corn Market Recap for 12/7/2012 (CME)
March Corn finished down 14 1/4 at 737 1/4, 15 1/2 off the high and 2 1/4 up from the low. May Corn closed down 13 3/4 at 739 1/4. This was 2 1/2 up from the low and 15 off the high. March corn traded sharply lower into the closing bell following very disappointing export demand data released yesterday. Profit taking was noted and the US dollar was strong on the day which pressured the broader commodity market. Many analysts are now cutting export demand in next week's USDA report which could mean a slight uptick in the crop year carryout to just over 660 million bushels vs. current estimates of 647. This would still be the tightest carryout since 1995/96. Early support was linked to flooding in Argentina but rainfall will come to an end today. A drier trend will begin over the weekend which will help progress planting in some areas. Argentina corn planting was pegged at 55% complete vs. 69% last year.
Overall, Brazil conditions are ideal with rain and sunshine and temperatures are not expected to rise to above normal levels. January Rice finished down 0.045 at 15.265, 0.145 off the high and equal to the low.

Recap Energy Market Report (CME)
January crude oil prices trended lower throughout the US trading session and registered an inside day range in the process. Crude oil rallied to its high of the session in response to US jobs data that came in above expectations. While that seemed to bolster the case for an economic turnaround, a disappointing consumer sentiment reading and gains in the US dollar soured that early optimism. January heating oil registered a new low for the decline this morning, falling to its lowest level in more than four months. January crude oil ended the week at the lower end of the nearly $5 range and down 3.3%.

Oil Advances as China Rebound Accelerates Before OPEC Meeting (Bloomberg)
Oil rose from the lowest level in three weeks in New York after reports showed China’s economy improved last month and crude processing climbed to a record. OPEC meets in Vienna this week to discuss its production quota. Futures advanced as much as 0.3 percent after falling the past four days. China’s oil refining climbed 9.1 percent in November from a year ago to 41.6 million metric tons, the National Bureau of Statistics in Beijing said yesterday. Industrial production jumped 10.1 percent and retail sales increased 14.9 percent. The Organization of Petroleum Exporting Countries meets on Dec. 12. Saudi Arabia is content with current prices, the country’s petroleum minister said last week. “The Saudis don’t want prices to go up much from here,” Robin Mills, the head of consulting at Dubai-based Manaar Energy Consulting and Project Management, said yesterday. “Some members like Iran may want a cut in production, but the oil price is still healthy so it’s difficult for OPEC members to claim there’s oversupply.” Crude for January delivery rose as much as 25 cents to $86.18 a barrel and was at $86.12 in electronic trading on the New York Mercantile Exchange at 11:17 a.m. Sydney time. The contract slid 33 cents on Dec. 7 to $85.93, the lowest close since Nov. 15. Prices slid 3.4 percent last week and are down 13 percent this year. Brent for January settlement gained 38 cents to $107.40 a barrel on the London-based ICE Futures Europe exchange. The European benchmark contract was at a premium of $21.28 to West Texas Intermediate futures. Economists surveyed by Bloomberg forecast China’s industrial production would increase 9.8 percent and retail sales would gain 14.6 percent. The nation is the world’s biggest crude consumer after the U.S. OPEC will probably leave its group production quota of 30 million barrels a day unchanged, according to a Bloomberg News survey of 18 analysts. “The prices are fine and customers are happy,” Ali Al- Naimi, Saudi Arabia’s petroleum minister, said on Dec. 7.

Copper Has Longest Run of Weekly Gains in 10 Months (Bloomberg)
Copper futures rose, capping the longest run of weekly advances in 10 months, as U.S. payrolls gained more than projected, boosting economic optimism and signaling more metal demand. Employment climbed by 146,000 in November, topping the 85,000 median estimate in a Bloomberg survey of economists, a government report showed today. The unemployment rate fell to the lowest in almost four years. Copper also rose as analysts forecast industrial output will accelerate in China, the world’s top consumer of base metals. “Markets are moving in reaction to the jobs report, and the idea is that we’re finally in the mind-set that things are going to get better” for the economy, Frank Cholly, a senior commodity broker at RJO Futures in Chicago, said in a telephone interview. “There are also signs of growth out of China.”
Copper futures for March delivery rose 0.5 percent to settle at $3.663 a pound at 1:21 p.m. on the Comex in New York. This week, the price advanced 0.4 percent, the fourth straight gain and the longest rally since Feb. 3. The U.S. is the second- biggest consumer of the metal. Chinese industrial-production growth probably accelerated for the third straight month in November to 9.8 percent from a year earlier, while retail sales probably rose more than 14 percent, the most since March, according to median estimates in Bloomberg News surveys before data due on Dec. 9. On the London Metal Exchange, copper for delivery in three months climbed 0.4 percent to $8,035 a metric ton ($3.64 a pound). Aluminum, zinc, nickel and lead rose, and tin declined.

Silver Market Recap Report (CME)
The March silver contract forged an outside day up but the upside action was limited and it wasn't sustained. Silver was buffeted by the ebb and flow fiscal cliff sentiment throughout the session, but silver was generally lifted off the flow of US scheduled data. As suggested in the gold coverage today, a nearing to the end of the Lame Duck Congress on December 14th could serve to increase the volatility in the coming week in silver and other physical commodity markets. All things considered silver should have cheered the flow of US data as that at least partially countervails the new found slowing fears in Europe.

Gold Market Recap Report (CME)
A huge range today in gold shows a market that remains in the crosshairs of a number of technical and fundamental crossroads. Clearly gold was undermined into the payroll reports but clearly gold was lifted in the wake of better than expected US scheduled data flows. However, gold and other physical commodity markets weren't able to embrace a full on "risk-on" environment, perhaps because negative talk from the Fiscal cliff battle countervailed the positives from the jobs sector. In fact, considering the potential negative drag from the east coast storm, one might suggest that the US economy is holding together despite major negative influences. With February gold at the low today, sitting as much as $116 an ounce below the October highs, any clearing of the fiscal cliff cloud ahead, could be seen as a powerful bullish tonic for gold and other physical commodity markets. On the other hand, a nearing of the end of the lame duck congressional session, could serve to increase the volatility in both directions next week.

20121210 1109 Soy Oil & Palm Oil Related News.

ITS CPO export down 2.8% to 504,302 tonnes for the period of 1~10 Dec 2012.

Soybean Complex Market Recap (CME)
January Soybeans finished down 19 at 1472 1/4, 26 off the high and 2 1/4 up from the low. March Soybeans closed down 14 at 1472. This was 2 1/2 up from the low and 21 3/4 off the high.
January Soymeal closed down 7.8 at 442.9. This was 0.9 up from the low and 10.0 off the high.
January Soybean Oil finished down 0.07 at 51.13, 0.25 off the high and 0.37 up from the low.
January soybeans traded sharply lower on the day on weaker outside markets, profit taking, and pressure that spilled over from a sharply lower corn market. Demand from China continues to add a bullish tilt to the market place and the USDA announced this morning that exporters sold 115,000 tonnes of soybeans to China for this crop year. Cash markets are firm in the Midwest and basis has surged in the PNW this week on rumors that up to 6 cargos of soybeans have been sold to China. The market is looking ahead to a large South American crop at the moment which could provide pressure long term. Rainfall in Argentina will back off today and a drier pattern will persist into next week. This should help move the soybean planting pace which is currently estimated at 54% vs. 69% last year. Weather in Brazil remains favorable with a good mixture of light rainfall and sunshine. The USDA currently has Brazil soybean production at 81 million tonnes but some believe the USDA may increase production on next week's report to 81.50 or 82 million tonnes.

EDIBLE OIL: Malaysian palm oil futures closed flat but notched their biggest weekly loss in almost a month amid an uncertain outlook where record high stocks are weighing on prices at the same time as expectations are rising for a pick up in demand. (Reuters)

VEGOILS-Palm oil flat, posts biggest weekly loss in nearly a month
Fri Dec 7, 2012 5:23am EST
(Updates prices, adds details on Commodities Ministry briefing)
    * Benchmark prices set for 3 percent weekly loss
    * Stocks weigh on sentiment, but traders looking at strong
demand as well
    * Biofuel margins on the rise, supporting market

    By Niluksi Koswanage
    KUALA LUMPUR, Dec 7 (Reuters) - Malaysian palm oil futures
closed flat on Friday, but notched their biggest weekly loss in
almost a month amid an uncertain outlook where record high
stocks are weighing on prices at the same time as expectations
are rising for a pick up in demand.
    Palm oil futures have fallen almost 28 percent so far this
year on record stocks and concerns that the euro zone debt
crisis would reining in global growth.
    "Palm oil is stuck," said a trader with a commodities
brokerage in Kuala Lumpur. "It is undervalued as biodiesel
demand has kicked in because of the high margins, but it also
cannot go higher because of high stocks."
    The benchmark February contract on the Bursa
Malaysia Derivatives Exchange settled up 0.04 percent to 2,296
ringgit ($750) per tonne in see-saw trade. The contract
recorded a decline of about 3 percent for the week, its third
straight weekly loss and the steepest fall since Nov. 11.
    Total traded volumes stood at 34,886 lots of 25 tonnes each,
compared to the usual 25,000 lots.
    Malaysian palm oil stocks probably hit a record 2.58 million
tonnes in November, a Reuters survey showed ahead of official
data on Monday, helping the tropical oil widen its discount to
competing Argentine soyoil to $360 per tonne.
    The discount remains unsustainable and will narrow as more
demand shifts to palm oil in the next few months, especially
with wet weather delaying soy plantings and curbing yields in
the world's biggest soyoil exporter Argentina.
    Traders are watching for cargo surveyor data on Malaysia's
Dec. 1-10 palm oil exports on Monday to confirm strong demand as
No.2 edible oil buyer China stocks up before stricter quality
controls on the refined grades come into effect on Jan. 1.
    In addition, export data may be even stronger as Malaysian
planters scramble to exhaust an annual tax-free export quota
totalling 3.5 million tonnes that is set to expire at the end of
December.
    Malaysia's Commodities Ministry will hold a briefing for
refiners on Monday to get feedback on the government's plan to
cut crude palm oil export taxes and completely dismantle the tax
free export quota for the grade, traders said.
    Some planters are asking for the quota to continue until
stocks fall below 2 million tonnes.
    Brent crude steadied above $107 per barrel on Friday, but
prices were headed for their biggest weekly loss in more than a
month on worries about the euro zone economy and a looming
fiscal crisis in the U.S., the world's top oil consumer.
    Despite the decline in oil markets, Singapore gas oil
GO-SIN sells at about $931 per tonne -- a 37 percent premium
to Indonesian crude palm oil used in biofuel.
    In palm oil's competing markets, U.S. soyoil for December
delivery edged up 0.2 percent in Asian trade. The most
active May 2013 soybean oil contract on the Dalian
Commodity Exchange ended almost flat.

20121207 1821 FCPO EOD Daily Chart Study.

FCPO closed : 2296, changed : +1 point, volume : lower.
Bollinger band reading : pullback correction little downside biased.
MACD Histogram : recovering, buyer seller battling.
Support : 2300, 2250, 2230, 2200, 2130 level.
Resistance : 2300, 2350, 2400, 2450, 2490 level.
Comment :
FCPO closed 1 tick higher with slowing down volume traded. Soy oil price currently trading flat after overnight closed firmer while crude oil recording small gain after fall.
Price traded range bound again ahead on next Monday MPOB official November data and 2 cargo surveyors export figures while soy oil price remained pressure upward due to weather factor.
Daily chart study revised to suggesting a pullback correction little downside biased market development.
When to buy : buy at support or weakness with quick cut loss and profit target.
When to sell : sell at resistant or strength with quick cut loss and profit target.

20121207 1738 FKLI EOD Daily Chart Study.

FKLI closed : 1615.5 changed : +0.5 point, volume : lower.
Bollinger band reading : correction range bound downside biased.
MACD Histogram : rising higher, buyer in advantage.
Support :  1615, 1610, 1600, 1595 level.
Resistance : 1623, 1627, 1635, 1640 level.
Comment :
FKLI closed 1 tick higher with decreasing volume traded doing 2 points discount compare to cash market that closed marginally higher. Overnight U.S markets closed firmer and today Asia markets ended mixed again while European markets moving side ways between gains and losses.
Global markets traded mixed ahead of U.S. payroll data, news on Bundesbank slash Germany 2013 growth forecast to 0.4& and 7.4 magnitude earthquake on east coast of Japan affecting Tokyo buildings and issue 1 meter tsunami alert.
Daily chart reading still calling a correction range bound down side 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.

20121207 1640 Global Markets & Commodities Related News.

STOCKS: European stocks looked set to open slightly higher and Asian shares touched fresh 16-month highs with hints of renewed efforts to avert the U.S. "fiscal cliff" ahead of jobs data. Signs that China's economy was stabilising also lent support. U.S. stocks closed modestly higher on Thursday.  (Reuters)


FOREX-ECB knocks wind out of euro bulls, focus on US jobs
The euro languished near one-week lows against the dollar, having suffered a major setback the previous day when the European Central Bank divulged its bleak outlook for the euro zone and spoke of turning interest rates negative.
"The main trigger for the sharply negative euro reaction was the mention of a 'wide' discussion over rate cuts, while Mr. Draghi also said the ECB was 'operationally ready' for negative rates," said BNP Paribas strategist Vassili Serebriakov.

ECB discusses rate cut, depicts bleak 2013
The European Central Bank pondered an interest rate cut on Thursday and predicted the euro zone economy would shrink again in 2013, leaving the door open to a possible reduction in borrowing costs early next year. (Reuters)

U.S. likely to extend Iran sanction waivers-sources
The United States will likely give India, South Korea, Turkey and others another six-month reprieve on Friday from financial sanctions because they have reduced their purchases of crude oil from Iran, two U.S. government sources said on Thursday. (Reuters)

GRAINS: U.S. soybeans edged down, coming off a near one-month top hit in the previous session, but worries about unfriendly crop weather curbing South American supply set up prices for their strongest weekly showing in more than three months. Corn rebounded slightly from losses in the previous session, when it was hurt by weak U.S. exports, while wheat also firmed, amid concern over winter crops in the United States.   (Reuters)

U.S. winter wheat abandonment may top 25 pct-experts
U.S. winter wheat farmers could abandon more than a quarter of the new wheat crop due to devastating weather, though decisions on abandonment will not be made until spring, experts said this week. (Reuters)

ArcelorMittal pulls French bid for EU steel project
A politically charged deal between the French government and ArcelorMittal to preserve jobs at an ailing steelworks looked at risk of unravelling on Thursday after the global steel giant ditched a bid to run an EU-funded project there. (Reuters)

Enbridge expands oil pipeline plan to C$6.2 bln
Enbridge Inc on Thursday proposed a C$6.2 billion expansion of its oil pipeline system, aimed at moving surging volumes of light crude from Western Canada and the North Dakota Bakken to refineries in the eastern part of the continent and U.S. Midwest. (Reuters)

OIL: Brent crude steadied above $107 per barrel, but prices were headed for their biggest weekly loss since October on worries about the euro zone economy and a looming fiscal crisis in the United States.  (Reuters)

BASE METAS: London copper was steady and was set to close the week little changed as traders focused on the progress of talks in the United States to avert a looming fiscal crisis, as well as the November jobs report. (Reuters)

PRECIOUS METALS: Gold nudged higher, extending gains from the previous session when bullion was boosted by prospects of future interest cuts by the European Central Bank, but the precious metal was headed for its second straight week of decline.  (Reuters)


PREVIEW-China iron ore, crude imports seen up in Nov on restocking
BEIJING, Dec 7 (Reuters) - China's imports of crude oil and iron are expected to rise in November as refineries raise runs and steel mills restock, but an uncertain economic outlook continues to hold back purchases of a range of commodities.
The pace of activity in China's vast manufacturing sector quickened for the first time in 13 months in November, a survey of private factory managers found, adding to evidence that the economy is reviving after seven quarters of slowing growth.

China daily steel output rises 0.4 pct in late Nov -CISA
SHANGHAI/BEIJING, Dec 7 (Reuters) - China's steel mills produced an average of 1.9599 million tonnes of steel a day over the Nov. 21-30 period, an increase of 0.42 percent over the previous 10 days, data from the China Iron and Steel Association showed on Friday.
Chinese steel output normally tails off as winter approaches and construction activity in northern regions slows, but it has remained at relatively high levels throughout November.

METALS-LME copper holds above $8,000 ahead of US jobs data
London copper was steady, and was set to close the week little changed, as traders focused on the progress in U.S. talks to avert a looming fiscal crisis while also waiting for a crucial jobs report from the world's largest economy.
"China data of late has been looking relatively positive. The wild card is the FOMC. We think that they may talk about extending the QE (quantitative easing) program ... that could be a little positive for commodities in general," said Nick Trevethan, senior commodity strategist at ANZ in Singapore.
"That said, fiscal cliff worries are likely to keep a lid on things for the most part. We are looking to see a small pull back by the end of the year," he added.

PRECIOUS-Gold inches up; headed for 2nd week of losses
Gold nudged higher, extending gains from the previous session when bullion was boosted by prospects of future interest cuts by the European Central Bank, but the precious metal was headed for its second straight week of decline.
"Gold's fundamentals are intact," said Chen Min, an analyst at Jinrui Futures in the southern Chinese city of Shenzhen.
"Investors seem to regard $1,690 as an attractive level to buy gold."


Baltic index down on weak capesize rates
Dec 6 (Reuters) - The Baltic Exchange's main sea freight index, which tracks rates for ships carrying dry commodities, fell on Thursday for a sixth straight session as rates for capesizes and panamaxes continued to remain weak.
The overall index, which reflects daily freight market prices for capesize, panamax, supramax and handysize dry bulk transport vessels, fell 3.13 percent to 990 points.

20121207 1120 Global Markets & Energy Related News.

GLOBAL MARKETS-Asia shares edge higher, focus on U.S. jobs
TOKYO, Dec 7 (Reuters) - Asian shares ticked up to a 16-month high following modest overnight gains in global equities as investors watched progress in U.S. budget talks and awaited U.S. nonfarm payrolls data later in the day.
"The main board is expected to rise on Friday, but gains will be limited in the absence of game-changing events since the last session as we await U.S. employment data," Cho Byung-hyun, an analyst at Tong Yang Securities, said of Seoul shares.

FOREX-Downbeat ECB knocks wind out of euro bulls
SYDNEY, Dec 7 (Reuters) - The euro languished at one-week lows against the greenback, having suffered a major setback after the European Central Bank painted a bleak outlook for the euro zone and discussed cutting interest rates.
"The main trigger for the sharply negative euro reaction was the mention of a 'wide' discussion over rate cuts, while Mr. Draghi also said the ECB was 'operationally ready' for negative rates," said BNP Paribas strategist Vassili Serebriakov.

ECB discusses rate cut, depicts bleak 2013
FRANKFURT, Dec 6 (Reuters) - The European Central Bank pondered an interest rate cut on Thursday and predicted the euro zone economy would shrink again in 2013, leaving the door open rrowing costs early next year.
ECB President Mario Draghi said the policymaking Governing Council held a wide discussion on interest rates before opting  to leave them on hold. The euro fell against the dollar and the yen in response.

 US seen extending Iran sanction waivers to India,others-sources
WASHINGTON, Dec 6 (Reuters) - The United States is likely to announce on Friday that it will give at least seven economies including India, South Korea and Turkey another six-month reprieve from financial sanctions against Iran, two U.S. government sources said.
As Washington works with the economies to rein in Tehran's nuclear ambitions, the State Department will likely extend the waivers, known as "exceptions," because they reduced their purchases of Iran's crude.

Argentina's LNG imports seen at record in 2013
BUENOS AIRES, Dec 6 (Reuters) - Argentina will buy as many as 83 cargoes of liquefied natural gas (LNG) in 2013, rising to a record on expectations for brisker economic growth, a source at state energy company Enarsa said on Thursday.
The South American country originally planned to import 80 cargoes this year, but slower economic growth and increased supplies of piped natural gas from Bolivia reduced the original forecast to 56 cargoes.

Indonesia 2013 LNG exports to drop 13.8 pct
JAKARTA, Dec 6 (Reuters) - Indonesia's liquefied natural gas (LNG) exports are expected to drop 13.8 percent in 2013 to 274 cargoes as its production declines and it sets aside more gas for domestic use, a source at its new interim oil and gas regulator (SKMigas) said.
Indonesia, the world's third-largest LNG exporter, is increasing the use of natural gas at home to avoid costly imports and to feed rising demand. Supplies have also declined from its ageing fields.

Oil falls on euro zone concerns, dollar strength
NEW YORK, Dec 6 (Reuters) - Oil prices fell on Thursday after the head of the European Central Bank said the euro zone's economic outlook faces "downside risk" and a recovery may not happen until later in 2013.
"Oil prices dropped on economic uncertainty in both Washington and Europe, with the ECB comments indicating it could take a year to start recovery there," said Gene McGillian of Tradition Energy in Connecticut.

20121207 0955 Global Economy Related News.

Australia: Jobless rate unexpectedly falls
Australia’s unemployment rate unexpectedly dropped in November as a labour market driven by mining-industry hiring weathers a weaker global economy. The jobless rate fell to 5.2% from 5.4% in October. That compares with the median estimate for unemployment of 5.5% in a Bloomberg News survey. The number of people employed advanced by 13,900, compared with the consensus forecast for no change. (Bloomberg)

UK: BOE keeps stimulus on hold as Osborne extends fiscal squeeze
BOE officials left their bond-buying programme on hold as they assessed the need for more stimulus a day after Chancellor of the Exchequer George Osborne committed the country to five more years of austerity. Governor Mervyn King and the Monetary Policy Committee kept their quantitative-easing target at GBP375bn, a move predicted by all 36 economists in a Bloomberg News survey. (Bloomberg)

Germany: Manufacturing orders surge in sign of resilience
German factory orders surged almost four times as much as economists forecast in October, driven by foreign demand. Orders, adjusted for seasonal swings and inflation, jumped 3.9% from September’s revised growth of 2.4%. The increase is the biggest since January 2011 and exceeds the median forecast for a 1% gain in a Bloomberg News survey. From a year earlier, orders fell 2.4% when adjusted for work days. (Bloomberg)

EU: Draghi leaves rate-cut door ajar as ECB reduces forecasts
The ECB cut its growth and inflation forecasts and President Draghi said the euro area won’t start to shake off its slump until 2H2013, leaving the door ajar for further interest-rate reductions. “Weak activity is expected to extend into next year,” Draghi said after policy makers left the benchmark rate at 0.75%. (Bloomberg)

US: Households back to slashing debt
Households went back to shedding debt in the third quarter, with Americans repaying mortgages even as student and car loans piled up. The Federal Reserve, in its voluminous flow-of-funds report, reported household debt fell an annualised 2% in the third quarter to USD12.87tn, marking the 16th period out of 18 that has seen a decline. The 2% drop was the largest since the second quarter of 2011. (MarketWatch)

US: Jobless claims drop 25,000 to 370,000
New applications for US unemployment benefits fell for the third straight week, but they still haven’t fallen to quite the same level that prevailed before the superstorm Sandy smashed into the Northeast in late October. Initial jobless claims sank by 25,000 to a seasonally adjusted 370,000 in the week ended 1 Dec. Claims from two weeks ago were revised upward to 395,000 from an initial read of 393,000. (MarketWatch)

US: Consumer comfort holds near highest since April
Consumer confidence held close to a seven-month high last week as the holiday-shopping season put more Americans in the mood to spend, and claims for unemployment benefits declined. The Bloomberg Consumer Comfort Index eased to minus 33.8 in the period ended 2 Dec from minus 33. This marks the 11th straight above minus 40, a point associated with recessions and their aftermath. (Bloomberg)

20121207 0954 Malaysia Corporate Related News.

Karambunai to pay off RM812m debts
Karambunai has proposed a capital reconstruction by cancelling RM0.40 of its RM0.50 sen par value shares to pay off its total accumulated losses of RM812m. The corporate exercise also includes a fundraising via proposed renounceable rights issue of 507.5m new shares on the basis of one rights for every four existing shares, together with 1.02bn free detachable warrants on the basis of two warrants for every one rights subscribed. The price and entitlement date will be determined later, with the company intending to raise at least RM22.3m. (Malaysian Reserve)

Maxis to invest up to RM500m in 4G, rollout in 1Q2013
Maxis is expected to invest RM400m–RM500m over the next three years in long-term evolution (LTE) or 4G services, which it will roll out in Klang Valley in 1Q2013. Services will be extended to Penang, Johor Bahru, Sabah and Sarawak in four to six months after the Klang Valley launch. (StarBiz)

Scomi extends cut-off date for proposed bond issue
Scomi and IJM Corp have agreed to extend the cut-off date for the fulfillment of conditions precedent for the completion of a proposed RM110m convertible bond issue to 11 Feb 2013, from 24 Dec 2012. Among the conditions still required include approvals from the Securities Commission. The company will then likely call for an EGM to vote on the proposed issue to IJM. There are two factions in the company, one which is against the entry of IJM and the other which welcomes the company. (Financial Daily)

Gamuda bidding for several infrastructure projects next year
Gamuda is looking forward to participate in upcoming infrastructure projects including the Kuala Lumpur–Singapore high speed railway link and the MRT second line. The progress of the MRT South Buloh-Kajang line is on track to be completed by July 2017, with some 95% of the RM19.8bn contract value already awarded. Meanwhile, Group MD Datuk Lim Yun Ling is planning to renew his contract for another five years. He has been with the company for 35 years. (StarBiz)

MMHE wins RM165m gas project
Malaysia Marine and Heavy Engineering (MMHE) has won a contract worth RM165m from ExxonMobil Exploration and Production Malaysia Inc to build the facilities for the Damar gas development project. Damar is one of several investments that would enable ExxonMobil and Petronas Carigali SB to develop natural gas assets. The project is about 200km off the east coast of Peninsular Malaysia in 55m of water. (BT)

20121207 0945 Global Markets Related News.

Asia FX By Cornelius Luca - Thu 06 Dec 2012 15:55:01 CT (CME/www.lucafxta.com)
The appetite for risk shrank selectively on Thursday ahead of the US non-far payrolls and despite the lack of progress in the "fiscal cliff" negotiations. The European currencies sank after the ECB said that its regional GDP will likely decline next year. The commodity currencies ended off their highs and the yen consolidated. The US stock markets made little progress, while the gold/oil spread surged. The short-term outlook for most foreign currencies is sideways, but the European currencies have a bearish bias. The medium-term outlook for most of the foreign currencies is sideways. The LGR short-term model is short on all European currencies. Good luck!

Overnight
US: The jobless claims fell to 370,000 in the week ended December 1 from the previous week's revised figure of 395,000.
Canada: The Ivey Purchasing Managers Index fell to 46.4 in November from 58.3 in October.
Canada: Building permits rose 15% on a monthly basis during October after contracting 12.7% in September.

Today's economic calendar
Australia: AiG Performance of Construction Index for November
UK: RICS housing price balance for November
Japan:  Coincident index /leading economic index for October

Asian Stocks Rise as Fewer American File Jobless Claims (Bloomberg)
Asian stocks gained, with the regional benchmark index extending an eight-month high, as fewer Americans filed applications for unemployment benefits and Australia’s building industry shrank at a slower pace. James Hardie Industries SE (JHX), the building materials suppliers that gets about 67 percent of sales from the U.S., climbed 1.6 percent in Sydney. Commonwealth Bank of Australia, the country’s biggest lender, climbed 1 percent. Renesas Electronics Corp. gained 1 percent in Tokyo on a report NEC Corp., Mitsubishi Electric Corp. and Hitachi Ltd. have agreed on a bailout for the ailing chipmaker. The MSCI Asia Pacific Index (MXAP) rose 0.1 percent to 125.91 as of 9:43 a.m. Tokyo time, headed for its highest close since April 3. Markets in China and Hong Kong have yet to open. The measure is heading for its third week of advance amid signs of recovery in the world’s two largest economies and optimism U.S. lawmakers will agree on a budget deal to avert the so-called fiscal cliff.
“We could see a short-term rally, driven by exporters amid signs of improving U.S. economy,” said Masahiko Ejiri, a Tokyo- based fund manager for Mizuho Asset Management Co., which oversees about $45 billion. “This rally may not be sustained. Europe’s problems are likely to persist.”

Japanese Stocks Hold Gains Ahead of U.S. Payroll Report (Bloomberg)
Japanese shares swung between gains the losses ahead of a U.S. payrolls report and as a technical indicator showed the market may be overbought after the Nikkei 225 (NKY) Stock Average rose to a seven-month high yesterday. Kansai Electric Power Co. (9503) paced gains among utilities on a Kyodo News report that the government may allow the restart of some nuclear reactors this summer. Softbank Corp. fell 1.1 percent after Nikkei newspaper reported NTT DoCoMo Inc. may start selling Apple Inc.’s iPhone to remain competitive. Sharp Corp. gained 6 percent, soaring 24 percent since announcing a capital alliance with Qualcomm Inc. on Dec. 4. The Nikkei 225 was little changed at 9543.71 as of 9:38 a.m. after rising as much as 0.2 percent. The equity gauge capped the biggest monthly gain since February last month on speculation Japan’s opposition will win the Dec. 16 election and call for more stimulus. The Topix Index rose 0.1 percent to 789.15, with about seven stocks falling for every six that gained.
“Investors are waiting for the U.S. employment data and so are finding it hard to pick a direction,” said Juichi Wako, a senior strategist at Tokyo-based Nomura Holdings Inc. “We don’t think the U.S. is going to go off the fiscal cliff. We expect there to be some compromise in the end, but it’s too early for unguarded optimism.” The Relative Strength Index (NKY) on the Nikkei 225 was 70.5 today, with some traders seeing a reading above 70 as a sign the measure is overbought.

U.S. Stocks Rise as Apple Rebounds Amid Budget Talks (Bloomberg)
U.S. stocks rose for a second day as Apple Inc. rebounded from its biggest drop in four years and investors weighed prospects for a budget deal in Washington. Apple advanced 1.6 percent, reversing an earlier loss. Akamai (AKAM) Technologies Inc. increased 10 percent after agreeing to sell services with AT&T Inc. H&R Block Inc. (HRB), the biggest U.S. tax preparer, advanced 5.1 percent after reporting a loss that was smaller than analysts estimated. Freeport-McMoRan Copper & Gold Inc. (FCX), the world’s largest publicly traded copper producer, and MetLife Inc. (MET), the biggest U.S. life insurer, declined at least 1.2 percent following analysts’ rating downgrades. The Standard & Poor’s 500 Index increased 0.3 percent to 1,413.94 at 4 p.m. New York time. The Dow Jones Industrial Average advanced 39.55 points, or 0.3 percent, to 13,074.04. More than 5.7 billion shares changed hands on U.S. exchanges, or 8.9 percent below the three-month average.
“Apple stock is taking a breather after a sharp selloff and that’s helping the overall market,” said Alan Gayle, senior strategist at RidgeWorth Capital Management in Richmond, Virginia, which oversees about $47 billion. “Most analysts continue to like their story. We’re seeing some validation of that. In addition, the jobless claims were better than expected. The data suggest the U.S. economy continues to heal and that will be the case as long as we don’t fall off the fiscal cliff.” A few dozen Republicans joined a bipartisan push to break an impasse between President Barack Obama and House Speaker John Boehner over taxes for the highest-earning Americans, signing a letter calling for openness to “all options.” Fewer Americans than projected filed applications for unemployment benefits last week as disruptions caused by superstorm Sandy waned.

European Stocks Advance to 18-Month High on U.S. Optimism (Bloomberg)
European (SXXP) stocks advanced to an 18- month high amid optimism U.S. lawmakers will agree on a new budget and avoid the so-called fiscal cliff. European Aeronautic, Defence & Space Co. jumped 8 percent after announcing a new shareholder structure and saying it will buy back shares. Daimler AG (DAI) rose 1.2 percent after selling half its remaining holding in EADS. (EAD) GDF Suez SA slid to its lowest ever after saying earnings will decline next year. The Stoxx Europe 600 Index added 0.7 percent to 278.82 at the close of trading, its highest since May 31, 2011. The gauge has surged 19 percent from this year’s low on June 4 as the European Central Bank announced a bond-buying plan, the Federal Reserve boosted stimulus measures and optimism rose that U.S. lawmakers will agree on a budget.
“Markets are moving on the expectation that however difficult things may be, there will be a U.S. budget deal,” said Mike Lenhoff, chief strategist at Brewin Dolphin Securities Ltd. in London. “It’s almost inconceivable at this stage that the Congress will allow the fiscal cliff to happen, especially when we don’t really know the severity of the recession.” About 80 members of Congress, comprising Republicans and Democrats, signed a letter calling for an exploration of “all options” in to end a deadlock between President Barack Obama and House Speaker John Boehner over taxes for the highest- earning Americans. Congress must strike a budget deal by the end of the year to prevent more than $600 billion of automatic tax increases and spending cuts from coming into effect.

Emerging Stocks Rise Second Day as Consumer Shares Gain (Bloomberg)
Emerging-market stocks rose to a seven-month high as speculation U.S. politicians will reach a budget deal spurred risk appetite and support widened for policies allowing foreign investment in India’s retail market. Hyundai Mobis Co. (012330), which got 21 percent of third-quarter sales from America, climbed to a six-week peak in Seoul. OAO Rostelecom, Russia’s state-run telephone operator, had the biggest gain in almost two months after a court ruling allowed investor Konstantin Malofeev to keep immunity from prosecution. Absa Group Ltd. (ASA) headed for the highest close since June on Barclays Plc’s plan to increase its stake in the Johannesburg- based lender.
The MSCI Emerging Markets Index added 0.2 percent to 1,019.48 at 1 p.m. in London, heading for the highest close since May. A few dozen Republicans joined a bipartisan push to break an impasse between President Barack Obama and House Speaker John Boehner over taxes for the highest-earning Americans, signing a letter calling for openness to “all options.” The leader of India’s fourth-largest party in the parliament said she would support the government’s plan to allow foreign investment in retail. “There has been growing optimism that a solution can finally be reached to resolve the fiscal cliff problem,” said Saharat Chudsuwan, who helps oversees $5 billion at Tisco Asset Management Co. in Bangkok. The BSE India Sensitive Index, or Sensex (SENSEX), gained for a third day, adding 0.5 percent. The rupee strengthened 0.8 percent versus the dollar, the highest in a month. Russia’s Micex Index (INDEXCF) increased 0.3 percent, rising for a second day, and Brazil’s Bovespa index declined 0.5 percent.

Aussie Set for Weekly Gain Before Chinese Production, Sales Data (Bloomberg)
Australia’s dollar was set for a five-day advance before Chinese data next week that may show the world’s second-largest economy is picking up. The so-called Aussie was near a two-month high after a private report showed the nation’s construction industry contracted at a slower pace. Demand for the currency was also supported after the statistics bureau reported a smaller-than- estimated trade deficit. “Chinese economic data are improving after concern about a slowdown,” said Teppei Ino, a Tokyo-based analyst at Bank of Tokyo-Mitsubishi UFJ Ltd., a unit of Japan’s biggest financial group by market value. “That’s providing some support for the Australian and New Zealand dollars.” Australia’s currency traded at $1.0484 as of 11:47 a.m. in Sydney after rising 0.3 percent to $1.0486 in New York when it reached $1.0516, the highest since Sept. 21. The New Zealand dollar, nicknamed the kiwi, bought 83.24 U.S. cents from 83.27. The Aussie has risen 0.5 percent this week, while the kiwi has advanced 1.5 percent.
China’s industrial production probably rose 9.8 percent in November from a year earlier, the fastest pace since March, according to the median estimate of economists surveyed by Bloomberg News. Retail sales are forecast to have increased 14.6 percent last month, compared with a 14.5 percent gain in October. The National Bureau of Statistics is due to release the figures on Dec. 9.

Euro Holds Drop on Slowdown Signs; Aussie Lower (Bloomberg)
The euro remained lower against the dollar after posting the biggest drop in a month on concern Europe’s debt crisis is weighing on growth. The shared currency headed for weekly declines against most of its 16 major peers before data forecast to show German industrial production stagnated. The European Central Bank yesterday cut its growth forecasts, leaving the door open to interest-rate reduction. Australia’s dollar fell from a two- month high before reports which may show the trade deficit widened. Demand for the yen was limited amid speculation the Bank of Japan will ease policy to boost economic growth. “Europe is in recession and with no prospects of it getting better any time soon,” said Kikuko Takeda, senior currency economist in London at Bank of Tokyo-Mitsubishi UFJ Ltd. “The euro will continue to be sold.”
The euro was little changed at $1.2969 per dollar as of 8:37 a.m. in Tokyo from yesterday, when it dropped 0.8 percent, the biggest decline since Nov. 2. The common currency traded at 106.85 yen from yesterday, when it lost 0.9 percent to 106.84. For the week, the euro is set for a 0.1 percent slide against the greenback and a 0.2 percent decline versus the yen. The Japanese currency traded at 82.39 to the dollar from 82.40 yesterday, and is up about 0.1 percent on the week. Australia’s dollar slipped 0.1 percent to $1.0477 from yesterday, when it touched $1.0516, the highest since Sept. 21.

Consumer Comfort in U.S. Holds Near Highest Since April (Bloomberg)
Consumer confidence held close to a seven-month high last week as the holiday-shopping season put more Americans in the mood to spend, and claims for unemployment benefits declined. The Bloomberg Consumer Comfort Index eased to minus 33.8 in the period ended Dec. 2 from minus 33. The reading, within the margin of error of 3 percentage points, was the 11th straight above minus 40, a point associated with recessions and their aftermath. Jobless claims decreased by 25,000 to 370,000 in the week ended Dec. 1, the Labor Department said. Holiday shoppers are taking advantage of discounting, expanded store hours and Internet deals, explaining why a gauge of the buying climate climbed to a five-year high. While confidence is getting a lift from cheaper gasoline and an improving job market, failure by lawmakers to prevent automatic tax increases threatens to throttle the household spending that accounts for 70 percent of the economy.
“I don’t expect that consumers will hold back during the holidays,” said Dean Maki, chief U.S. economist at Barclays Plc in New York. “I think the bigger risk is that as we move into the first quarter, if there’s not a resolution on the fiscal cliff,” Americans would cut back as their after-tax incomes decline, he said. The drop in claims was the third straight. The mid-Atlantic region, which employs about 14 percent of U.S. workers, is recovering after Sandy. Apart from the storm-related damage -- which may also be reflected in the November payrolls report tomorrow -- employers will probably curb hiring until the risks from the global slowdown and looming fiscal tightening dissipate.

Jobless Claims in U.S. Decline as Sandy Effect Wanes (Bloomberg)
Fewer Americans than projected filed applications for unemployment benefits last week as disruptions caused by superstorm Sandy waned. Jobless claims decreased by 25,000 to 370,000 in the week ended Dec. 1, Labor Department figures showed today in Washington. The median forecast of 52 economists surveyed by Bloomberg called for a drop to 380,000. A Labor Department spokesman said there was nothing unusual in last week’s data. The mid-Atlantic region, which employs about 14 percent of U.S. workers, is recovering after Sandy. Apart from the storm- related damage -- which may also be reflected in the November payrolls report tomorrow -- employers will probably curb hiring until the risks from the global slowdown and looming U.S. fiscal tightening dissipate.
“Sandy pushed up claims temporarily, and with this number we are pretty much back to where we were before the hurricane,” said Guy Berger, an economist at RBS Securities Inc. in Stamford, Connecticut, who accurately projected the drop in claims. “Layoffs are lingering at the same pace. Hiring remains relatively anemic.” Stock-index futures fell after European Central Bank President Mario Draghi said policy makers cut growth forecasts for the region and continued to see ‘downside risks.” The contract on the Standard & Poor’s 500 Index maturing this month fell 0.2 percent to 1,405.7 at 8:48 a.m. in New York.

Greenspan Says Painless Solution to U.S. Debt is Fantasy (Bloomberg)
Reducing U.S. long-term deficits will inevitably cause economic pain, former Federal Reserve Chairman Alan Greenspan said. “The presumption that we’re going to have a painless solution to this, I think, is fantasy,” Greenspan said today during a “Bloomberg Surveillance” television interview with Tom Keene and Sara Eisen. “There are a lot of risks out there but the one thing I can be reasonably certain of is we won’t get through this whole issue without some pain.” The U.S. faces twin fiscal challenges with more than $600 billion of spending cuts and tax increases scheduled to hit at the beginning of next year, threatening to send the economy into an austerity-induced recession, even as rising long-run deficits may prove unsustainable.
Greenspan, 86, who preceded Ben S. Bernanke as chairman of the central bank, blamed U.S. deficits on growth in spending and blamed both political parties, saying “strangely enough, and ironically, the spending surge which is creating the problem here is fundamentally both Republicans and Democrats.” Bernanke has also spoken of the need to control U.S. deficits. In a Nov. 20 speech in New York, he said Congress and the president should reach a plan to close deficits in the long term without harming the economy in the near term. “A credible framework to set federal fiscal policy on a stable path -- for example, one on which the ratio of federal debt to GDP eventually stabilizes or declines -- is thus urgently needed to ensure longer-term economic growth and stability,” Bernanke said last month in New York.

Household Net Worth in U.S. Increases by $1.72 Trillion (Bloomberg)
Household wealth in the U.S. climbed in the third quarter, reflecting increases in stock values and home prices that are helping boost consumer confidence. Net worth for households and non-profit groups increased by $1.72 trillion from July through September, or 2.7 percent from the previous three months, to $64.8 trillion, the Federal Reserve said today from Washington in its flow of funds report. A recovery in household wealth, which plunged in the wake of the recession, may put more Americans in the mood to spend during the holiday-shopping season and give the world’s largest economy a lift. Net worth is still below its pre-recession peak, one reason the Federal Reserve is considering additional actions to spur expansion.
“Households have gotten themselves into much, much better financial shape,” said Joseph LaVorgna, chief U.S. economist at Deutsche Bank Securities Inc. in New York. “The ability of consumers to weather a shock is higher because buying power has increased. There’s no question that rising home prices are really helping to underpin buying power.” The value of financial assets owned by American households, including stocks and pension fund holdings, increased by $1.3 trillion in the third quarter, today’s Fed report showed.

Short Sales of Homes Surge as Tax Break to Expire: Mortgages (Bloomberg)
Homeowners and banks are accelerating sales of properties for less than the amount owed as a U.S. law that gives them a tax break expires at the end of the year. The transactions, known as short sales, increased by 35 percent in the third quarter from a year earlier, while sales of bank-owned homes dropped 20 percent, according to a report today by mortgage data seller Renwood RealtyTrac LLC. Together, they accounted for 41.5 percent of home purchases in the quarter. Short sales have accounted for as many as 1.1 million transactions since 2009, helping to reduce the inventory of homes owned by banks that can blight neighborhoods and flood the market. Barring a last-minute extension of the 2007 Mortgage Forgiveness Debt Relief Act, homeowners will be taxed on the forgiven principal. With Congress focused on the so-called fiscal cliff, federal spending cuts and tax-rate hikes set to kick in on Jan. 1, the law may not be extended, leading to a drop in short sales and a rise in foreclosures.
“If you’re struggling to pay your mortgage, it’s not likely you can afford an extra $25,000 or $35,000 tax bill to avoid foreclosure,” said Edward Mills, a financial policy analyst at FBR Capital Markets in Arlington, Virginia. “Mortgage forgiveness has become part of fiscal cliff politics.” The Internal Revenue Service typically taxes forgiven debt as income to the debtor. For short sales, the average price tag was $94,896 below the mortgage on the property, according to the RealtyTrac report. Tacking that onto borrowers’ income would not only raise the amount of taxes due -- it could push them into a more expensive tax bracket.

China State-Driven Rebound at Risk as Small Firms Suffer (Bloomberg)
China’s growth rebound, forecast to have gathered pace in November, is bypassing smaller businesses in a sign the government may need to step up policy support to secure a more broad-based recovery. Industrial production growth probably accelerated for a third month to 9.8 percent from a year earlier, while retail sales probably rose 14.6 percent, the most since March, according to median estimates in Bloomberg News surveys before data due Dec. 9. At the same time, 80 percent of small businesses polled by a state-run association said they hadn’t seen any “obvious benefits” from government policies. China’s rebound from a seven-quarter slowdown is being driven by state-funded transport projects, boosting the shares of railcar makers such as China CNR Corp. even as the benchmark stock index dropped. The focus on infrastructure and the lack of a more widespread pickup may threaten the sustainability of the economic recovery.
“The recovery is uneven as the recent rebound is mainly driven by government-sponsored investment projects,” said Ding Shuang, a Hong Kong-based economist with Citigroup Inc. “Since the policy easing this time is more measured than previous rounds, the rebound is likely to be mild and may not persist. More support is needed for smaller firms to sustain growth and jobs.” China’s economy is stabilizing and positive factors are increasing, the ruling Communist Party’s top decision-making body said this week in its first public assessment of the economy under new leader Xi Jinping. Authorities will put “enhancing quality and efficiency of economic growth at the center” in 2013, the official Xinhua News Agency cited the Politburo as saying.

Draghi’s Go-to ECB Seen Risking Credibility Through Overload (Bloomberg)
Mario Draghi isn’t just battling to save Europe’s monetary union, he’s being asked to run it. The European Central Bank president is taking on more and more responsibility to keep the currency bloc afloat, from propping up bond markets to monitoring fiscal policies and assuming supervision of the region’s 6,000 banks. Economists, academics and officials past and present say the ECB is at risk of becoming overloaded, which could erode the credibility it needs to achieve its primary goal of price stability. “The ECB saved the euro,” says Andrew Bosomworth, managing director at Pacific Investment Management Co. in Munich. “But the extra responsibilities, in particular its supervisory role, put additional burdens and risks onto its mandate.”
The ECB has been the euro area’s go-to institution during the sovereign debt crisis, filling the void as governments procrastinate and squabble over how to fight the turmoil. Unencumbered by the need to win votes, the ECB’s ability to act quickly has seen it steadily accrue new roles and made its president at least as powerful as Europe’s elected leaders. Draghi yesterday left interest rates at a record low and said the ECB stands ready to intervene in bond markets if governments sign up to fiscal and economic reforms.

Draghi Leaves Rate-Cut Door Ajar as ECB Reduces Forecasts (Bloomberg)
The European Central Bank cut its growth and inflation forecasts and President Mario Draghi said the euro area won’t start to shake off its slump until the second half of 2013, leaving the door ajar for further interest- rate reductions. “Weak activity is expected to extend into next year,” Draghi said today at a press conference in Frankfurt after policy makers left the benchmark rate at a record low of 0.75 percent. “By the second part of the next year, we should see the beginning of a recovery” as global demand strengthens and the ECB’s low rates feed through to the economy, he said. While Draghi’s pledge to buy government bonds has reduced borrowing costs in countries such as Spain and Italy and soothed concerns about the euro’s survival, the 17-nation currency bloc fell back into recession in the third quarter. The ECB’s latest forecasts paint a picture of economic stagnation and inflation falling well below its 2 percent limit. The euro dropped almost a cent to $1.2977 at 4:15 p.m. in Frankfurt.
The new projections “firmly support the case for lower interest rates,” said Howard Archer, chief European economist at IHS Global Insight in London. “The ECB appears to have the door open for an interest-rate cut, and we expect it to step through early in 2013.”

BOE Keeps Stimulus on Hold as Osborne Extends Fiscal Squeeze (Bloomberg)
Bank of England officials left their bond-buying program on hold as they assessed the need for more stimulus a day after Chancellor of the Exchequer George Osborne committed the country to five more years of austerity. Governor Mervyn King and the Monetary Policy Committee kept their quantitative-easing target at 375 billion pounds ($604 billion), a move predicted by all 36 economists in a Bloomberg News survey. Still, they have indicated the door is open to more purchases if needed, and Osborne said yesterday his “credible” fiscal plan “allows for supportive monetary policy.” The Bank of England is struggling to stoke a recovery amid a squeeze on consumers, cooling global growth and headwinds from Europe’s debt crisis. It introduced its Funding for Lending Scheme this year to boost credit, and Osborne’s affirmation of his fiscal strategy confirmed the central bank’s role as the key source of stimulus for the economy.
“The scope for easier fiscal policy is pretty limited in the U.K.,” Kevin Daly, an economist at Goldman Sachs Group Inc. in London, said in an interview with Guy Johnson on Bloomberg Television today. “The slack needs to be closed through much easier monetary policy and specifically credit policy.” The Bank of England also left its key interest rate at a record low of 0.5 percent.

ECB Keeps Benchmark Rate at 0.75% as Yields Decline (Bloomberg)
The European Central Bank kept interest rates on hold after its pledge to buy government bonds lowered borrowing costs and boosted confidence that the euro area can emerge from recession next year. Policy makers meeting in Frankfurt today left the benchmark rate at a record low of 0.75 percent, as predicted by 56 of 61 economists in a Bloomberg News survey. They also left the deposit rate at zero. ECB President Mario Draghi will hold a press conference at 2:30 p.m. to brief reporters on the decision and reveal new economic forecasts, including a first projection for 2014. Italian and Spanish bond yields have plummeted since Draghi promised to do whatever it takes to save the euro and announced an unlimited bond-purchase program. That’s helping to ease the strain on the euro region’s third- and fourth-largest economies and fueling optimism that the sovereign debt crisis can be contained, even after the 17-nation currency bloc slipped into recession.
“I expect solid growth for the euro area next year and no change in interest rates,” said Ulrich Kater, chief economist at DekaBank Deutsche Girozentrale in Frankfurt. “Only if the economy doesn’t grow might the ECB have to come up with a Plan B and lower interest rates.”

German Manufacturing Orders Surge in Sign of Resilience (Bloomberg)
German factory orders surged almost four times as much as economists forecast in October, driven by foreign demand. Orders, adjusted for seasonal swings and inflation, jumped 3.9 percent from September, the Economy Ministry in Berlin said today. It revised September’s drop to 2.4 percent from 3.3 percent. The increase in October is the biggest since January 2011 and exceeds the median forecast for a 1 percent gain in a Bloomberg News survey of 42 economists. From a year earlier, orders fell 2.4 percent when adjusted for work days. German business confidence unexpectedly rose in November after growth slowed less than economists predicted in the third quarter. At the same time, the euro area, Germany’s largest export market, slipped into recession. The Bundesbank has warned that the economic slowdown could continue in the fourth quarter as the region’s debt crisis and weaker global growth damp demand.
“The music is playing outside the euro region, where the label ‘Made in Germany’ is enjoying everlasting popularity,” said Mario Gruppe, an economist at NordLB in Hanover. “That’s good news for the economic outlook. We’re in for a cold winter but not a recession - everything speaks for an economic dent.” The euro rose after the report and was trading unchanged at $1.3068 at 12:40 p.m. in Frankfurt. The benchmark DAX index rose 1 percent today to 7526.30.

King Seen Maintaining QE as Osborne Extends Fiscal Squeeze (Bloomberg)
Bank of England officials may today leave their bond-buying program on hold as they assess the need for more stimulus a day after Chancellor of the Exchequer George Osborne committed the country to five more years of austerity. Governor Mervyn King and the Monetary Policy Committee will probably leave their quantitative-easing target at 375 billion pounds ($604 billion), according to a Bloomberg News survey of economists. Still, they have left the door open to more purchases if needed, and Osborne said yesterday his “credible” fiscal plan “allows for supportive monetary policy.” The central bank is struggling to stoke a recovery amid a squeeze on consumers and headwinds from Europe’s debt crisis. Bank of Canada Governor Mark Carney was appointed last month to lead that effort from July, and Osborne’s affirmation yesterday of his fiscal strategy confirmed the BOE’s role as the key source of stimulus for the economy.
“There’s no prospect of any unwinding of any quantitative easing before Mervyn leaves, or a rate increase,” said David Tinsley, an economist at BNP Paribas SA and a former central bank official. “In fact the risks lately have shifted a bit to doing more QE because the data haven’t been so good.” All 36 economists in the Bloomberg poll see no increase in gilt purchases today, while the median forecast in a separate survey is that the benchmark interest rate will remain at a record-low 0.5 percent. The central bank will announce the decisions at noon in London. The pound rose 0.1 percent against the dollar today and was trading at $1.6114 as of 9:58 a.m. in London. The yield on the 10-year gilt rose 2 basis points to 1.8 percent.

Osborne Targets Welfare and the Rich as Fiscal Targets Slip (Bloomberg)
Chancellor of the Exchequer George Osborne took aim at welfare spending and the pensions of the rich after an ailing economy blew his deficit-cutting strategy off course. Osborne announced a broadly neutral fiscal plan for the next four years with a package of measures for companies, while telling the House of Commons in his autumn statement yesterday he no longer expects to meet his debt target and will have to extend austerity well beyond the 2015 general election. With the economy forecast to shrink by 0.1 percent this year and expand little more than 1 percent in 2013, Osborne is finding it increasingly difficult to stick to the plans on which he staked his political reputation two years ago. He now expects to balance the budget in 2018 instead of 2015, as originally planned, after announcing a 5 billion-pound ($8 billion) spending squeeze from 2017.
“The plan’s still there but it’s going to be the next government implementing it,” said Neville Hill, head of European Economics at Credit Suisse Group AG (CSGN) in London and a former U.K. Treasury official. “It’s pushing austerity back by almost Greek proportions. It’s a case of kicking the can down the road, which the government can afford to do.” Osborne told lawmakers that his fiscal watchdog, the Office for Budget Responsibility, believes he will miss his target to begin cutting the burden of government debt in 2015-16. Instead, debt as a share of gross domestic product will peak at 79.9 percent in that year, and then start to decline in following years, he said.

20121207 0945 Global Commodities Related News.

2012 Expected to be Warmest Year on Record for U.S. (Bloomberg)
This year will probably overtake 1998 to become the warmest year on record in the U.S., the National Oceanic and Atmospheric Administration said in its monthly climate report.
The first 11 months of 2012 were the warmest start to any year in the contiguous 48 states since the U.S. began keeping records in 1895, NOAA’s Climatic Data Center reported today. The average national temperature for the period was 57.1 degrees Fahrenheit (13.9 Celsius), 1 degree above the old mark set in 1934 and 3.3 degrees above the average for the 20th century, the agency said.
For all of 1998, the average temperature was 54.3 degrees.
“It appears virtually certain that 2012 will surpass the current record as the warmest year for the nation,” the Asheville, North Carolina-based center said. December temperatures would have to be lower by 1 degree than the coldest average for the month on record, in 1983, for the year not to set a new mark.
The U.S. autumn, which for meteorologists was from September through November, was the 21st warmest on record. The period was drier than normal for much of the central U.S. and Southeast, the agency said.
Only eight of the lower 48 states, along the West Coast and across the north from Washington through Minnesota, had average or above-normal rainfall during November.

DTN Closing Grain Comments 12/06 14:23 Grains Mostly Higher On Late Rally (CME)
A strong closing rally in the soybean market pulled wheat contracts higher. Corn struggled throughout the session, but did close well off session lows on spillover support from beans.

Wheat Futures Rise as Dry Spell Erodes Crop Prospects (Bloomberg)
Wheat prices gained for a second straight day on speculation that dry weather may curb production in the U.S., the world’s biggest exporter. Rainfall and snow will miss winter-wheat areas in the Great Plains, forecaster Commodity Weather Group said in a report today. Little or no rain has fallen during the past 30 days in parts of Oklahoma, Texas and Kansas, the biggest U.S. grower of winter wheat, National Weather Service data show. “They’re dry as far as the eye can see,” Tomm Pfitzenmaier, a partner at Summit Commodity Brokerage in Des Moines, Iowa, said in a telephone interview. “That by itself is going to offer some underlying support for wheat.” On the Chicago Board of Trade, wheat futures for March delivery gained 0.2 percent to settle at $8.62 a bushel at 2 p.m. For the year, prices still are up 32 percent after the worst U.S. drought in 56 years. Wheat is the fourth-largest U.S. crop, valued at $14.4 billion in 2011, behind corn, soybeans and hay, government data show.

Corn Market Recap for 12/6/2012 (CME)
March Corn finished down 6 1/4 at 751 1/2, 7 1/2 off the high and 3 1/2 up from the low. May Corn closed down 5 1/2 at 753. This was 4 up from the low and 6 3/4 off the high.
March corn ended the day with modest losses but closed off the session lows. The weekly export sales report was extremely disappointing at only 51,600 tonnes for the current marketing year and -4,200 for the next marketing year for a total of 47,400 tonnes. This was well below market expectations and against 236,100 tonnes last week. As of November 29th, cumulative sales stand at 42% of the USDA forecast for the current marketing year vs. the 5 year average of 50.5%. Sales of 431,000 tonnes are needed each week to reach the USDA forecast which increased from 421,300 last week. The US remains a stiff premium to South America corn at the moment which is hampering any progress in export sales. Support in the market continues to come from a dry weather outlook in the western plains and a very wet forecast for Argentina. Some analysts expect Argentina's corn production estimate to be cut from 28 million tonnes next week.
January Rice finished down 0.245 at 15.31, 0.16 off the high and equal to the low.

Wheat Market Recap Report (CME)
March Wheat finished up 2 at 862, 2 1/4 off the high and 9 up from the low. May Wheat closed up 2 1/2 at 871. This was 8 3/4 up from the low and 1 1/2 off the high.
March Chicago and KC wheat traded slightly higher into the closing bell. This morning's export sales report was considered neutral to market direction but wheat sold off early on after terrible corn sales were reported. The market gained traction near the close as soybeans rallied. Net weekly export sales came in at 353,100 tonnes and as of November 29th, cumulative wheat sales stand at 55% of the USDA forecast vs. a 5 year average of 69%. Sales of 511,000 tonnes are needed each week to reach the USDA forecast. Kansas City and Minneapolis wheat saw support after it was reported that Japan purchased 196,383 tonnes from the US and Canada. The US business was a mixture of western white, northern spring, and hard red winter wheat. Asian business has been the only real bright spot for the demand side of the US wheat balance sheet. Strength was also found on really no significant moisture for the western plains over the next couple of week.
March Oats closed up 1 at 398. This was 4 1/4 up from the low and 1 3/4 off the high.

Recap Energy Market Report (CME)
January crude oil prices traded sharply lower during the US trading session and back below the $86.00 level. Some traders pointed to slowing economic growth concerns out of Europe and strength in the US dollar as forces weighing on the market. There also seemed to be a level of uncertainty in the market regarding the US debt negotiations, as well as tomorrow's Non-Farm Payroll report. January RBOB prices extended yesterday's decline and fell to its lowest level since November 9th. Meanwhile, January natural gas prices established a higher high on the session in response to EIA inventory data that showed a larger than expected draw last week of 73 bcf. Total storage stands at 3,804 bcf, or 4.6% above the 5 year average. Over the last four weeks natural gas storage has declined 125 bcf.

Oil Trades Near Three-Week Low as ECB Cuts Europe Growth Outlook (Bloomberg)
Oil traded near the lowest level in three weeks in New York after the European Central Bank cut its forecast for euro-area economic growth and U.S. lawmakers struggled to reach agreement on a budget plan. Futures were little changed after sliding 1.8 percent yesterday, the biggest decline in more than two weeks. The euro area will probably contract 0.5 percent this year, worse than the September forecast of 0.4 percent, ECB President Mario Draghi said. U.S. President Barack Obama warned lawmakers that the economy will suffer unless there’s an agreement on a way to avert more than $600 billion in automatic spending cuts and tax increases known as the fiscal cliff. Oil is poised for its first weekly decline in more than a month. Crude for January delivery was at $86.36 a barrel, up 10 cents, in electronic trading on the New York Mercantile Exchange at 10:58 a.m. Sydney time.
The contract slid $1.62 yesterday to $86.26, the lowest close since Nov. 15. Prices are down 2.9 percent this week and 13 percent this year. Brent for January settlement fell $1.78 to $107.03 a barrel on the London-based ICE Futures Europe exchange yesterday. The European benchmark contract closed at a premium of $20.77 to West Texas Intermediate, the narrowest gap since Oct. 19. The euro area won’t start to shake off its slump until the second half of 2013, Draghi said at a press conference yesterday in Frankfurt after policy makers left the benchmark rate at a record low of 0.75 percent. The European Union accounted for 16 percent of the world’s oil consumption last year and the U.S. for 21 percent, according to BP Plc (BP/)’s Statistical Review of World Energy.

Iran Oil Export Delays Seen Worsening as Sanctions Hinder Trade (Bloomberg)
Iranian oil tankers are contending with longer delays in shipments and some are idled amid increasing pressure on buyers to curb purchases from what was once OPEC’s second-biggest producer. NITC, the Tehran-based tanker owner, has 42 crude oil carriers and 13 were delayed in transit since Oct. 21, according to data compiled by Richard Hurley, a senior maritime consultant at IHS Fairplay in London who has tracked vessel movements for two decades. Four NITC ships with cargoes are idling while they await orders and four others have switched off their signals and are presumed to be anchored, the data show. Iran is reliant on NITC ships because EU sanctions imposed in July barred about 95 percent of the global tanker fleet from carrying the nation’s crude. NITC has renamed vessels, switched their flag states and signaled inaccurate information about where they are registered, according to the data from IHS, which maintains the United Nations’ shipping database.
“Iran is finding it harder to place cargoes,” Hurley wrote in an e-mail. “China, while still a major purchaser, seems unwilling to take all the cargoes which are being sent to her and has been letting some ships wait at anchor for several weeks. India, while still a purchaser, is not taking much.” Two phone calls and e-mails over two days to Habib-ullah Seyedan, NITC’s commercial director, weren’t answered.

Silver Market Recap Report (CME)
March silver almost forged a quasi double bottom low on the charts. The bull camp will claim the trade rejected the prior session's low, while the bear camp might claim today's low was close enough to suggest that support under the Wednesday closing level is questionable. Silver might have been undermined by weakness in the Euro and perhaps silver was put off balance by weakness in copper and energy prices. The bull camp might be somewhat disappointed that a positive sweep of US scheduled data had only a marginal capacity to support silver prices today.

Gold Market Recap Report (CME)
The gold market saw initial weakness before catching some lift off favorable US equity market action and somewhat better than expected US scheduled data. The gold bulls apparently discounted potentially undermining action in the currency markets and the gold trade also generally played down concerns that the two parties in Washington remained far apart on the fiscal cliff dealings. Gold was temporarily undermined in the wake of the ECB news but seeing US stocks spend a lot of time in positive ground and seeing silver and platinum track higher, probably served to embolden the bull camp in gold today.

20121207 0944 Soy Oil & Palm Oil Related News.

Soybean Complex Market Recap (CME)
January Soybeans finished up 12 at 1491 1/4, 1 1/4 off the high and 18 up from the low. March Soybeans closed up 12 1/4 at 1486. This was 18 1/2 up from the low and 1 1/2 off the high. January Soymeal closed up 4.4 at 450.7. This was 4.8 up from the low and 0.3 off the high. January Soybean Oil finished up 0.2 at 51.2, 0.12 off the high and 0.9 up from the low.
January soybeans traded sharply higher into the closing bell after reporting explosive export demand data. The market ran higher on the news but quickly found selling interest on thoughts that the Brazil soybean crop might be getting larger due to favorable weather patterns. Brazil's government is projecting soybean production at 82.6 million tonnes vs. a range of 80.1-83 million tonnes in November. The USDA is at 81. Net weekly export sales came in at 1,142,700 tonnes for the current marketing year and 1,000 for the next marketing year for a total of 1,143,700. As of November 29th, cumulative sales stand at 78% of the USDA forecast for vs. a 5 year average of 63%. Sales of 208,000 tonnes are needed each week to reach the USDA forecast. Net meal sales came in at 463,600 tonnes for the current marketing year and 1,200 for the next marketing year for a total of 464,800 tonnes. As of November 29th, cumulative meal sales stand at 70% of the USDA forecast vs. a 5 year average of 44%. Sales of 49,000 tonnes are needed each week to reach the USDA forecast. Net oil sales came in at 19,000 tonnes and cumulative sales stand at 109% of the USDA forecast vs. a 5 year average of 34%. The late rally in soybeans was linked to strong demand by China and firm cash markets.

EDIBLE OIL: Malaysian palm oil futures edged up 0.4 percent as traders bet on demand rising in the face of tighter supplies of competing soyoil due to unfavourable weather in Argentina. (Reuters)

Palm Oil Shipments From Indonesia Seen Falling to Five-Month Low (Bloomberg)
Palm oil exports from Indonesia, the world’s largest producer, will probably drop to the lowest level in five months in December as a global economic slowdown curbs demand, according to a Bloomberg survey.
Shipments may fall 3 percent to 1.55 million metric tons from an estimated 1.6 million tons in November, according to the median of estimates from two traders, a plantation executive, refiner and an analyst compiled by Bloomberg. Inventories may remain unchanged at 3 million tons, the survey showed. Production may drop to 2.51 million tons from 2.54 million, four of the respondents said.
Palm oil, used in everything from soaps to candy to biofuels, has slumped 24 percent since the end of August as a decline in demand from Europe and China boosted stockpiles in Indonesia and Malaysia, the top growers. The commodity will probably tumble into a bear market next year as monthly output in Malaysia and Indonesia surges to records, according to Dorab Mistry, director at Godrej International Ltd.
“Demand from Europe is still weak especially for biodiesel,” Sahat Sinaga, executive director of the Indonesian Vegetable Oil Industry Association, said by phone from Jakarta. “We could see demand picking up in the first quarter with India maintaining its import tariff and recovery in China. It will help boost prices.”

Cheaper Oil
Futures in Kuala Lumpur, the global benchmark, may rally to 2,700 ringgit ($886) a ton by January, Sinaga said. The commodity will trade between 2,300 ringgit and 2,600 ringgit a ton between now and February, and drop below 2,200 ringgit in August or earlier, Godrej’s Mistry told a conference on Nov. 30.
The contract for February delivery rose 0.5 percent to close at 2,295 ringgit a ton on the Malaysia Derivatives Exchange yesterday. Futures have lost 28 percent this year, set for the biggest annual loss since the financial crisis in 2008.
Food demand for palm oil “is still relatively stable because palm is cheap compared with other oils,” said Hariyanto Wijaya, an analyst at PT Mandiri Sekuritas. Exports typically slow in December because of year-end holidays, he said.
Indonesia’s exports this month would be the lowest since July, when they reached 1.51 million tons, according to data from the palm oil association, known as Gapki. Shipments were 1.8 million tons and 1.5 million tons in November and December of last year, data showed. Gapki, which releases monthly export data, doesn’t publish stockpiles and production figures.
Malaysia’s inventories probably held near a record last month as production exceeded exports, according to another Bloomberg survey published yesterday. Stockpiles were 2.5 million tons compared with 2.51 million tons in October, according to the median of estimates from four analysts and two plantation executives. Output probably fell 5.7 percent to 1.83 million tons, while exports gained 1.7 percent to 1.79 million tons, the survey showed.