20120913 1646 Global Markets & Commodities Related News.

GLOBAL MARKETS: Asian shares were little changed and European equities looked set to open flat after setting 14-month highs in the previous session, with investors awaiting a policy decision from the U.S. Federal Reserve that could include more stimulus measures. Wall Street ended little changed on Wednesday. (Reuters)

FOREX: The euro held near a four-month high after Germany's Constitutional Court gave the green light for Berlin to ratify the euro zone's permanent rescue fund, looking to extend gains further on possible stimulus from the U.S. Federal Reserve. (Reuters)

FOREX-Euro steadies near 4-month peak after German ruling
TOKYO, Sept 13 (Reuters) - The euro held near a four-month high on Thursday after Germany's Constitutional Court gave the green light for Berlin to ratify the euro zone's permanent rescue fund, looking to extend gains further on possible stimulus from the U.S. Federal Reserve.    
"If the Fed avoids major easing steps, the euro could fall. Still, considering that the euro's rally has been driven by short-covering rather than build-up of new positions, downside for the euro may be limited," said Koichi Takamatsu, head of forex at Nomura Securities.

Fed seen launching fresh stimulus, details in question(Reuters)
The U.S. Federal Reserve appears set to launch a third round of unconventional monetary stimulus on Thursday while signaling that a weak U.S. economy may warrant ultra-low interest rates for at least another three years.

German court removes hurdle to euro zone bailout fund(Reuters)
Germany's Constitutional Court gave a green light on Wednesday for the country to ratify Europe's new bailout fund, boosting hopes that the single currency bloc is finally putting in place the tools to resolve its three-year old debt crisis.

China 2013 corn imports seen at 1 mln T, down sharply -CNGOIC(Reuters)
China's corn imports in 2013 may plunge more than 80 percent from this year's estimated purchases due to surging global prices, government think tank China National Grain and Oils Information Center said on Thursday.

GRAINS: Chicago corn fell for a fourth consecutive session, pressured by a lower-than-expected reduction in estimates for yields and buffer stocks in a U.S. government report. (Reuters)

OIL: Brent crude steadied near $116 a barrel, after rising for five straight sessions, as traders awaited a U.S. Federal Reserve policy decision that is expected to include further stimulus action to bolster the world's largest economy. (Reuters)

U.S. crude stocks rise as imports jump-EIA(Reuters)
U.S. crude oil stockpiles rose last week, with imports jumping and oil product stocks were mixed as refineries reduced utilization rates, government data showed on Wednesday

S.Africa mine protests hit top world platinum firm(Reuters)
Machete-wielding strikers forced top world platinum producer Anglo American Platinum to shut down some of its South African operations on Wednesday, widening the labour unrest sweeping through the country's mining industry.

Copper and iron ore; mirror, mirror...?
--Andy Home is a Reuters columnist. The opinions expressed are his own--
LONDON, Sept 12 (Reuters) - Copper and iron ore have ripped higher since China's National Development and Reform Commission announced last Friday the fast-tracking of a trillion yuan's ($157 billion) worth of infrastructure projects.
On the London Metal Exchange (LME) three-month copper  has jumped by almost 6 percent from its Thursday close to a four-month high of $8,158 per tonne this morning.

China orders for aluminium products, metal purchases rise
HONG KONG, Sept 13 (Reuters) - Aluminium profile manufacturers in Guangdong have reported a rise in orders this month, after seeing their order books decline over the past 3-4 months, which analysts and industry sources are pointing to as a sign of recovering demand in China.
The southern Chinese province is a major production base for aluminium profiles used in the construction sector, which is the biggest consumer of aluminium in China, the world's top consumer and producer of the metal.

BASE METALS: London copper was steady, holding near a four-month high hit in the previous session, as traders awaited a key U.S. Federal Reserve policy decision that is expected to include further stimulus action to boost the world's largest economy. (Reuters)

PRECIOUS METALS: Gold was little changed with investors awaiting a key Federal Reserve policy decision that may come a day after a German court ruling in favour of a euro zone rescue fund sent bullion to its highest since the end of February. (Reuters)

METALS-LME copper eases, still near 4-mth peak ahead of Fed decision
SHANGHAI, Sept 13 (Reuters) - Copper edged lower on Thursday, but held near a four-month high hit in the previous session, as traders awaited a key U.S. Federal Reserve policy decision that is expected to include further stimulus action to boost the world's largest economy.
"Some longs prefer to take profit ahead of the (Fed) meeting since they've already made money on their positions and because there is always a chance that the Fed won't start another round of quantitative easing - even if many people expect it," said a Shanghai-based trader with an international firm.

PRECIOUS-Gold steady ahead of Fed; gold-platinum premium narrows
SINGAPORE, Sept 13 (Reuters) - Gold was little changed on  Thursday with investors awaiting a key Federal Reserve policy  decision, a day after a German court ruling in favour of a euro  zone rescue fund sent bullion to its highest since the end of  February.
"If we do see a QE3 announcement, gold is likely to race  through $1,800 an ounce," said Chen Min, an analyst at Jinrui  Futures in the southern Chinese city of Shenzhen.

20120913 1543 Crude Oil Daily Chart Study.

Chart Reading :
Bollinger band reading : correction range bound market within an uptrend market.
MACD Histogram : recovering, buyer still in.
Support : 97, 94, 92 level.
Resistance : 100, 103, 106 level.
Idea : Long at support or break up above resistance, must set stop loss few points below support. Short at resistance, must set stop loss few points above support.

20120913 1541 Gold Daily Chart Study.

Chart Reading :
Bollinger band reading : pullback correction upside biased.
MACD Histogram : weakening, buyer profit taking.
Support : 1700, 1675, 1650 level.
Resistance :  1750, 1785, 1800  level.
Remark : Gold price tested 1750 resistance and retracing back lower having congestion range between 1727 and 1750.
Idea : Long at congestion break up above 1750, set stop loss below 1725. Not encourage to short unless for a quick scalp to short at congestion break down below 1727, set stop loss above 1750 with profit target near 1700 level.

20120913 1518 Palm Oil Related News.

VEGOILS-Rising stocks to drag on palm oil futures
Climbing palm oil output to weigh on prices
Palm oil to end rebound around 2,960 ringgit-technicals
Prices downside limited by palm oil's widening discount to soyoil

By Anuradha Raghu
KUALA LUMPUR, Sept 13 (Reuters) - Malaysian palm oil futures dropped on Thursday on expectations of output rising this month that could lead to a stock build-up, although losses were limited by expectations of strong Asian demand and tight supply of competing soyoil.
Palm oil prices have lost 8 percent so far this year thanks to the euro zone debt crisis stirring concerns of weaker global growth and commodity demand. In recent weeks, palm oil has dropped below 3,000 ringgit on rising stocks.
"The market is bearish. There's no doubt about it because fundamentally stocks are very high and there is no sign that production is slowing down," said a trader with a local commodities brokerage.
"Everybody knows at the back of their mind that production is climbing higher towards the peak, maybe in October," the trader added.
By the midday break, the benchmark November contract on the Bursa Malaysia Derivatives Exchange slipped 0.3 percent to 2,922 ringgit ($947.7) per tonne.
Total traded volume stood at 11,325 lots of 25 tonnes each, slightly lower than the usual 12,500 lots.
Technicals showed palm oil will end its current rebound around a resistance at 2,960 ringgit per tonne and drop back to its Sept. 11 low of 2,874 ringgit, said Reuters market analyst Wang Tao.
Traders have said the palm oil's widening discount to soyoil limit prices from falling as consumers shift their purchases to the tropical oil produced in Indonesia and Malaysia.
"Palm oil is now so much discounted against soy bean oil with the cap reaching $300. The market is just waiting for the time to bounce back and climb higher. Eventually, demand will start setting in," said the trader.
For now, palm oil's discount to soyoil could widen further after the U.S. Department of Agriculture cut its estimate of the soybean crop in the world's top grain-exporting nation.
The USDA pegged the soybean harvest at 2.634 billion bushels, down from last month's 2.692 billion and below analysts' average estimate of 2.657 billion. Ending stocks next summer were projected to be the lowest in nine years at 115 million, unchanged from August' s estimate.
Brent crude steadied near $116 a barrel on Thursday, as traders awaited a U.S. Federal Reserve policy decision that is expected to include further stimulus action to bolster the world's largest economy.
In other vegetable oil markets, U.S. soyoil for December delivery rose 0.5 percent. The most active January 2013 soyoil contract on the Dalian Commodity Exchange rose 1.4 percent. (Editing by Niluksi Koswanage)

VEGOILS-Palm oil ends higher on euro zone bailout approval
Wed Sep 12, 2012 6:51am EDT
German court approval of 700 billion euro bailout fund boosts markets
Prices likely to drop to 2,869 ringgit per tonne-technicals
Markets eye U.S. Agriculture report that may show tightening soy supply
By Anuradha Raghu
KUALA LUMPUR, Sept 12 (Reuters) - Malaysia crude palm oil futures edged up on Wednesday after Germany's top court backed a euro zone bailout fund, raising hopes that the debt crisis will not spread further and hurt global economic growth.
German's top court had earlier ruled in favour of a 700 billion euro bailout fund, lifting global stocks and shoring up Brent crude oil prices.
"I think what happened just now on the German court ruling is something that is quite encouraging for the commodity market although it comes with conditions," said Phillip Futures analyst Ker Chung Yang.
"The approval of the European Stability Mechanism (ESM) is something we have been waiting for. It is a breakthrough for the crisis," he added.
The benchmark November contract on the Bursa Malaysia Derivatives Exchange rose 0.4 percent to close at 2,930 ringgit ($950) per tonne. Earlier in the day, the market dropped on concerns of higher production fuelling a stock build up.
Total traded volume stood at 46,120 lots of 25 tonnes each, nearly double the usual 25,000 lots as traders piled back into the market to take positions.
Reuters technicals market analyst Wang Tao said palm oil is likely to drop to 2,869 ringgit per tonne, driven by a downward wave. A rebound from the current level will be limited to 2,947 ringgit.
Industry analyst James Fry told an industry seminar earlier in the day that palm oil prices could fall to 2,450 ringgit per tonne in the first quarter of 2013 if Brent crude dropped to $80 a barrel.
Palm oil stocks in August surged to a 10-month high of 2.1 million tonnes, exceeding market expectations, the Malaysian Palm Oil Board (MPOB) said earlier in the week.
While production is expected to be stronger, cargo surveyors have pointed to stronger demand this month. For the first ten days of September, Malaysian palm oil exports jumped 30 percent as the country shipped out more crude to India thanks to a bigger tax free quota of the grade.
India's palm oil imports in the new marketing year will rise 7.9 percent to 7.5 million tonnes as the world's top edible oil buyer struggles to meet demand due to faltering local oilseed output, an industry official told Reuters.
Brent crude oil rose for a fifth straight session on Wednesday, lifted by the German court decision on the giant bailout and hopes the Federal Reserve will ease monetary policy this week.
In other vegetable oil markets, U.S. soyoil for December delivery rose 1 percent with some traders expecting the U.S. Department of Agriculture to slash soybean production estimates following a crop-damaging historic Midwest drought.
The most active January 2013 soyoil contract on the Dalian Commodity Exchange fell 0.2 percent.

20120913 1112 Global Markets & Energy Related News.

GLOBAL MARKETS-Asian shares ease on caution before Fed decision
TOKYO, Sept 13 (Reuters) - Asian shares eased ahead of the U.S. Federal Reserve's decision later in the day, but investors remained optimistic of further stimulus action to bolster the world's largest economy.
"With key events in Europe behind us for the moment, all eyes now shift to the FOMC policy decision. We expect the Fed to extend its rate guidance into 2015 and launch an open-ended asset purchase program," said Barclays Capital in a note.

OIL-Brent up on German ruling, but EIA data curbs rise
NEW YORK, Sept 12 (Reuters) - Brent oil futures rose on Wednesday as a German court ruling affirming the legality of the euro zone bailout fund combined with geopolitical concerns to lift oil prices before data showing a rise in U.S. crude stocks curbed gains.
"People are looking at the Fed and wondering whether they are really going to do quantitative (monetary) easing or just another form of stimulus," said Mark Waggoner, president at Excel Futures in Bend, Oregon.

U.S. crude stocks rise as imports jump-EIA    
NEW YORK, Sept 12 (Reuters) - U.S. crude oil stockpiles rose last week, with imports jumping and oil product stocks were mixed as refineries reduced utilization rates, government data showed on Wednesday.
Domestic stocks of crude, excluding oil held in the Strategic Petroleum Reserve, rose 1.99 million barrels to 359.09 million barrels in the week ended Sept. 7, the Energy Information Administration reported. Analysts polled by Reuters had forecast a draw of 2.6 million barrels.

U.S. says sanctions slash Iran's oil exports
NEW YORK, Sept 12 (Reuters) - U.S. economic sanctions against Iran have slashed the country's crude exports and oil revenue, the U.S. Treasury said on Wednesday as it vowed to keep up the pressure on Tehran to prevent the Iranian government from getting nuclear weapons.
Since the beginning of the year, the United States has threatened to block certain foreign financial entities from U.S. markets unless Iran's major trading partners reduced their purchases of Iranian crude.

Iran parks oil off Malaysia to dodge Western sanctions
LABUAN, Malaysia/SINGAPORE, Sept 13 (Reuters) - Iran is using a little-known port off the East Malaysia coast to hide millions of barrels of oil from Western sanctions, according to shipping data, industry sources and officials.
A Reuters examination of shipping movements and interviews shows how Iranian crude is shipped to the area and loaded on to empty vessels at night to await potential Asian buyers. Storing the oil on hired tankers operating under the Panamanian flag in the calm waters off the tax-haven port of Labuan - an offshore financial centre about the size of Manhattan - means Iran can keep its own fleet active and ensure the flow of oil money into its struggling economy.

NATURAL GAS-US natgas futures end up for 3rd day, focus on storage
NEW YORK, Sept 12 (Reuters) - U.S. natural gas futures closed higher for a third day on Wednesday in anticipation of a bullish weekly inventory report on Thursday, with the front contract setting a five-month high, despite moderating U.S. weather that should slow air conditioning use.
"Some of the storage estimates this week have been pretty low which helped juice the market up, but the weather going forward looks bearish," said Steve Mosley at SMC Advisory Services in Arkansas.

EURO COAL-DES ARA prices sag to $89.50/T
LONDON, Sept 12 (Reuters) - Physical coal prices fell by between 75 cents and $1.50 per tonne on Wednesday on tepid demand and growing offers for prompt shipment.
"There are plenty of offers, more than there were recently but not much is trading," one European trader said.

20120913 1050 Local & Global Economy Related News.

The Goods and Services Tax (GST) will not be implemented this year as the government is focusing on creating awareness on the new taxation mechanism among the people,  Deputy Finance Minister Datuk Donald Lim Siang Chai said yesterday. He said awareness campaigns organised by the Finance Ministry are progressing well and are expected to conclude soon. (BT)

The government is expected to chalk up a revenue of more than RM200bn this year, surpassing its initial target of RM187bn, Deputy Finance Minister, Datuk Donald Lim Siang Chai said. The additional income would enable the government to hand out increased financial assistance to Malaysians, such as the proposed second edition of Bantuan Rakyat 1Malaysia (BR1M) in the upcoming 2013 Budget, he said.As of Jun 2012, the Treasury recorded a  revenue of RM99bn. The growth is mainly due to enhanced tax collection, increased contributions from the Royal Malaysian Customs Department and growth in property transactions, Lim said. The economy was expected to sustain its growth momentum in the next two quarters of this year. This is reflected by the leading index, which grew by an average of 1.4% from Oct 2011 to Mar 2012, he said. (Bernama)

The US trade deficit  increased 0.2% from Jun's deficit of US$41.9bn to US$42bn as fewer exports to Europe, India and Brazil offset a steep decline in oil imports. (AP)

The US MBA purchase applications index gained 8.0% wow in the 7 Sep week (-0.8% in the  earlier week), whilst the  refinance index  gained 12.0% (-3.0% in the prior week). (Bloomberg)

US inventories gained 0.7% mom in Jul (a revised -0.2% in Jun), higher than consensus of 0.4%. (Bloomberg)

The US poverty rate stabilized in 2011 for the first time in three years, edging down to 15% from 15.1% in 2010 even as incomes fell and inequality grew. (Reuters)

Weak economic growth and high oil prices are likely to contain  global oil demand in 2012 and cap it in 2013, the International Energy Agency said. (AFP)

Eurozone industrial production rose a sharp 0.6% mom in Jul after a 0.6% contraction the previous month, due to a strong increase of 2.4% in the production of capital goods. Consensus called for a 0.3% decline. (AFP)

The European Commission has presented proposals for a single European supervisory mechanism, a major step to a  banking union. A banking union foresees three steps: the ECB gets the power to monitor all euro zone banks and others in the wider EU that agree to the oversight; the establishment of a fund to close troubled banks; and a fully fledged scheme to protect citizens' deposits across the euro zone. (EC, Reuters)

Germany’s constitutional court has rejected a petition that would have stymied the creation of the eurozone’s €500bn rescue fund. The court also ruled that the ceiling of €190bn in German financial guarantees imposed when parliament approved the rescue fund could only be increased with the assent of lawmakers. There must be no unlimited liability for Germany, the ESM’s biggest backer, the justices decided. (FT)

Chinese banks granted  Rmb703.9bn or US$112bn in new loans in Aug, up from Rmb540.1bn in Jul, the People's Bank of China said. (AFP)

China's outbound direct investment (ODI) accelerated by 67% yoy to reach US$24bn in the second quarter of 2012. (Global Times)

The PBOC reported that China’s broad money supply M2 increased 13.5% yoy to Rmb92.49tr (US$14.59tr) at the end of Aug. However, the growth rate was down 0.4% pt from the end of Jul. (Xinhua)

China's fiscal revenues grew 4.2% yoy to Rmb786.3bn (about US$124bn) in Aug. (Xinhua)

South Korea's seasonally adjusted unemployment rate remained unchanged at 3.1% in Aug from a month earlier, despite a slowdown in job creation. (AFP)

Japan Finance Minister Jun Azumi said moves in the yen since yesterday were speculative and the government is  ready to act against unacceptable changes in the currency’s value. (Bloomberg)

Japan's core machinery orders jumped 4.6% mom in Jul (5.6% in Jun), the second straight monthly increase and was well above economists' expectations of a 1.4% rise. (AFP)

Indonesia Aug cement sales were 3.6m tonnes, down 25.2% mom (+7.2% in Jun). (Reuters)

Indonesia's governing coalition has tentatively agreed to steeply raise electricity rates next year in an attempt to reduce massive energy subsidies and to encourage investment in power-generation infrastructure that would bolster the country's growth, a deputy prime minister said Wednesday. (AWSJ)

India’s industrial ouput grew 0.1% yoy, helped by a recovery in consumer non-durables, slightly lower than a forecast of 0.3% growth, but an improvement on an annual contraction of 1.8% logged in June. (Reuters)

A planned  economic union in  Southeast Asia (ASEAN Economic Community) is likely to be delayed by a year until the end of 2015 because some countries are not ready, Surin Pitsuwan, secretary-general of ASEAN. (Reuters)

Thailand’s Nonthaburi and Pathum Thani residents severely hit by floods last year face the prospects of being battered by another deluge this year if there are torrential rains, Prime Minister Yingluck Shinawatra said yesterday.  Residents in 27 at-risk communities in Bangkok have been warned to brace for floods this weekend as heavy rains are expected from tomorrow (Friday)  until Monday. (Bangkok Post, The Nation)

Vietnam’s ministries of Finance as well as Industry and Trade decided to reduce the import tax rate for petrol and oil instead of increasing petrol and oil retail prices on the domestic market due to higher world oil prices. The new rate dropped by 2% from 12% to keep retail prices stable at VND23,650 per litre for A92 petrol and VND21,800 per litre for diesel oil. (Vietnam News)

Amid concerns over a potential surge in foreign capital inflows and its destabilizing  effects, the  Bangko Sentral ng Pilipinas has told banks and other organizations intending to source funds from offshore to disclose their foreign borrowing plans for 2013. (Philippine Daily Inquirer)

20120913 1050 Malaysia Corporate Related News.

Australia’s Roc Oil has kicked off the drilling and testing of Bentara 2, the first appraisal well at the Balai cluster off Sarawak. The process is part of the pre-development phase that comes under the marginal field development, a risk service contract undertaken by Roc (48%),  Dialog (32%) and  Petronas Carigali (20%). The Balai, Bentara, West Acis and Spaoh fields make up the cluster. (Upstream)

General Electric (GE) is considering options including a sale of its US$2.2bn (RM6.76bn) stake in Bank of Ayudhya, Thailand’s fifth largest lender, said two people with knowledge of the matter. GE might contact potential buyers including Maybank. GE owns 33% of Bank of Ayudhya, which has a market value of 206.5bn baht (US$6.7bn), data compiled by Bloonberg show. (StarBiz)

Pengurusan Aset Air Bhd (PAAB) has appointed the consortium of Syed Mohamed Hussein Bhd, Ranhill Consulting Sdn Bhd and KTA Tenaga Sdn Bhd to undertake the engineering design of the RM3.7bn  Langat 2 water treatment plant. The project was envisaged to be developed in two phases with the first phase involving the construction of treatment works with a nominal output capacity of 1,130 MLD. PAAB said work on the phase one was scheduled for completion in early 2017. The first phase has attracted an initial interest from 65 companies. Package 2A has more than 20 sub-contracts. Other jobs that are up for grabs during the entire development of Langat 2 include the construction of pipelines, a reservoir, a pump house and water tanks. (Starbiz)

Selangor MB Tan Sri Abdul Khalid Ibrahim said the state government would be asking its legal advisor and a group of appointed lawyers to study developments on the Langat 2 Water Treatment Project. He said the findings over jurisdiction on land matters under the state government were expected to be announced next week. The Selangor government still held specific powers relating to the approval of the Langat 2 water treatment plant according to the National Land Code, he said. This was in response to the federal government's go-ahead with the project despite not receiving a development order from the Selangor government, in the interest of the people in Selangor, Kuala Lumpur and Putrajaya. The successful bidder for the Langat 2 water treatment plant project will eventually have to face the Selangor government, he said. "The state government wants to remind everyone that it will protect this responsibility. You (Langat 2 bidders) know the cost and boundaries," he said, adding the state government's powers included permission to enter the site and planning permit. (Bernama, NST)

Axiata Group  said it has priced the world's largest  China currency denominated Islamic bond, or sukuk, of 1bn yuan or US$157.85m (RM485m) at 3.75% due to strong demand. Axiata's yuan Islamic bond is the second of its kind after Malaysia's state investor Khazanah Nasional Bhd offered 500m yuan of sukuk last year. The latest yuan Islamic bond issuance is part of Axiata's multi-currency sukuk programme that was established in July this year with a combined value of US$1.5bn (RM4.6bn). Axiata said in a statement ay that the sukuk was oversubscribed with a final book of more than 3.5bn yuan of orders, enabling Axiata to boost the size of the deal from an initial 500m yuan to 1bn yuan. The initial price guidance was at 4% and finally priced at the tightest end of the price guidance at 3.75%. "The ability to raise yuan-denominated funds demonstrates Axiata's ability to diversify away from other more traditional currencies such as the US dollar and achieve cost-efficient funding," Axiata group CFO James Maclaurin said in the statement. Malaysia's CIMB Bank, HSBC and Merill Lynch are the joint lead managers and book runners for the sukuk deal. (Reuters)

The number of customers in Negeri Sembilan hooked to Telekom Malaysia (TM) Unifi service, launched last year, stood at 2,076, including 204 business customers, as at Aug 31. TM Negeri Sembilan General Manager Ramlan Omar said the total includes 1,302 customers in Senawang (including 157 business customers) and 774 in Nilai (47 business customers). "In Senawang there are 6,624 households and in Nilai 3,264 households hooked up to the service, and nearly 10,000 households in the state will have the service by year-end," he told. (Bernama)

Ananda Krishnan's Binariang GSM Sdn Bhd has partially redeemed RM1.06bn of its senior sukuk and prepaid US$6.87m (RM22m) of its US dollar-denominated term loan, said a local ratings agency. RAM Ratings said it was closely monitoring the progress of the group's corporate restructuring exercise to decouple Aircel, and was in consultation with its advisors to determine and implement an optimal structure to satisfy the objective. “The corporate exercise which was initially slated for completion by September 2012, is now targeted to be completed within the next few months once there is further clarity on the New Telecom Policy and other regulatory and policy changes in India that could impact the transaction,” it said. It added the partial redemption had been prompted by the sale of Binariang's indirect 5% stake in  Maxis  Bhd via its wholly-owned subsidiary Maxis Communications Bhd, which has a direct shareholding of 65% in Maxis Bhd. The senior sukuk consists of a RM19bn Islamic medium-term notes programme and a RM2bn Islamic commercial papers programme, of which only RM7.2bn senior sukuk remains outstanding after the recent redemption. It also has a US$900m cumulative non-convertible Islamic junior sukuk. The move to restructure Aircel out of Binariang is due to the drag caused by Aircel on Binariang's consolidated balance sheet. Aircel is 74% owned Binariang via its subsidiary, Maxis Communications. (StarBiz)

The  Malaysian Palm Oil Board (MPOB) is seeking to promote environmental conservation to complement the industry's sustainability efforts and counter the criticism of the industry by local and foreign interest. The industry body aims to encourage oil palm planters to adopt conservation of wildlife measures as part of their standard operating procedure and become more socially responsible. The move towards conservation is part of the industry's effort to combat the negative publicity it faces. (Malaysian Reserve)

Sarawak Oil Palms Bhd (SOP) plans to buy the remaining stakes in two plantation companies for a total of RM242.5m to expand its palm oil-related activities in Sarawak. SOP has signed  a conditional share sale agreement with Shin Yang Holding Sdn Bhd to acquire the remaining 40% stake in  SOP Plantations (Beluru) Sdn Bhd for RM122.4m and 35 per% stake in SOP Plantations (Kemena) for RM120.1m. Upon completion of the exercise, both companies will be wholly-owned subsidiaries of SOP. The plantation estates held by both SOP Plantations (Beluru) and SOP Plantations (Kemena) consist of a mixture of immature and young mature oil palms, between age one to five years. (BT)

Genting Malaysia Bhd's indirect subsidiary Resorts World Sentosa Pte Ltd (RWS) has been fined $S600,000 (RM1.5m) by the Singapore Casino Regulatory Authority (CRA) for partially reimbursing the annual entry levy paid by local patrons. This is the second time RWS has been fined and is the highest single fine imposed to-date by the authority. (StarBiz)

Tan Sri Tony Fernandes said he is unperturbed by Malindo Airways and instead, will give his new rival a real run for their money in Indonesia. "We are thrilled that Malindo is coming here as this means taking away capacity from Indonesia. It is a confusing model. No way can they have lower unit cost than ours," said Fernandes. (Financial Daily)

Petronas Carigali (PCSB), the exploration and production arm of Petroliam Nasional (Petronas), has teamed up with MIT Innovation Sdn Bhd (MITSB) to produce a new drilling tool that can save more than RM150m in drilling cost a year. The two companies signed a technology collaboration agreement yesterday for the development of the new drilling tool that will significantly reduce drilling cost in challenging upstream exploration and development environment. "The new invention, known as the intelligent circulation while drilling (ICWD) tool, is being designed to safeguard complex equipment commonly used in today's drilling operations," Petronas said. Petronas said the ICWD tool will help drillers cure losses encountered in difficult wells and allow for continuous drilling operations without the limitations of the current technologies. Under the agreement, Petronas said the intellectual property rights of the ICWD tool, including patents will be jointly owned by PCSB and MITSB. (BT)

Sarawak export  plywood prices are likely to rise 5-10% over the next three months as demand continues to pick up from Japan. According to Shin Yang Group's ED  Wong Kai Song, average plywood price is currently at  US$550/ cu m compared to US$500/cu m  early this year. Demand from Japan is picking up from Japan and orders are full till the end of the year. Wong also said Japan total import of plywood from various markets rose to 304,000cu m compared to 250,000cu m in Jun. (Starbiz)  

Mazda Motor Corp announced that Berjaya Auto Philippines Inc (BAP) will commence the new distributorship of Mazda vehicles, parts and accessories in the Philippines from Jan 1, 2013. Bermaz Motor International Ltd, an indirect subsidiary of Berjaya Corp Bhd, and Berjaya Philippines Inc will be the major shareholders of BAP. Berjaya Philippines, a unit of BCorp's gaming arm  Berjaya Sports Toto Bhd, is listed on the Philippine stock exchange. (Financial Daily)

KPJ Healthcare Bhd is paying RM14.25m for 100% of  Sri Manjung Specialist Centre Sdn Bhd, which operates a medical centre by the same name in Sitiawan, Perak. It intends to fund the acquisition with internal funds. (Financial Daily)

While the major shareholders are maintaining that they do not intend to privatise  Bonia, the company will focus on an aggressive overseas expansion drive. The expansion in Indonesia and Vietnam would keep the company busy for the next three to five years. Bonia is looking at setting up their own retail stores there and also seek opportunities in the Middle East. (Star Biz)

20120913 1024 Global Markets Related News.

Asia FX By Cornelius Luca - Wed 12 Sep 2012 15:46:37 CT (Source:CME/www.lucafxta.com)
The financial markets were in risk-on mode after Germany's Constitutional Court has ruled that Germany can ratify the new permanent European Bailout Fund. The markets are now waiting a policy review by the Federal Reserve ending on Thursday. The European and commodity currencies marched higher on Wednesday after advancing across the board after on Tuesday. This strength should pause at least briefly today. The US stock markets advanced. Gold, oil and silver ended up as well. The short-term outlook for the foreign currencies is sideways with downside bias. The medium-term outlook for most of the foreign currencies is slightly bullish. The LGR short-term model is long on all foreign currencies. Good luck!

Overnight
US: Wholesale inventories rose 0.7% in July from the 0.2% drop in June inventories.

Today's economic calendar
Australia: Consumer inflation expectations for September

Most Asian Stocks Fall as Investors Await Fed Stimulus Decision (Bloomberg)
Most Asian stocks fell as investors awaited the Federal Reserve’s announcement today and after a Chinese newspaper commentary said massive stimulus measures would be “detrimental” to the nation’s sustainable growth. Toyota Motor Corp. (7203), a carmaker that gets 25 percent of its sales in North America, fell 0.8 percent in Tokyo. Samsung Electronics Co. (005930), which relies on China for 28 percent of revenue, slid 0.2 percent in Seoul. Itochu Corp. (8001) rose 0.5 percent in Tokyo after a report said the trading firm is in talks to buy Dole Food Co.’s packaged-foods business and a unit in Asia. The MSCI Asia Pacific Index fell 0.1 percent to 120.61 as of 9:26 a.m. in Tokyo, with about twice as many shares falling as rising. Markets in Hong Kong and China are yet to open.
“Looks like people are expecting some form of easing, and the market will wait for that uncertainty to be cleared,” said Matt Riordan, a portfolio manager who helps manage about $6.5 billion in Sydney at Paradice Investment Management Pty. “Ultimately they will do something, but it’s an issue of timing whether they will do it now or they will wait toward the end of the year.” The MSCI Asia Pacific Index gained 3 percent this quarter through yesterday as stimulus expectations outweighed signs of a global economic slowdown. The Asian benchmark traded at 12.5 times estimated earnings, compared with 13.9 for the Standard & Poor’s 500 Index (SPXL1) and 12.1 for the Stoxx Europe 600 Index.

China’s Stocks Decline, Led by Material, Industrial Companies(Bloomberg)
China’s stocks fell after the official Xinhua News Agency said massive stimulus measures would be “detrimental” to the nation’s sustainable growth. The Shanghai Composite Index (SHCOMP) slipped 0.3 percent to 2,120.49 at 9:34 a.m. local time, while the CSI 300 Index (SHSZ300) lost 0.4 percent to 2,311.76, led by material and industrial companies. The Hang Seng China Enterprises Index (HSCEI) of Chinese companies traded in Hong Kong slid ed 0.1 percent. The Bloomberg China-US 55 Index (CH55BN), the measure of the most-traded U.S.-listed Chinese companies, added 0.6 percent in New York. The Shanghai Composite had fallen 3.5 percent this year on concern the government isn’t loosening monetary policy or introducing stimulus policies fast enough to counter the slowdown in the economy. Massive stimulus measures would be “detrimental” to China’s sustainable economic growth, Xinhua wrote in a commentary yesterday.
“Many have expected the government to announce an aggressive plan, similar to the 4-trillion-yuan ($632 billion) stimulus package issued in 2008, to keep the economy from stalling for a second time,” Xinhua writer Liu Jie wrote in the commentary. “However, a massive stimulus plan is not only unlikely, but would be detrimental to the country’s sustainable growth.”

Japan Stocks Little Changed on Fed Reserve, China Policy(Bloomberg)
Japanese stocks were little changed as investors awaited the end of a U.S. Federal Reserve policy meeting and after an official commentary said massive stimulus would be “detrimental” for China’s economy. Toyota Motor Corp. (7203), a carmaker that gets 25 percent of its sales in North America, fell 0.3 percent. Hitachi Construction Machinery Co. (6305), which gets 17 percent of sales in China, fell 0.2 percent after the official Xinhua News Agency said broad-based easing will hurt the nation’s prospects for long-term growth. Itochu Corp. (8001) rose 0.6 percent after a report that the trading company is in talks to buy Dole Food Co.’s packaged-foods business and a unit in Asia. The Nikkei 225 Stock Average (NKY) was little changed at 8,959.67 as of 10:01 a.m. in Tokyo, with trading volume 16 percent below the 30-day average as investors wait signs of a third round of asset purchases from the Fed. The broader Topix Index (TPX) rose 0.1 percent to 742.42.
“Markets are slightly nervous in anticipation of quantitative easing,” Lim Say Boon, chief investment officer at DBS Private Bank, said on Bloomberg Television in Singapore. “If we get QE3 then the markets, beyond this period of nervousness, are likely to rally even further.”

U.S. Stocks Rise Amid German Bailout Ruling, Fed Bets(Bloomberg)
U.S. stocks rose, with benchmark indexes trading near four-year highs, as a German court cleared the way for Europe’s bailout fund and investors weighed prospects for stimulus measures from the Federal Reserve. Apple Inc. (AAPL) rallied 1.4 percent, reversing an earlier decline, after introducing the iPhone 5. General Electric Co. and JPMorgan Chase & Co. (JPM) added at least 0.8 percent, pacing gains among the biggest companies. PulteGroup Inc. (PHM) advanced 6 percent as homebuilders rallied. Facebook Inc. (FB) climbed 7.7 percent after Chief Executive Officer Mark Zuckerberg said he’s addressing missteps that made it hard to reap the benefits of mobile advertising. The Standard & Poor’s 500 Index added 0.2 percent to 1,436.56 at 4 p.m. in New York, near a four-year high set last week. The Dow Jones Industrial Average rose 9.99 points, or 0.1 percent, to 13,333.35 today. About 6.2 billion changed hands on U.S. exchanges today, 2.5 percent above the three-month average.
“All eyes are expecting some sort of quantitative easing,” Joseph Tanious, a New York-based strategist at JPMorgan Funds, which oversees $394 billion, said in a telephone interview. “Central bank accommodation has been what’s helped propel this market higher.” He said, “The tail risk is being eliminated in Europe. Getting the ruling from the German Constitutional Court reinforces that we’re stepping in the right direction.” The Fed began a two-day meeting today amid speculation policy makers will provide more stimulus. The central bank will probably announce a third round of bond purchases tomorrow, according to almost two-thirds of economists in a Bloomberg survey. The central bank will also likely commit to hold interest rates close to zero into 2015, the survey showed.

European Stocks Rise to 14-Month High After German Ruling(Bloomberg)
European stocks advanced to a 14- month high after Germany’s top constitutional court cleared the way for the ratification of the euro area’s permanent bailout fund. BAE Systems jumped the most in nine years after the company began talks with European Aeronautic, Defence & Space Co., for a possible combination. Barratt Developments (BDEV) Plc lost 6.4 percent after the housebuilder said it won’t pay an annual dividend. The Stoxx Europe 600 Index (SXXP) rose 0.1 percent to 272.91 in London, the highest close since July 8 last year. The Stoxx 600 has advanced 17 percent from its 2012 low on June 4, boosted by speculation central banks will do more to stimulate growth.
“There were no nasty surprises to come out of the German ratification, so the market got the outcome that it wanted,” said James Buckley, a London-based fund manager at Baring Asset Management Ltd. which oversees about $49 billion. “There are still various hurdles to be jumped, but in the near term, the rotation that we are seeing into financials may still have further to go,” he said in a phone interview. The Stoxx 600 last week surged the most since June as European Central Bank policy makers agreed to an unlimited bond- buying plan to help lower borrowing costs in the region.

Emerging Stocks Rise to One-Month High on Stimulus Bets(Bloomberg)
Emerging-market stocks rose to a one-month high after Chinese Premier Wen Jiabao said the nation has room to boost stimulus and a German court paved the way for a permanent rescue fund to combat Europe’s debt crisis. The MSCI Emerging Markets Index (MXEF) increased 0.6 percent to 978.48 at 5:04 p.m. in New York, climbing for a fifth day. Brazil’s Bovespa Index added 0.8 percent as steelmaker Usinas Siderurgicas de Minas Gerais SA climbed to a four-month high. Taiwan’s TPK Holding Co. (3673) gained the most in three months. Equity gauges in South Korea, South Africa (JALSH) and the Czech Republic increased.
China still has “ample strength” to use monetary or fiscal policy to boost growth in the biggest emerging economy, Wen said yesterday. Germany’s top constitutional court rejected bids to halt the nation’s ratification of the 500 billion-euro ($644 billion) rescue fund today. The U.S. Federal Reserve begins a two-day policy meeting today amid speculation policy makers will announce a third round of asset purchases to boost the economy. “Wen Jiabao’s comments together with last week’s infrastructure announcements have been very good for investor sentiment toward emerging markets,” Mark Luschini, chief investment strategist for Philadelphia-based Janney Montgomery Scott LLC, which manages about $54 billion, said in a phone interview. “The major central banks have been worried that the slowing has been more than anticipated, so they’re stepping up efforts to resuscitate economic activity before they lose the ability to do so in a swift manner.”

Dollar Near 4-Month Low Versus Euro Before Fed Decision(Bloomberg)
The dollar traded 0.2 percent from a four-month low against the euro amid speculation the Federal Reserve will announce it will buy bonds under a program of quantitative easing that tends to debase the currency. Gains in the euro were limited after Greek Prime Minister Antonis Samaras received the second refusal in four days from coalition partners over plans to reduce spending that’s key to receiving international aid. The New Zealand dollar traded near the strongest in more than four months after the nation’s central bank left interest rates unchanged at 2.5 percent. “The prevailing views are that the Fed will conduct another round of quantitative easing,” weighing on the dollar, said Marito Ueda, senior managing director in Tokyo at FX Prime Corp. (8711), a currency-margin company. “Considering the Greek situation, I still see about a 70 percent chance the nation will leave the euro bloc.”
The dollar slid 0.1 percent to $1.2912 per euro as of 9:35 a.m. in Tokyo from yesterday, when it touched $1.2937, the weakest since May 11. It fell 0.1 percent to 77.76 yen after reaching 77.70 on Sept. 11, the weakest since June 1. The euro bought 100.41 yen after gaining 0.5 percent to 100.42. The New Zealand dollar traded at 82.05 U.S. cents from 82.08 yesterday, when it advanced as much as 0.8 percent to 82.38, the highest since April 30.

FOREX-Euro rallies after German court verdict
LONDON, Sept 12 (Reuters) - The euro rose, hitting a four-month high against the dollar, after Germany's top court gave its approval to the euro zone's new rescue fund, allowing its ratification under certain conditions.
"This result from the German Constitutional Court is the best we could look for," a London based currency trader said.

Australian Dollar Trades Near 3-Week High Ahead of Fed Decision(Bloomberg)
The Australian dollar traded 0.4 percent from the highest level in three weeks as speculation the Federal Reserve may signal further stimulus supported demand for riskier assets. The so-called Aussie and New Zealand’s dollar maintained two days of gains after Germany’s top constitutional court cleared the way for the ratification of the euro area’s permanent bailout fund yesterday. New Zealand’s currency, known as the kiwi, was close to a more than four-month high after the Reserve Bank kept its benchmark interest rate unchanged today. “The markets are seeing a good chance that the Fed will announce QE3 today,” Daisaku Ueno, a senior foreign-exchange and fixed-income strategist at Mitsubishi UFJ Morgan Stanley Securities Co. in Tokyo, a unit of Japan’s biggest listed bank, said, referring to a third round of asset purchases known as quantitative easing. “That’s lending support to risk currencies like the Aussie and kiwi.”
The Australian dollar was little changed at $1.0467 as of 9:40 a.m. in Sydney from the close yesterday, when it touched $1.0506, the strongest since Aug. 23. It fetched 81.49 yen from 81.48. New Zealand’s dollar traded at 82.09 U.S. cents from 82.08, after yesterday rising as much as 0.8 percent to 82.38, the highest since April 30. Australian government bonds declined for a second day, with the yield on 10-year notes rising four basis points, or 0.04 percentage point, to 3.21 percent. The rate earlier touched 3.22 percent, the most since Aug. 28. The MSCI World Index (MXWO) of shares advanced 0.4 percent yesterday.

Treasuries Snap Loss as Fed May Highlight Growth Weakness(Bloomberg)
Treasuries snapped a loss as economists predicted a Federal Reserve statement today will show U.S. growth is weak enough to justify a fresh round of stimulus from the central bank. The Fed will probably implement a third series of bond purchases known as quantitative easing and extend its zero- interest-rate policy into 2015, according to almost two-thirds of economists in a Bloomberg survey. Benchmark 10-year rates are 37 basis points from the record low, reflecting demand for the relative safety of Treasuries as global growth slows. The so- called fiscal cliff, a series of spending and tax cuts scheduled for January, is an added threat to U.S. expansion. “I’m not sure the numbers on the U.S. economy will be good,” said Youngsung Kim, head of fixed income in Seoul at Samsung Asset Management Co., South Korea’s largest private bond investor. “The fiscal cliff will impact U.S. Treasury yields” and help keep them from rising.
Ten-year yields were little changed at 1.75 percent as of 10:06 a.m. in Tokyo, according to Bloomberg Bond Trader data. The price of the 1.625 percent security due in August 2022 was 98 7/8. The rate compares with the record low of 1.38 percent set July 25 and the average of 3.72 percent for the past decade.

Fed Seen Starting QE3 While Extending Rate Pledge to 2015(Bloomberg)
The Federal Reserve is likely to announce a third round of bond purchases tomorrow, according to almost two-thirds of economists in a Bloomberg survey, while also extending the duration of its zero-interest-rate policy into 2015. Chairman Ben S. Bernanke and his colleagues on the Federal Open Market Committee will once again roll out unconventional policies to bolster economic growth of less than 2 percent in the second quarter and bring down unemployment stuck above 8 percent for 43 straight months, the survey showed. “The Fed clearly wants to do more,” said Nick Sargen, a former San Francisco Fed economist who oversees $40 billion as chief investment officer at Fort Washington Investment Advisors in Cincinnati. “The economy is looking lackluster, and the Fed has said all along that they feel it’s almost immoral that the unemployment rate is as high as it is.”
Two rounds of bond purchases totaling $2.3 trillion have failed to breathe life into the labor market, which Bernanke said last month is a “grave concern.” That means policy makers will probably announce a new open-ended plan tied to a sustained improvement in the economy rather than specify an amount of purchases and an end-date, according to 32 of the 73 economists in the survey. Twenty-two expect a fixed duration and amount. The FOMC plans to release a statement tomorrow at about 12:30 p.m. after a two-day meeting. At 2 p.m. the Fed will release policy makers’ forecasts for unemployment, inflation and the expected path of the federal funds rate over the next several years. Bernanke plans to hold a press conference at about 2:15 p.m.

Wholesale Inventories in U.S. Climb 0.7%, More Than Forecast(Bloomberg)
Inventories at U.S. wholesalers rose in July by the most in five months as sales fell, indicating production may cool. The 0.7 percent increase in stockpiles followed a 0.2 percent drop in the prior month, Commerce Department data showed today in Washington. The median forecast in a Bloomberg survey called for a 0.3 percent July gain. Sales declined 0.1 percent, the third straight decrease. At the current pace of sales, wholesalers had enough goods on hand to last 1.21 months, the most since November 2009, the report showed. A global slowdown and looming U.S. tax and government spending changes may prompt companies to temper orders to factories as they work off any unintended build-up of stockpiles. “Companies will want to stay lean because of the outlook,” Millan Mulraine, a senior U.S. strategist at TD Securities in New York, said before the report. “The uncertainty is a constraint on demand.”
The median forecast for wholesale inventories was based on a Bloomberg survey of 29 economists. Estimates ranged from no change to an increase of 0.8 percent. Businesses trying to keep stockpiles in line with demand include Deere & Co. (DE), the world’s largest maker of agricultural equipment, which in August cut its full-year profit forecast as sales slowed. “The sales shortfall is reflected in higher inventories in the third quarter and at year-end,” James Field, president of the Moline, Illinois-based company’s agriculture and turf unit, said on an Aug. 15 teleconference. “Actions have been taken to manage the inventories.”

Wen Says China’s Policy Strength to Secure Growth Targets(Bloomberg)
Chinese Premier Wen Jiabao said the nation has room for fiscal and monetary measures to support growth and will meet this year’s economic goals, triggering gains in Asian stocks. “Be it monetary or fiscal, we still have ample strength,” Wen said at the World Economic Forum in Tianjin yesterday. A fiscal stabilization fund of 100 billion yuan ($16 billion) is available for “preemptive” measures, he said. Morgan Stanley today became at least the fifth bank to estimate that China’s economic growth this year will be 7.5 percent, the same as Wen’s target and the weakest pace in 22 years, after imports slid in August and industrial production cooled. While the premier’s comments encouraged investors, the government may limit stimulus to restrain inflation and bad loans and avoid undoing a campaign to cool the housing market.
“The government has fiscal and monetary war chests to revive growth but there does not seem to be much appetite to roll out a large-scale stimulus package,” said Wang Qinwei, a London-based economist with Capital Economics Ltd. who previously worked at the People’s Bank of China. The MSCI Asia Pacific Index rose 1.3 percent as of 7:23 p.m. in Tokyo, extending the rally over the past five days to more than 4 percent.

Big Stimulus Would Harm China Long-Term Growth: Xinhua(Bloomberg)
Massive stimulus measures would be “detrimental” to China’s sustainable economic growth, the official Xinhua News Agency wrote in a commentary. “Many have expected the government to announce an aggressive plan, similar to the 4-trillion-yuan ($632 billion) stimulus package issued in 2008, to keep the economy from stalling for a second time,” Xinhua writer Liu Jie wrote in the commentary yesterday. “However, a massive stimulus plan is not only unlikely, but would be detrimental to the country’s sustainable growth.” The 2008 stimulus led to large local-government debt and bad-loan risks, and left questions regarding the rebalancing of the economy unanswered, the Xinhua commentary said. This time steps are focused on invigorating the private sector and market through measures including tax cuts, according to the agency.
The world’s second-largest economy expanded 7.6 percent in the second quarter from a year earlier, the slowest pace in three years, after the government moved to counter inflation and surging property prices in the wake of the 2008 stimulus. China may limit stimulus to restrain inflation and bad loans and avoid undoing a campaign to cool the housing market. Morgan Stanley, UBS AG, ING Groep NV, Barclays Plc and Royal Bank of Scotland Plc have cut growth estimates to 7.5 percent. There’s a 20 percent chance growth will be 7.3 percent and a 20 percent probability of 7.7 percent, Morgan Stanley economists led by Helen Qiao said in a report.

Bank of Korea Unexpectedly Holds Rates After Stimulus(Bloomberg)
The Bank of Korea unexpectedly held borrowing costs, opting to preserve policy room in the event of a deeper global slowdown after the government boosted support measures with spending and tax cuts. Governor Kim Choong Soo and his board kept the benchmark seven-day repurchase rate at 3 percent after a surprise cut in July, the central bank said in a statement in Seoul today. One of 16 economists surveyed by Bloomberg News predicted the move while the rest forecast a 25 basis point reduction. Asian policy makers face pressure to add to global stimulus as Europe’s protracted debt crisis curbs exports and weighs on confidence. South Korea’s finance ministry announced 5.9 trillion won ($5.2 billion) of spending and tax relief this week while also emphasizing it intended to work within the budget and preserve fiscal firepower.
“The Bank of Korea needs to preserve its policy power because Europe’s fiscal crisis is a long-term fight,” Kwon Young Sun, a Hong Kong-based economist at Nomura International Ltd., said before the decision. “It also has to manage expectations for the rest of the year and an interval of three months is more appropriate than two months after a cut in July.” The won fell 0.1 percent to 1,127.35 per dollar as of 9:42 a.m. in Seoul, according to data compiled by Bloomberg. The Kospi index of stocks declined 0.1 percent.

North Korea Investment Zone Promoted to Chinese as Next Shenzhen(Bloomberg)
North Korean economic zones run jointly with the nation’s main ally, China, are wooing investors by promising low taxes and high returns as the totalitarian North seeks to salvage an impoverished economy. An area at Rason city will become “North Korea’s Shenzhen,” Li Zichen, a deputy director of a zone management committee, told hundreds of people at an investment fair in Xiamen, China, on Sept. 9. Shenzhen led China’s rise to becoming the world’s biggest exporter. A second zone on the Yalu river is a “blessed land for investors to get rich,” said Zhang Zhiqian, also a deputy director. The enthusiasm contrasts with frustrations highlighted last month when Chinese mineral company Xiyang Group said an iron-ore venture collapsed after North Korea violated a contract. Success in expanding the zones would help Kim Jong Un develop a nation that struggles to feed a population of 24 million amid international isolation stemming from its nuclear program.
“Any reasonable Chinese investor will think twice before putting money down,” said Da Zhigang, director of the Institute of Northeast Asian Studies at the Heilongjiang Academy of Social Sciences in the northeastern city of Harbin. “There are many stories on Chinese websites about losing money.” North Korea and China operate two joint economic zones near their shared border, one at Rason and the other on the islands of Hwanggumphyong and Wihwa on the Yalu river. Rason was founded in the 1990s and the island zone was set up in June. Li and Zhang made their presentations at a conference organized by China’s Ministry of Commerce.

Russia to Refrain From Rate Increase on Growth Concerns(Bloomberg)
Russia’s central bank will probably refrain from raising interest rates to contain surging consumer prices as economic expansion comes under pressure from deteriorating global demand. Monetary-policy makers will hold the refinancing rate at 8 percent, a quarter-point above the record low, at a meeting tomorrow, according to 12 of 15 economists in a Bloomberg survey. Three forecast a quarter-point increase. The overnight auction-based repurchase rate and deposit rate will also be left unchanged, two separate surveys showed. Growth in the world’s largest energy exporter slowed to 4 percent from a year earlier in the second quarter as China’s cooling expansion and Europe’s debt crisis sapped demand for Russian commodities exports. Inflation accelerated in August as droughts in the U.S. and Russia stoked food prices, threatening to push price growth beyond the central bank’s 6 percent target.
“Inflation is rising purely because of non-monetary factors,” said Ivan Tchakarov, chief economist at Moscow-based Renaissance Capital. “Raising rates in such an environment would take some heroic reasoning to justify.” Forward-rate agreements used to bet on borrowing costs in the next three months show the three-month MosPrime interbank rate may rise 14 basis points, or 0.14 percentage point, to 7.25 percent, according to data compiled by Bloomberg. The cost to fix floating interest payments in rubles for a year fell to 7.51 percent today, the lowest since June 11, from 7.72 percent at the start of the month.

New Zealand Keeps Record-Low Rate as Bollard Term Nears End(Bloomberg)
New Zealand signaled an 18-month pause in record-low interest rates may last through mid-2013 to help bolster an economy buffeted by weaker global growth and strained by one of the developed world’s strongest currencies. “New Zealand’s trading partner outlook remains weak,” Reserve Bank Governor Alan Bollard told reporters in Wellington after leaving the official cash rate at 2.5 percent. “We have got a forecast that short-term interest rates are going to stay roughly where they are for another year, so that’s quite a stable sort of outlook.” The decision was Bollard’s last in a 10-year tenure before he steps down later this month, succeeded by former World Bank co-managing director Graeme Wheeler. While the central bank signaled little need to raise borrowing costs until the second half of 2013 because of risks from Europe’s fiscal crisis and the outlook for New Zealand’s trading partners including China, economists are waiting to gauge Wheeler’s interpretation of conditions before agreeing.
“The forward guidance given in today’s statement has a fairly limited shelf life,” said Dominick Stephens, chief New Zealand economist at Westpac Banking Corp. in Auckland. “We will reserve any judgment on changing our monetary policy forecast until we have a better understanding of Graeme Wheeler’s style.”

German Court’s Backing Bailout Fund to Test EU Resolve on Crisis(Bloomberg)
German backing for Europe’s bailout fund quickened the bargaining over a bond-buying program for Spain, testing the resolve of government leaders and the European Central Bank to conquer the debt crisis. Spain is pressing for an ECB intervention with no strings attached, while creditors led by German Chancellor Angela Merkel are reluctant to lend more money. Mario Draghi’s central bank is waiting for the two sides to commit before it wades back into the bond market. After yesterday’s “Super Wednesday” in crisis politics marked by relief over the German supreme court’s endorsement of the 500 billion-euro ($645 billion) rescue fund, the question of a credit line or full loan program for Spain is set to dominate a two-day meeting of finance ministers starting tomorrow in Nicosia, Cyprus.
“Now we can say that Europe has in place a powerful backstop in terms of financial support,” Organization for Economic Cooperation and Development Chief Economist Pier Carlo Padoan told Bloomberg Radio’s Ken Prewitt yesterday. “It does not fix finally the problem but certainly it is very important progress.” Discussions at the finance meeting will also touch on Greece’s bid for easier aid terms and Cyprus’s efforts to escape a bailout, with no decisions until at least October, a European official told reporters in Brussels on Sept. 10.

German court backs euro rescue fund with conditions(Reuters)
Germany's Constitutional Court gave a green light for the country to ratify the euro zone's new rescue fund and budget pact but gave parliament veto powers over any future increases in the size of the fund.

French Yields Ignore Hollande Economy to Touch Lows: Euro Credit(Bloomberg)
French President Francois Hollande never misses an opportunity to boast about his country’s record- low bond yields. Trouble is, they may have little to do with him or his policies. Euro-area worries -- from Greece’s budget woes and a German court ruling on the region’s bailout fund to anti-austerity candidates gaining support ahead of today’s Dutch vote -- have sent investors scurrying to the relative safety of French debt. Investors drove yields below zero at a French bills sale last week and pushed 10-year borrowing costs to 2.21 percent, the lowest at an auction since at least 1999.
“What’s keeping French yields low is event risks ahead: Greece is still an issue; the German Constitutional Court’s decision is a risk; and we have an election in the Netherlands,” said Michael Leister, a strategist at Commerzbank AG in London. “France still offers safety in this environment. Hollande is working on reforms and that’s important, but it’s the situation in the euro region more than anything French specific that gets French yields to these levels.” Hollande faces an economy that hasn’t grown in three quarters and joblessness is at a 13-year high. The French president is also struggling to plug a budget hole of more than 30 billion euros ($37 billion) for next year. “The state borrows on the market at rates that are historically low,” he said in an interview on TF1 Television on Sept. 9. “But can we be sure it will last? I’m proud that France is among countries that has the capacity to borrow at such low rates, but we can’t just bank on this situation.”

20120913 1023 Global Commodities Related News.

Bulls Oust Commodity Bears in Fastest Turnaround Since 2008(Bloomberg)
Commodities are surging from a bear to a bull market in the fastest turnaround since the depths of the financial crisis four years ago as traders await economic stimulus measures from central banks. Within 11 weeks the Standard & Poor’s GSCI spot index rose 22 percent from its 2012 low, stoked by falling supplies of oil and grains and speculation that the Federal Reserve will prop up U.S. growth while the European Union ends its sovereign debt crisis. The gauge of 24 raw materials soared to a record high four years ago before plunging as the U.S. slid into the deepest recession since the 1930s. After the jobless rate stayed at more than 8 percent for 43 months, traders are speculating that Fed Chairman Ben S. Bernanke will unveil a third round of so-called quantitative easing as soon as this week. Corn prices are about an all-time high after the worst U.S. drought since 1956 and oil is rising amid mounting tension over Iran’s nuclear program.
“There have been a lot of moving parts within the commodities markets this year,” Jim Paulsen, chief investment strategist in Minneapolis at Wells Capital Management, which oversees $320 billion, said in a telephone interview. “We are turning a corner. The surprise is going to be that global growth is going to accelerate.”

DTN Closing Grain Comments 09/12 14:47 Grains Mixed at Midweek (CME)
Soybeans posted a strong rally while the corn market struggled throughout the day. Wheat contracts were higher with a late rally erasing losses. While there was a great deal of talk about the influence of USDA's numbers, market action indicates it was limited at best.

USDA Crops Update Fails to Light Corn Traders’ Fire(CME)
The U.S. Department of Agriculture further trimmed its outlook for the nation’s corn harvest to reflect severe Midwest drought, though the smaller than expected adjustments weren’t enough to “light a bullish fire” under the market, DTN Senior Analyst Darin Newsom said. Farmers will reap 10.727 billion bushels of corn this fall, the USDA said in a September 12 report, down 0.5% from an August forecast and down 13% from the 2011 crop. The projected crop would be the smallest since 2006. Still, CME Group corn futures fell after the report was released, indicating drought damage was already priced in with a recent rally. “So much had been made of harvest reductions in both corn and soybeans that the September USDA numbers were going to have to be extraordinary to move the needle,” Newsom said in a report.
The USDA lowered its soybean crop estimate by 2.2% from last month, to 2.634 billion bushels, down 14% from 2011 and the smallest harvest since 2003. The cut was larger than the estimates from many analysts, who on average expected a decline of 1.3% from the USDA’s August forecast. In midday trading September 12, December corn futures traded on CME Group were down 10 cents at $7.67 ¾ a bushel, while November soybean futures were up 45 cents at $17.46 ½ a bushel. December wheat fell 9 ½ cents to $8.74 ¼ a bushel.

USDA to sharpen estimate of smallest corn crop in years (Reuters)
U.S. corn crops likely shrank by 399 million bushels from last month's forecasts while the soybean harvest withered by 1 percent as the worst drought in decades dealt a final blow to grain supplies, the U.S. government is expected to report on Wednesday.

Pro Farmer: After the Bell Wheat Recap(CME)
Wheat futures were highly choppy today, but rallied into the close to end slightly to moderately higher at all three exchanges. Early pressure came on spillover from the corn pit, but around midday wheat futures turned higher on help from dollar weakness and spillover from soybean futures. Traders also viewed this morning's USDA data as slightly friendly as USDA trimmed 2012-13 U.S. wheat carryover more than expected.

Wheat Market Recap Report(CME)
December Wheat finished up 6 1/4 at 890, 3 1/2 off the high and 21 1/4 up from the low. March Wheat closed up 7 at 902 3/4. This was 21 3/4 up from the low and 2 3/4 off the high.
December Chicago wheat traded sharply lower midday but finished the day seeing marginal gains. Kansas City and Minneapolis wheat closed higher as well. The market broke lower after the USDA cut world ending stocks to only 176.71 million tonnes when the market was expecting a cut near 174.50. The USDA also left Australian wheat production unchanged at 26 million tonnes while the market fully expected a cut due to the recent estimate by ABARES down to 22.50 million tonnes. Russian wheat production was revised lower to 39 million tonnes which was in line with market expectations. Chicago wheat was pressured early on after corn fell to a new 7-week low, however comments from the Ukraine Ag Minister that suggest Ukraine will only produce 14.50 million tonnes of wheat vs. today's USDA esimtate of 15.50 offered support. Jordan bought 100,000 tonnes of Ukraine wheat today for December and January shipment. The US Dollar finished the day lower and added to the positive tone.
December Oats closed down 1/2 at 387. This was 1 3/4 up from the low and 4 3/4 off the high.

Pro Farmer: After the Bell Corn Recap(CME)
Following the release of USDA's report data, corn futures surged higher, plunged lower and then eventually moderated to post losses ranging from around 5 to 10 cents for the rest of the session. Futures settled mid-range with losses of 5 1/2 to 11 1/4 cents. Action in the corn market centered on followthrough selling after USDA cut its corn production estimate 324 million bu. less than expected to 10.727 billion bushels.

Corn Market Recap for 9/12/2012(CME)
December Corn finished down 8 1/4 at 769 1/2, 15 1/2 off the high and 10 1/4 up from the low. March Corn closed down 8 at 773 1/4. This was 10 up from the low and 15 off the high.
December corn traded sharply lower into the close and hit a new 7 week low following the release of this morning's USDA report. The USDA pegged the average US corn yield at 122.8 bushels per acre vs. the August estimate of 123.4. Production was lowered to 10.727 billion bushels vs. August production of 10.779. The market was disappointed after expectations leaned toward a yield of 120.59 and production at 10.380 billion bushels. Exports were cut by 50 million bushels to 1.250 billion bushels to offset some of the decline in supply. Corn used in ethanol production was left unchanged at 4.5 billion bushels. Ethanol production for the week ending September 7th averaged 816 thousand barrels per day which is down 7.2% from last year. Total Ethanol production for the week was 5.71 million barrels which was down nearly 9 million barrels from the week prior. Corn used in last week's production is estimated at 86.92 million bushels vs. 88.30 the week prior. Corn use needs to average 86.29 million bushels per week to meet this crop year's USDA estimate of 4.5 billion bushels. Basis in the Gulf of Mexico firmed today on tight supply and after farmer sales slowed due to the recent lower price trend. November Rice finished up 0.225 at 14.945, 0.055 off the high and 0.005 up from the low.

Corn-Crop Drought Damage Less Than Expected Spurs Price Drop(Bloomberg)
Corn output in the U.S., the world’s largest grower, will fall by less than analysts expected after the worst drought in more than 50 years, the government said. Prices fell to a seven-week low. Farmers will collect 10.727 billion bushels, the smallest crop in six years and down 13 percent from 12.358 billion in 2011, the U.S. Department of Agriculture said today in its second survey-based estimate for the crop. Last month, the USDA forecast 10.779 billion. The average prediction of 35 analysts surveyed by Bloomberg was for 10.420 billion. Supplies of the grain on Aug. 31, 2013, will be greater than analyst estimates. Crop conditions as of Sept. 9 were the worst since 1988, with the harvest about 15 percent complete, USDA data show. Since mid-June, prices have surged 52 percent, reaching a record $8.49 a bushel on Aug. 10. Futures for December delivery fell 1.1 percent to close at $7.695 at 2 p.m. on the Chicago Board of Trade, after touching $7.5925, the lowest for a most-active contract since July 24.
The larger-than-expected estimate is “a psychological blow to the market,” Randy Mittelstaedt, the director of research for R.J. O’Brien & Associates in Chicago, said before the report. “It’s still a small crop, and that means the market cannot afford to drop prices, or that will stimulate increased demand.”

Drought-hit Russia grain yields down 24.5 pct by Sept 10 (Reuters)
Drought-hit Russian grain quality has fallen sharply, with yields from the key global wheat supplier's current harvest down 24.5 percent from last year to 1.85 tonnes per hectare as of Sept. 10, data of the country's Agriculture Ministry showed.

GRAINS: Chicago soybeans rose after hitting a three-week low, while corn gained following two straight days of losses in positioning ahead of key U.S. reports which will shed light on damage caused by a historic Midwest drought. (Reuters)

SOFTS: Arabica coffee futures consolidated in early trading after a rally to a six-week high in the prior session, while sugar was steady with upside potential capped by record crushing in perfect weather in Brazil. Cocoa was little changed, as dealers focused on weather in top grower Ivory Coast before the start of the main crop. (Reuters)

Brazil sugar mills keep pedal to metal in record August(Reuters)
Perfect weather in the second half of August allowed Brazil's center-south cane mills to hit a second straight record fortnight, churning out 3.34 million tonnes of sugar, up 12.4 percent from a year earlier, industry association Unica said on Tuesday.

Oil Trades Near Two-Day Low as U.S. Stockpiles Unexpectedly Gain(Bloomberg)
Oil traded near the lowest level in two days in New York after a government report showed an unexpected increase in stockpiles in the U.S., the world’s biggest crude user. Futures were little changed after dropping for the first time in six days yesterday. Crude supplies climbed 1.99 million barrels last week, the Energy Department said. They were forecast to fall by 2.9 million barrels, according to the median estimate of 11 analysts in a Bloomberg News survey. Global inventories have become “more comfortable,” the International Energy Agency said in a report. Oil for October delivery was at $96.87 a barrel, down 14 cents, in electronic trading on the New York Mercantile Exchange at 8:52 a.m. Sydney time. The contract yesterday slipped 16 cents to $97.01, the lowest close since Sept. 10. Front-month prices are 2 percent lower this year.
Brent oil for October settlement climbed 56 cents to $115.96 a barrel on the London-based ICE Futures Europe exchange yesterday. The European benchmark grade’s premium to West Texas Intermediate was at $18.95. U.S. gasoline inventories fell 1.18 million barrels, the Energy Department report showed. They were forecast to decline by 1.7 million, according to the survey. Distillate supplies, a category that includes heating oil and diesel, rose 1.48 million barrels, compared with a projected 500,000 barrels drop in the survey.

Recap Energy Market Report(CME)
October crude oil traded higher during the initial morning hours but spent most of the US trading session grinding lower to finish negative on the session. Early gains were impressive, pushing prices to their highest level since August 23, supported by a positive outside market tone, a new four month low in the US dollar and a favorable German court ruling on the ESM bailout fund. Another source of support seemed to come from mounting geopolitical risk after the US ambassador to Libya and three counterparts were killed in an attack. This morning's EIA data showed an unexpected build in weekly crude oil inventories of 1.994 million barrels, which compared to expectations for a 3.0 million barrel draw. The disappointing figure inspired a decline in October crude oil prices to their low of the session. Crude oil imports for the week stood at 8.565 million barrels per day compared to 8.035 million barrels the previous week. The refinery operating rate was down 1.4% to 84.7%, the lowest since April. October crude oil prices grinded lower through the afternoon hours and broke a five day winning streak in the process.

OIL-Oil gains on euro zone bailout, Fed hopes
LONDON, Sept 12 (Reuters) - Brent crude oil rose for a fifth straight session, lifted by a German court decision in favour of a euro zone bailout fund and hopes the Federal Reserve will ease monetary policy this week.
"I think it should be seen as a positive step in the long road to solving the eurozone debt crisis. I think markets will be relatively pleased with the announcement, and the conditions put in place," said Henk Potts, market analyst at Barclays Wealth.

Brent-WTI Crude Undergoing "Fundamental Change"(CME)
By U.S. Energy Information Administration - Wed Sep 12 17:20:00 CDT 2012 CT
Gap Between Benchmarks Likely to Halve
The relationship between Brent and West Texas Intermediate crude oil benchmarks appears to have undergone a “fundamental change” that will lead to the price gap between the two shrinking to less than half recent levels, the Energy Information Administration said in its This Week in Petroleum Report. Brent’s price premium to WTI, which averaged $19 a barrel on spot markets during August, may decline to $9 be the end of 2013 as excess U.S. supply balances out, the EIA said. The premium should narrow further in 2014 because of expanding pipeline capacity to deliver WTI crude from Cushing, Okla., storage facilities to refineries along the Gulf of Mexico. Prior to 2011, the Brent was typically within $5 of WTI.
“New pipeline capacity from Cushing to the Gulf Coast will make it unlikely that light sweet crudes will move from the Gulf Coast to Cushing for delivery against WTI futures contracts as in the past,” the EIA said. “This suggests that the historical WTI premium to Brent in the futures market is unlikely to return.” In NYMEX trading September 12, WTI futures for October delivery fell 16 cents to $97.01 a barrel, while Brent “Look-Alike” futures rose 59 cents to $115.40 a barrel.

China Growth Raises Conundrum for Global Oil Markets(CME)
By CME Group - Wed Sep 12 14:00:00 CDT 2012 CT
Is a New International Crude Benchmark Coming?
The world faces “major questions” over adequacy of oil supplies and the ability of long-established, international benchmarks to provide sufficient price transparency, industry consultant Jan-Hein Jesse said. China and Russia are poised to become dominant market players over the next two decades, according to Jesse, who runs Josco Energy Finance & Strategy Consultancy out of the Netherlands. Meanwhile, production of one international bellwether, North Sea Brent crude, has halved over the past decade. The debate also involves West Texas Intermediate crude, the U.S. benchmark. One question is, “will China and others in the region continue to allow oil prices to be set in the West?” Jesse said. By the time all this shakes out, a new global benchmark may be in place. Jesse, an expert for the International Energy Agency and a former acquisitions manager with Royal Dutch Shell, will address this topic and others at the S&P Dow Jones Commodity Seminar in London September 20.

IEA says world well supplied with oil
LONDON, Sept 12 (Reuters) - Global oil demand is poised to be depressed for the next 18 months while supply levels from OPEC countries are at fairly comfortable levels, the West's energy agency said on Wednesday as it faces calls for an emergency stocks release.
Sources have told Reuters the United States is considering an emergency stocks release in a move to help suppress high oil prices, and other members of the International Energy Agency, such as France and Great Britain, could join the move.

U.S. crude stocks up slightly, gasoline falls-API
NEW YORK, Sept 11 (Reuters) - Rising imports boosted U.S. crude stocks, which rose slightly last week instead of falling as forecast, while gasoline stocks fell by a sharp 4.2 million barrels, data from the American Petroleum Institute showed on Tuesday.
Crude inventories rose by 221,000 barrels in the week to Sept. 7, compared with analysts' expectations for a drawdown of 2.6 million barrels.

U.S. sees tighter oil market; OPEC disagrees
NEW YORK/LONDON Sept 11 (Reuters) - The U.S. government and OPEC offered differing outlooks for global oil markets on Tuesday, with Washington ratcheting up price forecasts for oil on stronger demand while OPEC highlighted rising output from the exporter group.
In separate monthly reports, both emphasized the possibility that a worsening European crisis could still drag down oil prices, warnings that may complicate deliberations over whether to tap into strategic oil reserves again.

OPEC pumps more oil, sees abundant supply
LONDON, Sept 11 (Reuters) - Oil consumers have enough crude supply and the risk to global demand growth remains skewed to the downside, exporter group OPEC said on Tuesday, in a report that builds a case against any use of strategic reserves by consumer nations to lower prices.
The Organization of the Petroleum Exporting Countries said its production rose by about 260,000 barrels per day (bpd) in August, despite a European Union embargo on Iran's exports, due to higher output from other members of the 12-member group.

Oil prices lower after bearish inventory report(CME)
By Dominick Chirichella - Wed 12 Sep 2012 11:28:27 CT
Oil markets broke ranks today (as expected) from the QE wait and were mostly impacted by the latest EIA weekly oil inventory report...which was mostly biased to the bearish side (see below for a more detailed discussion on inventories). That said after the dust settles the long awaited outcome of the September US Fed FOMC meeting is likely to have a much deeper impact on oil and most risk asset prices and will likely have a much longer lasting impact on prices. The consensus opinion by over 2/3 of economist polled in various polls are expecting QE3 to be announced tomorrow for about $500 billion over a six month period of time. I remain in the 1/3 group as I am expecting it after the election.
As I have already discussed in Wednesday's newsletter the market has been pricing in some additional easing by the Fed. In fact the market may be setting up for a downside correction irrespective of the outcome. If the Fed announces a new QE3 program the market could be in a buy the rumor sell the fact mode and thus result in a downside correction. On the other hand if the Fed pushes the decision down the road (my likely outcome) we could also see a downside correction in risk asset markets. Irrespective of the outcome the next several days are likely to be volatile with the potential for intraday price reversals.
Although it has not impacted oil prices (as of yet) there has been a stark reminder over the last twenty four hours that the geopolitics of the middle east have not gone away. There have been demonstrations and attacks on US Embassy's in both Egypt and Libya with the US Ambassador of Libya killed along with three other Americans. The Libyan attack is currently being reported as an orchestrated and planned attack (possibly by al Qaeda) with the protests just a cover up the terrorist act. Whatever the case this is a very volatile region and one that can change from quiet to very active in a heartbeat. As a significant amount of oil that flows to the consuming world comes from this region and elevation of unrest in the region can always result in a possible interruption in supply. For now supply of oil is not an issue as the events over the last day are simply a reminder of the risk from this region.
Global equity markets have been mostly higher over the last twenty four hours as shown in the EMI Global Equity Index table below as market players await a new round of QE. The global equity markets are clearly in a holding pattern until the outcome of the FOMC meeting is announced early Thursday afternoon... as are just about all risk asset markets. The EMI Index has gained another 0.6% over the last twenty four hours widening the weekly gain to 1.5% and the year to date gain to 6.8%. the rankings of the bourses remain the same but Germany surged to a 24.5% gain for the year after the Federal Court approved Germany's participation in the ESM. Global equities have been a positive for oil prices and the broader commodity complex. However, as it stands right now if no action is taken by the Fed tomorrow there is likely to be a strong sell-off.
Wednesday's EIA inventory report was bearish for crude oil and distillate fuel and neutral to bullish for gasoline and jet fuel. Total commercial stocks increased strongly as did crude oil inventories all related to the recovery from the preemptive shut-ins from Hurricane Isaac. Refinery utilization rates declined on the week down to 84.7% of capacity. The data is summarized in the following table along with a comparison to last year and the five year average for the same week.
Total commercial stocks of crude oil and refined products increased by 3.3 million barrels after decreasing by almost 10 million barrels the week before. The year over year surplus widened to 7.1 million barrels while the surplus versus the five year average for the same week widened to 30.8 million barrels. By all measurements total oil supply in the US is still well balanced to comfortable irrespective of the evolving geopolitical risk in the Middle East and teh shut-ins from Isaac.
Crude oil inventories increased (by 2 million barrels) and versus an expectation for a modest draw. Crude oil inventories have been increasing steadily for most of this year and are still well above the levels they were at during the height of the recession as well as being at the highest level since 1990. With the increase in stocks this week the crude oil inventory status versus last year is still showing a surplus of around 6 million barrels while the surplus versus the five year average for the same week came in around 23.3 million barrels. Crude oil imports increased modestly on the week after falling strongly last week due to the storm.
PADD 2 crude oil inventories increased by about 0.5 million barrels while Cushing, Ok crude oil inventories declined by about 0.8 million barrels on the week. Crude oil inventories in the mid-west region of the US are off of their record high levels as the Seaway pipeline is now pumping oil out of the region as well as refineries running at over 90% of capacity (temporarily lower from Isaac). The decline in crude oil inventory in Cushing is marginally bearish for the Brent/WTI spread. The spread traded has widened over the last twenty four hours as the supply situation in the North Sea is still not back to normal after the maintenance season. The Oct spread is once again approaching the $19/bbl level.
Distillate stocks surprisingly increased (versus and expectation for a draw) even after a 1.4% decline in refinery run rates. Heating oil/diesel stocks increased by 1.5 million barrels. The year over year deficit came in around 28.2 million barrels while the five year average remained in a deficit of about 23.7 million barrels. The lost distillate production was offset by a likely reduction in exports.
Gasoline inventories decreased within the expectations...again all related to Isaac. Total gasoline stocks decreased by about 1.2 million barrels on the week versus an expectation for about the same size decline. The deficit versus last year came in at 11.1 million barrels while the deficit versus the five year average for the same week was about 6.2 million barrels.
The following table details the week to week changes for each of the major oil commodities at every level of the supply chain. As shown I have presented a mixed categorization on the week as inventories for distillate and crude oil were bearish while distillate and Jet Fuel were neutral to bullish. Overall this week's report was marginally biased to the bearish side as total stocks are once again back to building mode.
I still think the oil price is overvalued and toppy at current levels as it approaches a key technical resistance area. WTI is still currently in a $90 to $100/bbl trading range while Brent is in a $110 to $120 trading range. That said prices are almost solely being driven in the short term by a combination of last week's outcome of the ECB meeting and the growing view that more stimulus from both China and the US is on the way.
I am keeping my view at neutral as the industry is already almost back to normal operations after Isaac. At current prices the economics still favor Nat Gas but if prices do work their way to the upper end of the trading range utilities could begin to move back to coal.
Markets ended the US session mixed as shown in the following table.
Due to my travel schedule I am publishing Thursday's report on Wednesday afternoon.

Silver Market Recap Report(CME)
December silver carved out a trading range in excess of $1.60 in the wake of the German ESM court ruling, and finished Wednesday's session with a moderate loss. A sluggish Dollar combined with generally strong global equity market provided an early boost for silver prices this morning. However, a sharp selloff after US economic data was released took the silver market far below the overnight highs by mid-session.

Gold Market Recap Report(CME)
The gold market reached a new 61/2-month high early in Wednesday's trading but then proceeded to fall all the way back into negative territory by the close. The German Constitutional Court's ruling allowing that nation to ratify the ESM bond buying program boosted commodity risk sentiment and provided strong support for gold prices early during this morning's session. A weaker Dollar in front of tomorrow's FOMC meeting announcement was also felt to be an additional positive factor for the gold market. However, today's set of decent US economic numbers weighed on December gold and took prices well below their early highs.

Thomson Reuters: Gold Update By Thomson Reuters - Wed 12 Sep 2012 08:16:28 CT
Gold hovered near a six-month high as investors stayed put ahead of a German court ruling on the euro zone's rescue fund and the Federal Reserve's policy meeting, while a weaker dollar lent support.

20120913 1022 Soy Oil & Palm Oil Related News.

U.S. Soybean Crop Seen Falling to Nine-Year Low on Drought(Bloomberg)
U.S. soybean farmers will harvest the smallest crop in nine years after June and July were the hottest and driest since 1936, the government said. Prices rose the most in three weeks. Production will drop to 2.634 billion bushels (71.69 million metric tons), down 14 percent from 3.056 billion in 2011 and the lowest since 2003, the U.S. Department of Agriculture said today. The average estimate of 34 analysts polled by Bloomberg News was 2.659 billion bushels. A month ago, the USDA predicted 2.692 billion. Soybean prices are up 45 percent this year, reaching an all-time high last week, as crop conditions deteriorated to the worst since 1988. Output is dropping for a third straight year in the U.S., the largest grower, as demand increases for soy- based livestock feed and vegetable oil in China, where imports are forecast to reach a record for a ninth year.
“We have a huge shortage that is unprecedented and will require higher prices to slow demand,” Jerry Gidel, the chief feed-grain analyst for Rice Dairy LLC in Chicago, said in a telephone interview. “The U.S. beef and dairy industry will have to use less soybean feed to leave enough for the hog and poultry producers the remainder of this year.” Soybeans for November delivery jumped 2.6 percent to close at $17.4575 a bushel at 2 p.m. on the Chicago Board of Trade, the biggest gain since Aug. 21. Prices reached a record $17.89 on Sept. 4.

Pro Farmer: After the Bell Soybean Recap(CME)
Soybean futures rallied sharply today, ending with gains of 43 3/4 to 45 cents in the September through March contracts. Farther deferred contracts posted slightly lesser gains in the mid-20 to mid-30-cent range. USDA's report data was mostly neutral this morning as the 2012 crop estimate and the old- and new-crop ending stocks forecasts were in line with the pre-report guesses.

Soybean Complex Market Recap(CME)
November Soybeans finished up 44 1/4 at 1745 3/4, 4 1/4 off the high and 52 1/4 up from the low. January Soybeans closed up 43 3/4 at 1744 1/2. This was 51 1/4 up from the low and 4 1/4 off the high. December Soymeal closed up 16.2 at 532.1. This was 20.9 up from the low and 1.5 off the high. December Soybean Oil finished up 0.6 at 56.48, 0.36 off the high and 0.8 up from the low.
November soybeans traded sharply higher today and settled near the high end of today's trading range. Soybean meal and oil traded higher as well. The USDA cut the new crop soybean yield to 35.3 bushels per acre, which was down from 36.1 in August and vs. trade estimates of 35.8. Production was revised lower to 2.634 billion bushels vs. trader estimates of 2.657. Total usage was cut by 72 million bushels which put the 2012/13 ending stocks at 115 million bushels which was unchanged from the August estimate. The soybean market surged higher following the report on thoughts that demand will remain robust to finish out this year and higher prices will be needed to slow the pace of exports. Reports that dry weather in northern and central Brazil could delay soybean planting next week added to the positive tone of the market today. Soybean spot basis dropped 15-20 cents per bushel at a processor in Indiana after futures surged and harvest advanced across the Midwest. The US Dollar traded lower for most of the day which offered underlying support to soybeans.

India vegoil imports to rise to 10 mln T for in 2012/13 (Reuters)
India's edible oil imports are likely to rise more than 4 percent to 10 million tonnes in the 2012/13 marketing year as domestic output in the world's top buyer lags rising demand, an industry official said.

EDIBLES: Malaysia crude palm oil futures dipped on expectations of higher production this month could lead to a stock build up although agriculture markets were waiting for a key U.S. report on soybean supply later in the day. (Reuters)