TradeTheNews.com Better Corporate Earnings Drive Risk-On Rally, Better Economic Data Helps Bernanke Sit Tight (source: www.tradethenews.com)
By TradeTheNews.com - Fri 20 Jul 2012 15:49:41 CT
- Fed Chairman Bernanke appeared before House and Senate committees this week for his semi-annual monetary policy report. Ahead of the testimony, there was some speculation that Bernanke would finally provide some hints about QE3. However the chairman simply reiterated his prior outline of strategies the Fed might have at its disposal to further ease policy and stuck to his script from the June decision. A trio of data reports out this week suggested that the US economic conditions were not nearly bad enough to justify QE3: the July Empire Manufacturing survey was much better than expected, June industrial production data indicated that US output likely snapped back from the dire conditions seen in May, and June US housing starts climbed 6.9%, hitting their highest level since October 2008. In addition, the MBA mortgage report for the week ended July 13th jumped 17% as mortgage rates hit fresh record lows. It wasn't all good news, however: June retail sales fell for the third straight month, making for the longest downtrend since 2008 and the July Philly Fed index was lower than expected, although it ticked up from the very poor -16 reading in June. Some better corporate earnings reports helped drive mild equity gains through the middle part of the week, although trading volumes were notably light. On Friday, the brief risk-on rally came to a halt on press reports that Spain's Valencia region has requested aid from Madrid even as its Spain's European partners worked on formally approving the bank bailout scheme. Shorter-term debt issued by Germany, France, the Netherlands, Switzerland, Finland and Austria saw negative yields, while Italy's and Spain's 10-year yields surged back above six and seven percent, respectively. There was some better economic data out of China, although the NDRC warned that the economic slowdown might extend beyond Q3. Despite the gyrations, US equities posted modest gains on the week.
- The financial sector had a rough ride this week. After JPMorgan's very mixed report last Friday, there were flattish or poor results from Citigroup, Goldman Sachs, Bank of America and Morgan Stanley this week. Ultra low rates are taking their toll on interest margins, regulatory reforms have cut deeply into trading revenues, the European crisis lurks in the background and the recovery in mortgage lending has been very mild. BoA reported a decent profit versus a giant loss in the year ago quarter, but its shares still fell 3% this week. Morgan Stanley's revenue was down 24% from the year-ago quarter, with steep declines seen across the firm's core businesses. Goldman's profits were down 12% on a y/y basis. Citi's profits were down slightly y/y.
- Visa, MasterCard and other card issuing firms agreed to a $7.3B debit card swipe fee settlement with US merchants this week. If approved, the deal would resolve lawsuits filed by retailers in 2005. The card companies and banks would also allow stores to start charging customers extra for using certain credit cards. Shares of Visa and MA gained on the news, but poor results from American Express on Thursday dragged down the card issuers.
- Johnson & Johnson and Coca-Cola provided the usual in-line performance, up on a modest basis y/y. Business for both giants was pretty good in the quarter, with the exception of Coca-Cola's Europe volumes, which continue to decline. The strong USD hurt both names, cutting profits by approx 4% a piece in the quarter. Verizon saw some softness in new wireless and new FiOS customers in Q2. The company does not break out iPhone sales, but one industry watcher said Verizon only sold 2.7M iPhones (v estimates of around 3.4M units, and 3.2M units last quarter), given credence to the notion that iPhones sales are slowing ahead of the expected launch of the new model this fall. YUM! Brands missed earnings expectations and reported some softness in its China business due to inflation.
- Three major chip names - Intel, AMD and Qualcomm - reported varying results this week. Intel met expectations in its Q2 and analysts seem to agree that while its Q3 and FY12 revenue outlooks are not great, they could have been worse. Shares of AMD plummeted on its very weak forecast for Q3. Qualcomm met expectations and said it expects a "strong December quarter" as it will have overcome a shortfall in its advanced chip supply by the end of 2012. IBM beat earnings estimates, although the firm was a hair behind revenue targets, thanks to flat software revenue and declines in its overall Americas segment revenue. The firm complained about the very large FX translation headwinds it has been facing. Microsoft reported solid, in-line performance and had lots of brave words on the firm's Windows 8 rollout. Google saw very strong revenue, and both gross ad revenue and paid clicks continue growing at a healthy rate. Google had little to say about Marissa Mayer, a long time executive who defected to become Yahoo's latest CEO in a surprise announcement.
- After several months of rejected approaches, GlaxoSmithKline has finally found the right price point for partner Human Genome Sciences, which agreed to be acquired for $14.25/share or a total of $3 billion. This compares with GSK's prior $13/share offer. The acquisition will secure GSK's rights to recently launched lupus drug Benlysta and full ownership of experimental medicines for diabetes and heart disease.
- EUR/USD remained locked within the 1.2150 to 1.2330 corridor this week as euro buy-stops accumulated just above top end of the range. Decent bill auction results out of Europe stabilized the single currency to a certain degree but the effects were offset by a weak Spanish bond auction on Thursday. There were some headwinds as well from talk that the Swiss National Bank was selling off euros accumulated from its defense of the EUR/CHF floor at 1.2000. By the end of the week concerns over possible contagion in Europe pushed the 10-year Spanish/German government bond spread to a fresh EMU record level above 600 bps, squashing the euro.
- The BoE minutes weakened the pound sterling. Analysts believed that the vote to hike the Asset Purchase Target by £50B was unanimous, but the minutes showed that there were two dissenters, Broadbent and Dale, provoking some uneasiness. The BoE also tweaked its view on interest rates, noting that the MPC would reconsider rate cuts in light of the new initiatives. Back in June the MPC discussed the merits of cutting rates but saw no advantages to further QE at the time. The GBP shook off weakness provoked by the minutes and benefitted from the weak euro. EUR/GBP plumbed three-and-a-half year lows as it tested below the 0.78 handle.
- USD/JPY remained under pressure from the start of the week, breaching the 200-day moving avg around the ¥79 handle and extending its losses below ¥78.50, a 6-week low. The stronger JPY provoked further verbal intervention from Japanese authorities, as Finance Minister Azumi called the yen strength "speculative" and Bank of Japan Gov Shirakawa cautioned that the European debt crisis is contributing to JPY gains. Later in the week, the chairman of Japan Automobile Manufacturers Association remarked that the USD/JPY exchange rate "around ¥80" is still very tough for Japan automakers.
- The case for a China soft landing made by last week's release of Q2 GDP was further supported by surprisingly strong housing figures and lending estimates. June new home prices only fell in 21 out of 70 major cities, less than half the May figure, while measured prices in all Chinese cities was flat m/m - the first non-negative print in 9 months. Chinese lenders are also increasingly more active, as press reports suggested the top 4 banks' loans in the first half of July already reached CNY50B, more than twice the amount in the same period of June. The National Bureau of Stats was quick to respond to the latest data, noting it will keep the lid on property speculation with price oversight remaining a part of Beijing's long-term policy objective. Separately, an IMF quarterly review cut 2012 and 2013 GDP targets by 0.2pts and 0.3pts to 8.0% and 8.5%, respectively.
- In Australia, the RBA policy meeting minutes tilted toward the less dovish stance, pointing to stronger than expected GDP data, rising household consumption, and more positive developments in the China economy. The Australian central bank concluded it was appropriate for rates to be "a little below average" in light of slower global growth, suggesting domestic conditions may have to deteriorate again in order for RBA to consider another easing. Later in the week, press reports indicating the Bundesbank was joining other global central banks in diversifying their reserves into the Aussie dollar elevated AUD/USD above $1.04, its highest level in nearly 3 months.
Monday, July 23, 2012
20120723 1209 Metal Related News.
SILVER: A Metal of Sunken Treasure and ChampionsBy Eric McWhinnie - Sat 21 Jul 2012 12:05:10 CT (source: CME)
Earlier this week, Odyssey Marine Exploration, a world leader in deep-ocean shipwreck exploration, announced it successfully recovered approximately 48 tons of silver bullion from the SS Gairsoppa. The British ship was torpedoed by a German U-boat and sank in three miles of water off the coast of Ireland during World War II. Despite the silver being submerged for 71 years, it is still a highly prized discovery as the precious metal has appreciated in value.
In a press release, the company explained the initial recovery of the sunken treasure totaled 1,203 silver bars or approximately 1.4 million troy ounces of silver. The total operation, which also includes the SS Mantola, could bring to the surface about 240 tons of silver, a record-breaking amount. The recovery is the heaviest and deepest haul of precious metals to date.
"With the shipwreck lying approximately three miles below the surface of the North Atlantic, this was a complex operation," commented Greg Stemm, chief executive officer. "Our capacity to conduct precision cuts and successfully complete the surgical removal of bullion from secure areas on the ship demonstrates our capabilities to undertake complicated tasks in the very deep ocean."
Don't Miss: GOLD: Safe Haven or Risky Investment?
Companies such as Odyssey are willing to go to such great lengths to recover precious metals, because hard assets such as gold and silver tend to hold their value exceptionally well over the long-term. The SS Gairsoppa sank in 1941, a year in which the average silver price was 35 cents per ounce. However, in 2011 the average price of silver was $35 per ounce. Currently, the price of silver is about $27 per ounce, but Odyssey's haul of 1.4 million ounces is still valued at roughly $38 million.
Silver is an amazing metal. Not only is it known for historic monetary characteristics, but also for its industrial usage. Almost all electronics are configured with silver. The precious metal is used in everything from automobiles to alternative energy needs. According to The Silver Institute, over 36 million ounces of silver are used annually in automobiles. Meanwhile, silver paste is used in 90 percent of all crystalline silicon photovoltaic cells, which are the most common type of solar cell. Over 100 million ounces of silver are projected to be used on these solar cells by 2015. The white metal has also been used in medicinal and preservative purposes around the world for generations.
Gold is often called the money of kings, but silver will be known as the money of champions come the London Olympics. When athletes receive a gold medal at the Summer Olympics, only 1.34 percent of it will contain actual gold. The rest is comprised of 93 percent silver and 6 percent copper, according to CNNMoney. In fact, solid gold medals have not been issued since the 1912 Olympic games in Sweden.
Considering silver's unique industrial qualities and ability to endure years of abuse and still come out a winner, it seems only appropriate to have the precious metal at the top of the podium.
Earlier this week, Odyssey Marine Exploration, a world leader in deep-ocean shipwreck exploration, announced it successfully recovered approximately 48 tons of silver bullion from the SS Gairsoppa. The British ship was torpedoed by a German U-boat and sank in three miles of water off the coast of Ireland during World War II. Despite the silver being submerged for 71 years, it is still a highly prized discovery as the precious metal has appreciated in value.
In a press release, the company explained the initial recovery of the sunken treasure totaled 1,203 silver bars or approximately 1.4 million troy ounces of silver. The total operation, which also includes the SS Mantola, could bring to the surface about 240 tons of silver, a record-breaking amount. The recovery is the heaviest and deepest haul of precious metals to date.
"With the shipwreck lying approximately three miles below the surface of the North Atlantic, this was a complex operation," commented Greg Stemm, chief executive officer. "Our capacity to conduct precision cuts and successfully complete the surgical removal of bullion from secure areas on the ship demonstrates our capabilities to undertake complicated tasks in the very deep ocean."
Don't Miss: GOLD: Safe Haven or Risky Investment?
Companies such as Odyssey are willing to go to such great lengths to recover precious metals, because hard assets such as gold and silver tend to hold their value exceptionally well over the long-term. The SS Gairsoppa sank in 1941, a year in which the average silver price was 35 cents per ounce. However, in 2011 the average price of silver was $35 per ounce. Currently, the price of silver is about $27 per ounce, but Odyssey's haul of 1.4 million ounces is still valued at roughly $38 million.
Silver is an amazing metal. Not only is it known for historic monetary characteristics, but also for its industrial usage. Almost all electronics are configured with silver. The precious metal is used in everything from automobiles to alternative energy needs. According to The Silver Institute, over 36 million ounces of silver are used annually in automobiles. Meanwhile, silver paste is used in 90 percent of all crystalline silicon photovoltaic cells, which are the most common type of solar cell. Over 100 million ounces of silver are projected to be used on these solar cells by 2015. The white metal has also been used in medicinal and preservative purposes around the world for generations.
Gold is often called the money of kings, but silver will be known as the money of champions come the London Olympics. When athletes receive a gold medal at the Summer Olympics, only 1.34 percent of it will contain actual gold. The rest is comprised of 93 percent silver and 6 percent copper, according to CNNMoney. In fact, solid gold medals have not been issued since the 1912 Olympic games in Sweden.
Considering silver's unique industrial qualities and ability to endure years of abuse and still come out a winner, it seems only appropriate to have the precious metal at the top of the podium.
20120723 1208 Crude Oil & Energy Related News.
Oil move higher on the week By Dominick Chirihella - Sun 22 Jul 2012 03:30:34 CT (source: CME)
Just when you thought Europe was moving into the background the markets were quickly reminded on Friday that the EU sovereign debt problems have not changed and are here to stay until the EU leadership solves them once and for all. As Spanish bond yields soared again the market quickly moved back into a risk aversion mentality and embarked on a modest round of profit taking selling that dominated all of the main risk asset markets throughout the trading session. Spanish bond yields hit another record high even as the EU Finance Ministers gave their final approval to the bank bailout program for Spanish banks. Simply put the market continues to interpret all of the actions by the EU leadership as just not enough to be comfortable that the debt issues that have been evolving for the last three years are truly a problem that has been solved.
Friday's selling action sent the euro down thru another key technical support level hitting the lowest level since 6/14/2010 and seemingly now on a path to test the lows made in early June of 2010. The euro now seems like it is gaining momentum to test the next level of support at 1.1875. If the next level of support is breached the value of the euro versus the US dollar will be back to levels not seen since the second half of 2005! Market players are once again talking about the possibility of the euro and the US dollar trading in parity. If the market does not become convinced that the debt problems have truly been arrested the euro is going to remain under pressure.
Certainly the recipient of a weak euro is the US dollar which will continue to firm and thus act as a negative or bearish catalyst for oil and the broader commodity complex as well as equities if all of the historical relationship remain in play. At the moment the US dollar Index is hovering near levels not seen since the middle of 2010. If the US dollar continues to strengthen it will be very difficult for the short term oil bulls to remain very comfortable barring an elevation of the geopolitical risk and/or an offset to the rising US dollar... more US quantitative easing.
As I suggested last week the risk asset markets... including oil are in a battle between a slowing global economy versus money printing coming from all corners of the world. Supply and demand balances for oil are very comfortable at the moment. There are no shortages of oil anyplace in the world. Global inventories are mostly above normal for both crude oil and refined products. According to reports in the media a larger volume of Iranian crude oil (then originally expected) seems to be in the market as China continues to buy deeply discounted barrels. The only shortage of oil at the moment is not on the supply side rather it is on the demand side as global oil demand growth is continuing to contract with both the US and Europe expected to show a decline in oil consumption in 2012 while the main oil demand growth engine of the world...China...is consuming much less oil than previously forecast. Bottom line barring an increase in the geopolitical risk of a supply interruption and/or more quantitative easing oil prices may be very close to a short term top.
The markets are heading into the lower liquidity part of the summer season as many players move into vacation mode. That said corporate earnings reports will continue to be hitting the media airwaves and have at least a short term impact on equity markets and due to the high level of macro correlation risk they will also impact commodities. In addition the market will be looking at every macro economic data point very closely leading up the next US Fed FOMC meeting on July 31- August 1. The more negative the economic data the more quickly the market will interpret the data point as increasing the likelihood of the Fed embarking on QE3. The coming week is a light week for economic data out of the US with the second half of the week a bit more interesting as jobless claims, durable goods orders, GDP and sentiment data hit the airwaves. These are all gauges that the market will quickly interpret as supportive or not supportive for more quantitative easing.
In spite of the selling on Friday most risk asset markets over the last week... including the oil complex was stronger across the board with WTI and Brent about equal in their weekly moves. The August WTI contract increased by about 4.98% or $4.34/bbl while the September Brent contract ended the week with an increase of 4.33% or $4.33/bbl. The spot Brent/WTI spread widened by only about $0.09/bbl for the week as the normalization process is still interrupted by lower loadings out of the North Sea. I still expect the spread to gradually continue to narrow over the next 3 to 6 months as the surplus in the US mid-west is also starting to recede from a combination of exports of crude oil out of the region through the Seaway pipeline coupled with refinery utilization rates at the highest level in months.
On the distillate fuel front the Nymex HO contract increased by 4.88% or $0.1361/gal on the week even as distillate fuel inventories surged higher for the second week in a row versus an expectations for a more modest build. Gasoline prices increased on the week after a small surprise draw in gasoline stocks. The spot Nymex gasoline price increased 4.51% or $0.1269/gal this past week.
Nat Gas futures increased surged on the week after a smaller than expected injection into inventory. The August Nat Gas futures contract increased by 7.2% or $0.207/mmbtu on the week and is now trading around well above the key psychological level of $3.00/mmbtu.
Just about every risk asset market was lower on Friday with the excepting of Nat Gas. I have not been able to make that kind of comment very much over the last several years... in fact it was just the opposite statement as Nat Gas was in such a strong downtrend. Nat Gas has staged a decent recovery rally since bottoming out after hitting a low of around the $1.90/mmbtu level on April 20th. Since then the spot futures price has risen by about $1.15/mmbtu or about 60%. The recovery so far has been driven based on an improvement in the current fundamentals. The overhang or surplus in inventory compared to last year and the five year average for the same week peak around the 900 BCF level. Since then the overhang in inventory has been steadily declining and is now hovering around the 500 BCF level. The inventory overhang has declined by about 45% since peaking. Simply put that is why Nat Gas prices have moved higher.
The two main reasons why the inventory overhang has been declining is a modest voluntary reduction in supply and an improvement in demand. The demand impact has been a much more significant impact on the overall supply and demand balances than the supply cuts seen to date. The improvement in demand over last year has been three-fold... a small increase in industrial consumption related to the small increase in economic activity in the US, coal to Nat Gas switching and an increase in cooling related Nat Gas demand due to the extreme heat during the first half of the summer. The increase has resulted in weekly injections underperforming. The injection season to date has averaged 67.3% of last year's fill rate and 67.6% of the injection level of the five year average.
As I have been discussing the economics of coal to Nat Gas switching has moved back to being more economically favorable to coal than Nat Gas for the majority of the time over the last several weeks. With high inventories of coal at many utility locations coupled with unfavorable economics for Nat Gas over coal I would expect some utilities to move back to coal... if they have not already done so. The big increase in Nat Gas demand as a result of coal to Nat Gas switching has peaked and is now on the down swing. Future injections will be impacted.
Cooling related Nat Gas demand is also likely to start receding as the latest temperature forecast by NOAA is projecting above normal temperatures over a smaller portion of the US than what was actually experienced during the first part of the summer. The extreme is projected to be mainly in the mid section of the US... bad for the crop but not as severe for cooling demand as this section of the US is a lower population area compared to the coastal areas...which are both projected to experience normal to even below normal temperatures into very early August. Unless the projected area of the country expecting extreme heat increases significantly I now expect cooling related Nat Gas demand to also have peaked.
The last variable in the short term that has been keeping Nat Gas prices bid has been the large amount of nuclear power generation capacity that is currently down versus last year and the five year average. As of today 9,200 MW of capacity is out of service versus 2,700 MW last year and 4,400 MW for the five year average for the same week. However some of the capacity that was shut down over the last several days is already back into restart mode suggesting that nuclear capacity should be closer to normal for this time of the year in the not too distant future.
Overall I still view Nat Gas futures prices as overvalued versus the current fundamentals. There is still an exposure of the industry prematurely hitting maximum storage capacity especially if some of the increases in demand do start to recede as describes above. Also do not lose sight of the simple fact that even if the industry does not prematurely hit storage limitations there will be a record amount of Nat Gas in storage prior to the start of the upcoming winter heating season. there will not be a shortage or supply related issues anytime soon ...barring some unforeseen tropical activity in the US Gulf of Mexico.
On the financial front equity markets around the world were mostly higher on the week. The financial markets were mostly impacted by better than expected corporate earnings as well as growing belief that more easing is on the way. Global equity values increased as shown in the EMI Global Equity Index table below and is now marginally in positive territory for the year.
The EMI Index increased by 0.5% on the week and is in now back in positive territory for the year by 0.1%. Over the last week the Index increased in value in most all of bourses with three bourses still in negative territory for the year. At the moment the global equity markets are struggling to stay in positive territory except for Germany which is soaring higher based on the falling euro which is a major benefit to this export driven economy.
The euro lost ground on the week while the US dollar firmed marginally. Last week the global equity markets were a neutral price driver for oil and most commodity markets for most of the week until the selling on Friday.
I still think the oil price is overvalued. However, the combination of the evolving geopolitical concern around Iran and the Middle East as well as the view that the global Central Banks are more likely to ease monetary policies further as well as initiating a new round of stimulus should contribute the market stabilizing (after some profit taking selling). For the moment the oil complex is still trying to establish a new trading range.
I am keeping my view at neutral as the hot weather that has persisted across major portion of the US has subsided a bit and the rest of July is not likely to be as hot over the entire US as it was for the second half of June. In addition the economics of coal switching now favors coal which will result in a reduction in Nat Gas demand. Finally Nat Gas at current price levels is overvalued and is becoming more susceptible to a round of selling.
Just when you thought Europe was moving into the background the markets were quickly reminded on Friday that the EU sovereign debt problems have not changed and are here to stay until the EU leadership solves them once and for all. As Spanish bond yields soared again the market quickly moved back into a risk aversion mentality and embarked on a modest round of profit taking selling that dominated all of the main risk asset markets throughout the trading session. Spanish bond yields hit another record high even as the EU Finance Ministers gave their final approval to the bank bailout program for Spanish banks. Simply put the market continues to interpret all of the actions by the EU leadership as just not enough to be comfortable that the debt issues that have been evolving for the last three years are truly a problem that has been solved.
Friday's selling action sent the euro down thru another key technical support level hitting the lowest level since 6/14/2010 and seemingly now on a path to test the lows made in early June of 2010. The euro now seems like it is gaining momentum to test the next level of support at 1.1875. If the next level of support is breached the value of the euro versus the US dollar will be back to levels not seen since the second half of 2005! Market players are once again talking about the possibility of the euro and the US dollar trading in parity. If the market does not become convinced that the debt problems have truly been arrested the euro is going to remain under pressure.
Certainly the recipient of a weak euro is the US dollar which will continue to firm and thus act as a negative or bearish catalyst for oil and the broader commodity complex as well as equities if all of the historical relationship remain in play. At the moment the US dollar Index is hovering near levels not seen since the middle of 2010. If the US dollar continues to strengthen it will be very difficult for the short term oil bulls to remain very comfortable barring an elevation of the geopolitical risk and/or an offset to the rising US dollar... more US quantitative easing.
As I suggested last week the risk asset markets... including oil are in a battle between a slowing global economy versus money printing coming from all corners of the world. Supply and demand balances for oil are very comfortable at the moment. There are no shortages of oil anyplace in the world. Global inventories are mostly above normal for both crude oil and refined products. According to reports in the media a larger volume of Iranian crude oil (then originally expected) seems to be in the market as China continues to buy deeply discounted barrels. The only shortage of oil at the moment is not on the supply side rather it is on the demand side as global oil demand growth is continuing to contract with both the US and Europe expected to show a decline in oil consumption in 2012 while the main oil demand growth engine of the world...China...is consuming much less oil than previously forecast. Bottom line barring an increase in the geopolitical risk of a supply interruption and/or more quantitative easing oil prices may be very close to a short term top.
The markets are heading into the lower liquidity part of the summer season as many players move into vacation mode. That said corporate earnings reports will continue to be hitting the media airwaves and have at least a short term impact on equity markets and due to the high level of macro correlation risk they will also impact commodities. In addition the market will be looking at every macro economic data point very closely leading up the next US Fed FOMC meeting on July 31- August 1. The more negative the economic data the more quickly the market will interpret the data point as increasing the likelihood of the Fed embarking on QE3. The coming week is a light week for economic data out of the US with the second half of the week a bit more interesting as jobless claims, durable goods orders, GDP and sentiment data hit the airwaves. These are all gauges that the market will quickly interpret as supportive or not supportive for more quantitative easing.
In spite of the selling on Friday most risk asset markets over the last week... including the oil complex was stronger across the board with WTI and Brent about equal in their weekly moves. The August WTI contract increased by about 4.98% or $4.34/bbl while the September Brent contract ended the week with an increase of 4.33% or $4.33/bbl. The spot Brent/WTI spread widened by only about $0.09/bbl for the week as the normalization process is still interrupted by lower loadings out of the North Sea. I still expect the spread to gradually continue to narrow over the next 3 to 6 months as the surplus in the US mid-west is also starting to recede from a combination of exports of crude oil out of the region through the Seaway pipeline coupled with refinery utilization rates at the highest level in months.
On the distillate fuel front the Nymex HO contract increased by 4.88% or $0.1361/gal on the week even as distillate fuel inventories surged higher for the second week in a row versus an expectations for a more modest build. Gasoline prices increased on the week after a small surprise draw in gasoline stocks. The spot Nymex gasoline price increased 4.51% or $0.1269/gal this past week.
Nat Gas futures increased surged on the week after a smaller than expected injection into inventory. The August Nat Gas futures contract increased by 7.2% or $0.207/mmbtu on the week and is now trading around well above the key psychological level of $3.00/mmbtu.
Just about every risk asset market was lower on Friday with the excepting of Nat Gas. I have not been able to make that kind of comment very much over the last several years... in fact it was just the opposite statement as Nat Gas was in such a strong downtrend. Nat Gas has staged a decent recovery rally since bottoming out after hitting a low of around the $1.90/mmbtu level on April 20th. Since then the spot futures price has risen by about $1.15/mmbtu or about 60%. The recovery so far has been driven based on an improvement in the current fundamentals. The overhang or surplus in inventory compared to last year and the five year average for the same week peak around the 900 BCF level. Since then the overhang in inventory has been steadily declining and is now hovering around the 500 BCF level. The inventory overhang has declined by about 45% since peaking. Simply put that is why Nat Gas prices have moved higher.
The two main reasons why the inventory overhang has been declining is a modest voluntary reduction in supply and an improvement in demand. The demand impact has been a much more significant impact on the overall supply and demand balances than the supply cuts seen to date. The improvement in demand over last year has been three-fold... a small increase in industrial consumption related to the small increase in economic activity in the US, coal to Nat Gas switching and an increase in cooling related Nat Gas demand due to the extreme heat during the first half of the summer. The increase has resulted in weekly injections underperforming. The injection season to date has averaged 67.3% of last year's fill rate and 67.6% of the injection level of the five year average.
As I have been discussing the economics of coal to Nat Gas switching has moved back to being more economically favorable to coal than Nat Gas for the majority of the time over the last several weeks. With high inventories of coal at many utility locations coupled with unfavorable economics for Nat Gas over coal I would expect some utilities to move back to coal... if they have not already done so. The big increase in Nat Gas demand as a result of coal to Nat Gas switching has peaked and is now on the down swing. Future injections will be impacted.
Cooling related Nat Gas demand is also likely to start receding as the latest temperature forecast by NOAA is projecting above normal temperatures over a smaller portion of the US than what was actually experienced during the first part of the summer. The extreme is projected to be mainly in the mid section of the US... bad for the crop but not as severe for cooling demand as this section of the US is a lower population area compared to the coastal areas...which are both projected to experience normal to even below normal temperatures into very early August. Unless the projected area of the country expecting extreme heat increases significantly I now expect cooling related Nat Gas demand to also have peaked.
The last variable in the short term that has been keeping Nat Gas prices bid has been the large amount of nuclear power generation capacity that is currently down versus last year and the five year average. As of today 9,200 MW of capacity is out of service versus 2,700 MW last year and 4,400 MW for the five year average for the same week. However some of the capacity that was shut down over the last several days is already back into restart mode suggesting that nuclear capacity should be closer to normal for this time of the year in the not too distant future.
Overall I still view Nat Gas futures prices as overvalued versus the current fundamentals. There is still an exposure of the industry prematurely hitting maximum storage capacity especially if some of the increases in demand do start to recede as describes above. Also do not lose sight of the simple fact that even if the industry does not prematurely hit storage limitations there will be a record amount of Nat Gas in storage prior to the start of the upcoming winter heating season. there will not be a shortage or supply related issues anytime soon ...barring some unforeseen tropical activity in the US Gulf of Mexico.
On the financial front equity markets around the world were mostly higher on the week. The financial markets were mostly impacted by better than expected corporate earnings as well as growing belief that more easing is on the way. Global equity values increased as shown in the EMI Global Equity Index table below and is now marginally in positive territory for the year.
The EMI Index increased by 0.5% on the week and is in now back in positive territory for the year by 0.1%. Over the last week the Index increased in value in most all of bourses with three bourses still in negative territory for the year. At the moment the global equity markets are struggling to stay in positive territory except for Germany which is soaring higher based on the falling euro which is a major benefit to this export driven economy.
The euro lost ground on the week while the US dollar firmed marginally. Last week the global equity markets were a neutral price driver for oil and most commodity markets for most of the week until the selling on Friday.
I still think the oil price is overvalued. However, the combination of the evolving geopolitical concern around Iran and the Middle East as well as the view that the global Central Banks are more likely to ease monetary policies further as well as initiating a new round of stimulus should contribute the market stabilizing (after some profit taking selling). For the moment the oil complex is still trying to establish a new trading range.
I am keeping my view at neutral as the hot weather that has persisted across major portion of the US has subsided a bit and the rest of July is not likely to be as hot over the entire US as it was for the second half of June. In addition the economics of coal switching now favors coal which will result in a reduction in Nat Gas demand. Finally Nat Gas at current price levels is overvalued and is becoming more susceptible to a round of selling.
20120723 1208 Global Market Related News.
Asia FX By Cornelius Luca - Sun 22 Jul 2012 17:17:09 CT (Source:CME/www.lucafxta.com)
The European and commodity currencies open under pressure in the Far East after tanking on Friday amid concern that the US economy is heading for another recession. All eyes remain on the euro and franc, which took their downtrends to new lows. The short-term outlook for the European and commodity currencies is sideways. The medium-term outlook for most of the foreign currencies is sideways. The LGR short-term model is short only the euro and franc. Good luck!
Overnight
Canada: The Consumer Price Index has contracted 0.4% in June after expanding 0.2% in May.
Today's economic calendar
Australia: Producer Price Index for the second quarter
Asia Stocks Fall for Second Day on China Slowdown, Greece (Source: Bloomberg)
Asian stocks dropped for a second day after a Chinese central bank adviser forecast an economic slowdown and on renewed concern that Greece may not meet its bailout targets, damping demand for riskier assets. Shimao Property Holdings Ltd. paced losses among Chinese developers in Hong Kong, falling 2 percent. Samsung Electronics Co. (005930), which gets 47 percent of its revenue in China and Europe, lost 2.7 percent in Seoul. China Pacific Insurance (Group) Co. slumped 7.3 percent in Hong Kong on a share sale plan. BHP Billiton Ltd. (BHP), the world’s largest mining company, lost 2.9 percent in Sydney as lower oil and metal prices weighed on growth-sensitive companies. Gauges of volatility in Asia rose, reflecting rising risk aversion among investors. The MSCI Asia Pacific Index lost 1.5 percent to 114.97 as of 11:40 a.m. in Tokyo with more than seven stocks dropping for each that gained. The measure rose 1.2 percent last week.
“There are many global macro headwinds,” said George Boubouras, Melbourne-based head of investment strategy at UBS AG’s Australian unit. The Swiss bank has about $1.5 trillion in assets under management. “Risk aversion persists for many investors. Cautious corporate guidance remains, given the many different macro and political challenges.” The MSCI Asia-Pacific Index fell 9.5 percent from this year’s high on Feb. 29 through last week amid concern China’s economy will slow and Europe’s sovereign-debt crisis will worsen. The regional benchmark trades at 11.8 times estimated earnings, compared with a multiple of 13.2 for the S&P 500 Index and 10.8 for the Stoxx Europe 600 Index, according to data compiled by Bloomberg.
Asian Stocks Drop With Euro as Treasuries Gain on Growth Concern (Source: Bloomberg)
Asian stocks fell, while the euro weakened to an 11-year low against the yen and Treasury 10-year yields dropped to a record as a Chinese central bank board member warned of slowing growth and on concern Greece may exit the currency bloc. Corn declined after touching a record. The MSCI Asia Pacific Index tumbled 1.5 percent at 11:14 a.m. in Tokyo as Hong Kong’s Hang Seng Index slid 2.6 percent. Futures on the Standard & Poor’s 500 Index dropped 0.4 percent. The euro touched a two-year low against the greenback, and the Australian and New Zealand dollars each fell 0.6 percent. The yield on the U.S. 10-year note slumped to 1.4348 percent, while Asian government bonds rallied. Corn lost 1 percent after climbing to an all-time high of $8 a bushel.
“It’s going to be volatile, it’s going to be difficult,” said Raymond Chan, chief Asia-Pacific investment officer at Allianz Global Investors, which oversees about $300 billion. “We’ve not seen any solutions to make sure that the euro stays intact.” In China, “we don’t expect a strong recovery but we’ve probably seen the worst already,” Chan said in a Bloomberg Television interview. China’s economic expansion may cool for a seventh straight quarter to 7.4 percent in the three months to September, said Song Guoqing, a member of the People’s Bank of China monetary policy committee. Greece’s creditors meet this week amid doubts that the country will meet its bailout commitments. German Vice Chancellor Philipp Roesler said he’s “very skeptical” that European leaders will be able to rescue Greece. A July 27 report may show the U.S. economy grew in the second quarter at the slowest pace in a year.
Japan Stocks Drop to One-Month Low on China, Euro Concern (Source: Bloomberg)
Japanese stocks fell, heading for their lowest close in a month, as a Chinese central bank adviser warned of slowing growth and after the yen rose to a 11-year high against the euro amid renewed concern Greece may exit the currency bloc, curbing the outlook for exporters. Komatsu Ltd. (6301), a maker of construction machinery that gets 14 percent of its sales in China, fell 2.6 percent. Ricoh Co. (7752), a producer of office equipment that counts on Europe for 21 percent of revenue, retreated 5.6 percent. Nippon Steel Corp. (5401) paced declines in the sector on a report the company will probably report an 80 percent fall in first-quarter profit. The Nikkei 255 Stock Average (NKY) slid 1.5 percent to 8,542.65 at the 11:30 a.m. trading break in Tokyo, the lowest since June 12. The broader Topix Index fell 1.1 percent to 725.82, with more than three shares declining for each that rose.
“There’s a lot of bad news to start the week with,” David Gaud, a senior portfolio manager at Edmond de Rothschild Asset Management in Hong Kong, said on Bloomberg Television. “The markets are facing a lot of negative news, a lot of uncertainty from Europe. Second quarter GDP in China was probably a little below what official numbers are stating.” Stocks fell on expectations China’s economic expansion may cool for a seventh straight quarter to 7.4 percent in the three months through September, according to Song Guoqing, an academic member of the People’s Bank of China monetary policy committee. Komatsu fell 2.6 percent to 1,667 yen. Taiyo Yuden Co., a maker of electronic parts that gets 30 percent of sales in China, slid 5.9 percent to 636 yen.
Profit Growth Doubts at Baidu Spur ADRs Tumble: China Overnight (Source: Bloomberg)
Chinese stocks fell for a third week in New York before Internet companies from Baidu Inc. to Ctrip.com International Ltd. (CTRP) report second-quarter earnings that analysts estimate will show slower profit growth. The Bloomberg China-US Equity Index (CH55BN) of the most-traded Chinese shares in the U.S. sank 1.9 percent last week to 86.11. Baidu, the nation’s largest online search engine, hit an 18- month low while online travel agency Ctrip capped the longest losing streak since 2008. New Oriental Education & Technology Group Inc. (EDU) fell the most on record after saying the U.S. regulator is investigating its accounting practices and Muddy Waters LLC questioned its ownership structure.
Analysts expect Baidu to report today that profit in the three months ended June 30 rose 52 percent, after growing at least 70 percent in the previous nine quarters, according to data compiled by Bloomberg. Government reports showed net income for state-owned companies dropped 12 percent in the first half while gross domestic product expanded last quarter at the slowest pace in three years. “They will give us very little upside surprise,” Michael Ding, lead manager of the China Region Fund (USCOX) at U.S. Global Investors Inc., which oversees $2.2 billion, said in a telephone interview from San Antonio, Texas on July 20. “Advertising sales of Internet companies slowed down amid a slowdown in consumption. Baidu’s growth is on the downside as it doesn’t have many new revenue sources.”
European Stocks Rise for Seventh Week on Company Earnings (Source: Bloomberg)
European stocks climbed for a seventh straight week, the longest winning streak in more than six years, as better-than-expected earnings offset concern that the euro area crisis is deepening. ASML Holding NV (ASML), Europe’s biggest semiconductor equipment maker, Akzo Nobel NV, the world’s largest paintmaker, and SEB AB (SEBA) all advanced this week after posting results that beat analyst estimates. The Stoxx Europe 600 Index climbed 0.8 percent to 258.17 this week, for the longest stretch of gains since January 2006 even after falling 1.4 percent on Friday. The gauge has rebounded 10 percent from this year’s low on June 4 as central banks from Europe to China eased monetary policy to help spur economic growth. “Investors have been given the rare opportunity to focus on companies as the earnings reporting season continued to filter through,” said Simon Reynolds, a fund manager at Octopus Investments in London. “Upbeat U.S. earnings have helped lift equity markets.”
Of the 46 companies on the Stoxx 600 that have reported earnings this quarter, 48 percent beat forecasts, according to data compiled by Bloomberg. On the Standard & Poor’s 500 Index, 73 percent of the 118 companies that have reported quarterly earnings have topped analyst estimates, the data show.
S&P 500 Has First Back-to-Back Weekly Gain Since June (Source: Bloomberg)
U.S. stocks rose for the week, giving the Standard & Poor’s 500 Index its first back-to-back gain since June, as results from International Business Machines Corp. (IBM) to Baker Hughes Inc. beat forecasts and Federal Reserve Chairman Ben S. Bernanke said he’s prepared to add stimulus. The benchmark index snapped a three-day rally on the final day amid concern Europe’s crisis is intensifying. Baker Hughes surged 16 percent to lead energy shares to the biggest weekly gain among 10 S&P 500 groups. Technology stocks rose 1.9 percent as IBM climbed 3.5 percent and EBay Inc. (EBAY) jumped 12 percent amid better-than-expected earnings. Financial companies had the biggest retreat after Bank of America Corp. (BAC) and Morgan Stanley (MS) sank more than 9 percent amid disappointing results. The S&P 500 added 0.4 percent to 1,362.66 during the week, extending its gain for the year to 8.4 percent. The Dow Jones Industrial Average climbed 45.48 points, or 0.4 percent, to 12,822.57, the biggest weekly gain since June 29.
“There is this euphoria that maybe things are starting to turn around,” Linda Bakhshian, a money manager with Federated Investors in Pittsburgh, said in an interview. Her firm oversees $363.6 billion. “Expectations were pulled back. Companies are beating and the market is happy again because things are not that bad.”
Recap Stock Index Market Report (Source:CME)
The September S&P 500 trended lower throughout the trading session and erased all of yesterday's gains and more. Fresh concerns over the European debt situation inspired a round of profit-taking after the recent run up and ahead of the weekend. Earnings this morning from General Electric came in slightly better than expected but revenues fell short of estimates. Some analysts indicated that while the recent earnings flow has been above expectations, there are signs that weakness in Europe was filtering through. Most of the major sector indices were lower, led by declines in technology and financial-related shares. The September S&P 500 finished the week with a fractional gain after breaking out to its highest level since May 3rd on Thursday.
FOREX-Euro seen vulnerable to selling on Spain concerns
LONDON, July 20 (Reuters) - The euro eased against the U.S. dollar and hovered near a record low versus the Australian dollar, looking vulnerable to further losses as investors fretted about Spain's fiscal woes and favoured currencies with a higher yield.
"We have still got a market that fundamentally does not believe Spain will be in a position to support itself going forward. The euro will probably stay in a range today but pressure will return to the downside," said Simon Derrick, head of currency research at Bank of New York Mellon.
Australian, N.Z. Dollars Fall Amid European Debt Concern (Source: Bloomberg)
The Australian and New Zealand dollars slid for a second day as Asian stocks extended a global equity rout amid concern Europe’s debt crisis is worsening, reducing demand for higher-yielding assets. The so-called Aussie dollar fell against the yen before data this week forecast to show Australian inflation eased, giving the Reserve Bank more room to consider reductions in borrowing costs. New Zealand’s currency, known as the kiwi, dropped versus most of its major peers after Spanish yields rose toward a euro-era record last week and on renewed prospects Greece will exit the currency union. “The European crisis is far from solved and those concerns are weighing on the market,” said Thomas Averill, managing director in Sydney at Rochford Capital, a currency and interest- rate risk-management company. “Risk sentiment is very fragile and very volatile. You’ll likely to see the Aussie and the kiwi follow equities south.”
The Australian dollar fell 0.6 percent to $1.0319 as of 12:04 p.m. in Sydney from the close in New York on July 20, when it dropped 0.5 percent. The Aussie lost 0.8 percent to 80.81 yen. New Zealand’s dollar declined 0.6 percent to 79.48 U.S. cents. It dropped 0.8 percent to 62.25 yen. Australia’s government bonds advanced, pushing the yield on the benchmark 10-year security down by as much as 12 basis points, or 0.12 percentage point, to 2.81 percent, the lowest since June 5.
Euro Turns Carry Traders’ Favorite in Worst Year Since 2003 (Source: Bloomberg)
The euro’s strength against the U.S. dollar in the face of the region’s three-year banking and sovereign-debt crisis masks a nine-year low against other currencies, suggesting more weakness to come. While above a lifetime average of about $1.21, the 17- nation currency is at the lowest level since 2003 on a trade- weighted basis, according to a Deutsche Bank AG index that includes the yen, pound and Swiss franc. The European Central Bank’s July 5 reduction of its deposit rate to zero spurred investors to borrow euros to buy higher-yielding assets elsewhere, generating gains from the carry-trade for the first time in two years.
Even though the euro has slumped 24 percent from a high of $1.6038 in July 2008 as the debt crisis threatens to push the region into recession for a second time in three years, the drop is only about half the collapse versus Australia’s dollar. At the same time, the euro’s depreciation following ECB President Mario Draghi’s rate cuts is making exports more competitive and damping concern that the currency union will break up. “The euro has now joined the ranks of the funding currencies,” Ian Stannard, head of European currency strategy at Morgan Stanley in London, said in a July 20 telephone interview. “As far as safe havens are concerned, you can easily come to the conclusion that there are better alternatives to holding core European assets, which have negative yields, so you could see an outflow from Europe developing and the euro coming under broad pressure.”
Euro Drops to 11-Year Low Versus Yen Before Spain Auction (Source: Bloomberg)
The euro touched the lowest level in more than 11 years against the yen as concern escalated that Europe’s debt crisis is deepening. The 17-nation currency continued its decline against the dollar into a fourth day as a surge in Spain’s 10-year note yields toward a euro-era record last week dimmed the outlook for a bill sale tomorrow. The euro also weakened before data that economists said will show a gauge of consumer confidence hovered near a three-year low as Greece’s creditors assess the country’s progress in meeting its bailout targets. “The foreign-exchange market is going to be watching European bond market developments extremely closely this week,” said Ray Attrill, global co-head of foreign-exchange strategy at National Australia Bank Ltd. (NAB) in Sydney. “The euro-dollar rate will continue to go down.”
The common currency touched 94.75 yen, the lowest since November 2000, and traded at 94.80 as of 11:32 a.m. in Tokyo, 0.7 percent lower than the close in New York on July 20. It declined 0.3 percent to $1.2117 after sliding to as low as $1.2106, a level unseen since June 2010. The dollar fell 0.3 percent to 78.22 yen. Spain, the euro region’s fourth-biggest economy, will auction bills tomorrow maturing in three and six months. The nation’s benchmark 10-year yield climbed to 7.284 percent on July 20, almost matching the euro-era record 7.285 percent reached a month ago.
Treasury Yields Drop to Records (Source: Bloomberg)
Treasuries advanced, pushing 10- and 5-year yields down to record lows, before reports this week that may show growth in world’s biggest economy cooled and manufacturing and services output in the euro area stalled. Bill Gross, who runs the world’s biggest bond fund at Pacific Investment Management Co., wrote on Twitter that real assets are a “better bet” amid negative real interest rates in the U.S. Treasuries have handed investors a 1.2 percent return this month after a 0.4 percent decline in June, according to data from Bank of America Merrill Lynch. “Soft data in the U.S. is pretty consistent with what’s been happening across the globe,” said Michael Turner, an economist at RBC Capital Markets Ltd. in Sydney. “Yields are pretty low and there’s probably a fair bit of safe haven-type flow into them.”
Ten-year yields touched a record 1.4347 percent and were at 1.44 percent as of 11:44 a.m. in Tokyo, two basis points below the close on July 20. The 1.75 percent security due in May 2022 rose 5/32, or $1.56 per $1,000 face amount, to 102 27/32. The five-year yield slid to an all-time low of 0.5555 percent, while the rate on two-year U.S. government debt declined to as low as 0.1933 percent, the least since September 2011. The U.S. economy probably grew 1.4 percent in the three months through June, according to the median forecast in a Bloomberg News survey before the Commerce Department releases the data on July 27. That would be the slowest pace since the quarter ended June 2011 and compares with a 1.9 percent pace in the previous period.
Treasury 5-Year Yields Fall to Record on Europe Crisis (Source: Bloomberg)
Five-year Treasury note yields fell to a record low as data showed the U.S. economic growth slowing and investor concern Europe’s debt crisis is worsening led to increased demand for the safest assets. U.S. government debt gained for a fourth consecutive week as yields on Spain’s bonds climbed to record highs relative to German bunds. The pace of economic expansion in the U.S. probably cooled, data next week may show. The Treasury will sell $99 billion of two-, five-and seven-year notes next week. “Europe remains a big question,” said Priya Misra, head of U.S. rates strategy at Bank of America Merrill Lynch in New York, one of the 21 primary dealers required to bid on the securities. “Flight-to-quality bids will remain. We’re pricing in weak growth in the U.S.”
The five-year note yield fell this week five basis points, or 0.05 percentage point, to 0.57 percent, according to Bloomberg Bond Trader prices. It touched 0.5684 percent yesterday, below the previous mark of 0.577 percent set July 16. The benchmark 10-year Treasury yield fell three basis points to 1.46 percent after touching 1.4403 percent on July 16. It set a record low of 1.4387 percent June 1. The two-year rate fell four basis points 0.2015 percent, the lowest level since Sept. 23. Spain’s 10-year benchmark bond yields yesterday climbed above the 7 percent threshold for the first time since Prime Minister Mariano Rajoy unveiled his fourth austerity package last week. That’s the level that prompted bailouts for Greece, Ireland and Portugal.
Nasdaq Increases Payout in Facebook IPO to $62 Million Cash (Source: Bloomberg)
Nasdaq OMX Group Inc., the second- biggest U.S. stock exchange owner, revamped its proposal to compensate brokers that lost money in the public debut of Facebook Inc. (FB), boosting the payout to $62 million cash. The amendment, which follows criticism from Wall Street market makers and exchanges about the original plan, increases the compensation pool from $40 million and does away with a proposal to credit most of the money through reduced trading costs, according to a submission with the Securities and Exchange Commission. Member brokers who accommodated customers for losses will get paid first, it said. “It’s an attempt by Nasdaq to show that they recognize that their clients are very unhappy,” Larry Harris, a professor of finance and business economics at the University of Southern California in Los Angeles and a former chief economist at the SEC, said in a phone interview. “Clearly, making it all-cash is more palatable for regulators and for competitors.”
Delays and malfunctions on the Nasdaq Stock Market were the first signs of trouble in the May 18 Facebook initial public offering that burned investors, spurred losses on Wall Street and prompted lawsuits against the company, its exchange and the underwriters. At yesterday’s close of $28.76, the stock remains down 24 percent from the price set by underwriters, although it has recovered from its low of $25.87 in June.
Bank of America Defends China’s GDP Data (Source: Bloomberg)
Bank of America Corp. has stepped in to defend China’s second-quarter economic-growth data after analysts from Barclays Plc to Mizuho Securities Co. said the figures may be overstated. Shen Jianguang of Mizuho said in a research report this week that deeper slowdowns in industrial and electricity output contradict the gross domestic product statistics. Lu Ting, a Bank of America economist in Hong Kong, said in a July 19 note that industrial production is in line with GDP and that electricity data may fail to capture some growth. The debate shows how China’s government is still struggling to win the trust of economists and investors for GDP statistics that contain a fraction of the data released by the U.S. and Germany. Vice Premier Li Keqiang said in 2007 that GDP figures were “man-made” and “for reference only.”
“No country’s economic data are absolutely reliable, but China’s economic data are particularly unreliable,” said Dong Tao, Credit Suisse Group AG’s Hong Kong-based head of Asia economics excluding Japan, who has been covering the Chinese economy for the Swiss bank since 1998. “It’s subject to political intervention from both local governments and the central government -- that’s why people are suspicious of the data.” Shen, Mizuho’s Hong Kong-based chief Asia economist, said in an e-mail that actual growth is probably around 7 percent when considering monthly data including electricity, housing, infrastructure projects and lending. China may enact a “larger- than-expected stimulus package,” he said.
Top 2% Not Job Creators or Millionaires in Tax Debate (Source: Bloomberg)
President Barack Obama describes them as “millionaires and billionaires” who can afford to pay higher taxes. Republicans call them “job creators” who need to keep their money so they can hire more workers. As the Democratic president and his Republican opponents debate whether to extend the George W. Bush-era tax cuts for the top 2 percent of U.S. taxpayers -- individuals earning more than $200,000 a year and married couples making more than $250,000 -- their poll-tested phrases obscure the truth about who would be affected. They are two-earner professional couples living on the East and West Coasts, doctors, lawyers, engineers and Wall Street executives. Few are billionaires or earn more than $1 million a year, and most are not employers. “The 2 percent, they’re people who are successful in their professions, but they’re not the absolute rock stars,” said Leonard Burman, an economist at Syracuse University in New York. “There’s a big difference between the 99th percentile and the 99.9th.”
Growth Cooled as Americans Curbed Spending: U.S. Economy Preview (Source: Bloomberg)
The U.S. economy probably expanded in the second quarter at the slowest pace in a year as a weaker labor market prompted Americans to cut back on their spending, economists said before a report this week. Gross domestic product, the value of all goods and services the nation produced, rose at a 1.4 percent annual rate after a 1.9 percent gain in the prior quarter, according to the median forecast of 70 economists surveyed by Bloomberg News. Factory orders softened and new-home sales were little changed, other data may show. Consumer purchases, which account for about 70 percent of the world’s largest economy, are weakening at a time Europe’s debt crisis and looming U.S. tax-policy changes threaten to further restrain corporate investment. The deceleration in growth, a concern Federal Reserve Chairman Ben S. Bernanke highlighted last week, will make it harder to trim unemployment stuck above 8 percent since February 2009.
“We’re seeing weak numbers pretty much across the board,” said Michael Hanson, a senior U.S. economist at Bank of America Corp. in New York. “Softening consumption is definitely a big part of the slowdown. The uncertainty over Europe and the fiscal cliff will impinge on business decisions and activity.” A projected 1.3 percent gain in second-quarter household spending would be the smallest in a year and follow a 2.5 percent rise in the January to March period, according to the median projection ahead of the GDP release by the Commerce Department on July 27.
Canada Growth Risks Lagging U.S. as Exports Cool: Economy (Source: Bloomberg)
Canada’s economic growth is at risk of falling behind the U.S. next year for the first time since 2006 as exports slow and spending by companies and consumers cools. A lower-than-forecast increase in consumer prices reported today by Statistics Canada adds to evidence of a slowdown. Data this month showed the trade deficit widened in May and factory sales fell. Bank of Canada Governor Mark Carney this week lowered his growth projection for the world’s 10th largest economy this year to 2.1 percent from 2.4 percent. Carney reiterated that it “may become appropriate” to raise the benchmark lending rate for the first time since September 2010, even as a slowing global economy prompts central banks from China to the U.S. to ease policy. Investors are skeptical of Carney’s outlook: trading based on overnight index swaps shows no chance of an increase through the end of the year. The median estimate of economists surveyed by Bloomberg is for the first increase to come in the second quarter of 2013.
While today’s report probably doesn’t fundamentally change the central bank’s outlook, it “does allow them to stay on hold for longer given that inflation has been surprising on the low side,” said Doug Porter, deputy chief economist at Bank of Montreal, by telephone. The consumer price index climbed 1.5 percent in June from a year earlier, compared with a 1.2 percent gain the prior month, Statistics Canada said today. The core rate, which excludes eight volatile products, increased 2.0 percent after a gain of 1.8 percent in May. Economists surveyed by Bloomberg projected a 1.7 percent gain for CPI and 2.3 percent increase for the core figure.
China Central Bank Adviser Forecasts Growth Slowdown to 7.4% (Source: Bloomberg)
A Chinese central bank adviser predicted the nation’s expansion may cool to 7.4 percent this quarter, adding to concern that the world’s second-biggest economy has yet to bottom out. Song Guoqing, an academic member of the People’s Bank of China monetary policy committee, also warned that a decline in producer prices in tandem with consumer inflation may hurt investment returns of industrial companies, damping their desire to expand. China’s economic growth slowed to 7.6 percent in the three months ended June, the sixth straight deceleration, as Europe’s fiscal crisis sapped exports and a crackdown on property speculation curbed domestic demand. Premier Wen Jiabao said the momentum for a recovery isn’t yet in place, according to a July 15 Xinhua News Agency report, and warned two days later that the labor situation will become more “severe.”
“The consensus is that China’s economic growth rate will be close to 8 percent in coming months, but I personally am more pessimistic because there are problems on the export side,” Song said at a forum in Beijing on July 21. With Europe’s debt crisis still unfolding, “there is a risk of insufficient government measures if Chinese exports fall more sharply than expected in coming months,” he said.
Aging Japan-Chinese Workers Drive Jobs to Southeast Asia (Source: Bloomberg)
Jose Winylito Tanquis has reason to be proud as he raises a flag to signal the launch of the 58,000- ton “Ocean Symphony” in the Philippines. Not only did he help build the cargo vessel, his son John now works at the yard. “Now, he can buy his own stuff, like shoes and clothes,” said Tanquis, 47, a foreman at Tsuneishi Holdings Inc.’s yard in Balamban on Cebu Island. At 21, John is the eldest of six siblings who will enter the workforce in the next decade. The so-called demographic dividend from a rising supply of young workers is one reason Japan’s second-largest shipbuilder expanded in the Philippines, where workers are on average half the age of its Japanese employees. Tsuneishi is considering Indonesia, the Philippines and Myanmar for another shipyard, said Hitoshi Kono, chief of the company’s local operation.
Asia’s manufacturing powerhouses -- Japan, South Korea and China -- are among the fastest-aging countries in the world, while developing nations in Southeast Asia are among the youngest in the region. As factories, jobs and investment flow south to tap cheaper labor, growth in the 10-member Association of Southeast Asian Nations is poised to accelerate, propelling the area’s currencies and fueling consumer and property booms, Bank of America Corp. says. “The demographic dividend is over for Japan and Korea, and it will be over for China soon,” said Yoshimasa Maruyama, chief economist at Itochu Corp., Japan’s third-largest trading company. “It’s happening now in the Asean area, and it will continue for some time.”
South Korea to Ease Mortgage Lending Rule to Spur Consumption (Source: Bloomberg)
South Korea will ease a rule on mortgage lending to stimulate the real-estate market and boost consumption as faltering global demand hurts the export-reliant economy, an adviser to President Lee Myung Bak said. “We have seen that there are many irrational aspects to the debt-to-income ratio limit” banks apply to residential mortgage borrowers, Kim Dae Ki told reporters yesterday in Seoul. “While we will maintain the basic framework of the regulation, we concluded that certain irrational parts of the rule should be eased,” he said, without elaborating. South Korea’s central bank unexpectedly cut its benchmark interest rate on July 12 for the first time in more than three years as policy makers stepped up measures to counter the impact of Europe’s debt crisis, a Chinese slowdown and muted U.S. job creation.
Growth in Asia’s fourth-largest economy may have slowed to 0.5 percent in the second quarter from the previous three months, according to the median estimate in a Bloomberg News survey ahead of a preliminary report due July 26. “We expect Korea’s export-oriented economy to continue to struggle amid tougher global economic conditions,” economists led by Mark Williams and Andrew Kenningham at London-based Capital Economics Ltd. wrote in a note dated July 23. “As a result, the Bank of Korea’s policy rate cut this month is likely to be followed up with more loosening soon,” they wrote.
Maruti Suzuki Imposes Lockout at India Plant After Riot (Source: Bloomberg)
Maruti Suzuki India Ltd. (MSIL), the country’s largest carmaker, locked out workers at a factory near New Delhi and ruled out restarting production until a probe is completed into rioting that led to the death of a manager. The automaker, majority owned by Suzuki Motor Corp. (7269), won’t import cars to make up for the loss of production at its Manesar factory, which accounts for about 40 percent of its total capacity, Chairman R.C. Bhargava told reporters in New Delhi on July 21. He didn’t say how long the investigation would take or when workers would return to the plant. The latest production stoppage is the fourth in the past year at Manesar factory. All 3,000 union workers at the plant will be charged with murder and attempted murder for the mob attack that caused the death of Awanish Kumar Dev, a human resources general manager, and at least 70 injuries, Indian police said July 19.
The Federation of Indian Chambers of Commerce and Industry, one of the nation’s two largest business lobbies, said that the violence threatens India’s investment reputation. “It’s a matter of deep concern for a country that seeks to project itself as offering an environment that is business- friendly,” R.V. Kanoria, president of the lobby, said in an e- mailed statement on July 21, calling for authorities to deal “firmly” with the situation. Maruti has no plans to relocate the plant out of Manesar in northern Haryana state, Bhargava said. A factory at Gurgaon, about 12 miles northeast of Manesar, is operating at full capacity, he said. Suzuki has said production facilities weren’t damaged by the unrest.
Rupiah Declines Most in a Week on China Slowdown; Bonds Steady (Source: Bloomberg)
Indonesia’s rupiah declined the most in a week on concern growth in the world’s second-largest economy may slow further, reducing appetite for emerging-market assets. Government bonds were little changed. The Bloomberg-JPMorgan Asia Dollar Index dropped to a one- week low after Song Guoqing, a Chinese central bank adviser, said July 21 the nation’s growth may slow to 7.4 percent this quarter from 7.6 percent in the previous period. Global funds withdrew 1.1 trillion rupiah ($116 million) from local bond holdings in the first three days of last week, finance ministry data show. China is the largest market for Indonesian exports. “Negative external sentiment still weighs on the rupiah,” said Gusti Kahari, a foreign-exchange dealer at PT Bank Artha Graha Internasional in Jakarta. “It is unlikely to fall below 9,500 as Indonesia’s fundamentals are still relatively good.”
The rupiah weakened 0.4 percent to 9,490 per dollar as of 9:02 a.m. in Jakarta, the biggest drop since July 12, prices from local banks compiled by Bloomberg show. One-month implied volatility, which measures exchange-rate swings used to price options, held at 8 percent.
Australia May Have One Rate Cut Left in Cycle, Deloitte Says (Source: Bloomberg)
Australia’s central bank may cut the benchmark interest rate once more in this cycle if China can maintain its growth outlook, Deloitte Access Economics said. China has “boosted the ability of banks to lend and accelerated the go-ahead on everything from steel mills to alternative energy, hospitals and railways,” the Canberra-based research company said in a report today. “That mix helps limit blowback on global growth, which may not be far below longer term trend. But the risks are real. Either Europe or China -- or, heaven forbid, both -- could upset the applecart.” The Reserve Bank of Australia kept borrowing costs unchanged this month as domestic economic growth and previous interest-rate reductions help the local economy weather global disruptions. The central bank reduced rates by a total of 75 basis points in May and June to help cushion the economy from the fallout in Europe and slower growth in China.
“Much still hinges on Europe and China,” Deloitte said today. “Provided neither generates worse news than already expected -- an admittedly key caveat -- then we’d stick to the view we’ve had for a while: that the overall outlook for Australian growth is still looking rather better than most people realize.” Australia’s core inflation probably slowed to 1.9 percent last quarter, below the central bank’s 2 percent to 3 percent target range, a survey of economists showed before a July 25 government report.
Argentine Factory Output Tumbles as Brazil Buys Fewer Cars (Source: Bloomberg)
Argentina’s industrial production fell more than 4 percent for a second straight month in June, the biggest two-month drop in a decade, as slowing growth in Brazil undermines automobile exports and steel production. Output fell 4.7 percent last month from a year earlier and 0.1 percent from May, the national statistics institute said today in Buenos Aires. The annual decline was steeper than forecast by eight economists surveyed by Bloomberg, whose median estimate was for a 4.5 percent fall. Auto production, which led industrial growth in recent years, dropped 34 percent in June, mainly because of lower demand from neighboring Brazil. South America’s second-biggest economy, which defaulted on $95 billion in late 2001, will expand 2.45 percent this year, the least since 2009, according to the median estimate of six economists surveyed by Bloomberg. Economic activity fell 0.5 percent in May from a year earlier, the first year-over-year decline since July 2009, the agency said.
Brazil’s economy is recovering more slowly than expected from a contraction in last year’s third quarter. Gross domestic product expanded at a 0.8 percent annualized rate in the first quarter, and economists in the latest central bank survey lowered their 2012 growth estimate for the 10th straight week, to 1.9 percent.
Brazil Inflation Unexpectedly Jumps, Ending Downward Trend (Source: Bloomberg)
Brazil’s inflation unexpectedly accelerated this month, reinforcing investors’ bets that the central bank will soon end a cycle of interest rate cuts that has taken borrowing costs to a record low.
Consumer prices as measured by the IPCA-15 price index rose 0.33 percent in the month through July 13, exceeding all 42 analyst estimates in a Bloomberg survey whose median forecast was for a 0.18 percent increase. The annual inflation rate accelerated for the first time in 10 months to 5.24 percent, the national statistics agency said in Rio de Janeiro today. Brazil’s central bank has cut the benchmark Selic rate by 450 basis points since August to a record low 8 percent, saying slower global growth will have a disinflationary effect on Latin America’s biggest economy. Traders pared bets that the central bank will cut the key rate to as low as 7.25 percent this year as today’s report showed inflation remains a concern. “The downward trend has run its course and you’re now going to see inflation hovering above 5 percent,” Newton Rosa, chief economist at SulAmerica Investimentos, said in a phone interview from Sao Paulo. “This is beginning to limit the central bank’s ability to keep cutting.”
U.K. Second-Quarter GDP Seen Declining 0.2% as Recession Deepens (Source: Bloomberg)
The U.K. economy probably contracted for a third consecutive quarter in the three months through June as a double-dip recession deepened, economists said. Gross domestic product fell 0.2 percent, according to the median estimate of 36 economists in a Bloomberg News survey. It shrank 0.3 percent in the first quarter and 0.4 percent in the last three months of 2011. The Office for National Statistics will publish the data on July 25. The Bank of England expanded its emergency bond-purchase program this month and introduced measures to boost lending. The International Monetary Fund said this week that the recovery has “stalled” and the government may need to consider easing its budget squeeze if central bank efforts fail to help the economy gather momentum.
“Tight fiscal policy and still significant problems for consumers” will “limit U.K. economic activity,” said Howard Archer, an economist at IHS Global Insight in London. “Ongoing euro-zone sovereign debt problems and weakened economic activity are expected to continue to weigh down on U.K. recovery prospects.” From a year earlier, the economy probably shrank 0.3 percent in the second quarter, according to a separate Bloomberg survey. Activity in the quarter was probably affected by the extra public holiday for the queen’s Jubilee in June. Bank of England policy makers expanded stimulus by 50 billion pounds ($78 billion) to 375 billion pounds on July 5. In the minutes of the meeting, they said they may review the merits of cutting their benchmark interest rate, currently at a record- low 0.5 percent.
Spain Insists $15 Billion Aid for Regions Won’t Swell Debt (Source: Bloomberg)
Spain’s plan to offer cash-strapped regional administrations emergency loans leaves the Treasury with 12 billion euros ($15 billion) of additional funding needs that the government says won’t affect its borrowing plans. The central government will tap the lottery for part of the 18 billion-euro fund for regions, leaving 12 billion euros for the Treasury to finance. While Economy Minister Luis de Guindos said yesterday that the plan won’t affect the nation’s borrowing program, economists including Jose Carlos Diez at Intermoney SA say it will be hard to sustain without selling more debt. “Where will it come from?” said Diez, chief economist at the Madrid-based brokerage, which is Spain’s biggest bond trader. “In the end it has to add to their financing needs.”
Spain’s Cabinet approved the creation of the fund on July 13 to help regions that have lost access to markets meet debt redemptions and finance deficits. The decree states that the facility will be funded with public debt and the Treasury’s borrowing program will “incorporate the amounts” needed. Valencia, the second-most indebted region, said today it was preparing to tap the fund as it faces a liquidity squeeze.
Greece Back at Center of Euro Crisis as Exit Talk Resurfaces (Source: Bloomberg)
Greece retakes its position at the heart of the European debt crisis this week as its creditors assess how far off course the country is from bailout targets, raising again the specter of its exit from the euro. Greece’s troika of international creditors -- the European Commission, the European Central Bank and the International Monetary Fund -- will arrive in Athens tomorrow amid doubts the country will meet its commitments and reluctance among euro-area states to put up more funds should it fail. “If Greece doesn’t fulfill those conditions, then there can be no more payments,” German Vice Chancellor Philipp Roesler told broadcaster ARD yesterday, adding that he is “very skeptical” Greece can be rescued and that the prospect of its exit from the monetary union “has long ago lost its terror.”
After euro finance ministers failed to staunch a fresh low for the single currency last week with the approval of a 100 billion-euro ($122 billion) aid package for Spain, the troika will be tasked with determining the fiscal position of the nation where the crisis began almost three years ago. Greece is clamoring for more help as efforts to cut its debt to 120 percent of gross domestic product by 2020 fall short.
The European and commodity currencies open under pressure in the Far East after tanking on Friday amid concern that the US economy is heading for another recession. All eyes remain on the euro and franc, which took their downtrends to new lows. The short-term outlook for the European and commodity currencies is sideways. The medium-term outlook for most of the foreign currencies is sideways. The LGR short-term model is short only the euro and franc. Good luck!
Overnight
Canada: The Consumer Price Index has contracted 0.4% in June after expanding 0.2% in May.
Today's economic calendar
Australia: Producer Price Index for the second quarter
Asia Stocks Fall for Second Day on China Slowdown, Greece (Source: Bloomberg)
Asian stocks dropped for a second day after a Chinese central bank adviser forecast an economic slowdown and on renewed concern that Greece may not meet its bailout targets, damping demand for riskier assets. Shimao Property Holdings Ltd. paced losses among Chinese developers in Hong Kong, falling 2 percent. Samsung Electronics Co. (005930), which gets 47 percent of its revenue in China and Europe, lost 2.7 percent in Seoul. China Pacific Insurance (Group) Co. slumped 7.3 percent in Hong Kong on a share sale plan. BHP Billiton Ltd. (BHP), the world’s largest mining company, lost 2.9 percent in Sydney as lower oil and metal prices weighed on growth-sensitive companies. Gauges of volatility in Asia rose, reflecting rising risk aversion among investors. The MSCI Asia Pacific Index lost 1.5 percent to 114.97 as of 11:40 a.m. in Tokyo with more than seven stocks dropping for each that gained. The measure rose 1.2 percent last week.
“There are many global macro headwinds,” said George Boubouras, Melbourne-based head of investment strategy at UBS AG’s Australian unit. The Swiss bank has about $1.5 trillion in assets under management. “Risk aversion persists for many investors. Cautious corporate guidance remains, given the many different macro and political challenges.” The MSCI Asia-Pacific Index fell 9.5 percent from this year’s high on Feb. 29 through last week amid concern China’s economy will slow and Europe’s sovereign-debt crisis will worsen. The regional benchmark trades at 11.8 times estimated earnings, compared with a multiple of 13.2 for the S&P 500 Index and 10.8 for the Stoxx Europe 600 Index, according to data compiled by Bloomberg.
Asian Stocks Drop With Euro as Treasuries Gain on Growth Concern (Source: Bloomberg)
Asian stocks fell, while the euro weakened to an 11-year low against the yen and Treasury 10-year yields dropped to a record as a Chinese central bank board member warned of slowing growth and on concern Greece may exit the currency bloc. Corn declined after touching a record. The MSCI Asia Pacific Index tumbled 1.5 percent at 11:14 a.m. in Tokyo as Hong Kong’s Hang Seng Index slid 2.6 percent. Futures on the Standard & Poor’s 500 Index dropped 0.4 percent. The euro touched a two-year low against the greenback, and the Australian and New Zealand dollars each fell 0.6 percent. The yield on the U.S. 10-year note slumped to 1.4348 percent, while Asian government bonds rallied. Corn lost 1 percent after climbing to an all-time high of $8 a bushel.
“It’s going to be volatile, it’s going to be difficult,” said Raymond Chan, chief Asia-Pacific investment officer at Allianz Global Investors, which oversees about $300 billion. “We’ve not seen any solutions to make sure that the euro stays intact.” In China, “we don’t expect a strong recovery but we’ve probably seen the worst already,” Chan said in a Bloomberg Television interview. China’s economic expansion may cool for a seventh straight quarter to 7.4 percent in the three months to September, said Song Guoqing, a member of the People’s Bank of China monetary policy committee. Greece’s creditors meet this week amid doubts that the country will meet its bailout commitments. German Vice Chancellor Philipp Roesler said he’s “very skeptical” that European leaders will be able to rescue Greece. A July 27 report may show the U.S. economy grew in the second quarter at the slowest pace in a year.
Japan Stocks Drop to One-Month Low on China, Euro Concern (Source: Bloomberg)
Japanese stocks fell, heading for their lowest close in a month, as a Chinese central bank adviser warned of slowing growth and after the yen rose to a 11-year high against the euro amid renewed concern Greece may exit the currency bloc, curbing the outlook for exporters. Komatsu Ltd. (6301), a maker of construction machinery that gets 14 percent of its sales in China, fell 2.6 percent. Ricoh Co. (7752), a producer of office equipment that counts on Europe for 21 percent of revenue, retreated 5.6 percent. Nippon Steel Corp. (5401) paced declines in the sector on a report the company will probably report an 80 percent fall in first-quarter profit. The Nikkei 255 Stock Average (NKY) slid 1.5 percent to 8,542.65 at the 11:30 a.m. trading break in Tokyo, the lowest since June 12. The broader Topix Index fell 1.1 percent to 725.82, with more than three shares declining for each that rose.
“There’s a lot of bad news to start the week with,” David Gaud, a senior portfolio manager at Edmond de Rothschild Asset Management in Hong Kong, said on Bloomberg Television. “The markets are facing a lot of negative news, a lot of uncertainty from Europe. Second quarter GDP in China was probably a little below what official numbers are stating.” Stocks fell on expectations China’s economic expansion may cool for a seventh straight quarter to 7.4 percent in the three months through September, according to Song Guoqing, an academic member of the People’s Bank of China monetary policy committee. Komatsu fell 2.6 percent to 1,667 yen. Taiyo Yuden Co., a maker of electronic parts that gets 30 percent of sales in China, slid 5.9 percent to 636 yen.
Profit Growth Doubts at Baidu Spur ADRs Tumble: China Overnight (Source: Bloomberg)
Chinese stocks fell for a third week in New York before Internet companies from Baidu Inc. to Ctrip.com International Ltd. (CTRP) report second-quarter earnings that analysts estimate will show slower profit growth. The Bloomberg China-US Equity Index (CH55BN) of the most-traded Chinese shares in the U.S. sank 1.9 percent last week to 86.11. Baidu, the nation’s largest online search engine, hit an 18- month low while online travel agency Ctrip capped the longest losing streak since 2008. New Oriental Education & Technology Group Inc. (EDU) fell the most on record after saying the U.S. regulator is investigating its accounting practices and Muddy Waters LLC questioned its ownership structure.
Analysts expect Baidu to report today that profit in the three months ended June 30 rose 52 percent, after growing at least 70 percent in the previous nine quarters, according to data compiled by Bloomberg. Government reports showed net income for state-owned companies dropped 12 percent in the first half while gross domestic product expanded last quarter at the slowest pace in three years. “They will give us very little upside surprise,” Michael Ding, lead manager of the China Region Fund (USCOX) at U.S. Global Investors Inc., which oversees $2.2 billion, said in a telephone interview from San Antonio, Texas on July 20. “Advertising sales of Internet companies slowed down amid a slowdown in consumption. Baidu’s growth is on the downside as it doesn’t have many new revenue sources.”
European Stocks Rise for Seventh Week on Company Earnings (Source: Bloomberg)
European stocks climbed for a seventh straight week, the longest winning streak in more than six years, as better-than-expected earnings offset concern that the euro area crisis is deepening. ASML Holding NV (ASML), Europe’s biggest semiconductor equipment maker, Akzo Nobel NV, the world’s largest paintmaker, and SEB AB (SEBA) all advanced this week after posting results that beat analyst estimates. The Stoxx Europe 600 Index climbed 0.8 percent to 258.17 this week, for the longest stretch of gains since January 2006 even after falling 1.4 percent on Friday. The gauge has rebounded 10 percent from this year’s low on June 4 as central banks from Europe to China eased monetary policy to help spur economic growth. “Investors have been given the rare opportunity to focus on companies as the earnings reporting season continued to filter through,” said Simon Reynolds, a fund manager at Octopus Investments in London. “Upbeat U.S. earnings have helped lift equity markets.”
Of the 46 companies on the Stoxx 600 that have reported earnings this quarter, 48 percent beat forecasts, according to data compiled by Bloomberg. On the Standard & Poor’s 500 Index, 73 percent of the 118 companies that have reported quarterly earnings have topped analyst estimates, the data show.
S&P 500 Has First Back-to-Back Weekly Gain Since June (Source: Bloomberg)
U.S. stocks rose for the week, giving the Standard & Poor’s 500 Index its first back-to-back gain since June, as results from International Business Machines Corp. (IBM) to Baker Hughes Inc. beat forecasts and Federal Reserve Chairman Ben S. Bernanke said he’s prepared to add stimulus. The benchmark index snapped a three-day rally on the final day amid concern Europe’s crisis is intensifying. Baker Hughes surged 16 percent to lead energy shares to the biggest weekly gain among 10 S&P 500 groups. Technology stocks rose 1.9 percent as IBM climbed 3.5 percent and EBay Inc. (EBAY) jumped 12 percent amid better-than-expected earnings. Financial companies had the biggest retreat after Bank of America Corp. (BAC) and Morgan Stanley (MS) sank more than 9 percent amid disappointing results. The S&P 500 added 0.4 percent to 1,362.66 during the week, extending its gain for the year to 8.4 percent. The Dow Jones Industrial Average climbed 45.48 points, or 0.4 percent, to 12,822.57, the biggest weekly gain since June 29.
“There is this euphoria that maybe things are starting to turn around,” Linda Bakhshian, a money manager with Federated Investors in Pittsburgh, said in an interview. Her firm oversees $363.6 billion. “Expectations were pulled back. Companies are beating and the market is happy again because things are not that bad.”
Recap Stock Index Market Report (Source:CME)
The September S&P 500 trended lower throughout the trading session and erased all of yesterday's gains and more. Fresh concerns over the European debt situation inspired a round of profit-taking after the recent run up and ahead of the weekend. Earnings this morning from General Electric came in slightly better than expected but revenues fell short of estimates. Some analysts indicated that while the recent earnings flow has been above expectations, there are signs that weakness in Europe was filtering through. Most of the major sector indices were lower, led by declines in technology and financial-related shares. The September S&P 500 finished the week with a fractional gain after breaking out to its highest level since May 3rd on Thursday.
FOREX-Euro seen vulnerable to selling on Spain concerns
LONDON, July 20 (Reuters) - The euro eased against the U.S. dollar and hovered near a record low versus the Australian dollar, looking vulnerable to further losses as investors fretted about Spain's fiscal woes and favoured currencies with a higher yield.
"We have still got a market that fundamentally does not believe Spain will be in a position to support itself going forward. The euro will probably stay in a range today but pressure will return to the downside," said Simon Derrick, head of currency research at Bank of New York Mellon.
Australian, N.Z. Dollars Fall Amid European Debt Concern (Source: Bloomberg)
The Australian and New Zealand dollars slid for a second day as Asian stocks extended a global equity rout amid concern Europe’s debt crisis is worsening, reducing demand for higher-yielding assets. The so-called Aussie dollar fell against the yen before data this week forecast to show Australian inflation eased, giving the Reserve Bank more room to consider reductions in borrowing costs. New Zealand’s currency, known as the kiwi, dropped versus most of its major peers after Spanish yields rose toward a euro-era record last week and on renewed prospects Greece will exit the currency union. “The European crisis is far from solved and those concerns are weighing on the market,” said Thomas Averill, managing director in Sydney at Rochford Capital, a currency and interest- rate risk-management company. “Risk sentiment is very fragile and very volatile. You’ll likely to see the Aussie and the kiwi follow equities south.”
The Australian dollar fell 0.6 percent to $1.0319 as of 12:04 p.m. in Sydney from the close in New York on July 20, when it dropped 0.5 percent. The Aussie lost 0.8 percent to 80.81 yen. New Zealand’s dollar declined 0.6 percent to 79.48 U.S. cents. It dropped 0.8 percent to 62.25 yen. Australia’s government bonds advanced, pushing the yield on the benchmark 10-year security down by as much as 12 basis points, or 0.12 percentage point, to 2.81 percent, the lowest since June 5.
Euro Turns Carry Traders’ Favorite in Worst Year Since 2003 (Source: Bloomberg)
The euro’s strength against the U.S. dollar in the face of the region’s three-year banking and sovereign-debt crisis masks a nine-year low against other currencies, suggesting more weakness to come. While above a lifetime average of about $1.21, the 17- nation currency is at the lowest level since 2003 on a trade- weighted basis, according to a Deutsche Bank AG index that includes the yen, pound and Swiss franc. The European Central Bank’s July 5 reduction of its deposit rate to zero spurred investors to borrow euros to buy higher-yielding assets elsewhere, generating gains from the carry-trade for the first time in two years.
Even though the euro has slumped 24 percent from a high of $1.6038 in July 2008 as the debt crisis threatens to push the region into recession for a second time in three years, the drop is only about half the collapse versus Australia’s dollar. At the same time, the euro’s depreciation following ECB President Mario Draghi’s rate cuts is making exports more competitive and damping concern that the currency union will break up. “The euro has now joined the ranks of the funding currencies,” Ian Stannard, head of European currency strategy at Morgan Stanley in London, said in a July 20 telephone interview. “As far as safe havens are concerned, you can easily come to the conclusion that there are better alternatives to holding core European assets, which have negative yields, so you could see an outflow from Europe developing and the euro coming under broad pressure.”
Euro Drops to 11-Year Low Versus Yen Before Spain Auction (Source: Bloomberg)
The euro touched the lowest level in more than 11 years against the yen as concern escalated that Europe’s debt crisis is deepening. The 17-nation currency continued its decline against the dollar into a fourth day as a surge in Spain’s 10-year note yields toward a euro-era record last week dimmed the outlook for a bill sale tomorrow. The euro also weakened before data that economists said will show a gauge of consumer confidence hovered near a three-year low as Greece’s creditors assess the country’s progress in meeting its bailout targets. “The foreign-exchange market is going to be watching European bond market developments extremely closely this week,” said Ray Attrill, global co-head of foreign-exchange strategy at National Australia Bank Ltd. (NAB) in Sydney. “The euro-dollar rate will continue to go down.”
The common currency touched 94.75 yen, the lowest since November 2000, and traded at 94.80 as of 11:32 a.m. in Tokyo, 0.7 percent lower than the close in New York on July 20. It declined 0.3 percent to $1.2117 after sliding to as low as $1.2106, a level unseen since June 2010. The dollar fell 0.3 percent to 78.22 yen. Spain, the euro region’s fourth-biggest economy, will auction bills tomorrow maturing in three and six months. The nation’s benchmark 10-year yield climbed to 7.284 percent on July 20, almost matching the euro-era record 7.285 percent reached a month ago.
Treasury Yields Drop to Records (Source: Bloomberg)
Treasuries advanced, pushing 10- and 5-year yields down to record lows, before reports this week that may show growth in world’s biggest economy cooled and manufacturing and services output in the euro area stalled. Bill Gross, who runs the world’s biggest bond fund at Pacific Investment Management Co., wrote on Twitter that real assets are a “better bet” amid negative real interest rates in the U.S. Treasuries have handed investors a 1.2 percent return this month after a 0.4 percent decline in June, according to data from Bank of America Merrill Lynch. “Soft data in the U.S. is pretty consistent with what’s been happening across the globe,” said Michael Turner, an economist at RBC Capital Markets Ltd. in Sydney. “Yields are pretty low and there’s probably a fair bit of safe haven-type flow into them.”
Ten-year yields touched a record 1.4347 percent and were at 1.44 percent as of 11:44 a.m. in Tokyo, two basis points below the close on July 20. The 1.75 percent security due in May 2022 rose 5/32, or $1.56 per $1,000 face amount, to 102 27/32. The five-year yield slid to an all-time low of 0.5555 percent, while the rate on two-year U.S. government debt declined to as low as 0.1933 percent, the least since September 2011. The U.S. economy probably grew 1.4 percent in the three months through June, according to the median forecast in a Bloomberg News survey before the Commerce Department releases the data on July 27. That would be the slowest pace since the quarter ended June 2011 and compares with a 1.9 percent pace in the previous period.
Treasury 5-Year Yields Fall to Record on Europe Crisis (Source: Bloomberg)
Five-year Treasury note yields fell to a record low as data showed the U.S. economic growth slowing and investor concern Europe’s debt crisis is worsening led to increased demand for the safest assets. U.S. government debt gained for a fourth consecutive week as yields on Spain’s bonds climbed to record highs relative to German bunds. The pace of economic expansion in the U.S. probably cooled, data next week may show. The Treasury will sell $99 billion of two-, five-and seven-year notes next week. “Europe remains a big question,” said Priya Misra, head of U.S. rates strategy at Bank of America Merrill Lynch in New York, one of the 21 primary dealers required to bid on the securities. “Flight-to-quality bids will remain. We’re pricing in weak growth in the U.S.”
The five-year note yield fell this week five basis points, or 0.05 percentage point, to 0.57 percent, according to Bloomberg Bond Trader prices. It touched 0.5684 percent yesterday, below the previous mark of 0.577 percent set July 16. The benchmark 10-year Treasury yield fell three basis points to 1.46 percent after touching 1.4403 percent on July 16. It set a record low of 1.4387 percent June 1. The two-year rate fell four basis points 0.2015 percent, the lowest level since Sept. 23. Spain’s 10-year benchmark bond yields yesterday climbed above the 7 percent threshold for the first time since Prime Minister Mariano Rajoy unveiled his fourth austerity package last week. That’s the level that prompted bailouts for Greece, Ireland and Portugal.
Nasdaq Increases Payout in Facebook IPO to $62 Million Cash (Source: Bloomberg)
Nasdaq OMX Group Inc., the second- biggest U.S. stock exchange owner, revamped its proposal to compensate brokers that lost money in the public debut of Facebook Inc. (FB), boosting the payout to $62 million cash. The amendment, which follows criticism from Wall Street market makers and exchanges about the original plan, increases the compensation pool from $40 million and does away with a proposal to credit most of the money through reduced trading costs, according to a submission with the Securities and Exchange Commission. Member brokers who accommodated customers for losses will get paid first, it said. “It’s an attempt by Nasdaq to show that they recognize that their clients are very unhappy,” Larry Harris, a professor of finance and business economics at the University of Southern California in Los Angeles and a former chief economist at the SEC, said in a phone interview. “Clearly, making it all-cash is more palatable for regulators and for competitors.”
Delays and malfunctions on the Nasdaq Stock Market were the first signs of trouble in the May 18 Facebook initial public offering that burned investors, spurred losses on Wall Street and prompted lawsuits against the company, its exchange and the underwriters. At yesterday’s close of $28.76, the stock remains down 24 percent from the price set by underwriters, although it has recovered from its low of $25.87 in June.
Bank of America Defends China’s GDP Data (Source: Bloomberg)
Bank of America Corp. has stepped in to defend China’s second-quarter economic-growth data after analysts from Barclays Plc to Mizuho Securities Co. said the figures may be overstated. Shen Jianguang of Mizuho said in a research report this week that deeper slowdowns in industrial and electricity output contradict the gross domestic product statistics. Lu Ting, a Bank of America economist in Hong Kong, said in a July 19 note that industrial production is in line with GDP and that electricity data may fail to capture some growth. The debate shows how China’s government is still struggling to win the trust of economists and investors for GDP statistics that contain a fraction of the data released by the U.S. and Germany. Vice Premier Li Keqiang said in 2007 that GDP figures were “man-made” and “for reference only.”
“No country’s economic data are absolutely reliable, but China’s economic data are particularly unreliable,” said Dong Tao, Credit Suisse Group AG’s Hong Kong-based head of Asia economics excluding Japan, who has been covering the Chinese economy for the Swiss bank since 1998. “It’s subject to political intervention from both local governments and the central government -- that’s why people are suspicious of the data.” Shen, Mizuho’s Hong Kong-based chief Asia economist, said in an e-mail that actual growth is probably around 7 percent when considering monthly data including electricity, housing, infrastructure projects and lending. China may enact a “larger- than-expected stimulus package,” he said.
Top 2% Not Job Creators or Millionaires in Tax Debate (Source: Bloomberg)
President Barack Obama describes them as “millionaires and billionaires” who can afford to pay higher taxes. Republicans call them “job creators” who need to keep their money so they can hire more workers. As the Democratic president and his Republican opponents debate whether to extend the George W. Bush-era tax cuts for the top 2 percent of U.S. taxpayers -- individuals earning more than $200,000 a year and married couples making more than $250,000 -- their poll-tested phrases obscure the truth about who would be affected. They are two-earner professional couples living on the East and West Coasts, doctors, lawyers, engineers and Wall Street executives. Few are billionaires or earn more than $1 million a year, and most are not employers. “The 2 percent, they’re people who are successful in their professions, but they’re not the absolute rock stars,” said Leonard Burman, an economist at Syracuse University in New York. “There’s a big difference between the 99th percentile and the 99.9th.”
Growth Cooled as Americans Curbed Spending: U.S. Economy Preview (Source: Bloomberg)
The U.S. economy probably expanded in the second quarter at the slowest pace in a year as a weaker labor market prompted Americans to cut back on their spending, economists said before a report this week. Gross domestic product, the value of all goods and services the nation produced, rose at a 1.4 percent annual rate after a 1.9 percent gain in the prior quarter, according to the median forecast of 70 economists surveyed by Bloomberg News. Factory orders softened and new-home sales were little changed, other data may show. Consumer purchases, which account for about 70 percent of the world’s largest economy, are weakening at a time Europe’s debt crisis and looming U.S. tax-policy changes threaten to further restrain corporate investment. The deceleration in growth, a concern Federal Reserve Chairman Ben S. Bernanke highlighted last week, will make it harder to trim unemployment stuck above 8 percent since February 2009.
“We’re seeing weak numbers pretty much across the board,” said Michael Hanson, a senior U.S. economist at Bank of America Corp. in New York. “Softening consumption is definitely a big part of the slowdown. The uncertainty over Europe and the fiscal cliff will impinge on business decisions and activity.” A projected 1.3 percent gain in second-quarter household spending would be the smallest in a year and follow a 2.5 percent rise in the January to March period, according to the median projection ahead of the GDP release by the Commerce Department on July 27.
Canada Growth Risks Lagging U.S. as Exports Cool: Economy (Source: Bloomberg)
Canada’s economic growth is at risk of falling behind the U.S. next year for the first time since 2006 as exports slow and spending by companies and consumers cools. A lower-than-forecast increase in consumer prices reported today by Statistics Canada adds to evidence of a slowdown. Data this month showed the trade deficit widened in May and factory sales fell. Bank of Canada Governor Mark Carney this week lowered his growth projection for the world’s 10th largest economy this year to 2.1 percent from 2.4 percent. Carney reiterated that it “may become appropriate” to raise the benchmark lending rate for the first time since September 2010, even as a slowing global economy prompts central banks from China to the U.S. to ease policy. Investors are skeptical of Carney’s outlook: trading based on overnight index swaps shows no chance of an increase through the end of the year. The median estimate of economists surveyed by Bloomberg is for the first increase to come in the second quarter of 2013.
While today’s report probably doesn’t fundamentally change the central bank’s outlook, it “does allow them to stay on hold for longer given that inflation has been surprising on the low side,” said Doug Porter, deputy chief economist at Bank of Montreal, by telephone. The consumer price index climbed 1.5 percent in June from a year earlier, compared with a 1.2 percent gain the prior month, Statistics Canada said today. The core rate, which excludes eight volatile products, increased 2.0 percent after a gain of 1.8 percent in May. Economists surveyed by Bloomberg projected a 1.7 percent gain for CPI and 2.3 percent increase for the core figure.
China Central Bank Adviser Forecasts Growth Slowdown to 7.4% (Source: Bloomberg)
A Chinese central bank adviser predicted the nation’s expansion may cool to 7.4 percent this quarter, adding to concern that the world’s second-biggest economy has yet to bottom out. Song Guoqing, an academic member of the People’s Bank of China monetary policy committee, also warned that a decline in producer prices in tandem with consumer inflation may hurt investment returns of industrial companies, damping their desire to expand. China’s economic growth slowed to 7.6 percent in the three months ended June, the sixth straight deceleration, as Europe’s fiscal crisis sapped exports and a crackdown on property speculation curbed domestic demand. Premier Wen Jiabao said the momentum for a recovery isn’t yet in place, according to a July 15 Xinhua News Agency report, and warned two days later that the labor situation will become more “severe.”
“The consensus is that China’s economic growth rate will be close to 8 percent in coming months, but I personally am more pessimistic because there are problems on the export side,” Song said at a forum in Beijing on July 21. With Europe’s debt crisis still unfolding, “there is a risk of insufficient government measures if Chinese exports fall more sharply than expected in coming months,” he said.
Aging Japan-Chinese Workers Drive Jobs to Southeast Asia (Source: Bloomberg)
Jose Winylito Tanquis has reason to be proud as he raises a flag to signal the launch of the 58,000- ton “Ocean Symphony” in the Philippines. Not only did he help build the cargo vessel, his son John now works at the yard. “Now, he can buy his own stuff, like shoes and clothes,” said Tanquis, 47, a foreman at Tsuneishi Holdings Inc.’s yard in Balamban on Cebu Island. At 21, John is the eldest of six siblings who will enter the workforce in the next decade. The so-called demographic dividend from a rising supply of young workers is one reason Japan’s second-largest shipbuilder expanded in the Philippines, where workers are on average half the age of its Japanese employees. Tsuneishi is considering Indonesia, the Philippines and Myanmar for another shipyard, said Hitoshi Kono, chief of the company’s local operation.
Asia’s manufacturing powerhouses -- Japan, South Korea and China -- are among the fastest-aging countries in the world, while developing nations in Southeast Asia are among the youngest in the region. As factories, jobs and investment flow south to tap cheaper labor, growth in the 10-member Association of Southeast Asian Nations is poised to accelerate, propelling the area’s currencies and fueling consumer and property booms, Bank of America Corp. says. “The demographic dividend is over for Japan and Korea, and it will be over for China soon,” said Yoshimasa Maruyama, chief economist at Itochu Corp., Japan’s third-largest trading company. “It’s happening now in the Asean area, and it will continue for some time.”
South Korea to Ease Mortgage Lending Rule to Spur Consumption (Source: Bloomberg)
South Korea will ease a rule on mortgage lending to stimulate the real-estate market and boost consumption as faltering global demand hurts the export-reliant economy, an adviser to President Lee Myung Bak said. “We have seen that there are many irrational aspects to the debt-to-income ratio limit” banks apply to residential mortgage borrowers, Kim Dae Ki told reporters yesterday in Seoul. “While we will maintain the basic framework of the regulation, we concluded that certain irrational parts of the rule should be eased,” he said, without elaborating. South Korea’s central bank unexpectedly cut its benchmark interest rate on July 12 for the first time in more than three years as policy makers stepped up measures to counter the impact of Europe’s debt crisis, a Chinese slowdown and muted U.S. job creation.
Growth in Asia’s fourth-largest economy may have slowed to 0.5 percent in the second quarter from the previous three months, according to the median estimate in a Bloomberg News survey ahead of a preliminary report due July 26. “We expect Korea’s export-oriented economy to continue to struggle amid tougher global economic conditions,” economists led by Mark Williams and Andrew Kenningham at London-based Capital Economics Ltd. wrote in a note dated July 23. “As a result, the Bank of Korea’s policy rate cut this month is likely to be followed up with more loosening soon,” they wrote.
Maruti Suzuki Imposes Lockout at India Plant After Riot (Source: Bloomberg)
Maruti Suzuki India Ltd. (MSIL), the country’s largest carmaker, locked out workers at a factory near New Delhi and ruled out restarting production until a probe is completed into rioting that led to the death of a manager. The automaker, majority owned by Suzuki Motor Corp. (7269), won’t import cars to make up for the loss of production at its Manesar factory, which accounts for about 40 percent of its total capacity, Chairman R.C. Bhargava told reporters in New Delhi on July 21. He didn’t say how long the investigation would take or when workers would return to the plant. The latest production stoppage is the fourth in the past year at Manesar factory. All 3,000 union workers at the plant will be charged with murder and attempted murder for the mob attack that caused the death of Awanish Kumar Dev, a human resources general manager, and at least 70 injuries, Indian police said July 19.
The Federation of Indian Chambers of Commerce and Industry, one of the nation’s two largest business lobbies, said that the violence threatens India’s investment reputation. “It’s a matter of deep concern for a country that seeks to project itself as offering an environment that is business- friendly,” R.V. Kanoria, president of the lobby, said in an e- mailed statement on July 21, calling for authorities to deal “firmly” with the situation. Maruti has no plans to relocate the plant out of Manesar in northern Haryana state, Bhargava said. A factory at Gurgaon, about 12 miles northeast of Manesar, is operating at full capacity, he said. Suzuki has said production facilities weren’t damaged by the unrest.
Rupiah Declines Most in a Week on China Slowdown; Bonds Steady (Source: Bloomberg)
Indonesia’s rupiah declined the most in a week on concern growth in the world’s second-largest economy may slow further, reducing appetite for emerging-market assets. Government bonds were little changed. The Bloomberg-JPMorgan Asia Dollar Index dropped to a one- week low after Song Guoqing, a Chinese central bank adviser, said July 21 the nation’s growth may slow to 7.4 percent this quarter from 7.6 percent in the previous period. Global funds withdrew 1.1 trillion rupiah ($116 million) from local bond holdings in the first three days of last week, finance ministry data show. China is the largest market for Indonesian exports. “Negative external sentiment still weighs on the rupiah,” said Gusti Kahari, a foreign-exchange dealer at PT Bank Artha Graha Internasional in Jakarta. “It is unlikely to fall below 9,500 as Indonesia’s fundamentals are still relatively good.”
The rupiah weakened 0.4 percent to 9,490 per dollar as of 9:02 a.m. in Jakarta, the biggest drop since July 12, prices from local banks compiled by Bloomberg show. One-month implied volatility, which measures exchange-rate swings used to price options, held at 8 percent.
Australia May Have One Rate Cut Left in Cycle, Deloitte Says (Source: Bloomberg)
Australia’s central bank may cut the benchmark interest rate once more in this cycle if China can maintain its growth outlook, Deloitte Access Economics said. China has “boosted the ability of banks to lend and accelerated the go-ahead on everything from steel mills to alternative energy, hospitals and railways,” the Canberra-based research company said in a report today. “That mix helps limit blowback on global growth, which may not be far below longer term trend. But the risks are real. Either Europe or China -- or, heaven forbid, both -- could upset the applecart.” The Reserve Bank of Australia kept borrowing costs unchanged this month as domestic economic growth and previous interest-rate reductions help the local economy weather global disruptions. The central bank reduced rates by a total of 75 basis points in May and June to help cushion the economy from the fallout in Europe and slower growth in China.
“Much still hinges on Europe and China,” Deloitte said today. “Provided neither generates worse news than already expected -- an admittedly key caveat -- then we’d stick to the view we’ve had for a while: that the overall outlook for Australian growth is still looking rather better than most people realize.” Australia’s core inflation probably slowed to 1.9 percent last quarter, below the central bank’s 2 percent to 3 percent target range, a survey of economists showed before a July 25 government report.
Argentine Factory Output Tumbles as Brazil Buys Fewer Cars (Source: Bloomberg)
Argentina’s industrial production fell more than 4 percent for a second straight month in June, the biggest two-month drop in a decade, as slowing growth in Brazil undermines automobile exports and steel production. Output fell 4.7 percent last month from a year earlier and 0.1 percent from May, the national statistics institute said today in Buenos Aires. The annual decline was steeper than forecast by eight economists surveyed by Bloomberg, whose median estimate was for a 4.5 percent fall. Auto production, which led industrial growth in recent years, dropped 34 percent in June, mainly because of lower demand from neighboring Brazil. South America’s second-biggest economy, which defaulted on $95 billion in late 2001, will expand 2.45 percent this year, the least since 2009, according to the median estimate of six economists surveyed by Bloomberg. Economic activity fell 0.5 percent in May from a year earlier, the first year-over-year decline since July 2009, the agency said.
Brazil’s economy is recovering more slowly than expected from a contraction in last year’s third quarter. Gross domestic product expanded at a 0.8 percent annualized rate in the first quarter, and economists in the latest central bank survey lowered their 2012 growth estimate for the 10th straight week, to 1.9 percent.
Brazil Inflation Unexpectedly Jumps, Ending Downward Trend (Source: Bloomberg)
Brazil’s inflation unexpectedly accelerated this month, reinforcing investors’ bets that the central bank will soon end a cycle of interest rate cuts that has taken borrowing costs to a record low.
Consumer prices as measured by the IPCA-15 price index rose 0.33 percent in the month through July 13, exceeding all 42 analyst estimates in a Bloomberg survey whose median forecast was for a 0.18 percent increase. The annual inflation rate accelerated for the first time in 10 months to 5.24 percent, the national statistics agency said in Rio de Janeiro today. Brazil’s central bank has cut the benchmark Selic rate by 450 basis points since August to a record low 8 percent, saying slower global growth will have a disinflationary effect on Latin America’s biggest economy. Traders pared bets that the central bank will cut the key rate to as low as 7.25 percent this year as today’s report showed inflation remains a concern. “The downward trend has run its course and you’re now going to see inflation hovering above 5 percent,” Newton Rosa, chief economist at SulAmerica Investimentos, said in a phone interview from Sao Paulo. “This is beginning to limit the central bank’s ability to keep cutting.”
U.K. Second-Quarter GDP Seen Declining 0.2% as Recession Deepens (Source: Bloomberg)
The U.K. economy probably contracted for a third consecutive quarter in the three months through June as a double-dip recession deepened, economists said. Gross domestic product fell 0.2 percent, according to the median estimate of 36 economists in a Bloomberg News survey. It shrank 0.3 percent in the first quarter and 0.4 percent in the last three months of 2011. The Office for National Statistics will publish the data on July 25. The Bank of England expanded its emergency bond-purchase program this month and introduced measures to boost lending. The International Monetary Fund said this week that the recovery has “stalled” and the government may need to consider easing its budget squeeze if central bank efforts fail to help the economy gather momentum.
“Tight fiscal policy and still significant problems for consumers” will “limit U.K. economic activity,” said Howard Archer, an economist at IHS Global Insight in London. “Ongoing euro-zone sovereign debt problems and weakened economic activity are expected to continue to weigh down on U.K. recovery prospects.” From a year earlier, the economy probably shrank 0.3 percent in the second quarter, according to a separate Bloomberg survey. Activity in the quarter was probably affected by the extra public holiday for the queen’s Jubilee in June. Bank of England policy makers expanded stimulus by 50 billion pounds ($78 billion) to 375 billion pounds on July 5. In the minutes of the meeting, they said they may review the merits of cutting their benchmark interest rate, currently at a record- low 0.5 percent.
Spain Insists $15 Billion Aid for Regions Won’t Swell Debt (Source: Bloomberg)
Spain’s plan to offer cash-strapped regional administrations emergency loans leaves the Treasury with 12 billion euros ($15 billion) of additional funding needs that the government says won’t affect its borrowing plans. The central government will tap the lottery for part of the 18 billion-euro fund for regions, leaving 12 billion euros for the Treasury to finance. While Economy Minister Luis de Guindos said yesterday that the plan won’t affect the nation’s borrowing program, economists including Jose Carlos Diez at Intermoney SA say it will be hard to sustain without selling more debt. “Where will it come from?” said Diez, chief economist at the Madrid-based brokerage, which is Spain’s biggest bond trader. “In the end it has to add to their financing needs.”
Spain’s Cabinet approved the creation of the fund on July 13 to help regions that have lost access to markets meet debt redemptions and finance deficits. The decree states that the facility will be funded with public debt and the Treasury’s borrowing program will “incorporate the amounts” needed. Valencia, the second-most indebted region, said today it was preparing to tap the fund as it faces a liquidity squeeze.
Greece Back at Center of Euro Crisis as Exit Talk Resurfaces (Source: Bloomberg)
Greece retakes its position at the heart of the European debt crisis this week as its creditors assess how far off course the country is from bailout targets, raising again the specter of its exit from the euro. Greece’s troika of international creditors -- the European Commission, the European Central Bank and the International Monetary Fund -- will arrive in Athens tomorrow amid doubts the country will meet its commitments and reluctance among euro-area states to put up more funds should it fail. “If Greece doesn’t fulfill those conditions, then there can be no more payments,” German Vice Chancellor Philipp Roesler told broadcaster ARD yesterday, adding that he is “very skeptical” Greece can be rescued and that the prospect of its exit from the monetary union “has long ago lost its terror.”
After euro finance ministers failed to staunch a fresh low for the single currency last week with the approval of a 100 billion-euro ($122 billion) aid package for Spain, the troika will be tasked with determining the fiscal position of the nation where the crisis began almost three years ago. Greece is clamoring for more help as efforts to cut its debt to 120 percent of gross domestic product by 2020 fall short.
20120723 1207 Global Commodities Related News.
Bulls Ascendant as Wagers Climb to Three-Month High: Commodities (Source: Bloomberg)
Speculators raised bullish wagers on commodities to a three-month high on mounting speculation that more stimulus measures will boost demand for everything from oil to metals and crop prices will keep rising as drought spreads. Money managers raised their net-long positions across 18 U.S. futures and options by 7.5 percent to 1.13 million contracts in the week ended July 17, U.S. Commodity Futures Trading Commission data show. Wheat holdings reached a record, and corn bets climbed to the highest since March. Almost $2.5 trillion was added to the value of global equities since June 4 as investors anticipated policy makers would step in to bolster growth. Federal Reserve Chairman Ben S. Bernanke told Congress during testimony on July 18 that he is prepared to act to boost the recovery and central banks from Europe to China cut interest rates in the past several weeks. The worst U.S. drought in 56 years is parching crops, and a lack of rain is also wilting fields from Australia to Russia.
“You could probably call it a miniature stampede back into commodities,” said Jeffrey Sica, the Morristown, New Jersey- based president of SICA Wealth Management who helps oversee more than $1 billion of assets. “A lot of investors at this point see that increased liquidity in the market will mean more appreciation in raw-materials prices.”
Crop Sowing Delayed in Some Parts of India Due to Weak Rains (Source: Bloomberg)
The weakest monsoon rainfall in three years is delaying sowing of rice, oilseeds and lentils in several parts of India, Agriculture Secretary Ashish Bahuguna told reporters in New Delhi today. The deficient rains may prompt growers to shift to corn from peanuts in some parts, he said. The worst affected by the below-average rainfall are Karnataka, Gujarat, Maharashtra and Rajasthan states, he said. The area under all the monsoon-sown crops fell 14 percent to 53.4 million hectares from a year earlier, the agriculture ministry said yesterday. Monsoon, which accounts for more than 70 percent of India’s annual rainfall, is the worst since 2009 when showers were 22 percent less than a 50-year average.
Crop Traders Extend Bullish Streak on U.S. Drought: Commodities (Source: Bloomberg)
Corn and soybean traders are bullish for a 13th consecutive week on mounting concern that yields will keep dropping amid the worst U.S. drought in a half century. Twenty analysts surveyed by Bloomberg expect soybeans to climb next week, after reaching a record yesterday. A further five were bearish and three neutral. Nineteen predicted gains in corn, five saw a decline and three anticipated little change. Hedge funds are holding the biggest bet on rising soybeans since the beginning of May and the largest wager on corn since April, U.S. Commodity Futures Trading Commission data show.
The drought may persist in the Midwest for the rest of the growing season, the U.S. government said this week. Above- average temperatures and below-normal rainfall will continue through next week, according to meteorologist Telvent DTN. The 56 percent jump in corn and 28 percent gain in soybeans since mid-June may spur another bout of global food-price inflation, after surges in 2008 and 2011 that sparked civil unrest in developing countries, Barclays Plc said in a report July 18. “There’s not much reason for us to see a slowdown in the price rally,” said Erin FitzPatrick, an analyst at Rabobank International in London, who predicted in April that soybeans would reach a record. “The size of the 2012-13 harvest is shrinking every day that we don’t get rain or a cooling off in the U.S. It’s fundamentally still bullish, even though we’re at these record prices.”
Argentina Wheat Export Cap Benefits Heineken, Pig Farmers (Source: Bloomberg)
Argentina’s policy of capping wheat exports to contain food inflation is having the “perverse effect” of benefiting brewers such as Heineken NV (HEIA) and cheapening feed for pig farmers in China, wheat growers said. Argentine farmers in an area known in the first half of last century as the world’s granary basket will boost barley planting by 17 percent this year at the expense of wheat, which will shrink to the second-lowest in a century, the Buenos Aires Cereals Exchange said yesterday. Barley isn’t part of President Cristina Fernandez de Kirchner’s export restrictions. The government is considering increasing taxes on grain exports, Lapoliticaonline reported today.
Breweries such as Heineken and Anheuser-Busch InBev NV (ABI), the maker of Budweiser, stand to gain as Argentina lowers one of their main costs, Raul Maestre, the treasurer of Argentina’s wheat growers association said in a telephone interview yesterday. Growers are also attracted to barley as rising corn prices are causing pig and chicken farmers in China to switch to barley as feed, he said. “Farmers are running away from wheat because of this government intervention,” Daniel Miro, president of agro- industrial consulting company Novitas SA said in a telephone interview yesterday from Buenos Aires. “Barley is an emerging cereal.”
Wheat Market Recap Report (Source: CME)
September Wheat finished up 8 1/4 at 943 1/4, 1 1/2 off the high and 26 1/2 up from the low. December Wheat closed up 13 3/4 at 948 1/4. This was 26 up from the low and 3 1/4 off the high. September Chicago wheat traded higher into the closing bell, posting another new high for the move. Kansas City and Minneapolis wheat also traded higher on the day. Wheat found support from sharply higher corn market after weather forecasts show temperatures are expected to reach 95-105 degrees in Kansas, Missouri, South Dakota, Iowa, and Nebraska into next week; increasing stress on crops. Wheat is also being supported on shrinking production estimates in the Black Sea as warm and dry weather continues to lower yield potential. Current trade estimates peg Russian wheat production for 2012/13 near 45 million tonnes vs. the current USDA estimate of 49 million tonnes. The market believes the small US corn crop will force importers to use more feed wheat in the coming year. Japan's usage of corn in May dropped to a 20 year low as the world's largest importer of corn continues to use wheat. This trend is likely to remain intact going forward. Grain markets are trading higher despite the negative outside markets and a sharply higher US Dollar. September Oats closed up 3 1/2 at 387. This was 5 up from the low and 1 3/4 off the high.
Pro Farmer: After the Bell Wheat (Source: CME)
Recap Wheat futures saw another choppy day of trade, but bulls again carried the market into the close. Chicago and Minneapolis wheat settled moderately higher, while Kansas City wheat saw lighter gains. Wheat surged sharply higher week-over-week. Wheat's action was tied to that of the corn market this week and more of the same can in the week ahead. The corn rally has shown signs of sputtering, then surged higher. This signals a top is likely near.
Pro Farmer: After the Bell Corn Recap (Source: CME)
To cap off a strong week of price gains, September corn posted an all-time high for a front-month contract as traders fear next week's extreme heat will further damage yield potential and there's not enough rain in the forecast to really make a difference. Many traders had an upside target of $8.00 as the drought was gaining momentum, as they recognize that price should (and has) slowed demand. That's not to say prices won't or can't continue to rally, as focus is turning to areas where traders had anticipated near-trendline yield potential, only to see a forecast for increased stress next week.
Corn Market Recap for 7/20/2012 (Source: CME)
September Corn finished up 16 3/4 at 824 1/2, 4 1/4 off the high and 25 up from the low. December Corn closed up 17 1/4 at 795 3/4. This was 16 3/4 up from the low and 1 1/4 off the high. September and December corn traded sharply higher into the close. September corn posted a new high for the move while the December contract once again failed to move above the 800 level, offering a slightly negative technical view. The trade believes crop conditions could lose another 3-5% on their good/excellent ratings on Monday's Crop Condition report. Weather forecasts continue to look abysmal for US row crops the next two weeks with below normal rainfall and above normal temperatures in the central Midwest. Temperatures are expected to reach 95-105 degrees in Kansas, Missouri, South Dakota, Iowa, and Nebraska this week; increasing stress on crops. The blistering temperatures are expected to last until the middle of next week. Iran bought 50,000 tonnes of Brazilian corn today and sluggish export sales reported yesterday suggest demand is slowly backing off. The bearish demand headlines are being offset by lower corn yield estimates. A closely followed commodity weather agency revised their new crop corn yield to 136.2 bushels/acre. This was down from 152.2 bushels per acre. Yield could fall further if current weather patterns persist into August. Grain markets are trading higher despite the negative outside markets and a sharply higher US Dollar. September Rice finished up 0.04 at 15.535, equal to the high and 0.025 up from the low.
Shoppers may be spared worst of corn price surge
NEW YORK, July 19 (Reuters) - U.S. grain prices are soaring as the Midwest corn belt suffers its worst drought since 1956, but that doesn't mean grocery bills are about to jump.
Easing costs of other commodities, hedging strategies aimed at keeping corn costs in line and fears of turning off consumers in a weak economy should all keep packaged food companies from hiking prices, at least in the short term.
GRAINS-US corn climbs, extends drought-fed rally to 55 pct in 5 wks
SYDNEY, July 20 (Reuters) - U.S. new-crop corn rose taking its drought-driven rally to more than 55 percent in five weeks, as crops continued to wilt under a searing Midwest heat, stoking fears of a food shortage.
"Funds were in buying all three grains last night, and I think that will continue on, though the book will be squared before the weekend."
Japan corn use in animal feed falls to two-decade low
TOKYO, July 20 (Reuters) - Japan's usage of corn in animal feed reached a 20-year low in May, maintaining a downtrend that began in 2010 when high prices spurred the world's biggest corn importer to use more wheat instead.
Preliminary government data, released on Friday, showed the ratio of corn in animal feed fell to 43.7 percent in May compared with 46 percent in the same month a year ago.
Rains too late for some drought-savaged US corn fields
CHICAGO, July 19 (Reuters) - Indiana farmer Brian Scott saw on Thursday the heaviest rains of the year soak his 2,300-acre farm in the throes of the worst drought in five decades, but they were a mixed blessing at best.
The downpour came too late for his corn crop, which was already past the critical stage of setting yields. His soybeans, though, could get better and set more pods.
Argentine exchange trims wheat view as prices soar
BUENOS AIRES, July 19 (Reuters) - Argentina will plant 22 percent less wheat this season than it did in the previous crop year, a key local exchange said on Thursday, feeding a world rally in grains prices sparked by dry and hot U.S. farm weather.
Argentina is the world's No. 6 wheat exporter and the top supplier to neighboring Brazil. With Chicago Board of Trade wheat futures already at four-year highs, a shortfall in global wheat seedings and output could boost prices further.
Crops suffer as drought intensifies in US breadbasket
July 19 (Reuters) - The most expansive U.S. drought in more than a half century intensified this week and stretched further into major farm areas of the western Midwest where crops had largely been shielded from the harsh conditions that decimated yields further east.
The moderate drought in parts of eastern Nebraska, northern Illinois and much of the top corn and soybean state Iowa was downgraded to a severe drought in the past week, climate experts said Thursday, and forecasts showed little relief in sight.
Argentine 2012/13 wheat area seen at 3.6 mln hectares
BUENOS AIRES, July 19 (Reuters) - Argentine farmers will plant wheat this year on 3.6 million hectares, the Buenos Aires Grains Exchange said on Thursday, cutting its previous estimate by 100,000 hectares.
If the forecast proves correct, it would mark a 22 percent reduction in wheat area from the 2011/12 season, the exchange said in its weekly crop report.
EU farmers struggle with barley harvest in rain
HAMBURG, July 19 (Reuters) - Europe's drenched summer which has ruined countless holidays has also made harvesting this season's barley crop immensely difficult for farmers, analysts and traders said on Thursday.
"We urgently need an end to the rain to get harvesting completed," one barley trader said. "The crop could be reduced if rain goes on."
Weak monsoon casts drought shadow over India
NEW DELHI, July 19 (Reuters) - India's monsoon rains lost momentum again last week, falling nearly a fifth short of averages and raising the risk of a drought year in one of the world's leading producers of grains and sugar just as global prices hit record highs.
Rainfall was 22 percent below average across the country in the week to July 18, even though the parched interior in the south received downpours up to 179 percent above average, data from the India Meteorological Department (IMD) on Thursday showed.
SOFTS-Cocoa slips after grindings data, sugar firm
LONDON, July 20 (Reuters) - Cocoa futures eased following mixed global grindings results, clouding the outlook for demand, while sugar firmed to a fresh 3-month high and arabica coffee edged lower. Cocoa futures were slightly lower following mixed grindings results with North America's grind falling sharply, while the Asian grind rose.
Asia's Q2 cocoa grindings rise 5.7 pct on yr -trade body
SINGAPORE, July 20 (Reuters) - Cocoa grindings in Asia rose 5.7 percent to 150,726 tonnes in the second quarter of 2012 from the same period last year, the Cocoa Association of Asia said on its website, outpacing grindings in North America and Europe.
The CAA gave no details, but dealers said the increase in grindings in Asia was driven by steady demand for cocoa powder, which is used to make chocolate-flavoured products including bakery good, beverages and ice cream.
N America Q2 cocoa grind sees biggest drop in 3+ years
NEW YORK, July 19 (Reuters) - North American cocoa grindings in the second quarter of 2012 made their biggest decline in more than three years, data from the National Confectioners Association (NCA) showed on Thursday.
The quarterly grindings reached 112,768 tonnes, down 9.76 percent from the second quarter of 2011. This is the biggest quarterly drop since the first quarter of 2009, when grindings dropped by nearly 13 percent at 99,962 tonnes.
Brazil sugar lineup grows under rains, strike
SAO PAULO, July 19 (Reuters) - The lineup of ships waiting to load sugar in Brazil rose to 87 from 81 a week earlier as rains and striking sanitary inspectors at the ports slowed loading, Williams shipping agents said in a report released late Wednesday.
The number of ships waiting at Brazilian port was also rising as the harvest of the 2012/13 crop in the important center-south region picked up steam. Wet weather in Santos and Paranagua over the past several days slowed loading of bulk raws into open holds.
Rain may strand Brazil cane in field till next yr-Datagro
SAO PAULO, July 19 (Reuters) - Abundant rainfall over Brazil's main center-south sugar cane crop during this dry season risks stranding some of the 2012/13 crop until the next season, leading sugar and ethanol consultancy Datagro said on Thursday.
Many of Brazil's cane mills have delayed the start of harvest this season, which officially started in April, to allow the crop to mature and yields to improve after a wet start to the crushing season.
Indonesia eyes investment plan for rubber industry
JAKARTA, July 19 (Reuters) - Indonesia, the world's second-largest rubber producer, is considering investing $526 million over three years to boost and improve output in its rubber trees.
Starting in 2013, if approved the money will be used to re-plant or revitalise about 350,000 hectares of old and unhealthy rubber plantation in Southeast Asia's largest economy, Rismansyah Danasaputra, director of perennial crops at the Agriculture Ministry said on Thursday.
Oil Drops a Second Day on China Slowdown, Europe Crisis (Source: Bloomberg)
Oil dropped for a second day amid speculation fuel demand will falter as China’s economy slows and Europe struggles to control its debt crisis. Futures slid as much as 0.9 percent after a Chinese central bank adviser said the nation’s economy may cool further. International creditors meet in Athens tomorrow amid concern Greece may not meet its bailout targets, and after an aid package for Spain failed to prevent the euro dropping to its lowest level in more than two years against the dollar. Iraq resumed oil exports to Turkey after an explosion shut a pipeline that carries as much as 350,000 barrels a day, Sumaria News reported July 21, citing an unidentified Iraqi official. “The Spanish or European story will result in repeated volatility in the market,” Jarmo Kotilaine, the chief economist at Jeddah-based National Commercial Bank, said by phone yesterday. “We are still not clear on what the policy options will be. Demand-erosion concerns keep coming back.”
Oil for September delivery fell as much as 81 cents to $91.02 a barrel in electronic trading on the New York Mercantile Exchange and was at $91.03 at 12:08 p.m. Sydney time. The contract slid 1.2 percent to $91.83 on July 20. Prices are 7.9 percent lower this year. Brent crude for September settlement declined 80 cents, or 0.8 percent, to $106.03 a barrel on the London-based ICE Futures Europe exchange. The European benchmark’s premium to West Texas Intermediate was unchanged at $15.
OIL-Brent dips toward $107, steep 4-wk rally spurs selling
SINGAPORE, July 20 (Reuters) - Brent crude slipped toward $107 per barrel after an almost 18 percent rally over four weeks rompted some selling as worries about a conflict in the Middle East eased slightly.
"Prices were getting stretched a little, getting a bit ahead of themselves," said Mark Pervan, senior commodities strategist at ANZ bank. "This rally is supply driven, and supply-driven rallies tend to be very volatile because when prices go up, they threaten to hurt demand."
China end-June commercial crude stocks up 4.8 pct on mth
SHANGHAI, July 20 (Reuters) - Commercial crude inventories in China, the world's second-largest oil consumer, rose 4.8 percent in June from a month earlier, while refined fuel stocks eased by 7.56 percent, the official Xinhua News Agency reported in a newsletter on Friday.
The increase in crude oil stocks was attributed to falling crude oil throughput, which declined for a third consecutive month in June on the back of slowing energy demand amid weaker economic growth.
Coal May Regain Market Share From Natural Gas, Barclays Says (Source: Bloomberg)
Coal may regain some market share for power generation from natural gas during the summer as deferred shipments pour in, according to analysts from Barclays Capital Inc. Cheap gas displaced coal for making electricity earlier in the year, leading to high stockpiles of the fuel and prompting utilities to postpone deliveries, Shiyang Wang, an analyst in New York at the bank, said today in an e-mailed research note. “Deferred coal shipments also create an additional headwind for natural gas consumption in the U.S. power sector through the summer,” Wang wrote. Coal producers allowed the deferred shipments in lieu of renegotiating legacy contracts and slashing prices, Barclays said. As the deliveries trickle into utilities and plants also take advantage of lower spot prices for coal, gas demand may wane, according to the investment bank.
Spot coal from Wyoming’s Powder River Basin, which holds the largest and least expensive reserves, has fallen 40 percent to $8.75 a ton from a year earlier, according to data compiled by Bloomberg.
Power Dearth Threatens Indonesia Smelter Bids: Southeast Asia (Source: Bloomberg)
A shortage of electricity in Indonesia may hamper President Susilo Bambang Yudhoyono’s plan to ban all raw-ore exports by 2014, as he seeks to increase revenue by forcing companies to refine locally. More than 1 gigawatt of additional capacity may be needed to power the smelters required for the world’s biggest nickel producer and largest exporter of tin to process its ore, according to Xavier Jean, the Singapore-based associate director of corporate ratings at Standard and Poor’s. It may take longer than three years to build a plant capable of producing that much power, according to Nur Pamudji, president director of state utility PT Perusahaan Listrik Negara.
Asia’s second-biggest copper producer after China banned shipments of some metals on May 6, and the prohibition takes effect on all raw ore in 2014. The curb, combined with an export tax, is aimed at increasing revenue from higher-value processing. Japan, the second-biggest global buyer of nickel, has threatened to complain to the World Trade Organization about the restrictions. “Project management complexity will increase substantially, as not only do companies need to manage the construction of large smelters but they also need to manage the construction of the associated power generation units,” Jean wrote in an e-mail to Bloomberg News this month. “The risk of delays is high, and that could force the government to pragmatically delay or tone down some of the recent regulations applied to the sector regarding the export of unprocessed ores.”
Speculators raised bullish wagers on commodities to a three-month high on mounting speculation that more stimulus measures will boost demand for everything from oil to metals and crop prices will keep rising as drought spreads. Money managers raised their net-long positions across 18 U.S. futures and options by 7.5 percent to 1.13 million contracts in the week ended July 17, U.S. Commodity Futures Trading Commission data show. Wheat holdings reached a record, and corn bets climbed to the highest since March. Almost $2.5 trillion was added to the value of global equities since June 4 as investors anticipated policy makers would step in to bolster growth. Federal Reserve Chairman Ben S. Bernanke told Congress during testimony on July 18 that he is prepared to act to boost the recovery and central banks from Europe to China cut interest rates in the past several weeks. The worst U.S. drought in 56 years is parching crops, and a lack of rain is also wilting fields from Australia to Russia.
“You could probably call it a miniature stampede back into commodities,” said Jeffrey Sica, the Morristown, New Jersey- based president of SICA Wealth Management who helps oversee more than $1 billion of assets. “A lot of investors at this point see that increased liquidity in the market will mean more appreciation in raw-materials prices.”
Crop Sowing Delayed in Some Parts of India Due to Weak Rains (Source: Bloomberg)
The weakest monsoon rainfall in three years is delaying sowing of rice, oilseeds and lentils in several parts of India, Agriculture Secretary Ashish Bahuguna told reporters in New Delhi today. The deficient rains may prompt growers to shift to corn from peanuts in some parts, he said. The worst affected by the below-average rainfall are Karnataka, Gujarat, Maharashtra and Rajasthan states, he said. The area under all the monsoon-sown crops fell 14 percent to 53.4 million hectares from a year earlier, the agriculture ministry said yesterday. Monsoon, which accounts for more than 70 percent of India’s annual rainfall, is the worst since 2009 when showers were 22 percent less than a 50-year average.
Crop Traders Extend Bullish Streak on U.S. Drought: Commodities (Source: Bloomberg)
Corn and soybean traders are bullish for a 13th consecutive week on mounting concern that yields will keep dropping amid the worst U.S. drought in a half century. Twenty analysts surveyed by Bloomberg expect soybeans to climb next week, after reaching a record yesterday. A further five were bearish and three neutral. Nineteen predicted gains in corn, five saw a decline and three anticipated little change. Hedge funds are holding the biggest bet on rising soybeans since the beginning of May and the largest wager on corn since April, U.S. Commodity Futures Trading Commission data show.
The drought may persist in the Midwest for the rest of the growing season, the U.S. government said this week. Above- average temperatures and below-normal rainfall will continue through next week, according to meteorologist Telvent DTN. The 56 percent jump in corn and 28 percent gain in soybeans since mid-June may spur another bout of global food-price inflation, after surges in 2008 and 2011 that sparked civil unrest in developing countries, Barclays Plc said in a report July 18. “There’s not much reason for us to see a slowdown in the price rally,” said Erin FitzPatrick, an analyst at Rabobank International in London, who predicted in April that soybeans would reach a record. “The size of the 2012-13 harvest is shrinking every day that we don’t get rain or a cooling off in the U.S. It’s fundamentally still bullish, even though we’re at these record prices.”
Argentina Wheat Export Cap Benefits Heineken, Pig Farmers (Source: Bloomberg)
Argentina’s policy of capping wheat exports to contain food inflation is having the “perverse effect” of benefiting brewers such as Heineken NV (HEIA) and cheapening feed for pig farmers in China, wheat growers said. Argentine farmers in an area known in the first half of last century as the world’s granary basket will boost barley planting by 17 percent this year at the expense of wheat, which will shrink to the second-lowest in a century, the Buenos Aires Cereals Exchange said yesterday. Barley isn’t part of President Cristina Fernandez de Kirchner’s export restrictions. The government is considering increasing taxes on grain exports, Lapoliticaonline reported today.
Breweries such as Heineken and Anheuser-Busch InBev NV (ABI), the maker of Budweiser, stand to gain as Argentina lowers one of their main costs, Raul Maestre, the treasurer of Argentina’s wheat growers association said in a telephone interview yesterday. Growers are also attracted to barley as rising corn prices are causing pig and chicken farmers in China to switch to barley as feed, he said. “Farmers are running away from wheat because of this government intervention,” Daniel Miro, president of agro- industrial consulting company Novitas SA said in a telephone interview yesterday from Buenos Aires. “Barley is an emerging cereal.”
Wheat Market Recap Report (Source: CME)
September Wheat finished up 8 1/4 at 943 1/4, 1 1/2 off the high and 26 1/2 up from the low. December Wheat closed up 13 3/4 at 948 1/4. This was 26 up from the low and 3 1/4 off the high. September Chicago wheat traded higher into the closing bell, posting another new high for the move. Kansas City and Minneapolis wheat also traded higher on the day. Wheat found support from sharply higher corn market after weather forecasts show temperatures are expected to reach 95-105 degrees in Kansas, Missouri, South Dakota, Iowa, and Nebraska into next week; increasing stress on crops. Wheat is also being supported on shrinking production estimates in the Black Sea as warm and dry weather continues to lower yield potential. Current trade estimates peg Russian wheat production for 2012/13 near 45 million tonnes vs. the current USDA estimate of 49 million tonnes. The market believes the small US corn crop will force importers to use more feed wheat in the coming year. Japan's usage of corn in May dropped to a 20 year low as the world's largest importer of corn continues to use wheat. This trend is likely to remain intact going forward. Grain markets are trading higher despite the negative outside markets and a sharply higher US Dollar. September Oats closed up 3 1/2 at 387. This was 5 up from the low and 1 3/4 off the high.
Pro Farmer: After the Bell Wheat (Source: CME)
Recap Wheat futures saw another choppy day of trade, but bulls again carried the market into the close. Chicago and Minneapolis wheat settled moderately higher, while Kansas City wheat saw lighter gains. Wheat surged sharply higher week-over-week. Wheat's action was tied to that of the corn market this week and more of the same can in the week ahead. The corn rally has shown signs of sputtering, then surged higher. This signals a top is likely near.
Pro Farmer: After the Bell Corn Recap (Source: CME)
To cap off a strong week of price gains, September corn posted an all-time high for a front-month contract as traders fear next week's extreme heat will further damage yield potential and there's not enough rain in the forecast to really make a difference. Many traders had an upside target of $8.00 as the drought was gaining momentum, as they recognize that price should (and has) slowed demand. That's not to say prices won't or can't continue to rally, as focus is turning to areas where traders had anticipated near-trendline yield potential, only to see a forecast for increased stress next week.
Corn Market Recap for 7/20/2012 (Source: CME)
September Corn finished up 16 3/4 at 824 1/2, 4 1/4 off the high and 25 up from the low. December Corn closed up 17 1/4 at 795 3/4. This was 16 3/4 up from the low and 1 1/4 off the high. September and December corn traded sharply higher into the close. September corn posted a new high for the move while the December contract once again failed to move above the 800 level, offering a slightly negative technical view. The trade believes crop conditions could lose another 3-5% on their good/excellent ratings on Monday's Crop Condition report. Weather forecasts continue to look abysmal for US row crops the next two weeks with below normal rainfall and above normal temperatures in the central Midwest. Temperatures are expected to reach 95-105 degrees in Kansas, Missouri, South Dakota, Iowa, and Nebraska this week; increasing stress on crops. The blistering temperatures are expected to last until the middle of next week. Iran bought 50,000 tonnes of Brazilian corn today and sluggish export sales reported yesterday suggest demand is slowly backing off. The bearish demand headlines are being offset by lower corn yield estimates. A closely followed commodity weather agency revised their new crop corn yield to 136.2 bushels/acre. This was down from 152.2 bushels per acre. Yield could fall further if current weather patterns persist into August. Grain markets are trading higher despite the negative outside markets and a sharply higher US Dollar. September Rice finished up 0.04 at 15.535, equal to the high and 0.025 up from the low.
Shoppers may be spared worst of corn price surge
NEW YORK, July 19 (Reuters) - U.S. grain prices are soaring as the Midwest corn belt suffers its worst drought since 1956, but that doesn't mean grocery bills are about to jump.
Easing costs of other commodities, hedging strategies aimed at keeping corn costs in line and fears of turning off consumers in a weak economy should all keep packaged food companies from hiking prices, at least in the short term.
GRAINS-US corn climbs, extends drought-fed rally to 55 pct in 5 wks
SYDNEY, July 20 (Reuters) - U.S. new-crop corn rose taking its drought-driven rally to more than 55 percent in five weeks, as crops continued to wilt under a searing Midwest heat, stoking fears of a food shortage.
"Funds were in buying all three grains last night, and I think that will continue on, though the book will be squared before the weekend."
Japan corn use in animal feed falls to two-decade low
TOKYO, July 20 (Reuters) - Japan's usage of corn in animal feed reached a 20-year low in May, maintaining a downtrend that began in 2010 when high prices spurred the world's biggest corn importer to use more wheat instead.
Preliminary government data, released on Friday, showed the ratio of corn in animal feed fell to 43.7 percent in May compared with 46 percent in the same month a year ago.
Rains too late for some drought-savaged US corn fields
CHICAGO, July 19 (Reuters) - Indiana farmer Brian Scott saw on Thursday the heaviest rains of the year soak his 2,300-acre farm in the throes of the worst drought in five decades, but they were a mixed blessing at best.
The downpour came too late for his corn crop, which was already past the critical stage of setting yields. His soybeans, though, could get better and set more pods.
Argentine exchange trims wheat view as prices soar
BUENOS AIRES, July 19 (Reuters) - Argentina will plant 22 percent less wheat this season than it did in the previous crop year, a key local exchange said on Thursday, feeding a world rally in grains prices sparked by dry and hot U.S. farm weather.
Argentina is the world's No. 6 wheat exporter and the top supplier to neighboring Brazil. With Chicago Board of Trade wheat futures already at four-year highs, a shortfall in global wheat seedings and output could boost prices further.
Crops suffer as drought intensifies in US breadbasket
July 19 (Reuters) - The most expansive U.S. drought in more than a half century intensified this week and stretched further into major farm areas of the western Midwest where crops had largely been shielded from the harsh conditions that decimated yields further east.
The moderate drought in parts of eastern Nebraska, northern Illinois and much of the top corn and soybean state Iowa was downgraded to a severe drought in the past week, climate experts said Thursday, and forecasts showed little relief in sight.
Argentine 2012/13 wheat area seen at 3.6 mln hectares
BUENOS AIRES, July 19 (Reuters) - Argentine farmers will plant wheat this year on 3.6 million hectares, the Buenos Aires Grains Exchange said on Thursday, cutting its previous estimate by 100,000 hectares.
If the forecast proves correct, it would mark a 22 percent reduction in wheat area from the 2011/12 season, the exchange said in its weekly crop report.
EU farmers struggle with barley harvest in rain
HAMBURG, July 19 (Reuters) - Europe's drenched summer which has ruined countless holidays has also made harvesting this season's barley crop immensely difficult for farmers, analysts and traders said on Thursday.
"We urgently need an end to the rain to get harvesting completed," one barley trader said. "The crop could be reduced if rain goes on."
Weak monsoon casts drought shadow over India
NEW DELHI, July 19 (Reuters) - India's monsoon rains lost momentum again last week, falling nearly a fifth short of averages and raising the risk of a drought year in one of the world's leading producers of grains and sugar just as global prices hit record highs.
Rainfall was 22 percent below average across the country in the week to July 18, even though the parched interior in the south received downpours up to 179 percent above average, data from the India Meteorological Department (IMD) on Thursday showed.
SOFTS-Cocoa slips after grindings data, sugar firm
LONDON, July 20 (Reuters) - Cocoa futures eased following mixed global grindings results, clouding the outlook for demand, while sugar firmed to a fresh 3-month high and arabica coffee edged lower. Cocoa futures were slightly lower following mixed grindings results with North America's grind falling sharply, while the Asian grind rose.
Asia's Q2 cocoa grindings rise 5.7 pct on yr -trade body
SINGAPORE, July 20 (Reuters) - Cocoa grindings in Asia rose 5.7 percent to 150,726 tonnes in the second quarter of 2012 from the same period last year, the Cocoa Association of Asia said on its website, outpacing grindings in North America and Europe.
The CAA gave no details, but dealers said the increase in grindings in Asia was driven by steady demand for cocoa powder, which is used to make chocolate-flavoured products including bakery good, beverages and ice cream.
N America Q2 cocoa grind sees biggest drop in 3+ years
NEW YORK, July 19 (Reuters) - North American cocoa grindings in the second quarter of 2012 made their biggest decline in more than three years, data from the National Confectioners Association (NCA) showed on Thursday.
The quarterly grindings reached 112,768 tonnes, down 9.76 percent from the second quarter of 2011. This is the biggest quarterly drop since the first quarter of 2009, when grindings dropped by nearly 13 percent at 99,962 tonnes.
Brazil sugar lineup grows under rains, strike
SAO PAULO, July 19 (Reuters) - The lineup of ships waiting to load sugar in Brazil rose to 87 from 81 a week earlier as rains and striking sanitary inspectors at the ports slowed loading, Williams shipping agents said in a report released late Wednesday.
The number of ships waiting at Brazilian port was also rising as the harvest of the 2012/13 crop in the important center-south region picked up steam. Wet weather in Santos and Paranagua over the past several days slowed loading of bulk raws into open holds.
Rain may strand Brazil cane in field till next yr-Datagro
SAO PAULO, July 19 (Reuters) - Abundant rainfall over Brazil's main center-south sugar cane crop during this dry season risks stranding some of the 2012/13 crop until the next season, leading sugar and ethanol consultancy Datagro said on Thursday.
Many of Brazil's cane mills have delayed the start of harvest this season, which officially started in April, to allow the crop to mature and yields to improve after a wet start to the crushing season.
Indonesia eyes investment plan for rubber industry
JAKARTA, July 19 (Reuters) - Indonesia, the world's second-largest rubber producer, is considering investing $526 million over three years to boost and improve output in its rubber trees.
Starting in 2013, if approved the money will be used to re-plant or revitalise about 350,000 hectares of old and unhealthy rubber plantation in Southeast Asia's largest economy, Rismansyah Danasaputra, director of perennial crops at the Agriculture Ministry said on Thursday.
Oil Drops a Second Day on China Slowdown, Europe Crisis (Source: Bloomberg)
Oil dropped for a second day amid speculation fuel demand will falter as China’s economy slows and Europe struggles to control its debt crisis. Futures slid as much as 0.9 percent after a Chinese central bank adviser said the nation’s economy may cool further. International creditors meet in Athens tomorrow amid concern Greece may not meet its bailout targets, and after an aid package for Spain failed to prevent the euro dropping to its lowest level in more than two years against the dollar. Iraq resumed oil exports to Turkey after an explosion shut a pipeline that carries as much as 350,000 barrels a day, Sumaria News reported July 21, citing an unidentified Iraqi official. “The Spanish or European story will result in repeated volatility in the market,” Jarmo Kotilaine, the chief economist at Jeddah-based National Commercial Bank, said by phone yesterday. “We are still not clear on what the policy options will be. Demand-erosion concerns keep coming back.”
Oil for September delivery fell as much as 81 cents to $91.02 a barrel in electronic trading on the New York Mercantile Exchange and was at $91.03 at 12:08 p.m. Sydney time. The contract slid 1.2 percent to $91.83 on July 20. Prices are 7.9 percent lower this year. Brent crude for September settlement declined 80 cents, or 0.8 percent, to $106.03 a barrel on the London-based ICE Futures Europe exchange. The European benchmark’s premium to West Texas Intermediate was unchanged at $15.
OIL-Brent dips toward $107, steep 4-wk rally spurs selling
SINGAPORE, July 20 (Reuters) - Brent crude slipped toward $107 per barrel after an almost 18 percent rally over four weeks rompted some selling as worries about a conflict in the Middle East eased slightly.
"Prices were getting stretched a little, getting a bit ahead of themselves," said Mark Pervan, senior commodities strategist at ANZ bank. "This rally is supply driven, and supply-driven rallies tend to be very volatile because when prices go up, they threaten to hurt demand."
China end-June commercial crude stocks up 4.8 pct on mth
SHANGHAI, July 20 (Reuters) - Commercial crude inventories in China, the world's second-largest oil consumer, rose 4.8 percent in June from a month earlier, while refined fuel stocks eased by 7.56 percent, the official Xinhua News Agency reported in a newsletter on Friday.
The increase in crude oil stocks was attributed to falling crude oil throughput, which declined for a third consecutive month in June on the back of slowing energy demand amid weaker economic growth.
Coal May Regain Market Share From Natural Gas, Barclays Says (Source: Bloomberg)
Coal may regain some market share for power generation from natural gas during the summer as deferred shipments pour in, according to analysts from Barclays Capital Inc. Cheap gas displaced coal for making electricity earlier in the year, leading to high stockpiles of the fuel and prompting utilities to postpone deliveries, Shiyang Wang, an analyst in New York at the bank, said today in an e-mailed research note. “Deferred coal shipments also create an additional headwind for natural gas consumption in the U.S. power sector through the summer,” Wang wrote. Coal producers allowed the deferred shipments in lieu of renegotiating legacy contracts and slashing prices, Barclays said. As the deliveries trickle into utilities and plants also take advantage of lower spot prices for coal, gas demand may wane, according to the investment bank.
Spot coal from Wyoming’s Powder River Basin, which holds the largest and least expensive reserves, has fallen 40 percent to $8.75 a ton from a year earlier, according to data compiled by Bloomberg.
Power Dearth Threatens Indonesia Smelter Bids: Southeast Asia (Source: Bloomberg)
A shortage of electricity in Indonesia may hamper President Susilo Bambang Yudhoyono’s plan to ban all raw-ore exports by 2014, as he seeks to increase revenue by forcing companies to refine locally. More than 1 gigawatt of additional capacity may be needed to power the smelters required for the world’s biggest nickel producer and largest exporter of tin to process its ore, according to Xavier Jean, the Singapore-based associate director of corporate ratings at Standard and Poor’s. It may take longer than three years to build a plant capable of producing that much power, according to Nur Pamudji, president director of state utility PT Perusahaan Listrik Negara.
Asia’s second-biggest copper producer after China banned shipments of some metals on May 6, and the prohibition takes effect on all raw ore in 2014. The curb, combined with an export tax, is aimed at increasing revenue from higher-value processing. Japan, the second-biggest global buyer of nickel, has threatened to complain to the World Trade Organization about the restrictions. “Project management complexity will increase substantially, as not only do companies need to manage the construction of large smelters but they also need to manage the construction of the associated power generation units,” Jean wrote in an e-mail to Bloomberg News this month. “The risk of delays is high, and that could force the government to pragmatically delay or tone down some of the recent regulations applied to the sector regarding the export of unprocessed ores.”
20120723 1206 Soy Oil & Palm Oil Related News.
Pro Farmer: After the Bell Soybean Recap (Source: CME)
Soybean futures added to the strong price surge today as traders continue to actively build premium into the market amid drought-induced supply concerns. Forecasts call for extreme heat across the country's midsection next week, which will likely take another big bite out of the crop. Timing for severe crop stress couldn't be much worse with the crop flowering and setting pods. As a result, there's incentive for traders to build more premium into prices.
Soybean Complex Market Recap (Source: CME)
August Soybeans finished up 23 3/4 at 1757 1/2, 20 1/4 off the high and 28 1/2 up from the low. November Soybeans closed up 34 at 1686 1/4. This was 41 1/4 up from the low and 4 3/4 off the high. August Soymeal closed up 11 at 543.0. This was 11.5 up from the low and 9.0 off the high. August Soybean Oil finished down 0.05 at 54.35, 0.35 off the high and 0.22 up from the low. August soybeans traded sharply higher into the close today while the November contract led the complex higher and posted new highs for the move. August soybean meal traded limit higher early in the session but backed off midday. Soybean oil traded lower on the day. Midday session weakness offered bulls another chance to enter the market prior to next Monday's crop conditions report as the trade expects declines in the good/excellent category. While recent rainfall in the southeast and delta have been beneficial to soybean crops, conditions in the western Corn Belt have likely gotten worse. Temperatures are expected to reach 95-105 degrees in Kansas, Missouri, South Dakota, Iowa, and Nebraska this week; increasing stress on crops. The blistering temperatures are expected to last the middle of next week. Weather services reported a 30 day forecast calling for above normal temperatures and below normal rainfall, which could cause further deterioration in soybean yields. Analysts in Brazil expect the 2012/13 Brazilian soybean crop to produce 82.29 million tonnes, up 24% from the current soybean crop. The market shook off the bearish headline as traders focus on US crop conditions. Grain markets are trading higher despite the negative outside markets and a sharply higher US Dollar.
VEGOILS-Palm oil edges up, weak exports cap gains
SINGAPORE, July 20 (Reuters) - Malaysian crude palm oil futures edged up as crop-damaging weather in the U.S. Midwest raised prospects of a smaller supply of soybean oil shifting demand to the cheaper palm oil.
"From the inventory level alone, it is negative to prices. But the dry season in the United States is still very much in the picture," said Alan Lim, research analyst with Malaysia's Kenanga Investment Bank.
Soybean futures added to the strong price surge today as traders continue to actively build premium into the market amid drought-induced supply concerns. Forecasts call for extreme heat across the country's midsection next week, which will likely take another big bite out of the crop. Timing for severe crop stress couldn't be much worse with the crop flowering and setting pods. As a result, there's incentive for traders to build more premium into prices.
Soybean Complex Market Recap (Source: CME)
August Soybeans finished up 23 3/4 at 1757 1/2, 20 1/4 off the high and 28 1/2 up from the low. November Soybeans closed up 34 at 1686 1/4. This was 41 1/4 up from the low and 4 3/4 off the high. August Soymeal closed up 11 at 543.0. This was 11.5 up from the low and 9.0 off the high. August Soybean Oil finished down 0.05 at 54.35, 0.35 off the high and 0.22 up from the low. August soybeans traded sharply higher into the close today while the November contract led the complex higher and posted new highs for the move. August soybean meal traded limit higher early in the session but backed off midday. Soybean oil traded lower on the day. Midday session weakness offered bulls another chance to enter the market prior to next Monday's crop conditions report as the trade expects declines in the good/excellent category. While recent rainfall in the southeast and delta have been beneficial to soybean crops, conditions in the western Corn Belt have likely gotten worse. Temperatures are expected to reach 95-105 degrees in Kansas, Missouri, South Dakota, Iowa, and Nebraska this week; increasing stress on crops. The blistering temperatures are expected to last the middle of next week. Weather services reported a 30 day forecast calling for above normal temperatures and below normal rainfall, which could cause further deterioration in soybean yields. Analysts in Brazil expect the 2012/13 Brazilian soybean crop to produce 82.29 million tonnes, up 24% from the current soybean crop. The market shook off the bearish headline as traders focus on US crop conditions. Grain markets are trading higher despite the negative outside markets and a sharply higher US Dollar.
VEGOILS-Palm oil edges up, weak exports cap gains
SINGAPORE, July 20 (Reuters) - Malaysian crude palm oil futures edged up as crop-damaging weather in the U.S. Midwest raised prospects of a smaller supply of soybean oil shifting demand to the cheaper palm oil.
"From the inventory level alone, it is negative to prices. But the dry season in the United States is still very much in the picture," said Alan Lim, research analyst with Malaysia's Kenanga Investment Bank.
Friday, July 20, 2012
20120720 1809 FCPO EOD Daily Chart Study.
Bollinger band reading : side way range bound.
MACD Histogram : falling, seller taking small exposure.
Support : 3020, 2970, 2950, 2920 level.
Resistance : 3050, 3070, 3100, 3150 level.
Comment :
FCPO closed recorded marginal loss with lesser volume transacted. Soy oil currently trading firmer after overnight closed recorded gain while crude oil price currently pullback lower after overnight surged.
Remained slow export data released by 2 cargo surveyors kept price closed in negative territory today with traders watching closely on U.S. drought development.
Technical chart reading remained suggesting a side way range bound market development.
When to buy : buy at support or weakness with quick cut loss and profit target.
When to sell : sell at resistant or strength with quick cut loss and profit target.
20120720 1735 FKLI EOD Daily Chart Study.
Bollinger band reading : pullback correction upside biased.
MACD Histogram : turned downward, buyer taking profit.
Support : 1640, 1630, 1620, 1610 level.
Resistance : 1650, 1660, 1670, 1680 level.
Comment :
FKLI closed retreat slightly lower with little increased volume changed hand doing abount 4 points premium compare to cash market that also ended marginally lower. Overnight U.S. markets traded little higher and today Asia markets closed mostly lower while European markets currently trading little lower.
News on missed estimates U.S. existing home sales, contracted Philadelphia manufacturing for a third month and concern on China will keep property curbs in place resulted most regional market to trade lower however losses were limited as IBM and Ebay reported beat profit forecast.
Back home, FKLI daily chart adjusted to recommending a pullback correction upside biased market development.
When to buy : buy at support or weakness with quick cut loss and profit target.
When to sell : sell at resistance or strength with quick cut loss and profit target.
20120720 1657 Regional Markets EOD Daily Chart Study.
DJIA chart reading : little upside biased.
Hang Seng chart reading : side way range bound little upside biased.
KLCI chart reading : possible pullback upside biased.
20120720 1601 Global Markets & Commodities Related News.
GLOBAL MARKETS: Asian shares eased but were poised for their biggest weekly gain since January, as strong U.S. corporate earnings lifted the S&P 500 to a 2-1/2 month high while Spain's fiscal woes kept the euro under pressure. European shares were expected to open fractionally lower, taking their cue from losses in Asia and consolidating four month highs as a two-session rally runs out of catalysts. U.S. stocks rose on Thursday for a third straight day, with the S&P 500 at a 2-1/2 month high, as earnings from technology companies and expectations for more monetary stimulus outweighed weak economic data.
FOREX: The euro eased against the dollar and hovered near a record low versus the Australian dollar, undermined by worries about Spain's fiscal woes and recent falls in euro zone money-market rates.
FOREX-Euro held back by Spain's woes, near record low vs Aussie
SINGAPORE, July 20 (Reuters) - The euro eased against the dollar and hovered near a record low versus the Australian dollar on Friday, and was seen on shaky ground due to worries about Spain's fiscal woes and as investors hunt for higher yields.
Weak demand at a bond auction pushed Spain's 10-year bond yield above 7 percent on Thursday for the first time in more than a week, intensifying doubts over whether Madrid can avoid a full-blown bailout.
Merkel wins Spanish aid vote with big majority
German Chancellor Angela Merkel easily won a parliamentary vote on a euro zone rescue package for Spanish banks on Thursday despite growing unease in her centre-right coalition about the rising cost of Europe's debt crisis for German taxpayers.
Factory, jobs data show U.S. economy mired in weakness
The slowdown in the U.S. economy persisted early in the third quarter as factory activity in the U.S. Mid-Atlantic region contracted in July for a third straight month and new claims for jobless aid surged last week.
POLL-Global economy hobbled by Europe, 2013 promises more
The global economy will labour against a dismal tide from recession-hit Europe for the rest of this year, but 2013 should bring better growth, according to Reuters polls of hundreds of economists worldwide.
GRAINS: U.S. new-crop corn rose, taking its drought-driven rally to more than 55 percent in five weeks, as crops continued to wilt under a searing Midwest heat, stoking fears of a food shortage.
Brazil sugar lineup grows under rains, strike
The lineup of ships waiting to load sugar in Brazil rose to 87 from 81 a week earlier as rains and striking sanitary inspectors at the ports slowed loading, Williams shipping agents said in a report released late Wednesday.
After first-half surge, US drillers find respite in guar wars
U.S. oil and gas drillers are finally catching a break from the surging cost of a tiny seed at the heart of the nation's oil and gas bonanza.
OIL: Brent crude held above $107, edging lower after a surge of 20 percent in four weeks prompted some selling as Israel signalled it would not rush into any open conflict over a deadly attack on its citizens, easing geopolitical worries.
Euro Coal-Holds steady in thin trade
LONDON, July 19 (Reuters) - Physical prompt coal prices held steady on Thursday, supported by oil hitting a seven-week high but few trades were reported.
Prices have found a floor at roughly $85 a tonne and are unlikely to fall much further, although a slight drift lower through the remainder of the summer is possible, traders and end-users said.
China coal demand seen cooling further in H2 -assn
SHANGHAI, July 19 (Reuters) - Coal demand from China, the world's top consumer, is expected to slow further in the second-half, while rising supply from domestic mines and imports swells stocks, a media report on Thursday cited the China Coal Association as saying.
A slower pace of economic growth has already hit China's coal demand in the first half, with consumption up just 2.8 percent to 1.97 billion tonnes from the first half of 2011, the association's vice president Jiang Zhimin was quoted as saying at a briefing.
SEOUL/SHANGHAI, July 20(Reuters) - China's slowing demand for steel is driving Chinese exports of the metal to the highest level in more than three years, flooding the Asian market with supplies at a time when producers such as South Korea's POSCO are grappling with thinning profits.
Europe used to soak up most of China's steel exports, but the region's protracted debt woes have forced producers like Baoshan Iron & Steel to turn their shipments to destinations closer to home.
Japan Q2 crude steel output highest in 5 quarters
TOKYO, July 19 (Reuters) - Japan's crude steel output rose on an annual basis in the April-June quarter for the first time in five quarters, as robust car output bolstered the sagging sector, but a strong yen currency and slowing car sales cloud the outlook for the third quarter.
Crude steel output in the second quarter rose 4.3 percent on the year to 27.5 million tonnes, a level not seen since the January-March quarter of 2011, the Japan Iron and Steel Federation said on Thursday.
BASE METALS: London copper was down trading at $7,707 per tonne after touching a high of $7,813 per tonne on Thursday, its highest since July 3.
PRECIOUS METALS: Gold hovered near $1,580, an ounce as investors clung onto hopes for more monetary easing from the U.S. central bank after weak data in the previous session, but a dollar rebound would likely cap gains.
METALS-LME copper holds near 2-week top on China stimulus hope
SHANGHAI, July 20 (Reuters) - London copper prices edged up on Friday, holding near a two-week high hit in the previous session on hopes of more steps by top consumer China to boost its economy after Beijing's comments on jobs creation.
But gains are likely to be capped by China's warning against relaxing curbs on the property sector, favoured by many investors as a quick way to boost domestic consumption, and by weak U.S. data underscoring a fragile U.S. economic recovery.
PRECIOUS-Gold steady on weak US data; dollar weighs
SINGAPORE, July 20 (Reuters) - Gold hovered near $1,580 an ounce on Friday as investors clung onto hopes for more monetary easing from the U.S. central bank after weak data in the previous session, but a dollar rebound would likely cap gains.
The latest data showed factory activity in the U.S. Mid-Atlantic region contracted in July for a third straight month and new jobless claims surged last week.
Baltic's freight index slides on sluggish demand
July 19 (Reuters) - The Baltic Exchange's main sea freight index, tracking rates for ships carrying dry commodities, fell on Thursday for the eighth straight day as the market continued to struggle with slower cargo trade and mounting fleet growth.
The overall index, a gauge of the cost of shipping commodities such as iron ore, cement, grain, coal and fertiliser, fell 21 points or 1.96 percent to 1,053 points.
FOREX: The euro eased against the dollar and hovered near a record low versus the Australian dollar, undermined by worries about Spain's fiscal woes and recent falls in euro zone money-market rates.
FOREX-Euro held back by Spain's woes, near record low vs Aussie
SINGAPORE, July 20 (Reuters) - The euro eased against the dollar and hovered near a record low versus the Australian dollar on Friday, and was seen on shaky ground due to worries about Spain's fiscal woes and as investors hunt for higher yields.
Weak demand at a bond auction pushed Spain's 10-year bond yield above 7 percent on Thursday for the first time in more than a week, intensifying doubts over whether Madrid can avoid a full-blown bailout.
Merkel wins Spanish aid vote with big majority
German Chancellor Angela Merkel easily won a parliamentary vote on a euro zone rescue package for Spanish banks on Thursday despite growing unease in her centre-right coalition about the rising cost of Europe's debt crisis for German taxpayers.
Factory, jobs data show U.S. economy mired in weakness
The slowdown in the U.S. economy persisted early in the third quarter as factory activity in the U.S. Mid-Atlantic region contracted in July for a third straight month and new claims for jobless aid surged last week.
POLL-Global economy hobbled by Europe, 2013 promises more
The global economy will labour against a dismal tide from recession-hit Europe for the rest of this year, but 2013 should bring better growth, according to Reuters polls of hundreds of economists worldwide.
GRAINS: U.S. new-crop corn rose, taking its drought-driven rally to more than 55 percent in five weeks, as crops continued to wilt under a searing Midwest heat, stoking fears of a food shortage.
Brazil sugar lineup grows under rains, strike
The lineup of ships waiting to load sugar in Brazil rose to 87 from 81 a week earlier as rains and striking sanitary inspectors at the ports slowed loading, Williams shipping agents said in a report released late Wednesday.
After first-half surge, US drillers find respite in guar wars
U.S. oil and gas drillers are finally catching a break from the surging cost of a tiny seed at the heart of the nation's oil and gas bonanza.
OIL: Brent crude held above $107, edging lower after a surge of 20 percent in four weeks prompted some selling as Israel signalled it would not rush into any open conflict over a deadly attack on its citizens, easing geopolitical worries.
Euro Coal-Holds steady in thin trade
LONDON, July 19 (Reuters) - Physical prompt coal prices held steady on Thursday, supported by oil hitting a seven-week high but few trades were reported.
Prices have found a floor at roughly $85 a tonne and are unlikely to fall much further, although a slight drift lower through the remainder of the summer is possible, traders and end-users said.
China coal demand seen cooling further in H2 -assn
SHANGHAI, July 19 (Reuters) - Coal demand from China, the world's top consumer, is expected to slow further in the second-half, while rising supply from domestic mines and imports swells stocks, a media report on Thursday cited the China Coal Association as saying.
A slower pace of economic growth has already hit China's coal demand in the first half, with consumption up just 2.8 percent to 1.97 billion tonnes from the first half of 2011, the association's vice president Jiang Zhimin was quoted as saying at a briefing.
Iron Ore-Price slide extends, spot at 8-1/2-month low
SINGAPORE, July 20 (Reuters) - Shanghai rebar futures hit a contract low for the eighth time in nine sessions, and are set to post their worst week since October as weak Chinese demand kept the pressure on prices, pulling down iron ore to 8-1/2-month lows.
"It looks like the trend will continue next week. There is very limited trading in the open market. Sentiment is quite weak and no one is willing to buy," said a manager for an iron ore trading firm in Shanghai.
Vale Q2 iron ore production rises to 80.54 mln tonnes
RIO DE JANEIRO, July 18 (Reuters) - Brazilian miner Vale produced 80.54 million tonnes of iron ore in the second quarter, the company said in a securities filing Wednesday.
That marks a 0.35 percent increase from 80.26 million tonnes in the second quarter of 2011, the company said, but a 15.1 percent increase from 69.99 million tonnes of iron ore produced during the first quarter of this year.
PREVIEW-China's rising steel exports slam Asian producers
SEOUL/SHANGHAI, July 20(Reuters) - China's slowing demand for steel is driving Chinese exports of the metal to the highest level in more than three years, flooding the Asian market with supplies at a time when producers such as South Korea's POSCO are grappling with thinning profits.
Europe used to soak up most of China's steel exports, but the region's protracted debt woes have forced producers like Baoshan Iron & Steel to turn their shipments to destinations closer to home.
Japan Q2 crude steel output highest in 5 quarters
TOKYO, July 19 (Reuters) - Japan's crude steel output rose on an annual basis in the April-June quarter for the first time in five quarters, as robust car output bolstered the sagging sector, but a strong yen currency and slowing car sales cloud the outlook for the third quarter.
Crude steel output in the second quarter rose 4.3 percent on the year to 27.5 million tonnes, a level not seen since the January-March quarter of 2011, the Japan Iron and Steel Federation said on Thursday.
BASE METALS: London copper was down trading at $7,707 per tonne after touching a high of $7,813 per tonne on Thursday, its highest since July 3.
PRECIOUS METALS: Gold hovered near $1,580, an ounce as investors clung onto hopes for more monetary easing from the U.S. central bank after weak data in the previous session, but a dollar rebound would likely cap gains.
METALS-LME copper holds near 2-week top on China stimulus hope
SHANGHAI, July 20 (Reuters) - London copper prices edged up on Friday, holding near a two-week high hit in the previous session on hopes of more steps by top consumer China to boost its economy after Beijing's comments on jobs creation.
But gains are likely to be capped by China's warning against relaxing curbs on the property sector, favoured by many investors as a quick way to boost domestic consumption, and by weak U.S. data underscoring a fragile U.S. economic recovery.
PRECIOUS-Gold steady on weak US data; dollar weighs
SINGAPORE, July 20 (Reuters) - Gold hovered near $1,580 an ounce on Friday as investors clung onto hopes for more monetary easing from the U.S. central bank after weak data in the previous session, but a dollar rebound would likely cap gains.
The latest data showed factory activity in the U.S. Mid-Atlantic region contracted in July for a third straight month and new jobless claims surged last week.
Baltic's freight index slides on sluggish demand
July 19 (Reuters) - The Baltic Exchange's main sea freight index, tracking rates for ships carrying dry commodities, fell on Thursday for the eighth straight day as the market continued to struggle with slower cargo trade and mounting fleet growth.
The overall index, a gauge of the cost of shipping commodities such as iron ore, cement, grain, coal and fertiliser, fell 21 points or 1.96 percent to 1,053 points.
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