Asia FX By Cornelius Luca - Mon 30 Jul 2012 17:04:40 CT (Source:CME/www.lucafxta.com)
The appetite for risk was limited on Monday after surging in the second half of last week on hopes that both ECB and the Fed will ease as early as this week in order to alleviate the Eurozone debt crisis and support the deteriorating US economy. Now, these central banks are faced to the task of having to meet these expectations. The European currencies edged lower on profit taking after surging since Wednesday, while the commodity currencies and the yen advanced. The US stock indexes edged lower. The gold/oil ratio edged up. The short-term outlook for the European and commodity currencies is sideways. The medium-term outlook for most of the foreign currencies is sideways. The LGR short-term model is short only the euro and franc. Good luck!
Today's economic calendar
UK: Gfk consumer confidence for July
Australia: Building permits for June
Japan: Overall household spending for June
Japan: Unemployment rate for June
Japan: Housing starts for June
Asian Stocks Swing From Gains to Losses Ahead of Fed, ECB(Source:Bloomberg)
Asian stocks swung between gains and losses as investors await policy announcements by the Federal Reserve and the European Central Bank amid signs of a global economic slowdown. Information technology and utility shares advanced. Hokuriku Electric Power Co. soared 14 percent, leading utilities higher in Tokyo after raising its sales forecast. Canon Inc. (7751), the world’s biggest camera maker, advanced 4 percent on a share buyback plan. Drugmaker Otsuka Holdings Co. fell 1.5 percent, pacing declines among Japanese health-care companies. The MSCI Asia Pacific Index rose 0.1 percent to 117.40 as of 10:17 a.m. in Tokyo before markets in Hong Kong and China opened. About three shares fell for each two that rose. The measure has added 0.2 percent this month, headed for a second monthly gain. It yesterday capped the biggest three-day rally since Dec. 5.
“At the moment, the markets are really focused on central bank actions rather than the economic environment,” said Matthew Sherwood, Perpetual Investments’ head of investment markets research in Sydney. Perpetual manages about $25 billion. “We may get a little bit of sell-down in Asian equities after pretty good rises.” The MSCI Asia Pacific Index fell 9 percent from this year’s high on Feb. 29 through yesterday amid concern Europe’s sovereign-debt crisis will worsen and China’s economy is slowing. The regional benchmark index traded at 11.9 times estimated earnings, compared with 13.5 for the Standard & Poor’s 500 Index (SPXL1) and 11.2 for the Stoxx Europe 600 Index, according to data compiled by Bloomberg.
Japan Stocks Fall First Time in Four Days on Factory Data(Source:Bloomberg)
Japanese stocks fell for the first time in four days, with the Nikkei 225 Stock Average heading for the worst monthly performance among developed equity markets, as manufacturing contracted this month. Shipping companies slipped before reporting earnings today. Fanuc Corp., the world’s largest maker of controls that run machine tools, slid 4.6 percent, the biggest decline on the Nikkei 225. (NKY) Nippon Yusen K.K. (9101), Japan’s largest shipping line, fell 1.7 percent. Canon Inc. (7751) soared 3.9 percent after saying it will spend 50 billion yen ($640 million) to buy back shares. The Nikkei 225 lost 0.4 percent to 8,605.51 as of 10:05 a.m in Tokyo, heading for a 4.5 percent loss this month. That’s the worst performance among 24 benchmark developed-market equity indexes tracked by Bloomberg News. The broader Topix Index (TPX) today retreated less than 0.1 percent to 731.48.
Shares fell even as Japan’s jobless rate unexpectedly declined in June to 4.3 percent, beating analyst expectations that unemployment would remain flat at 4.4 percent. The Topix lost 16 percent since March 27, leaving the gauge trading at 0.9 times book value, compared with 1.1 for the MSCI World Index, data compiled by Bloomberg show. A number less than one means a company can be bought for less than the value of its assets.
U.S. Stock-Index Futures Decline on Economic Concern(Source:Bloomberg)
U.S. stock futures fell, signaling the Standard & Poor’s 500 Index may drop for the first time in three days, before reports this week that may show the country’s jobless rate remained above 8 percent and consumer confidence fell in July. JPMorgan Chase & Co. (JPM) lost 0.8 percent in early New York trading after Deutsche Bank AG lowered its rating on the shares. Nexen Inc. (NXY) dropped in Germany on concern Cnooc Ltd.’s acquisition of the company may spark government concern about Chinese control of U.S. energy sources. Microsoft Corp. (MSFT) rose 1.1 percent in premarket trading. S&P 500 futures expiring in September lost 0.3 percent to 1,379.1 as of 7:15 a.m. in New York. The benchmark gauge completed its third weekly gain, the longest stretch since March. Dow Jones Industrial Average futures slipped 20 points, or 0.2 percent, to 13,013 today.
“We’re getting a big picture that’s consistent with the commentary seen out of the U.S. over the last six months, that recovery continues to pace, but there’s no boom in sight,” Michael McCarthy, chief market strategist at CMC Markets in Sydney said in an interview on Bloomberg Television. “What we’re expecting in the U.S. is ongoing modest growth.” The Dow topped 13,000 last week, capping its longest stretch of weekly advances since January, amid expectations the European Central Bank will buy bonds to help lower borrowing costs and preserve the euro. Meanwhile, the Chicago Board Options Exchange Volatility Index has fallen to the lowest daily average in five years.
Most U.S. Stocks Slip After Two-Day Rally; Corn at Record(Source:Bloomberg)
Most U.S. stocks fell following the biggest two-day rally of the year, while European equities rose for a third day and Spanish bonds rallied on speculation policy makers will take action to ease the region’s debt crisis. Corn jumped to a record as an American drought persisted. The Standard & Poor’s 500 Index (SPXL1) slipped 0.05 percent to 1,385.3 at 4 p.m. in New York after jumping 3.6 percent over the previous two sessions. Three stocks retreated for every two that rose on U.S. exchanges. The Stoxx Europe 600 Index surged 1.6 percent to extend a rally since July 25 to more than 5 percent. Ten-year Treasury notes halted a three-day retreat, sending rates down five basis points to 1.50 percent. The euro depreciated 0.5 percent to $1.2258, snapping a three-day gain. Corn, wheat and soybeans rallied at least 1.8 percent.
European Central Bank President Mario Draghi met with U.S. Treasury Secretary Timothy Geithner in Frankfurt today after leaders in Berlin, Paris and Rome backed him by saying they will do what’s needed to protect the 17-nation euro. Spain’s economy shrank 0.4 percent in the second quarter, the National Statistics Institute in Madrid said today. The Federal Reserve will start a two-day meeting tomorrow. “People looked at their portfolios over the weekend and, after a move like we saw, that usually brings more sellers and people rearranging their positions,” Rick Fier, director of equity trading at Conifer Securities LLC in New York, said in a telephone interview. His firm oversees $12 billion in assets. “It’s an extremely frustrating market. People that were shorting lost it all in two days, people that were more long came back but nobody is killing it.”
European Stocks Rise on Euro Support Pledge(Source:Bloomberg)
European stocks rose to their highest level since April amid optimism the European Central Bank will win support from policy makers for a plan to ease the euro area’s debt crisis. Air France-KLM Group (AF) surged 19 percent after it posted a narrower second-quarter loss. Evraz (EVR) Plc and Fiat SpA (F) climbed more than 4.5 percent, leading rallies by gauges of commodity producers and automakers. JCDecaux SA (DEC) plunged 6.9 percent as it reported a 13 percent drop in first-half profit. The benchmark Stoxx Europe 600 Index gained 1.6 percent to 263.94 at the close in London, completing a three-day rally of 5.4 percent, the largest since November. The gauge has risen 13 percent from this year’s low on June 4 as Greece elected a coalition government prepared to abide by the terms of its two European Union-led bailouts.
“We’ve been here before,” George Godber, who helps oversee $22 billion as a fund manager at Charles Stanley’s Matterley division in London, said in an interview on Bloomberg Television. “We’ve actually got to see if they’re going to act now and that’s really what matters. It doesn’t have to be massive steps forward, it just has to be an outlining of a road map.”
Emerging Stocks Rise to 3-Week High on Europe Speculation(Source:Bloomberg)
Emerging-market stocks rose, driving the benchmark index to a three-week high, on optimism European Union policy makers will act to ease the region’s debt crisis. The MSCI Emerging Markets Index (MXEF) climbed 0.8 percent to 948.97 by 5:10 p.m. in New York. Brazil’s Bovespa stock index rose 1.2 percent as steelmaker Usinas Siderurgicas de Minas Gerais SA surged after Goldman Sachs Group Inc. raised its rating. Samsung Electronics Co. (005930), the world’s largest maker of televisions and mobile phones, rose to an 11-week high in Seoul after Daewoo Securities Co. said the company’s profit will accelerate from the second quarter.
U.S. Treasury Secretary Timothy F. Geithner and German Finance Minister Wolfgang Schaeuble held talks in Germany today and backed a commitment by European leaders to do everything needed to defend the euro area while failing to mention its weakest link, Greece. Geithner was scheduled to meet European Central Bank President Mario Draghi later today. In the U.S., Federal Reserve policy makers convene this week before a jobs report to decide whether additional stimulus is needed.
Treasuries Remain Higher Amid Speculation Fed to Ease(Source:Bloomberg)
Treasuries remained higher following a gain yesterday as the Federal Reserve starts a two-day policy meeting today amid speculation it will add to monetary stimulus to boost the economy. Ten-year yields were about 12 basis points from a record low before reports that economists say will show consumer spending stagnated in June and confidence deteriorated for the longest period since 2008. Federal Reserve Chairman Ben S. Bernanke said on July 17 that policy makers are “looking for ways to address the weakness in the economy should more action be needed.” “We can’t expect a significant improvement in the U.S. economy, and that’s weighing on Treasury yields,” said Makoto Suzuki, a senior bond strategist in Tokyo at Okasan Securities Co. “The Fed may extend its pledge to keep interest rates low for longer.”
The benchmark 10-year yield was little changed at 1.5 percent as of 9:07 a.m. Tokyo time, according to Bloomberg Bond Trader prices. It reached the all-time low of 1.379 percent on July 25. The 1.75 percent security due May 2022 traded at 102 1/4. The Fed said in January that the benchmark interest rate will stay at “exceptionally low levels” at least through late 2014, extending its pledge from the middle of 2013. Consumer spending probably rose 0.1 percent in June following no change the prior month, according to the median estimate of economists in a Bloomberg News survey taken before the Commerce Department releases figures today.
FOREX-Euro slips on profit-taking as ECB action awaited
LONDON, July 30 (Reuters) - The euro slipped, with traders taking profit on the gains enjoyed late last week due to growing expectations the European Central Bank will launch fresh action to tackle the euro zone's debt crisis.
"Draghi has to put some action behind his words last week ... The bias is towards disappointment and that's what's creeping into markets now," said Niels Christensen, currency strategist at Nordea in Copenhagen.
Aussie Dollar Halts Gain Before Building Permits Data(Source:Bloomberg)
Australia’s dollar halted an advance that took it to a four-month high before data that may show building approvals in the nation declined last month. The so-called Aussie slid versus most of its major counterparts as economists forecast unemployment in the euro area climbed to a record in June, tempering demand for higher- yielding assets. The Australian and New Zealand currencies are set to close out a second monthly gain against the greenback as the Federal Reserve begins its two-day policy meeting today. “Chances are that the Aussie loses a little bit of steam today,” said Joseph Capurso, a strategist in Sydney at Commonwealth Bank of Australia (CBA), the nation’s biggest lender. “The building approvals report should be very, very weak.”
The Australian dollar was little changed at $1.0502 as of 9:19 a.m. in Sydney after touching $1.0508 yesterday, the strongest since March 27. The Aussie traded at 82.09 yen from 82.10. New Zealand’s currency bought 80.90 U.S. cents from 80.89 yesterday, when it rose to 81.13 cents, the highest since May 2. The so-called kiwi was unchanged 63.24 yen. Australia’s 10-year government bond yield dropped six basis points, or 0.06 percentage point, to 3.07 percent. New Zealand’s two-year swap rate, a fixed payment made to receive floating rates, was little changed at 2.77 percent.
Dollar Repatriation First Since Lehman Evokes Post-LTCM Gain(Source:Bloomberg)
Until about four months ago, JKMilne Asset Management invested at least half the money in its global fund outside the U.S. No more. With Europe’s debt crisis intensifying, the Fort Myers, Florida-based firm with $1.8 billion under management has all its money in dollars. “It’s been a winning strategy,” John Milne, chief executive officer, said July 26 in a telephone interview. “Given the magnitude of the problem, there was the realization that there was a contagion possibility.” Milne has plenty of company. U.S. investors repatriated $48.9 billion from December to May, the first time they brought assets home during a six-month stretch since the period following the failure of Lehman Brothers Holdings Inc. in 2008, according to Treasury Department data compiled by Bloomberg. The flows are among the biggest since 1999, after the collapse of hedge fund Long-Term Capital Management LP boosted the dollar as funds retreated from all but the world’s safest assets.
IntercontinentalExchange Inc.’s Dollar Index has risen 3.3 percent this year as investors moved cash into funds that focus on U.S. bonds. Inflows more than doubled to $157 billion in the first six months from $65 billion during the same period a year earlier, while international bond investments were unchanged, according to TrimTabs Investment Research.
Euro Set for Monthly Loss Before Jobs, Manufacturing Data(Source:Bloomberg)
The euro was set for a monthly loss against the dollar on signs the sovereign-debt crisis is hampering growth in the region’s economy. The 17-nation currency maintained losses against the yen from yesterday before reports this week forecast to show the jobless rate in the euro area rose to a record and manufacturing shrank, and before the European Central Bank’s Governing Council meets on Aug. 2. The dollar remained lower against its Japanese counterpart amid speculation Federal Reserve policy makers may signal additional stimulus when they conclude a two-day meeting that starts today. “Apart from Germany, the rest of Europe is struggling, and the crisis is far from solved,” said Thomas Averill, managing director in Sydney at Rochford Capital, a currency and interest- rate risk-management company. “The euro is going down to $1.18.”
The euro traded at $1.2261 as of 10 a.m. in Tokyo from $1.2260 yesterday, when it fell 0.5 percent. It was poised for a 3.2 percent decline this month. The shared currency was little changed at 95.84 yen from 95.85, set for a 5.1 percent slide in July. The U.S. dollar bought 78.17 yen from 78.18 yesterday, when it declined 0.4 percent. The greenback has dropped 2 percent since the end of June versus its Japanese counterpart.
Geithner, Schaeuble Hail Euro Plan as Greece Gets No Word(Source:Bloomberg)
U.S. Treasury Secretary Timothy F. Geithner and German Finance Minister Wolfgang Schaeuble backed a commitment by European leaders to do everything needed to defend the euro area while failing to mention its weakest link, Greece. In a joint statement issued after they held talks on the German North Sea island of Sylt today, Geithner and Schaeuble “took note” of comments made last week by European leaders to “take whatever steps are necessary to safeguard financial stability” in the 17-nation currency area. The two officials welcomed Ireland’s sale of bonds and Portugal’s “continued success in meeting program commitments” and discussed the “considerable efforts” made by Spain and Italy “to pursue far-reaching fiscal and structural reforms.” They didn’t refer to Greece, where international creditors are reviewing the government’s progress.
The talks signaled U.S. endorsement for European Central Bank President Mario Draghi as he seeks a game changer in the battle against Europe’s sovereign-debt crisis almost three years after it surfaced in Greece. Geithner is due to conclude his one-day trip to Germany later today by meeting with Draghi in Frankfurt. An ECB spokeswoman declined to comment when asked whether the ECB would release a statement after the Draghi meeting.
Fed Weighs Cutting Interest on Banks’ Reserves After ECB Move(Source:Bloomberg)
Federal Reserve Chairman Ben S. Bernanke may be taking another look at cutting the interest rate the Fed pays on bank reserves to bring down short-term borrowing costs and spur the slowing U.S. expansion. Bernanke testified to Congress on July 17 that reducing the rate from its current 0.25 percent is one of several easing steps the Fed might take to reduce unemployment stuck above 8 percent for more than three years. In February, by contrast, the Fed chairman told Congress that lowering the rate might drive away investors from short-term money markets. “They’re reconsidering it,” said Ward McCarthy, a former Richmond Fed economist. A July 5 decision by the European Central Bank to cut its deposit rate to zero is prompting renewed interest in the strategy, said McCarthy, chief financial economist at Jefferies & Co. McCarthy said it’s unlikely the Fed will reduce the rate at a two-day meeting that starts tomorrow.
Policy makers meeting this week are looking for new monetary tools after the Fed lowered its benchmark interest rate to near zero in December 2008 and purchased $2.3 trillion of securities to spur the economy. A government report on July 27 showed economic growth slowed to a 1.5 percent annual rate in the second quarter as consumers curbed spending.
Deflation Dismissed by Bond Measure Amid QE3 Anticipation(Source:Bloomberg)
For all the handwringing over the slowdown in the U.S. economy, the bond market shows there’s less risk of deflation now than before the Federal Reserve’s first two rounds of large-scale debt purchases. The expectation that consumer prices will rise, measured by the five-year, five-year forward breakeven rate, means that Fed Chairman Ben S. Bernanke has persuaded traders the U.S. will avoid the chronic deflation that has slowed Japan’s economy since 1995. It also complicates the central bank’s decision about starting more quantitative easing to boost an economy that grew at the slowest pace in a year during the second quarter. Commodity prices surged during QE1 and QE2 in 2008 and 2010.
“Higher inflation results in a tax on consumers and slows the economy down,” Michael Materasso, a senior portfolio manager and co-chairman of the fixed-income policy committee at Franklin Templeton Investments, which oversees $320 billion of bonds, said in a July 24 interview at Bloomberg headquarters in New York. “If you end up with a spike in commodity prices, have you done more harm than good?” The Fed’s favored bond-market gauge of inflation expectations ended last week at 2.39 percent, above the 2 percent levels in 2008 and 2010 that led the central bank to inject $2.3 trillion into the economy by purchasing Treasuries and mortgage-related bonds, the policy known as quantitative easing. The five-year, five-year measure shows how much traders anticipate consumer prices will rise during a period of five years starting in 2017.
China Increases Railway Spending Plan for Second Time(Source:Bloomberg)
China announced a jump in planned railway spending and the State Council called for private investment in utilities and health care as Premier Wen Jiabao tries to reverse an economic slowdown. The Ministry of Railways, the nation’s largest corporate debt issuer, plans to spend 470 billion yuan ($74 billion) on railroads and bridges this year, according to a bond prospectus issued yesterday. That’s the second increase in July, making a combined gain of about 14 percent from the previous figure. The new target exceeds last year’s 461 billion yuan in spending and follows Wen’s July 10 comments that promoting investment growth is the key now to stabilizing an expansion that decelerated to 7.6 percent last quarter, a three-year low. At the same time, Chinese officials are signaling the slowdown isn’t deep enough to warrant a return to the 700 billion-yuan level of railway-construction funds in 2010.
“China is selectively upscaling the stimulus,” said Lu Zhengwei, chief economist with Industrial Bank Co. in Shanghai. “Premier Wen Jiabao said China will do something to boost confidence, and this is fresh evidence.” Economic growth hit bottom in the second quarter and will probably rebound to 7.8 percent in the third quarter, Lu said.
Singapore’s GIC Adds Cash, Cuts Stocks and Bonds Amid Crisis(Source:Bloomberg)
Government of Singapore Investment Corp., managing more than $100 billion, said it almost quadrupled its cash allocation, pared bonds and stocks and reduced its holdings in Europe amid the region’s debt crisis. Cash made up 11 percent of its portfolio in the year ended March from 3 percent a year earlier, GIC, as the sovereign wealth fund is known, said in its annual report. Stocks fell to 45 percent from 49 percent as it pared equities in developed markets, while bonds dropped to 17 percent from 22 percent. GIC is reducing its investments as the MSCI World Index (MXWO) posted its biggest slump since the 2008 global financial crisis and market volatility reached the highest level in more than two years. Investment options become limited for government funds seeking to preserve capital as policy makers across the world prepare for a deeper impact from Europe’s debt woes.
“There are not many safe havens, so cash is king,” said Ronald Wan, a Hong Kong-based managing director at China Merchants Securities Co., which oversees about $1.5 billion. “It’s logical for everyone to cut investments and take a wait- and-see approach. The economic downturn will last for a while before we can see certainty and a swing-back in investment sentiment.”
Korea Output Unexpectedly Falls as Europe Caps Demand(Source:Bloomberg)
South Korea’s industrial production fell for the first time in three months in June as Europe’s debt crisis and China’s slowing economy curtailed export demand. Output fell 0.4 percent last month from May when it climbed a revised 1.3 percent, Statistics Korea said today. The median estimate of 12 economists in a Bloomberg News survey was for a 0.1 percent gain. Production rose 1.6 percent from a year earlier. South Korean manufacturers’ confidence dropped to a three- year low for August, the central bank said yesterday, after Asia’s fourth-largest economy grew at the slowest pace in almost three years last quarter. Bank of Korea Governor Kim Choong Soo warned last week the economy is losing steam, fueling speculation policy makers will follow a surprise rate cut on July 12 with further easing.
“The lower-than-expected output figure once again shows that the European crisis is hurting South Korean companies and consumer sentiment more than what economists had thought,” said Lee Sung Kwon, an economist at Shinhan Investment Corp. “Although the industrial output data may not be enough for the Bank of Korea to cut rates again this month, they may have to in September or October.” The won gained 0.1 percent to 1,137.60 per dollar at the close in Seoul yesterday, according to data compiled by Bloomberg. It touched 1,132.45 earlier, the strongest since May 4, on speculation Europe’s policy makers will act to resolve the region’s debt crisis. The benchmark Kospi Index rose 0.8 percent.
South Korea Manufacturer Confidence Drops to 3-Year Low(Source:Bloomberg)
South Korean manufacturers’ confidence dropped to the lowest level in more than three years as Europe’s worsening fiscal crisis damped sentiment in a country where exports make up about half the economy. An index measuring expectations for August was at 70, the lowest level since May 2009, after dropping from a revised 81 in July, the Bank of Korea said in a statement in Seoul today. A measure of expectations at non-manufacturing companies also dropped to 69 from a revised 76. “The South Korean economy is muddling through uncertainty caused by the European debt crisis,” Oh Suk Tae, an economist at SC First Bank Korea Ltd. in Seoul, said before the release. “The central bank indicated that it’s ready to act, but the market is expecting supplementary fiscal support only if the economy contracts significantly.”
Asia’s fourth-largest economy grew at the slowest pace in almost three years last quarter, with HSBC Holdings Plc and Citigroup Inc. saying the Bank of Korea may cut rates again this year. The BOK lowered its main rate a quarter percentage point to 3 percent on July 12, and Governor Kim Choong Soo warned last week the nation may miss a 3 percent growth estimate for 2012.
Japan Jobless Rate Falling May Fail to End Recovery Concerns(Source:Bloomberg)
Japan’s jobless rate unexpectedly declined in June, a positive sign for an economy struggling with gains in the yen and weakness in export demand because of Europe's debt crisis. The rate fell to 4.3 percent from 4.4 percent the previous month, the statistics bureau said today in Tokyo. The median estimate of 29 economists surveyed by Bloomberg News was for the rate to stay at 4.4 percent. The yen rose more than 6 percent against the dollar since mid-March, hurting profits of exporters such as Canon Inc. (7751) and Nintendo Co., and reached an 11-year high against the euro last week. The improvement in the unemployment rate may not be enough to dispel concerns that a recovery is losing steam after industrial output declined for a third month in June. “Activity could drop more sharply once the full impact of the crisis in Europe and the strong yen hit home,” Julian Jessop, an economist at Capital Economics Ltd. in London said before today’s release.
BOJ Shouldn’t Buy Foreign Bonds, Ex-MOF’s Utsumi Says(Source:Bloomberg)
The Bank of Japan (8301) should reject calls for it to buy foreign currency bonds to weaken the yen because such a move would hurt its independence, said Makoto Utsumi, a former top currency official. Such purchases would be “akin to currency intervention and wouldn’t be in the bank’s realm of authority,” said Utsumi, 78, the former vice finance minister for international affairs and now president of Japan Credit Rating Agency Ltd. “We’re not in a situation where we need to blur that distinction.” Signs of a global slowdown have boosted the yen’s haven appeal, sending it to an 11-year high versus the euro this month. It was at 78.12 per dollar as of 9:26 a.m. in Tokyo, less than 4 percent from the postwar record of 75.35 on Oct. 31. Former BOJ Deputy Governor Kazumasa Iwata and Takehiro Sato, who was appointed to the central bank’s policy board last week, have called for the bank to weigh buying foreign-currency bonds.
Current Deputy Governor Hirohide Yamaguchi on July 25 signaled the BOJ isn’t considering such purchases, saying that doing so to weaken the yen would be against the central bank law, which says that the government dictates currency policy.
RBI Says India Inflation Risks Significant Even as Growth Slows(Source:Bloomberg)
Indian inflation is a major challenge for monetary policy even as economic expansion remains weak, the Reserve Bank of India said. Threats to the economy “have been amplified by decelerating global trade and domestic supply constraints,” the central bank said yesterday ahead of its rate decision in Mumbai today. At the same time, “persistent inflation limits the space for monetary policy to revive growth.” Governor Duvvuri Subbarao faces inflation above 7 percent even with expansion at a nine-year low, curbing his scope to join a stimulus drive extending from China to Europe. Nearly all analysts in a Bloomberg News survey predict he will leave borrowing costs unchanged as a drop in the rupee, a scanty monsoon and infrastructure gaps, underscored yesterday by India’s worst power-grid failure in a decade, stoke price pressures.
“The Reserve Bank has rightly pointed out significant risks to inflation,” said Brinda Jagirdar, an economist at State Bank of India (SBIN) in Mumbai. “That leaves it with little headroom to cut rates to support growth. New Delhi has to act on fiscal tightening and accelerating reforms.”
Singh’s $400 Billion Power Plan Gains Urgency as Grid Collapses(Source:Bloomberg)
India’s worst power-grid failure in a decade exposed the urgency behind Prime Minister Manmohan Singh’s bid to attract $400 billion in investment and ease an electricity deficit that is holding back economic growth. Seven states that are home to more than 360 million people were plunged into darkness early yesterday as power networks collapsed, possibly after too many provinces simultaneously purchased electricity beyond their scheduled allowance, Power Grid Corp. (PWGR) of India Chairman R.N. Nayak told reporters. It took about 15 hours for 80 percent of services to be resumed. The blackout “was a fairly large breakdown that exposed major technical faults in India’s grid system,” Subhranshu Patnaik, a Gurgaon-based senior director at Deloitte Touche Tohmatsu India Pvt., said yesterday. “If this were a simple demand-supply problem, the grid operator would have intervened to strike a balance. Something went terribly wrong which caused the backup safety systems to fail.”
Businesses and households across much of Delhi, Haryana, Punjab, Himachal Pradesh, Uttar Pradesh, Jammu and Kashmir, and Rajasthan states had to turn to generators, while services on New Delhi’s metro and Indian railways were suspended for several hours. Traffic signals failed, jamming roads for morning commuters.
Euro-Area Economic Confidence Drops More Than Forecast(Source:Bloomberg)
Economic confidence in the euro area fell more than economists forecast to the lowest in almost three years in July, suggesting the economy’s slump extended into the third quarter as governments struggled to tame the debt crisis. An index of executive and consumer sentiment in 17-nation euro area dropped to 87.9 from 89.9 in June, the European Commission in Brussels said today. That’s the lowest since September 2009. Economists had forecast a drop to 88.9, the median of 26 estimates in a Bloomberg News survey showed. European governments are striving to contain the debt turmoil, which has undermined confidence and last month forced Spain and Cyprus to seek external aid. European Central Bank President Mario Draghi, who will meet with U.S. Treasury Secretary Timothy Geithner in Frankfurt today, said last week that policy makers will do whatever is needed to preserve the euro.
“It appears that the euro zone is headed for further clear gross-domestic-product contraction in the third quarter,” said Howard Archer, chief European economist at IHS Global Insight, who estimates the second-quarter contraction at 0.3 percent. The weakness “piles yet more pressure on the ECB to come up with concrete measures at its policy meeting” on Aug. 2.
Draghi on Offensive as Game Changer Sought in Crisis(Source:Bloomberg)
European Central Bank President Mario Draghi has gone on the offensive as he seeks a game changer in the battle against the sovereign debt crisis. Draghi, who sparked a global market rally last week by pledging to do whatever it takes to preserve the euro, is trying to build consensus among governments and central bankers for a plan to ease borrowing costs in Spain and Italy before ECB policy makers convene on Aug. 2. He meets with U.S. Treasury Secretary Timothy Geithner in Frankfurt today and is also attempting to win over Bundesbank President Jens Weidmann, a critic of ECB bond purchases. Berlin, Paris and Rome have already endorsed Draghi’s approach, echoing his language in saying they will do what’s needed to protect the 17-nation euro. Draghi must now deliver or face a renewed selloff on bond markets, where soaring Spanish and Italian yields have fueled speculation that the monetary union could fall apart.
Draghi “put his personal credibility on the line” and “would not have done so without being confident about his key constituency,” Erik Nielsen, global chief economist at UniCredit Bank AG in London, wrote in a note to clients yesterday. “The ECB under Draghi does not like to mess around in the market, but if it sees a need, it will come with overwhelming force.”
Tuesday, July 31, 2012
20120731 1025 Global Commodities Related News.
Hedge Funds Add Wagers in Longest Streak Since 2009: Commodities(Source:Bloomberg)
Hedge funds raised commodity bets in the longest bullish streak in three years as speculation that policy makers will increase economic stimulus drove prices toward the biggest monthly rally since October. Money managers raised their net-long positions across 18 U.S. futures and options by 3.4 percent to 1.17 million contracts in the week ended July 24, U.S. Commodity Futures Trading Commission data show. Wagers gained for seven weeks, the longest increase since June 2009. Corn bets climbed to the highest since September 2011, and traders are the most bullish on natural gas since October 2006.
Investors added bets even as commodities fell 0.4 percent in the week to July 24. The bulls were proved right after prices rebounded 1.8 percent in the following three days as European Central Bank President Mario Draghi pledged to protect the euro on July 26. German Chancellor Angela Merkel and French President Francois Hollande echoed his comments the next day. A U.S. government report on July 27 showed the world’s biggest economy grew at a slower pace in the second quarter, increasing pressure on the Federal Reserve to boost aid measures. “Some of these issues that have been weighing against commodities, particularly industrial metals and energy, have probably over-emphasized the negative,” said Bill O’Neill, the chief investment officer for the Europe, Middle East and Africa at Merrill Lynch Wealth Management, which oversees more than $1.8 trillion. “The fundamental backup is the policy easing.”
Asia's feed mills caught short by costly corn
SINGAPORE, July 30 (Reuters) - As corn prices climb past the record levels hit this time last year, a major factor has changed for Asian importers of the grain: Australia no longer has heaps of cheap feed wheat as a substitute.
For a region that buys just under half the world's traded corn, the 25 percent jump in cash prices since the start of June for the main animal feed ingredient means more costly pork, chicken and beef by the end of the year.
Grocery giants bloodied by surge in corn prices
--Gavin Maguire is a Reuters market analyst. The views expressed are his own--
CHICAGO, July 27 (Reuters) - It's not just cattle feeders and ethanol manufacturers who are feeling the pain from the recent sharp rise in crop prices. Top manufacturers of goods that line grocery store shelves and meat counters have also been reeling of late as their share prices slump on the back of the dramatic surge in key production inputs.
Pork giant Smithfield Foods , chicken producer Tyson Foods and breakfast food maker Kellogg Co have all suffered steep share price declines lately on worries that each firm will have trouble passing on the steeply higher input and ingredient costs to consumers amid the prevailing uncertain economy.
Grains Rally on Weather(source:CME)
Another round of above average temperatures and lack of rain sparked a fresh round of buying interest and sharp gains in the grain markets to begin the week.
Pro Farmer: After the Bell Wheat Recap (source:CME)
Chicago wheat futures ended 1 1/2 to 16 1/2 cents higher, with the September through March 2013 contracts posting double-digit gains. Kansas City wheat finished mostly 7 to 11 cents higher. Minneapolis wheat posted gains of mostly 4 to 8 cents. Chicago wheat futures paced gains in the wheat market thanks to strength in the corn market. Traders are also concerned with crop prospects in the Former Soviet Union due to drought in key production countries.
Wheat Market Recap Report(source:CME)
September Wheat finished up 16 1/2 at 914 1/2, 5 1/4 off the high and 11 1/2 up from the low. December Wheat closed up 16 at 927 1/4. This was 10 1/2 up from the low and 6 off the high. September Chicago wheat traded sharply higher into the close with KC and Minneapolis following. Volume was slightly lower today but wheat managed to hang onto gains. Chicago wheat was supported by a strong corn market and off a warm and dry forecast for the Black Sea and Australia. Nearly a third of the Russian spring wheat crop will lack moisture this week and minimal rainfall is expected in Australian wheat growing areas over the next 10 days. East Russia domestic wheat prices rose last week signaling supply tightness and government officials announced that they would release additional intervention stocks to calm inflation fears. A well know banking institution announced that they expect the USDA to cut Russian wheat production to 42-43 million tonnes on the next USDA report. This is in line with market expectations. Export inspections for the week ending July 26th were reported at 18.60 million bushels vs. 11.64 for the week prior. Inspections needed per week to meet the current USDA estimate for the 2012/13 marketing year are 23.79 million bushels. Current inspections total 12.2% of the USDA estimate. Outside markets offered minimal resistance to wheat prices today as the US Dollar traded higher and US stocks were generally lower on the day. September Oats closed up 7 1/4 at 384 1/4. This was 2 1/2 up from the low and 3 1/2 off the high.
Pro Farmer: After the Bell Corn Recap (source:CME)
Corn futures ended slightly off session highs with gains of 17 to 21 1/2 cents in the September through July 2013 contracts. Far-deferred contract months posted gains the 9- to 12-cent range. Focus remains on the weather, with traders showing their disappointment with weekend rainfall by moving futures higher today. Traders expect the crop to continue to wither this week as there's little rain in the near-term forecast and above-normal temps are expected to stay around.
Corn, Soybean Conditions Decline as U.S. Drought Expands(Source:Bloomberg)
The condition of the U.S. corn crop worsened for an eighth straight week amid the worst Midwest drought in a generation. Soybean ratings also fell. About 24 percent of the corn was in good or excellent condition as of yesterday, down from 26 percent a week earlier and 77 percent in mid-May, the U.S. Department of Agriculture said today in a report. An estimated 29 percent of the soybeans got the top ratings, down from 31 percent. Both crops are in the worst shape for this time of year since a drought in 1988. “The damage has been done to the corn crop,” Peter Meyer, a senior director of agriculture commodities at PIRA Energy Group in New York, said by telephone today. “Now the weather is starting to become more of a factor in the soybean markets.” The worst of the drought occurred when corn plants were going through the critical pollination stage last month. Soybeans, which normally are planted later in the Midwest, are just now entering reproductive stages, so they have more time to grow.
Corn futures reached a record $8.1775 a bushel today on the Chicago Board of Trade and have surged 28 percent this month. Soybeans are up 15 percent in July. During the past week, little or no rain fell in parts of Iowa, Illinois and Nebraska, the largest corn-growing states, National Weather Service data show.
Corn Market Recap for 7/30/2012(source:CME)
September Corn finished up 21 1/2 at 820, 3 off the high and 20 1/4 up from the low. December Corn closed up 20 3/4 at 814. This was 19 up from the low and 3 3/4 off the high. December corn traded sharply higher into the close after posting a new all-time high. The sharply higher trade is linked to continued concern over the falling US corn yield. Private crop scouts have estimated the US corn yield near 118-122 bushels per acre. The market is likely trading a yield slightly higher than that but traders fear that the warmer than normal weather this week will cause increased yield loss in the western Corn Belt. Crop condition reports will be released this afternoon. The trade expects a 2% decline in corn good/excellent conditions. Export inspections for the week ending July 26th were reported at 21.44 million bushels vs. 19.59 million bushels in the week prior. This week's inspections continue to lag the needed pace of 36.11 million bushels to reach the 2011/12 USDA estimate. Current inspections are 88% of the USDA estimate for this crop year. Iowa ethanol processors posted their 3rd straight week of positive margins. As of July 27th, Iowa processors saw margins of.06 cents/bushel which was slightly lower than last week. A firmer DDG market and lower corn prices also offered some support today. Outside markets offered minimal resistance today, with the US Dollar mostly trading higher and US equities spending a lot of time in negative ground. September Rice finished up 0.235 at 15.835, equal to the high and 0.145 up from the low.
GRAINS-Soy jumps to 1-week top, new-crop corn hits contract high
SINGAPORE, July 30 (Reuters) - Chicago soybeans jumped to a one-week top while new-crop corn rose to a contract high as the worst drought in five decades continued to threaten crop yields across the U.S. grain belt with little relief expected this week.
"There is no weather relief this week as there are no rains in central and southeastern corn belt until the weekend and temperatures will remain above average," said Victor Thianpiriya, agricultural commodity strategist at ANZ.
Indonesia wheat flour consumption may rise 10 pct in 2012
JAKARTA, July 30 (Reuters) - Wheat flour consumption in Indonesia, Asia's top wheat importer, may increase 10 percent in 2012, the Indonesian Wheat Flour Producers Association said on Monday, as increasing wealth enables more consumers to shift away from rice.
Southeast Asia's largest economy may import as much as 6.8 million tonnes in 2012, compared to 6.2 million tonnes last year, association Chairman Francis Welirang told Reuters.
Thailand may adjust rice buying scheme for Oct crop-minister
BANGKOK, July 30 (Reuters) - Thailand may limit the amount of rice it buys from farmers or cap the money it pays per tonne for the October crop, the commerce minister said on Monday, in a bid to defuse criticism of a government intervention scheme aimed at helping the poor.
"We may limit the amount of rice we buy or put a ceiling on the money we pay to individual farmers," Minister Boonsong Teriyapirom told reporters, adding that the policy was being looked at to allow small farmers to benefit.
Australian wheat growers tap some, not all, of price spike
SYDNEY, July 30 (Reuters) - Australian wheat growers look set to miss out on the full benefits of a spike in prices on the back of the worst drought to hit the U.S. Midwest in more than 50 years after reducing plantings and selling stocks earlier in the year.
Led by a 55 percent spike in corn, global grain prices have soared as unrelenting heat across the U.S. Midwest over the past six weeks has destroyed crops, reducing yields in what was expected to be a bumper harvest.
Bangladesh to lift rice export ban to boost farmers
DHAKA, July 29 (Reuters) - Bangladesh is lifting a ban on rice exports to support farmers after record crops and bulging domestic reserves left prices below production costs, the finance minister said on Sunday.
Bangladesh, the world's fourth-biggest rice producer, banned overseas shipments of common varieties in May 2008 following a spike in prices and banned all exports a year later.
Drought slashes U.S. Midwest corn crop
OMAHA, Neb., July 27 (Reuters) - The most extensive U.S. drought in five decades has left corn plants withered and dying, and crop yields in the largest producing states will be much lower than experts have forecast, scouts said on Friday as they completed a U.S. Midwest crop tour.
The MDA EarthSat crop tour estimated a corn yield of a 118 bushels per acre after surveying 49 fields in Iowa, Illinois, Indiana and Ohio. That was sharply lower than a U.S. Agriculture Department estimate earlier this month of a yield of 146 bpa and a Reuters poll this week of 130.8 bpa.
Dry conditions affecting Argentine wheat crop - government
BUENOS AIRES, July 27 (Reuters) - Dry weather in some wheat-growing areas in Argentina has begun to affect the 2012/13 crop, which farmers have yet to finish planting, the Agriculture Ministry said on Friday in its weekly crop progress report.
The country is the world's No. 6 wheat exporter and the top supplier to neighboring Brazil. The government expects farmers to seed 3.8 million hectares with the grain this season, down from 4.6 million hectares last season.
Midwest crops, fish, water supply punished by US drought
CHICAGO/SCRANTON, Iowa, July 27 (Reuters) - Temperatures heading north of 100 degrees Fahrenheit and scarce rain portended another blistering weekend for much of the U.S. Midwest, where the most extensive drought since 1956 is devastating crops, evaporating rivers, and threatening to push world food prices higher.
Violent storms brought rain to the extreme eastern portions of the U.S. corn belt in Ohio on Thursday night, but moisture was sparse further west.
Corn highly variable in west Iowa, yields lower
SCRANTON, Iowa, July 27 (Reuters) - Corn yield potential appears highly variable in west-central Iowa, mirroring the ups and downs of production prospects in the central and eastern areas of the No. 1 corn and soy growing state, scouts on a U.S. Midwest crop tour said Friday.
Some plants suffering under the worst drought in 56 years were withered and dying, standing only 4 to 5 feet (1 to 1.5 m)tall with thin stalks and small ears.
Russia harvested 24.8 mln T of grains as of July 26 - ministry
MOSCOW, July 27 (Reuters) - Russia has harvested grain and legumes from 24.1 percent of the total target area, bringing in 24.8 million tonnes compared to 25.3 million tonnes a year earlier, harvest data published on Friday by Russia's Agriculture Ministry showed as of July 26.
Inclement weather in Russia's southernmost agricultural regions has slashed yields to 2.3 tonnes per hectare, it added.
India's monsoon stays weak as govt mulls drought steps
NEW DELHI, July 27 (Reuters) - India's monsoon rains are unlikely to pick up enough to avert the possibility that ministers meeting next week may officially declare a drought, which could prompt the government to offer more support for farmers to ensure adequate food supplies.
Rains from June 1 up to the end of the planting month of July are likely to be 21-22 percent below average, Farm Secretary Ashish Bahuguna said on Friday, unchanged from the seasonal shortfall recorded up to July 25.
SOFTS-Sugar nudges higher, weak monsoon supports
LONDON, July 30 (Reuters) - Raw sugar futures edged higher supported by key producer India's weak monsoon, while cocoa was steady and robusta coffee eased. Sugar futures were slightly higher in early trading, as a lack of rain in the world's second biggest producer India, was expected to cut the country's production prospects.
Chinese cotton stock policy to dominate in 2012/13 -Allenberg
July 27 (Reuters) - China's policy of buying and stashing large amounts of cotton in state reserves will dominate the market in the 2012/13 marketing season getting started on Aug. 1, the chief executive of the world's biggest cotton trader and merchant said on Friday.
Allenberg Cotton Co President and CEO Joe Nicosia told the Ag Market network's annual radio program from New York that "everything (in the cotton market) is dependent on the Chinese reserve policy."
OIL-Brent slips to $106 as stimulus expectations fade
LONDON, July 30 (Reuters) - Brent crude oil fell to around $106 a barrel, erasing early gains as hopes faded that the United States and Europe would soon announce measures to shore up their fragile economies, which could boost the outlook for oil demand.
"Speculation over central bank action looks like it has gone too far," said Carsten Fritsch, oil analyst at Commerzbank in Frankfurt. "The euro has already begun to retreat and oil has also started to weaken. The move upwards seems exaggerated."
Japan's Iranian crude imports jump in June from May
TOKYO, July 30 (Reuters) - Japan's crude oil imports from Iran in June rose 60.5 percent from May as refiners ramped up loadings before a halt in oil flows this month due to the imposition of sanctions on the Middle Eastern country.
Customs-cleared imports from Iran rose to 812,693 kilolitres (170,389 barrels per day) in June from 106,162 bpd in the previous month, Ministry of Finance data showed on Monday. Imports were down 33.9 percent from a year earlier.
Oil Trades Near Two-Day Low Before Central Banks Meet on Economy(Source:Bloomberg)
Oil traded near the lowest closing price in two days in New York before central bank policy makers meet to discuss the economy and ahead of a report that may show crude imports fell in the U.S. Futures were little changed, heading for the first monthly gain in three. Prices slid for the first time in five days yesterday as economic confidence in the euro area dropped to the lowest level in almost three years. The European Central Bank and the U.S. Federal Reserve hold separate meetings this week, with ECB President Mario Draghi pledging to do whatever it takes to preserve the euro. Crude purchases by the U.S. probably dropped in the seven days ended July 27, a Bloomberg News survey showed before an Energy Department report tomorrow.
“Oil, like a lot of markets, is parked, waiting for the outcome of the ECB meeting,” said Ric Spooner, a chief market analyst at CMC Markets in Sydney. “The market has taken quite a leap of faith and run up based on Draghi’s statements of intent so we’ll be looking for some detail which confirms that.” Oil for September delivery was at $89.58 a barrel, down 20 cents, in electronic trading on the New York Mercantile Exchange at 11:07 a.m. Sydney time. The contract yesterday dropped 0.4 percent to $89.78, the lowest close since July 26. Prices are up 5.4 percent this month and 9.4 percent lower this year.
Copper Drops on Economic Concerns Before Central Bankers Meet(Source:Bloomberg)
Copper fell for the first time in four sessions as investors awaited signals from central banks this week on bolstering the faltering global economy. European Central Bank President Mario Draghi is attempting to build consensus for a plan to ease euro-area borrowing costs amid the region’s debt crisis. Federal Reserve policy makers meet before a U.S. employment report that may show the pace of hiring in July failed to reduce the jobless rate. “A lot of people are taking a wait-and-see attitude ahead of the meetings and the payrolls report,” Adam Klopfenstein, a market strategist at Archer Financial Services Inc. in Chicago, said in a telephone interview. “Copper will rally if we get an agreement out of Europe, but the market needs to see it. The table is set, but they’re waiting for the meal to be served.”
Copper futures for September delivery declined 0.3 percent to settle at $3.416 a pound at 1:14 p.m. on the Comex in New York. The metal rose 2.2 percent in the previous three sessions in the longest rally since mid-June. A Labor Department report on Aug. 3 is expected to show U.S. payrolls increased by 100,000 workers, according to the median forecast of economists surveyed by Bloomberg News. Unemployment is projected to hold at 8.2 percent.
Most-Accurate Gold Forecasters Splitting After Rout: Commodities(Source:Bloomberg)
The only three analysts to correctly predict gold’s biggest quarterly slump in four years are now split, reflecting investors’ diverging views on the probability of central banks doing more to shore up growth. Justin Smirk of Westpac Banking Corp., the most accurate of 20 analysts tracked by Bloomberg in the second quarter, says prices will keep dropping. Eugen Weinberg of Commerzbank AG and Nick Trevethan at ANZ Banking Group Ltd. predict a record within a year. Hedge funds and other speculators are the least bullish since 2008, even with investor holdings of physical bullion in exchange-traded products close to an all-time high, government data and figures compiled by Bloomberg show.
While gold has rallied since tumbling to within 1 percent of a bear market in May, it’s still 16 percent below the record $1,923.70 an ounce reached on Sept. 6. Investors have favored sovereign debt and the dollar to protect their wealth as economic growth slows, driving yields to record lows and the U.S. currency to a two-year high. Central banks from Europe to China cut interest rates this month, and the Federal Reserve said it was prepared to act to boost the recovery. “There is not much interest in gold right now given the fears of economic slowdown globally,” said Michael Cuggino, who manages $17 billion of assets at Permanent Portfolio Funds in San Francisco, with about 20 percent of his investments in gold. “The velocity of the money has not yet entered the system, but one has to buy gold as it is a long-term play and will keep rising as you need insurance against future inflation.”
July Cargoes on Panamax Ships Slump as China Coal Demand Falls(Source:Bloomberg)
The number of cargoes booked on Panamax bulk carriers, the largest to transit the Panama Canal, slumped 33 percent in July amid slowing Chinese imports of thermal coal, used for power stations, Morgan Stanley said. There were 151 new cargoes reported for Panamax ships in July, compared with 224 for the same period 12 months ago and 174 in each of the previous two months, according to an e-mailed report today from Morgan Stanley analysts including New York- based Fotis Giannakoulis. Monthly bookings, known as fixtures in the industry, gained for the larger Capesize vessels in July compared with the previous two months, even as rates to hire the ships slumped. “Panamax fixtures continue to decline as China’s thermal coal demand is softening,” the U.S. investment bank said in the report, citing a slowing economy and growing hydropower output. “The weakness of the freight market is rapidly moving towards the smaller vessels that until recently seemed decoupled.”
The Baltic Dry Index, a measure of commodity freight costs for four vessel sizes, dropped 1.9 percent to 915, the lowest since June 14, according to the Baltic Exchange. The London- based exchange assesses freight costs on more than 50 international maritime routes. Average Panamax hire costs slid 2.1 percent to $8,054 and are 42 percent lower than 2012’s high on April 27, data show. U.S. grain and soybean exports, which usually begin to surge in October, will be reduced due to an ongoing drought, extending weakening demand for smaller bulk carriers, according to the report.
Hedge funds raised commodity bets in the longest bullish streak in three years as speculation that policy makers will increase economic stimulus drove prices toward the biggest monthly rally since October. Money managers raised their net-long positions across 18 U.S. futures and options by 3.4 percent to 1.17 million contracts in the week ended July 24, U.S. Commodity Futures Trading Commission data show. Wagers gained for seven weeks, the longest increase since June 2009. Corn bets climbed to the highest since September 2011, and traders are the most bullish on natural gas since October 2006.
Investors added bets even as commodities fell 0.4 percent in the week to July 24. The bulls were proved right after prices rebounded 1.8 percent in the following three days as European Central Bank President Mario Draghi pledged to protect the euro on July 26. German Chancellor Angela Merkel and French President Francois Hollande echoed his comments the next day. A U.S. government report on July 27 showed the world’s biggest economy grew at a slower pace in the second quarter, increasing pressure on the Federal Reserve to boost aid measures. “Some of these issues that have been weighing against commodities, particularly industrial metals and energy, have probably over-emphasized the negative,” said Bill O’Neill, the chief investment officer for the Europe, Middle East and Africa at Merrill Lynch Wealth Management, which oversees more than $1.8 trillion. “The fundamental backup is the policy easing.”
Asia's feed mills caught short by costly corn
SINGAPORE, July 30 (Reuters) - As corn prices climb past the record levels hit this time last year, a major factor has changed for Asian importers of the grain: Australia no longer has heaps of cheap feed wheat as a substitute.
For a region that buys just under half the world's traded corn, the 25 percent jump in cash prices since the start of June for the main animal feed ingredient means more costly pork, chicken and beef by the end of the year.
Grocery giants bloodied by surge in corn prices
--Gavin Maguire is a Reuters market analyst. The views expressed are his own--
CHICAGO, July 27 (Reuters) - It's not just cattle feeders and ethanol manufacturers who are feeling the pain from the recent sharp rise in crop prices. Top manufacturers of goods that line grocery store shelves and meat counters have also been reeling of late as their share prices slump on the back of the dramatic surge in key production inputs.
Pork giant Smithfield Foods , chicken producer Tyson Foods and breakfast food maker Kellogg Co have all suffered steep share price declines lately on worries that each firm will have trouble passing on the steeply higher input and ingredient costs to consumers amid the prevailing uncertain economy.
Grains Rally on Weather(source:CME)
Another round of above average temperatures and lack of rain sparked a fresh round of buying interest and sharp gains in the grain markets to begin the week.
Pro Farmer: After the Bell Wheat Recap (source:CME)
Chicago wheat futures ended 1 1/2 to 16 1/2 cents higher, with the September through March 2013 contracts posting double-digit gains. Kansas City wheat finished mostly 7 to 11 cents higher. Minneapolis wheat posted gains of mostly 4 to 8 cents. Chicago wheat futures paced gains in the wheat market thanks to strength in the corn market. Traders are also concerned with crop prospects in the Former Soviet Union due to drought in key production countries.
Wheat Market Recap Report(source:CME)
September Wheat finished up 16 1/2 at 914 1/2, 5 1/4 off the high and 11 1/2 up from the low. December Wheat closed up 16 at 927 1/4. This was 10 1/2 up from the low and 6 off the high. September Chicago wheat traded sharply higher into the close with KC and Minneapolis following. Volume was slightly lower today but wheat managed to hang onto gains. Chicago wheat was supported by a strong corn market and off a warm and dry forecast for the Black Sea and Australia. Nearly a third of the Russian spring wheat crop will lack moisture this week and minimal rainfall is expected in Australian wheat growing areas over the next 10 days. East Russia domestic wheat prices rose last week signaling supply tightness and government officials announced that they would release additional intervention stocks to calm inflation fears. A well know banking institution announced that they expect the USDA to cut Russian wheat production to 42-43 million tonnes on the next USDA report. This is in line with market expectations. Export inspections for the week ending July 26th were reported at 18.60 million bushels vs. 11.64 for the week prior. Inspections needed per week to meet the current USDA estimate for the 2012/13 marketing year are 23.79 million bushels. Current inspections total 12.2% of the USDA estimate. Outside markets offered minimal resistance to wheat prices today as the US Dollar traded higher and US stocks were generally lower on the day. September Oats closed up 7 1/4 at 384 1/4. This was 2 1/2 up from the low and 3 1/2 off the high.
Pro Farmer: After the Bell Corn Recap (source:CME)
Corn futures ended slightly off session highs with gains of 17 to 21 1/2 cents in the September through July 2013 contracts. Far-deferred contract months posted gains the 9- to 12-cent range. Focus remains on the weather, with traders showing their disappointment with weekend rainfall by moving futures higher today. Traders expect the crop to continue to wither this week as there's little rain in the near-term forecast and above-normal temps are expected to stay around.
Corn, Soybean Conditions Decline as U.S. Drought Expands(Source:Bloomberg)
The condition of the U.S. corn crop worsened for an eighth straight week amid the worst Midwest drought in a generation. Soybean ratings also fell. About 24 percent of the corn was in good or excellent condition as of yesterday, down from 26 percent a week earlier and 77 percent in mid-May, the U.S. Department of Agriculture said today in a report. An estimated 29 percent of the soybeans got the top ratings, down from 31 percent. Both crops are in the worst shape for this time of year since a drought in 1988. “The damage has been done to the corn crop,” Peter Meyer, a senior director of agriculture commodities at PIRA Energy Group in New York, said by telephone today. “Now the weather is starting to become more of a factor in the soybean markets.” The worst of the drought occurred when corn plants were going through the critical pollination stage last month. Soybeans, which normally are planted later in the Midwest, are just now entering reproductive stages, so they have more time to grow.
Corn futures reached a record $8.1775 a bushel today on the Chicago Board of Trade and have surged 28 percent this month. Soybeans are up 15 percent in July. During the past week, little or no rain fell in parts of Iowa, Illinois and Nebraska, the largest corn-growing states, National Weather Service data show.
Corn Market Recap for 7/30/2012(source:CME)
September Corn finished up 21 1/2 at 820, 3 off the high and 20 1/4 up from the low. December Corn closed up 20 3/4 at 814. This was 19 up from the low and 3 3/4 off the high. December corn traded sharply higher into the close after posting a new all-time high. The sharply higher trade is linked to continued concern over the falling US corn yield. Private crop scouts have estimated the US corn yield near 118-122 bushels per acre. The market is likely trading a yield slightly higher than that but traders fear that the warmer than normal weather this week will cause increased yield loss in the western Corn Belt. Crop condition reports will be released this afternoon. The trade expects a 2% decline in corn good/excellent conditions. Export inspections for the week ending July 26th were reported at 21.44 million bushels vs. 19.59 million bushels in the week prior. This week's inspections continue to lag the needed pace of 36.11 million bushels to reach the 2011/12 USDA estimate. Current inspections are 88% of the USDA estimate for this crop year. Iowa ethanol processors posted their 3rd straight week of positive margins. As of July 27th, Iowa processors saw margins of.06 cents/bushel which was slightly lower than last week. A firmer DDG market and lower corn prices also offered some support today. Outside markets offered minimal resistance today, with the US Dollar mostly trading higher and US equities spending a lot of time in negative ground. September Rice finished up 0.235 at 15.835, equal to the high and 0.145 up from the low.
GRAINS-Soy jumps to 1-week top, new-crop corn hits contract high
SINGAPORE, July 30 (Reuters) - Chicago soybeans jumped to a one-week top while new-crop corn rose to a contract high as the worst drought in five decades continued to threaten crop yields across the U.S. grain belt with little relief expected this week.
"There is no weather relief this week as there are no rains in central and southeastern corn belt until the weekend and temperatures will remain above average," said Victor Thianpiriya, agricultural commodity strategist at ANZ.
Indonesia wheat flour consumption may rise 10 pct in 2012
JAKARTA, July 30 (Reuters) - Wheat flour consumption in Indonesia, Asia's top wheat importer, may increase 10 percent in 2012, the Indonesian Wheat Flour Producers Association said on Monday, as increasing wealth enables more consumers to shift away from rice.
Southeast Asia's largest economy may import as much as 6.8 million tonnes in 2012, compared to 6.2 million tonnes last year, association Chairman Francis Welirang told Reuters.
Thailand may adjust rice buying scheme for Oct crop-minister
BANGKOK, July 30 (Reuters) - Thailand may limit the amount of rice it buys from farmers or cap the money it pays per tonne for the October crop, the commerce minister said on Monday, in a bid to defuse criticism of a government intervention scheme aimed at helping the poor.
"We may limit the amount of rice we buy or put a ceiling on the money we pay to individual farmers," Minister Boonsong Teriyapirom told reporters, adding that the policy was being looked at to allow small farmers to benefit.
Australian wheat growers tap some, not all, of price spike
SYDNEY, July 30 (Reuters) - Australian wheat growers look set to miss out on the full benefits of a spike in prices on the back of the worst drought to hit the U.S. Midwest in more than 50 years after reducing plantings and selling stocks earlier in the year.
Led by a 55 percent spike in corn, global grain prices have soared as unrelenting heat across the U.S. Midwest over the past six weeks has destroyed crops, reducing yields in what was expected to be a bumper harvest.
Bangladesh to lift rice export ban to boost farmers
DHAKA, July 29 (Reuters) - Bangladesh is lifting a ban on rice exports to support farmers after record crops and bulging domestic reserves left prices below production costs, the finance minister said on Sunday.
Bangladesh, the world's fourth-biggest rice producer, banned overseas shipments of common varieties in May 2008 following a spike in prices and banned all exports a year later.
Drought slashes U.S. Midwest corn crop
OMAHA, Neb., July 27 (Reuters) - The most extensive U.S. drought in five decades has left corn plants withered and dying, and crop yields in the largest producing states will be much lower than experts have forecast, scouts said on Friday as they completed a U.S. Midwest crop tour.
The MDA EarthSat crop tour estimated a corn yield of a 118 bushels per acre after surveying 49 fields in Iowa, Illinois, Indiana and Ohio. That was sharply lower than a U.S. Agriculture Department estimate earlier this month of a yield of 146 bpa and a Reuters poll this week of 130.8 bpa.
Dry conditions affecting Argentine wheat crop - government
BUENOS AIRES, July 27 (Reuters) - Dry weather in some wheat-growing areas in Argentina has begun to affect the 2012/13 crop, which farmers have yet to finish planting, the Agriculture Ministry said on Friday in its weekly crop progress report.
The country is the world's No. 6 wheat exporter and the top supplier to neighboring Brazil. The government expects farmers to seed 3.8 million hectares with the grain this season, down from 4.6 million hectares last season.
Midwest crops, fish, water supply punished by US drought
CHICAGO/SCRANTON, Iowa, July 27 (Reuters) - Temperatures heading north of 100 degrees Fahrenheit and scarce rain portended another blistering weekend for much of the U.S. Midwest, where the most extensive drought since 1956 is devastating crops, evaporating rivers, and threatening to push world food prices higher.
Violent storms brought rain to the extreme eastern portions of the U.S. corn belt in Ohio on Thursday night, but moisture was sparse further west.
Corn highly variable in west Iowa, yields lower
SCRANTON, Iowa, July 27 (Reuters) - Corn yield potential appears highly variable in west-central Iowa, mirroring the ups and downs of production prospects in the central and eastern areas of the No. 1 corn and soy growing state, scouts on a U.S. Midwest crop tour said Friday.
Some plants suffering under the worst drought in 56 years were withered and dying, standing only 4 to 5 feet (1 to 1.5 m)tall with thin stalks and small ears.
Russia harvested 24.8 mln T of grains as of July 26 - ministry
MOSCOW, July 27 (Reuters) - Russia has harvested grain and legumes from 24.1 percent of the total target area, bringing in 24.8 million tonnes compared to 25.3 million tonnes a year earlier, harvest data published on Friday by Russia's Agriculture Ministry showed as of July 26.
Inclement weather in Russia's southernmost agricultural regions has slashed yields to 2.3 tonnes per hectare, it added.
India's monsoon stays weak as govt mulls drought steps
NEW DELHI, July 27 (Reuters) - India's monsoon rains are unlikely to pick up enough to avert the possibility that ministers meeting next week may officially declare a drought, which could prompt the government to offer more support for farmers to ensure adequate food supplies.
Rains from June 1 up to the end of the planting month of July are likely to be 21-22 percent below average, Farm Secretary Ashish Bahuguna said on Friday, unchanged from the seasonal shortfall recorded up to July 25.
SOFTS-Sugar nudges higher, weak monsoon supports
LONDON, July 30 (Reuters) - Raw sugar futures edged higher supported by key producer India's weak monsoon, while cocoa was steady and robusta coffee eased. Sugar futures were slightly higher in early trading, as a lack of rain in the world's second biggest producer India, was expected to cut the country's production prospects.
Chinese cotton stock policy to dominate in 2012/13 -Allenberg
July 27 (Reuters) - China's policy of buying and stashing large amounts of cotton in state reserves will dominate the market in the 2012/13 marketing season getting started on Aug. 1, the chief executive of the world's biggest cotton trader and merchant said on Friday.
Allenberg Cotton Co President and CEO Joe Nicosia told the Ag Market network's annual radio program from New York that "everything (in the cotton market) is dependent on the Chinese reserve policy."
OIL-Brent slips to $106 as stimulus expectations fade
LONDON, July 30 (Reuters) - Brent crude oil fell to around $106 a barrel, erasing early gains as hopes faded that the United States and Europe would soon announce measures to shore up their fragile economies, which could boost the outlook for oil demand.
"Speculation over central bank action looks like it has gone too far," said Carsten Fritsch, oil analyst at Commerzbank in Frankfurt. "The euro has already begun to retreat and oil has also started to weaken. The move upwards seems exaggerated."
Japan's Iranian crude imports jump in June from May
TOKYO, July 30 (Reuters) - Japan's crude oil imports from Iran in June rose 60.5 percent from May as refiners ramped up loadings before a halt in oil flows this month due to the imposition of sanctions on the Middle Eastern country.
Customs-cleared imports from Iran rose to 812,693 kilolitres (170,389 barrels per day) in June from 106,162 bpd in the previous month, Ministry of Finance data showed on Monday. Imports were down 33.9 percent from a year earlier.
Oil Trades Near Two-Day Low Before Central Banks Meet on Economy(Source:Bloomberg)
Oil traded near the lowest closing price in two days in New York before central bank policy makers meet to discuss the economy and ahead of a report that may show crude imports fell in the U.S. Futures were little changed, heading for the first monthly gain in three. Prices slid for the first time in five days yesterday as economic confidence in the euro area dropped to the lowest level in almost three years. The European Central Bank and the U.S. Federal Reserve hold separate meetings this week, with ECB President Mario Draghi pledging to do whatever it takes to preserve the euro. Crude purchases by the U.S. probably dropped in the seven days ended July 27, a Bloomberg News survey showed before an Energy Department report tomorrow.
“Oil, like a lot of markets, is parked, waiting for the outcome of the ECB meeting,” said Ric Spooner, a chief market analyst at CMC Markets in Sydney. “The market has taken quite a leap of faith and run up based on Draghi’s statements of intent so we’ll be looking for some detail which confirms that.” Oil for September delivery was at $89.58 a barrel, down 20 cents, in electronic trading on the New York Mercantile Exchange at 11:07 a.m. Sydney time. The contract yesterday dropped 0.4 percent to $89.78, the lowest close since July 26. Prices are up 5.4 percent this month and 9.4 percent lower this year.
Copper Drops on Economic Concerns Before Central Bankers Meet(Source:Bloomberg)
Copper fell for the first time in four sessions as investors awaited signals from central banks this week on bolstering the faltering global economy. European Central Bank President Mario Draghi is attempting to build consensus for a plan to ease euro-area borrowing costs amid the region’s debt crisis. Federal Reserve policy makers meet before a U.S. employment report that may show the pace of hiring in July failed to reduce the jobless rate. “A lot of people are taking a wait-and-see attitude ahead of the meetings and the payrolls report,” Adam Klopfenstein, a market strategist at Archer Financial Services Inc. in Chicago, said in a telephone interview. “Copper will rally if we get an agreement out of Europe, but the market needs to see it. The table is set, but they’re waiting for the meal to be served.”
Copper futures for September delivery declined 0.3 percent to settle at $3.416 a pound at 1:14 p.m. on the Comex in New York. The metal rose 2.2 percent in the previous three sessions in the longest rally since mid-June. A Labor Department report on Aug. 3 is expected to show U.S. payrolls increased by 100,000 workers, according to the median forecast of economists surveyed by Bloomberg News. Unemployment is projected to hold at 8.2 percent.
Most-Accurate Gold Forecasters Splitting After Rout: Commodities(Source:Bloomberg)
The only three analysts to correctly predict gold’s biggest quarterly slump in four years are now split, reflecting investors’ diverging views on the probability of central banks doing more to shore up growth. Justin Smirk of Westpac Banking Corp., the most accurate of 20 analysts tracked by Bloomberg in the second quarter, says prices will keep dropping. Eugen Weinberg of Commerzbank AG and Nick Trevethan at ANZ Banking Group Ltd. predict a record within a year. Hedge funds and other speculators are the least bullish since 2008, even with investor holdings of physical bullion in exchange-traded products close to an all-time high, government data and figures compiled by Bloomberg show.
While gold has rallied since tumbling to within 1 percent of a bear market in May, it’s still 16 percent below the record $1,923.70 an ounce reached on Sept. 6. Investors have favored sovereign debt and the dollar to protect their wealth as economic growth slows, driving yields to record lows and the U.S. currency to a two-year high. Central banks from Europe to China cut interest rates this month, and the Federal Reserve said it was prepared to act to boost the recovery. “There is not much interest in gold right now given the fears of economic slowdown globally,” said Michael Cuggino, who manages $17 billion of assets at Permanent Portfolio Funds in San Francisco, with about 20 percent of his investments in gold. “The velocity of the money has not yet entered the system, but one has to buy gold as it is a long-term play and will keep rising as you need insurance against future inflation.”
July Cargoes on Panamax Ships Slump as China Coal Demand Falls(Source:Bloomberg)
The number of cargoes booked on Panamax bulk carriers, the largest to transit the Panama Canal, slumped 33 percent in July amid slowing Chinese imports of thermal coal, used for power stations, Morgan Stanley said. There were 151 new cargoes reported for Panamax ships in July, compared with 224 for the same period 12 months ago and 174 in each of the previous two months, according to an e-mailed report today from Morgan Stanley analysts including New York- based Fotis Giannakoulis. Monthly bookings, known as fixtures in the industry, gained for the larger Capesize vessels in July compared with the previous two months, even as rates to hire the ships slumped. “Panamax fixtures continue to decline as China’s thermal coal demand is softening,” the U.S. investment bank said in the report, citing a slowing economy and growing hydropower output. “The weakness of the freight market is rapidly moving towards the smaller vessels that until recently seemed decoupled.”
The Baltic Dry Index, a measure of commodity freight costs for four vessel sizes, dropped 1.9 percent to 915, the lowest since June 14, according to the Baltic Exchange. The London- based exchange assesses freight costs on more than 50 international maritime routes. Average Panamax hire costs slid 2.1 percent to $8,054 and are 42 percent lower than 2012’s high on April 27, data show. U.S. grain and soybean exports, which usually begin to surge in October, will be reduced due to an ongoing drought, extending weakening demand for smaller bulk carriers, according to the report.
Monday, July 30, 2012
20120730 1812 FCPO EOD Daily Chart Study.
Bollinger band reading : pullback correction little downside biased.
MACD Histogram : recovering, seller reducing exposure.
Support : 2970, 2950, 2920, 2900 level.
Resistance : 3020, 3050, 3070, 3100 level.
Comment :
FCPO closed rallied higher with little lesser volume distributed. Soy oil currently trading higher after last Friday advance little higher while crude oil price currently trading little higher.
Price soar higher ahead of tomorrow export data and after news from Reuters on Malaysia government to increase crude palm oil tax free export quota to 2 million tonnes, persisted dry weather from U.S. and prospect on further stimulus measures from world central bank sent broad commodities price upwards.
FCPO daily chart analysis continue to suggesting a pullback correction little downside biased market development.
When to buy : buy at support or weakness with quick cut loss and profit target.
When to sell : sell at resistant or strength with quick cut loss and profit target.
20120730 1749 Crude Palm Oil Related News.
Malaysia to boost tax free palm oil quota by 2 mln T -govt sources 0#FCPO: - RTRS
30-Jul-2012 12:24
July 30 (Reuters) - Malaysia will increase shipping quotas for tax free crude palm oil by up to 2 million tonnes this year to help planters cope with higher output in the next few months, government sources said, as the world's No.2 supplier struggles to maintain its export momentum.
"We are doing this on a case-by-case basis for local firms since production is starting to rise in the second half of this year and exports are a bit slow," said one government official who declined to be named due to the sensitivity of the issue.
"It is a stock management effort. This is in an interim response to Indonesia at the moment. We are still formulating a comprehensive response," the source added.
The move will lift Malaysia's total duty free CPO export quota to 5 million tonnes this year and comes after top importer India this month raised base import prices of refined palm oil in a move that encourages more crude palm oil shipments.
Both Malaysia and India are responding to last year's move by top palm oil producer Indonesia to slash export taxes of refined palm oil -- used as a cooking oil -- and spur its own processing industry.
Malaysia says Jakarta's export tax cut has eaten into its own refined palm oil shipments and hurts its processors -- a concern similar to that voiced by India, which has spent billions to build the factories of its edible oil manufacturing sector.
30-Jul-2012 12:24
July 30 (Reuters) - Malaysia will increase shipping quotas for tax free crude palm oil by up to 2 million tonnes this year to help planters cope with higher output in the next few months, government sources said, as the world's No.2 supplier struggles to maintain its export momentum.
"We are doing this on a case-by-case basis for local firms since production is starting to rise in the second half of this year and exports are a bit slow," said one government official who declined to be named due to the sensitivity of the issue.
"It is a stock management effort. This is in an interim response to Indonesia at the moment. We are still formulating a comprehensive response," the source added.
The move will lift Malaysia's total duty free CPO export quota to 5 million tonnes this year and comes after top importer India this month raised base import prices of refined palm oil in a move that encourages more crude palm oil shipments.
Both Malaysia and India are responding to last year's move by top palm oil producer Indonesia to slash export taxes of refined palm oil -- used as a cooking oil -- and spur its own processing industry.
Malaysia says Jakarta's export tax cut has eaten into its own refined palm oil shipments and hurts its processors -- a concern similar to that voiced by India, which has spent billions to build the factories of its edible oil manufacturing sector.
20120730 1730 FKLI EOD Daily Chart Study.
Bollinger band reading : pullback correction little upside biased.
MACD Histogram : falling lower, buyer closing position.
Support : 1623, 1615, 1600, 1595 level.
Resistance : 1630, 1640, 1650, 1660 level.
Comment :
FKLI closed recorded gain with lesser volume transacted doing 3.5 point discount compare to cash market that soared higher. Last Friday U.S. markets rallied higher again and today Asia markets closed mostly higher while European markets currently trading in positive territory.
News on ECB and European leader pledged to support the Euros, better than expected U.S. corporate earnings, China to implement more infrastructure project and better than forecast U.S. GDP(declined) reported send global market trading higher.
FKLI daily chart reading revised to suggesting a pullback correction little 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.
20120730 1656 Regional Markets EOD Daily Chart Study.
DJIA chart reading : little upside biased with possible pullback correction.
Hang Seng chart reading : side way range bound.
KLCI chart reading : pullback correction upside biased.
20120730 1622 Global Markets & Commodities Related News.
GLOBAL MARKETS: European shares were set to gain for a third straight session and Asian shares extended their gains, supported by expectations the U.S. Federal Reserve and European Central Bank will act to support their fragile economies. U.S. stocks surged on Friday, driving the S&P 500 to its highest close since May 3 as hopes increased that the Federal Reserve and the European Central Bank may provide further stimulus.
FOREX: The euro slipped as short-term technical charts flashed a bearish signal, but its losses were limited by hopes the European Central Bank will soon launch fresh action to tackle the euro zone's debt crisis.
FOREX-Euro falters but drop contained on ECB hopes
SINGAPORE, July 30 (Reuters) - The euro slipped on Monday as short-term technical charts flashed a bearish signal, but its losses were limited by hopes the European Central Bank will soon launch fresh action to tackle the euro zone's debt crisis.
"That was a short-term bearish signal on the charts," he said, adding that the single currency had failed to form a key reversal pattern on weekly charts.
ECB's Super Mario takes the stage
Mario Draghi may not need to show his money this week, but impatient markets will be unforgiving if the European Central Bank chief does not flesh out his dramatic promise to do whatever is needed to save the euro.
Cautious consumers, foreign trade curb U.S. Q2 growth
U.S. economic growth slowed in the second quarter as consumers spent at their slowest pace in a year, increasing pressure on the Federal Reserve to do more to bolster the recovery.
Australian wheat growers tap some, not all, of price spike
Australian wheat growers look set to miss out on the full benefits of a spike in prices on the back of the worst drought to hit the U.S. Midwest in more than 50 years after reducing plantings and selling stocks earlier in the year.
GRAINS: Chicago soybeans jumped 2 percent to a one-week top, while new-crop corn rose to a contract high as the worst drought in five decades continued to threaten crop yields across the U.S. grain belt with little relief expected this week.
OIL: Brent crude rose toward $107 per barrel, stretching gains into a fifth consecutive day on hopes the United States and Europe will this week announce new measures to shore up their fragile economies, boosting the outlook for oil demand.
India coal buyers see defaults as prices slip -traders
LONDON/NEW DELHI, July 27 (Reuters) - Indian coal markets are seeing scattered defaults among end-user and trade buyers in part because of a 20 percent slide in prices this year, although the vast majority are honouring their contracts, Indian trader said.
International coal prices have slumped to about $85 a tonne for South African cargoes from comfortably over $100 in December because of oversupply and tepid Asian demand .
Euro Coal-Prices rise 50c-$1/T but discounts deepen
LONDON, July 27 (Reuters) - Physical prompt European coal prices rose by around 50 cents to $1.00 a tonne on Friday, bolstered by strong swaps values, but weak fundamentals could reassert themselves soon and pull prices down, traders and utilities said.
Coal swaps rose by $1.00 on Friday in line with stronger oil and the euro.
Coal import defaults worsen in China as economy weakens
SHANGHAI/JAKARTA, July 27 (Reuters) - Chinese traders have so far this month scrapped import deals for at least two million tonnes of coal due to plentiful supply, industry sources say, another sign of how a slowdown in world's second largest economy is curbing its need for resources.
China's economy expanded at its slowest pace in more than three years in the second quarter of 2012, confirming a downtrend that leaves full-year growth on course for its softest showing since 1999.
Iron Ore-Traders eye pause in declining spot prices
SHANGHAI, July 30 (Reuters) - Chinese traders expect iron ore prices to pause from a recent decline and stabilise after hitting a 2-1/2 year low last week, as the country's steelmakers take advantage of low prices to restock the key steelmaking ingredient.
Still, industry participants said any bargain buying would be limited, and prices were unlikely to stage a significant rebound amid uncertainties about the health of the global economy.
China iron ore prices slump to 2 1/2-yr low
BEIJING, July 27 (Reuters) - Benchmark international iron ore prices hit their lowest level in more than two and a half years on Friday as China's slowing economy reduced global demand growth.
The fall in the price of iron ore cargoes to the world's biggest steelmaking country will trigger alarm bells among global iron ore giants such as Vale , BHP Billiton and Rio Tinto , all targeting growth in Chinese demand with rapid capacity expansion plans.
Russia's Norilsk Q2 nickel output down 8 pct q/q
MOSCOW, July 30 (Reuters) - Russia's Norilsk Nickel , the world's largest nickel and palladium producer, said on Monday its nickel output declined to 69,639 tonnes in the second quarter of 2012 from 75,824 tonnes in the preceding quarter.
The company also said in a statement that its second-quarter platinum output rose to 186,000 troy ounces from 166,000 in the first three months of 2012, while palladium output rose to 729,000 troy ounces from 649,000.
Japan's nickel ore imports from Indonesia grew 4 times in June
TOKYO, July 30 (Reuters) - Japan's imports of nickel ore from Indonesia grew more than four times from a year earlier to 136,600 tonnes in June, the Ministry of Finance's monthly customs data showed on Monday.
Cargoes that had been delayed in the wake of the implementation of a new tax in Indonesia arrived in May and June, an official at Japan's Mining Industry Association told Reuters last week.
Italy steel exports up, imports fall -industry
MILAN, July 27 (Reuters) - Steel exports from Italy, the European Union's second largest producer, jumped 9.8 percent year-on-year to 8.21 million tonnes in the first five months of 2012, the industry group Federacciai said on Friday, in a rare bright spot for Italy's shrinking economy.
Steel imports, about 58 percent of which came from other EU countries in the January-May period, dropped 26.3 percent to 6.21 million tonnes in the first five months of 2012, data published on Federacciai's website showed.
Russia's Evraz sees 2 percent steel output rise in Q3
MOSCOW, July 27 (Reuters) - Russia's largest steelmaker said on Friday that it expects its crude steel production to rise by 2 percent in the third quarter of 2012 compared to the previous quarter.
The company, which saw crude steel production drop 6 percent in the second quarter from the previous three months due to capital repairs at its mills, said the temporary shutdowns of some of its enterprises will continue to affect its operations in the third quarter.
Japan's June zinc exports double yr/yr to 9,356 tonnes
TOKYO, July 30 (Reuters) - Japan's June zinc exports doubled to 9,356 tonnes from a year earlier as smelters resumed work following closures last year after the March 2011 earthquake and tsunami devastated the northeastern region.
Taiwan was the biggest buyer of refined zinc from Japan last month, purchasing 2,328 tonnes, an increase of 59 percent from the same month a year earlier, customs-cleared trade data showed on Monday.
Japan June copper exports to China double in June
TOKYO, July 30 (Reuters) - Japan's June exports of copper cathode to China, the world's biggest consumer of the metal, nearly doubled from the same month a year ago, customs data from the Ministry of Finance showed on Monday.
The strong gains came off a low base a year ago, when a magnitude 9.0 earthquake damaged smelters in the world's third-biggest refined copper producer, prompting them to sharply curtail exports in the three months through June.
BASE METALS: London copper held steady buttressed by hopes that Europe and the United States will this week announce fresh measures to shore up their faltering economies, helping to boost demand for industrial metals.
PRECIOUS METALS: Gold held steady above $1,620 per ounce, as investors wait for the central banks on both sides of the Atlantic to give clearer cues on the potential for further monetary stimulus.
METALS-Copper firms, underpinned by stimulus hopes
SINGAPORE, July 30 (Reuters) - Copper edged up on Monday as its demand outlook improved on hopes Europe and the United States will announce fresh measures to shore up their faltering economies, while investors also eyed factory data from top metals consumer China for trading cues.
"There are still some feel good factors running through the market," said senior commodities strategist Nick Trevethan of ANZ in Singapore.
PRECIOUS-Gold hovers around $1,620/oz, c.bank meetings eyed
SINGAPORE, July 30 (Reuters) - Gold held steady above $1,620 per ounce on Monday, as investors wait for the central banks on both sides of the Atlantic to give clearer cues on the potential for further monetary stimulus.
"I don't see the Fed drastically changing its rhetoric on QE3 at this week's meeting," said Li Ning, an analyst at Shanghai CIFCO Futures. "Technically, gold is poised for some correction after last week's rally, as there is still quite a bit of pressure at the $1,640 level.
Baltic index slides on slow freight business
July 27 (Reuters) - The Baltic Exchange's main sea freight index, which tracks rates to ship dry commodities, fell on Friday as the market continued to struggle with slower cargo trade and mounting fleet growth.
The overall index fell 2.61 percent or 25 points to 933 points. The index fell for the fourteenth straight day and has declined over 10 percent this week.
FOREX: The euro slipped as short-term technical charts flashed a bearish signal, but its losses were limited by hopes the European Central Bank will soon launch fresh action to tackle the euro zone's debt crisis.
FOREX-Euro falters but drop contained on ECB hopes
SINGAPORE, July 30 (Reuters) - The euro slipped on Monday as short-term technical charts flashed a bearish signal, but its losses were limited by hopes the European Central Bank will soon launch fresh action to tackle the euro zone's debt crisis.
"That was a short-term bearish signal on the charts," he said, adding that the single currency had failed to form a key reversal pattern on weekly charts.
ECB's Super Mario takes the stage
Mario Draghi may not need to show his money this week, but impatient markets will be unforgiving if the European Central Bank chief does not flesh out his dramatic promise to do whatever is needed to save the euro.
Cautious consumers, foreign trade curb U.S. Q2 growth
U.S. economic growth slowed in the second quarter as consumers spent at their slowest pace in a year, increasing pressure on the Federal Reserve to do more to bolster the recovery.
Australian wheat growers tap some, not all, of price spike
Australian wheat growers look set to miss out on the full benefits of a spike in prices on the back of the worst drought to hit the U.S. Midwest in more than 50 years after reducing plantings and selling stocks earlier in the year.
GRAINS: Chicago soybeans jumped 2 percent to a one-week top, while new-crop corn rose to a contract high as the worst drought in five decades continued to threaten crop yields across the U.S. grain belt with little relief expected this week.
OIL: Brent crude rose toward $107 per barrel, stretching gains into a fifth consecutive day on hopes the United States and Europe will this week announce new measures to shore up their fragile economies, boosting the outlook for oil demand.
India coal buyers see defaults as prices slip -traders
LONDON/NEW DELHI, July 27 (Reuters) - Indian coal markets are seeing scattered defaults among end-user and trade buyers in part because of a 20 percent slide in prices this year, although the vast majority are honouring their contracts, Indian trader said.
International coal prices have slumped to about $85 a tonne for South African cargoes from comfortably over $100 in December because of oversupply and tepid Asian demand .
Euro Coal-Prices rise 50c-$1/T but discounts deepen
LONDON, July 27 (Reuters) - Physical prompt European coal prices rose by around 50 cents to $1.00 a tonne on Friday, bolstered by strong swaps values, but weak fundamentals could reassert themselves soon and pull prices down, traders and utilities said.
Coal swaps rose by $1.00 on Friday in line with stronger oil and the euro.
Coal import defaults worsen in China as economy weakens
SHANGHAI/JAKARTA, July 27 (Reuters) - Chinese traders have so far this month scrapped import deals for at least two million tonnes of coal due to plentiful supply, industry sources say, another sign of how a slowdown in world's second largest economy is curbing its need for resources.
China's economy expanded at its slowest pace in more than three years in the second quarter of 2012, confirming a downtrend that leaves full-year growth on course for its softest showing since 1999.
Iron Ore-Traders eye pause in declining spot prices
SHANGHAI, July 30 (Reuters) - Chinese traders expect iron ore prices to pause from a recent decline and stabilise after hitting a 2-1/2 year low last week, as the country's steelmakers take advantage of low prices to restock the key steelmaking ingredient.
Still, industry participants said any bargain buying would be limited, and prices were unlikely to stage a significant rebound amid uncertainties about the health of the global economy.
China iron ore prices slump to 2 1/2-yr low
BEIJING, July 27 (Reuters) - Benchmark international iron ore prices hit their lowest level in more than two and a half years on Friday as China's slowing economy reduced global demand growth.
The fall in the price of iron ore cargoes to the world's biggest steelmaking country will trigger alarm bells among global iron ore giants such as Vale , BHP Billiton and Rio Tinto , all targeting growth in Chinese demand with rapid capacity expansion plans.
Russia's Norilsk Q2 nickel output down 8 pct q/q
MOSCOW, July 30 (Reuters) - Russia's Norilsk Nickel , the world's largest nickel and palladium producer, said on Monday its nickel output declined to 69,639 tonnes in the second quarter of 2012 from 75,824 tonnes in the preceding quarter.
The company also said in a statement that its second-quarter platinum output rose to 186,000 troy ounces from 166,000 in the first three months of 2012, while palladium output rose to 729,000 troy ounces from 649,000.
Japan's nickel ore imports from Indonesia grew 4 times in June
TOKYO, July 30 (Reuters) - Japan's imports of nickel ore from Indonesia grew more than four times from a year earlier to 136,600 tonnes in June, the Ministry of Finance's monthly customs data showed on Monday.
Cargoes that had been delayed in the wake of the implementation of a new tax in Indonesia arrived in May and June, an official at Japan's Mining Industry Association told Reuters last week.
Italy steel exports up, imports fall -industry
MILAN, July 27 (Reuters) - Steel exports from Italy, the European Union's second largest producer, jumped 9.8 percent year-on-year to 8.21 million tonnes in the first five months of 2012, the industry group Federacciai said on Friday, in a rare bright spot for Italy's shrinking economy.
Steel imports, about 58 percent of which came from other EU countries in the January-May period, dropped 26.3 percent to 6.21 million tonnes in the first five months of 2012, data published on Federacciai's website showed.
Russia's Evraz sees 2 percent steel output rise in Q3
MOSCOW, July 27 (Reuters) - Russia's largest steelmaker said on Friday that it expects its crude steel production to rise by 2 percent in the third quarter of 2012 compared to the previous quarter.
The company, which saw crude steel production drop 6 percent in the second quarter from the previous three months due to capital repairs at its mills, said the temporary shutdowns of some of its enterprises will continue to affect its operations in the third quarter.
Japan's June zinc exports double yr/yr to 9,356 tonnes
TOKYO, July 30 (Reuters) - Japan's June zinc exports doubled to 9,356 tonnes from a year earlier as smelters resumed work following closures last year after the March 2011 earthquake and tsunami devastated the northeastern region.
Taiwan was the biggest buyer of refined zinc from Japan last month, purchasing 2,328 tonnes, an increase of 59 percent from the same month a year earlier, customs-cleared trade data showed on Monday.
Japan June copper exports to China double in June
TOKYO, July 30 (Reuters) - Japan's June exports of copper cathode to China, the world's biggest consumer of the metal, nearly doubled from the same month a year ago, customs data from the Ministry of Finance showed on Monday.
The strong gains came off a low base a year ago, when a magnitude 9.0 earthquake damaged smelters in the world's third-biggest refined copper producer, prompting them to sharply curtail exports in the three months through June.
BASE METALS: London copper held steady buttressed by hopes that Europe and the United States will this week announce fresh measures to shore up their faltering economies, helping to boost demand for industrial metals.
PRECIOUS METALS: Gold held steady above $1,620 per ounce, as investors wait for the central banks on both sides of the Atlantic to give clearer cues on the potential for further monetary stimulus.
METALS-Copper firms, underpinned by stimulus hopes
SINGAPORE, July 30 (Reuters) - Copper edged up on Monday as its demand outlook improved on hopes Europe and the United States will announce fresh measures to shore up their faltering economies, while investors also eyed factory data from top metals consumer China for trading cues.
"There are still some feel good factors running through the market," said senior commodities strategist Nick Trevethan of ANZ in Singapore.
PRECIOUS-Gold hovers around $1,620/oz, c.bank meetings eyed
SINGAPORE, July 30 (Reuters) - Gold held steady above $1,620 per ounce on Monday, as investors wait for the central banks on both sides of the Atlantic to give clearer cues on the potential for further monetary stimulus.
"I don't see the Fed drastically changing its rhetoric on QE3 at this week's meeting," said Li Ning, an analyst at Shanghai CIFCO Futures. "Technically, gold is poised for some correction after last week's rally, as there is still quite a bit of pressure at the $1,640 level.
Baltic index slides on slow freight business
July 27 (Reuters) - The Baltic Exchange's main sea freight index, which tracks rates to ship dry commodities, fell on Friday as the market continued to struggle with slower cargo trade and mounting fleet growth.
The overall index fell 2.61 percent or 25 points to 933 points. The index fell for the fourteenth straight day and has declined over 10 percent this week.
20120730 1127 Global Markets & Commodities Related News.
GLOBAL MARKETS-Shares extend gains on stimulus hopes
TOKYO, July 30 (Reuters) - Asian shares extended their gains on Monday, supported by expectations the Federal Reserve and the European Central Bank will deliver new measures to underpin their fragile economies.
"It (the GDP) contained enough weakness to support the Fed's commitment to an exceptionally long period of nearly zero overnight interest rates," said Richard Hastings, macro strategist at Global Hunter Securities.
COMMODITIES-Stimulus, euro hopes too late to prevent weekly loss
NEW YORK, July 27 (Reuters) - Commodities rose the most in over a week on Friday, but a renewed rally in drought-stricken grain markets and growing hopes for further global stimulus came too late to prevent the sector's first weekly decline in over a month.
"Financial markets see a benign mix of gently rising risk appetite as worries over an imminent euro zone disaster ease and prospects for another U.S. stimulus increase," said Carsten Fritsch, oil analyst at Commerzbank in Frankfurt.
Oil market playing chicken with Saudi Arabia
(Robert Campbell is a Reuters market analyst. The views expressed are his own.)
NEW YORK, July 27 (Reuters) - Crude oil has shown great resilience in the face of unsupportive data over the last month, bolstered by traders' optimism that central banks will prime the economic pump yet again by printing more money.
Even traders who acknowledge that sentiment may have lifted crude temporarily out of alignment with fundamentals say they have to keep buying. Momentum can be friendly, after all.
The trick, of course, is knowing when to stop chasing the crowd, because when sentiment shifts, the reckoning can be brutal.
OIL-Brent holds above $106, eyes on US, Europe stimulus
SINGAPORE, July 30 (Reuters) - Brent crude held above $106 per barrel on Monday, after rising for four straight sessions on hopes the United States and Europe will this week announce new measures to shore up their fragile economies, boosting the outlook for oil demand.
"If unemployment starts to worsen, you can be sure that the FOMC are going to step in and inject more stimulus into the economy," said Tony Nunan, a Tokyo-based risk manager at Mitsubishi Corp.
POLL-Iran tensions to keep oil above $100 into 2013
July 26 (Reuters) - Fewer analysts project oil prices at $100 or less over the next two years this month than last, as Iranian tensions and expectations of money printing by the global central banks outweighed concerns about economic growth.
A Reuters poll showed on Friday that eight of 30 respondents in the monthly survey forecast Brent crude to average $100 a barrel or less in 2013 and six of 19 analysts expect the same in 2014.
Japan's Iran crude imports drop 33.9 pct y/y in June
TOKYO, July 30 (Reuters) - Japan's crude imports from Iran fell 33.9 percent in June from a year earlier, as refiners reduced purchases from the Islamic Republic before the imposition of EU sanctions from July 1.
Customs-cleared imports from Iran fell to 812,693 kilolitres (170,389 barrels per day), Ministry of Finance data showed on Monday.
NATURAL GAS-US Aug natgas futures expire down 3 pct, longs take profits
NEW YORK, July 27 (Reuters) - U.S. natural gas futures, pressured by some long liquidation or profit taking ahead of the August contract expiration, ended lower on Friday, but supportive inventory data and warm weather forecasts for the next two weeks helped limit the downside.
"Prices were drifting a little lower late this week ahead of expiration, but we've had a lot of warm weather, and I haven't seen any reports calling for a sizeable break in the heat," said Tom Saal, senior vice president at INTL Hencorp Futures.
EURO COAL-Prices rise 50c-$1/T but discounts deepen
LONDON, July 27 (Reuters) - Physical prompt European coal prices rose by around 50 cents to $1.00 a tonne on Friday, bolstered by strong swaps values, but weak fundamentals could reassert themselves soon and pull prices down, traders and utilities said.
"Fixed prices have gone up today but the discounts to indexes have increased," one European trader said. "These prices are not justified by fundamentals," the trader said.
TOKYO, July 30 (Reuters) - Asian shares extended their gains on Monday, supported by expectations the Federal Reserve and the European Central Bank will deliver new measures to underpin their fragile economies.
"It (the GDP) contained enough weakness to support the Fed's commitment to an exceptionally long period of nearly zero overnight interest rates," said Richard Hastings, macro strategist at Global Hunter Securities.
COMMODITIES-Stimulus, euro hopes too late to prevent weekly loss
NEW YORK, July 27 (Reuters) - Commodities rose the most in over a week on Friday, but a renewed rally in drought-stricken grain markets and growing hopes for further global stimulus came too late to prevent the sector's first weekly decline in over a month.
"Financial markets see a benign mix of gently rising risk appetite as worries over an imminent euro zone disaster ease and prospects for another U.S. stimulus increase," said Carsten Fritsch, oil analyst at Commerzbank in Frankfurt.
Oil market playing chicken with Saudi Arabia
(Robert Campbell is a Reuters market analyst. The views expressed are his own.)
NEW YORK, July 27 (Reuters) - Crude oil has shown great resilience in the face of unsupportive data over the last month, bolstered by traders' optimism that central banks will prime the economic pump yet again by printing more money.
Even traders who acknowledge that sentiment may have lifted crude temporarily out of alignment with fundamentals say they have to keep buying. Momentum can be friendly, after all.
The trick, of course, is knowing when to stop chasing the crowd, because when sentiment shifts, the reckoning can be brutal.
OIL-Brent holds above $106, eyes on US, Europe stimulus
SINGAPORE, July 30 (Reuters) - Brent crude held above $106 per barrel on Monday, after rising for four straight sessions on hopes the United States and Europe will this week announce new measures to shore up their fragile economies, boosting the outlook for oil demand.
"If unemployment starts to worsen, you can be sure that the FOMC are going to step in and inject more stimulus into the economy," said Tony Nunan, a Tokyo-based risk manager at Mitsubishi Corp.
POLL-Iran tensions to keep oil above $100 into 2013
July 26 (Reuters) - Fewer analysts project oil prices at $100 or less over the next two years this month than last, as Iranian tensions and expectations of money printing by the global central banks outweighed concerns about economic growth.
A Reuters poll showed on Friday that eight of 30 respondents in the monthly survey forecast Brent crude to average $100 a barrel or less in 2013 and six of 19 analysts expect the same in 2014.
Japan's Iran crude imports drop 33.9 pct y/y in June
TOKYO, July 30 (Reuters) - Japan's crude imports from Iran fell 33.9 percent in June from a year earlier, as refiners reduced purchases from the Islamic Republic before the imposition of EU sanctions from July 1.
Customs-cleared imports from Iran fell to 812,693 kilolitres (170,389 barrels per day), Ministry of Finance data showed on Monday.
NATURAL GAS-US Aug natgas futures expire down 3 pct, longs take profits
NEW YORK, July 27 (Reuters) - U.S. natural gas futures, pressured by some long liquidation or profit taking ahead of the August contract expiration, ended lower on Friday, but supportive inventory data and warm weather forecasts for the next two weeks helped limit the downside.
"Prices were drifting a little lower late this week ahead of expiration, but we've had a lot of warm weather, and I haven't seen any reports calling for a sizeable break in the heat," said Tom Saal, senior vice president at INTL Hencorp Futures.
EURO COAL-Prices rise 50c-$1/T but discounts deepen
LONDON, July 27 (Reuters) - Physical prompt European coal prices rose by around 50 cents to $1.00 a tonne on Friday, bolstered by strong swaps values, but weak fundamentals could reassert themselves soon and pull prices down, traders and utilities said.
"Fixed prices have gone up today but the discounts to indexes have increased," one European trader said. "These prices are not justified by fundamentals," the trader said.
20120730 1115 Malaysia Corporate Related News.
New market reps to lure investors
Faced with an ageing remisiers pool, stockbroking companies have forwarded a proposal to the Securities Commission (SC) Malaysia to create two new categories of capital market representatives. The new market representatives are to complement remisiers in bringing more retail business. This objective that runs parallel with that of the SC’s, which is currently deliberating on the proposal that could help reverse dwindling retail participation in the market. (Financial Daily)
Ken Holding Bhd’s RM1.22bn project dwarfs its market cap
Ken Holdings Bhd is poised to embark on a huge development project in Johor Bahru. The proposed mixed development, with an estimated gross development value (GDV) of RM1.22bn over six to seven years, is expected to deliver gross profit of RM301m, about three times the company’s current market capitalization of RM114.1m, at its closing price of RM1.19 last Friday. For the project, the company acquired four parcels of land through the proposed acquisition of a 100% stake in land owner Gadini SB from Malaysia Building Society Bhd. The acquisition is now in the final stages. (Financial Daily)
Banking system stirred
A recent issuance of banking licenses in Singapore may have some implications on the Malaysian banking system, according to industry sources. Recently, the Monetary Authority of Singapore (MAS) said it would be granting two full-fledged licenses in the city state to two yet unnamed Chinese. The full banking licenses, called Qualifying Full Bank (QFB) licenses in Singapore, will be issued to two Chinese banks already operating in Singapore. (StarBiz)
MRCB in line for RM1bn MRT job
Malaysian Resources Corp Bhd (MRCB) is expected to win a contract worth about RM1bn this week for the Sungai Buloh-Kajang My Rapid Transit (MRT) line. If awarded, this will be the first railway-related job for MRCB this year. The contract is expected to boost MRCB’s existing order book to more than RM2.5bn. (BT)
Bank Indonesia turns to Chinese bonds for diversity
Indonesia’s central bank is set to buy Chinese bonds by year end, helping to diversify its holdings of foreign reserves and cushion the archipelago from external shocks to its financial system. The planned purchase would mark Bank Indonesia’s first ever move to buy China’s interbank bonds, said Hartadi A. Sarwono, a deputy governor for research and monetary policy at the central bank. (BT)
Seaport Terminal charts course for Penang Port
Seaport Terminal SB – the successful bidder for the proposed privatization of Penang Port SB (PPSB) – broke its silence last week by assuring that it is committed to invest in increasing the capacity of the country’s oldest port. In a statement, the Tan Sri Syed Mokhtar al-Bukhary-owned company said it will deepen the navigation channel according to the needs of the port and dispelled claims that no dredging works will be carried out to deepen the northern channel. (BT)
MPHB: Govt liberalization will help boost legal betting
Multi-Purpose Holdings Bhd (MPHB) expects growth for its wholly-owned gaming arm, Magnum Corp SB, to come mainly from the migration of gamers from one end of the spectrum – the illegal games – to the legal ones in view of potential liberalization by the government. MPHB managing director Tan Sri Lau Kim Khoon@Surin Upatkoon believes the games that Magnum creates, such as the 4D Jackpot, cannot be duplicated by illegal gaming syndicates due to their sheer size, and this advantage is crucial in pulling customers away from illegal games. (Malaysian Reserve)
Bonus for civil servants will not affect Govt’s deficit reduction plan
The half-month bonus payment to civil servants, which will involve a total payout of RM2.2bn, will not disturb the government’s deficit target, said Second Finance Minister Datuk Seri Ahmad Husni Hanadzlah yesterday. The country’s finances can afford a yearly bonus payout through the government devices, and the government debt is under control, he said. (Malaysian Reserve)
Oka Corp gains RM8.4m on revaluation
Oka Corp Bhd has made a gain of RM8.4m from a revaluation exercise of its properties in the country. The gain sees the concrete and readymix product maker’s net asset per share value rise to RM1.56 per share from RM1.43 per share as at the end of 31 Mar 201, according to an exchange filing last Friday. (Malaysian Reserve)
MAHB: Posts higher 2Q earnings on improved passenger traffic
Malaysia Airports Holdings (MAHB) posted a higher net profit of RM100.69m for the second quarter ended June 30 against RM91.1m a year ago. The improved performance was driven by growth in passenger traffic and commercial revenue. Its revenue rose 21.9% to RM807.8m from RM662.7m in the same corresponding period a year ago. Earnings per share increased to 8.32 sen in the second quarter from 8.28 sen previously. CFO Faizal Mansor said the results were good for the first 6 months and the group was on track to achieve its headline key performance indicators. (StarBiz)
MAHB: KLIA2 airport tax to remain unchanged
Malaysia Airports Holdings (MAHB) CFO Faizal Mansor said the airport tax for the new lowcost carrier terminal KLIA2 would remain unchanged when it begins operations in April next year. He said the charges are, however, regulated by the government, and it is the government's decision whether to increase or lower the tax. Faizal was responding to AirAsia X Chairman Tan Sri Rafidah Aziz's statement Thursday that timeliness and a concrete blackand-white commitment on fixed airport charges in the new low-cost carrier terminal are needed to cool down the ongoing tension between AirAsia Chief Tan Sri Tony Fernandes and MAHB. (Bernama)
Malaysia Resources Corporation: To get 60-acre prime land boost
The EPF is planning to inject a dose of entrepreneurship into its property business. MRCB, the EPF’s property and construction arm, is in negotiations to acquire private developer Nusa Gapurna Development Sdn Bhd, a Klang Valey-based property concern owned by businessman Datuk Mohamad Salim Fateh Din through Gapurna Sdn Bhd. The deal, to be financed via an exchange of shares, will give the politically well-connected businessman a direct stake in MRCB and a lead management role in the merged entity. A Gapurna executive said Gapurna is the midst of preparing a proposal for consideration by the MRCB board. However, he said the valuations for the deal have not been finalized and parties are looking at the possibilities. (The Edge Weekly)
AirAsia: Indonesia may cancel acquisition Of Batavia Air
The Indonesian government may cancel the acquisition of local airline Batavia Air by Malaysia's AirAsia Bhd and its Indonesian partner, if the transaction breaches the ownership limit imposed on foreign companies in national airlines. The English weekly, Sunday Post, quoted the Director General of Indonesian Transportation Ministry Herry Bhakti Gumay as saying that AirAsia and its partner in the acquisition, PT Fersindo Nusaperkasa, had yet to report their acquisition to the ministry. Herry said the Indonesian government will give Batavia, AirAsia and Fersindo Nusaperkasa one month to report their plan to them. He added that they will cancel the acquisition process if Indonesia is not the majority shareholder. Herry also said the ministry would not hesitate to revoke Batavia Air's flight permit. (Bernama)
KYM Holdings: Pecoh could attract US$5bn in steel mill investment
Riding on the upcoming Vale iron ore distribution centre, the Perak Eco Industrial Hub (Pecoh) in Lumut to be developed by KYM Holdings with the state and other parties could attract some US$5bn in investment from an international steel mill among others. COO Allan Chin Kong Yaw said Boston Consulting Group (BCG) was appointed to conduct a study last year and the findings indicate that the 1,376ha Pecoh has the potential to house a large steel mill with production capacity of up to 5m tonnes a year. (Financial Daily)
Kim Loong Resources: To drive downstream business with RM10m R&D investment
Kim Loong Resources has allocated about RM10m for research and development (R&D) to drive its downstream business forward. Its executive chairman, Gooi Seong Lim, said considering the high land prices, the group would not be actively looking to expand its landbank. Nevertheless, he said, the company has set aside fund for land acquisition if the opportunity arose. He said they aim to make this business sustainable by shifting our focus on the downstream sector to make something useful from the palm oil waste, such as developing our biogas power generator and other uses of biomass. Gooi said the group was eyeing something more higher-end, such as cellulose fibre, which could be used to make paper and fabrics. (Bernama)
Crescendo Corporation: To launch Johor township with GDV of RM3bn
Crescendo Corporation is preparing to launch its Bandar Cemerlang township, a development spanning 1,390 acres in Johor. The project will have a GDV of RM3bn over 10 to 15 years. MD Gooi Seong Lim said the company will start the development with some medium-cost houses in phase one which will have a GDV of about RM150m. He added that the township is strategically located near Ulu Tiram town and can be accessed via Johor Baru-Kota Tinggi Highway. He also said Crescendo is enjoying good demand for its Nusa Cemerlang Industrial Park (NCIP) in view of Singapore government's strategy to relocate some of its medium and small industries to Johor. As such, the company plans to develop about 50% of NCIP landbank in the next couple of years and convert some of the land into business park that would entail developments with higher value. (StarBiz)
Integrax: Vale Malaysia open to collaboration
Vale Malaysia Minerals Sdn Bhd, the local unit of Vale SA, is open to discussions with Integrax and other parties on collaboration for its iron ore distribution center and port in Lumut, Perak, said director Marcelo Figueiredo. He said Integrax had approached them and they are currently studying everything in an open way. (Financial Daily)
Integrax: Signs handling services deal with TNB
Integrax’s subsidiary has sealed a 28-year contract with Tenaga Nasional (TNB) to provide handling services for the importation of coal for the latter's power plant in Telok Rubiah, Perak. The company said its unit, Lekir Bulk Terminal Sdn Bhd (LBT), had signed a new jetty terminal usage agreement with TNB’s unit TNB Janamanjung Sdn Bhd (TNBJ) for the coal imports to be used in the new 1,010MW coal-fired power plant. Integrax said the agreement would expire on March 30, 2040. Under the agreement, LBT will procure and appoint a reputable contractor to undertake the design, engineering, procurement and construction of about 80-tonne grab bucket unloader, feeder conveyors and its associated equipment and structures. Integrax added that the agreement would continue to be effective and subsist after the initial period so long as the power plant was in operations and provided that TNBJ and LBT reached an agreement on the base operating payments and tonnage payments to be charged after expiration of the initial period. (StarBiz)
Ajiya: Unit to build factory in Thailand
Ajiya subsidiary Thai Ajiya Safety Glass Co Ltd will design, build and complete two units of factory-cum-three-storey office main building and associated external works at Amatanakorn Industrial Estate, Chonburi, Thailand, for 167.8m baht. Ajiya said in a statement that the company signed a contract yesterday with Vanbilv Co Ltd entailing the payment or such other sum as would become payable equivalent to RM16.78m. (StarBiz)
Building Materials: CMS Cement says will not raise price
CMS Cement Sdn Bhd, Sarawak’s sole cement producer and manufacturer, will not raise the price of cement despite recent reports of a nationwide cement price hike, Cahya Mata Sarawak group MD Datuk Richard Curtis said. He said CMS had always remained committed to the state’s socio-economic growth and would not increase its prices although cement production in Sarawak posed a logistical challenge due to terrain, raw materials and geographical population spread. In considering the impact of its price hike on the construction sector, he said, CMS also respected the Malaysian Competition Act and did not engage in price discussions with any Malaysian cement producers. (StarBiz)
Building Materials: MBAM wants ministry to investigate possible hike in cement prices
The Master Builders Association Malaysia (MBAM), concerned over a possible hike in cement prices, is appealing to the Domestic Trade, Co-operatives and Consumerism Ministry to look into the matter immediately. In a statement, MBAM said it had been notified by a member that a major cement manufacturer would be increasing cement price in the Klang Valley beginning Aug 1. The listed price of cement will increase to RM17.75 per bag, from RM16.75 previously, while the listed price of cement bulk will cost RM340 per tonne from RM320 per tonne earlier. (Bernama)
Construction: Firms keen on high-speed rail job must bid via tender exercise
The Land Public Transport Commission (SPAD) will not be considering proposals submitted previously by several companies for the high-speed rail project linking Kuala Lumpur and Singapore, a key official said. SPAD chief development officer Azmi Abdul Aziz said companies which have submitted proposals and are still interested in the high-speed rail project will have to participate in the tender exercise to be called next year. Business Times reported previously that UEM Group-Hartasuma, China Infraglobe Consortium-Global Rail and YTL Corporation have made presentations on the project to the National Key Economic Area laboratory. Azmi said the feasibility study that is currently being carried out by SPAD does not include details pen out in their proposals as the commission does not want to be influenced by any of the studies that they have carried out in preparing their proposals. (Business Times)
Oil & Gas: Petronas raises Progress Energy offer after rival bid
Progress Energy Resources Corp said Malaysia's state oil company Petronas has agreed to raise its offer to buy the Canadian natural gas producer by 8% after Progress received an unsolicited proposal from a third party. Petronas, which in June launched a C$20.45 per share offer for Progress, will now pay C$22.00 for each share, or C$5.17bn ($5.12bn) in total. Progress did not name the third party that made the unsolicited offer, but said its board has approved Petronas's latest offer. (StarBiz)
Plantation: Players positive on palm oil price will remain strong
Local plantation players say crude palm oil (CPO) is still fundamentally strong with the average price this year expected in the range of RM2,800 to RM3,000 per tonne. Many disagree with international palm oil expert Dorab Mistry, who recently forecast that CPO might decline to RM2,700 per tonne by year-end due to poor offtakes, and even slump to RM2,200 per tonne if there was a repeat of the 2008 financial crisis. United Malacca CEO Dr Leong Tat Thim is positive that the average CPO price can reach RM3,000 per tonne this year. The average MPOB price for the six months of this year was already at RM3,207 per tonne. (StarBiz)
Steel: M&As can help steel makers better tap strong demand in Asean
Malaysian Iron and Steel Industry Federation (Misif) president Datuk Soh Thian Lai said mergers and acquisitions (M&As) are needed among Malaysian steel manufacturers to better tap the strong demand for steel products in the Asean region as a large entity can increase production efficiency and obtain cost savings and economies of scale. Soh, who is also group MD and CEO of Yung Kong Galvanising Industries, said Asean countries were still net importers of steel products. (StarBiz)
Economy: Malaysia’s credit rating affirmed
Standard and Poor’s (S&P) Ratings Services on Friday affirmed its A-/A-2 foreign currency and A/A-1 local currency sovereign credit ratings on Malaysia, with a stable outlook. In a statement yesterday, it also affirmed its Asean scale rating on Malaysia at axAAA/axA-1+. It said the sovereign credit rating on Malaysia reflects the country’s strong external liquidity position, its competitive middle-income economy and high savings rate. (Business Times)
Faced with an ageing remisiers pool, stockbroking companies have forwarded a proposal to the Securities Commission (SC) Malaysia to create two new categories of capital market representatives. The new market representatives are to complement remisiers in bringing more retail business. This objective that runs parallel with that of the SC’s, which is currently deliberating on the proposal that could help reverse dwindling retail participation in the market. (Financial Daily)
Ken Holding Bhd’s RM1.22bn project dwarfs its market cap
Ken Holdings Bhd is poised to embark on a huge development project in Johor Bahru. The proposed mixed development, with an estimated gross development value (GDV) of RM1.22bn over six to seven years, is expected to deliver gross profit of RM301m, about three times the company’s current market capitalization of RM114.1m, at its closing price of RM1.19 last Friday. For the project, the company acquired four parcels of land through the proposed acquisition of a 100% stake in land owner Gadini SB from Malaysia Building Society Bhd. The acquisition is now in the final stages. (Financial Daily)
Banking system stirred
A recent issuance of banking licenses in Singapore may have some implications on the Malaysian banking system, according to industry sources. Recently, the Monetary Authority of Singapore (MAS) said it would be granting two full-fledged licenses in the city state to two yet unnamed Chinese. The full banking licenses, called Qualifying Full Bank (QFB) licenses in Singapore, will be issued to two Chinese banks already operating in Singapore. (StarBiz)
MRCB in line for RM1bn MRT job
Malaysian Resources Corp Bhd (MRCB) is expected to win a contract worth about RM1bn this week for the Sungai Buloh-Kajang My Rapid Transit (MRT) line. If awarded, this will be the first railway-related job for MRCB this year. The contract is expected to boost MRCB’s existing order book to more than RM2.5bn. (BT)
Bank Indonesia turns to Chinese bonds for diversity
Indonesia’s central bank is set to buy Chinese bonds by year end, helping to diversify its holdings of foreign reserves and cushion the archipelago from external shocks to its financial system. The planned purchase would mark Bank Indonesia’s first ever move to buy China’s interbank bonds, said Hartadi A. Sarwono, a deputy governor for research and monetary policy at the central bank. (BT)
Seaport Terminal charts course for Penang Port
Seaport Terminal SB – the successful bidder for the proposed privatization of Penang Port SB (PPSB) – broke its silence last week by assuring that it is committed to invest in increasing the capacity of the country’s oldest port. In a statement, the Tan Sri Syed Mokhtar al-Bukhary-owned company said it will deepen the navigation channel according to the needs of the port and dispelled claims that no dredging works will be carried out to deepen the northern channel. (BT)
MPHB: Govt liberalization will help boost legal betting
Multi-Purpose Holdings Bhd (MPHB) expects growth for its wholly-owned gaming arm, Magnum Corp SB, to come mainly from the migration of gamers from one end of the spectrum – the illegal games – to the legal ones in view of potential liberalization by the government. MPHB managing director Tan Sri Lau Kim Khoon@Surin Upatkoon believes the games that Magnum creates, such as the 4D Jackpot, cannot be duplicated by illegal gaming syndicates due to their sheer size, and this advantage is crucial in pulling customers away from illegal games. (Malaysian Reserve)
Bonus for civil servants will not affect Govt’s deficit reduction plan
The half-month bonus payment to civil servants, which will involve a total payout of RM2.2bn, will not disturb the government’s deficit target, said Second Finance Minister Datuk Seri Ahmad Husni Hanadzlah yesterday. The country’s finances can afford a yearly bonus payout through the government devices, and the government debt is under control, he said. (Malaysian Reserve)
Oka Corp gains RM8.4m on revaluation
Oka Corp Bhd has made a gain of RM8.4m from a revaluation exercise of its properties in the country. The gain sees the concrete and readymix product maker’s net asset per share value rise to RM1.56 per share from RM1.43 per share as at the end of 31 Mar 201, according to an exchange filing last Friday. (Malaysian Reserve)
MAHB: Posts higher 2Q earnings on improved passenger traffic
Malaysia Airports Holdings (MAHB) posted a higher net profit of RM100.69m for the second quarter ended June 30 against RM91.1m a year ago. The improved performance was driven by growth in passenger traffic and commercial revenue. Its revenue rose 21.9% to RM807.8m from RM662.7m in the same corresponding period a year ago. Earnings per share increased to 8.32 sen in the second quarter from 8.28 sen previously. CFO Faizal Mansor said the results were good for the first 6 months and the group was on track to achieve its headline key performance indicators. (StarBiz)
MAHB: KLIA2 airport tax to remain unchanged
Malaysia Airports Holdings (MAHB) CFO Faizal Mansor said the airport tax for the new lowcost carrier terminal KLIA2 would remain unchanged when it begins operations in April next year. He said the charges are, however, regulated by the government, and it is the government's decision whether to increase or lower the tax. Faizal was responding to AirAsia X Chairman Tan Sri Rafidah Aziz's statement Thursday that timeliness and a concrete blackand-white commitment on fixed airport charges in the new low-cost carrier terminal are needed to cool down the ongoing tension between AirAsia Chief Tan Sri Tony Fernandes and MAHB. (Bernama)
Malaysia Resources Corporation: To get 60-acre prime land boost
The EPF is planning to inject a dose of entrepreneurship into its property business. MRCB, the EPF’s property and construction arm, is in negotiations to acquire private developer Nusa Gapurna Development Sdn Bhd, a Klang Valey-based property concern owned by businessman Datuk Mohamad Salim Fateh Din through Gapurna Sdn Bhd. The deal, to be financed via an exchange of shares, will give the politically well-connected businessman a direct stake in MRCB and a lead management role in the merged entity. A Gapurna executive said Gapurna is the midst of preparing a proposal for consideration by the MRCB board. However, he said the valuations for the deal have not been finalized and parties are looking at the possibilities. (The Edge Weekly)
AirAsia: Indonesia may cancel acquisition Of Batavia Air
The Indonesian government may cancel the acquisition of local airline Batavia Air by Malaysia's AirAsia Bhd and its Indonesian partner, if the transaction breaches the ownership limit imposed on foreign companies in national airlines. The English weekly, Sunday Post, quoted the Director General of Indonesian Transportation Ministry Herry Bhakti Gumay as saying that AirAsia and its partner in the acquisition, PT Fersindo Nusaperkasa, had yet to report their acquisition to the ministry. Herry said the Indonesian government will give Batavia, AirAsia and Fersindo Nusaperkasa one month to report their plan to them. He added that they will cancel the acquisition process if Indonesia is not the majority shareholder. Herry also said the ministry would not hesitate to revoke Batavia Air's flight permit. (Bernama)
KYM Holdings: Pecoh could attract US$5bn in steel mill investment
Riding on the upcoming Vale iron ore distribution centre, the Perak Eco Industrial Hub (Pecoh) in Lumut to be developed by KYM Holdings with the state and other parties could attract some US$5bn in investment from an international steel mill among others. COO Allan Chin Kong Yaw said Boston Consulting Group (BCG) was appointed to conduct a study last year and the findings indicate that the 1,376ha Pecoh has the potential to house a large steel mill with production capacity of up to 5m tonnes a year. (Financial Daily)
Kim Loong Resources: To drive downstream business with RM10m R&D investment
Kim Loong Resources has allocated about RM10m for research and development (R&D) to drive its downstream business forward. Its executive chairman, Gooi Seong Lim, said considering the high land prices, the group would not be actively looking to expand its landbank. Nevertheless, he said, the company has set aside fund for land acquisition if the opportunity arose. He said they aim to make this business sustainable by shifting our focus on the downstream sector to make something useful from the palm oil waste, such as developing our biogas power generator and other uses of biomass. Gooi said the group was eyeing something more higher-end, such as cellulose fibre, which could be used to make paper and fabrics. (Bernama)
Crescendo Corporation: To launch Johor township with GDV of RM3bn
Crescendo Corporation is preparing to launch its Bandar Cemerlang township, a development spanning 1,390 acres in Johor. The project will have a GDV of RM3bn over 10 to 15 years. MD Gooi Seong Lim said the company will start the development with some medium-cost houses in phase one which will have a GDV of about RM150m. He added that the township is strategically located near Ulu Tiram town and can be accessed via Johor Baru-Kota Tinggi Highway. He also said Crescendo is enjoying good demand for its Nusa Cemerlang Industrial Park (NCIP) in view of Singapore government's strategy to relocate some of its medium and small industries to Johor. As such, the company plans to develop about 50% of NCIP landbank in the next couple of years and convert some of the land into business park that would entail developments with higher value. (StarBiz)
Integrax: Vale Malaysia open to collaboration
Vale Malaysia Minerals Sdn Bhd, the local unit of Vale SA, is open to discussions with Integrax and other parties on collaboration for its iron ore distribution center and port in Lumut, Perak, said director Marcelo Figueiredo. He said Integrax had approached them and they are currently studying everything in an open way. (Financial Daily)
Integrax: Signs handling services deal with TNB
Integrax’s subsidiary has sealed a 28-year contract with Tenaga Nasional (TNB) to provide handling services for the importation of coal for the latter's power plant in Telok Rubiah, Perak. The company said its unit, Lekir Bulk Terminal Sdn Bhd (LBT), had signed a new jetty terminal usage agreement with TNB’s unit TNB Janamanjung Sdn Bhd (TNBJ) for the coal imports to be used in the new 1,010MW coal-fired power plant. Integrax said the agreement would expire on March 30, 2040. Under the agreement, LBT will procure and appoint a reputable contractor to undertake the design, engineering, procurement and construction of about 80-tonne grab bucket unloader, feeder conveyors and its associated equipment and structures. Integrax added that the agreement would continue to be effective and subsist after the initial period so long as the power plant was in operations and provided that TNBJ and LBT reached an agreement on the base operating payments and tonnage payments to be charged after expiration of the initial period. (StarBiz)
Ajiya: Unit to build factory in Thailand
Ajiya subsidiary Thai Ajiya Safety Glass Co Ltd will design, build and complete two units of factory-cum-three-storey office main building and associated external works at Amatanakorn Industrial Estate, Chonburi, Thailand, for 167.8m baht. Ajiya said in a statement that the company signed a contract yesterday with Vanbilv Co Ltd entailing the payment or such other sum as would become payable equivalent to RM16.78m. (StarBiz)
Building Materials: CMS Cement says will not raise price
CMS Cement Sdn Bhd, Sarawak’s sole cement producer and manufacturer, will not raise the price of cement despite recent reports of a nationwide cement price hike, Cahya Mata Sarawak group MD Datuk Richard Curtis said. He said CMS had always remained committed to the state’s socio-economic growth and would not increase its prices although cement production in Sarawak posed a logistical challenge due to terrain, raw materials and geographical population spread. In considering the impact of its price hike on the construction sector, he said, CMS also respected the Malaysian Competition Act and did not engage in price discussions with any Malaysian cement producers. (StarBiz)
Building Materials: MBAM wants ministry to investigate possible hike in cement prices
The Master Builders Association Malaysia (MBAM), concerned over a possible hike in cement prices, is appealing to the Domestic Trade, Co-operatives and Consumerism Ministry to look into the matter immediately. In a statement, MBAM said it had been notified by a member that a major cement manufacturer would be increasing cement price in the Klang Valley beginning Aug 1. The listed price of cement will increase to RM17.75 per bag, from RM16.75 previously, while the listed price of cement bulk will cost RM340 per tonne from RM320 per tonne earlier. (Bernama)
Construction: Firms keen on high-speed rail job must bid via tender exercise
The Land Public Transport Commission (SPAD) will not be considering proposals submitted previously by several companies for the high-speed rail project linking Kuala Lumpur and Singapore, a key official said. SPAD chief development officer Azmi Abdul Aziz said companies which have submitted proposals and are still interested in the high-speed rail project will have to participate in the tender exercise to be called next year. Business Times reported previously that UEM Group-Hartasuma, China Infraglobe Consortium-Global Rail and YTL Corporation have made presentations on the project to the National Key Economic Area laboratory. Azmi said the feasibility study that is currently being carried out by SPAD does not include details pen out in their proposals as the commission does not want to be influenced by any of the studies that they have carried out in preparing their proposals. (Business Times)
Oil & Gas: Petronas raises Progress Energy offer after rival bid
Progress Energy Resources Corp said Malaysia's state oil company Petronas has agreed to raise its offer to buy the Canadian natural gas producer by 8% after Progress received an unsolicited proposal from a third party. Petronas, which in June launched a C$20.45 per share offer for Progress, will now pay C$22.00 for each share, or C$5.17bn ($5.12bn) in total. Progress did not name the third party that made the unsolicited offer, but said its board has approved Petronas's latest offer. (StarBiz)
Plantation: Players positive on palm oil price will remain strong
Local plantation players say crude palm oil (CPO) is still fundamentally strong with the average price this year expected in the range of RM2,800 to RM3,000 per tonne. Many disagree with international palm oil expert Dorab Mistry, who recently forecast that CPO might decline to RM2,700 per tonne by year-end due to poor offtakes, and even slump to RM2,200 per tonne if there was a repeat of the 2008 financial crisis. United Malacca CEO Dr Leong Tat Thim is positive that the average CPO price can reach RM3,000 per tonne this year. The average MPOB price for the six months of this year was already at RM3,207 per tonne. (StarBiz)
Steel: M&As can help steel makers better tap strong demand in Asean
Malaysian Iron and Steel Industry Federation (Misif) president Datuk Soh Thian Lai said mergers and acquisitions (M&As) are needed among Malaysian steel manufacturers to better tap the strong demand for steel products in the Asean region as a large entity can increase production efficiency and obtain cost savings and economies of scale. Soh, who is also group MD and CEO of Yung Kong Galvanising Industries, said Asean countries were still net importers of steel products. (StarBiz)
Economy: Malaysia’s credit rating affirmed
Standard and Poor’s (S&P) Ratings Services on Friday affirmed its A-/A-2 foreign currency and A/A-1 local currency sovereign credit ratings on Malaysia, with a stable outlook. In a statement yesterday, it also affirmed its Asean scale rating on Malaysia at axAAA/axA-1+. It said the sovereign credit rating on Malaysia reflects the country’s strong external liquidity position, its competitive middle-income economy and high savings rate. (Business Times)
20120730 1114 Global Economy Related News.
South Korea: Manufacturer confidence drops to three-year low on Europe woes
South Korean manufacturers’ confidence dropped to the lowest level in more than three years as Europe’s worsening fiscal crisis damped sentiment in a country where exports make up about half the economy. An index measuring expectations for August was at 70, the lowest level since May 2009, after dropping from a revised 81 in July. A measure of expectations at non-manufacturing companies also dropped to 69 from a revised 76. Consumer confidence fell to a five-month low in July, the Bank of Korea said on 25 July. (Bloomberg)
EU: Spain jobless reaches post-Franco record amid austerity
Spanish unemployment rose to the highest on record after Prime Minister Mariano Rajoy made it easier to fire workers, while implementing the steepest budget cuts in the country’s recent democratic history. Unemployment, already the highest in the European Union, rose to 24.6% in the 2Q2012 from 24.4% in 1Q2012. More than 50% of under-25 year olds are already jobless in Spain and overall unemployment is as high as 33.9% in the southern region of Andalusia. (Bloomberg)
EU: German inflation unexpectedly held steady in July on oil prices
German inflation unexpectedly held steady in July after energy prices rose. Inflation, calculated using a harmonized European Union method, stayed at 2% in July while economists forecasted a decline to 1.9%. Consumer prices rose 0.4% m-o-m. Non-harmonized inflation remained at 1.7%, with prices rising 0.4% from June. (Bloomberg)
UK: Osborne urged to think again as triple-dip recession predicted
Chancellor of the Exchequer George Osborne was urged by businesses and his political opponents to reconsider the UK’s austerity strategy, as economists warned the nation could face a “triple-dip” recession. Osborne is facing renewed criticism after figures released last week showed Britain’s recession deepened in the second quarter, prompting questions about his economic plans and whether he should remain at the Treasury. GDP fell 0.7% from the first quarter, the third consecutive quarterly decline. Osborne said he will maintain the UK’s austerity program even as the economy remains weak after Standard & Poor’s reaffirmed the nation’s AAA credit rating. (Bloomberg)
US: Growth slows as consumers restrain spending
The world’s largest economy cooled in the second quarter as limited job growth prompted Americans to curb spending while state and local governments cut back. GDP, the value of all goods and services produced, rose at a 1.5% annual rate after a revised 2% gain in the prior quarter. Household purchases, which account for about 70% of GDP, grew at the slowest pace in a year. Household consumption rose at a 1.5% rate from April through June, down from a 2.4% gain in the prior quarter. Purchases added 1.05 ppt to growth. (Bloomberg)
Dow Jones posts another triple-digit gain
Stocks posted steep gains for a second day on Friday, reclaiming a weekly advance as investors anticipated moves from the European Central Bank and the US Federal Reserve. The Dow Jones Industrial Average ended up 187.73 pts or 1.5%, to close at 13,075.66 pts. It was its first close above 13,000 pts since 7 May while the Standard & Poor 500 gained 25.95 points or 1.9% to 1385.97. (Star Telegram)
South Korean manufacturers’ confidence dropped to the lowest level in more than three years as Europe’s worsening fiscal crisis damped sentiment in a country where exports make up about half the economy. An index measuring expectations for August was at 70, the lowest level since May 2009, after dropping from a revised 81 in July. A measure of expectations at non-manufacturing companies also dropped to 69 from a revised 76. Consumer confidence fell to a five-month low in July, the Bank of Korea said on 25 July. (Bloomberg)
EU: Spain jobless reaches post-Franco record amid austerity
Spanish unemployment rose to the highest on record after Prime Minister Mariano Rajoy made it easier to fire workers, while implementing the steepest budget cuts in the country’s recent democratic history. Unemployment, already the highest in the European Union, rose to 24.6% in the 2Q2012 from 24.4% in 1Q2012. More than 50% of under-25 year olds are already jobless in Spain and overall unemployment is as high as 33.9% in the southern region of Andalusia. (Bloomberg)
EU: German inflation unexpectedly held steady in July on oil prices
German inflation unexpectedly held steady in July after energy prices rose. Inflation, calculated using a harmonized European Union method, stayed at 2% in July while economists forecasted a decline to 1.9%. Consumer prices rose 0.4% m-o-m. Non-harmonized inflation remained at 1.7%, with prices rising 0.4% from June. (Bloomberg)
UK: Osborne urged to think again as triple-dip recession predicted
Chancellor of the Exchequer George Osborne was urged by businesses and his political opponents to reconsider the UK’s austerity strategy, as economists warned the nation could face a “triple-dip” recession. Osborne is facing renewed criticism after figures released last week showed Britain’s recession deepened in the second quarter, prompting questions about his economic plans and whether he should remain at the Treasury. GDP fell 0.7% from the first quarter, the third consecutive quarterly decline. Osborne said he will maintain the UK’s austerity program even as the economy remains weak after Standard & Poor’s reaffirmed the nation’s AAA credit rating. (Bloomberg)
US: Growth slows as consumers restrain spending
The world’s largest economy cooled in the second quarter as limited job growth prompted Americans to curb spending while state and local governments cut back. GDP, the value of all goods and services produced, rose at a 1.5% annual rate after a revised 2% gain in the prior quarter. Household purchases, which account for about 70% of GDP, grew at the slowest pace in a year. Household consumption rose at a 1.5% rate from April through June, down from a 2.4% gain in the prior quarter. Purchases added 1.05 ppt to growth. (Bloomberg)
Dow Jones posts another triple-digit gain
Stocks posted steep gains for a second day on Friday, reclaiming a weekly advance as investors anticipated moves from the European Central Bank and the US Federal Reserve. The Dow Jones Industrial Average ended up 187.73 pts or 1.5%, to close at 13,075.66 pts. It was its first close above 13,000 pts since 7 May while the Standard & Poor 500 gained 25.95 points or 1.9% to 1385.97. (Star Telegram)
20120730 1109 Global Market Related News.
Asia FX By Cornelius Luca - Sun 29 Jul 2012 17:15:43 CT(Source:CME/www.lucafxta.com)
The foreign currencies open little changed in the Far East after the European and commodity currencies have surged since Wednesday on hopes that both ECB and the Fed will ease as early as this week in order to alleviate the Eurozone debt crisis and support the deteriorating US economy. Facts will need to meet these hopes. 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
US: Gross domestic product grew 1.5% in the second quarter, down from 2% posted in the first quarter.
US: The final Reuters and the University of Michigan consumer sentiment index for July was upwardly revised to 72.3 from the mid-month reading of 72.0.
Today's economic calendar
Japan: JMMA Manufacturing Purchasing Manager Index for July
Japan: Industrial production for June
Asian Stocks Advance Third Day on Optimism Over Europe (Source:Bloomberg)
Asian stocks rose for a third day, led by financial firms, on optimism European policy makers will support the euro and after companies including Konica Minolta (4902) Holdings Inc. and Fujifilm Holdings Corp. reporting earnings. Commonwealth Bank of Australia, Australia’s biggest lender by market value, gained 2.3 percent after the cost to protect Asian bonds against default declined. Konica Minolta, a maker of photo film that gets 28 percent of its sales in Europe, jumped 6.9 percent in Tokyo after operating profit almost doubled from a year earlier. Cnooc Ltd. (883) added 1.4 percent after U.S. regulators got a court order to freeze assets of traders who allegedly profited by trading before the energy company announced a takeover. The MSCI Asia Pacific Index added 0.9 percent to 116.99 as of 10:54 a.m. in Tokyo with about three stocks rising for each that fell. The index added 1.8 percent on July 27, the biggest gain since June 29.
“There is a strong political and financial will for the euro,” 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. “Actions that address the EU challenges will create the opportunity for a sustainable rally ahead.”
Japan Stocks Rise as European Debt-Crisis Concern Ebbs (Source:Bloomberg)
Japanese stocks rose for a third day amid optimism European policy makers will act to ease the region’s debt crisis, boosting the outlook for exporters. Makita Corp., a maker of power tools that generates 42 percent of sales in Europe, advanced 1 percent. Konica Minolta Holdings Inc. (4902) surged 7.1 percent after reporting a 94 percent increase in first-quarter operating profit. Hitachi Cable Ltd. slumped 9.2 percent as the maker of power cables and optical fiber lowered its full-year profit estimate. The Nikkei 225 Stock Average advanced 0.8 percent to 8,634.97 as of 9:59 a.m. in Tokyo, bringing its three-day gain to 3.2 percent. The broader Topix Index today climbed 0.6 percent to 730.77.
“There is a strong political and financial will for the euro,” 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 globally. “Actions that address the EU challenges will create the opportunity for a sustainable rally ahead.” Leaders in Berlin, Paris and Rome have backed European Central Bank President Mario Draghi’s approach to combat the sovereign debt crisis, saying they will do what’s needed to protect the 17-nation euro. The proposal involves the region’s rescue fund buying government bonds, two central bank officials said July 27 on condition of anonymity.
European Stocks Climb for an Eighth Week; Santander Jumps(Source:Bloomberg)
European stocks rose for an eighth week as German Chancellor Angela Merkel and French President Francois Hollande joined European Central Bank President Mario Draghi in promising to do everything to protect the euro. Banco Santander SA (SAN) jumped 14 percent as Spanish lenders led gains on the benchmark Stoxx Europe 600 Index. (SXXP) Barclays Plc (BARC), the British lender fined for rigging Libor, climbed 4.9 percent as it posted first-half profit that beat analysts’ estimates. MAN SE slumped 7.4 percent as the German truckmaker controlled by Volkswagen AG cut its earnings forecast for 2012. The Stoxx 600 added 0.6 percent to 259.81 this past week, its eighth consecutive advance for the longest stretch of weekly gains since January 2006. The gauge has rebounded 11 percent from this year’s low on June 4 as central banks from Europe to China eased monetary policy to help spur economic growth. The Stoxx 600 has risen 3.4 percent so far this month.
“The real focus for everyone is Europe and the comments made by Draghi and Merkel,” said Chris Beauchamp, a market analyst at IG Index in London. “They make a strong defense of the euro. But if you do not see these words backed up with real action, disappointment could quickly set in.”
Treasuries Fall as European Leaders to Meet on Crisis Measures(Source:Bloomberg)
Treasury 10-year note yields rose for the first time in five weeks as European leaders pledged to take steps to resolve the region’s sovereign-debt crisis, damping demand for the safest assets. European Central Bank President Mario Draghi and the head of the Bundesbank will discuss new rescue measures, which could include bond purchases, two central bank officials said. The leaders of Germany and France said they would do “everything” necessary to save the common currency. The Federal Reserve will announce Aug. 1 whether it intends to take additional measures to bolster the U.S. economy. “Draghi’s comments have lifted expectations that the ECB is finally ready to act,” said Guy Haselmann, an interest-rate strategist in New York at Bank of Nova Scotia (BNS), one of the 21 primary dealers that trade with the Fed. “The marketplace is expecting something out of the Fed.”
The U.S. 10-year yield rose nine basis points for the week, or 0.09 percentage point, to 1.55 percent, according to Bloomberg Bond Trader prices. The 1.75 percent note due in May 2022 fell 26/32, or $8.13 per $1,000 face amount, to 101 27/32. Treasury trading volume reported by ICAP Plc, the largest inter-dealer broker of U.S. government debt, rose to $330.3 billion at 5:03 p.m. yesterday, the highest since June 6. Trading has averaged $240.1 billion this year.
Dollar Repatriation First Since Lehman Evokes Post-LTCM Rally(Source:Bloomberg)
Until about four months ago, JKMilne Asset Management invested at least half the money in its global fund outside the U.S. No more. With Europe’s debt crisis intensifying, the Fort Meyers, Florida-based firm with $1.8 billion under management has all its money in dollars. “It’s been a winning strategy,” John Milne, chief executive officer, said July 26 in a telephone interview. “Given the magnitude of the problem, there was the realization that there was a contagion possibility.” Milne has plenty of company. U.S. investors repatriated $48.9 billion from December to May, the first time they brought assets home during a six-month stretch since the period following the failure of Lehman Brothers Holdings Inc. in 2008, according to the latest Treasury Department data compiled by Bloomberg. The flows are among the biggest since 1999, after the collapse of hedge fund Long-Term Capital Management LP boosted the dollar as investors retreated from all but the world’s safest assets.
IntercontinentalExchange Inc.’s Dollar Index rose 3.2 percent this year as investors moved cash into funds that focus on U.S. bonds. Inflows more than doubled to $157 billion in the first six months from $65 billion during the same period a year earlier, while international bond investments were unchanged, according to TrimTabs Investment Research.
Euro Weakens Versus Peers Before Confidence, Jobless Data(Source:Bloomberg)
The euro fell against most major peers, retreating from near a two-week high against the yen, before a report today that may add to signs the region’s debt crisis is weighing on consumer sentiment. The 17-nation currency trimmed gains from last week before data tomorrow that may show the region’s unemployment increased to a record last month. European Central Bank President Mario Draghi meets U.S. Treasury Secretary Timothy Geithner today as he attempts to win over Bundesbank President Jens Weidmann on measures to ease the region’s debt woes. The ECB can’t resolve the debt crisis, Moody’s Investors Service said, as central bank officials gather for a policy decision on Aug. 2.
“The euro will continue to struggle,” said Daisaku Ueno, a senior currency and debt strategist at Tokyo-based Mitsubishi UFJ Morgan Stanley Securities Co., a unit of Japan’s biggest financial group by market value. “To resolve Europe’s debt crisis, monetary policy will have to bear a lot of the burden.” The euro dropped 0.3 percent to $1.2285 as of 11:02 a.m. in Tokyo, trimming last week’s 1.4 percent rally. The common currency slid 0.3 percent 96.35 yen after touching a two-week high of 97.34 on July 27. The dollar bought 78.42 yen, little changed from last week. Today’s report from the European Commission in Brussels will probably confirm its index of household sentiment in the euro area declined to an almost three-year low of minus 21.6 in July, according to economists in a Bloomberg News survey.
FOREX-Euro's bounce fizzles, U.S. GDP awaited
LONDON, July 27 (Reuters) - The euro fell, retreating from a two-week high against the dollar, as investors sold into its recent rally on fresh doubts about whether the European Central Bank would take bold measures to tackle the sovereign debt crisis.
"It suggests we saw a bit of an overreaction to Draghi's comments yesterday," said Adam Cole, global head of FX strategy at RBC.
Geithner to Meet Schaeuble, Draghi in Germany Next Week(Source:Bloomberg)
U.S. Treasury Secretary Timothy F. Geithner will meet with German Finance Minister Wolfgang Schaeuble and European Central Bank President Mario Draghi in separate sessions on July 30. The meeting with Schaeuble will take place on the German island of Sylt in the afternoon of July 30, and the session with Draghi will be held that evening in Frankfurt, the Treasury Department said in a statement today. The Treasury said the meetings will be closed to the press, with a photo opportunity before the Schaeuble meeting. A Treasury official with knowledge of the matter said that Geithner and Schaeuble won’t hold a news conference after the meeting. European stocks rose for an eighth week as German Chancellor Angela Merkel and French President Francois Hollande joined Draghi in promising to do everything to protect the euro. “France and Germany are fundamentally attached to the integrity of the euro zone,” Merkel and Hollande said in a joint statement today. “They are determined to do everything to protect it.”
The leaders of the euro area’s two biggest economies issued their statement a day after Draghi said that the central bank will act to preserve the euro.
Hiring Probably Limited by Slowing Growth: U.S. Economy Preview(Source:Bloomberg)
The pace of hiring in July probably failed to reduce the U.S. jobless rate, which has been stuck above 8 percent for more than three years, economists said before a report this week. A payroll increase of 100,000 workers would follow an 80,000 gain in June, according to the median forecast of 68 economists surveyed by Bloomberg News ahead of Labor Department figures Aug. 3. Unemployment is projected to hold at 8.2 percent. Other data this week may show manufacturing stagnated in July and consumer confidence fell for a fifth month. Federal Reserve policy makers will meet ahead of the jobs report to decide whether additional stimulus is needed to combat a slowing economy as Europe’s debt crisis lingers. Companies such as Lockheed Martin Corp. (LMT) are among those warning they’ll have to reduce headcounts later this year in the run up to the so-called U.S. fiscal cliff of automatic tax increases and government spending cuts.
“The pace of hiring is pretty lackluster,” said Omair Sharif, a U.S. economist at RBS Securities Inc. in Stamford, Connecticut. “It’s going to be a painfully slow grind lower on the unemployment rate. Firms have become cautious as the U.S. is slowing a fair bit and global markets are getting worse.” Payroll gains slowed to an average 75,000 in the April to June period, down from 226,000 in the first quarter and the weakest in almost two years, Labor Department figures show.
Deflation Dismissed by Bond Measure as QE3 Anticipation Abounds(Source:Bloomberg)
For all the handwringing over the slowdown in the U.S. economy, the bond market shows there’s less risk of deflation now than before the Federal Reserve’s first two rounds of large-scale debt purchases. The expectation that consumer prices will rise, measured by the five-year, five-year forward breakeven rate, means that Fed Chairman Ben S. Bernanke has persuaded traders the U.S. will avoid the chronic deflation that has slowed Japan’s economy since 1995. It also complicates the central bank’s decision about starting more quantitative easing to boost an economy that grew at the slowest pace in a year during the second quarter. Commodity prices surged during QE1 and QE2 in 2008 and 2010.
“Higher inflation results in a tax on consumers and slows the economy down,” Michael Materasso, a senior portfolio manager and co-chairman of the fixed-income policy committee at Franklin Templeton Investments, which oversees $320 billion of bonds, said in a July 24 interview at Bloomberg headquarters in New York. “If you end up with a spike in commodity prices, have you done more harm than good?” The Fed’s favored bond-market gauge of inflation expectations ended last week at 2.39 percent, above the 2 percent levels in 2008 and 2010 that led the central bank to inject $2.3 trillion into the economy by purchasing Treasuries and mortgage-related bonds, the policy known as quantitative easing. The five-year, five-year measure shows how much traders anticipate consumer prices will rise during a period of five years starting in 2017.
Facebook Stock Plunge Slashes $34 Billion of Market Value(Source:Bloomberg)
Facebook Inc. (FB) has lost about $34 billion in market value since its May initial public offering, as the operator of the world’s largest social-networking service fails to assuage concerns about how it can make more money from almost a billion users. Facebook’s stock dropped 12 percent yesterday, its biggest one-day loss on record, after its first quarterly earnings report as a public company. That brought the plunge to 38 percent since the May 17 debut, which at $16 billion was the largest ever for a technology company. Chief Executive Officer Mark Zuckerberg’s fortune plunged to $12.1 billion yesterday from $13.7 billion, according to the Bloomberg Billionaires Index. “Investors were always paying for potential for Facebook,” said Aaron Kessler, an analyst at Raymond James & Associates in San Francisco, who has a market perform rating on the stock. “Clearly, today people are willing to pay less for that potential, which may be a few years out still.”
Of the largest IPOs on record, no other company has lost so much value so quickly, data compiled by Bloomberg show. General Motors Co. (GM) raised $18.1 billion after expanding its November 2010 offering and gained value in the comparable period, as did Visa Inc. (V), which generated $19.7 billion when it listed in 2008.
Chinese City Halts Waste Project After Thousands Protest(Source:Bloomberg)
Authorities in eastern China scrapped plans for a pipeline to discharge waste from a paper mill into the sea after a protest by thousands of residents turned violent. The mayor of Nantong in Jiangsu province said on July 28 the project would be permanently canceled, a day after the vice mayor of Qidong, a lower-level coastal city where the demonstration took place, pledged to suspend construction of the pipeline from a paper factory run by a venture of Japan’s Oji Paper Co. The unrest was the latest in a series of confrontations between local governments and residents over pollution concerns linked to industrial projects. Thousands of people in the southwestern city of Shifang protested earlier this month over the construction of a molybdenum copper plant, and demonstrators in northeast China’s Dalian last year succeeded in getting a chemical factory shuttered on environmental grounds, according to reports by state media.
The Qidong protests “demonstrate that ordinary people’s awareness of their rights has increased and they are more willing to assert their rights,” Willy Wo-Lap Lam, an adjunct professor of history at the Chinese University of Hong Kong, said in a telephone interview yesterday. “It also demonstrates more sophistication on the part of the authorities in handling protests.”
Japan’s Production Unexpectedly Falls as Korean Confidence Sinks(Source:Bloomberg)
Japan’s industrial production unexpectedly declined and South Korean manufacturers’ confidence dropped to a three-year low as global demand weakened. Production fell 0.1 percent in June from May, when it slid 3.4 percent, Japan’s Trade Ministry said today. The median estimate of 29 economists surveyed by Bloomberg News was for a 1.5 percent gain. The South Korean confidence index for August was at 70 from 81 for July, the central bank said. Weakness in the U.S., European and Asian economies is fueling speculation that extra stimulus may be rolled out in coming months by central banks including the Federal Reserve and the Bank of Japan. (8301) European Central Bank President Mario Draghi’s success in taming the euro region’s debt crisis may be the key to the global outlook after he pledged to do whatever it takes to preserve the common currency.
“It’s increasingly likely that the Fed and ECB will ease further by September and I think the BOJ will follow,” said Masamichi Adachi, a senior economist at JPMorgan Securities in Tokyo and a former central bank official. In Japan, “it’s a very likely scenario that the government will implement a supplementary budget this autumn and the BOJ will expand the asset-purchase program again.”
South Korea Manufacturer Confidence Drops to 3-Year Low(Source:Bloomberg)
South Korean manufacturers’ confidence dropped to the lowest level in more than three years as Europe’s worsening fiscal crisis damped sentiment in a country where exports make up about half the economy. An index measuring expectations for August was at 70, the lowest level since May 2009, after dropping from a revised 81 in July, the Bank of Korea said in a statement in Seoul today. A measure of expectations at non-manufacturing companies also dropped to 69 from a revised 76. “The South Korean economy is muddling through uncertainty caused by the European debt crisis,” Oh Suk Tae, an economist at SC First Bank Korea Ltd. in Seoul, said before the release. “The central bank indicated that it’s ready to act, but the market is expecting supplementary fiscal support only if the economy contracts significantly.”
Asia’s fourth-largest economy grew at the slowest pace in almost three years last quarter, with HSBC Holdings Plc and Citigroup Inc. saying the Bank of Korea may cut rates again this year. The BOK lowered its main rate a quarter percentage point to 3 percent on July 12, and Governor Kim Choong Soo warned last week the nation may miss a 3 percent growth estimate for 2012.
Record Cash Collides With Yen as Topix Valuation Approaches Low(Source:Bloomberg)
Japan’s stagnating stock market, its aging populace and the slowing global recovery are masking record cash in company accounts and equity valuations that are close to a 20-year low. The 1,671 companies in the Topix (TPX) Index, the country’s broadest measure of equity performance, had 105.2 trillion yen ($1.34 trillion), or 41 percent of their market value, according to the latest filings compiled by Bloomberg. Almost half have more cash than debt, a record. At the same time, the index’s 75 percent drop since 1989 pushed prices to 0.86 times book value, 4 percent from a two-decade low, data show. For bulls, the combination makes Japanese shares irresistible as earnings rebound from last year’s earthquake and chief executive officers spend more on buybacks and dividends that have doubled since 2006. Bears say the country has been disappointing investors for the last 20 years and that rising cash shows managers are reluctant to invest as the yen appreciates and the recovery weakens.
“The price that a Japanese company sells for is significantly lower than the rest of the world,” said David Herro, the Chicago-based manager of the $8.5 billion Oakmark International Fund and Morningstar Inc.’s international fund manager of the decade. “What would really ignite the Japanese stock market is an acceleration of better capital allocation and a weakening in the yen. I think those are the only two factors preventing the Japanese from exploding on the upside.”
New U.K. Strategy Urged as Triple-Dip Recession Predicted(Source:Bloomberg)
Chancellor of the Exchequer George Osborne was urged by businesses and his political opponents to reconsider the U.K.’s austerity strategy, as economists warned the nation could face a “triple-dip” recession. The London-based Sunday Times newspaper reported economists’ concerns that the euro-area crisis and a possible Greek exit from the region could push the U.K. into a recession again next spring. The opposition Labour Party’s finance spokesman Ed Balls renewed his attack on Osborne, saying the chancellor’s policies are “flat-lining” economic recovery. Osborne is facing renewed criticism after figures released last week showed Britain’s recession deepened in the second quarter, prompting questions about his economic plans and whether he should remain at the Treasury. Gross domestic product fell 0.7 percent from the first quarter, the third consecutive quarterly decline.
“If last week’s figures won’t make the government wake up and change course, then I don’t know what will,” Balls wrote in an article for the London-based Sun newspaper today. “But the longer they stick to this failing plan, the heavier the price our country will pay.” Osborne’s Labour opponents say his fiscal plans are too harsh at a time when households and banks are weighed down by debt. Taking longer to bring the budget into balance would have paid for tax and spending measures and sustained consumer confidence, they say.
Merkel, Monti Agree ‘Will Do Everything’ to Protect Euro(Source:Bloomberg)
German Chancellor Angela Merkel and Italian Prime Minister Mario Monti agreed that the European Union’s summit conclusions last month must be implemented “as quickly as possible” after speaking by phone yesterday. Merkel and Monti “agreed that Germany and Italy will do everything to protect the euro area,” German government spokesman Georg Streiter said in an e-mailed statement today in Berlin. Monti agreed to travel to Berlin for talks with Merkel in the second half of August, Streiter said.
Spanish Bond Yields Drop Most in 7 Months on Bets ECB Will Buy(Source:Bloomberg)
Spain’s government bonds rose, with 10-year yields dropping the most in seven months, amid speculation the European Central Bank will accelerate efforts to ease the region’s sovereign debt crisis. Italy’s securities also rallied after German Chancellor Angela Merkel and French President Francois Hollande pledged to do everything to keep the 17-nation currency bloc intact, echoing comments the day before from ECB President Mario Draghi. Germany’s bunds declined after Moody’s Investors Service cut the outlook on the nation’s Aaa rating, citing concern the country will have to support weaker euro-region members. The ECB meets to review monetary policy on Aug. 2.
“A lot of it is down to Mr. Draghi’s comments, which convinced the market that come next Thursday the ECB will be providing us with some support” for bonds, said Eric Wand, a fixed-income strategist at Lloyds Banking Group Plc in London. “The language he used was pretty forceful. If he fails to deliver on that promise the market is going to make them pay and big time.” Spain’s 10-year yield fell 52 basis points, or 0.52 percentage point, this week to 6.74 percent at 5 p.m. London time yesterday, the biggest weekly drop since the period ended Dec. 2. The 5.85 percent bond due in January 2012 gained 3.38, or 33.80 euros per 1,000-euro ($1,237) face amount, to 93.83. The Italian 10-year bond yield declined 21 basis points this week to 5.96 percent after rising to 6.71 percent on July 25, the highest level since Jan. 16.
U.K. Home Prices Fall for First Time This Year, Hometrack Says(Source:Bloomberg)
U.K. house prices fell in July for the first time this year and may extend their decline as a deepening recession curbs demand for homes, Hometrack Ltd. said. Values slipped 0.1 percent from June, when they stagnated, the London-based property-research company said in a report today. A measure of demand fell the most in six months. In London, the pace of home-price inflation slowed to 0.1 percent. Data this week showed Britain’s economy shrank 0.7 percent in the second quarter, the most in more than three years, while Chancellor of the Exchequer George Osborne said there are “deep-rooted economic problems.” At the same time, the euro- area debt crisis is mounting, with speculation increasing that Spain may need a full sovereign bailout.
“Weaker demand is to be expected over the summer months, but compared to previous years, the seasonal slowdown has started earlier and developed more rapidly,” said Richard Donnell, director of research at Hometrack. “This reflects growing concern over the U.K.’s economy and the deepening euro- zone crisis.” Compared with June, prices fell in eight out of 10 regions tracked by Hometrack and were unchanged in one, according to the report. London was the only region to register an increase. From a year earlier, values nationally fell 0.5 percent. The number of new buyer registrations, a measure of demand, dropped 2.1 percent in July from the previous month, while the volume of properties being put up for sale rose 1.4 percent. Donnell said the gap between supply and demand “is set to widen over the summer months and points to further modest price falls.”
The foreign currencies open little changed in the Far East after the European and commodity currencies have surged since Wednesday on hopes that both ECB and the Fed will ease as early as this week in order to alleviate the Eurozone debt crisis and support the deteriorating US economy. Facts will need to meet these hopes. 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
US: Gross domestic product grew 1.5% in the second quarter, down from 2% posted in the first quarter.
US: The final Reuters and the University of Michigan consumer sentiment index for July was upwardly revised to 72.3 from the mid-month reading of 72.0.
Today's economic calendar
Japan: JMMA Manufacturing Purchasing Manager Index for July
Japan: Industrial production for June
Asian Stocks Advance Third Day on Optimism Over Europe (Source:Bloomberg)
Asian stocks rose for a third day, led by financial firms, on optimism European policy makers will support the euro and after companies including Konica Minolta (4902) Holdings Inc. and Fujifilm Holdings Corp. reporting earnings. Commonwealth Bank of Australia, Australia’s biggest lender by market value, gained 2.3 percent after the cost to protect Asian bonds against default declined. Konica Minolta, a maker of photo film that gets 28 percent of its sales in Europe, jumped 6.9 percent in Tokyo after operating profit almost doubled from a year earlier. Cnooc Ltd. (883) added 1.4 percent after U.S. regulators got a court order to freeze assets of traders who allegedly profited by trading before the energy company announced a takeover. The MSCI Asia Pacific Index added 0.9 percent to 116.99 as of 10:54 a.m. in Tokyo with about three stocks rising for each that fell. The index added 1.8 percent on July 27, the biggest gain since June 29.
“There is a strong political and financial will for the euro,” 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. “Actions that address the EU challenges will create the opportunity for a sustainable rally ahead.”
Japan Stocks Rise as European Debt-Crisis Concern Ebbs (Source:Bloomberg)
Japanese stocks rose for a third day amid optimism European policy makers will act to ease the region’s debt crisis, boosting the outlook for exporters. Makita Corp., a maker of power tools that generates 42 percent of sales in Europe, advanced 1 percent. Konica Minolta Holdings Inc. (4902) surged 7.1 percent after reporting a 94 percent increase in first-quarter operating profit. Hitachi Cable Ltd. slumped 9.2 percent as the maker of power cables and optical fiber lowered its full-year profit estimate. The Nikkei 225 Stock Average advanced 0.8 percent to 8,634.97 as of 9:59 a.m. in Tokyo, bringing its three-day gain to 3.2 percent. The broader Topix Index today climbed 0.6 percent to 730.77.
“There is a strong political and financial will for the euro,” 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 globally. “Actions that address the EU challenges will create the opportunity for a sustainable rally ahead.” Leaders in Berlin, Paris and Rome have backed European Central Bank President Mario Draghi’s approach to combat the sovereign debt crisis, saying they will do what’s needed to protect the 17-nation euro. The proposal involves the region’s rescue fund buying government bonds, two central bank officials said July 27 on condition of anonymity.
European Stocks Climb for an Eighth Week; Santander Jumps(Source:Bloomberg)
European stocks rose for an eighth week as German Chancellor Angela Merkel and French President Francois Hollande joined European Central Bank President Mario Draghi in promising to do everything to protect the euro. Banco Santander SA (SAN) jumped 14 percent as Spanish lenders led gains on the benchmark Stoxx Europe 600 Index. (SXXP) Barclays Plc (BARC), the British lender fined for rigging Libor, climbed 4.9 percent as it posted first-half profit that beat analysts’ estimates. MAN SE slumped 7.4 percent as the German truckmaker controlled by Volkswagen AG cut its earnings forecast for 2012. The Stoxx 600 added 0.6 percent to 259.81 this past week, its eighth consecutive advance for the longest stretch of weekly gains since January 2006. The gauge has rebounded 11 percent from this year’s low on June 4 as central banks from Europe to China eased monetary policy to help spur economic growth. The Stoxx 600 has risen 3.4 percent so far this month.
“The real focus for everyone is Europe and the comments made by Draghi and Merkel,” said Chris Beauchamp, a market analyst at IG Index in London. “They make a strong defense of the euro. But if you do not see these words backed up with real action, disappointment could quickly set in.”
Treasuries Fall as European Leaders to Meet on Crisis Measures(Source:Bloomberg)
Treasury 10-year note yields rose for the first time in five weeks as European leaders pledged to take steps to resolve the region’s sovereign-debt crisis, damping demand for the safest assets. European Central Bank President Mario Draghi and the head of the Bundesbank will discuss new rescue measures, which could include bond purchases, two central bank officials said. The leaders of Germany and France said they would do “everything” necessary to save the common currency. The Federal Reserve will announce Aug. 1 whether it intends to take additional measures to bolster the U.S. economy. “Draghi’s comments have lifted expectations that the ECB is finally ready to act,” said Guy Haselmann, an interest-rate strategist in New York at Bank of Nova Scotia (BNS), one of the 21 primary dealers that trade with the Fed. “The marketplace is expecting something out of the Fed.”
The U.S. 10-year yield rose nine basis points for the week, or 0.09 percentage point, to 1.55 percent, according to Bloomberg Bond Trader prices. The 1.75 percent note due in May 2022 fell 26/32, or $8.13 per $1,000 face amount, to 101 27/32. Treasury trading volume reported by ICAP Plc, the largest inter-dealer broker of U.S. government debt, rose to $330.3 billion at 5:03 p.m. yesterday, the highest since June 6. Trading has averaged $240.1 billion this year.
Dollar Repatriation First Since Lehman Evokes Post-LTCM Rally(Source:Bloomberg)
Until about four months ago, JKMilne Asset Management invested at least half the money in its global fund outside the U.S. No more. With Europe’s debt crisis intensifying, the Fort Meyers, Florida-based firm with $1.8 billion under management has all its money in dollars. “It’s been a winning strategy,” John Milne, chief executive officer, said July 26 in a telephone interview. “Given the magnitude of the problem, there was the realization that there was a contagion possibility.” Milne has plenty of company. U.S. investors repatriated $48.9 billion from December to May, the first time they brought assets home during a six-month stretch since the period following the failure of Lehman Brothers Holdings Inc. in 2008, according to the latest Treasury Department data compiled by Bloomberg. The flows are among the biggest since 1999, after the collapse of hedge fund Long-Term Capital Management LP boosted the dollar as investors retreated from all but the world’s safest assets.
IntercontinentalExchange Inc.’s Dollar Index rose 3.2 percent this year as investors moved cash into funds that focus on U.S. bonds. Inflows more than doubled to $157 billion in the first six months from $65 billion during the same period a year earlier, while international bond investments were unchanged, according to TrimTabs Investment Research.
Euro Weakens Versus Peers Before Confidence, Jobless Data(Source:Bloomberg)
The euro fell against most major peers, retreating from near a two-week high against the yen, before a report today that may add to signs the region’s debt crisis is weighing on consumer sentiment. The 17-nation currency trimmed gains from last week before data tomorrow that may show the region’s unemployment increased to a record last month. European Central Bank President Mario Draghi meets U.S. Treasury Secretary Timothy Geithner today as he attempts to win over Bundesbank President Jens Weidmann on measures to ease the region’s debt woes. The ECB can’t resolve the debt crisis, Moody’s Investors Service said, as central bank officials gather for a policy decision on Aug. 2.
“The euro will continue to struggle,” said Daisaku Ueno, a senior currency and debt strategist at Tokyo-based Mitsubishi UFJ Morgan Stanley Securities Co., a unit of Japan’s biggest financial group by market value. “To resolve Europe’s debt crisis, monetary policy will have to bear a lot of the burden.” The euro dropped 0.3 percent to $1.2285 as of 11:02 a.m. in Tokyo, trimming last week’s 1.4 percent rally. The common currency slid 0.3 percent 96.35 yen after touching a two-week high of 97.34 on July 27. The dollar bought 78.42 yen, little changed from last week. Today’s report from the European Commission in Brussels will probably confirm its index of household sentiment in the euro area declined to an almost three-year low of minus 21.6 in July, according to economists in a Bloomberg News survey.
FOREX-Euro's bounce fizzles, U.S. GDP awaited
LONDON, July 27 (Reuters) - The euro fell, retreating from a two-week high against the dollar, as investors sold into its recent rally on fresh doubts about whether the European Central Bank would take bold measures to tackle the sovereign debt crisis.
"It suggests we saw a bit of an overreaction to Draghi's comments yesterday," said Adam Cole, global head of FX strategy at RBC.
Geithner to Meet Schaeuble, Draghi in Germany Next Week(Source:Bloomberg)
U.S. Treasury Secretary Timothy F. Geithner will meet with German Finance Minister Wolfgang Schaeuble and European Central Bank President Mario Draghi in separate sessions on July 30. The meeting with Schaeuble will take place on the German island of Sylt in the afternoon of July 30, and the session with Draghi will be held that evening in Frankfurt, the Treasury Department said in a statement today. The Treasury said the meetings will be closed to the press, with a photo opportunity before the Schaeuble meeting. A Treasury official with knowledge of the matter said that Geithner and Schaeuble won’t hold a news conference after the meeting. European stocks rose for an eighth week as German Chancellor Angela Merkel and French President Francois Hollande joined Draghi in promising to do everything to protect the euro. “France and Germany are fundamentally attached to the integrity of the euro zone,” Merkel and Hollande said in a joint statement today. “They are determined to do everything to protect it.”
The leaders of the euro area’s two biggest economies issued their statement a day after Draghi said that the central bank will act to preserve the euro.
Hiring Probably Limited by Slowing Growth: U.S. Economy Preview(Source:Bloomberg)
The pace of hiring in July probably failed to reduce the U.S. jobless rate, which has been stuck above 8 percent for more than three years, economists said before a report this week. A payroll increase of 100,000 workers would follow an 80,000 gain in June, according to the median forecast of 68 economists surveyed by Bloomberg News ahead of Labor Department figures Aug. 3. Unemployment is projected to hold at 8.2 percent. Other data this week may show manufacturing stagnated in July and consumer confidence fell for a fifth month. Federal Reserve policy makers will meet ahead of the jobs report to decide whether additional stimulus is needed to combat a slowing economy as Europe’s debt crisis lingers. Companies such as Lockheed Martin Corp. (LMT) are among those warning they’ll have to reduce headcounts later this year in the run up to the so-called U.S. fiscal cliff of automatic tax increases and government spending cuts.
“The pace of hiring is pretty lackluster,” said Omair Sharif, a U.S. economist at RBS Securities Inc. in Stamford, Connecticut. “It’s going to be a painfully slow grind lower on the unemployment rate. Firms have become cautious as the U.S. is slowing a fair bit and global markets are getting worse.” Payroll gains slowed to an average 75,000 in the April to June period, down from 226,000 in the first quarter and the weakest in almost two years, Labor Department figures show.
Deflation Dismissed by Bond Measure as QE3 Anticipation Abounds(Source:Bloomberg)
For all the handwringing over the slowdown in the U.S. economy, the bond market shows there’s less risk of deflation now than before the Federal Reserve’s first two rounds of large-scale debt purchases. The expectation that consumer prices will rise, measured by the five-year, five-year forward breakeven rate, means that Fed Chairman Ben S. Bernanke has persuaded traders the U.S. will avoid the chronic deflation that has slowed Japan’s economy since 1995. It also complicates the central bank’s decision about starting more quantitative easing to boost an economy that grew at the slowest pace in a year during the second quarter. Commodity prices surged during QE1 and QE2 in 2008 and 2010.
“Higher inflation results in a tax on consumers and slows the economy down,” Michael Materasso, a senior portfolio manager and co-chairman of the fixed-income policy committee at Franklin Templeton Investments, which oversees $320 billion of bonds, said in a July 24 interview at Bloomberg headquarters in New York. “If you end up with a spike in commodity prices, have you done more harm than good?” The Fed’s favored bond-market gauge of inflation expectations ended last week at 2.39 percent, above the 2 percent levels in 2008 and 2010 that led the central bank to inject $2.3 trillion into the economy by purchasing Treasuries and mortgage-related bonds, the policy known as quantitative easing. The five-year, five-year measure shows how much traders anticipate consumer prices will rise during a period of five years starting in 2017.
Facebook Stock Plunge Slashes $34 Billion of Market Value(Source:Bloomberg)
Facebook Inc. (FB) has lost about $34 billion in market value since its May initial public offering, as the operator of the world’s largest social-networking service fails to assuage concerns about how it can make more money from almost a billion users. Facebook’s stock dropped 12 percent yesterday, its biggest one-day loss on record, after its first quarterly earnings report as a public company. That brought the plunge to 38 percent since the May 17 debut, which at $16 billion was the largest ever for a technology company. Chief Executive Officer Mark Zuckerberg’s fortune plunged to $12.1 billion yesterday from $13.7 billion, according to the Bloomberg Billionaires Index. “Investors were always paying for potential for Facebook,” said Aaron Kessler, an analyst at Raymond James & Associates in San Francisco, who has a market perform rating on the stock. “Clearly, today people are willing to pay less for that potential, which may be a few years out still.”
Of the largest IPOs on record, no other company has lost so much value so quickly, data compiled by Bloomberg show. General Motors Co. (GM) raised $18.1 billion after expanding its November 2010 offering and gained value in the comparable period, as did Visa Inc. (V), which generated $19.7 billion when it listed in 2008.
Chinese City Halts Waste Project After Thousands Protest(Source:Bloomberg)
Authorities in eastern China scrapped plans for a pipeline to discharge waste from a paper mill into the sea after a protest by thousands of residents turned violent. The mayor of Nantong in Jiangsu province said on July 28 the project would be permanently canceled, a day after the vice mayor of Qidong, a lower-level coastal city where the demonstration took place, pledged to suspend construction of the pipeline from a paper factory run by a venture of Japan’s Oji Paper Co. The unrest was the latest in a series of confrontations between local governments and residents over pollution concerns linked to industrial projects. Thousands of people in the southwestern city of Shifang protested earlier this month over the construction of a molybdenum copper plant, and demonstrators in northeast China’s Dalian last year succeeded in getting a chemical factory shuttered on environmental grounds, according to reports by state media.
The Qidong protests “demonstrate that ordinary people’s awareness of their rights has increased and they are more willing to assert their rights,” Willy Wo-Lap Lam, an adjunct professor of history at the Chinese University of Hong Kong, said in a telephone interview yesterday. “It also demonstrates more sophistication on the part of the authorities in handling protests.”
Japan’s Production Unexpectedly Falls as Korean Confidence Sinks(Source:Bloomberg)
Japan’s industrial production unexpectedly declined and South Korean manufacturers’ confidence dropped to a three-year low as global demand weakened. Production fell 0.1 percent in June from May, when it slid 3.4 percent, Japan’s Trade Ministry said today. The median estimate of 29 economists surveyed by Bloomberg News was for a 1.5 percent gain. The South Korean confidence index for August was at 70 from 81 for July, the central bank said. Weakness in the U.S., European and Asian economies is fueling speculation that extra stimulus may be rolled out in coming months by central banks including the Federal Reserve and the Bank of Japan. (8301) European Central Bank President Mario Draghi’s success in taming the euro region’s debt crisis may be the key to the global outlook after he pledged to do whatever it takes to preserve the common currency.
“It’s increasingly likely that the Fed and ECB will ease further by September and I think the BOJ will follow,” said Masamichi Adachi, a senior economist at JPMorgan Securities in Tokyo and a former central bank official. In Japan, “it’s a very likely scenario that the government will implement a supplementary budget this autumn and the BOJ will expand the asset-purchase program again.”
South Korea Manufacturer Confidence Drops to 3-Year Low(Source:Bloomberg)
South Korean manufacturers’ confidence dropped to the lowest level in more than three years as Europe’s worsening fiscal crisis damped sentiment in a country where exports make up about half the economy. An index measuring expectations for August was at 70, the lowest level since May 2009, after dropping from a revised 81 in July, the Bank of Korea said in a statement in Seoul today. A measure of expectations at non-manufacturing companies also dropped to 69 from a revised 76. “The South Korean economy is muddling through uncertainty caused by the European debt crisis,” Oh Suk Tae, an economist at SC First Bank Korea Ltd. in Seoul, said before the release. “The central bank indicated that it’s ready to act, but the market is expecting supplementary fiscal support only if the economy contracts significantly.”
Asia’s fourth-largest economy grew at the slowest pace in almost three years last quarter, with HSBC Holdings Plc and Citigroup Inc. saying the Bank of Korea may cut rates again this year. The BOK lowered its main rate a quarter percentage point to 3 percent on July 12, and Governor Kim Choong Soo warned last week the nation may miss a 3 percent growth estimate for 2012.
Record Cash Collides With Yen as Topix Valuation Approaches Low(Source:Bloomberg)
Japan’s stagnating stock market, its aging populace and the slowing global recovery are masking record cash in company accounts and equity valuations that are close to a 20-year low. The 1,671 companies in the Topix (TPX) Index, the country’s broadest measure of equity performance, had 105.2 trillion yen ($1.34 trillion), or 41 percent of their market value, according to the latest filings compiled by Bloomberg. Almost half have more cash than debt, a record. At the same time, the index’s 75 percent drop since 1989 pushed prices to 0.86 times book value, 4 percent from a two-decade low, data show. For bulls, the combination makes Japanese shares irresistible as earnings rebound from last year’s earthquake and chief executive officers spend more on buybacks and dividends that have doubled since 2006. Bears say the country has been disappointing investors for the last 20 years and that rising cash shows managers are reluctant to invest as the yen appreciates and the recovery weakens.
“The price that a Japanese company sells for is significantly lower than the rest of the world,” said David Herro, the Chicago-based manager of the $8.5 billion Oakmark International Fund and Morningstar Inc.’s international fund manager of the decade. “What would really ignite the Japanese stock market is an acceleration of better capital allocation and a weakening in the yen. I think those are the only two factors preventing the Japanese from exploding on the upside.”
New U.K. Strategy Urged as Triple-Dip Recession Predicted(Source:Bloomberg)
Chancellor of the Exchequer George Osborne was urged by businesses and his political opponents to reconsider the U.K.’s austerity strategy, as economists warned the nation could face a “triple-dip” recession. The London-based Sunday Times newspaper reported economists’ concerns that the euro-area crisis and a possible Greek exit from the region could push the U.K. into a recession again next spring. The opposition Labour Party’s finance spokesman Ed Balls renewed his attack on Osborne, saying the chancellor’s policies are “flat-lining” economic recovery. Osborne is facing renewed criticism after figures released last week showed Britain’s recession deepened in the second quarter, prompting questions about his economic plans and whether he should remain at the Treasury. Gross domestic product fell 0.7 percent from the first quarter, the third consecutive quarterly decline.
“If last week’s figures won’t make the government wake up and change course, then I don’t know what will,” Balls wrote in an article for the London-based Sun newspaper today. “But the longer they stick to this failing plan, the heavier the price our country will pay.” Osborne’s Labour opponents say his fiscal plans are too harsh at a time when households and banks are weighed down by debt. Taking longer to bring the budget into balance would have paid for tax and spending measures and sustained consumer confidence, they say.
Merkel, Monti Agree ‘Will Do Everything’ to Protect Euro(Source:Bloomberg)
German Chancellor Angela Merkel and Italian Prime Minister Mario Monti agreed that the European Union’s summit conclusions last month must be implemented “as quickly as possible” after speaking by phone yesterday. Merkel and Monti “agreed that Germany and Italy will do everything to protect the euro area,” German government spokesman Georg Streiter said in an e-mailed statement today in Berlin. Monti agreed to travel to Berlin for talks with Merkel in the second half of August, Streiter said.
Spanish Bond Yields Drop Most in 7 Months on Bets ECB Will Buy(Source:Bloomberg)
Spain’s government bonds rose, with 10-year yields dropping the most in seven months, amid speculation the European Central Bank will accelerate efforts to ease the region’s sovereign debt crisis. Italy’s securities also rallied after German Chancellor Angela Merkel and French President Francois Hollande pledged to do everything to keep the 17-nation currency bloc intact, echoing comments the day before from ECB President Mario Draghi. Germany’s bunds declined after Moody’s Investors Service cut the outlook on the nation’s Aaa rating, citing concern the country will have to support weaker euro-region members. The ECB meets to review monetary policy on Aug. 2.
“A lot of it is down to Mr. Draghi’s comments, which convinced the market that come next Thursday the ECB will be providing us with some support” for bonds, said Eric Wand, a fixed-income strategist at Lloyds Banking Group Plc in London. “The language he used was pretty forceful. If he fails to deliver on that promise the market is going to make them pay and big time.” Spain’s 10-year yield fell 52 basis points, or 0.52 percentage point, this week to 6.74 percent at 5 p.m. London time yesterday, the biggest weekly drop since the period ended Dec. 2. The 5.85 percent bond due in January 2012 gained 3.38, or 33.80 euros per 1,000-euro ($1,237) face amount, to 93.83. The Italian 10-year bond yield declined 21 basis points this week to 5.96 percent after rising to 6.71 percent on July 25, the highest level since Jan. 16.
U.K. Home Prices Fall for First Time This Year, Hometrack Says(Source:Bloomberg)
U.K. house prices fell in July for the first time this year and may extend their decline as a deepening recession curbs demand for homes, Hometrack Ltd. said. Values slipped 0.1 percent from June, when they stagnated, the London-based property-research company said in a report today. A measure of demand fell the most in six months. In London, the pace of home-price inflation slowed to 0.1 percent. Data this week showed Britain’s economy shrank 0.7 percent in the second quarter, the most in more than three years, while Chancellor of the Exchequer George Osborne said there are “deep-rooted economic problems.” At the same time, the euro- area debt crisis is mounting, with speculation increasing that Spain may need a full sovereign bailout.
“Weaker demand is to be expected over the summer months, but compared to previous years, the seasonal slowdown has started earlier and developed more rapidly,” said Richard Donnell, director of research at Hometrack. “This reflects growing concern over the U.K.’s economy and the deepening euro- zone crisis.” Compared with June, prices fell in eight out of 10 regions tracked by Hometrack and were unchanged in one, according to the report. London was the only region to register an increase. From a year earlier, values nationally fell 0.5 percent. The number of new buyer registrations, a measure of demand, dropped 2.1 percent in July from the previous month, while the volume of properties being put up for sale rose 1.4 percent. Donnell said the gap between supply and demand “is set to widen over the summer months and points to further modest price falls.”
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