Asia FX By Cornelius Luca - Wed 01 Aug 2012 15:14:18 CT (Source:CME/www.lucafxta.com)
The appetite for risk soured on Wednesday, after the Federal Reserve reiterated the slowing the US economy without committing to additional easing. I had warned you about this behavior, given the limited tools the Fed has; the Fed must preserve these tools for more dire situations. All eyes are now on the ECB meeting on Thursday, and there is a better chance of some action there. The foreign currencies ended lower. The US stock markets slipped as well. But the gold/oil ratio fell. The short-term outlook for the foreign 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: The ADP report showed that the private sector added 163,000 jobs in July following a downwardly revised increase of 172,000 jobs (from 176,000) in June.
US: Manufacturing PMI declined to 51.4 in July from 52.5 in June.
US: The ISM's manufacturing PMI inched up to 49.8 in July from 49.7 in June.
US: Construction spending grew by 0.4% in June, less than +0.9% in May.
Today's economic calendar
Australia: Retail sales for June
Australia: Trade balance for June
First All-Market Gain in Two Years Led by Drought, Draghi (Source:Bloomberg)
For the first time in more than two years, commodities, equities, bonds and the dollar posted a monthly gain, as the U.S. drought sent corn prices to a record and European Central Bank President Mario Draghi’s pledge to protect the euro buoyed stocks. Raw materials led the increase as the Standard & Poor’s GSCI Total Return Index of 24 raw materials rose 6.4 percent in July, the most since October. The MSCI All-Country World Index of equities rallied at the end of the month for a 1.4 percent gain. The U.S. Dollar Index, a measure against six currencies, added 1.3 percent. Bonds of all types returned 1.4 percent on average, the most since December, Bank of America Merrill Lynch’s Global Broad Market Index shows.
The last time all four measures rose for a month was in April 2010, when concerns about Greece were heating up and U.S. economic reports were improving. While corn rose the most last month in almost a quarter century and wheat reached a four-year high, financial assets gained as policy makers worked to boost global growth. Federal Reserve Chairman Ben S. Bernanke said he’s prepared to take more steps, and Draghi pledged to do “whatever it takes” to preserve the euro. “A lot of the rally in everything is central-bank led,” said Jason Brady, a managing director at Thornburg Investment Management in Santa Fe, New Mexico, which oversees $80 billion. “So now we have a world where central-bank actions are really what people are looking at, and those actions are really positive for all asset prices and negative for savers and folks who are looking to put money in at reasonable levels over a longer period of time.”
Asia Stocks Swing Between Gains and Losses on Fed, ECB (Source:Bloomberg)
Most Asian stocks rose, with the benchmark index swinging between gains and losses, amid speculation the European Central Bank will announce measures to combat the debt crisis after the U.S. Federal Reserve refrained from adding stimulus to the world’s biggest economy. Toyota Motor Corp. (7203), Asia’s biggest carmaker by market value, rose 3.8 percent in Tokyo after its U.S. sales gained 26 percent in July. Commonwealth Bank of Australia, the nation’s No. 1 lender, fell 0.8 percent, pacing declines among banks after its investment rating was cut by Deutsche Bank AG. Aozora Bank Ltd. jumped 11 percent in Tokyo after saying it’s close to an agreement on a plan to repay public funds. The MSCI Asia Pacific Index was little changed at 118.32 as of 10:10 a.m. in Tokyo before markets in Hong Kong and China opened. It’s swung between gains and losses six times. About two stocks rose for each that fell.
“People would like the Fed to do more because I think it would improve the market sentiment a little bit,” said Angus Gluskie, managing director at White Funds Management in Sydney who manages more than $350 million. “But I think the fact that the Fed is not doing anything and still saying they remain prepared to, it’s not a huge negative. I think it’s neutral.”
Asia Stocks Open Little Changed After Fed Stimulus Pledge (Source:Bloomberg)
Asian stocks opened with the regional benchmark index little changed after the Federal Reserve said it will pump fresh stimulus if necessary into the world’s biggest economy, disappointing some investors anticipating a more definitive sign of further easing. Westpac Banking Corp. (WBC), Australia’s No. 2 lender by market value, fell 0.3 percent in Sydney. Sony Corp. (6758), Japan’s No. 1 exporter of consumer electronics, rose 3.5 percent Tokyo after the yen retreated from a two-month high against the dollar. Soy sauce maker Kikkoman Corp. dropped 3.9 percent in Tokyo after first-quarter operating profit fell. The MSCI Asia Pacific Index was little changed at 118.22 as of 9:22 a.m. in Tokyo before markets in Hong Kong and China opened.
“People would like the Fed to do more because I think it would improve the market sentiment a little bit,” said Angus Gluskie, managing director at White Funds Management in Sydney who manages more than $350 million. “But I think the fact that the Fed is not doing anything and still saying they remain prepared to, it’s not a huge negative. I think it’s neutral.”
Japan Stocks Rise as Fed Says It’s Ready to Act if Needed (Source:Bloomberg)
Japan stocks rose after the U.S. Federal Reserve’s pledge to provide additional support for the world’s largest economy if necessary boosted exporters. Toyota Motor Corp. (7203) advanced after sales in the U.S. beat estimates. Sony Corp. (6758), Japan’s No. 1 exporter of consumer electronics, climbed 4 percent after the yen retreated from a two-month high against the dollar. Toyota, Asia’s biggest carmaker, advanced 3.3 percent. Aozora Bank Ltd. (8304), a lender controlled by Cerberus Capital Management LP, surged 11 percent after saying it’s close to an agreement with major stakeholders to repay public funds. The Nikkei 225 (NKY) Stock Average rose 0.4 percent to 8,679.98 at 9:56 a.m. in Tokyo. The broader Topix Index climbed 0.6 percent to 734.15.
“There remains a significant risk that policy makers will keep intervening to support economic confidence and financial markets,” said Mikio Kumada, a Singapore-based global strategist for LGT Capital Management, which oversees more than $20 billion. “Overly bearish investors still risk being caught wrong-footed in rising markets. A reasonably constructive investment approach remains appropriate for now, with a slight tilt in favor of selected risky assets.” The Topix lost 16 percent since this year’s peak on March 27, leaving shares on the gauge trading at 0.9 times book value, compared with 2.2 times for the S&P 500 and 1.4 times for the Europe Stoxx 600 Index. A number less than one means that companies can be bought for less than value of their assets.
U.S. Stocks Decline as Fed Fails to Bolster Confidence (Source:Bloomberg)
U.S. stocks declined, reversing earlier gains, as the Federal Reserve’s pledge to provide additional support for the economy disappointed investors anticipating a more definitive sign of further monetary easing. Knight Capital Corp. (KCG), one of the largest market makers of U.S. stocks, plunged 33 percent as it experienced technology issues with trading. MasterCard Inc. (MA), the second-biggest payments network, slumped 2.2 percent as sales missed analysts’ estimates. Comcast Corp. (CMCSA), the largest U.S. cable company, and Allstate Corp. (ALL), the biggest publicly traded U.S. home and auto insurer, rose at least 3 percent as earnings topped projections.
Fourteen stocks fell for every five rising on U.S. exchanges at 4 p.m. in New York. The Standard & Poor’s 500 Index slid 0.3 percent to 1,375.32. The Dow Jones Industrial Average dropped 37.62 points, or 0.3 percent, to 12,971.06. The Russell 2000 Index of small companies slumped 2 percent to 771.11, led by Knight. Volume for exchange-listed stocks in the U.S. was 7.4 billion shares, 10 percent above the three-month average. “The Fed basically passed,” said Michael Strauss, who helps oversee about $26 billion of assets as the chief investment strategist at Commonfund in Wilton, Connecticut. “They didn’t say anything new. The Fed is recognizing the economy is a bit weaker, but there’s not that much it can do.”
European Stocks Gain Amid Speculation of Central Bank Aid (Source:Bloomberg)
European stocks rose for the fourth time in five days as speculation central banks will take further steps to support the economic recovery outweighed the biggest contraction in U.K. manufacturing for three years. Next Plc (NXT) jumped 6.5 percent as the retailer increased its annual profit forecast after reporting first-half sales that rose more than analysts estimated. Arkema SA (AKE) climbed 5.7 percent as second-quarter earnings beat projections. Mediaset SpA (MS) dropped 11 percent after profit declined 65 percent amid lower advertising sales. The Stoxx Europe 600 Index (SXXP) gained 0.5 percent to 262.57 at the close of trading. The benchmark measure has rallied 12 percent from this year’s low on June 4 as German Chancellor Angela Merkel and French President Francois Hollande last week joined European Central Bank President Mario Draghi in promising to do everything to protect the euro.
“Markets are clearly being driven by the expectation of further central-bank intervention,” said Peter Garnry, an equity strategist at Saxo Bank A/S in Copenhagen. “Everyone is expecting Draghi to launch another round of secondary-market purchases to get yields on Spanish and Italian bonds lower.”
Emerging Stocks Advance a Fifth Day on Interest-Rate Speculation (Source:Bloomberg)
Emerging-market stocks rose, sending the benchmark index to the longest rally since April, as speculation of more interest-rate cuts by central banks outweighed data showing weaker manufacturing in Asia. The MSCI Emerging Markets Index (MXEF) added 0.2 percent to 954.22, with 432 companies gaining to 329 declining. Homebuilder Rossi Residencial SA and state controlled oil company Petroleo Brasileiro SA (PETR4) led Brazilian stocks higher. Russia’s Micex Index climbed, led higher by OAO Mechel, the country’s biggest maker of coking coal. Anhui Conch (914) Cement Co. surged in Hong Kong after the government pledged to ensure stable economic growth.
The Federal Open Market Committee “will provide additional accommodation as needed” to boost economic recovery, it said at the conclusion of a two-day meeting in Washington. A purchasing managers’ index released today showed China’s manufacturing industry grew at the slowest pace in eight months in July. The European Central Bank will announce a policy decision tomorrow after ECB President Mario Draghi last week pledged to do “whatever it takes” to preserve the euro. “It’s the reaction toward comments from different authorities and that has continued into this week,” Elena Ogram, a portfolio manager at Bank am Bellevue AG in Zurich, which manages about $50 million of emerging-market equity assets, said by phone. “Markets expect some sort of quantitative easing from either the ECB or the Federal Reserve or both.”
FOREX-Euro steady before U.S., euro zone policy decisions
LONDON, Aug 1 (Reuters) - The euro held steady against the dollar before monetary policy decisions in the United States and the euro zone, with investors gearing up for possible European Central Bank action to stem the region's debt crisis.
"If the ECB come up with something very clear-cut we could see a position squeeze (higher) in the euro, depending on how much detail Draghi gives at the press conference," said Ankita Dudani, currency strategist at RBS.
Euro Remains Lower Before ECB Meets to Discuss Crisis (Source:Bloomberg)
The euro failed to rally from a decline yesterday before European Central Bank policy makers meet to discuss ways to tackle the region’s debt crisis today. The 17-nation currency remained lower versus the yen before Spain sells bonds today for the first time since ECB President Mario Draghi pledged to do whatever it takes to defend the euro, suggesting the central bank may intervene in bond markets. Demand for the dollar was supported after the Federal Reserve yesterday refrained from monetary easing. “I think a lot of people are expecting the ECB to announce some sort of ‘shock-and-awe’ policy today,” said Peter Dragicevich, a Sydney-based foreign-exchange economist at Commonwealth Bank of Australia. (CBA) “If the ECB were to disappoint, we expect the euro to fall.”
The euro bought $1.2222 as of 9:40 a.m. in Tokyo after falling 0.6 percent to $1.2225 in New York. The shared currency traded at 95.90 yen from 95.89 yesterday, when it dropped 0.2 percent. The dollar was little changed at 78.45 yen, following a 0.4 percent gain yesterday. Investors and politicians are clamoring for ECB action to quell Europe’s sovereign debt crisis, which is threatening to cripple Spain and Italy and tear the 17-nation euro area apart. While Draghi’s commitment in London last week to do what’s needed fueled a global market rally, some economists cast doubt on his ability to build the consensus needed to deliver a game changer.
U.S. Treasury Plans Floating-Rate Notes in Year or More (Source:Bloomberg)
The U.S. Treasury Department said today it is developing a floating-rate note program that could be operational in a year or more, while it is preparing for possible negative-rate bidding. The Treasury also plans to sell $72 billion in notes and bonds in next week’s refunding, it said in a statement in Washington. The Treasury intends to auction $32 billion in 3- year notes on Aug. 7, $24 billion in 10-year notes on Aug. 8 and $16 billion in 30-year bonds on Aug. 9. The floating-rate notes would be the first new U.S. government debt security since Treasury Inflation-Protected Securities, known as TIPS, were introduced in 1997. With a budget deficit estimated at $1.21 trillion this year, the Treasury needs to expand its base of investors, and the notes may appeal to those who are seeking to protect themselves from a possible increase in interest rates or faster inflation stemming from the Federal Reserve’s unprecedented stimulus.
“People are nervous about fixed-rate instruments because of rising rates,” said William Larkin, a fixed-income money manager who helps oversee $500 million at Cabot Money Management Inc. in Salem, Massachusetts. “The floating-rate notes remove that risk for investors, so it makes the Treasury’s source of capital a little bit more stable.” The Treasury Borrowing Advisory Committee, the bond dealers and investors who meet quarterly with department officials, said it unanimously supports the introduction of the notes as soon as possible. The group predicted “strong, broad-based demand for the product.”
Fed Signals More Steps to Spur Economy Amid Slower Growth (Source:Bloomberg)
The Federal Reserve said it will pump fresh stimulus if necessary into the weakening economic expansion to boost growth and reduce an unemployment rate that’s been stuck at 8 percent or higher for more than three years. The Federal Open Market Committee “will provide additional accommodation as needed to promote a stronger economic recovery and sustained improvement in labor market conditions in a context of price stability,” it said today in a statement at the end of a two-day meeting in Washington. “Economic activity decelerated somewhat over the first half of this year.” Stocks fell on disappointment Fed Chairman Ben S. Bernanke refrained from taking action even as consumer spending flagged, job growth slackened and manufacturing cooled. Before its next meeting Sept. 12-13, the FOMC will assess unemployment reports for July and August, and the European Central Bank may take steps to ease Europe’s debt crisis at a meeting tomorrow.
“They were as blunt as you can get without actually pulling the trigger,” said Dan Greenhaus, chief global strategist at BTIG LLC in New York. “They’re saying, ‘Hey, things are not good and we’re an inch away from easing.’”
U.S. Manufacturing Unexpectedly Shrinks for Second Month (Source:Bloomberg)
American manufacturing unexpectedly contracted in July for a second month, reflecting a drop in orders that threatens to undercut a mainstay of the recovery. The Institute for Supply Management’s factory index was 49.8 last month, little changed from a three-year low of 49.7 reached in June, the Tempe, Arizona-based group said today. Economists surveyed by Bloomberg News projected a reading of 50.2, according to the median estimate, just above the 50 mark that separates expansions and contractions. Manufacturers from China to the euro area joined the U.S. in showing signs of retrenching, indicating Europe’s debt crisis and the looming U.S. government spending cuts and tax increases that constitute the so-called fiscal cliff are taking a toll on customers globally. Federal Reserve policy makers today acknowledged that the economy has slowed and foreshadowed new steps to boost the weakening expansion.
“We’ve seen slower growth in emerging markets, the recession in Europe -- all of that is still ever-present,” said Sam Bullard, a senior economist at Wells Fargo Securities LLC in Charlotte, North Carolina. “Firms are holding pat right now.”
Geithner Urges U.S. Congress, Europe to Spur Growth (Source:Bloomberg)
U.S. Treasury Secretary Timothy F. Geithner called on European policy makers and lawmakers in Washington to spur economic growth even as they seek long-term measures to narrow budget deficits. “There’s a lot of things Congress can do, in the near term, not just in the long run, to make growth stronger,” Geithner said in an interview with Bloomberg Television in Los Angeles yesterday. European leaders also “have to do some more things to help support growth in the near term,” he said. Geithner, 50, said Congress should take advantage of low borrowing costs to adopt measures to support the economy, which he said must grow faster to create jobs and reduce an unemployment rate stuck above 8 percent since February 2009. He said such measures include helping homeowners refinance mortgages and approving tax incentives for businesses.
“We pay about 1 1/2 percent for a 10-year Treasury now, to borrow long-term now, because fundamentally people have faith in the ability of the U.S. to solve its problems,” Geithner said. “It’s sensible for us to take advantage of this moment to do things that will make the economy stronger.”
Draghi Pledge May Boost Investment in Europe Stocks (Source:Bloomberg)
The underperformance of European stocks relative to their U.S. counterparts may be ending, as investors speculate the European Central Bank will win the backing of government leaders on a plan to ease the euro area’s debt crisis. The Euro Stoxx 50 Index -- a benchmark of blue-chip shares -- has risen 8.1 percent since July 25, the day before ECB President Mario Draghi pledged that policy makers are “ready to do whatever it takes to preserve the euro.” By comparison, the Standard & Poor’s 500 Index has risen 2.8 percent during the same period. The recent outperformance comes after the European index lagged behind the S&P 500 by almost 80 percent between March 9, 2009, when the U.S. index hit a 13-year low, and June 18, 2012.
As “most of the bad news” already may be built into market prices, Pioneer Investment Management Inc., which oversees about $185 billion in assets, “cautiously moved to a risk-on” position in European equities about a month ago, while remaining underweight U.S. stocks, said Monica Defend, head of global asset-allocation research in Milan. While this “appears to be a bold move” in the current market, “we should not underestimate the commitment of leading central banks” to provide support to the financial system, she said.
U.K. Manufacturing Slump Deepens as Export Orders Fall: Economy (Source:Bloomberg)
U.K. manufacturing shrank the most in more than three years in July as export orders slumped, indicating the economy’s recession continued to deepen at the start of the third quarter. A factory-output gauge fell to 45.4 from a revised 48.4 in June, London-based Markit Economics said today. The reading was weaker than any of the 30 forecasts in a Bloomberg News survey. The decline was led by weaker demand in the euro area, where a separate index showed manufacturing shrank for a 12th month. British manufacturers are struggling as the sovereign debt crisis deepens in Europe, the U.K.’s biggest trading partner, and global growth cools. The Bank of England, which expanded stimulus last month, will probably keep its bond-purchase target unchanged tomorrow as policy makers assess their Funding for Lending plan aimed at stoking the flow of credit and reviving growth.
“There is a lot of ground to recover,” said Ross Walker, an economist at Royal Bank of Scotland Group Plc in London. “Alongside distinctly underwhelming anecdotal evidence from consumer-facing parts of the economy, this bodes ill for hopes of a rebound in third-quarter gross domestic product.” Economists had forecast a reading of 48.4 for the factory index, based on the median estimate. A reading below 50 indicates contraction.
U.K. Factory Output Shrinks Most in More Than Three Years (Source:Bloomberg)
U.K. manufacturing shrank the most in more than three years in July as new export orders slumped, indicating the economy continued to weaken at the start of the third quarter. A gauge of factory output, based on a survey by Markit Economics and the Chartered Institute of Purchasing and Supply, fell to 45.4 from a revised 48.4 in June, London-based Markit said today. The index was weaker than any of the 30 forecasts in a Bloomberg News survey and the pound weakened against the dollar and the euro. A reading below 50 indicates contraction. British manufacturers are continuing to struggle as the sovereign debt crisis deepens in the euro area, the U.K.’s biggest trading partner. The Bank of England will probably maintain its target for bond purchases tomorrow as policy makers assess their Funding for Lending plan aimed at stoking the flow of credit.
“A perfect storm of wet weather and weak confidence in the U.K. has combined with global economic drift to engulf the manufacturing sector,” CIPS Chief Executive Officer David Noble said. “While the euro zone has continued to be the major factor, declines in business from Asia have dashed hopes of a quicker recovery.” Economists had forecast a reading of 48.4 for the factory index, based on the median estimate. Markit said the level of new export business declined for a fourth month in July and at the fastest pace since February 2009. The euro area “remained the principal drag” on exports, it said.
IMF Chief Lagarde Praises Greece, Spain for Efforts (Source:Bloomberg)
International Monetary Fund Managing Director Christine Lagarde defended the lender’s role in Greece and said the nation has made progress even as it needs to deepen structural changes to its economy. “When I look back to the initial program and the achievements of the Greek economy and the Greek population, it’s impressive,” Lagarde told reporters in Washington today. “There is still a lot that the country can do.” Greece’s budget deficit will narrow to 7 percent of gross domestic product this year and 2.7 percent next year, the Washington-based IMF said in a July 16 report. The IMF had forecast in April that Greece’s deficit will be 7.2 percent this year and 4.6 percent in 2013. Lagarde also praised Spain, saying, “When we look at what Spain has already done, and is committing to do, there’s not much more that we would be asking from Spain if it was in a program with the IMF.”
Spain sought a European bailout for its banks in June of as much as 100 billion euros ($123 billion) as the government lacked the financing to shore up its lenders. Prime Minister Mariano Rajoy is fighting to keep enough access to markets to fund the deficit, and has called for the European Central Bank to buy Spanish bonds and for European Union nations to take steps to bring down borrowing costs.
Indonesia’s July Inflation Accelerates on Higher Food Prices (Source:Bloomberg)
Indonesia’s inflation quickened for a second month in July, limiting scope for the central bank to join its neighbors in lowering interest rates even as declining exports threaten growth. Consumer prices rose 4.56 percent from a year earlier, after climbing 4.53 percent in June, the statistics bureau said in Jakarta today. The median forecast of 23 economists in a Bloomberg News survey was for a 4.59 percent gain. Inflation was mainly held up by increasing food costs, the bureau said. Bank Indonesia has held off from adding to a February rate cut, seeking to support a currency that has fallen about 4 percent in 2012. Policy makers from China to the Philippines lowered rates last month, a move Governor Darmin Nasution may avoid amid the risk of price pressures as the world’s largest Muslim population observes the fasting period of Ramadan and the Eid al-Fitr festival that marks its end.
“Inflation has started to creep higher, with inflation now in the upper half” of the central bank’s target range, said Chua Hak Bin, a Singapore-based economist at Bank of America Corp. “We expect Bank Indonesia to hold the policy rate” at the Aug. 9 meeting, he said. The rupiah fell 0.3 percent to 9,470 per dollar as of 2:35 p.m. in Jakarta, according to prices from local banks compiled by Bloomberg.
Thursday, August 2, 2012
20120802 1002 Global Commodities Related News.
South America Readies Record Crops Amid U.S. Drought (Source:Bloomberg)
South American farmers are preparing to plant record grain and oilseed crops that may temper surging food inflation caused by the worst U.S. drought in a generation. Argentine farmers, buoyed by rains that alleviated a drought, will smash a previous corn harvest record of 22 million metric tons by reaping as much as 31 million tons in the 2012- 2013 season, growers group Crea said July 23. Brazil may harvest its biggest-ever soybean crop in 2012-2013 to surpass the U.S. as the world’s biggest grower, according to Sao Paulo-based researcher Agroconsult.
Corn rose to a record $8.205 a bushel in Chicago yesterday, capping the biggest monthly gain since 1988, while soybeans reached an all-time high on July 23 and surged 15 percent last month. Corn retreated 1.2 percent today. The response from South American growers to the worst U.S. drought since 1956 will be the “turning point” in the corn and soybean rally, Wayne Gordon, the head of global agriculture markets research at UBS AG in New York, said in an interview. “We are in a great situation,” said Martin Otero, the owner of Buenos Aires-based farm investment group Hillock Capital Management that owns and manages farmland in Argentina and Uruguay. “We have very high yield prospects, and there’s a high probability that prices will be very good.”
Soil Conditions
South America may boost its soybean crop by 30 percent in the 2012-2013 season as farmers look to cash in on higher prices and improved soil conditions after a drought last season, said Karim Cherif, a Zurich-based analyst for Credit Suisse Group AG. Argentina and Paraguay are the world’s third- and fourth- largest exporters, respectively, of the oilseed behind the U.S. and Brazil. In corn, Argentina, Ukraine and Brazil trail the U.S. as the largest global exporters of the cereal. South American farmers start planting corn and soybean crops from September, while harvesting will take place between February and June next year. In the U.S., whose season runs inversely to South America, the already planted corn crop is “not save-able” in many areas, economist Dennis Gartman wrote in his daily Gartman Letter.
Ninety-four percent of U.S. corn crops have gone through the silking stage, while only 55 percent of soybean plants are setting pods, the U.S. Department of Agriculture said July 30. Both phases are critical for determining yields. Soybeans typically mature later than corn and damages can be reversed by rains now, Gartman said. Much of the U.S. Midwest may remain hot and dry through the middle of August, Matt Rogers, Commodity Weather Group LLC president, said in an e-mail today.
Weather ‘Crucial’
Prices may advance to records on the shortage, said Sudakshina Unnikrishnan, an analyst at Barclays Plc in London. “I don’t think we’ve seen the top so far,” she said in an interview. In the U.S. “weather through August is going to be absolutely crucial.” The U.S. drought will cause food-price volatility that may expand hunger to the world’s poor, threatening social stability and putting pressure on governments, World Bank President Jim Yong Kim said in a report July 30. French Agriculture Minister Stephane Le Foll said a surge in grain and soy prices is a “major preoccupation” worldwide. “South American farmers will respond to high crop prices by increasing planted acres,” Juan Luciano, chief operating officer of Decatur, Illinois-based grains processor Archer- Daniels-Midland Co. said in a conference call with analysts yesterday.
Brazilian farmers may plant a record soybean crop because of prices, the prospect of rain caused by the El Nino weather phenomenon and its higher profitability than corn, said Silvio Porto, the director of agriculture policy and information at Conab, the Brazilian government crop-forecasting agency.
Prefer Soybeans
Many Brazilian farmers will sow soybeans instead of corn because the seeds are cheaper and the cost of transporting from farms far from the eastern Atlantic coast is cheaper, said Glauber Silveira, a farmer who is also president of Brazil’s soybean growers association known as Aprosoja. “You have more safety with soy, it’s easier to sell in advance,” said Silveira, who owns farms in Mato Grosso state that borders the Amazon Jungle. “I have already sold 60 percent of my crop next year in advance.” Brazil will plant 27 million hectares (66.7 million acres) in 2012-2013 to reap a record 78 million-ton soybean crop and may even surpass that target as growers use record amounts of fertilizers to maximize yields, said Giovana Araujo, a Sao Paulo-based analyst at Banco Itau BBA SA.
El Nino
To be sure, farmers across South America are counting on the downpours that arrive with El Nino that warms ocean temperatures, bringing wetter weather to the grassy plains in Argentina and Brazil. The El Nino rains may be less intense than in previous episodes of the weather phenomenon, said Eduardo Sierra, a climatologist at the Buenos Aires Cereals Exchange. Many Argentine farmers need the heavy downpours that occur during the so-called Santa Rosa storm at the end of August to sow corn, said Esteban Copati, an analyst at the exchange. Argentine farmers are still lobbying the government to ease export restrictions on food staples such as corn consumed in the South American country and may grow soybeans instead because they are not subject to the restrictions, Copati said.
The country’s soybean harvest may rise about 35 percent in 2012-2013 to 56 million tons, UBS’s Gordon said. Output in neighboring Paraguay may almost double to 7.8 million tons in the 2012-2013 season from 4 million tons a year earlier, the USDA said March 28. “The Latin American guys are going to be the turning point,” Gordon said. “What the condition of their planting is in October and November will determine the length in the rally.”
U.S. Midwest May Remain Hot, Dry Through Mid-August (Source:Bloomberg)
Much of the Midwest may remain hot and dry through the middle of August, after a month in which more than half the U.S. was covered by drought and temperature records toppled by the thousands. The Midwest is expected to stay about 5 to 8 degrees Fahrenheit (2.8 to 4.4 Celsius) above normal through Aug. 15, according to Matt Rogers, Commodity Weather Group LLC president. The area from Iowa south Arkansas, west to Nebraska and Kansas and east to Illinois will probably have below-normal rain through Aug. 15, said Joel Widenor, CWG co-founder. “While next week sees some back-and-forth variability, we still favor a hot-dominated story with the most severe conditions still over the drought areas of the western Midwest, Plains and nearby parts of the South,” Rogers said.
In July, 4,368 daily high temperature records were set or tied across the U.S. or about 2.6 percent of the total possible, according to National Climatic Data Center statistics. A year ago, 2,755 daily records were set or tied, or 1.5 percent of the total, according to the center in Asheville, North Carolina. As of last week, at least 63.9 percent of the contiguous 48 states was affected by drought considered moderate or worse. The parched soil has left corn and soybean crops in the worst condition since 1988. Ninety percent of topsoil in six Midwest states was considered short or very short on moisture. In Missouri and Illinois, 99 percent reached that level. Widenor said he expects above-normal rain to fall from Montana to southern Wisconsin from Aug. 6-10 and in Minnesota from Aug. 11-15. Those showers will probably bypass most of Iowa and Illinois.
Grains Stage Impressive Recovery (Source:CME)
The grain complex closed lower but well off session lows on a late round of buying interest as low volume trade continues to cause large spikes up and down.
Pro Farmer: After the Bell Wheat Recap (Source:CME)
Chicago and Kansas City wheat futures finished widely mixed. The September through May contracts ended slightly lower and mid-range for the day, while 2013-crop contracts posted strong gains and finished on session highs. Minneapolis wheat futures finished 16 to 26 cents lower in the September through July 2013 contracts. Futures were pressured by profit-taking as support from the corn market was lacking today.
Wheat Market Recap Report (Source:CME)
September Wheat finished down 8 3/4 at 879 1/2, 17 1/2 off the high and 17 3/4 up from the low. December Wheat closed down 8 3/4 at 893 3/4. This was 17 3/4 up from the low and 17 1/2 off the high. September Chicago wheat traded sharply lower for most of the day but managed to find support late in the day as corn and soybean began to climb. Russian government officials reported that they see their wheat production reaching 50 million tonnes and exports between 11-15 million tonnes for the 2012/13 marketing year. The market is anticipating a much lower production estimate after severe drought has stressed a large portion of that wheat crop. Algeria reportedly bought 400-500,000 tonnes of French wheat overnight and Saudi Arabia announced a tender to buy 275,000 tonnes of hard wheat this morning. Black Sea and French shippers have done a majority of the tender business that has been announced in the last week providing evidence of just how uncompetitive the US wheat market is. This has forced traders to take profits ahead of the European Central Bank meeting on Thursday and ahead of the USDA report next week. September Oats closed down 9 1/4 at 371. This was 1/4 up from the low and 15 1/2 off the high.
Pro Farmer: After the Bell Corn Recap (Source:CME)
Corn futures were under pressure for much of the day, but posted a strong recovery in late trade to end just slightly lower in all but the July 2013 contract, which finished 1 1/4 cents higher. Early losses were tied to profit-taking, as there was little fresh news for traders to digest and focus was on minimizing risk ahead of this afternoon's statement from the Federal Open Market Committee.
Corn Market Recap for 8/1/2012 (Source:CME)
September Corn finished down 6 at 800 1/2, 17 1/2 off the high and 18 1/4 up from the low. December Corn closed down 4 3/4 at 800 1/2. This was 19 1/4 up from the low and 16 1/4 off the high. December corn traded sharply lower midday but climbed off session lows to close just under the 800 level. Pressure was linked to profit taking by speculative traders but end user buying was noted on today's dip. The Federal Reserve announced that they would leave interest rates unchanged which offered slight support to the commodity sector late in the session. Early yield reports out of the southern Delta have been average to above average as they begin harvest. The market is expecting yield declines as harvest extends to the north where drier conditions existed. The corn market continues weigh the effects of a smaller corn crop vs. the forecasted demand as many expect sharp declines in US exports and feed use in the coming year. Brazil reportedly exported 1.7 million tonnes of corn in July which was up from 134,900 tonnes in June. Ethanol production for the week ending July 27th averaged 809 thousand barrels per day. This is up 1.63% vs. last week and down 7.86% vs. last year. Total Ethanol production for the week was 5.663 million barrels. This was the first week of production increases for the month of July. Corn used in last week's production is estimated at 86.18 million bushels vs. 84.791 for the week prior. This crop year's cumulative corn used for ethanol production is 4.52 billion bushels. Corn use needs to average 108.364 million bushels per week to meet this crop year's USDA estimate of 5.05 billion bushels. September Rice finished down 0.03 at 15.585, equal to the high and 0.015 up from the low.
Crop bulls should beware falling corn and soy volumes
--Gavin Maguire is a Reuters market analyst. The views expressed are his own--
CHICAGO, July 31 (Reuters) - The corn and soybean markets may appear destined to keep rising as commercial buyers and traders scramble to secure crop coverage amid escalating fears of a potential supply shortfall due to pronounced drought across the U.S crop heartland.
But recent declines in traded volumes and open interest in both commodities suggests traders may be backing away from these markets over the near term, not racing toward them.
GRAINS-Corn rebounds as US drought worsens food supply worries
SINGAPORE, Aug 1 (Reuters) - Chicago corn rose 1.2 percent building on its biggest two-month rally since the last major U.S. drought of 1988, while soybeans gained almost 1 percent with little relief from the dryness in the Midwest.
"The concern about crop yields is continuing to support the market and there are reports that suggest we might see much lower yields," said Abah Ofon, an analyst at Standard Chartered Bank in Singapore.
Ukraine maize crop at 20 mln tonnes due heatwave-forecaster
KIEV, Aug 1 (Reuters) - Searing temperatures of up to 42 degrees Celsius expected in parts of Ukraine in early August are certain to hit the country's maize production, a state weather forecaster said on Wednesday.
"At the very best, the maize harvest (this year) will be 20 million tonnes," said Tetyana Adamenko, head of the state weather forecasting centre's agriculture department, indicating a revision downwards from the centre's previous 21 million tonne estimate.
Russia's 2012/13 exportable wheat surplus seen at 11-15 mln T - source
MOSCOW, Aug 1 (Reuters) - Russia will have an exportable surplus of wheat in a range of 11 million tonnes to 15 million tonnes depending on the final 2012 crop, which was damaged by drought, a government source told Reuters on Wednesday.
Prime Minister Dmitry Medvedev said on Tuseday that Russia, hit by severe drought first in the southern breadbasket regions and then in the other key growing regions, Siberia, the Volga and the Urals, could harvest 75-80 million tonnes this year, down from last year's 94 million tonnes.
France raises wheat crop estimate to 36.7 mln tonnes
PARIS, Aug 1 (Reuters) - France raised its harvest estimate to 36.7 million tonnes of soft wheat this year, a rise of 7.9 percent compared with the 2011 harvest, the French farm ministry said on Wednesday.
The ministry first estimated in July the crop would be around 35.9 million tonnes.
W.Australia grains crop seen down a third -CBH Group
MELBOURNE, Aug 1 (Reuters) - Grains production in the key producing state of Western Australia is likely to fall to 9.5-10.5 million tonnes in the 2012/13 season, down about a third from a record 15 million tonnes harvested last year, growers cooperative CBH Group said.
Australia was the world's No.2 wheat exporter in the last crop year and the government forecasts nationwide wheat production will fall 18 percent to total 24.1 million tonnes during the 2012/13 season.
Russian forecaster sees Aug weather warmer than usual
MOSCOW, Aug 1 (Reuters) - Temperatures will be higher than usual in Russia during August, putting pressure on the summer's crop, Russia's state forecaster said on Wednesday.
Russia, one of key global wheat supplier, will be able to maintain an exportable grain surplus, Prime Minister Dmitry Medvedev said on Tuesday, even as the Agriculture Ministry narrowed down its estimate of the drought-hit harvest to 80 million tonnes.
US corn crop shrinks further; bottom may be near
CHICAGO, July 31 (Reuters) - The U.S. corn crop has shrunk another 2.5 percent over the past week, but the modest decline suggests damage from the worst drought in half a century may be nearing an end, a Reuters poll of analysts showed on Tuesday.
The soybean crop is also getting smaller, and hot, dry weather forecast for the Midwest farm belt for the next two weeks could do more damage to the crop, according to the analysts.
Low corn supplies squeeze ADM earnings
July 31 (Reuters) - Tight corn supplies squeezed Archer Daniels Midland Co profits last quarter as the agribusiness giant handled less grain than expected and endured poor ethanol margins.
ADM said net earnings for the fiscal fourth quarter, which ended June 30, dropped 25 percent from a year earlier to 43 cents per share, below expectations for 60 cents. Adjusted earnings per share were 38 cents.
India buys time in drought, cuts irrigation costs
NEW DELHI, July 31 (Reuters) - India, facing its second drought in just four years, took steps to cut irrigation costs and increase fodder supplies for livestock farmers but held off from imposing any curb on exports of agricultural products or a ban of futures trading in them.
India's June-September monsoon rains, the main source of irrigation for 55 percent of its farmlands, are so far 19 percent below average. This has triggered fears of lower output and higher food inflation in one of the world's largest consumers and producers of grain.
Medvedev sees grain surplus as Russia cuts crop estimate
MOSCOW, July 31 (Reuters) - Key global wheat supplier Russia will be able to maintain an exportable grain surplus, Prime Minister Dmitry Medvedev said on Tuesday, even as the agriculture ministry narrowed down its estimate of the drought-hit harvest to 80 million tonnes.
The ministry cut its estimate from a previous 80-85 million tonnes and expected a 2012 exportable surplus of 12 million tonnes, according to Interfax news agency.
SOFTS-Sugar up slightly on India weather concerns, cocoa firm
LONDON, Aug 1 (Reuters) - Raw sugar edged higher on weather concerns in key producer India, while cocoa and coffee were firmer, but trading was hesitant ahead of policy making meetings of the U.S. Federal Reserve and the European Central Bank. Sugar futures nudged higher, supported by weak monsoon rains in India, plus the risk of El Nino curbing production in the world's second largest producer.
Indonesia allows imports of white sugar to rein in prices
JAKARTA, Aug 1 (Reuters) - Indonesia, Southeast Asia's largest sugar consumer, has issued import permits for 17,500 tonnes of the sweetener in a bid to ease price pressures, a trade ministry official said on Wednesday, less than six months after it banned imports for the whole year.
Late in February, Indonesia's trade minister said that despite a shortage of white sugar, the country would not import the commodity as it sought to refine more sugar in a drive to boost manufacturing.
Indonesia's July Sumatra coffee bean exports up 3 pct y/y
BANDAR LAMPUNG, Indonesia, Aug 1 (Reuters) - Robusta coffee bean exports in July from Indonesia's main growing area in Sumatra rose 3 percent from a year earlier, government trade data showed on Wednesday, with arrivals picking up as the harvest approached its peak period.
Indonesia, the world's third-largest coffee producer, shipped to 21,685.01 tonnes of robusta in July, versus 21,116.06 tonnes a year earlier. Last month's shipments were 47 percent higher than June's exports of 14,718.70 tonnes.
Oil Trades Near Two-Day High After U.S. Crude Stockpiles Tumble (Source:Bloomberg)
Oil traded near the highest level in two days in New York after stockpiles declined the most in seven months in the U.S., the world’s biggest crude consumer. Futures were little changed after climbing 1 percent yesterday, the first gain in three days. Inventories slid by 6.5 million barrels last week, the most since December, data from the Energy Department showed. They were forecast to drop by 1 million barrels, according to a Bloomberg News survey. Oil for September delivery was at $88.76 a barrel, down 15 cents, in electronic trading on the New York Mercantile Exchange at 9:16 a.m. Sydney time. The contract yesterday rose 85 cents to $88.91, the highest close since July 30. Prices are 10 percent lower this year. Brent crude for September settlement increased $1.04, or 1 percent, to $105.96 a barrel on the London-based ICE Futures Europe exchange yesterday. The European benchmark’s premium to West Texas Intermediate closed at $17.05, the widest since May.
U.S. gasoline supplies dropped 2.2 million barrels last week, the Energy Department report showed. They were forecast to rise 800,000 barrels, according to the median estimate of 12 analysts in the Bloomberg News survey. Oil fluctuated after the Federal Reserve said it will take steps to boost the U.S. economy if necessary as a two-day meeting ended in Washington yesterday, while refraining from announcing fresh stimulus immediately. European Central Bank policy makers meet in Frankfurt today.
OIL-Brent steadies after slipping on China data; Fed eyed
SINGAPORE, Aug 1 (Reuters) - Brent crude steadied below $105 per barrel after slipping to its lowest in almost a week on softer official manufacturing data from top energy consumer China, while fading hopes for U.S. stimulus measures kept prices in a tight range.
"We may see the market lighten its hold with the China PMI coming in below expectations, but it's not the end of the world, at least this week because, the main focus is still the FOMC and ECB meeting," said Ben Taylor, sales trader at CMC Markets.
Iraq oil exports up to 2.516 mln bpd in July-SOMO
BAGHDAD, Aug 1 (Reuters) - Iraq's oil exports rose to 2.516 million barrels per day (bpd) on average in July compared with 2.403 million bpd in June, the head of the State Oil Marketing Organisation (SOMO) told Reuters on Wednesday.
Exports from Basra in the south were 2.216 million bpd in July, while shipments from northern Kirkuk were 300,000 bpd, including 6,000 bpd by truck through Jordan, SOMO chief Falah Alamri said.
Iran Loses $133 Million a Day From Sanctions as Oil Buoys Obama (Source:Bloomberg)
U.S.-led sanctions against Iran are costing OPEC’s third-largest producer $133 million a day in lost sales without raising global crude prices, handing President Barack Obama an election-year foreign-policy victory. Shipments from Iran have plunged by 1.2 million barrels a day, or 52 percent, since the sanctions banning the purchase, transport, financing and insuring of Iranian crude began July 1, according to data compiled by Bloomberg. Annualized, that would cost President Mahmoud Ahmadinejad’s country about $48 billion in revenue, equivalent to 10 percent of its economy. While Iran’s threats to disrupt the flow of oil through the Persian Gulf sent crude to a three-year high in March, increased production from Saudi Arabia, a U.S. output boom and the slowing global economy have left prices 1.3 percent lower in 2012. That’s helping Obama avoid steeper domestic fuel costs before the November presidential election. Iran has to contend with a weakening currency and rising unemployment.
“It’s been an unqualified success,” Mike Wittner, head of oil-market research for the Americas at Societe Generale SA, said in a telephone interview from New York on July 25. “There were a lot of concerns sanctions could backfire by causing an oil-price spike, but in the end the U.S. and Europeans got their cake and they ate it too, because volumes are down and prices are down.”
Gas Liquids ‘Bloodbath’ Brings Shale Pain to Oil Market (Source:Bloomberg)
The shale boom that sent natural-gas prices to a 10-year low is being felt for the first time in the oil markets. Williams Partners LP (WPZ) joined Marathon Oil Corp. (MRO) and Devon Energy Corp. (DVN) yesterday in blaming a glut of propane and related products for lower profits in the second quarter. Next week more companies are expected to show the effects of falling prices for so-called natural-gas liquids used in backyard barbecues and motor fuels as producer Chesapeake Energy Corp. (CHK) and Targa Resources Partners LP (NGLS), a pipeline and storage company whose trading symbol is NGLS, release earnings.
The “NGL bloodbath,” as it was dubbed by Tudor, Pickering, Holt & Co. last month, is rippling across the oil and gas industry as explorers cut production and reduce cash flow projections, service companies forecast lower demand for drilling rigs, and pipeline partnerships suffer falling revenue for their gas liquids processing plants. The price of an ethane- propane NGL mix is down 58 percent from a high in January, outpacing the 19 percent drop in crude from a February peak. “The same thing is now happening to liquids that happened to natural gas itself,” said James Williams, an energy economist at WTRG Economics in London, Arkansas. “We now have too much. We have an oversupply, so it’s depressing the price.”
Iron Ore-Shanghai rebar falls on weak China data
SHANGHAI, Aug 1 (Reuters) - Chinese steel futures fell more than one percent, ending six consecutive sessions of gains, as weaker-than-expected Chinese manufacturing data dented market confidence and rekindled worries about sagging demand.
"The economy is really weak. Before we see any bigger recovery in the economy, the steel market will soon enter a weak demand season from late November," said an iron ore trader with a state-owned company's trading unit in Shanghai.
Global iron ore output hit record high in 2011 - UN
GENEVA, July 31 (Reuters) - Global production of iron ore, vital for the steel industry, hit a record high of 1.92 billion tons in 2011, largely to feed surging demand from China, the United Nations reported on Tuesday.
The UN's trade and development agency UNCTAD said in a new report, Iron Ore Market 2011-13, that last year's total output was up 4.7 percent on 2010, with major producer Australia increasing its total by 12.7 percent, Brazil by 5.1 percent and China by 2.1 percent.
Indian steel makers double pellets imports in May
MUMBAI, July 30 (Reuters) - Imports into India of iron ore pellets, used in making steel, more than doubled in May to 174,319 tonnes as a partial mining ban in southern Karnataka state hit supplies, an industry body said.
Production in India, once the third-biggest global supplier of iron ore, has been hit as the government and state authorities raise taxes and freight rates to try to curb exports and retain supplies for domestic use.
Bank of Korea Increases Gold Reserves for First Time This Year (Source:Bloomberg)
The Bank of Korea, which has the world’s seventh-biggest foreign-exchange reserves, boosted gold holdings for the first time this year. The central bank bought 16 metric tons last month, boosting reserves to 70.4 tons, according to Lee Jung, head of the investment strategy team at the bank’s Reserve Investment Division. Holdings increased by $810 million to $2.98 billion, or the equivalent of 0.9 percent of total reserves, the bank said in a statement today. Central banks are expanding reserves after bullion appreciated for 11 consecutive years as investors sought a hedge against everything from accelerating inflation to Europe’s debt crisis to slumping equities. Central-bank purchases this year will probably exceed the 456 tons added in 2011, the World Gold Council estimates.
The Bank of Korea bought 25 tons over a one-month period from June to July last year, the first purchases in more than a decade, and added a further 15 tons in November, joining other emerging-market countries in expanding holdings to guard against currency volatility and to diversify portfolios. Central banks and the International Monetary Fund are the largest bullion owners with 29,500 tons at the end of last year, or 17 percent of all mined metal, council data show.
Gold Is Seen Advancing on Speculation About More Easing (Source:Bloomberg)
Gold declined after Federal Reserve Chairman Ben S. Bernanke held off on increasing stimulus measures, lowering demand for the precious metal. The Federal Open Market Committee “will closely monitor incoming information on economic and financial developments and will provide additional accommodation as needed to promote a stronger economic recovery and sustained improvement in labor market conditions in a context of price stability,” it said today at the conclusion of a two-day meeting. Earlier, a report by ADP Employer Services showed companies in the U.S. added more workers than projected in July. “We saw a knee-jerk reaction, but the stage was already set after we saw strong ADP numbers,” Donald Selkin, the New York-based chief market strategist at National Securities Corp., which manages about $3 billion of assets, said by telephone. “There may be some announcement from the Fed either later this month or next.”
Gold futures for December delivery slid 0.6 percent to $1,605.10 an ounce in electronic trading at 3:20 p.m. on the Comex in New York. The prices settled earlier at $1,607.30, down 0.5 percent. Bullion surged 70 percent from the end of December 2008 to June 2011 as the U.S. central bank kept borrowing costs at a record low and bought $2.3 trillion of debt in two rounds of so- called quantitative easing.
METALS-LME copper drops to near 1-week low after China data
London copper dropped to its lowest in almost a week after official manufacturing data from top metals consumer China fell short of expectations, while fading hopes for monetary stimulus in the United States and Europe also dragged down prices.
"Copper is likely to stay range bound for the next few weeks. China's copper demand is not good and there's no sign of any recovery at the moment," said Beijing-based metals analyst Wang Ling of consultancy CRU.
PRECIOUS-Gold steady as investors eye central bank decisions
Gold was locked in a tight range on Wednesday, as investors awaited monetary policy decisions from the U.S. Federal Reserve and the European Central Bank, which will determine the direction of markets.
"The ECB is the major source of uncertainty," said Nick Trevethan, senior metals strategist at ANZ in Singapore. "The focus is whether Draghi has promised action without ensuring support from the members of the ECB governing council."
Slump in activity pushes Baltic index down
July 31 (Reuters) - The Baltic Exchange's main sea freight index, which tracks rates for ships carrying dry commodities, fell on Tuesday for a sixteenth straight day due to a slump in activity.
The overall index, a gauge of the cost of shipping commodities such as iron ore, cement, grain, coal and fertiliser, lost 18 points or 1.97 percent to 897 points.
South American farmers are preparing to plant record grain and oilseed crops that may temper surging food inflation caused by the worst U.S. drought in a generation. Argentine farmers, buoyed by rains that alleviated a drought, will smash a previous corn harvest record of 22 million metric tons by reaping as much as 31 million tons in the 2012- 2013 season, growers group Crea said July 23. Brazil may harvest its biggest-ever soybean crop in 2012-2013 to surpass the U.S. as the world’s biggest grower, according to Sao Paulo-based researcher Agroconsult.
Corn rose to a record $8.205 a bushel in Chicago yesterday, capping the biggest monthly gain since 1988, while soybeans reached an all-time high on July 23 and surged 15 percent last month. Corn retreated 1.2 percent today. The response from South American growers to the worst U.S. drought since 1956 will be the “turning point” in the corn and soybean rally, Wayne Gordon, the head of global agriculture markets research at UBS AG in New York, said in an interview. “We are in a great situation,” said Martin Otero, the owner of Buenos Aires-based farm investment group Hillock Capital Management that owns and manages farmland in Argentina and Uruguay. “We have very high yield prospects, and there’s a high probability that prices will be very good.”
Soil Conditions
South America may boost its soybean crop by 30 percent in the 2012-2013 season as farmers look to cash in on higher prices and improved soil conditions after a drought last season, said Karim Cherif, a Zurich-based analyst for Credit Suisse Group AG. Argentina and Paraguay are the world’s third- and fourth- largest exporters, respectively, of the oilseed behind the U.S. and Brazil. In corn, Argentina, Ukraine and Brazil trail the U.S. as the largest global exporters of the cereal. South American farmers start planting corn and soybean crops from September, while harvesting will take place between February and June next year. In the U.S., whose season runs inversely to South America, the already planted corn crop is “not save-able” in many areas, economist Dennis Gartman wrote in his daily Gartman Letter.
Ninety-four percent of U.S. corn crops have gone through the silking stage, while only 55 percent of soybean plants are setting pods, the U.S. Department of Agriculture said July 30. Both phases are critical for determining yields. Soybeans typically mature later than corn and damages can be reversed by rains now, Gartman said. Much of the U.S. Midwest may remain hot and dry through the middle of August, Matt Rogers, Commodity Weather Group LLC president, said in an e-mail today.
Weather ‘Crucial’
Prices may advance to records on the shortage, said Sudakshina Unnikrishnan, an analyst at Barclays Plc in London. “I don’t think we’ve seen the top so far,” she said in an interview. In the U.S. “weather through August is going to be absolutely crucial.” The U.S. drought will cause food-price volatility that may expand hunger to the world’s poor, threatening social stability and putting pressure on governments, World Bank President Jim Yong Kim said in a report July 30. French Agriculture Minister Stephane Le Foll said a surge in grain and soy prices is a “major preoccupation” worldwide. “South American farmers will respond to high crop prices by increasing planted acres,” Juan Luciano, chief operating officer of Decatur, Illinois-based grains processor Archer- Daniels-Midland Co. said in a conference call with analysts yesterday.
Brazilian farmers may plant a record soybean crop because of prices, the prospect of rain caused by the El Nino weather phenomenon and its higher profitability than corn, said Silvio Porto, the director of agriculture policy and information at Conab, the Brazilian government crop-forecasting agency.
Prefer Soybeans
Many Brazilian farmers will sow soybeans instead of corn because the seeds are cheaper and the cost of transporting from farms far from the eastern Atlantic coast is cheaper, said Glauber Silveira, a farmer who is also president of Brazil’s soybean growers association known as Aprosoja. “You have more safety with soy, it’s easier to sell in advance,” said Silveira, who owns farms in Mato Grosso state that borders the Amazon Jungle. “I have already sold 60 percent of my crop next year in advance.” Brazil will plant 27 million hectares (66.7 million acres) in 2012-2013 to reap a record 78 million-ton soybean crop and may even surpass that target as growers use record amounts of fertilizers to maximize yields, said Giovana Araujo, a Sao Paulo-based analyst at Banco Itau BBA SA.
El Nino
To be sure, farmers across South America are counting on the downpours that arrive with El Nino that warms ocean temperatures, bringing wetter weather to the grassy plains in Argentina and Brazil. The El Nino rains may be less intense than in previous episodes of the weather phenomenon, said Eduardo Sierra, a climatologist at the Buenos Aires Cereals Exchange. Many Argentine farmers need the heavy downpours that occur during the so-called Santa Rosa storm at the end of August to sow corn, said Esteban Copati, an analyst at the exchange. Argentine farmers are still lobbying the government to ease export restrictions on food staples such as corn consumed in the South American country and may grow soybeans instead because they are not subject to the restrictions, Copati said.
The country’s soybean harvest may rise about 35 percent in 2012-2013 to 56 million tons, UBS’s Gordon said. Output in neighboring Paraguay may almost double to 7.8 million tons in the 2012-2013 season from 4 million tons a year earlier, the USDA said March 28. “The Latin American guys are going to be the turning point,” Gordon said. “What the condition of their planting is in October and November will determine the length in the rally.”
U.S. Midwest May Remain Hot, Dry Through Mid-August (Source:Bloomberg)
Much of the Midwest may remain hot and dry through the middle of August, after a month in which more than half the U.S. was covered by drought and temperature records toppled by the thousands. The Midwest is expected to stay about 5 to 8 degrees Fahrenheit (2.8 to 4.4 Celsius) above normal through Aug. 15, according to Matt Rogers, Commodity Weather Group LLC president. The area from Iowa south Arkansas, west to Nebraska and Kansas and east to Illinois will probably have below-normal rain through Aug. 15, said Joel Widenor, CWG co-founder. “While next week sees some back-and-forth variability, we still favor a hot-dominated story with the most severe conditions still over the drought areas of the western Midwest, Plains and nearby parts of the South,” Rogers said.
In July, 4,368 daily high temperature records were set or tied across the U.S. or about 2.6 percent of the total possible, according to National Climatic Data Center statistics. A year ago, 2,755 daily records were set or tied, or 1.5 percent of the total, according to the center in Asheville, North Carolina. As of last week, at least 63.9 percent of the contiguous 48 states was affected by drought considered moderate or worse. The parched soil has left corn and soybean crops in the worst condition since 1988. Ninety percent of topsoil in six Midwest states was considered short or very short on moisture. In Missouri and Illinois, 99 percent reached that level. Widenor said he expects above-normal rain to fall from Montana to southern Wisconsin from Aug. 6-10 and in Minnesota from Aug. 11-15. Those showers will probably bypass most of Iowa and Illinois.
Grains Stage Impressive Recovery (Source:CME)
The grain complex closed lower but well off session lows on a late round of buying interest as low volume trade continues to cause large spikes up and down.
Pro Farmer: After the Bell Wheat Recap (Source:CME)
Chicago and Kansas City wheat futures finished widely mixed. The September through May contracts ended slightly lower and mid-range for the day, while 2013-crop contracts posted strong gains and finished on session highs. Minneapolis wheat futures finished 16 to 26 cents lower in the September through July 2013 contracts. Futures were pressured by profit-taking as support from the corn market was lacking today.
Wheat Market Recap Report (Source:CME)
September Wheat finished down 8 3/4 at 879 1/2, 17 1/2 off the high and 17 3/4 up from the low. December Wheat closed down 8 3/4 at 893 3/4. This was 17 3/4 up from the low and 17 1/2 off the high. September Chicago wheat traded sharply lower for most of the day but managed to find support late in the day as corn and soybean began to climb. Russian government officials reported that they see their wheat production reaching 50 million tonnes and exports between 11-15 million tonnes for the 2012/13 marketing year. The market is anticipating a much lower production estimate after severe drought has stressed a large portion of that wheat crop. Algeria reportedly bought 400-500,000 tonnes of French wheat overnight and Saudi Arabia announced a tender to buy 275,000 tonnes of hard wheat this morning. Black Sea and French shippers have done a majority of the tender business that has been announced in the last week providing evidence of just how uncompetitive the US wheat market is. This has forced traders to take profits ahead of the European Central Bank meeting on Thursday and ahead of the USDA report next week. September Oats closed down 9 1/4 at 371. This was 1/4 up from the low and 15 1/2 off the high.
Pro Farmer: After the Bell Corn Recap (Source:CME)
Corn futures were under pressure for much of the day, but posted a strong recovery in late trade to end just slightly lower in all but the July 2013 contract, which finished 1 1/4 cents higher. Early losses were tied to profit-taking, as there was little fresh news for traders to digest and focus was on minimizing risk ahead of this afternoon's statement from the Federal Open Market Committee.
Corn Market Recap for 8/1/2012 (Source:CME)
September Corn finished down 6 at 800 1/2, 17 1/2 off the high and 18 1/4 up from the low. December Corn closed down 4 3/4 at 800 1/2. This was 19 1/4 up from the low and 16 1/4 off the high. December corn traded sharply lower midday but climbed off session lows to close just under the 800 level. Pressure was linked to profit taking by speculative traders but end user buying was noted on today's dip. The Federal Reserve announced that they would leave interest rates unchanged which offered slight support to the commodity sector late in the session. Early yield reports out of the southern Delta have been average to above average as they begin harvest. The market is expecting yield declines as harvest extends to the north where drier conditions existed. The corn market continues weigh the effects of a smaller corn crop vs. the forecasted demand as many expect sharp declines in US exports and feed use in the coming year. Brazil reportedly exported 1.7 million tonnes of corn in July which was up from 134,900 tonnes in June. Ethanol production for the week ending July 27th averaged 809 thousand barrels per day. This is up 1.63% vs. last week and down 7.86% vs. last year. Total Ethanol production for the week was 5.663 million barrels. This was the first week of production increases for the month of July. Corn used in last week's production is estimated at 86.18 million bushels vs. 84.791 for the week prior. This crop year's cumulative corn used for ethanol production is 4.52 billion bushels. Corn use needs to average 108.364 million bushels per week to meet this crop year's USDA estimate of 5.05 billion bushels. September Rice finished down 0.03 at 15.585, equal to the high and 0.015 up from the low.
Crop bulls should beware falling corn and soy volumes
--Gavin Maguire is a Reuters market analyst. The views expressed are his own--
CHICAGO, July 31 (Reuters) - The corn and soybean markets may appear destined to keep rising as commercial buyers and traders scramble to secure crop coverage amid escalating fears of a potential supply shortfall due to pronounced drought across the U.S crop heartland.
But recent declines in traded volumes and open interest in both commodities suggests traders may be backing away from these markets over the near term, not racing toward them.
GRAINS-Corn rebounds as US drought worsens food supply worries
SINGAPORE, Aug 1 (Reuters) - Chicago corn rose 1.2 percent building on its biggest two-month rally since the last major U.S. drought of 1988, while soybeans gained almost 1 percent with little relief from the dryness in the Midwest.
"The concern about crop yields is continuing to support the market and there are reports that suggest we might see much lower yields," said Abah Ofon, an analyst at Standard Chartered Bank in Singapore.
Ukraine maize crop at 20 mln tonnes due heatwave-forecaster
KIEV, Aug 1 (Reuters) - Searing temperatures of up to 42 degrees Celsius expected in parts of Ukraine in early August are certain to hit the country's maize production, a state weather forecaster said on Wednesday.
"At the very best, the maize harvest (this year) will be 20 million tonnes," said Tetyana Adamenko, head of the state weather forecasting centre's agriculture department, indicating a revision downwards from the centre's previous 21 million tonne estimate.
Russia's 2012/13 exportable wheat surplus seen at 11-15 mln T - source
MOSCOW, Aug 1 (Reuters) - Russia will have an exportable surplus of wheat in a range of 11 million tonnes to 15 million tonnes depending on the final 2012 crop, which was damaged by drought, a government source told Reuters on Wednesday.
Prime Minister Dmitry Medvedev said on Tuseday that Russia, hit by severe drought first in the southern breadbasket regions and then in the other key growing regions, Siberia, the Volga and the Urals, could harvest 75-80 million tonnes this year, down from last year's 94 million tonnes.
France raises wheat crop estimate to 36.7 mln tonnes
PARIS, Aug 1 (Reuters) - France raised its harvest estimate to 36.7 million tonnes of soft wheat this year, a rise of 7.9 percent compared with the 2011 harvest, the French farm ministry said on Wednesday.
The ministry first estimated in July the crop would be around 35.9 million tonnes.
W.Australia grains crop seen down a third -CBH Group
MELBOURNE, Aug 1 (Reuters) - Grains production in the key producing state of Western Australia is likely to fall to 9.5-10.5 million tonnes in the 2012/13 season, down about a third from a record 15 million tonnes harvested last year, growers cooperative CBH Group said.
Australia was the world's No.2 wheat exporter in the last crop year and the government forecasts nationwide wheat production will fall 18 percent to total 24.1 million tonnes during the 2012/13 season.
Russian forecaster sees Aug weather warmer than usual
MOSCOW, Aug 1 (Reuters) - Temperatures will be higher than usual in Russia during August, putting pressure on the summer's crop, Russia's state forecaster said on Wednesday.
Russia, one of key global wheat supplier, will be able to maintain an exportable grain surplus, Prime Minister Dmitry Medvedev said on Tuesday, even as the Agriculture Ministry narrowed down its estimate of the drought-hit harvest to 80 million tonnes.
US corn crop shrinks further; bottom may be near
CHICAGO, July 31 (Reuters) - The U.S. corn crop has shrunk another 2.5 percent over the past week, but the modest decline suggests damage from the worst drought in half a century may be nearing an end, a Reuters poll of analysts showed on Tuesday.
The soybean crop is also getting smaller, and hot, dry weather forecast for the Midwest farm belt for the next two weeks could do more damage to the crop, according to the analysts.
Low corn supplies squeeze ADM earnings
July 31 (Reuters) - Tight corn supplies squeezed Archer Daniels Midland Co profits last quarter as the agribusiness giant handled less grain than expected and endured poor ethanol margins.
ADM said net earnings for the fiscal fourth quarter, which ended June 30, dropped 25 percent from a year earlier to 43 cents per share, below expectations for 60 cents. Adjusted earnings per share were 38 cents.
India buys time in drought, cuts irrigation costs
NEW DELHI, July 31 (Reuters) - India, facing its second drought in just four years, took steps to cut irrigation costs and increase fodder supplies for livestock farmers but held off from imposing any curb on exports of agricultural products or a ban of futures trading in them.
India's June-September monsoon rains, the main source of irrigation for 55 percent of its farmlands, are so far 19 percent below average. This has triggered fears of lower output and higher food inflation in one of the world's largest consumers and producers of grain.
Medvedev sees grain surplus as Russia cuts crop estimate
MOSCOW, July 31 (Reuters) - Key global wheat supplier Russia will be able to maintain an exportable grain surplus, Prime Minister Dmitry Medvedev said on Tuesday, even as the agriculture ministry narrowed down its estimate of the drought-hit harvest to 80 million tonnes.
The ministry cut its estimate from a previous 80-85 million tonnes and expected a 2012 exportable surplus of 12 million tonnes, according to Interfax news agency.
SOFTS-Sugar up slightly on India weather concerns, cocoa firm
LONDON, Aug 1 (Reuters) - Raw sugar edged higher on weather concerns in key producer India, while cocoa and coffee were firmer, but trading was hesitant ahead of policy making meetings of the U.S. Federal Reserve and the European Central Bank. Sugar futures nudged higher, supported by weak monsoon rains in India, plus the risk of El Nino curbing production in the world's second largest producer.
Indonesia allows imports of white sugar to rein in prices
JAKARTA, Aug 1 (Reuters) - Indonesia, Southeast Asia's largest sugar consumer, has issued import permits for 17,500 tonnes of the sweetener in a bid to ease price pressures, a trade ministry official said on Wednesday, less than six months after it banned imports for the whole year.
Late in February, Indonesia's trade minister said that despite a shortage of white sugar, the country would not import the commodity as it sought to refine more sugar in a drive to boost manufacturing.
Indonesia's July Sumatra coffee bean exports up 3 pct y/y
BANDAR LAMPUNG, Indonesia, Aug 1 (Reuters) - Robusta coffee bean exports in July from Indonesia's main growing area in Sumatra rose 3 percent from a year earlier, government trade data showed on Wednesday, with arrivals picking up as the harvest approached its peak period.
Indonesia, the world's third-largest coffee producer, shipped to 21,685.01 tonnes of robusta in July, versus 21,116.06 tonnes a year earlier. Last month's shipments were 47 percent higher than June's exports of 14,718.70 tonnes.
Oil Trades Near Two-Day High After U.S. Crude Stockpiles Tumble (Source:Bloomberg)
Oil traded near the highest level in two days in New York after stockpiles declined the most in seven months in the U.S., the world’s biggest crude consumer. Futures were little changed after climbing 1 percent yesterday, the first gain in three days. Inventories slid by 6.5 million barrels last week, the most since December, data from the Energy Department showed. They were forecast to drop by 1 million barrels, according to a Bloomberg News survey. Oil for September delivery was at $88.76 a barrel, down 15 cents, in electronic trading on the New York Mercantile Exchange at 9:16 a.m. Sydney time. The contract yesterday rose 85 cents to $88.91, the highest close since July 30. Prices are 10 percent lower this year. Brent crude for September settlement increased $1.04, or 1 percent, to $105.96 a barrel on the London-based ICE Futures Europe exchange yesterday. The European benchmark’s premium to West Texas Intermediate closed at $17.05, the widest since May.
U.S. gasoline supplies dropped 2.2 million barrels last week, the Energy Department report showed. They were forecast to rise 800,000 barrels, according to the median estimate of 12 analysts in the Bloomberg News survey. Oil fluctuated after the Federal Reserve said it will take steps to boost the U.S. economy if necessary as a two-day meeting ended in Washington yesterday, while refraining from announcing fresh stimulus immediately. European Central Bank policy makers meet in Frankfurt today.
OIL-Brent steadies after slipping on China data; Fed eyed
SINGAPORE, Aug 1 (Reuters) - Brent crude steadied below $105 per barrel after slipping to its lowest in almost a week on softer official manufacturing data from top energy consumer China, while fading hopes for U.S. stimulus measures kept prices in a tight range.
"We may see the market lighten its hold with the China PMI coming in below expectations, but it's not the end of the world, at least this week because, the main focus is still the FOMC and ECB meeting," said Ben Taylor, sales trader at CMC Markets.
Iraq oil exports up to 2.516 mln bpd in July-SOMO
BAGHDAD, Aug 1 (Reuters) - Iraq's oil exports rose to 2.516 million barrels per day (bpd) on average in July compared with 2.403 million bpd in June, the head of the State Oil Marketing Organisation (SOMO) told Reuters on Wednesday.
Exports from Basra in the south were 2.216 million bpd in July, while shipments from northern Kirkuk were 300,000 bpd, including 6,000 bpd by truck through Jordan, SOMO chief Falah Alamri said.
Iran Loses $133 Million a Day From Sanctions as Oil Buoys Obama (Source:Bloomberg)
U.S.-led sanctions against Iran are costing OPEC’s third-largest producer $133 million a day in lost sales without raising global crude prices, handing President Barack Obama an election-year foreign-policy victory. Shipments from Iran have plunged by 1.2 million barrels a day, or 52 percent, since the sanctions banning the purchase, transport, financing and insuring of Iranian crude began July 1, according to data compiled by Bloomberg. Annualized, that would cost President Mahmoud Ahmadinejad’s country about $48 billion in revenue, equivalent to 10 percent of its economy. While Iran’s threats to disrupt the flow of oil through the Persian Gulf sent crude to a three-year high in March, increased production from Saudi Arabia, a U.S. output boom and the slowing global economy have left prices 1.3 percent lower in 2012. That’s helping Obama avoid steeper domestic fuel costs before the November presidential election. Iran has to contend with a weakening currency and rising unemployment.
“It’s been an unqualified success,” Mike Wittner, head of oil-market research for the Americas at Societe Generale SA, said in a telephone interview from New York on July 25. “There were a lot of concerns sanctions could backfire by causing an oil-price spike, but in the end the U.S. and Europeans got their cake and they ate it too, because volumes are down and prices are down.”
Gas Liquids ‘Bloodbath’ Brings Shale Pain to Oil Market (Source:Bloomberg)
The shale boom that sent natural-gas prices to a 10-year low is being felt for the first time in the oil markets. Williams Partners LP (WPZ) joined Marathon Oil Corp. (MRO) and Devon Energy Corp. (DVN) yesterday in blaming a glut of propane and related products for lower profits in the second quarter. Next week more companies are expected to show the effects of falling prices for so-called natural-gas liquids used in backyard barbecues and motor fuels as producer Chesapeake Energy Corp. (CHK) and Targa Resources Partners LP (NGLS), a pipeline and storage company whose trading symbol is NGLS, release earnings.
The “NGL bloodbath,” as it was dubbed by Tudor, Pickering, Holt & Co. last month, is rippling across the oil and gas industry as explorers cut production and reduce cash flow projections, service companies forecast lower demand for drilling rigs, and pipeline partnerships suffer falling revenue for their gas liquids processing plants. The price of an ethane- propane NGL mix is down 58 percent from a high in January, outpacing the 19 percent drop in crude from a February peak. “The same thing is now happening to liquids that happened to natural gas itself,” said James Williams, an energy economist at WTRG Economics in London, Arkansas. “We now have too much. We have an oversupply, so it’s depressing the price.”
Iron Ore-Shanghai rebar falls on weak China data
SHANGHAI, Aug 1 (Reuters) - Chinese steel futures fell more than one percent, ending six consecutive sessions of gains, as weaker-than-expected Chinese manufacturing data dented market confidence and rekindled worries about sagging demand.
"The economy is really weak. Before we see any bigger recovery in the economy, the steel market will soon enter a weak demand season from late November," said an iron ore trader with a state-owned company's trading unit in Shanghai.
Global iron ore output hit record high in 2011 - UN
GENEVA, July 31 (Reuters) - Global production of iron ore, vital for the steel industry, hit a record high of 1.92 billion tons in 2011, largely to feed surging demand from China, the United Nations reported on Tuesday.
The UN's trade and development agency UNCTAD said in a new report, Iron Ore Market 2011-13, that last year's total output was up 4.7 percent on 2010, with major producer Australia increasing its total by 12.7 percent, Brazil by 5.1 percent and China by 2.1 percent.
Indian steel makers double pellets imports in May
MUMBAI, July 30 (Reuters) - Imports into India of iron ore pellets, used in making steel, more than doubled in May to 174,319 tonnes as a partial mining ban in southern Karnataka state hit supplies, an industry body said.
Production in India, once the third-biggest global supplier of iron ore, has been hit as the government and state authorities raise taxes and freight rates to try to curb exports and retain supplies for domestic use.
Bank of Korea Increases Gold Reserves for First Time This Year (Source:Bloomberg)
The Bank of Korea, which has the world’s seventh-biggest foreign-exchange reserves, boosted gold holdings for the first time this year. The central bank bought 16 metric tons last month, boosting reserves to 70.4 tons, according to Lee Jung, head of the investment strategy team at the bank’s Reserve Investment Division. Holdings increased by $810 million to $2.98 billion, or the equivalent of 0.9 percent of total reserves, the bank said in a statement today. Central banks are expanding reserves after bullion appreciated for 11 consecutive years as investors sought a hedge against everything from accelerating inflation to Europe’s debt crisis to slumping equities. Central-bank purchases this year will probably exceed the 456 tons added in 2011, the World Gold Council estimates.
The Bank of Korea bought 25 tons over a one-month period from June to July last year, the first purchases in more than a decade, and added a further 15 tons in November, joining other emerging-market countries in expanding holdings to guard against currency volatility and to diversify portfolios. Central banks and the International Monetary Fund are the largest bullion owners with 29,500 tons at the end of last year, or 17 percent of all mined metal, council data show.
Gold Is Seen Advancing on Speculation About More Easing (Source:Bloomberg)
Gold declined after Federal Reserve Chairman Ben S. Bernanke held off on increasing stimulus measures, lowering demand for the precious metal. The Federal Open Market Committee “will closely monitor incoming information on economic and financial developments and will provide additional accommodation as needed to promote a stronger economic recovery and sustained improvement in labor market conditions in a context of price stability,” it said today at the conclusion of a two-day meeting. Earlier, a report by ADP Employer Services showed companies in the U.S. added more workers than projected in July. “We saw a knee-jerk reaction, but the stage was already set after we saw strong ADP numbers,” Donald Selkin, the New York-based chief market strategist at National Securities Corp., which manages about $3 billion of assets, said by telephone. “There may be some announcement from the Fed either later this month or next.”
Gold futures for December delivery slid 0.6 percent to $1,605.10 an ounce in electronic trading at 3:20 p.m. on the Comex in New York. The prices settled earlier at $1,607.30, down 0.5 percent. Bullion surged 70 percent from the end of December 2008 to June 2011 as the U.S. central bank kept borrowing costs at a record low and bought $2.3 trillion of debt in two rounds of so- called quantitative easing.
METALS-LME copper drops to near 1-week low after China data
London copper dropped to its lowest in almost a week after official manufacturing data from top metals consumer China fell short of expectations, while fading hopes for monetary stimulus in the United States and Europe also dragged down prices.
"Copper is likely to stay range bound for the next few weeks. China's copper demand is not good and there's no sign of any recovery at the moment," said Beijing-based metals analyst Wang Ling of consultancy CRU.
PRECIOUS-Gold steady as investors eye central bank decisions
Gold was locked in a tight range on Wednesday, as investors awaited monetary policy decisions from the U.S. Federal Reserve and the European Central Bank, which will determine the direction of markets.
"The ECB is the major source of uncertainty," said Nick Trevethan, senior metals strategist at ANZ in Singapore. "The focus is whether Draghi has promised action without ensuring support from the members of the ECB governing council."
Slump in activity pushes Baltic index down
July 31 (Reuters) - The Baltic Exchange's main sea freight index, which tracks rates for ships carrying dry commodities, fell on Tuesday for a sixteenth straight day due to a slump in activity.
The overall index, a gauge of the cost of shipping commodities such as iron ore, cement, grain, coal and fertiliser, lost 18 points or 1.97 percent to 897 points.
20120802 1001 Soy Oil & Palm Oil Related News.
Pro Farmer: After the Bell Soybean Recap (Source:CME)
Soybean futures closed 4 1/4 to 38 3/4 cents lower, but came well off session lows late to finish mid-range. Futures faced corrective selling today as fresh news was limited. While there are ongoing crop concerns, there wasn't any fresh news on that front, which gave traders an opportunity to take profits out of the market. Additional pressure came from weather forecasts as midday updates called for better rain chances into early next week.
Soybean Complex Market Recap (Source:CME)
August Soybeans finished down 38 3/4 at 1682 1/4, 53 3/4 off the high and 31 1/4 up from the low. November Soybeans closed down 12 at 1629. This was 33 1/4 up from the low and 31 off the high. August Soymeal closed down 7.5 at 537.2. This was 19.9 up from the low and 12.8 off the high. August Soybean Oil finished down 0.82 at 51.73, 1.25 off the high and 0.03 up from the low. The soybean complex closed well off session lows after climbing higher late in the session following the announcement by The Federal Reserve that they would leave interest rates unchanged. The August contract lost to the September and November contracts as bull spreads unwound. August soybean meal and soybean oil traded sharply lower on the day. Weather maps suggested a slightly wetter forecast for the next week but market confidence is low that the forecast will successfully develop. The forecast also called for slightly cooler temperatures in the central Midwest next week. Temperatures are expected to stay warm in the southwestern portion of the Corn Belt. Soybean volume has been slightly lower to the start the week and traders were looking to take profits ahead of the USDA report next week and the European Central Bank meeting tomorrow. The next two weeks remain critical to the soybean yield potential for the 2012/13 marketing year. Good support was seen towards the end of the trading session which suggests speculators and end users found good value at the sharply lower price levels, given the weather forecast over the next two weeks.
VEGOILS-Palm oil edges up on lingering U.S. weather fears
SINGAPORE, Aug 1 (Reuters) - Malaysian crude palm oil inched up in a quiet trading session as lingering weather fears in the U.S. Midwest trumped expectations of higher stocks in No.2 producer Malaysia.
"We see some range-bound trading today. If the market breaks the 3,000-ringgit level, then prices can go much higher," said a trader with a foreign commodities brokerage in Kuala Lumpur.
Soybean futures closed 4 1/4 to 38 3/4 cents lower, but came well off session lows late to finish mid-range. Futures faced corrective selling today as fresh news was limited. While there are ongoing crop concerns, there wasn't any fresh news on that front, which gave traders an opportunity to take profits out of the market. Additional pressure came from weather forecasts as midday updates called for better rain chances into early next week.
Soybean Complex Market Recap (Source:CME)
August Soybeans finished down 38 3/4 at 1682 1/4, 53 3/4 off the high and 31 1/4 up from the low. November Soybeans closed down 12 at 1629. This was 33 1/4 up from the low and 31 off the high. August Soymeal closed down 7.5 at 537.2. This was 19.9 up from the low and 12.8 off the high. August Soybean Oil finished down 0.82 at 51.73, 1.25 off the high and 0.03 up from the low. The soybean complex closed well off session lows after climbing higher late in the session following the announcement by The Federal Reserve that they would leave interest rates unchanged. The August contract lost to the September and November contracts as bull spreads unwound. August soybean meal and soybean oil traded sharply lower on the day. Weather maps suggested a slightly wetter forecast for the next week but market confidence is low that the forecast will successfully develop. The forecast also called for slightly cooler temperatures in the central Midwest next week. Temperatures are expected to stay warm in the southwestern portion of the Corn Belt. Soybean volume has been slightly lower to the start the week and traders were looking to take profits ahead of the USDA report next week and the European Central Bank meeting tomorrow. The next two weeks remain critical to the soybean yield potential for the 2012/13 marketing year. Good support was seen towards the end of the trading session which suggests speculators and end users found good value at the sharply lower price levels, given the weather forecast over the next two weeks.
VEGOILS-Palm oil edges up on lingering U.S. weather fears
SINGAPORE, Aug 1 (Reuters) - Malaysian crude palm oil inched up in a quiet trading session as lingering weather fears in the U.S. Midwest trumped expectations of higher stocks in No.2 producer Malaysia.
"We see some range-bound trading today. If the market breaks the 3,000-ringgit level, then prices can go much higher," said a trader with a foreign commodities brokerage in Kuala Lumpur.
Wednesday, August 1, 2012
20120801 1117 Global Markets & Commodities Related News.
GLOBAL MARKETS-Shares fall as stimulus hopes fade, eyes on China PMI
TOKYO, Aug 1 (Reuters) - Asian shares fell on Wednesday after four days of gains, as expectations of stimulus action this week by the U.S. Federal Reserve and the European Central Bank fade, and following signs of deepening Asian economic stress.
"We are looking for, at most, a chance in the Fed's language that extends low rates through at least early-2015, which won't be the stimulus bump market participants have been hoping for," said Christopher Vecchio, currency analyst at DailyFX.
ASEAN path to economic union muddied by South China Sea
JAKARTA, Aug 1 (Reuters) - Discord in Southeast Asia over how to deal with Beijing's claims in the South China Sea comes as the region struggles to overcome competing national interests and form a European Union-style economic community by 2015.
Political leaders and officials say the row may not directly affect plans by the Association of Southeast Asian Nations (ASEAN) for the economic integration of countries ranging from wealthy Singapore to impoverished Myanmar.
COMMODITIES-Big gains in July; focus on Fed/ECB moves next
NEW YORK, July 31 (Reuters) - Oil prices fell sharply on Tuesday as hopes for a quick U.S. stimulus faded, but commodities ended July with their biggest monthly gains since October, due to a broad rally over the past four weeks.
Analysts said investor confidence that has boosted commodities since the end of the second quarter was largely intact, although worries over the U.S. economy and global financial conditions could chip away at prices.
US crude stocks plunge nearly 12 million barrels-API
NEW YORK, July 31 (Reuters) - U.S. crude inventories plunged last week by the most since 2008, and oil product stocks also fell unexpectedly, data from the American Petroleum Institute showed on Tuesday.
Crude inventories fell by 11.6 million barrels in the week to July 27, the API reported, a far steeper drop than the 700,000 barrel decline forecast in a Reuters poll of analysts.
OIL-Oil down 2nd day as stimulus hopes falter
NEW YORK, July 31 (Reuters) - Oil prices fell for a second straight day on Tuesday on expectations that any central bank stimulus may be insufficient to revive economic growth, even as hopes dimmed that the U.S. Federal Reserve will act this week to boost the economy.
"Oil prices are lower on the paradox of slightly better economic data in the form of the Chicago PMI and the consumer confidence reading," said John Kilduff, a partner at Again Capital LLC in New York.
NATURAL GAS-Front-month U.S. natgas futures end down after 7-1/2-month high
NEW YORK, July 31 (Reuters) - Front-month U.S. natural gas futures ended slightly lower on Tuesday on profit-taking, but warm weather forecasts and expectations for another light weekly build in inventories helped limit the downside.
"The temperature outlook remains supportive, with warmer than normal temperatures forecast for most of the continent through August 14 that are likely to translate into below average storage injections," Tim Evans, analyst at Citi Futures Perspective, said in a report.
TOKYO, Aug 1 (Reuters) - Asian shares fell on Wednesday after four days of gains, as expectations of stimulus action this week by the U.S. Federal Reserve and the European Central Bank fade, and following signs of deepening Asian economic stress.
"We are looking for, at most, a chance in the Fed's language that extends low rates through at least early-2015, which won't be the stimulus bump market participants have been hoping for," said Christopher Vecchio, currency analyst at DailyFX.
ASEAN path to economic union muddied by South China Sea
JAKARTA, Aug 1 (Reuters) - Discord in Southeast Asia over how to deal with Beijing's claims in the South China Sea comes as the region struggles to overcome competing national interests and form a European Union-style economic community by 2015.
Political leaders and officials say the row may not directly affect plans by the Association of Southeast Asian Nations (ASEAN) for the economic integration of countries ranging from wealthy Singapore to impoverished Myanmar.
COMMODITIES-Big gains in July; focus on Fed/ECB moves next
NEW YORK, July 31 (Reuters) - Oil prices fell sharply on Tuesday as hopes for a quick U.S. stimulus faded, but commodities ended July with their biggest monthly gains since October, due to a broad rally over the past four weeks.
Analysts said investor confidence that has boosted commodities since the end of the second quarter was largely intact, although worries over the U.S. economy and global financial conditions could chip away at prices.
US crude stocks plunge nearly 12 million barrels-API
NEW YORK, July 31 (Reuters) - U.S. crude inventories plunged last week by the most since 2008, and oil product stocks also fell unexpectedly, data from the American Petroleum Institute showed on Tuesday.
Crude inventories fell by 11.6 million barrels in the week to July 27, the API reported, a far steeper drop than the 700,000 barrel decline forecast in a Reuters poll of analysts.
OIL-Oil down 2nd day as stimulus hopes falter
NEW YORK, July 31 (Reuters) - Oil prices fell for a second straight day on Tuesday on expectations that any central bank stimulus may be insufficient to revive economic growth, even as hopes dimmed that the U.S. Federal Reserve will act this week to boost the economy.
"Oil prices are lower on the paradox of slightly better economic data in the form of the Chicago PMI and the consumer confidence reading," said John Kilduff, a partner at Again Capital LLC in New York.
NATURAL GAS-Front-month U.S. natgas futures end down after 7-1/2-month high
NEW YORK, July 31 (Reuters) - Front-month U.S. natural gas futures ended slightly lower on Tuesday on profit-taking, but warm weather forecasts and expectations for another light weekly build in inventories helped limit the downside.
"The temperature outlook remains supportive, with warmer than normal temperatures forecast for most of the continent through August 14 that are likely to translate into below average storage injections," Tim Evans, analyst at Citi Futures Perspective, said in a report.
20120801 1006 Malaysia Corporate Related News.
George Kent: Bags Ampang LRT job. George Kent Bhd, a company specialising in mechanical and engineering work, has won a contract for the Ampang light rail transit (LRT) extension line project. The contract awarded by Syarikat Prasarana Negara Bhd is for engineering, procurement, construction, testing and commissioning of system works for the Ampang LRT line. (Source: Business Times)
Yinson: Will bid for more Vietnam O&G jobs. Yinson Holdings Bhd will continue to bid for new contracts in the Vietnamese O&G sector despite already having a MYR3.5b order book. Chairman and managing director Lim Han Weng said the company was confident of securing a part of projects worth USD400m which would be in the offing in Vietnam in the next 2 - 3 years. He said the company's first floating, storage and offloading (FSO) vessel worth US150m would be launched at a shipyard in South Korea next month. Lim said this would be followed by the USD400m production, floating, storage and offloading (PFSO) in Singapore either in the third or the fourth-quarter of next year. (Source: The Star)
MMC Corp: We'll steer Penang Port towards China-India routes. Seaport Terminal Sdn Bhd, the successful bidder for the privatisation of Penang Port, is poised to position the country's oldest port as the provider of shipping services to vessels plying the eastern and western routes of China and India respectively. "We will provide enough depth for vessels plying these routes as our study on the port's capabilities has convinced us that Penang Port is not in a position to compete with the likes of the Port of Singapore, Port of Tanjung Pelepas or Klang Port," Seaport Terminal port director Datuk Mohd Sidik Shaik Osman told Business Times. (Source: Business Times)
SILK Holdings: Gets Petrofac job. Silk Holdings Bhd has secured a MYR24m contract from Petrofac (Malaysia-PM304) Ltd, to provide an anchor-handling tug supply vessel. The contract commences immediately and is for 12 months, with an extension period of 12 months which is exercisable at the discretion of Petrofac. (Source: Bursa Malaysia)
Market: EPF buys MYR2.2b blue chip stocks. Over the past two months, the benchmark index rose by 3.3 per cent to 1,632.54, from 1,580.67 in June. EPF has turned net buyers of blue chip stocks, acquiring an estimated MYR2.2 b worth of stocks over the past two months.Analysts said that the latest accumulation spree has helped the benchmark FTSE Bursa Malaysia KLCI to achieve its all-time high of 1,645 points on July 18. Among notable purchases over the past two months include net buys of over 103 million shares in Maybank worth at least MYR893.5M, 42 million Axiata Group Bhd shares worth at least MYR223.44m, and over 80 million Telekom Malaysia shares worth over MYR441m. (Source: Business Times)
IPO: Risda eyes Bursa listing. The Rubber Industry Smallholders Development Authority (Risda) is reportedly eyeing an initial public offering but will have to get approval from the Government on the move due to the differing ownership structure of the land compared with Felda Global Ventures Holdings Bhd. According to information obtained from the Risda website, the land assets are managed by wholly owned subsidiary Estet Pekebun Kecil Sdn Bhd. Estet Pekebun Kecil manages about 78,000ha of oil palm and rubber plantations in Peninsular Malaysia. Risda also owns a 70% stake in Risda Plantation Sdn Bhd with the remainder equity being owned by Koperasi Pekebun Kecil Getah Nasional Bhd. (Source: The Star)
Media: Eight companies will fight for digital terrestrial television contract. Only 8 out of 60 companies that collected tender documents for the digital terrestrial television (DTTB) infrastructure build-up submitted their bids at the close of the tender last week, the 8 are said to be Astro Productions, Celcom Axiata Bhd, Sapura Group, iMedia, Packet One Networks (P1), REDtone International Bhd, DTV, and Puncak Semangat Sdn Bhd. The tender bid is for the building of a common integrated infrastructure for all the free-to-air TV stations to migrate to provide digital TV nationwide. The whole project is likely to cost over MYR1b. The company that wins will also have to supply set top boxes which could cost as much as MYR300m. (Source: The Star)
Autos: More opt for bikes amid tough car loan ruling. The Malaysia Motorcycle and Scooter Dealers Association is optimistic that the industry can achieve sales of 600,000 units this year against 542,000 units last year. Its chairman Wee Hong said the number of motorcycles and scooters registered between January and June 2012 rose to 315,714 units from 281,517 units in the same period last year. "The increase is in line with the growing number of buyers who opt to buy motorcycles as the new guidelines on financing makes it difficult for them to get car loans approved," he said. (Source: Business Times)
AirAsia: CEO said Batavia deal is still on while regulators asked for more details
AirAsia’s acquisition of PT Metro Batavia is still on track despite possible review over the deal due to ownership concerns, said AirAsia CEO Aireen Omar. Meanwhile, AirAsia and its partner PT Fersindo Nusaperkasa were required by the Business Competition Supervisory Commission (KPPU) of Indonesia to give details on their controlling stake in Batavia Air. The Jakarta Post reported that the agency wanted to make sure that AirAsia would not violate Indonesia's 1999 Law on unlawful business practices and it also feared that AirAsia would control more than 50% of domestic market from the acquisition of Batavia Air. KPPU head Tadjuddin Noer Said said the agency will annul the acquisition if it has the potential to stop other carriers from growing in the country's aviation industry. He added that the agency wanted to determine whether the acquisition of Batavia Air was prompted by the possibility of the company going bankrupt or driven by AirAsia's intention to expand its Indonesian presence ahead of Asean Open Sky policy in 2015. (Financial Daily, Business Times)
K&N Kenanga Holdings: To spend up to RM250m on integration costs
K&N Kenanga Holdings expects to spend RM200m to RM250m in terms of integration costs once the deal to take over ECM Libra Financial Group’s investment banking arm is completed in November. Kenanga group MD, Chay Wai Leong said, in following the global benchmark, they should have about 30% savings over the next 3 years. (Financial Daily)
ECM Libra Financial Group: To diversify its portfolio
ECM Libra Financial Group, which will be left with some RM350m after the disposal of its investment banking unit to K&N Kenanga Holdings, is looking to acquire new businesses within and outside Malaysia to diversify its income stream. ECM Libra chairman Datuk Seri Kalimullah Hassan said the company is looking at opportunities in countries such as the UK and Myanmar. Kalimullah, who is also a shareholder of Tune Hotels, said ECM Libra may consider buying hotels abroad as there will be appreciation in foreign exchange rates and property values. (Financial Daily)
Malaysia Resources Corporation: Link with Nusa stirs excitement
Malaysian Resources Corp (MRCB) is being linked with a major property takeover deal, management changes and a RM1bn infrastructure deal although the company itself is tightlipped about its recent news flow. MRCB is controlled by the Employees Provident Fund (EPF), which has a 42.2% stake in the property and infrastructure developer. A business daily recently reported that MRCB was expected to land a RM1bn contract soon concerning the Klang Valley My Rapid Transit (MRT) project. This would substantially boost its order book, after the company won a RM1.33bn contract in August 2011 for the light rail transit extension of the Ampang line. Meanwhile, industry observers are also excited over a recent report by a financial weekly that MRCB was planning to take over private property developer Nusa Gapurna Development Sdn Bhd, which is 40% owned by EPF. The remaining 60% stake in Nusa Gapurna is held by businessman Datuk Mohamad Salim Fateh Din. (StarBiz)
KKB Engineering: Bags RM171m steel job
KKB Engineering has been awarded with a contract for the structural steel and cladding work at the proposed Ferro Alloy Complex, Bintulu, Sarawak, worth approximately RM171m. The contract was awarded by Pertama Ferroalloys Sdn Bhd, the employer of the complex. KKB Engineering said the completion time for the contract would be staggered within 15 months commencing from the third quarter of the year. (Financial Daily)
Patimas Computers: Accounts show RM21m unaccounted for
External auditors have found an accounting irregularity in Patimas Computers where RM21m of trade receivables could not be accounted for. The finding was the reason the stock was suspended on Tuesday and the company could not submit its audited financial statements for FY2012 by yesterday’s deadline. Patimas said its external auditors were unable to verify the veracity of sale and purchase transactions undertaken by Patimas with a group of customers/suppliers that owed the company approximately RM21m. (Financial Daily)
Shipping: Seaport Terminal to steer Penang Port towards China-India routes
Seaport Terminal Sdn Bhd - the successful bidder for the privatization of Penang Port - is poised to position the country's oldest port as the provider of shipping services to vessels plying the eastern and western routes of China and India respectively. Seaport Terminal port director Datuk Mohd Sidik Shaik Osman said they will provide enough depth for vessels plying these routes as their study on the port's capabilities has convinced them that Penang Port is not in a position to compete with the likes of the Port of Singapore, Port of Tanjung Pelepas or Klang Port. He said Seaport Terminal is committed to improve the services offered by Penang Port and will position the port to handle the majority of transshipment cargo. He added that they would expect the services of Penang Port to be equal to that of regional ports like Port Klang and Luang Prabang Port in Thailand. (Business Times)
Steel: Kiswire to inject RM1.8bn to bolster Malaysian operations
Kiswire Malaysia, a division of South Korea’s major steel wire producer Kiswire Ltd, will inject RM1.8bn in fresh investments in Johor as it embarks on a mission to turn Malaysia into a production hub for high-carbon steel wire products in South-East Asia. Kiswire Ltd chairman Hong Yong Chul said the capital injection was to upgrade its operations with the aim of boosting its annual production capacity. He also said the new aim is to increase annual production capacity in Malaysia from the current 200,000 tonnes to 500,000 tonnes by 2020. The 300,000-sq-ft Kota Kiswire will operate as the regional headquarters for the South Korean steel wire producer’s operations in South-East Asia. (StarBiz)
Yinson: Will bid for more Vietnam O&G jobs. Yinson Holdings Bhd will continue to bid for new contracts in the Vietnamese O&G sector despite already having a MYR3.5b order book. Chairman and managing director Lim Han Weng said the company was confident of securing a part of projects worth USD400m which would be in the offing in Vietnam in the next 2 - 3 years. He said the company's first floating, storage and offloading (FSO) vessel worth US150m would be launched at a shipyard in South Korea next month. Lim said this would be followed by the USD400m production, floating, storage and offloading (PFSO) in Singapore either in the third or the fourth-quarter of next year. (Source: The Star)
MMC Corp: We'll steer Penang Port towards China-India routes. Seaport Terminal Sdn Bhd, the successful bidder for the privatisation of Penang Port, is poised to position the country's oldest port as the provider of shipping services to vessels plying the eastern and western routes of China and India respectively. "We will provide enough depth for vessels plying these routes as our study on the port's capabilities has convinced us that Penang Port is not in a position to compete with the likes of the Port of Singapore, Port of Tanjung Pelepas or Klang Port," Seaport Terminal port director Datuk Mohd Sidik Shaik Osman told Business Times. (Source: Business Times)
SILK Holdings: Gets Petrofac job. Silk Holdings Bhd has secured a MYR24m contract from Petrofac (Malaysia-PM304) Ltd, to provide an anchor-handling tug supply vessel. The contract commences immediately and is for 12 months, with an extension period of 12 months which is exercisable at the discretion of Petrofac. (Source: Bursa Malaysia)
Market: EPF buys MYR2.2b blue chip stocks. Over the past two months, the benchmark index rose by 3.3 per cent to 1,632.54, from 1,580.67 in June. EPF has turned net buyers of blue chip stocks, acquiring an estimated MYR2.2 b worth of stocks over the past two months.Analysts said that the latest accumulation spree has helped the benchmark FTSE Bursa Malaysia KLCI to achieve its all-time high of 1,645 points on July 18. Among notable purchases over the past two months include net buys of over 103 million shares in Maybank worth at least MYR893.5M, 42 million Axiata Group Bhd shares worth at least MYR223.44m, and over 80 million Telekom Malaysia shares worth over MYR441m. (Source: Business Times)
IPO: Risda eyes Bursa listing. The Rubber Industry Smallholders Development Authority (Risda) is reportedly eyeing an initial public offering but will have to get approval from the Government on the move due to the differing ownership structure of the land compared with Felda Global Ventures Holdings Bhd. According to information obtained from the Risda website, the land assets are managed by wholly owned subsidiary Estet Pekebun Kecil Sdn Bhd. Estet Pekebun Kecil manages about 78,000ha of oil palm and rubber plantations in Peninsular Malaysia. Risda also owns a 70% stake in Risda Plantation Sdn Bhd with the remainder equity being owned by Koperasi Pekebun Kecil Getah Nasional Bhd. (Source: The Star)
Media: Eight companies will fight for digital terrestrial television contract. Only 8 out of 60 companies that collected tender documents for the digital terrestrial television (DTTB) infrastructure build-up submitted their bids at the close of the tender last week, the 8 are said to be Astro Productions, Celcom Axiata Bhd, Sapura Group, iMedia, Packet One Networks (P1), REDtone International Bhd, DTV, and Puncak Semangat Sdn Bhd. The tender bid is for the building of a common integrated infrastructure for all the free-to-air TV stations to migrate to provide digital TV nationwide. The whole project is likely to cost over MYR1b. The company that wins will also have to supply set top boxes which could cost as much as MYR300m. (Source: The Star)
Autos: More opt for bikes amid tough car loan ruling. The Malaysia Motorcycle and Scooter Dealers Association is optimistic that the industry can achieve sales of 600,000 units this year against 542,000 units last year. Its chairman Wee Hong said the number of motorcycles and scooters registered between January and June 2012 rose to 315,714 units from 281,517 units in the same period last year. "The increase is in line with the growing number of buyers who opt to buy motorcycles as the new guidelines on financing makes it difficult for them to get car loans approved," he said. (Source: Business Times)
AirAsia: CEO said Batavia deal is still on while regulators asked for more details
AirAsia’s acquisition of PT Metro Batavia is still on track despite possible review over the deal due to ownership concerns, said AirAsia CEO Aireen Omar. Meanwhile, AirAsia and its partner PT Fersindo Nusaperkasa were required by the Business Competition Supervisory Commission (KPPU) of Indonesia to give details on their controlling stake in Batavia Air. The Jakarta Post reported that the agency wanted to make sure that AirAsia would not violate Indonesia's 1999 Law on unlawful business practices and it also feared that AirAsia would control more than 50% of domestic market from the acquisition of Batavia Air. KPPU head Tadjuddin Noer Said said the agency will annul the acquisition if it has the potential to stop other carriers from growing in the country's aviation industry. He added that the agency wanted to determine whether the acquisition of Batavia Air was prompted by the possibility of the company going bankrupt or driven by AirAsia's intention to expand its Indonesian presence ahead of Asean Open Sky policy in 2015. (Financial Daily, Business Times)
K&N Kenanga Holdings: To spend up to RM250m on integration costs
K&N Kenanga Holdings expects to spend RM200m to RM250m in terms of integration costs once the deal to take over ECM Libra Financial Group’s investment banking arm is completed in November. Kenanga group MD, Chay Wai Leong said, in following the global benchmark, they should have about 30% savings over the next 3 years. (Financial Daily)
ECM Libra Financial Group: To diversify its portfolio
ECM Libra Financial Group, which will be left with some RM350m after the disposal of its investment banking unit to K&N Kenanga Holdings, is looking to acquire new businesses within and outside Malaysia to diversify its income stream. ECM Libra chairman Datuk Seri Kalimullah Hassan said the company is looking at opportunities in countries such as the UK and Myanmar. Kalimullah, who is also a shareholder of Tune Hotels, said ECM Libra may consider buying hotels abroad as there will be appreciation in foreign exchange rates and property values. (Financial Daily)
Malaysia Resources Corporation: Link with Nusa stirs excitement
Malaysian Resources Corp (MRCB) is being linked with a major property takeover deal, management changes and a RM1bn infrastructure deal although the company itself is tightlipped about its recent news flow. MRCB is controlled by the Employees Provident Fund (EPF), which has a 42.2% stake in the property and infrastructure developer. A business daily recently reported that MRCB was expected to land a RM1bn contract soon concerning the Klang Valley My Rapid Transit (MRT) project. This would substantially boost its order book, after the company won a RM1.33bn contract in August 2011 for the light rail transit extension of the Ampang line. Meanwhile, industry observers are also excited over a recent report by a financial weekly that MRCB was planning to take over private property developer Nusa Gapurna Development Sdn Bhd, which is 40% owned by EPF. The remaining 60% stake in Nusa Gapurna is held by businessman Datuk Mohamad Salim Fateh Din. (StarBiz)
KKB Engineering: Bags RM171m steel job
KKB Engineering has been awarded with a contract for the structural steel and cladding work at the proposed Ferro Alloy Complex, Bintulu, Sarawak, worth approximately RM171m. The contract was awarded by Pertama Ferroalloys Sdn Bhd, the employer of the complex. KKB Engineering said the completion time for the contract would be staggered within 15 months commencing from the third quarter of the year. (Financial Daily)
Patimas Computers: Accounts show RM21m unaccounted for
External auditors have found an accounting irregularity in Patimas Computers where RM21m of trade receivables could not be accounted for. The finding was the reason the stock was suspended on Tuesday and the company could not submit its audited financial statements for FY2012 by yesterday’s deadline. Patimas said its external auditors were unable to verify the veracity of sale and purchase transactions undertaken by Patimas with a group of customers/suppliers that owed the company approximately RM21m. (Financial Daily)
Shipping: Seaport Terminal to steer Penang Port towards China-India routes
Seaport Terminal Sdn Bhd - the successful bidder for the privatization of Penang Port - is poised to position the country's oldest port as the provider of shipping services to vessels plying the eastern and western routes of China and India respectively. Seaport Terminal port director Datuk Mohd Sidik Shaik Osman said they will provide enough depth for vessels plying these routes as their study on the port's capabilities has convinced them that Penang Port is not in a position to compete with the likes of the Port of Singapore, Port of Tanjung Pelepas or Klang Port. He said Seaport Terminal is committed to improve the services offered by Penang Port and will position the port to handle the majority of transshipment cargo. He added that they would expect the services of Penang Port to be equal to that of regional ports like Port Klang and Luang Prabang Port in Thailand. (Business Times)
Steel: Kiswire to inject RM1.8bn to bolster Malaysian operations
Kiswire Malaysia, a division of South Korea’s major steel wire producer Kiswire Ltd, will inject RM1.8bn in fresh investments in Johor as it embarks on a mission to turn Malaysia into a production hub for high-carbon steel wire products in South-East Asia. Kiswire Ltd chairman Hong Yong Chul said the capital injection was to upgrade its operations with the aim of boosting its annual production capacity. He also said the new aim is to increase annual production capacity in Malaysia from the current 200,000 tonnes to 500,000 tonnes by 2020. The 300,000-sq-ft Kota Kiswire will operate as the regional headquarters for the South Korean steel wire producer’s operations in South-East Asia. (StarBiz)
20120801 1006 Global Economy Related News.
U.S: Consumer spending stagnates as Americans save more. Household purchases, which make up 70% of the economy, were unchanged in June after a 0.1% MoM decline in May. Incomes climbed 0.5% MoM, lifting the saving rate to 4.4%, the highest in a year. (Source: Bloomberg)
U.S: Business activity unexpectedly grows at faster pace in July as the economy weathered a slowdown in hiring and household spending. A barometer from the Institute for Supply Management-Chicago Inc. increased to 53.7, the highest since April from 52.9 in June. Readings greater than 50 signal growth. (Source: Bloomberg)
U.S: Home prices fell less than forecast in year to May. The S&P/Case-Shiller index of property values in 20 cities decreased 0.7% YoY from May 2011, the smallest 12-month fall since September 2010, after dropping 1.8% YoY in the year ended April. (Source: Bloomberg)
U.S: Consumer confidence unexpectedly climbed in July. The Conference Board's index increased to 65.9 this month from 62.7 in June. The report showed a gain in the share of consumers anticipating better labor and economic conditions in six months. (Source: Bloomberg)
U.S: Congress leaders and Obama agree on six-month spending bill. Congressional leaders said they and President Barack Obama have agreed on a USD 1.047t plan to fund the U.S. government from October through March. Lawmakers will vote on the measure in September, Senate Majority Leader Harry Reid, a Nevada Democrat, told reporters in Washington. "This agreement reached between the Senate, the House and the White House provides stability for the coming months, when we will have to resolve critical issues that directly affect middle class families," Reid said. (Source: Bloomberg)
E.U: The jobless rate in the euro area reached the highest on record as the festering debt crisis and deepening economic slump prompted companies to cut jobs. Unemployment in the economy of the 17 nations using the
euro held at 11.2% in June, the European Union's statistics office in Luxembourg said. That's the highest since the data series started in 1995. (Source: Bloomberg)
Germany: Retail sales unexpectedly declined for a third month in June amid uncertainty about the consequences of Europe's debt crisis. Sales, adjusted for inflation and seasonal swings, fell 0.1% MoM from May, when they slipped 0.3% MoM, the Federal Statistics Office in Wiesbaden said. That's the longest stretch of declines since the end of 2007, when they dropped four consecutive months. Sales rose 2.9% YoY. (Source: Bloomberg)
China: Pledges to ensure stable growth as local loans may rise. China's leaders pledged to keep adjusting policies to ensure stable economic growth this year as a state newspaper said some banks are telling branches to provide local-government loans. "The ongoing pace of economic growth is within expectations, but the external environment remains grim and poses difficulties and challenges," the official Xinhua News Agency said, citing a meeting of the Communist Party's Politburo. The meeting also determined that maintaining stable growth is still the top priority, Xinhua said. (Source: Bloomberg)
India: The Reserve Bank of India kept the repurchase rate at 8% while reducing the amount of deposits banks must hold in government bonds. Governor Duvvuri Subbarao said after the decision that the benchmark gauge of prices, which climbed 7.25% YoY in June, has stayed "sticky." (Source: Bloomberg)
S. Korea: Inflation moderated to slowest in 12 years in July. Consumer prices increased 1.5% YoY after a 2.2% YoY gain in June. Prices fell 0.2% MoM from the previous month. (Source: Bloomberg)
Taiwan: GDP fell 0.16% YoY in 2Q12, according to preliminary data released by the statistics bureau in Taipei. (Source: Bloomberg)
Singapore: Unemployment rate unexpectedly fell last quarter as construction companies and manufacturers increased hiring even as the economy contracted. The seasonally adjusted jobless rate fell to 2% in the three months through June from 2.1% the previous quarter, the Ministry of Manpower said in a statement. The economy added 29,200 jobs last quarter, compared with 27,200 in the previous period. (Source: Bloomberg)
U.S: Business activity unexpectedly grows at faster pace in July as the economy weathered a slowdown in hiring and household spending. A barometer from the Institute for Supply Management-Chicago Inc. increased to 53.7, the highest since April from 52.9 in June. Readings greater than 50 signal growth. (Source: Bloomberg)
U.S: Home prices fell less than forecast in year to May. The S&P/Case-Shiller index of property values in 20 cities decreased 0.7% YoY from May 2011, the smallest 12-month fall since September 2010, after dropping 1.8% YoY in the year ended April. (Source: Bloomberg)
U.S: Consumer confidence unexpectedly climbed in July. The Conference Board's index increased to 65.9 this month from 62.7 in June. The report showed a gain in the share of consumers anticipating better labor and economic conditions in six months. (Source: Bloomberg)
U.S: Congress leaders and Obama agree on six-month spending bill. Congressional leaders said they and President Barack Obama have agreed on a USD 1.047t plan to fund the U.S. government from October through March. Lawmakers will vote on the measure in September, Senate Majority Leader Harry Reid, a Nevada Democrat, told reporters in Washington. "This agreement reached between the Senate, the House and the White House provides stability for the coming months, when we will have to resolve critical issues that directly affect middle class families," Reid said. (Source: Bloomberg)
E.U: The jobless rate in the euro area reached the highest on record as the festering debt crisis and deepening economic slump prompted companies to cut jobs. Unemployment in the economy of the 17 nations using the
euro held at 11.2% in June, the European Union's statistics office in Luxembourg said. That's the highest since the data series started in 1995. (Source: Bloomberg)
Germany: Retail sales unexpectedly declined for a third month in June amid uncertainty about the consequences of Europe's debt crisis. Sales, adjusted for inflation and seasonal swings, fell 0.1% MoM from May, when they slipped 0.3% MoM, the Federal Statistics Office in Wiesbaden said. That's the longest stretch of declines since the end of 2007, when they dropped four consecutive months. Sales rose 2.9% YoY. (Source: Bloomberg)
China: Pledges to ensure stable growth as local loans may rise. China's leaders pledged to keep adjusting policies to ensure stable economic growth this year as a state newspaper said some banks are telling branches to provide local-government loans. "The ongoing pace of economic growth is within expectations, but the external environment remains grim and poses difficulties and challenges," the official Xinhua News Agency said, citing a meeting of the Communist Party's Politburo. The meeting also determined that maintaining stable growth is still the top priority, Xinhua said. (Source: Bloomberg)
India: The Reserve Bank of India kept the repurchase rate at 8% while reducing the amount of deposits banks must hold in government bonds. Governor Duvvuri Subbarao said after the decision that the benchmark gauge of prices, which climbed 7.25% YoY in June, has stayed "sticky." (Source: Bloomberg)
S. Korea: Inflation moderated to slowest in 12 years in July. Consumer prices increased 1.5% YoY after a 2.2% YoY gain in June. Prices fell 0.2% MoM from the previous month. (Source: Bloomberg)
Taiwan: GDP fell 0.16% YoY in 2Q12, according to preliminary data released by the statistics bureau in Taipei. (Source: Bloomberg)
Singapore: Unemployment rate unexpectedly fell last quarter as construction companies and manufacturers increased hiring even as the economy contracted. The seasonally adjusted jobless rate fell to 2% in the three months through June from 2.1% the previous quarter, the Ministry of Manpower said in a statement. The economy added 29,200 jobs last quarter, compared with 27,200 in the previous period. (Source: Bloomberg)
20120801 1004 Global Market Related News.
Asia FX By Cornelius Luca - Tue 31 Jul 2012 16:59:22 CT(Source:CME/www.lucafxta.com)
The appetite for risk soured a little on Tuesday ahead of the Federal Reserve policy decision tomorrow and the ECB meeting on Thursday. Traders hope for further easing, but these central banks have yet to answer these expectations. The foreign currencies made little progress, but the commodity currencies remained relatively strong. The US stock markets, gold, oil and silver fell. The short-term outlook for the foreign currencies is generally 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: The Conference Board's consumer confidence index climbed to 65.9 in July from an upwardly revised 62.7 in June.
US: The ISM Chicago's business barometer rose to 53.7 in July from 52.9 in June.
US: Personal income rose 0.5% in June from previous reading of +0.3%. Consumer spending fell 0.1% in June, down from +0.1% in May.
US: The S&P/Case-Shiller 20-City Composite Home Price Index rose by 2.2% in May following a 1.3% increase in April.
Canada: The GDP grew 0.1% in May, down from +0.3% in April.
Canada: The industrial product price index decreased 0.3% in June, more than -0.1% in May.
Today's economic calendar
Australia: AiG performance of manufacturing index for July
Australia: House Price Index for the second quarter
China: HSBC manufacturing PMI for July
Asian Stocks Head for First Drop in Five Days Before Fed (Source: Bloomberg)
Asian stocks fell, with the regional benchmark index heading for the first drop in five days, as investors await monetary policy decisions by the Federal Reserve and the European Central Bank. Japanese shares led declines on disappointing earnings reports. Komatsu Ltd. (6301), Japan’s largest construction machinery maker, plunged 9.4 percent after cutting its annual earnings forecast. Carmaker Honda Motor Co. (7267) dropped 5.7 percent in Tokyo after reporting profit that missed analyst estimates. Mobile phone maker LG Electronics Inc. (066570), which gets 45 percent of its sales in North America and Europe, fell 1.6 percent in Seoul. The MSCI Asia Pacific Index dropped 0.6 percent to 117.96 as of 10:07 a.m. in Tokyo before markets in Hong Kong and China opened. Almost three stocks fell for each that rose on the measure, which gained 1.3 percent in July, capping a second monthly gain. Shares of companies that do business in China may be active after the nation pledged to maintain stable growth.
“Investors have been in wait-and-see mode for the last two days ahead of key central bank announcements and that will continue today,” said Prasad Patkar, portfolio manager who helps manage about $1 billion at Platypus Asset Management Ltd. in Sydney.
Japan Stocks Fall on China Manufacturing; Honda Slumps (Source: Bloomberg)
Japanese stocks fell, with the Nikkei 225 (NKY) Stock Average declining the first time in five days, as companies from Honda Motor Co. and Komatsu Ltd. missed profit estimates and after China’s manufacturing output expanded at a slower pace than economists expected. Honda, Japan’s third-largest carmaker by sales, slipped 5.8 percent as it joined Nissan Motor Co. in reporting earnings that trailed estimates. Komatsu, which gets about 14 percent of sales from China, sank 9.7 percent after the world’s second-biggest maker of construction equipment cut its annual profit forecast. Nomura Holdings Inc. slid 2.9 percent as Japan’s No. 1 brokerage faces penalties after staff leaked information on at least three share sales in 2010.
“This quarter’s earnings have shown that Japanese exporters are badly affected by the slowdown in China, the recession in Europe and the yen’s appreciation,” said Norihiro Fujito, a senior investment strategist at Mitsubishi UFJ Morgan Stanley Securities Co. “Given that the Chinese economy hasn’t bottomed yet, next quarter’s earnings could be even worse and share prices may keep sliding. It’s difficult to see a recovery by the end of the year.” The Nikkei 225 retreated 1.3 percent to 8,579.91 as of 10:17 a.m. in Tokyo, with five shares falling for each that rose. The broader Topix Index lost 1.2 percent to 727.45.
China’s Stocks Decline to 2009 Low; B Shares Slump on New Rules (Source: Bloomberg)
China’s stocks fell to the lowest level in more than three years amid concern the slowing economy will hurt earnings growth. Foreign-currency denominated B shares dropped for their biggest two-day loss in almost a year. Chinese steelmakers, including Baoshan Iron & Steel Co. and Angang Steel Co., slid after posting a 96 percent drop in first- half profit. Kama Co. led declines by B shares on concern stricter rules by the exchange may lead to companies being delisted. China Railway Group Ltd. (601390) gained after the government boosted investment in railways for the second time in a month. The Shanghai Composite Index (SHCOMP) fell 0.3 percent to 2,103.64 at the close, the lowest since March 2009. The gauge, Asia’s worst-performing gauge this month with a 5.5 percent loss, has tumbled 14.5 percent from this year’s high on March 2. The Shanghai B-Share Stock Price Index slumped 0.9 percent for a two-day, 6.5 percent loss, the most since Aug. 2011.
“The declining trend hasn’t changed, as the economy is bad,” said Tang Yonggang, an analyst at Hongyuan Securities Co. in Beijing. “We could see some short-term gains but in the mid- to-long term it’s going to continue to fall unless we see more policy loosening.” The CSI 300 Index (SHSZ300) fell 0.1 percent to 2,332.92. The Bloomberg China-US 55 Index (CH55BN), the measure of the most-traded U.S.-listed Chinese companies, dropped 1.4 percent in New York. The Shanghai index is valued at 9.4 times estimated profit, compared with the three-year average of 14.7.
Hong Kong Stocks Rise 4th Day on Signs of China Stimulus (Source: Bloomberg)
Hong Kong stocks gained, with the Hang Seng Index capping its longest rising streak since March, on signs China is boosting infrastructure investment as it seeks to spur growth in the world’s second-largest economy. CSR Corp. (1766), a Chinese train maker, gained 4.2 percent after China boosted investment in railways for a second time in a month. Aluminum Corp. of China Ltd., the nation’s largest producer of the metal, rose 1.9 percent. Hang Lung Properties Ltd., a Hong Kong developer that derives 46 percent of its sales from the mainland, jumped 3.8 percent after reporting better than expected half-year results. The Hang Seng Index rose 1.1 percent to 19,796.81 at the close of trading in Hong Kong, with all but nine shares gaining on the 49-member gauge. The gauge last advanced for four days in March. It and increased 1.8 percent in July, a second straight advance. The Hang Seng China Enterprises Index (HSCEI) of mainland companies added 1.6 percent to 9,674.27.
“The question is when investors get bullish,” said Khiem Do, Hong Kong-based head of Asian multi-asset strategy at Baring Asset Management (Asia) Ltd., which oversees about $8 billion. “They are looking for a strong reason to buy back into the market. There is encouraging progress being made.” The benchmark Hang Seng Index fell 8.7 percent from this year’s high in February through today on signs Europe’s debt crisis is worsening while growth slows in China and the U.S. The drop reduced the value of shares on the gauge to 10.4 times estimated earnings on average, compared with 13.5 for the Standard & Poor’s 500 Index and 11.2 for the Stoxx Europe 600 Index.
U.S. Stocks Decline as Investors Await Fed Decision (Source: Bloomberg)
U.S. stocks fell, trimming a second monthly advance in the Standard & Poor’s 500 Index, as investors awaited the Federal Reserve’s monetary-policy decision tomorrow. Coach Inc. (COH), the largest U.S. luxury handbag maker, tumbled 19 percent after reporting revenue that trailed analysts’ estimates. Humana Inc. (HUM) slumped 13 percent as the provider of Medicare benefits cut its 2012 profit forecast. Apple (AAPL) Inc. rose 2.6 percent as Sanford C. Bernstein & Co. said it is considering a stock split that could prompt the world’s most valuable company to be added to the Dow Jones Industrial Average. About five stocks fell for every three that rose on U.S. exchanges at 4 p.m. New York time. The S&P 500 (SPX) slid 0.4 percent to 1,379.32. The benchmark measure rose 1.3 percent in July. The Dow average slid 64.33 points, or 0.5 percent, to 13,008.68 today. Volume for exchange-listed stocks in the U.S. was 6.7 billion shares, or about in line with the three-month average.
“People are taking some chips off the table as they don’t expect the Fed to come up with any positive surprise,” said Michael Holland, chairman of New York-based Holland & Co. His firm oversees more than $4 billion. “In addition, you have a mixed bag of earnings and news out of Europe is not helping.” Equities fell on bets the Fed may forgo announcing a third round of large-scale asset purchases this week, and is more likely to wait until September to unveil plans to buy $600 billion in housing and government debt. Policy makers meeting today and tomorrow may wait for more employment data before deciding whether action is needed to boost an economy that’s slowed for two straight quarters.
Recap Stock Index Market Report (Source:CME)
The September S&P 500 trended lower throughout the session, marking its low of the day during the final hour. Some traders noted that trading volumes were very light, and that seemed to foster a choppy end-of month trade. The September E-mini Dow and S&P 500 registered a lower low on the session, while the September NASDAQ remained inside of the previous session's range. They major indices showed little reaction to this morning's flow of US economic data, which revealed an unexpected bounce in May home prices and unexpected gains in Chicago PMI and consumer confidence. Earnings this morning from Pfizer came in better than expected, and that offered a measure of support to the S&P and Dow Jones Index. Shares of Apple were up nearly 2.0% on talk that the company could be contemplating a stock split. Meanwhile, retail-related shares came under pressure following disappointing results from Coach. Most of the major S&P sectors were in negative territory, led by declines in consumer discretionary and energy-related shares.
Emerging Stocks Climb for a Fourth Day on Stimulus Speculation (Source: Bloomberg)
Emerging-market stocks rose for a fourth day on speculation central banks from the U.S. and Europe will take measures to bolster economic growth. The MSCI Emerging Markets Index added 0.4 percent to 952.49, the most since July 5. Brazil’s Bovespa stock index dropped from an 11-week high, pushed lower by phone company Tim Participacoes SA. Samsung Electronics Co. (005930), which gets more than a third of its sales in America and Europe, capped its biggest four-day rally this year. Policy makers at the U.S. Federal Reserve began a two-day meeting today, looking for new stimulus measures as the International Monetary Fund said Europe’s debt crisis is likely to be prolonged. Reports today showed South Korea’s industrial production fell for the first time in three months and Taiwan’s gross domestic product unexpectedly shrank. Last week, European leaders had resolved to do whatever it takes to protect the euro.
“The big signal for a risk rally will come from a strong policy response,” said Mohamed Saidi, a Brussels-based fund manager at Dexia Asset Management, which oversees about $860 million of equity assets in developing nations. “Emerging markets have been doing quite well on the back of more positive euro sentiment, starting with the words of Mario Draghi on Thursday. On top of that, there is expectation of monetary stimulus from the U.S.”
U.K. Stocks Retreat on BP Earnings, German ESM Comments (Source: Bloomberg)
U.K. stocks retreated, paring their second monthly advance, as BP Plc (BP/) reported results that missed estimates and Germany’s Finance Ministry said it sees no need to give Europe’s permanent bailout fund a banking license. BP lost 4.4 percent, the most in eight months, after Europe’s second-largest oil company posted a net loss for the second quarter. Barclays Plc (BARC) led a retreat in banks, falling 1.5 percent. CRH Plc (CRH) tumbled 5.8 percent, the most since November. The FTSE 100 Index (UKX) lost 58.35 points, or 1 percent, to 5,635.28 at the close in London, trimming this month’s gain to 1.2 percent. The gauge has climbed 7.1 percent from its 2012 low on June 1, boosted by pledges from European Central Bank President Mario Draghi to preserve the euro. The broader FTSE All-Share Index also fell 1 percent today, while Ireland’s ISEQ Index retreated 0.9 percent.
“Confidence and sentiment are being slowly eroded away by the dire state of affairs in the periphery” of Europe, said Simon Denham, managing director at Capital Spreads in London. “Despite the markets getting excited about the prospects of fresh stimulus, the trickle down to confidence and the man on the street won’t materialize for months to come.” Stocks extended losses after Germany’s Finance Ministry said the rules of the European Stability Mechanism don’t foresee a banking license to allow refinancing at the European Central Bank. They said they are holding no talks on the topic.
Treasury 5-Year Yield Near Record Low Amid Slowing Signs (Source: Bloomberg)
Treasury five-year note yields were six basis points from a record low as signs of an economic slowdown in the U.S. and Europe boosted demand for the securities as a haven. The notes remained higher following a two-day advance before reports today that economists say will show U.S. employers added the fewest workers in three months and that a gauge of euro-area manufacturing slid to a three-year low. The Federal Reserve will conclude a two-day policy meeting today. “Economies are weak globally, resulting in a flight to quality,” said Hiromasa Nakamura, who helps oversee the equivalent of $42 billion as an investor at Mizuho Asset Management Co. in Tokyo. “Treasury yields have more room to decline.”
The benchmark five-year yield was little changed at 0.59 percent as of 9:48 a.m. in Tokyo. It reached the all-time low of 0.53 percent on July 25, according to Bloomberg Bond Trader data The 0.5 percent security due July 2017 traded at 99 18/32 today. Ten-year yields were at 1.48 percent after falling eight basis points in the past two days to 1.47 percent yesterday. ADP Employer Services will probably say today that companies in the U.S. added 120,000 workers last month, according to the median estimate of economists surveyed by Bloomberg News. That would be the least since April and down from a 176,000 increase in June.
Euro Holds Gains Versus Dollar, Yen on ECB Stimulus Bets (Source: Bloomberg)
The euro remained higher against the dollar following an advance yesterday as optimism built that the European Central Bank will take steps at a meeting tomorrow to stem the region’s debt crisis. The 17-nation currency held gains against the yen after France’s President Francois Hollande and Italy’s Prime Minister Mario Monti said yesterday the countries are “determined” to do everything to protect the integrity of euro zone. The greenback maintained this week’s decline against the Japanese currency before the Federal Reserve concludes a two-day meeting today amid speculation the U.S. central bank will signal additional monetary easing. “I’m bullish on the euro in the near term,” said Kengo Suzuki, a foreign-exchange strategist in Tokyo at Mizuho Securities Co., a unit of Japan’s third-largest bank by market value. “The ECB is expected to show its resolve and act to preserve the currency.”
The euro bought $1.2295 as of 8:51 a.m. in Tokyo after climbing 0.4 percent yesterday to $1.2304. The shared currency traded at 96.06 yen from 96.12 yesterday, when it advanced 0.3 percent. The dollar was little changed at 78.13 yen, having fallen for the past two days. Spanish Economy Minister Luis de Guindos is pushing for additional budget cuts after his German counterpart, Wolfgang Schaeuble, signaled to him that such a move would be rewarded by bond market assistance, according to two people in Madrid familiar with his thinking.
Aussie Dollar Falls on Stocks Drop, China Manufacturing (Source: Bloomberg)
Australia’s dollar weakened after a manufacturing index in China, the nation’s biggest trading partner, slid to the lowest level this year, sapping demand for the South Pacific nation’s assets. The so-called Aussie slid versus all except one of its 16 major peers after a gauge of Australian manufacturing dropped last month to the lowest level in three years, while New Zealand’s currency remained lower against the yen after a two- day decline. Demand for the Australian and New Zealand currencies was tempered as technical indicators showed their recent gains may have been too rapid. “Investors are being a little bit more cautious,” said Callum Henderson, global head of currency research at Standard Chartered in Singapore. “We’ll see the dollar be a little bit stronger against the Group of 10 currencies, with the higher- yielding, higher-bet currencies such as the Aussie and kiwi giving up some of their recent gains.”
The Australian dollar lost 0.3 percent to $1.0473 as of 11:15 a.m. in Sydney from $1.0503 yesterday, when it touched $1.0538, the strongest level since March 27. It slid 0.5 percent to 81.67 yen. New Zealand’s currency was little changed at 80.93 U.S. cents. The so-called kiwi dropped 0.1 percent to 63.11 yen after falling 0.6 percent in the previous two days.
FOREX-Euro steady, investors nervous before ECB meeting
LONDON, July 31 (Reuters) - The euro was subdued against the dollar, trading below recent three-week highs on growing doubts the European Central Bank can meet market expectations of bold steps to combat the euro zone debt crisis.
"There is a clear danger that expectations might be too high...He's got to put his money where his mouth is, as there is a risk of disappointment around Thursday," said Nick Parsons, head of markets strategy at nabCapital in London.
Fed Seen Forgoing New Bond Buying Program Until September (Source: Bloomberg)
Federal Reserve Chairman Ben S. Bernanke will probably forgo announcing a third round of large- scale asset purchases this week, and is more likely to wait until September to unveil plans to buy $600 billion in housing and government debt, according to median estimates of economists in a Bloomberg News survey. Eighty-eight percent of economists say the Federal Open Market Committee will refrain from starting new purchases at a two-day meeting that began today in Washington. Forty-eight percent say the FOMC will announce the buying at its Sept. 12-13 meeting, according to the July 25-27 survey of 58 economists.
The FOMC may take further action should the job market not make “sustained progress” in bringing down an unemployment rate stuck above 8 percent for 41 consecutive months, Bernanke said this month in congressional testimony. The FOMC wants to see more jobs data before beginning asset purchases aimed at holding down borrowing costs, spurring growth and reducing unemployment, said Michael Gapen, senior U.S. economist for Barclays Plc in New York. Policy makers “don’t need to do something immediately because the economy is basically treading water,” with a second quarter growth rate of 1.5 percent, Gapen said. “What gives the Fed the ability to sit tight for now is financial market conditions haven’t weakened that much.”
Consumer Spending in U.S. Was Unchanged in June (Source: Bloomberg)
Consumer spending in the U.S. stagnated in June as labor-market weakness prompted Americans to use the biggest gain in incomes in three months to build savings. Household purchases, which make up 70 percent of the economy, were unchanged last month after a 0.1 percent decline in May, a Commerce Department report showed today in Washington. The median estimate in a Bloomberg News survey of economists called for a 0.1 percent rise. Incomes climbed 0.5 percent, lifting the saving rate to 4.4 percent, the highest in a year. Americans may be growing less pessimistic about job prospects later in the year, with another report today showing consumer confidence rose unexpectedly for the first time in five months. Federal Reserve policy makers meeting today and tomorrow may wait for more employment data before deciding whether action is needed to boost an economy that’s slowed for two straight quarters.
“There’s been some back-tracking in the labor market so consumers are choosing to save the income rather than spend it,” said Julia Coronado, chief economist for North America at BNP Paribas in New York, who correctly projected the stagnation in purchases. “The third quarter will be pretty subdued.”
Geithner Says 2-3 Years of Creative Housing Needed (Source: Bloomberg)
Treasury Secretary Timothy F. Geithner said two to three years of “aggressive, creative” programs are needed to help the U.S. recover from its housing crisis. “We’re going to keep at this as long as necessary,” Geithner said at an event in Los Angeles today. “We think there’s a very good case for people deeply under water, experiencing hardship, to modify their mortgages by reducing principal.” Government-sponsored enterprises Fannie Mae and Freddie Mac won’t forgive principal on delinquent mortgages they guarantee, the firms’ regulator said today. Months of analysis showed there would be no clear benefit to taxpayers if the Federal Housing Finance Agency were to change its policy barring the mortgage- finance companies from loan modifications that include debt writedowns, Edward J. DeMarco, the agency’s acting director, told reporters.
Geithner criticized the decision in a letter to DeMarco today. “I do not believe it is the best decision for the country,” Geithner wrote. “The use of targeted principal reductions by the GSEs would provide much-needed help to a significant number of troubled homeowners.”
U.S. Housing Recovery Tested as Economy Tempers Optimism (Source: Bloomberg)
Rob Gray moved his family of four from Massachusetts to Texas, where he bought a new five-bedroom, five-bath, two-fireplace home built by Toll Brothers Inc. (TOL) After completing the deal on July 26 for the $572,000 brick-and-stone house in Allen, about 30 miles (48 kilometers) north of Dallas, Gray and his wife Paula plan to spend about $30,000 on new furniture, appliances, window treatments and an outdoor grill. “We’re not afraid to roll the dice, to take a leap of faith on the U.S. economy,” Gray, 47, an insurance-company recruiter, said in a telephone interview. “Things are on the rebound, and we need to get off the sidelines.”
As the residential property market climbs back from the worst collapse since the Great Depression, homebuilders need more customers like the Grays for the industry to enter a sustainable recovery and help drive U.S. economic growth. While orders for new homes are rising at the fastest rate in two years and housing may be a net contributor to the economy’s expansion for the first time since 2005, slowing job growth, tight inventories and a backlog of foreclosures threaten to put the brakes on a comeback.
Consumer Confidence in U.S. Unexpectedly Climbed in July (Source: Bloomberg)
Confidence among U.S. consumers unexpectedly rose for the first time in five months as Americans became more upbeat about job prospects later this year. The Conference Board’s index increased to 65.9 this month from 62.7 in June, figures from the New York-based private research group showed today. Economists projected a reading of 61.5, according to the median estimate in a Bloomberg News survey. The report showed a gain in the share of consumers anticipating better labor and economic conditions in six months. A pickup in the housing market and decreases in fuel prices may also be helping sustain consumer sentiment. At the same time, faster job gains are needed to spur consumer spending, which grew in the second quarter at the slowest pace in a year.
“The increase was partly in expectations for business conditions and less pessimism on the future job market, but very little change in the outlook for household income and that is probably more important,” said Scott Brown, chief economist at Raymond James & Associates Inc. in St. Petersburg, Florida. Stocks held losses after the report. The Standard & Poor’s 500 Index fell 0.1 percent to 1,383.91 at 11:08 a.m. in New York.
Business Activity in U.S. Unexpectedly Grows at Faster Pace (Source: Bloomberg)
Business activity in the U.S. unexpectedly grew at a faster pace in July as the economy weathered a slowdown in hiring and household spending. A barometer from the Institute for Supply Management- Chicago Inc. increased to 53.7, the highest since April from 52.9 in June. Readings greater than 50 signal growth. The median forecast of 50 economists surveyed by Bloomberg News projected the purchasing managers’ gauge would decline to 52.5. The need to rebuild auto inventories may be giving a boost to manufacturing, which had been a key driver of the economic recovery. The Federal Reserve is meeting this week to determine if more stimulus is needed as Europe’s fiscal crisis and the threat of more than $600 billion in U.S. spending cuts and tax increases at year’s end curbed demand. Manufacturing is showing “modest improvement,’’ Harm Bandholz, chief U.S. economist at UniCredit Group in New York, said before today’s report. “It’s not great but it’s also not that bad.’’
Home Prices in U.S. Fell Less Than Forecast in Year to May (Source: Bloomberg)
Residential real estate prices declined less than forecast in the year ended May, another sign that the housing market is on the mend. The S&P/Case-Shiller index of property values in 20 cities decreased 0.7 percent from May 2011, the smallest 12-month fall since September 2010, after dropping 1.8 percent in the year ended April, the group said today in New York. The median forecast of 29 economists in a Bloomberg News survey projected a 1.4 percent fall. Stabilizing prices could help drive a housing market that’s starting to recover three years after the end of the recession. Federal Reserve policy makers have said residential construction is a bright spot in the recovery even as unemployment remains a concern to households.
“This is great news that certainly bucks the trend of other data that points to an economy that’s slowing,” said Ellen Zentner, a senior U.S. economist at Nomura Securities International Inc. in New York. “It’ll be a salve for a lot of U.S. households if we continue to see price gains in housing.”
Don’t Fight Fed as Decision Days Fuel Rally, Bespoke Says (Source: Bloomberg)
Investors should buy stocks before the Federal Reserve’s announcement tomorrow, if history is of any guide, according to Bespoke Investment Group LLC. The Standard & Poor’s 500 Index (SPX) has advanced in 20 out of the past 29 decision days since the Fed pledged to keep interest rates near zero in December 2008, a study from Harrison, New York-based Bespoke shows. While Fed days made up 3 percent of the trading days during the period, they accounted for about 38 percent of the equity gauge’s gain, the data show. “‘Don’t fight the Fed’ is one of the most well-known market axioms around, and these performance numbers couldn’t do a better job of highlighting why,” Justin Walters, Bespoke’s co-founder, wrote in a note today. The S&P 500 has rallied 10 percent this year amid speculation that worse-than-expected economic data will prompt the Fed to take more actions to spur growth. Chairman Ben S. Bernanke and other Federal Open Market Committee members began a two-day meeting today.
Bernanke will probably forgo announcing a third round of large-scale asset purchases, and is more likely to wait until September to unveil plans to buy $600 billion in housing and government debt, according to median estimates of economists in a Bloomberg News survey.
China Reiterates Growth Chief Priority (Source: Bloomberg)
China’s leaders pledged to keep adjusting policies to ensure stable economic growth this year as a state newspaper said some banks are telling branches to provide local-government loans. “The ongoing pace of economic growth is within expectations, but the external environment remains grim and poses difficulties and challenges,” the official Xinhua News Agency said yesterday, citing a meeting of the Communist Party’s Politburo. The meeting also determined that maintaining stable growth is still the top priority, Xinhua said. The Politburo reiterated that China will pursue a “prudent” monetary policy and “proactive” fiscal policy, signaling that authorities are trying to stem a six-quarter slowdown in the world’s largest economy without resorting to the level of stimulus implemented after the global financial crisis.
“If the economic situation worsens, China can ease more,” said Zhang Zhiwei, chief China economist at Nomura Holdings Inc. in Hong Kong. Options include further reductions in banks’ reserve requirements and in benchmark interest rates, he said.
China Manufacturing Slows to Eight-Month Low (Source: Bloomberg)
China’s manufacturing expanded at the slowest pace in eight months, adding to evidence Premier Wen Jiabao has yet to reverse the nation’s economic slowdown. The Purchasing Managers’ Index fell to 50.1 in July from 50.2 in June, the Beijing-based National Bureau of Statistics and China Federation of Logistics and Purchasing said in a statement today. That compares with the 50.5 median estimate in a Bloomberg News survey of 24 economists. A reading above 50 indicates expansion. Today’s data increase odds China will introduce more measures to stem a deceleration in the world’s second-biggest economy that may extend into a seventh quarter. Leaders of the ruling Communist Party pledged yesterday to keep adjusting policies to ensure stable growth, describing the external environment as posing “difficulties and challenges” as the jobless rate in the euro area reached the highest on record.
“The impact of policy easing is taking some time to show up,” Zhu Haibin, Hong Kong-based chief China economist with JPMorgan Chase & Co., said before the report. There is also “large uncertainty” in the global economy, he said. China may cut interest rates a third time this year and lower banks’ reserve requirements three more times, Zhu estimates.
South Korea’s Inflation Moderates to Slowest in 12 Years (Source: Bloomberg)
South Korea’s inflation moderated to a 12-year low in July as service-sector and communication prices fell, giving the central bank room to further ease borrowing costs as Europe weighs on growth. Consumer prices increased 1.5 percent from a year earlier, the slowest since May 2000, after a 2.2 percent gain in June, Statistics Korea said today in Gwacheon, south of Seoul. The median estimate in a Bloomberg News survey of 16 economists was for a 2 percent gain. Prices fell 0.2 percent from the previous month. South Korea’s economy grew at the slowest pace in almost three years in the second quarter and the central bank has pared its forecast for this year's expansion. Industrial production unexpectedly fell for the first time in three months in June, the government said yesterday. “This gives the central bank a big push to lower rates in the coming months, most likely in September,” said An Ki Tae, an economist at Woori Investment & Securities. “The inflation rate will stay low through this year.”
The won was little changed at the 9 a.m. open in Seoul, according to data compiled by Bloomberg, while the Kospi stock index fell 0.6 percent.
Korean Bonds Rise as Exports Plunge, Inflation Cools; Won Gains (Source: Bloomberg)
South Korea’s bonds rose, building on a run of four monthly gains, as data showing a slide in exports and the slowest inflation since 2000 fanned speculation the central bank will cut interest rates. The won climbed to a three-month high before a Federal Reserve meeting ends today. Overseas sales fell 8.8 percent in July from a year earlier, the biggest contraction since September 2009, the government reported today. The median estimate in a Bloomberg News survey was for a 3.7 percent decline. Consumer prices rose 1.5 percent, less than all 16 estimates in a Bloomberg survey. The Kospi Index (KOSPI) snapped a four-day rally even as overseas funds bought more Korean equities than they sold for a fourth day.
“With consumer-price gains falling to the 1 percent level and exports posting the biggest decline this year, there are expectations that the Bank of Korea will cut rates further,” said Travis Choi, a fixed-income analyst at Woori Investment & Securities Co. in Seoul. The Bank of Korea unexpectedly lowered its benchmark rate by a quarter of a percentage point to 3 percent last month. The yield on South Korea’s 3.25 percent notes due June 2015 slid three basis points, or 0.03 percentage point, to 2.82 percent as of 9:47 a.m. in Seoul, Korea Exchange Inc. prices show. That follows a 45 basis point drop in July that was the biggest decline for a benchmark three-year note since 2008. Three-year debt futures rose 0.11 to 106.08 and the one-year interest-rate swap slid four basis points to 2.84 percent.
Default Concerns Make Belize Bonds Worst in Emerging Markets (Source: Bloomberg)
Belize’s notes are the worst performers in emerging markets this month as the Central American nation’s budget deficit widens and concerns grow that the government will force holders of $544 million of bonds to take losses in a restructuring. Belize’s dollar bonds have fallen 2.5 percent this month, the most among 52 emerging-market countries tracked by JPMorgan Chase & Co’s EMBIG index. Brazilian and Indonesian bonds have gained 4.2 percent over the same period. Yields on Belize’s so- called superbond due in 2029 climbed 145 basis points, or 1.45 percentage point, to 20.08 percent this month as the country nears its second restructuring in five years.
Prime Minister Dean Barrow, who campaigned on a promise to restructure the bonds, told lawmakers in June that lowering the debt burden is “unavoidable.” The government faces an Aug. 20 payment of about $25 million and Barrow said Belize’s budget deficit will swell to 2.5 percent of gross domestic product next year from 1.1 percent this year. Investors are starting to “appreciate the difficulty” the government will have in meeting creditor demands, said Stuart Culverhouse, chief economist at Exotix Ltd.
IMF Urges Brazil to Guard Against Bubbles as Interest Rates Fall (Source: Bloomberg)
Brazil should boost supervision of its banking system to avoid against credit bubbles that could form as a result of fast credit growth and falling interest rates, the International Monetary Fund said. Credit that has doubled as a percent of gross domestic product in the last decade has helped spur economic growth but is also showing signs of straining households, the IMF said in a report today about the health of Brazil’s financial system. In prime housing markets like Sao Paulo and Rio de Janeiro, prices have jumped as much as 30 percent annually in recent years, the Washington-based lender said. “There is a risk that the financial system may become a victim of its own success,” Dimitri Demekas, head of the team that conducted the assessment, said in a statement on the IMF’s website.
Brazil has cut interest rates to record low this year and loosened reserve requirements to spur car purchases even as consumer default levels hover near a 30-month high and growth remains weak. Today, HSBC (HSBA) became the latest bank to reduce its 2012 growth forecast, to 1.7 percent from 2.5 percent. Consumer confidence in Brazil fell in July for the third month in a row, according to the Getulio Vargas Foundation.
Geithner Says Europe Committed to Resolving Crisis (Source: Bloomberg)
U.S. Treasury Secretary Timothy F. Geithner said Europe is “absolutely committed to doing what’s necessary” to resolve the continent’s debt crisis, one day after meeting with German Finance Minister Wolfgang Schaeuble and European Central Bank President Mario Draghi. “This is completely within their financial ability to solve,” Geithner said today at an event at the Los Angeles World Affairs Council. He added that “the politics of doing this are very hard.” German government bonds rose for a second day, and Spanish bonds slid for the first time in five days as German Chancellor Angela Merkel’s coalition rejected granting the permanent rescue fund access to European Central Bank liquidity, fueling doubts that Draghi will fulfill his pledge to “do whatever it takes to preserve the euro.”
“Both the economic reforms and those changes to the institutions of Europe are going to take a long time and going to take time to work,” Geithner said today. “What Europe’s trying to do now is make sure they do enough to hold things together, lay the foundation for growth in the short term, bring down interest rates.” Geithner held separate meetings yesterday in Germany with Schaeuble and Draghi. In a statement released after their meeting, 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 euro area.
Euro-Area Unemployment Rate Reaches Record 11.2%: Economy (Source: Bloomberg)
The jobless rate in the euro area reached the highest on record as the festering debt crisis and deepening economic slump prompted companies to cut jobs. Unemployment in the economy of the 17 nations using the euro reached a revised 11.2 percent in May and held at that level in June, the European Union’s statistics office in Luxembourg said today. That’s the highest since the data series started in 1995. In Germany, unemployment climbed for a fourth straight month in July, a separate report showed. Policy makers are weighing options to counter the turmoil that has forced five euro-area nations to seek external aid, eroded investor confidence and pushed companies to trim their workforces. European Central Bank President Mario Draghi, who met with U.S. Treasury Secretary Timothy Geithner yesterday in Frankfurt, has pledged to do everything to preserve the euro.
“Companies generally are under serious pressure to keep their labor forces as tight as possible to contain their costs in the face of the current limited demand, strong competition and worrying and uncertain growth outlook,” said Howard Archer, chief European economist at IHS Global Insight in London. “There looks to be a very real danger that the euro-zone unemployment rate could reach 12 percent in 2013.”
Saudi $60 Billion Debt-Financed Hub Will Triple Traffic: Freight (Source: Bloomberg)
Saudi Arabia is spending more than $60 billion on a logistics hub, airport improvement and roads to reduce travel time in the Arab world’s biggest economy. The investments also yielded the largest sukuk, or Islamic bond, offered in the Middle East this year and an initial public offering on the stock exchange in June. “There is a large infrastructure boom happening in Saudi Arabia,” Jarmo Kotilaine, chief economist at Jeddah-based National Commercial Bank, said in a phone interview on July 30. “Once they create these sukuk instruments, they cut their reliance on direct government funding and make it possible to buy into the projects. This policy benefits the government and investors.”
The world’s top oil exporter is spending $500 billion to build power plants, schools, roads and other facilities to modernize the country and create jobs for youth. Earlier this month, the kingdom’s Ministry of Transportation signed contracts valued at 4.4 billion riyals ($1.2 billion) to build new roads and maintain and operate existing ones. Saudi Arabia’s economy is forecast to expand 4.8 percent this year, the fastest rate after Qatar among the six Gulf Cooperation Council states, according to an April survey of economists compiled by Bloomberg. Net foreign assets of the kingdom’s central bank increased 20 percent in June to 2.2 trillion riyals from a year earlier, central bank data show. Under the $53 billion five-year aviation investment program, the government plans to triple passenger traffic at Riyadh’s King Khaled International Airport to 25 million people, build an airport in Jazan in the southwest and renovate other airports.
The appetite for risk soured a little on Tuesday ahead of the Federal Reserve policy decision tomorrow and the ECB meeting on Thursday. Traders hope for further easing, but these central banks have yet to answer these expectations. The foreign currencies made little progress, but the commodity currencies remained relatively strong. The US stock markets, gold, oil and silver fell. The short-term outlook for the foreign currencies is generally 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: The Conference Board's consumer confidence index climbed to 65.9 in July from an upwardly revised 62.7 in June.
US: The ISM Chicago's business barometer rose to 53.7 in July from 52.9 in June.
US: Personal income rose 0.5% in June from previous reading of +0.3%. Consumer spending fell 0.1% in June, down from +0.1% in May.
US: The S&P/Case-Shiller 20-City Composite Home Price Index rose by 2.2% in May following a 1.3% increase in April.
Canada: The GDP grew 0.1% in May, down from +0.3% in April.
Canada: The industrial product price index decreased 0.3% in June, more than -0.1% in May.
Today's economic calendar
Australia: AiG performance of manufacturing index for July
Australia: House Price Index for the second quarter
China: HSBC manufacturing PMI for July
Asian Stocks Head for First Drop in Five Days Before Fed (Source: Bloomberg)
Asian stocks fell, with the regional benchmark index heading for the first drop in five days, as investors await monetary policy decisions by the Federal Reserve and the European Central Bank. Japanese shares led declines on disappointing earnings reports. Komatsu Ltd. (6301), Japan’s largest construction machinery maker, plunged 9.4 percent after cutting its annual earnings forecast. Carmaker Honda Motor Co. (7267) dropped 5.7 percent in Tokyo after reporting profit that missed analyst estimates. Mobile phone maker LG Electronics Inc. (066570), which gets 45 percent of its sales in North America and Europe, fell 1.6 percent in Seoul. The MSCI Asia Pacific Index dropped 0.6 percent to 117.96 as of 10:07 a.m. in Tokyo before markets in Hong Kong and China opened. Almost three stocks fell for each that rose on the measure, which gained 1.3 percent in July, capping a second monthly gain. Shares of companies that do business in China may be active after the nation pledged to maintain stable growth.
“Investors have been in wait-and-see mode for the last two days ahead of key central bank announcements and that will continue today,” said Prasad Patkar, portfolio manager who helps manage about $1 billion at Platypus Asset Management Ltd. in Sydney.
Japan Stocks Fall on China Manufacturing; Honda Slumps (Source: Bloomberg)
Japanese stocks fell, with the Nikkei 225 (NKY) Stock Average declining the first time in five days, as companies from Honda Motor Co. and Komatsu Ltd. missed profit estimates and after China’s manufacturing output expanded at a slower pace than economists expected. Honda, Japan’s third-largest carmaker by sales, slipped 5.8 percent as it joined Nissan Motor Co. in reporting earnings that trailed estimates. Komatsu, which gets about 14 percent of sales from China, sank 9.7 percent after the world’s second-biggest maker of construction equipment cut its annual profit forecast. Nomura Holdings Inc. slid 2.9 percent as Japan’s No. 1 brokerage faces penalties after staff leaked information on at least three share sales in 2010.
“This quarter’s earnings have shown that Japanese exporters are badly affected by the slowdown in China, the recession in Europe and the yen’s appreciation,” said Norihiro Fujito, a senior investment strategist at Mitsubishi UFJ Morgan Stanley Securities Co. “Given that the Chinese economy hasn’t bottomed yet, next quarter’s earnings could be even worse and share prices may keep sliding. It’s difficult to see a recovery by the end of the year.” The Nikkei 225 retreated 1.3 percent to 8,579.91 as of 10:17 a.m. in Tokyo, with five shares falling for each that rose. The broader Topix Index lost 1.2 percent to 727.45.
China’s Stocks Decline to 2009 Low; B Shares Slump on New Rules (Source: Bloomberg)
China’s stocks fell to the lowest level in more than three years amid concern the slowing economy will hurt earnings growth. Foreign-currency denominated B shares dropped for their biggest two-day loss in almost a year. Chinese steelmakers, including Baoshan Iron & Steel Co. and Angang Steel Co., slid after posting a 96 percent drop in first- half profit. Kama Co. led declines by B shares on concern stricter rules by the exchange may lead to companies being delisted. China Railway Group Ltd. (601390) gained after the government boosted investment in railways for the second time in a month. The Shanghai Composite Index (SHCOMP) fell 0.3 percent to 2,103.64 at the close, the lowest since March 2009. The gauge, Asia’s worst-performing gauge this month with a 5.5 percent loss, has tumbled 14.5 percent from this year’s high on March 2. The Shanghai B-Share Stock Price Index slumped 0.9 percent for a two-day, 6.5 percent loss, the most since Aug. 2011.
“The declining trend hasn’t changed, as the economy is bad,” said Tang Yonggang, an analyst at Hongyuan Securities Co. in Beijing. “We could see some short-term gains but in the mid- to-long term it’s going to continue to fall unless we see more policy loosening.” The CSI 300 Index (SHSZ300) fell 0.1 percent to 2,332.92. The Bloomberg China-US 55 Index (CH55BN), the measure of the most-traded U.S.-listed Chinese companies, dropped 1.4 percent in New York. The Shanghai index is valued at 9.4 times estimated profit, compared with the three-year average of 14.7.
Hong Kong Stocks Rise 4th Day on Signs of China Stimulus (Source: Bloomberg)
Hong Kong stocks gained, with the Hang Seng Index capping its longest rising streak since March, on signs China is boosting infrastructure investment as it seeks to spur growth in the world’s second-largest economy. CSR Corp. (1766), a Chinese train maker, gained 4.2 percent after China boosted investment in railways for a second time in a month. Aluminum Corp. of China Ltd., the nation’s largest producer of the metal, rose 1.9 percent. Hang Lung Properties Ltd., a Hong Kong developer that derives 46 percent of its sales from the mainland, jumped 3.8 percent after reporting better than expected half-year results. The Hang Seng Index rose 1.1 percent to 19,796.81 at the close of trading in Hong Kong, with all but nine shares gaining on the 49-member gauge. The gauge last advanced for four days in March. It and increased 1.8 percent in July, a second straight advance. The Hang Seng China Enterprises Index (HSCEI) of mainland companies added 1.6 percent to 9,674.27.
“The question is when investors get bullish,” said Khiem Do, Hong Kong-based head of Asian multi-asset strategy at Baring Asset Management (Asia) Ltd., which oversees about $8 billion. “They are looking for a strong reason to buy back into the market. There is encouraging progress being made.” The benchmark Hang Seng Index fell 8.7 percent from this year’s high in February through today on signs Europe’s debt crisis is worsening while growth slows in China and the U.S. The drop reduced the value of shares on the gauge to 10.4 times estimated earnings on average, compared with 13.5 for the Standard & Poor’s 500 Index and 11.2 for the Stoxx Europe 600 Index.
U.S. Stocks Decline as Investors Await Fed Decision (Source: Bloomberg)
U.S. stocks fell, trimming a second monthly advance in the Standard & Poor’s 500 Index, as investors awaited the Federal Reserve’s monetary-policy decision tomorrow. Coach Inc. (COH), the largest U.S. luxury handbag maker, tumbled 19 percent after reporting revenue that trailed analysts’ estimates. Humana Inc. (HUM) slumped 13 percent as the provider of Medicare benefits cut its 2012 profit forecast. Apple (AAPL) Inc. rose 2.6 percent as Sanford C. Bernstein & Co. said it is considering a stock split that could prompt the world’s most valuable company to be added to the Dow Jones Industrial Average. About five stocks fell for every three that rose on U.S. exchanges at 4 p.m. New York time. The S&P 500 (SPX) slid 0.4 percent to 1,379.32. The benchmark measure rose 1.3 percent in July. The Dow average slid 64.33 points, or 0.5 percent, to 13,008.68 today. Volume for exchange-listed stocks in the U.S. was 6.7 billion shares, or about in line with the three-month average.
“People are taking some chips off the table as they don’t expect the Fed to come up with any positive surprise,” said Michael Holland, chairman of New York-based Holland & Co. His firm oversees more than $4 billion. “In addition, you have a mixed bag of earnings and news out of Europe is not helping.” Equities fell on bets the Fed may forgo announcing a third round of large-scale asset purchases this week, and is more likely to wait until September to unveil plans to buy $600 billion in housing and government debt. Policy makers meeting today and tomorrow may wait for more employment data before deciding whether action is needed to boost an economy that’s slowed for two straight quarters.
Recap Stock Index Market Report (Source:CME)
The September S&P 500 trended lower throughout the session, marking its low of the day during the final hour. Some traders noted that trading volumes were very light, and that seemed to foster a choppy end-of month trade. The September E-mini Dow and S&P 500 registered a lower low on the session, while the September NASDAQ remained inside of the previous session's range. They major indices showed little reaction to this morning's flow of US economic data, which revealed an unexpected bounce in May home prices and unexpected gains in Chicago PMI and consumer confidence. Earnings this morning from Pfizer came in better than expected, and that offered a measure of support to the S&P and Dow Jones Index. Shares of Apple were up nearly 2.0% on talk that the company could be contemplating a stock split. Meanwhile, retail-related shares came under pressure following disappointing results from Coach. Most of the major S&P sectors were in negative territory, led by declines in consumer discretionary and energy-related shares.
Emerging Stocks Climb for a Fourth Day on Stimulus Speculation (Source: Bloomberg)
Emerging-market stocks rose for a fourth day on speculation central banks from the U.S. and Europe will take measures to bolster economic growth. The MSCI Emerging Markets Index added 0.4 percent to 952.49, the most since July 5. Brazil’s Bovespa stock index dropped from an 11-week high, pushed lower by phone company Tim Participacoes SA. Samsung Electronics Co. (005930), which gets more than a third of its sales in America and Europe, capped its biggest four-day rally this year. Policy makers at the U.S. Federal Reserve began a two-day meeting today, looking for new stimulus measures as the International Monetary Fund said Europe’s debt crisis is likely to be prolonged. Reports today showed South Korea’s industrial production fell for the first time in three months and Taiwan’s gross domestic product unexpectedly shrank. Last week, European leaders had resolved to do whatever it takes to protect the euro.
“The big signal for a risk rally will come from a strong policy response,” said Mohamed Saidi, a Brussels-based fund manager at Dexia Asset Management, which oversees about $860 million of equity assets in developing nations. “Emerging markets have been doing quite well on the back of more positive euro sentiment, starting with the words of Mario Draghi on Thursday. On top of that, there is expectation of monetary stimulus from the U.S.”
U.K. Stocks Retreat on BP Earnings, German ESM Comments (Source: Bloomberg)
U.K. stocks retreated, paring their second monthly advance, as BP Plc (BP/) reported results that missed estimates and Germany’s Finance Ministry said it sees no need to give Europe’s permanent bailout fund a banking license. BP lost 4.4 percent, the most in eight months, after Europe’s second-largest oil company posted a net loss for the second quarter. Barclays Plc (BARC) led a retreat in banks, falling 1.5 percent. CRH Plc (CRH) tumbled 5.8 percent, the most since November. The FTSE 100 Index (UKX) lost 58.35 points, or 1 percent, to 5,635.28 at the close in London, trimming this month’s gain to 1.2 percent. The gauge has climbed 7.1 percent from its 2012 low on June 1, boosted by pledges from European Central Bank President Mario Draghi to preserve the euro. The broader FTSE All-Share Index also fell 1 percent today, while Ireland’s ISEQ Index retreated 0.9 percent.
“Confidence and sentiment are being slowly eroded away by the dire state of affairs in the periphery” of Europe, said Simon Denham, managing director at Capital Spreads in London. “Despite the markets getting excited about the prospects of fresh stimulus, the trickle down to confidence and the man on the street won’t materialize for months to come.” Stocks extended losses after Germany’s Finance Ministry said the rules of the European Stability Mechanism don’t foresee a banking license to allow refinancing at the European Central Bank. They said they are holding no talks on the topic.
Treasury 5-Year Yield Near Record Low Amid Slowing Signs (Source: Bloomberg)
Treasury five-year note yields were six basis points from a record low as signs of an economic slowdown in the U.S. and Europe boosted demand for the securities as a haven. The notes remained higher following a two-day advance before reports today that economists say will show U.S. employers added the fewest workers in three months and that a gauge of euro-area manufacturing slid to a three-year low. The Federal Reserve will conclude a two-day policy meeting today. “Economies are weak globally, resulting in a flight to quality,” said Hiromasa Nakamura, who helps oversee the equivalent of $42 billion as an investor at Mizuho Asset Management Co. in Tokyo. “Treasury yields have more room to decline.”
The benchmark five-year yield was little changed at 0.59 percent as of 9:48 a.m. in Tokyo. It reached the all-time low of 0.53 percent on July 25, according to Bloomberg Bond Trader data The 0.5 percent security due July 2017 traded at 99 18/32 today. Ten-year yields were at 1.48 percent after falling eight basis points in the past two days to 1.47 percent yesterday. ADP Employer Services will probably say today that companies in the U.S. added 120,000 workers last month, according to the median estimate of economists surveyed by Bloomberg News. That would be the least since April and down from a 176,000 increase in June.
Euro Holds Gains Versus Dollar, Yen on ECB Stimulus Bets (Source: Bloomberg)
The euro remained higher against the dollar following an advance yesterday as optimism built that the European Central Bank will take steps at a meeting tomorrow to stem the region’s debt crisis. The 17-nation currency held gains against the yen after France’s President Francois Hollande and Italy’s Prime Minister Mario Monti said yesterday the countries are “determined” to do everything to protect the integrity of euro zone. The greenback maintained this week’s decline against the Japanese currency before the Federal Reserve concludes a two-day meeting today amid speculation the U.S. central bank will signal additional monetary easing. “I’m bullish on the euro in the near term,” said Kengo Suzuki, a foreign-exchange strategist in Tokyo at Mizuho Securities Co., a unit of Japan’s third-largest bank by market value. “The ECB is expected to show its resolve and act to preserve the currency.”
The euro bought $1.2295 as of 8:51 a.m. in Tokyo after climbing 0.4 percent yesterday to $1.2304. The shared currency traded at 96.06 yen from 96.12 yesterday, when it advanced 0.3 percent. The dollar was little changed at 78.13 yen, having fallen for the past two days. Spanish Economy Minister Luis de Guindos is pushing for additional budget cuts after his German counterpart, Wolfgang Schaeuble, signaled to him that such a move would be rewarded by bond market assistance, according to two people in Madrid familiar with his thinking.
Aussie Dollar Falls on Stocks Drop, China Manufacturing (Source: Bloomberg)
Australia’s dollar weakened after a manufacturing index in China, the nation’s biggest trading partner, slid to the lowest level this year, sapping demand for the South Pacific nation’s assets. The so-called Aussie slid versus all except one of its 16 major peers after a gauge of Australian manufacturing dropped last month to the lowest level in three years, while New Zealand’s currency remained lower against the yen after a two- day decline. Demand for the Australian and New Zealand currencies was tempered as technical indicators showed their recent gains may have been too rapid. “Investors are being a little bit more cautious,” said Callum Henderson, global head of currency research at Standard Chartered in Singapore. “We’ll see the dollar be a little bit stronger against the Group of 10 currencies, with the higher- yielding, higher-bet currencies such as the Aussie and kiwi giving up some of their recent gains.”
The Australian dollar lost 0.3 percent to $1.0473 as of 11:15 a.m. in Sydney from $1.0503 yesterday, when it touched $1.0538, the strongest level since March 27. It slid 0.5 percent to 81.67 yen. New Zealand’s currency was little changed at 80.93 U.S. cents. The so-called kiwi dropped 0.1 percent to 63.11 yen after falling 0.6 percent in the previous two days.
FOREX-Euro steady, investors nervous before ECB meeting
LONDON, July 31 (Reuters) - The euro was subdued against the dollar, trading below recent three-week highs on growing doubts the European Central Bank can meet market expectations of bold steps to combat the euro zone debt crisis.
"There is a clear danger that expectations might be too high...He's got to put his money where his mouth is, as there is a risk of disappointment around Thursday," said Nick Parsons, head of markets strategy at nabCapital in London.
Fed Seen Forgoing New Bond Buying Program Until September (Source: Bloomberg)
Federal Reserve Chairman Ben S. Bernanke will probably forgo announcing a third round of large- scale asset purchases this week, and is more likely to wait until September to unveil plans to buy $600 billion in housing and government debt, according to median estimates of economists in a Bloomberg News survey. Eighty-eight percent of economists say the Federal Open Market Committee will refrain from starting new purchases at a two-day meeting that began today in Washington. Forty-eight percent say the FOMC will announce the buying at its Sept. 12-13 meeting, according to the July 25-27 survey of 58 economists.
The FOMC may take further action should the job market not make “sustained progress” in bringing down an unemployment rate stuck above 8 percent for 41 consecutive months, Bernanke said this month in congressional testimony. The FOMC wants to see more jobs data before beginning asset purchases aimed at holding down borrowing costs, spurring growth and reducing unemployment, said Michael Gapen, senior U.S. economist for Barclays Plc in New York. Policy makers “don’t need to do something immediately because the economy is basically treading water,” with a second quarter growth rate of 1.5 percent, Gapen said. “What gives the Fed the ability to sit tight for now is financial market conditions haven’t weakened that much.”
Consumer Spending in U.S. Was Unchanged in June (Source: Bloomberg)
Consumer spending in the U.S. stagnated in June as labor-market weakness prompted Americans to use the biggest gain in incomes in three months to build savings. Household purchases, which make up 70 percent of the economy, were unchanged last month after a 0.1 percent decline in May, a Commerce Department report showed today in Washington. The median estimate in a Bloomberg News survey of economists called for a 0.1 percent rise. Incomes climbed 0.5 percent, lifting the saving rate to 4.4 percent, the highest in a year. Americans may be growing less pessimistic about job prospects later in the year, with another report today showing consumer confidence rose unexpectedly for the first time in five months. Federal Reserve policy makers meeting today and tomorrow may wait for more employment data before deciding whether action is needed to boost an economy that’s slowed for two straight quarters.
“There’s been some back-tracking in the labor market so consumers are choosing to save the income rather than spend it,” said Julia Coronado, chief economist for North America at BNP Paribas in New York, who correctly projected the stagnation in purchases. “The third quarter will be pretty subdued.”
Geithner Says 2-3 Years of Creative Housing Needed (Source: Bloomberg)
Treasury Secretary Timothy F. Geithner said two to three years of “aggressive, creative” programs are needed to help the U.S. recover from its housing crisis. “We’re going to keep at this as long as necessary,” Geithner said at an event in Los Angeles today. “We think there’s a very good case for people deeply under water, experiencing hardship, to modify their mortgages by reducing principal.” Government-sponsored enterprises Fannie Mae and Freddie Mac won’t forgive principal on delinquent mortgages they guarantee, the firms’ regulator said today. Months of analysis showed there would be no clear benefit to taxpayers if the Federal Housing Finance Agency were to change its policy barring the mortgage- finance companies from loan modifications that include debt writedowns, Edward J. DeMarco, the agency’s acting director, told reporters.
Geithner criticized the decision in a letter to DeMarco today. “I do not believe it is the best decision for the country,” Geithner wrote. “The use of targeted principal reductions by the GSEs would provide much-needed help to a significant number of troubled homeowners.”
U.S. Housing Recovery Tested as Economy Tempers Optimism (Source: Bloomberg)
Rob Gray moved his family of four from Massachusetts to Texas, where he bought a new five-bedroom, five-bath, two-fireplace home built by Toll Brothers Inc. (TOL) After completing the deal on July 26 for the $572,000 brick-and-stone house in Allen, about 30 miles (48 kilometers) north of Dallas, Gray and his wife Paula plan to spend about $30,000 on new furniture, appliances, window treatments and an outdoor grill. “We’re not afraid to roll the dice, to take a leap of faith on the U.S. economy,” Gray, 47, an insurance-company recruiter, said in a telephone interview. “Things are on the rebound, and we need to get off the sidelines.”
As the residential property market climbs back from the worst collapse since the Great Depression, homebuilders need more customers like the Grays for the industry to enter a sustainable recovery and help drive U.S. economic growth. While orders for new homes are rising at the fastest rate in two years and housing may be a net contributor to the economy’s expansion for the first time since 2005, slowing job growth, tight inventories and a backlog of foreclosures threaten to put the brakes on a comeback.
Consumer Confidence in U.S. Unexpectedly Climbed in July (Source: Bloomberg)
Confidence among U.S. consumers unexpectedly rose for the first time in five months as Americans became more upbeat about job prospects later this year. The Conference Board’s index increased to 65.9 this month from 62.7 in June, figures from the New York-based private research group showed today. Economists projected a reading of 61.5, according to the median estimate in a Bloomberg News survey. The report showed a gain in the share of consumers anticipating better labor and economic conditions in six months. A pickup in the housing market and decreases in fuel prices may also be helping sustain consumer sentiment. At the same time, faster job gains are needed to spur consumer spending, which grew in the second quarter at the slowest pace in a year.
“The increase was partly in expectations for business conditions and less pessimism on the future job market, but very little change in the outlook for household income and that is probably more important,” said Scott Brown, chief economist at Raymond James & Associates Inc. in St. Petersburg, Florida. Stocks held losses after the report. The Standard & Poor’s 500 Index fell 0.1 percent to 1,383.91 at 11:08 a.m. in New York.
Business Activity in U.S. Unexpectedly Grows at Faster Pace (Source: Bloomberg)
Business activity in the U.S. unexpectedly grew at a faster pace in July as the economy weathered a slowdown in hiring and household spending. A barometer from the Institute for Supply Management- Chicago Inc. increased to 53.7, the highest since April from 52.9 in June. Readings greater than 50 signal growth. The median forecast of 50 economists surveyed by Bloomberg News projected the purchasing managers’ gauge would decline to 52.5. The need to rebuild auto inventories may be giving a boost to manufacturing, which had been a key driver of the economic recovery. The Federal Reserve is meeting this week to determine if more stimulus is needed as Europe’s fiscal crisis and the threat of more than $600 billion in U.S. spending cuts and tax increases at year’s end curbed demand. Manufacturing is showing “modest improvement,’’ Harm Bandholz, chief U.S. economist at UniCredit Group in New York, said before today’s report. “It’s not great but it’s also not that bad.’’
Home Prices in U.S. Fell Less Than Forecast in Year to May (Source: Bloomberg)
Residential real estate prices declined less than forecast in the year ended May, another sign that the housing market is on the mend. The S&P/Case-Shiller index of property values in 20 cities decreased 0.7 percent from May 2011, the smallest 12-month fall since September 2010, after dropping 1.8 percent in the year ended April, the group said today in New York. The median forecast of 29 economists in a Bloomberg News survey projected a 1.4 percent fall. Stabilizing prices could help drive a housing market that’s starting to recover three years after the end of the recession. Federal Reserve policy makers have said residential construction is a bright spot in the recovery even as unemployment remains a concern to households.
“This is great news that certainly bucks the trend of other data that points to an economy that’s slowing,” said Ellen Zentner, a senior U.S. economist at Nomura Securities International Inc. in New York. “It’ll be a salve for a lot of U.S. households if we continue to see price gains in housing.”
Don’t Fight Fed as Decision Days Fuel Rally, Bespoke Says (Source: Bloomberg)
Investors should buy stocks before the Federal Reserve’s announcement tomorrow, if history is of any guide, according to Bespoke Investment Group LLC. The Standard & Poor’s 500 Index (SPX) has advanced in 20 out of the past 29 decision days since the Fed pledged to keep interest rates near zero in December 2008, a study from Harrison, New York-based Bespoke shows. While Fed days made up 3 percent of the trading days during the period, they accounted for about 38 percent of the equity gauge’s gain, the data show. “‘Don’t fight the Fed’ is one of the most well-known market axioms around, and these performance numbers couldn’t do a better job of highlighting why,” Justin Walters, Bespoke’s co-founder, wrote in a note today. The S&P 500 has rallied 10 percent this year amid speculation that worse-than-expected economic data will prompt the Fed to take more actions to spur growth. Chairman Ben S. Bernanke and other Federal Open Market Committee members began a two-day meeting today.
Bernanke will probably forgo announcing a third round of large-scale asset purchases, and is more likely to wait until September to unveil plans to buy $600 billion in housing and government debt, according to median estimates of economists in a Bloomberg News survey.
China Reiterates Growth Chief Priority (Source: Bloomberg)
China’s leaders pledged to keep adjusting policies to ensure stable economic growth this year as a state newspaper said some banks are telling branches to provide local-government loans. “The ongoing pace of economic growth is within expectations, but the external environment remains grim and poses difficulties and challenges,” the official Xinhua News Agency said yesterday, citing a meeting of the Communist Party’s Politburo. The meeting also determined that maintaining stable growth is still the top priority, Xinhua said. The Politburo reiterated that China will pursue a “prudent” monetary policy and “proactive” fiscal policy, signaling that authorities are trying to stem a six-quarter slowdown in the world’s largest economy without resorting to the level of stimulus implemented after the global financial crisis.
“If the economic situation worsens, China can ease more,” said Zhang Zhiwei, chief China economist at Nomura Holdings Inc. in Hong Kong. Options include further reductions in banks’ reserve requirements and in benchmark interest rates, he said.
China Manufacturing Slows to Eight-Month Low (Source: Bloomberg)
China’s manufacturing expanded at the slowest pace in eight months, adding to evidence Premier Wen Jiabao has yet to reverse the nation’s economic slowdown. The Purchasing Managers’ Index fell to 50.1 in July from 50.2 in June, the Beijing-based National Bureau of Statistics and China Federation of Logistics and Purchasing said in a statement today. That compares with the 50.5 median estimate in a Bloomberg News survey of 24 economists. A reading above 50 indicates expansion. Today’s data increase odds China will introduce more measures to stem a deceleration in the world’s second-biggest economy that may extend into a seventh quarter. Leaders of the ruling Communist Party pledged yesterday to keep adjusting policies to ensure stable growth, describing the external environment as posing “difficulties and challenges” as the jobless rate in the euro area reached the highest on record.
“The impact of policy easing is taking some time to show up,” Zhu Haibin, Hong Kong-based chief China economist with JPMorgan Chase & Co., said before the report. There is also “large uncertainty” in the global economy, he said. China may cut interest rates a third time this year and lower banks’ reserve requirements three more times, Zhu estimates.
South Korea’s Inflation Moderates to Slowest in 12 Years (Source: Bloomberg)
South Korea’s inflation moderated to a 12-year low in July as service-sector and communication prices fell, giving the central bank room to further ease borrowing costs as Europe weighs on growth. Consumer prices increased 1.5 percent from a year earlier, the slowest since May 2000, after a 2.2 percent gain in June, Statistics Korea said today in Gwacheon, south of Seoul. The median estimate in a Bloomberg News survey of 16 economists was for a 2 percent gain. Prices fell 0.2 percent from the previous month. South Korea’s economy grew at the slowest pace in almost three years in the second quarter and the central bank has pared its forecast for this year's expansion. Industrial production unexpectedly fell for the first time in three months in June, the government said yesterday. “This gives the central bank a big push to lower rates in the coming months, most likely in September,” said An Ki Tae, an economist at Woori Investment & Securities. “The inflation rate will stay low through this year.”
The won was little changed at the 9 a.m. open in Seoul, according to data compiled by Bloomberg, while the Kospi stock index fell 0.6 percent.
Korean Bonds Rise as Exports Plunge, Inflation Cools; Won Gains (Source: Bloomberg)
South Korea’s bonds rose, building on a run of four monthly gains, as data showing a slide in exports and the slowest inflation since 2000 fanned speculation the central bank will cut interest rates. The won climbed to a three-month high before a Federal Reserve meeting ends today. Overseas sales fell 8.8 percent in July from a year earlier, the biggest contraction since September 2009, the government reported today. The median estimate in a Bloomberg News survey was for a 3.7 percent decline. Consumer prices rose 1.5 percent, less than all 16 estimates in a Bloomberg survey. The Kospi Index (KOSPI) snapped a four-day rally even as overseas funds bought more Korean equities than they sold for a fourth day.
“With consumer-price gains falling to the 1 percent level and exports posting the biggest decline this year, there are expectations that the Bank of Korea will cut rates further,” said Travis Choi, a fixed-income analyst at Woori Investment & Securities Co. in Seoul. The Bank of Korea unexpectedly lowered its benchmark rate by a quarter of a percentage point to 3 percent last month. The yield on South Korea’s 3.25 percent notes due June 2015 slid three basis points, or 0.03 percentage point, to 2.82 percent as of 9:47 a.m. in Seoul, Korea Exchange Inc. prices show. That follows a 45 basis point drop in July that was the biggest decline for a benchmark three-year note since 2008. Three-year debt futures rose 0.11 to 106.08 and the one-year interest-rate swap slid four basis points to 2.84 percent.
Default Concerns Make Belize Bonds Worst in Emerging Markets (Source: Bloomberg)
Belize’s notes are the worst performers in emerging markets this month as the Central American nation’s budget deficit widens and concerns grow that the government will force holders of $544 million of bonds to take losses in a restructuring. Belize’s dollar bonds have fallen 2.5 percent this month, the most among 52 emerging-market countries tracked by JPMorgan Chase & Co’s EMBIG index. Brazilian and Indonesian bonds have gained 4.2 percent over the same period. Yields on Belize’s so- called superbond due in 2029 climbed 145 basis points, or 1.45 percentage point, to 20.08 percent this month as the country nears its second restructuring in five years.
Prime Minister Dean Barrow, who campaigned on a promise to restructure the bonds, told lawmakers in June that lowering the debt burden is “unavoidable.” The government faces an Aug. 20 payment of about $25 million and Barrow said Belize’s budget deficit will swell to 2.5 percent of gross domestic product next year from 1.1 percent this year. Investors are starting to “appreciate the difficulty” the government will have in meeting creditor demands, said Stuart Culverhouse, chief economist at Exotix Ltd.
IMF Urges Brazil to Guard Against Bubbles as Interest Rates Fall (Source: Bloomberg)
Brazil should boost supervision of its banking system to avoid against credit bubbles that could form as a result of fast credit growth and falling interest rates, the International Monetary Fund said. Credit that has doubled as a percent of gross domestic product in the last decade has helped spur economic growth but is also showing signs of straining households, the IMF said in a report today about the health of Brazil’s financial system. In prime housing markets like Sao Paulo and Rio de Janeiro, prices have jumped as much as 30 percent annually in recent years, the Washington-based lender said. “There is a risk that the financial system may become a victim of its own success,” Dimitri Demekas, head of the team that conducted the assessment, said in a statement on the IMF’s website.
Brazil has cut interest rates to record low this year and loosened reserve requirements to spur car purchases even as consumer default levels hover near a 30-month high and growth remains weak. Today, HSBC (HSBA) became the latest bank to reduce its 2012 growth forecast, to 1.7 percent from 2.5 percent. Consumer confidence in Brazil fell in July for the third month in a row, according to the Getulio Vargas Foundation.
Geithner Says Europe Committed to Resolving Crisis (Source: Bloomberg)
U.S. Treasury Secretary Timothy F. Geithner said Europe is “absolutely committed to doing what’s necessary” to resolve the continent’s debt crisis, one day after meeting with German Finance Minister Wolfgang Schaeuble and European Central Bank President Mario Draghi. “This is completely within their financial ability to solve,” Geithner said today at an event at the Los Angeles World Affairs Council. He added that “the politics of doing this are very hard.” German government bonds rose for a second day, and Spanish bonds slid for the first time in five days as German Chancellor Angela Merkel’s coalition rejected granting the permanent rescue fund access to European Central Bank liquidity, fueling doubts that Draghi will fulfill his pledge to “do whatever it takes to preserve the euro.”
“Both the economic reforms and those changes to the institutions of Europe are going to take a long time and going to take time to work,” Geithner said today. “What Europe’s trying to do now is make sure they do enough to hold things together, lay the foundation for growth in the short term, bring down interest rates.” Geithner held separate meetings yesterday in Germany with Schaeuble and Draghi. In a statement released after their meeting, 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 euro area.
Euro-Area Unemployment Rate Reaches Record 11.2%: Economy (Source: Bloomberg)
The jobless rate in the euro area reached the highest on record as the festering debt crisis and deepening economic slump prompted companies to cut jobs. Unemployment in the economy of the 17 nations using the euro reached a revised 11.2 percent in May and held at that level in June, the European Union’s statistics office in Luxembourg said today. That’s the highest since the data series started in 1995. In Germany, unemployment climbed for a fourth straight month in July, a separate report showed. Policy makers are weighing options to counter the turmoil that has forced five euro-area nations to seek external aid, eroded investor confidence and pushed companies to trim their workforces. European Central Bank President Mario Draghi, who met with U.S. Treasury Secretary Timothy Geithner yesterday in Frankfurt, has pledged to do everything to preserve the euro.
“Companies generally are under serious pressure to keep their labor forces as tight as possible to contain their costs in the face of the current limited demand, strong competition and worrying and uncertain growth outlook,” said Howard Archer, chief European economist at IHS Global Insight in London. “There looks to be a very real danger that the euro-zone unemployment rate could reach 12 percent in 2013.”
Saudi $60 Billion Debt-Financed Hub Will Triple Traffic: Freight (Source: Bloomberg)
Saudi Arabia is spending more than $60 billion on a logistics hub, airport improvement and roads to reduce travel time in the Arab world’s biggest economy. The investments also yielded the largest sukuk, or Islamic bond, offered in the Middle East this year and an initial public offering on the stock exchange in June. “There is a large infrastructure boom happening in Saudi Arabia,” Jarmo Kotilaine, chief economist at Jeddah-based National Commercial Bank, said in a phone interview on July 30. “Once they create these sukuk instruments, they cut their reliance on direct government funding and make it possible to buy into the projects. This policy benefits the government and investors.”
The world’s top oil exporter is spending $500 billion to build power plants, schools, roads and other facilities to modernize the country and create jobs for youth. Earlier this month, the kingdom’s Ministry of Transportation signed contracts valued at 4.4 billion riyals ($1.2 billion) to build new roads and maintain and operate existing ones. Saudi Arabia’s economy is forecast to expand 4.8 percent this year, the fastest rate after Qatar among the six Gulf Cooperation Council states, according to an April survey of economists compiled by Bloomberg. Net foreign assets of the kingdom’s central bank increased 20 percent in June to 2.2 trillion riyals from a year earlier, central bank data show. Under the $53 billion five-year aviation investment program, the government plans to triple passenger traffic at Riyadh’s King Khaled International Airport to 25 million people, build an airport in Jazan in the southwest and renovate other airports.
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