20121024 0957 Global Markets Related News.

Asia FX By Cornelius Luca - Tue 23 Oct 2012 17:10:54 CT (Source:CME/www.lucafxta.com)
The appetite for risk averse imploded for the second day in the past three days amid mixed corporate earnings and a credit rating downgrade of five Spanish regional governments. The European and commodity currencies succumbed and the yen ended marginally near a 3 1/2-month low. The US stock markets cratered, so the Asian markets should follow. Gold, oil and silver plunged as well. The short-term outlook for the European and commodity currencies is sideways with downside risk. The medium-term outlook for most of the foreign currencies is still slightly bullish. The LGR short-term model is short on yen, sterling and Canadian dollar, and long euro, franc and Australian dollar. Good luck!

Overnight
Canada: Retail sales rose 0.3% in August, down from +0.7% in July.
Canada: The BoC left interest rates unchanged at 1%.

Today's economic calendar
Australia: Consumer Price Index  for the third quarter
China: HSBC manufacturing PMI for October

Asian Stocks Decline as Global Slowdown Erodes Earnings (Bloomberg)
Asian stocks dropped, with the regional benchmark index heading for its fourth straight loss, as the global economic slowdown crimps corporate earnings and after commodities erased this year’s gains. BHP Billiton Ltd. (BHP), the world’s biggest mining company, declined 1.6 percent in Sydney. Daiki Aluminium Industry Co. sank 3.9 percent in Osaka after the Japanese supplier of the light metal used in the automobile industry lowered its full- year profit forecast. SK Hynix Inc. gained 2 percent in Seoul after the world’s second-largest maker of computer memory chips reported its first profit in four quarters on lower costs and currency gains.
The MSCI Asia Pacific Index (MXAP) slid 0.4 percent to 122.98 as of 9:29 a.m. in Tokyo, with almost four stocks falling for each that rose, before markets in China and Hong Kong open. The gauge rebounded 13 percent from this year’s low on June 4 through yesterday as stimulus measures in the U.S., Japan and China boosted market sentiment amid a global economic slowdown and Europe’s debt crisis. Spain’s borrowing costs rose yesterday after the Bank of Spain said the natiion’s recession will worsen in coming months. “Weaker earnings from some of America’s biggest companies, along with a sense that Europe isn’t making good progress on the debt crisis, has shaken investor confidence,” said Hiroichi Nishi, an equities manager in Tokyo at SMBC Nikko Securities Inc. “After the run-up in markets we’ve seen, technical indicators are pointing to some overheating.”

Japan Stocks Decline as Global Slowdown Erodes Earnings (Bloomberg)
Japanese stocks fell, retreating from the Nikkei 225 (NKY) Stock Average’s longest winning streak since July 2011, on concern a global economic slowdown is crimping earnings and as commodities erased this year’s gains. Canon Inc., camera maker that gets 80 percent of its revenue overseas, lost 1.3 percent. Kawasaki Heavy Industries Ltd. sank 5.1 percent after the gas-turbine maker said in a preliminary statement first-half earnings missed its forecasts on the economic slowdown in China and Europe. Inpex Corp., Japan’s top oil explorer by market value, slid 1.4 percent after crude prices dropped. The Nikkei 225 slid 0.7 percent to 8,956.65 as of 9:24 a.m. in Tokyo, falling for the first time in eight days. The broader Topix Index lost 0.5 percent to 745.77, with four shares dropping for each that rose.
“Investor sentiments are being swayed” as major U.S. companies cut earnings forecasts in addition to the global economic slowdown, said Hiroichi Nishi, an equities manager in Tokyo at SMBC Nikko Securities Inc. “More investors are likely to sell shares as the markets are kind of overheated.” Volume on the Nikkei 225 was 4.3 percent higher than the 30-day average.

Cnooc Drives Drop as Economy Cuts Rally: China Overnight (Bloomberg)
Chinese stocks tumbled from a five- month high in New York, spurred by declines in energy and commodities producers, on speculation the past month’s rally was overdone given lingering concerns over the global economy. The Bloomberg China-US Equity Index (CH55BN) of the most-traded Chinese companies in the U.S. sank 1.3 percent to 95.41 yesterday, the biggest drop in a month. PetroChina Co. slipped as crude declined to a three-month low. Cnooc Ltd. (883) slumped to widen the discount to its Hong Kong shares to the most in four months, on concern the Beijing-based oil producer’s bid for Nexen Inc. (NXY) may not get Canadian approval.
Chinese equities in the U.S. rallied over the past month to trade at their highest valuation since August last week, as data showing rising industrial production and retail sales sparked optimism the slowdown in Asia’s largest economy was bottoming. The basis for economic stabilization isn’t “firm” enough and China will remain proactive on fiscal policy, the Finance Ministry said yesterday, according to a Xinhua News Agency report posted on the government’s website. “Markets had gotten very high and there has been too much complacency, yet there are a whole host of global economic issues that have yet to be resolved,” Kevin Pollack, a managing director at Paragon Capital in New York, said by phone yesterday. “Investors should be cautious going into the end of the year and early next year as there remains significant downside risk.”

Dow Drops Most Since June Amid Disappointing Earnings (Bloomberg)
U.S. stocks retreated, giving the Dow Jones Industrial Average its biggest decline since June, amid disappointing results at companies from 3M Co. to DuPont (DD) Co. and as commodities erased their gain for the year. 3M, the maker of products ranging from Scotch tapes to dental braces, and DuPont, the most valuable U.S. chemical maker, slumped at least 4.1 percent. Freeport-McMoRan Copper & Gold Inc. (FCX) and Halliburton Co. (HAL) dropped more than 3.1 percent as commodities sank amid concern about a global economic slowdown. Facebook Inc. (FB) surged 9.5 percent at 4:39 p.m. New York time after posting sales that topped analysts’ projections. The Standard & Poor’s 500 Index decreased 1.4 percent to 1,413.11 at 4 p.m. New York time, the lowest level since Sept. 5. The Dow slumped 243.36 points, or 1.8 percent, to 13,102.53. Volume for exchange-listed stocks in the U.S. was 6.6 billion shares, or 9.1 percent above the three-month average.
“That’s the reality of the situation that investors are facing,” said Bruce Bittles, chief investment strategist at Milwaukee-based RW Baird & Co., which oversees $85 billion. He spoke in a phone interview. “There’s not much growth in the economy. There’s lack of demand. How can revenues grow?” Thirty-three companies in the S&P 500 were scheduled to release results today. Third-quarter sales missed forecasts at 60 percent of companies, according to data compiled by Bloomberg. Earnings at about 70 percent of the index’s companies beat analysts’ estimates, the data showed.

Recap Stock Index Market Report (CME)
The December S&P 500 traded sharply lower on the session, falling to its lowest level since September 6th. The primary source of weakness in the market came from a round of corporate earnings that showed disappointment, with concerns over upcoming business conditions and slowing economic growth. Disappointing earnings from DuPont and plans to slash 2% of their workforce seemed to underscore concerns over slowing economic growth. The December S&P 500 managed to bounce from its morning lows in early afternoon trade, helped by a rebound in the shares of Apple following the debut of their new iPad mini. All of the major S&P sector indices were in negative territory, led by declines in material and energy-related firms. The market will get more corporate earnings after the close from Amgen, Facebook and Netflix.

European Stocks Decline to Seven-Week Low on Results (Bloomberg)
European stocks declined for a third day, with the Stoxx Europe 600 Index (SXXP) sliding to its lowest level in almost seven weeks as results from companies including Alfa Laval AB and D.E Master Blenders (DE) 1753 NV disappointed investors. Alfa Laval and D.E Master Blenders fell at least 5 percent each. Mulberry Group Plc (MUL) plunged 24 percent after unexpectedly saying profit will fall. Chemical makers including Arkema SA (AKE) tumbled after DuPont Co.’s earnings lagged forecasts. The Stoxx Europe 600 Index lost 1.7 percent to 268.40 at the close of trading, its lowest level since Sept. 5. The gauge has erased most of the gains since European Central Bank officials agreed on an unlimited bond-purchase program. “An ugly session for equity markets has unfolded today as sellers drove stocks lower on the back of some disappointing corporate earnings,” said Angus Campbell, head of market analysis at Capital Spreads in London.
“With a lack of macro-economic data releases, the focus has been very much on companies and there were some car-crash type profit warnings and well-below-expectation results which sent investors into risk aversion mode.” European stocks fell yesterday as investors speculated that Spain will face less pressure to seek a bailout after a victory in regional elections for Prime Minister Mariano Rajoy. Moody’s Investors Service lowered its credit rating on Catalonia and four other Spanish regions. The decision was “driven by the deterioration in their liquidity positions, as evidenced by their very limited cash reserves as of September 2012 and their significant reliance on short-term credit lines to fund operating needs,” the ratings company said.

Emerging ETF Sinks Most Since July on Declining Earnings (Bloomberg)
The exchange-traded fund tracking emerging-market shares slipped the most since July in New York and stocks slumped on concern the global slowdown is crimping company earnings and as commodities erased this year’s gains. The iShares MSCI Emerging Markets Index ETF, which tracks companies including Korea’s Posco and Moscow-based OAO Gazprom, sank 2.1 percent to $41.04 at the close of trading in New York, the biggest one-day slide since July 23. The MSCI Emerging Markets Index (MXEF) lost 1 percent to 996.82, the steepest drop since Oct. 8. About 63 percent of companies in the MSCI gauge that reported quarterly earnings have trailed analyst estimates, according to data compiled by Bloomberg. Posco, the third- biggest Asian steelmaker by output, fell to the lowest level since March 2009 after reporting earnings for the third quarter that missed estimates and cutting its 2012 sales forecast for the third time this year.
Itau Unibanco Holding SA (ITUB4), Latin America’s largest bank by market value, slipped to the lowest since July as profit dropped in the third quarter. “Concerns about weaker earnings keep the markets down today,” Maarten-Jan Bakkum, an emerging-market strategist at ING Investment Management in The Hague, said by e-mail. There are questions about “the longer-term growth outlook for China, the earnings momentum and a deteriorated macro policy mix in several key emerging economies,” he said. The Standard & Poor’s GSCI Index tracking prices for 24 commodities sank for a third day, losing 1.4 percent to 639.30, while crude oil for December delivery declined $1.98 to $86.67 a barrel in New York, the lowest settlement since July 12. Russia is the world’s largest energy exporter, while metals and other commodities account for 45 percent of South Africa’s exports.

U.S. Home Prices Rose 0.7% in August From July, FHFA Says (Bloomberg)
U.S. house prices rose 0.7 percent in August from July as buyers competed for a dwindling supply of property listings, the Federal Housing Finance Agency said. The average estimate of 15 economists in a Bloomberg survey was for a 0.4 percent gain. Prices climbed 4.7 percent from a year earlier, according to the FHFA. The previously reported 0.2 percent increase in July was revised downward to a 0.1 percent gain. The agency posted the data on its website a day before its regularly scheduled release date. The FHFA’s index has climbed as improving employment, a tight inventory of available homes and record-low borrowing costs help strengthen a real estate recovery. A home value index by Zillow Inc. jumped 1.3 percent in the third quarter from the previous three months, the biggest gain since 2006, the Seattle- based property-data company reported today.
The FHFA report, which is based on single-family houses with mortgages backed by Fannie Mae or Freddie Mac, doesn’t provide a specific price. The median price of an existing single-family home, as measured by the National Association of Realtors, was $188,700 in August, up 10 percent from a year earlier.

Euro Stays Lower Before PMI; Yen Trades Near 3-Month Low (Bloomberg)
The euro maintained losses against most of its major peers before data that may add to evidence Europe’s debt turmoil continues to weigh on economic growth. The 17-nation currency traded 0.2 percent from a one-week low against the U.S. dollar amid investor uncertainty whether Spain will seek a bailout. Reports today are forecast to show manufacturing and services industries in the euro area contracted for a ninth month and German business confidence hovered close to the lowest since February 2010. The yen was near the weakest level in more than three months on speculation the Bank of Japan (8301) will expand stimulus at a meeting next week. “We would see a bit more downside in the near term for the euro,” said Imre Speizer, a strategist in Auckland at Westpac Banking Corp. (WBC), Australia’s second-largest lender. “Economic numbers are hurting the euro and the lack of a Spanish bailout is also hurting.”
The euro traded at $1.2983 as of 10:09 a.m. in Tokyo from $1.2987 yesterday, when it touched $1.2952, the lowest since Oct. 16. The common currency was little changed at 103.68 yen, after it dropped 0.7 percent in New York. The yen was at 79.86 per dollar from 79.85 yesterday, when it slipped to 80.01, the weakest since July 6.

Bernanke QE3 Stocks Miss Greenspan Irrational Exuberance (Bloomberg)
Federal Reserve Chairman Ben S. Bernanke is trying to inject a little of the exuberance his predecessor Alan Greenspan called “irrational” into markets for everything from stocks to housing. Bernanke, who is seeking to spur the economy with a third round of so-called quantitative easing, has said his stimulus works by lowering borrowing costs and encouraging investors to seek higher-yielding assets. Boosting home and equity prices through bond buying will encourage consumers and businesses to spend more, according to Bernanke. Since these are the same assets that plummeted during the financial crisis after reaching record highs, “is there some risk you could start a new bubble and repeat the whole cycle? I suppose there is,” said Robert Shiller, the Yale University professor who forecast the end of the Internet boom in his book, “Irrational Exuberance,” which was published in March 2000, the month the Nasdaq Composite Index peaked before crashing 78 percent. (CCMP)
Bernanke’s approach risks “distorting” decisions, and “it might be economically inefficient to try to push prices up so much,” Shiller, who also predicted the bursting of the subprime-mortgage bubble, said in a New York interview Oct. 15.

Despite Romney Resurgence, Obama Still the Man Election Day (CME)
By The Economist Intelligence Unit - Mon Oct 22 10:10:00 CDT 2012 CT
GOP Candidate Has Struggled to Persuade Voters
Despite Mitt Romney's recent resurgence in polls, the Republican presidential candidate still faces an uphill battle and probably won't unseat Barack Obama from the White House in the November 6 election, according to the Economist Intelligence Unit. "Our forecast for the U.S. presidential election is that Barack Obama will be re-elected," the Economist Intelligence Unit said in a recent report. While Romney had a strong performance in the first debate early this month, "we do not believe he has enough time to overcome the president's lead" in many polls, the group said. Sluggish job growth and unemployment near 8% should be a boon to Romney, allowing him to plausibly argue Obama has been a poor steward of the economy and the country should consider a change of political leadership. Still, Romney has not converted his advantages into a lead.
Romney has "struggled to persuade voters," who seem to be giving Obama the benefit of the doubt over the slow economic recovery, the group said. Romney has suffered from "poor campaigning decisions" and failed to criticize "consistently and forcefully the president's performance."


Hong Kong Intervenes to Defend Peg as Upper Limit Tested (Bloomberg)
The Hong Kong Monetary Authority sold its own currency for a second time in a week to stem appreciation after it traded near the upper limit of a 29-year- old peg to the U.S. dollar. The central bank bought a combined $1.25 billion at a rate of HK$7.75 per U.S. dollar in Hong Kong and New York yesterday, the authority said in an e-mailed statement. That followed a $603 million intervention on Oct. 19, when it stepped into the market for the first time since 2009. The Hong Kong dollar was at HK$7.7501 as of 6 a.m. Hong Kong time today, according to data compiled by Bloomberg. Local financial markets were closed yesterday for a public holiday. “They will have no choice but to keep intervening,” said Irene Cheung, a currency strategist in Singapore at Australia & New Zealand Banking Group. “The Hong Kong dollar’s strength reflects the capital flows we see into most Asian currencies.”
The central bank fixed the currency in 1983 and in 2005 committed to keep the exchange rate between HK$7.85 and HK$7.75. The link has given Hong Kong companies stability in commercial contracts while tethering monetary policy to that of the U.S., where borrowing costs are being held down to spur hiring and prop up the housing market. Hong Kong’s jobless rate is near a four-year low and home prices are at all-time highs.  Policy makers from around the world have bemoaned the economic threat of stronger exchange rates as asset purchases by the Federal Reserve boost the supply of dollars. At International Monetary Fund meetings in Tokyo this month, Philippine central bank Governor Amando Tetangco said the Fed was causing “challenges to monetary policy in emerging markets.” The HKMA first intervened during Hong Kong hours yesterday by buying $505 million and bought a further $350 million later, it said in e-mailed statements. It then purchased $395 million in New York, according to a later e-mail.

Priciest Malaysian Phone Stocks Attract Top Fund: Southeast Asia (Bloomberg)
Investor demand for bigger dividends and smaller stock swings has pushed Malaysian telecommunications shares to record valuations and convinced at least one of the nation’s top-ranked fund managers the rally isn’t over. The MSCI Malaysia Telecommunication Services Index (MXMY0TC) has climbed to 24 times estimated earnings, the highest level since Bloomberg began tracking the data in 2006 and the most expensive among peers in emerging and advanced nations. Telecommunications shares pay the biggest dividends of nine industries in Malaysia, where stock volatility is lower than any major market worldwide.
While Samsung Asset Management Co. is avoiding the companies after valuations surged, Hwang Investment Management Bhd.’s David Ng says he’s hanging on to shares of Axiata Group Bhd. (AXIATA) and DiGi.Com Bhd. (DIGI) that rallied at least 29 percent this year and helped his Hwang Select Dividend Fund (HWDBDIV) beat 97 percent of peers. The companies, which benefit from growing demand for smartphones in Southeast Asia’s third-biggest economy, pay dividend yields that exceed returns on Malaysian bonds. “Dividend stocks have done well because a lot of these businesses are more stable,” Ng, who oversees the equivalent of $5.6 billion as the chief investment officer of Hwang Investment in Kuala Lumpur, said in a phone interview on Oct. 16. “Investors just want income and certainty.”

Carney Strengthens Rate-Increase Bias on Debt Concern: Economy (Bloomberg)
The Bank of Canada signaled it may seek to curb record household debt levels by raising interest rates for the first time in more than two years, sharpening the divide with other Group of Seven nations focused on easing policy to combat a cooling global economy. Governor Mark Carney said in Ottawa today that “some modest withdrawal of monetary policy stimulus will likely be required,” even as it kept the benchmark rate at 1 percent, and that “imbalances in the household sector” will influence the timing of any move. Strategists such as Jimmy Jean at Desjardins Capital Markets in Montreal predicted the central bank would drop or weaken its tightening bias. Canada’s banking system and housing market were unscathed by the global financial crisis, allowing the world’s 11th largest economy to recover ahead of other G-7 countries. The bank said in July that the expansion is threatened by consumer debt that’s climbed to 165.8 percent of disposable income, higher than the U.S. peak before its property bubble burst.
Canadian house prices have risen 56 percent since June 2005. “They kept the hawkish bias as a warning to consumers and to curb the real-estate market,” said Denis Senecal, vice president and head of fixed income and cash for State Street Global Advisors, Canada, which manages C$1.4 trillion ($1.41 trillion) of assets. Carney also said that household debts, already at record levels, will rise further. His concern has intensified since April, when he said monetary policy should be the “last line of defense” against high debt. Canadian Finance Minister Jim Flaherty told CBC Radio Oct. 20 that he isn’t planning further measures to restrain the housing market because steps to tighten mortgage regulations have already slowed gains in some of the country’s major cities.

N.Z.’s Wheeler May Resist Rate-Cut Calls in First Policy Meeting (Bloomberg)
New Zealand central bank Governor Graeme Wheeler will probably resist pressure from unions and exporters to counter a rising currency by cutting interest rates in his first policy decision. All 17 economists surveyed by Bloomberg News predict Wheeler will leave the official cash rate at 2.5 percent tomorrow in Wellington, prolonging a period of record-low borrowing costs that began in March 2011. There is a 92 percent chance of no change, according to swaps data compiled by Bloomberg, and the New Zealand Institute of Economic Research Inc.’s shadow board also sees Wheeler extending the pause. The Council of Trade Unions wants the new governor, a former World Bank official who started on the job a month ago, to respond to the slowest inflation in more than a decade by reducing the benchmark rate, saying that will curb demand for New Zealand’s currency and make exports more affordable.
Weakening the argument for a cut are signs of a stronger housing market and prospects for inflation to rise even as the economy struggles to accelerate. “A good case for an easing can be made,” said Darren Gibbs, chief New Zealand economist at Deutsche Bank AG in Auckland and a former Treasury and Reserve Bank of New Zealand economist. Still, “the economic case for easing policy further is not watertight at this stage, especially as he will likely be concerned not to further stoke price pressures in the housing market.”

ESM Fund Plans ‘Prudent’ Investments, May Buy Bank Debt (Bloomberg)
The head of Europe’s permanent rescue fund said the countries bailed out by the region’s governments should be in a position to finance themselves by the end of 2014. “That should be well underway in two years,” Klaus Regling, head of the European Stability Mechanism, said in a Bloomberg Television interview in Luxembourg yesterday. He didn’t name specific countries. While “there will not be a feeling that the crisis is over” as workers adjust to wage and pension cuts, measures taken by governments may be sufficient by then to help them pass “the ultimate test” and return to the bond market, he said. European policy makers are working to draw a line under a crisis that is now in its fourth year. While market turmoil has eased since the European Central Bank pledged to buy unlimited quantities of government bonds to stop the euro from falling apart, economists and investors say they still expect Spain to apply for aid from the bailout fund in coming months.
Regling, who didn’t mention Spain, said that the ESM can give a precautionary credit line to distressed nations more quickly than the two or three weeks it takes to put together a full sovereign bailout. “If a country asks for a precautionary arrangement, we can act relatively fast,” he said. “Secondary market intervention” could be done in two days, he said. The ESM was declared operational on Oct. 8 and will rely on paid-in capital by European governments to underpin its full firepower of 500 billion euros ($649 billion.) By 2014, governments will have paid in 80 billion euros in capital. Regling said that the 32 billion euros currently paid in will be invested by the end of November. The ESM has so far invested 4 billion euros in “highly rated” government bonds and the bonds of international institutions. The securities are “mainly in euro,” he said. “We do it in small amounts of money, otherwise we would move the market, which we don’t want to do,” he said.

King Says BOE Is Ready to Add to Stimulus If U.K. Recovery Fades (Bloomberg)
Bank of England Governor Mervyn King said the Monetary Policy Committee is ready to add to stimulus again as it assesses the strength of the domestic recovery amid signs that global economic weakness is spreading. “At this stage, it is difficult to know whether some of the recent more positive signs will persist,” King said in a speech late yesterday in Cardiff, Wales. “Should those signs fade, the MPC does stand ready to inject more money into the economy.” King said gross domestic product data tomorrow may confirm a “zig-zag” pattern of recovery in the U.K. that is likely to continue. His comments come two weeks before officials must decide whether to increase bond purchases and at a time when the economies that have driven global growth through the crisis have shown signs of faltering. “The storm clouds coming from the euro area have not yet lifted, and in other parts of the sky new clouds have drifted over,” he said. “China, India and Brazil, the three largest emerging market economies, are all slowing.” The Bank of England is in the final weeks of the 50 billion-pound ($80 billion) round of quantitative easing it put in place in July. The MPC will announce its next policy decision on Nov. 8, and King said it will think “long and hard” about expanding the program from the current target of 375 billion pounds. King also said he doesn’t have concerns about the bank’s scope to add to bond purchases. On the question of the effectiveness of QE, he said that while its direct impact on gilt yields may be reduced as sovereign borrowing costs decline, raising the price on other assets is an “equally important” objective.

Rajoy Sees Case for Slowing Spain’s Austerity as Economy Shrinks (Bloomberg)
Spanish Prime Minister Mariano Rajoy said there is a case for easing budget-deficit targets set by the European Union as the recession undermines tax revenue. “I think what a lot of other people think,” Rajoy told the Spanish senate yesterday. “Things could be done more calmly, taking into account especially that we are in a recession, but in any case I can’t give up on Spain’s commitments.” Rajoy’s comments undercut Budget Minister Cristobal Montoro’s insistence that Spain can stick to the path of budget consolidation demanded by the EU even after the Bank of Spain said the euro area’s fourth-largest economy contracted for a fifth quarter between July and October. “In 2012, we definitively will comply with our target,” Montoro said as he presented the 2013 budget to the Parliament in Madrid. The EU has set Spain a goal of 6.3 percent of gross domestic product this year, after overspending amounted to 9.4 percent last year, as much as Greece and the second-highest shortfall behind Ireland.
Spain’s borrowing costs rose 12 basis points to 5.6 percent yesterday after the Bank of Spain said the recession will worsen in coming months and called on the government to take further measures to fulfill its commitments. Rajoy didn’t mention seeking aid even as he praised the European Central Bank’s offer to help lower countries’ borrowing costs. “The ECB has set up a mechanism to purchase a country’s bonds in the secondary market if it requests it, that’s an important step forward,” he said. Economy Minister Luis de Guindos meanwhile told lawmakers that Spain’s access to funding has improved. “We are starting to see foreign investors coming back to back Spanish debt purchases,” he said. “That is fundamentally due to two reasons: because the government is doing what it has to do, and because we are all acting to dissipate doubts on the euro’s future.”

Euro-Area Bailout Fund Faces Challenge at Highest Court (Bloomberg)
The euro area’s 500 billion-euro ($652 billion) bailout fund faces another test as the European Union’s highest court weighs claims that the firewall violates EU law and should be banned in its current form. A complaint by Thomas Pringle, an independent member of the Irish parliament, today reached the EU Court of Justice, which has the power to topple the European Stability Mechanism, or ESM. A ruling is possible as soon as the end of the year under a fast-track procedure. “Developed in haste, the ESM treaty is at odds with and undermines the EU legal order,” John Rogers, a lawyer for Pringle, told the court in Luxembourg today. “In trying to defend the compatibility of the ESM with the EU treaties, the intervening member states and institutions have had to engage in mischaracterization and distortion in the confusion of form and substance and in legal and conceptual contradictions.”
The EU court case follows a separate decision last month by Germany’s Federal Constitutional Court in Karlsruhe not to block the ESM. The German ruling handed a victory to Chancellor Angela Merkel, who championed the bailout facility as vital to save the euro area from a fiscal meltdown as it lurches between crises. The EU court has engaged all 27 judges for the first time in a case referred by a national tribunal.

ECB Would Gain Power Over Banker Bonuses in Oversight Plan (Bloomberg)
The European Central Bank would get power to oversee bankers’ compensation under draft legislative proposals to establish the ECB as a bank supervisor. The Frankfurt-based institution would get the power to monitor risk management, capital standards and “remuneration policies and practices,” according to the draft dated today. The blueprint also says the ECB would be able to carry out stress tests and “where appropriate publish the results.” EU banking supervisors would send decisions to the ECB’s Governing Council for an up-or-down vote under the new draft, which builds on previous efforts to clarify how participating non-euro nations could take part in bank oversight decision. The draft says supervisory board leaders would not have to be Governing Council members and it lays out conditions in which the central bank’s top panel could exercise an oversight veto.
European Union officials will discuss the proposal this week as they push to design a framework by the end of the year for a euro-area bank supervisor. Leaders last week renewed their commitment to give the ECB oversight powers over all banks in the 17-nation currency union as well as in other nations that choose to participate.

EU Said to Loosen Female Board Rule in Bid For Support (Bloomberg)
European Union plans to set a 40 percent quota for women on company supervisory boards by 2020 stalled after EU commissioners failed to agree on the measures at a meeting today. The European Commission’s legal service warned that a binding quota for women may be illegal ahead of the meeting, according to a person familiar with the talks. Lawyers said EU regulators don’t have the right to mandate binding targets for results obtained by companies, said the person who asked not to be identified because the process is private. EU rules can require companies to make efforts toward a target. EU commissioners postponed discussion of EU Justice Commissioner Viviane Reding’s plan until Nov. 14. Reding said she has “strong support” from other commissioners and drafted a compromise in line with lawyers’ guidelines to win consensus from her colleagues. She declined to give details, beyond saying she would retain the 40 percent target.
“It took centuries to get gender equality on the map,” Reding told reporters. “Therefore, boardrooms can wait for three more weeks. I will not give up.” U.K. business secretary Vince Cable and ministers from nine other countries wrote the European Commission last month seeking more time for national efforts aimed at encouraging female appointments to take effect. The lack of female candidates for a seat on the European Central Bank’s Executive Board saw a European Parliament committee yesterday oppose the appointment of Luxembourg’s Yves Mersch. Reding’s proposal had the support of eight of the 27 European commissioners, including economy commissioner Olli Rehn and antitrust chief Joaquin Almunia, ahead of today’s meeting, according to another person familiar with the situation. Seven others are opposed, said the person yesterday, who declined to be identified because the matter is private.

Spain Output Shrinks Fifth Quarter Amid Bailout Talk: Economy (Bloomberg)
Spain’s economy contracted for a fifth quarter, adding pressure on Premier Mariano Rajoy to seek more European aid even as the euro area’s fourth-largest economy met a bill-sales target. Gross domestic product fell 0.4 percent in the three months through September from the previous quarter, matching the contraction of the second quarter, the Bank of Spain said in an estimate in its monthly bulletin released in Madrid today. That compares with a median forecast for a 0.7 percent contraction in a Bloomberg News survey of 10 economists. Spain’s bonds have declined since European Union leaders last week failed to discuss further aid for the nation at a Brussels summit. Rajoy has struggled to trim a 2011 budget deficit that was more than three times the EU limit, after the country’s deepening recession pushed the jobless rate over 25 percent, sapping demand and tax revenue.
“Progress isn’t conclusive, there is a huge amount of uncertainty in Spain right now,” said Ebrahim Rhbari, a London- based economist at Citigroup Inc. “There are question marks about the banking sector and public finances and economic fundamentals suggest we will see a bailout sooner than later.” Spain’s economy probably contracted 1.7 percent in the third quarter from a year ago, as job losses continued, households ate into their savings and low disposable income reduced their ability to pay down debt, the Bank of Spain said. The euro weakened 0.7 percent against the dollar and was at $1.2972 as of 6:03 p.m. in Brussels. The Stoxx Europe 600 Index dropped for a third day, falling 1.7 percent.

Draghi Takes Pitch Into Lion’s Den as German Faith in ECB Wavers (Bloomberg)
Mario Draghi is taking his sales pitch into the lion’s den. By appearing before a joint session of three committees of the German parliament in Berlin tomorrow, the European Central Bank president is seeking popular support in Europe’s largest economy for his plan to purchase government bonds to stem the debt crisis. While Draghi says his so-called Open Market Transactions are required for price stability, some German policy makers say they are an affront to the monetary orthodoxy upon which the ECB was founded. “Draghi is on a mission to smooth concern that OMT won’t send inflation skyrocketing or lumber German taxpayers with liabilities they can’t pay,” said Frank Schaeffler, finance spokesman for the Free Democrats, who are in coalition with Chancellor Angela Merkel’s Christian Democrats. “Many lawmakers -- even if they don’t admit it -- have grown suspicious of the ECB and its head, once dubbed the most German of non-German central bankers.”
While the announcement of Draghi’s yet-to-be-deployed bond- buying program has calmed financial markets, Germany’s revered Bundesbank has openly opposed the plan, fanning concerns among politicians and the public. Some 42 percent of respondents to a Stern survey published Sept. 6 said they had little or no trust in the ECB president, compared with just 18 percent who judged him favorably.

Banks Awarded Higher Credit Ratings for Business, ECB Study Says (Bloomberg)
Big banks are awarded higher grades from ratings firms because the lenders provide them with business including evaluating securitized debt, according to a European Central Bank study. Larger financial institutions were more likely to receive better grades, according to the research report, which reviewed about 39,000 quarterly bank ratings from Standard & Poor’s, Moody’s Investors Service and Fitch Ratings from 1990 to 2011. Inflated grades on bonds backed by subprime mortgages during the housing boom helped ignite the worst financial crisis since the Great Depression when their values plummeted five years ago. Analysts at the three firms were pressured to give their stamp of approval to complex investments to win lucrative business from Wall Street banks, the Senate Permanent Subcommittee on Investigations said last year in a report.
The “bias mostly reflects credit rating agencies’ conflicting incentives with respect to large banks,” authors Harald Hau, Sam Langfield and David Marques-Ibanez wrote in the report posted on the European Central Bank’s website, whose findings don’t represent that of the ECB. “We strongly disagree with the methodology and conclusions of the study,” Michael Adler, a spokesman for Moody’s, said in a telephone interview, declining to give more details. “To suggest that large bank ratings are conflicted simply because those banks might also be in a ’stronger client position’ is in our view a cynical leap -- or what the ECB report calls a ’hypothesis’,” Dan Noonan, a spokesman for Fitch, wrote in an e-mail. “No business model is completely free from potential conflicts of interest -- what matters is how well they are managed and communicated to the market.”

German Business Confidence May Rise on ECB Bond-Buy Plan (Bloomberg)
German business confidence probably climbed for the first time in seven months in October as the European Central Bank’s plan to buy government bonds eased concern about the region’s debt crisis. The Ifo institute’s business climate index, based on a survey of 7,000 executives, will rise to 101.6 from 101.4 in September, according to the median forecast of 39 economists in a Bloomberg News survey. Ifo releases the report at 10 a.m. in Munich today. Financial markets have rallied since ECB President Mario Draghi pledged to do whatever is needed to preserve the euro and unveiled a plan to buy government bonds. German investor confidence gained for a second month in October. Still, Europe’s largest economy may shrink in the fourth quarter as euro-area and global demand for its exports wanes, the Bundesbank said on Oct. 22.
“Business confidence in Germany and in Europe is supported by the ECB,” said Thomas Costerg, an economist at Standard Chartered Bank in London. “Even if there is some uncertainty at the moment, Germany’s economy should be back to growth in the first half of next year.” Ifo’s measure of executives’ expectations probably rose to 93.6 from 93.2 in September, while a gauge of the current situation may have slipped to 110 from 110.3, the survey shows.

20121024 0957 Global Commodities Related News.

DTN Closing Grain Comments 10/23 14:50 Soybeans Rally; Wheat, Corn Struggle Tuesday (CME)
The soybean market staged an impressive rally hinting at fresh export business while corn and wheat were limited by solid commercial selling and bearish outside markets.

Commodities Erase 2012 Gain on Global Economic Woes (Bloomberg)
Commodities declined, erasing this year’s advance, on speculation that demand for energy, industrial metals and some agricultural products will slump because of the sluggish global economy. The Standard & Poor’s GSCI Spot Index (MXWD) of 24 raw materials fell 1.4 percent to settle at 639.3 at 4 p.m. New York time. Earlier, the gauge touched 635.1, the lowest since Aug. 3. The measure also erased 2012 gains in May and July. The last annual drop was in 2008. The International Monetary Fund cut its 2012 global-growth forecast to 3.3 percent on Oct. 9 from a July prediction of 3.5 percent and said the euro area will contract 0.4 percent. The economy in China, the biggest user of everything from copper to cotton, has slowed for seven straight quarters.
“The commodity complex is very sensitive to the demand destruction that is happening because of the global slowdown,” said Stanley Crouch, who helps oversee $2 billion of assets as chief investment officer at New York-based Aegis Capital Corp. “We are due for a big sell-off in the risk assets, and so commodities will not do well as the macro concerns remain.” Cotton futures fell the most in 10 weeks, and crude oil dropped to the lowest since mid-July. Gasoline declined for the ninth straight session, the longest slump since at least October 2005. Copper dropped to the lowest since Sept. 7. European leaders have struggled to contain the region’s debt crisis that prompted Greece, Ireland and Portugal to get bailouts.

‘Collateral Damage’
“People are still worried about demand from Europe and the collateral damage from Europe itself,” said Dan Denbow, a portfolio manager of the $2.1 billion USAA Precious Metals & Minerals Fund in San Antonio. “If Europe continues to slide and if it slides further into recession, does that tip the Chinese soft landing into something worse and therefore hurts commodity demand even more?” Spain’s economy contracted for a fifth quarter, adding pressure on Premier Mariano Rajoy to seek more European aid. Chinese factories are losing pricing power in the worst wholesale-cost deflation since 2009, signaling company earnings may deteriorate further. “For a while, global growth is off the table,” said John Stephenson, who helps manage $2.7 billion at First Asset Investment Management Inc. in Toronto. “You’ve got Europe clearly in the middle of a crisis. Commodities go lower and investors should adopt the fetal position.”

Wheat Harvest in Australia Falling 28% to Five-Year Low (Bloomberg)
Wheat production in Australia, the world’s second-biggest shipper, will probably decline 28 percent to the lowest level in five years, missing a government estimate, after dry weather reduced yields. The harvest (ALHVS) will total 21.2 million metric tons in the 2012-2013 marketing year, according to the median of estimates from four analysts and two traders compiled by Bloomberg. That compares with 23.25 million tons in a survey last month and an official forecast of 22.5 million tons. The crop was a record 29.5 million tons last year. Wheat climbed 33 percent this year as dry weather in parts of the European Union and Russia cut global stockpiles to the lowest in four years, helping boost food costs 7.7 percent the past three months. The U.S. Department of Agriculture cut its estimate for Australian output 12 percent to 23 million tons on Oct. 11. That may be lowered by 2 million tons in coming reports because of dry conditions, said Rabobank International.
“Western Australia had a very prolonged dry stretch through the cropping year,” said David Johnson, general manager of risk and pricing at Emerald Group Australia Pty in Melbourne. Eastern Australia “hasn’t been getting convincing rain to be able to fulfill crop potential, so the crop has just been slowly declining.” The Australian Bureau of Agricultural and Resource Economics and Sciences, or Abares, will revise its estimate in December.

Price Gains
Wheat for delivery in December declined 0.9 percent to $8.70 a bushel on the Chicago Board of Trade at 4:41 p.m. in Singapore. Futures rose 0.7 percent yesterday, advancing for the fourth straight session. The grain is the best performer this year on the Standard & Poor’s GSCI Spot Index of 24 commodities. CBH Group, Western Australia’s top grain handler, said Oct. 3 it expects to receive from the region between 9.1 million tons and 9.3 million tons this harvest, down from a record 15 million tons last year, after a dry July and August. That compares with its prediction of 9 million tons to 10 million tons on Sept. 5. Western Australia’s southwest had the driest July on record while the state had below-average rainfall in August and near- average rain in September, according to the Bureau of Meteorology. Wheat output in the nation’s biggest producer may drop 39 percent to 7.1 million tons, according to Abares.
“The crop has been really under pressure the whole way through,” Emerald’s Johnson said by phone Oct. 19. The east coast is set for an average year, he said. Global stockpiles will be 173 million tons on May 31, down from a previous estimate of 176.71 million, the USDA said Oct. 11. World output was forecast at 653.05 million tons, down 0.9 percent from the prediction a month earlier, it said.

Pro Farmer: After The Bell Wheat Recap  (CME)
Wheat futures settled 3 1/2 to 9 1/2 cents lower in Chicago, mostly 1/2 to 8 cents lower in Kansas City and around 2 to 3 cents lower in all but the far-deferred contracts that were firmer in Minneapolis. Futures got caught up in the broad, risk-off move in the investment world today. Despite heavy outside market pressure, wheat was able to rebound well off session lows into the close as corn trimmed losses and many of the soybean contracts worked higher.

Wheat Market Recap Report (CME)
December Wheat finished down 9 1/2 at 868 3/4, 9 3/4 off the high and 8 3/4 up from the low. March Wheat closed down 8 1/4 at 882. This was 9 1/4 up from the low and 8 off the high. December Chicago wheat traded lower on the day and led all thee wheat classes in losses. Poor corporate earnings and a higher dollar forced bulls to the sidelines as long liquidation spread across most commodity markets. Reports that US exporters sold Taiwan 104,000 tonnes of wheat for November through December shipment was moved aside after it was clear the US was uncompetitive in a hard wheat tender to Iraq. Traders noted that Black Sea cargoes were offered at a steep discount which triggered profit taking. The bull camp is beginning to take notice to the wheat emergence problems in the western plains which could add support to wheat in the long term. This week's Planting Progress report showed 49% of the entire winter wheat crop had emerged as of October 21st vs. 51% for the same period last year. Emergence in Colorado, Montana, Nebraska, and South Dakota remain well behind the 5 year average. A dry pattern is expected to persist in the western plains this week but longer term forecasts suggest a better chance for rainfall after October 31st. December Oats closed down 9 1/2 at 386. This was 2 1/2 up from the low and 10 off the high.

Pro Farmer: After The Bell Corn Recap  (CME)
December through July corn futures ended fractionally to 5 3/4 cents lower, with far-deferred contracts fractionally to 1 3/4 cents higher. Corn futures favored a weaker tone throughout the day, but deferred futures found late-session spillover support as soybean futures came off their lows. Negative outside markets tempered buying throughout the day.

Corn Market Recap for 10/23/2012 (CME)
December Corn finished down 5 1/4 at 756, 6 1/2 off the high and 6 1/2 up from the low. March Corn closed down 3 1/4 at 756. This was 7 1/2 up from the low and 4 1/4 off the high. December corn traded lower on the day, along with most other commodity markets. Worse than expected corporate earnings along with fears of a global economic slowdown sent crude oil down almost 2% on the day. Afternoon strength was seen in the soybean market which helped corn pick itself off the session lows. Corn bids were weaker in river markets midday as barge freight firmed and on slow export demand. Physical traders noted that basis was steady to slightly firm in processor markets. The USDA reported this morning that exporters switched 270,000 tonnes of US corn sold to Mexico to a non-US origin for the 2012/13 crop year. This may have added to the downside influence but the weakness in the broader market overshadowed fundamentals. Iowa ethanol margins remain in negative territory as of October 19th. Public data suggests facilities are now losing 46 cents per bushel which is up from a 51 cent per bushel loss the week prior. This is the 12th straight week of negative margins. The weak ethanol margins continue to favor the bear camp however the potential for a pickup in exports later this crop year is adding long term support to the market. November Rice finished up 0.08 at 14.98, equal to the high and 0.11 up from the low.

U.S. corn harvest 87 pct done, soybeans 80 pct (Reuters)
U.S. corn harvest was a record 87 percent complete and farmers had finished 80 percent of soybean harvest as of Sunday, according to a U.S. Agriculture Department report issued on Monday, but the tail end of their combining efforts was expected to be slow due to rain.

Argentine storms to help grain output, hurt quality (Reuters)
Argentine grains output will benefit from this year's early and potent arrival of El Nino-related rains, but low crop quality linked to flooding is likely to undermine the expected increase in soy and corn volume.

Ivorian cocoa arrivals seen at 51,000 T by Oct 21 (Reuters)
Cocoa arrivals at ports in top grower Ivory Coast reached around 51,000 tonnes by Oct. 21 since the since the start of the season Oct. 3, exporters estimated on Monday, compared with 50,381 tonnes in the same period of the previous season.

Oil Near Three-Month Low on Speculation U.S. Stockpiles Rose (Bloomberg)
Oil traded near a three-month low in New York before a report forecast to show that stockpiles gained amid surging U.S. production. Futures were little changed after dropping 2.3 percent yesterday, the biggest decline since Sept. 19. The Energy Department will show in a report today that U.S. crude supplies climbed for a third week, according to a Bloomberg News survey of analysts. The industry-funded American Petroleum Institute reported yesterday that oil inventories increased by 313,000 barrels last week to 369.6 million. Crude for December delivery was unchanged at $86.67 a barrel in electronic trading on the New York Mercantile Exchange at 8:38 a.m. in Tokyo. The contract fell $2.06 yesterday to its lowest close since July 10 and is down 12 percent this year.
Brent oil for December settlement dropped $1.19, or 1.1 percent, to end yesterday’s session at $108.25 a barrel on the London-based ICE Futures Europe exchange. The European benchmark’s premium to the New York-traded West Texas Intermediate grade widened to $21.58. Today’s Energy Department report will probably show that U.S. crude supplies increased after output climbed to the highest level in more than 17 years, according to the median of 11 analyst estimates in a Bloomberg survey. Crude inventories rose by 1.8 million barrels in the week ended Oct. 19, the survey showed. A gain of that size would leave stockpiles at the highest level since July. Gasoline supplies climbed 500,000 barrels, the analysts forecast.
Stronger U.S. economic data later this week may spur a rally in oil prices, said Jason Schenker, president of Prestige Economics LLC, an Austin, Texas-based energy consultant. The Commerce Department is projected to report that U.S. new home sales and house prices increased in August, according to a Bloomberg survey of analysts.

Iran Threatens to Halt Crude Exports If Sanctions Intensify (Bloomberg)
Iran will suspend all oil exports, pushing global crude prices higher, if the U.S. and Europe tighten sanctions further on the OPEC member’s economy, Oil Minister Rostam Qasemi warned. “If you continue to add to the sanctions, we will stop our oil exports to the world,” he said at a news conference in Dubai. “The lack of Iranian oil in the market would drastically add to the price.” Iran wants “reasonable” prices for crude and doesn’t seek an increase, he said earlier today. Brent crude for December settlement was $1.09 lower at $108.35 a barrel on the London- based ICE Futures Europe exchange at 2:36 p.m. local time. Prices for the grade have risen 11 percent since the European Union banned purchases of Iranian crude on July 1.
Iran’s oil exports have dwindled in the face of U.S. and EU sanctions on its energy and financial industries. The International Energy Agency, which advises the world’s biggest industrialized economies, reported that Iranian shipments slumped to 860,000 barrels a day in September from 1.1 million barrels in August. About 40 percent of Iran’s exports last month were destined for China, according to tanker-tracking data compiled by Bloomberg. A unilateral halt in Iran’s oil sales would be “extremely unlikely,” said Robin Mills, head of consulting at Dubai-based Manaar Energy Consulting and Project Management.

Recap Energy Market Report  (CME)
December crude oil traded sharply lower throughout the session and fell to its lowest level since July 10th. Weakness in the crude oil market originated from slowing economic growth prospects, strength in the US dollar and a sell off in global equity markets. Disappointing corporate earnings from a couple of large multi-national companies, like DuPont and 3M, sparked further concerns over a slowing global economy. Some traders indicated that prospects for slowing growth were seen tamping down global oil demand. Meanwhile, West-Texas crude oil was decisively weaker than Brent crude oil throughout the session, perhaps in the wake of the TransCanada Keystone pipeline restart. Another force weighing on December crude oil was expectations that this week's EIA inventory report will likely show a build in crude stocks last week in the range of 1.5 million barrels.

Gold Futures Fall to Six-Week Low as Dollar Extends Rally (Bloomberg)
Gold futures fell to a six-week low as the dollar’s advance curbed demand for the metal as an alternative investment. Palladium tumbled the most since March. The greenback rose for the fourth straight session, the longest rally in five months. The euro dropped as Spain’s economy contracted for the fifth straight quarter and French industrial confidence fell to the lowest in more than three years. Gold has declined 4.1 percent this month. “Spain continues to drive the direction of the market, and people are moving toward the dollar and staying away from riskier assets,” Fain Shaffer, the president of Infinity Trading Corp. in Medford, Oregon, said in a telephone interview. Gold futures for December delivery fell 1 percent to settle at $1,709.40 an ounce at 1:48 p.m. on the Comex in New York. Earlier, the price touched $1,705.10, the lowest for a most- active contract since Sept. 7.
On the New York Mercantile Exchange, palladium futures for December delivery plunged 4.6 percent to $593.85 an ounce, the biggest drop since March 22. Earlier, the metal touched $590.40, the lowest since Aug. 17. Platinum futures for January delivery fell 2.3 percent to $1,575.60 an ounce. The price dropped as low as $1,573.70, the cheapest since Sept. 7. Silver futures for December delivery slid 1.4 percent to $31.793 an ounce on the Comex. The price touched $31.65, the lowest since Sept. 4. In 2012, silver has climbed 14 percent. Platinum has gained 12 percent, and gold has advanced 9.1 percent. Palladium has dropped 9.5 percent. Today, the Standard & Poor’s GSCI Spot Index of 24 raw materials, which includes gold and silver, erased this year’s gain.

Silver Market Recap Report (CME)
The silver market didn't exhibit as much range down action as the gold market today but December silver still managed to reach the lowest level since September 4th. Like gold, silver was clearly undermined by the sharp washout in global equities and silver was probably put under additional pressure because of weak US data. Surprisingly silver seemed to discount hard range down action in a host of industrial commodities but silver ultimately managed to spend a large portion of the Tuesday trade above the prior low!

Gold Market Recap Report  (CME)
Significant technical damage was seen today as December gold prices at times were as much as $93 an ounce below the October highs. Fears of slowing joined fears of a change in leadership at the Fed to produce an aggressive wholesale liquidation of gold prices. While the market started out in a risk-off mode, seeing soft scheduled data, hard down equity market action and uncertainty toward the leadership of the Fed was apparently enough to force a number of longs from positions. While gold hasn't paid that much attention to currency influences recently, adverse currency market action was probably another element turning up the liquidation pressure on gold prices. The real test of the bear's resolve might come in the lead up to the FOMC statement release Wednesday afternoon.

20121024 0956 Soy Oil & Palm Oil Related News.

Sime Sees Palm Rally as Mistry Says Worst Not Over: Commodities (Bloomberg)
The six-month bear market in palm may be ending as declining output in Malaysia curbs a record glut, with Sime Darby (SIME) Bhd., the largest producer, forecasting a rally in the world’s most-used cooking oil. Reserves will diminish as exports accelerate, said Franki Anthony Dass, an executive vice president at Sime Darby Plantation Sdn. Futures will rally 9 percent to 2,775 ringgit ($909) a metric ton in Kuala Lumpur by the end of the quarter, based on the median of 13 analyst and trader estimates compiled by Bloomberg. Prices may go as high as 3,100 ringgit by the end of the first half, Dass said in an interview.
Palm, used in everything from biofuels to candy to noodles, slumped to a three-year low this month as Malaysian inventories reached a record, spurring the government to cut export taxes to clear the glut. Dorab Mistry, who has traded the oil for 35 years and correctly forecast previous slumps, said that won’t be enough and prices have yet to bottom. Analysts expect Felda Global Ventures Holdings Bhd. (FGV), the third-largest palm-plantation operator, to report a 21 percent increase in profit next year. “The drop was a lot more excessive than was warranted,” said Abah Ofon, an agricultural analyst at Standard Chartered Plc in Singapore, predicting prices as high as 3,250 ringgit this quarter. “We’re going to see a drop in output and seasonally we’re going to see an uptake in demand,” said Ofon, who correctly forecast in November that prices would rally.

Crops Wilting
Palm retreated 20 percent to 2,544 ringgit on the Malaysia Derivatives Exchange this year, slumping as low as 2,230 ringgit on Oct. 3. That contrasts with record corn and soybean prices as the worst U.S. drought since 1956 wilted crops. The Standard & Poor’s GSCI Agricultural Index of eight commodities gained 13 percent since the start of January as the MSCI All-Country World Index of equities rose 11 percent. Treasuries returned 1.5 percent, a Bank of America Corp. index shows. Global consumption will rise 5.3 percent to 51.7 million tons in the 2013 marketing year, driving stockpiles relative to demand to a four-year low, the U.S. Department of Agriculture estimates. Reserves will be equal to 11 percent of demand at the end of the period, a drop of about 1 percentage point, according to the USDA, whose estimates include several national years.
The commodity is extracted from the fruit of the oil palm grown in tropical regions. Indonesia and Malaysia account for 87 percent of global supply. Malaysian output reached a record 2 million tons in September, taking inventories to 2.48 million tons, industry data show. Output peaked in October last year, then fell 38 percent in the following four months. Prices have risen every fourth quarter in all but one of the past six years.

Duty Free
The government said Oct. 12 that export taxes will drop to 4.5 percent to 8.5 percent from Jan. 1, down from 23 percent, and a quota on duty-free shipments would end. India, the biggest importer, may buy as much as 50 percent of its supply from Malaysia after the change, from 20 percent now, according to B.V. Mehta, the executive director of the Mumbai-based Solvent Extractors’ Association, an industry group. The tax change will reduce reserves, Sime Darby’s Dass said Oct. 19 in Subang Jaya, outside Kuala Lumpur. Higher demand from India and steady consumption in Europe and China will boost shipments, said Dass, who’s been in the industry for 30 years and oversaw 2.45 million tons of production last year.

Global Economy
Slowing global economic growth may curb demand and limit the rally. The 17-nation euro area will contract 0.5 percent this quarter and not expand again until the third quarter, the median of as many as 25 economist estimates compiled by Bloomberg shows. The 27-nation European Union accounted for 14 percent of imports last year, according to USDA data. China, the second-biggest buyer, has slowed for seven straight quarters. Prices plunged 44 percent in 2008 as the global economy endured its deepest recession since World War II. The world is “awfully close” to another slump, Bank of Israel GovernorStanley Fischer said in a Bloomberg Television interview broadcast Oct. 15. The International Monetary Fund cut its 2012 global growth forecast to 3.3 percent on Oct. 9, compared with a July prediction of 3.5 percent.
The economy doesn’t “look bullish” for palm, Mistry, a director at Godrej International Ltd., told a conference in Kuala Lumpur on Oct. 16. Malaysian stockpiles may exceed 3 million tons by Jan. 1 and futures may drop to 2,200 ringgit within six weeks, he said. Mistry became known as Mr. Titanic after he compared the market in 1998 to the ill-fated liner.

Southeast Asia
Indicators of an El Nino, caused by a warming of the Pacific Ocean that can parch Southeast Asia, remain neutral after being close to thresholds for the weather pattern in recent months, Australia’s Bureau of Meteorology said yesterday. Output dropped 8.3 percent in 1998 because of an El Nino event, data from the Malaysian Palm Oil Board show. Demand for palm may be boosted by curbs in supplies of soybeans and sunflowers, according to Thomas Mielke, the executive director of Oil World, a Hamburg-based research company. Global stockpiles of soybean oil, the most-consumed after palm, have started falling toward the smallest since 1994 because of the U.S. drought, USDA data show. Total inventories of palm, soybean, rapeseed and sunflower oils will decline to about 8.2 percent of consumption this year, the lowest since 1977, according to data compiled by Bloomberg using USDA estimates.

Soybeans Rally
Soybeans advanced 27 percent on the Chicago Board of Trade this year, reaching a record $17.89 a bushel in September, and soymeal surged 49 percent. While soybean oil retreated 1.9 percent, its premium to palm widened to as much as $379 a ton this month, the most since 2008. China’s imports of palm may rise 5.3 percent to 6 million tons in 2013, according to Desmond Ng, the Malaysian Palm Oil Council’s regional manager for China. The Asian nation is consuming about nine times more than a generation ago, leading a fourfold gain in global demand, the USDA estimates. Felda’s profit will increase to 1.14 billion ringgit next year from 943.2 million ringgit, according to the mean of 18 analysts’ estimates compiled by Bloomberg. The Kuala Lumpur- based company raised $3.3 billion in June in what was the year’s biggest initial public offering since Facebook Inc. Its shares have fallen 12 percent since the end of June. All producers are profitable with prices at 2,200 ringgit or more, Mistry said.
“The supply situation for oilseeds is very tight historically,” said Erin Fitzpatrick, an analyst at Rabobank International in London. “That is going to be supportive for palm oil.”

Pro Farmer: After The Bell Soybean Recap  (CME)
Soybean futures faced heavy pressure in early trade, but the market improved around midday and extended gains into the close to settle steady to 6 3/4 cents higher through the September contract. Far deferred months closed 2 cents lower. Early in the session, soybean futures faced heavy profit-taking pressure due to strong gains in the U.S. dollar index and sharp losses in the stock market and crude oil futures.

Soybean Complex Market Recap (CME)
November Soybeans finished up 6 3/4 at 1553 1/4, 1 3/4 off the high and 24 1/4 up from the low. January Soybeans closed up 6 1/2 at 1555 3/4. This was 24 1/2 up from the low and 1 1/4 off the high. December Soymeal closed up 5.2 at 476.2. This was 10.3 up from the low and 0.7 off the high. December Soybean Oil finished down 0.34 at 51.32, 0.7 off the high and 0.36 up from the low. November soybeans traded sharply lower in early trade today but managed to climb into positive territory and close on the highs of the day in impressive fashion. Soybean oil finished the day lower while meal finished the day higher. Futures were able to hold above yesterday's lows despite broad-based commodity liquidation throughout the day. Worse than expected corporate earnings also added to the negative tone as stocks traded down sharply and the US Dollar rose. Soybean basis in the Gulf of Mexico ticked higher midday on demand interest from China and slow country movement. Calendar spreads held steady to firm despite the sharp selloff in futures early on which suggests a bullish fundamental bias. South American weather remains mostly favorable but temperatures are expected to rise in the central west to south central regions of Brazil this week. South Brazil and Argentina will continue to see heavy rainfall through the next 7-10 days but drier than normal conditions in central and northern Brazil remains a concern. The longer term forecast for South America should favor row crop planting and maturity.

EDIBLE OIL: Malaysian palm oil futures fell as investors booked profits after the previous session's three-week high on worries that October's stronger-than-expected exports were not enough to trim record high stocks in the world's No.2 producer. (Reuters)

20121023 1805 FCPO EOD Daily Chart Study.

FCPO closed : 2540, changed : -37 points, volume : lower.
Bollinger band reading : correction range bound little downside biased.
MACD Histogram : turned downward, buyer taking profit.
Support : 2520, 2490, 2450, 2400 level.
Resistance : 2550, 2570, 2600, 2620 level.
Comment :
FCPO closed recorded loss with lesser volume participation  Soy oil currently falling lower after overnight closed recorded small gain while crude oil price trading weaker.
Buyer profit taking activities after 5 consecutive days of advance followed by afternoon news on Indonesia may lower November palm oil export tax to 10.5% from Oct 13.5% send FCPO price lower today.
Daily chart reading continue to calling a correction range bound little downside biased market development.
When to buy : buy at support or weakness with quick cut loss and profit target.
When to sell : sell at resistant or strength with quick cut loss and profit target.

20121023 1723 FKLI EOD Daily Chart Study.

FKLI closed : 1669.5 changed : +5.5 points, volume : lower.
Bollinger band reading : correction range bound upside biased.
MACD Histogram : turned upward, buyer seller battling.
Support : 1660, 1657, 1651, 1645 level.
Resistance : 1670, 1680, 1690, 1700 level.
Comment :
FKLI closed recorded gain with slower volume changed hand doing 4.5 points premium compare to cash market closed little higher. Overnight U.S. markets closed flat and today Asia markets ended mixed while European markets currently trading lower.
Missed forecast corporate earnings reports, 5 Spanish's region downgrade by Moody's and yesterday Japanese exports slump still having negative impact to today's world markets performance. Back home, KLCI closed little higher on selected blue chip counters gain and positive news on Bank Negara international reserves recorded slightly increase.
FKLI daily chart study remained suggesting a correction range bound upside biased market development.
When to buy : buy at support or weakness with quick cut loss and profit target.
When to sell : sell at resistance or strength with quick cut loss and profit target.

20121023 1642 Global Markets & Commodities Related News.

STOCKS: European stock index futures pointed to a higher open, with shares set to reverse the previous session's dip and track a late-session bounce on Wall Street. Asian shares were lacklustre with the corporate reporting season getting underway in the region, as investors stayed cautious after global shares faltered overnight on weak earning reports and outlook. (Reuters)

FOREX: The yen hit a three-month low against the dollar and a five-month trough versus the euro, pressured by expectations that the Bank of Japan will further loosen monetary conditions to help the export-reliant economy face a global slowdown. (Reuters)


FOREX-Yen hits 3-month low vs dollar, BOJ easing eyed
SINGAPORE, Oct 23 (Reuters) - The yen hit a three-month low against the dollar and a five-month trough versus the euro, pressured by  expectations that the Bank of Japan will further loosen monetary conditions to help the export-reliant economy face a global slowdown.
"Yen-selling versus the dollar will probably continue ahead of the BOJ (meeting) and while the dollar might see a slight pullback afterwards, I think this trend will persist," Maeba said, adding that the dollar may rise toward 82 yen by year-end.


Euro zone cut fiscal deficit in 2011, debt up
The euro zone's fiscal deficit fell sharply last year as governments slashed expenses and raised taxes to regain market confidence in their public finances, but public debt still climbed, data from the European Union's statistics office showed on Monday. (Reuters)

GRAINS: Chicago wheat edged lower as the market took a breather after rising for four consecutive sessions on concerns over shrinking supplies in the Black Sea region and dryness hurting crops in top exporters the United States and Australia. Soybeans eased as investors shifted their focus to Brazil and Argentina, where farmers are boosting plantings to produce record-large crops early next year. (Reuters)

U.S. corn harvest 87 pct done, soybeans 80 pct
U.S. corn harvest was a record 87 percent complete and farmers had finished 80 percent of soybean harvest as of Sunday, according to a U.S. Agriculture Department report issued on Monday, but the tail end of their combining efforts was expected to be slow due to rain. (Reuters)

As unconventional U.S. oil, gas boom, so do jobs - report
The U.S. oil and gas rush is cutting into jobless numbers, supporting a total of 1.7 million jobs this year, a number that will swell to almost 3 million by 2020, a leading consultant said in a study released on Tuesday. (Reuters)

OIL: Brent futures held steady above $109 as investors judged the previous session's fall in prices to their lowest in nearly three weeks as an opportunity to buy, with simmering tensions in the Middle East providing additional support.  (Reuters)

POLL-US crude stocks projected up for third straight week (Reuters)
U.S. crude oil inventories likely rose for the third straight week on recovered imports, a preliminary Reuters poll of analysts showed on Monday.

BASE METALS: London copper fell and prices remained near the six-week low hit the previous day, as investors played safe ahead of a U.S. Federal Reserve policy meeting, while awaiting China's next policy moves. (Reuters)

PRECIOUS METALS: Gold held above $1,720 an ounce after demand from jewellers helped prices rebound from their lowest in more than a month, but investors were likely to stay on the sidelines ahead of a U.S. Federal Reserve meeting. (Reuters)


Daily aluminium output rises in September- IAI
LONDON, Oct 22 (Reuters) - Daily average aluminium output for September rose slightly to 67,000 tonnes from 66,900 tonnes in August, figures from the International Aluminium Institute (IAI) showed on Monday, after falling recent months.
Production has been on a falling trend between October 2011 and August this year, the figures showed, as aluminium prices come under pressure due to a slowing global economy hitting demand for the metal used in packaging and transport.

Global crude steel output flat in Sept, China edges up
LONDON, Oct 22 (Reuters) - Global crude steel production in September was little changed from a year earlier, World Steel Association (Worldsteel) data showed on Monday, with China raising production slightly while western producers held back output in the face of weak demand.  
Output of steel, used in automaking and construction, was 123.63 million tonnes in September versus 123.62 million a year earlier, Worldsteel figures showed.

METALS-Copper hits fresh 6-wk low; Fed, China eyed
SHANGHAI, Oct 23 (Reuters) - Copper fell to fresh six-week lows as investors played safe ahead of a U.S. Federal Reserve policy meeting, while awaiting China's next policy moves.
"The market is clearly still looking to China as the real driver and the rest of the world is only providing a bit of short-term noise," RBC Capital Markets said in a note.

PRECIOUS-Gold ticks lower on equities, Fed in focus
SINGAPORE, Oct 23 (Reuters) - Gold edged lower after  equities gave up early gains, although demand from  jewellers helped prices rebound from their lowest in more than a month as investors waited on the results of a U.S. Federal  Reserve meeting.
"We are not expecting much, unless there are surprises from the Fed. So I believe gold will still be trading within this  band. A lot of investors are also eyeing the outcome of the  presidential election in the U.S.," said Brian Lan, managing  director of GoldSilver Central Pte Ltd in Singapore.

20121023 1447 Palm Oil Related News.

Indonesia may cut palm export tax to 10.5 pct in Nov -industry SMAR.JK WLIL.SI - RTRS
23-Oct-2012 14:44
JAKARTA, Oct 23 (Reuters) - Indonesia, the world's top palm oil producer, may cut its export tax for crude palm oil to 10.5 percent for November, from 13.5 percent for October, an industry group said on Tuesday.
Lower benchmark prices over the last month will prompt the government move, Fadhil Hasan, executive director of the Indonesian Palm Oil Association (GAPKI), told Reuters.
From late August, benchmark Malaysian palm oil futures FCPOc3 have fallen by as much as 29 percent due to a slowing economic outlook and a rise in stocks, but have partly recovered to trade at about 2,541 ringgit ($833) per tonne on Tuesday.
Southeast Asia's largest economy has a palm export tax system that aims to boost downstream industries, secure domestic supplies and reduce volatility in cooking oil prices.
The tax rate for the subsequent month is calculated by government officials based on CIF Rotterdam prices, the Malaysian benchmark and Jakarta futures prices.


VEGOILS-Palm oil down on profit-taking, high stocks concerns
Tue Oct 23, 2012 1:06am EDT
* Futures market down on profit-taking from Monday's 3-week
high
    * Investors worry about high stocks despite strong exports
-trader
    * Palm oil to rebound more to 2,676 ringgit -technicals

    By Anuradha Raghu
    KUALA LUMPUR, Oct 23 (Reuters) - Malaysian palm oil futures
fell on Tuesday as investors booked profits after the previous
session's three-week high and on worries that October's
stronger-than-expected exports were not enough to ease record
high stocks in the world's No.2 producer.
    Prices shot up to 2,580 ringgit on Monday, a level unseen
since Sept. 28, after data from cargo surveyors showed that
exports in the first twenty days of the month surged as much as
16.7 percent.
    "Yesterday prices went up too fast, way above market
expectations," said a trader with a local commodities brokerage
in Malaysia.
    "Those who went long yesterday are now liquidating their
positions and taking some profit because of the uncertainty over
this export number," he added.
    By the midday break, the benchmark January contract
on the Bursa Malaysia Derivatives Exchange fell 1.4 percent to
2,541 ringgit ($833) per tonne.
    Total traded volumes stood at 13,547 lots of 25 tonnes each,
slightly higher than the usual 12,500 lots as investors hedged
positions after the positive export data.
    Technical analysis showed palm oil may rebound further to
2,676 ringgit per tonne, with a support level of 2,492 ringgit,
said Reuters market analyst Wang Tao.
    Seasonally high production amid commodity demand weakened by
a tepid global economy lifted palm oil stocks in Malaysia to a
record high 2.5 million tonnes in September, hurting prices
which has dropped one-fifth so far this year.
    Despite the positive export numbers signalling improving
demand from the European Union and Pakistan, investors remain
wary about the future.
    "I'm quite positive about it but as of now, that's the only
hope that we have," the trader added.
    "Whether the number is sufficient enough to bring the stock
level lower or not for the coming report in November -- that is
still a big question."
    In related markets, Brent futures held steady above $109 as
investors judged the previous session's fall in prices to their
lowest in nearly three weeks as an opportunity to buy, with
simmering tensions in the Middle East providing additional
support.
    In other vegetable oil markets, U.S. soyoil for December
delivery inched up 0.1 percent in early Asian trade. The
most-active May 2013 soybean oil contract on the Dalian
Commodity Exchange fell 0.2 percent by the midday break.

20121023 1058 Global Markets & Energy Related News.

GLOBAL MARKETS-Asian shares edge higher, earnings caution caps
TOKYO, Oct 23 (Reuters) - Asian shares edged higher but sentiment was cautious, after global shares faltered overnight on weak corporate results and outlook, and with Asia's corporate reporting season underway.
"Local earnings will disappoint as Chinese growth did not pick up in third quarter as originally thought," said Kim Young-joon, an analyst at SK Securities, as Korean earnings season began.

Oil dips on economy worry, but supply fears support
NEW YORK, Oct 22 (Reuters) - Oil prices fell on Monday as economic concerns and expected production and pipeline restarts weighed on crude futures and offset support from fears the turmoil in the Middle East may threaten the region's supply.
"I think the outlook from Cat is weighing on the overall demand outlook for oil, helping to push prices lower," said John Kilduff, partner at Again Capital LLC in New York.

POLL-US crude stocks projected up for third straight week
Oct 22 (Reuters) - U.S. crude oil inventories likely rose for the third straight week on recovered imports, a preliminary Reuters poll of analysts showed on Monday.
Crude inventories were expected to have risen 1.7 million barrels for the week ended Oct. 19. All seven analysts saw a build in crude stockpiles.

NATURAL GAS - US natgas futures down 5 pct, first loss in 4 sessions
NEW YORK, Oct 22 (Reuters) - U.S. natural gas futures ended lower on Monday f or the first time in four sessions, p ressured by profit-taking after an early front-month run to a new 2012 high and by reports extended  forecasts for cold weather had  been revised to s lig htly milder.
" We saw a little profit taking after we hit the new high, then selling accelerated around noon," said Jonathan Lee at Ecova Inc., adding the slightly milder turn in computer weather projections at midday may have triggered the sharp sell-off.

Euro Coal-Creeps higher but no trades
LONDON, Oct 22 (Reuters) - Prompt physical coal prices moved marginally higher by 25-75 cents a tonne although no fresh trades were reported and demand remained tepid in Europe and Asia.
"Trading the DES ARA or Richards Bay markets via brokers or on screen offers very little in terms of profits, direct and bilateral deals are more attractive to us now," one European trader said.

20121023 1009 Malaysia Corporate Related News.

Astro bucks IPO trend
Astro Malaysia Holdings Bhd saw its share price fall as much as 9% in intraday trading on its second day on Bursa Malaysia, bucking the trend of successful mega-listings seen on the bourse this year. The pay TV operator fell to a low of RM2.73 yesterday before ending the day at RM2.77, compared with its offer price of RM3. About 120m shares changed hands yesterday. (Financial Daily)

Canada says to continue talks with Petronas
Canada could still approve the CND5.17bn (RM16bn) acquisition of Progress Energy Resources Corp by state oil company Petronas Nasional Bhd (Petronas), the country’s finance minister said on Sunday, despite blocking the bid late last week. While observers predict a chaotic market reaction following the federal government’s statement last Friday, the deal did not provide the “net benefit” required from foreign buyers under the Investment Canada Act. Finance Minister Jim Flaherty said on Canadian television negotiations would continue. (Financial Daily)

JTI and Philip Morris maintain cigarette prices
Tobaco players JT International (JTI) and Philip Morris (PMI) have yet to raise the prices of their cigarettes, following British American Tobacco (BAT) hike in the prices of its cigarettes starting yesterday. When asked about the government’s move to raise ex-factory pricing of cigarettes, a JTI spokesman said that they are not in the position to comment on the matter and pricing decisions remain the prerogative of individual companies. (Financial Daily)

China Stationery to acquire 9.8% in Pelikan
China Stationery (CSL) has proposed to acquire 50m shares in Pelikan International Corp, representing a 9.8% equity interest, from Mahir Agresif and Persada Bina for RM50m. CSL, in a filing to Bursa Malaysia yesterday, said the proposed acquisition will be satisfied by the new issuance of up to 47.2m new shares at RM1.06 per share and an additional three million new shares as payment for the professional fees. (Financial Daily)

FPSO demand to pick up
Although the demand for floating production storage and offloading (FPSO) has been weak year to date, the sector is expected to flex its muscle going forward, and it will happen most likely next year, according to industry players and analysts. A Malaysia Marine and Heavy Engineering Holdings (MMHE) spokesperson said that the demand for FPSOs was good but due to various reasons, the awards were not forthcoming this year. (StarBiz)

KLIA2 gets AirAsia nod
AirAsia group chief executive officer Tan Sri Tony Fernandes has given the green light for AirAsia, Asia’s largest low-fare, no-frills airline, to move to the KLIA2 low-cost carrier terminal upon its completion next year. The KLIA2, which is being built at a cost of almost RM4bn, is designed to cater for 30m passengers a year and with the provision to expand it to 45m passenger. Scheduled to open in April next year, the low-cost terminal has a retail space of 32,000 sq m and can accommodate 225 retail outlets. (BT)

MRT Corp awards RM1.2bn jobs to Mitsubishi, Apex
Mass Rapid Transit Corp (MRT Corp) has awarded Mitsubishi Heavy Industries and Apex Communication-LG CNS Consortium the trackworks and telecommunications packages respectively, valued at RM855m (trackworks) and RM319.9m (telecommunications). Both packages will be for a duration of 82 months each. (Malaysian Reserve)

Axis-REIT 9 months net profit up 22%
AXIS Real Estate Investment Trust (Axis-REIT) reported a 21.7% increase in net profit to RM59.7m for the first nine months of its financial year ending 31 Dec 2012, compared to RM49.1m it registered in the same period a year ago. Revenue for the period ended 30 Sep 2012, also showed a gain, of 15.4% or RM13m, to RM97.9m from RM84.9m recorded in the previous corresponding period. (Malaysian Reserve)

20121023 1009 Global Economy Related News.

Vietnam: Struggle to meet 2012 growth target
Vietnam will struggle to meet its 2012 growth target without pumping money into the economy, according to economists including an adviser to Prime Minister Nguyen Tan Dung. Vietnam’s economy needs to grow 6.5% in the fourth quarter in order to meet the government’s full-year growth target of 5.2%, the prime minister told lawmakers at the National Assembly. Vietnam’s 2012 economic growth may reach 5% to 5.2%, Nguyen Van Giau, chairman of the assembly’s economic committee, told lawmakers. (Bloomberg)

Japan: Exports tumble 10% as Maehara presses BOJ to ease
Japan’s exports fell the most since the aftermath of last year’s earthquake as a global slowdown, the yen’s strength and a dispute with China increase the odds of a contraction in the world’s third-largest economy. Shipments slid 10.3% in September from a year earlier, leaving a trade deficit of JPY558.6bn (USD7bn), the Finance Ministry said. The median forecast in a Bloomberg News survey of analysts was for a 9.9% export decline. Imports rose 4.1%. (Bloomberg)

Australia: Linkers drop most since June as inflation ebbs
Australian inflation-linked bonds are falling by the most in four months before a report that will probably show slowing economic growth is containing consumer-price gains. The bonds have lost 1.2% since 30 Sept, almost double the 0.7% slide for notes that aren’t tied to living costs, Bank of America Merrill Lynch indexes show. Annual inflation reached 1.6% in the 12 months ended 30 Sept, below the bottom of the Reserve Bank of Australia’s target range of 2% to 3%, according to economists surveyed by Bloomberg News. (Bloomberg)

EU: Seeks go-ahead to devise transaction tax for willing nations
The European Union is officially asking all 27 EU nations to allow development of a financial transaction tax for a subset of willing countries, according to documents obtained by Bloomberg News. EU Tax Commissioner Algirdas Semeta plans to move the process forward by announcing that the European Commission, the EU executive in Brussels, has the backing needed to use the so-called enhanced cooperation procedures. A weighted majority of the 27 EU countries must approve the start of the talks, and details of the tax will then be negotiated among participants. (Bloomberg)

EU: Cut fiscal deficit in 2011, debt up
The eurozone’s fiscal deficit fell sharply last year as governments slashed expenses and raised taxes to regain market confidence in their public finances, but public debt still climbed, data from the European Union’s statistics office showed. Eurostat said the aggregate budget deficit in the 17 countries using the euro fell to 4.1% of GDP in 2011 from 6.2% in 2010- the first year of the sovereign debt crisis.(Reuters)

20121023 1007 Global Markets Related News.

Asia FX By Cornelius Luca - Mon 22 Oct 2012 16:59:41 CT (Cource:CME/www.lucafxta.com)
The appetite for risk recovered on Monday, as a win for Spanish Prime Minister Mariano Rajoy in elections in his home region of Galicia was seen as removing one obstacle to Madrid seeking international aid. The foreign currencies European and commodity currencies advanced after falling for two days amid concern about earnings and the stubborn Eurozone debt crisis. Conversely, the yen extended losses to a 3 1/2-month low on rising speculation of more monetary easing by the Bank of Japan following an over 10% contraction of Japanese exports in September. The US stock markets edged up on Monday after plunging on Friday, the 25th anniversary of Black Monday. Gold, and silver advanced as well, but oil fell. The short-term outlook for the European and commodity currencies is sideways. The medium-term outlook for most of the foreign currencies is still slightly bullish. The LGR short-term model is short on yen, sterling and Canadian dollar, and long euro, franc and Australian dollar. Good luck!

Asian Stocks Swing Between Gains, Losses on Earnings (Bloomberg)
Asian stocks swung between gains and losses amid concern over slowing corporate earnings growth and as Europe struggles to contain its debt crisis. Acer Inc. slid 3.3 percent in Taipei after Asia’s second- largest computer maker posted third-quarter profit that missed estimates. Kansai Electric Power Co. (9503) sank 7 percent after the Nikkei newspaper reported the Japanese utility won’t pay a dividend. LG Display Co., the world’s No. 2 maker of liquid- crystal displays, climbed 2.2 percent in Seoul after a U.S. court ruled that it didn’t violate a patent owned by Industrial Technology Research Institute.
The MSCI Asia Pacific Index (MXAP) lost 0.1 percent to 123.03 as of 10:18 a.m. in Tokyo, erasing gains of as much as 0.3 percent. About five shares dropped for every three that rose on the measure. The gauge rebounded 13 percent from this year’s low on June 4 through yesterday as stimulus measures in the U.S., Japan and China boosted market sentiment amid a global economic slowdown and Europe’s debt crisis. Moody’s Investors Service lowered it credit ratings on Catalonia and four other Spanish regions. “External factors such as the European debt crisis and the U.S. elections are still the biggest risks for the market,” said Angus Gluskie, managing director at White Funds Management in Sydney, which manages more than $350 million. “Earnings are hostage to these macroeconomic factors.”

Japan Stocks Head for Longest Win Streak Since July 2011 (Bloomberg)
Japanese stocks rose, with the Nikkei 225 (NKY) Stock Average heading for the longest winning streak since July 2011, as exporters climbed after the yen touched the weakest level in more than three months. Sony Corp. (6758), Japan’s biggest consumer-electronics exporter, gained 0.8 percent. Komatsu Ltd. advanced 1.2 percent after the construction machinery maker said it will acquire Swedish harvester maker Log Max AB. GS Yuasa Corp. slumped 11 percent, the biggest drop on the Nikkei 225, after the battery maker cut its earnings forecast. Kansai Electric Power Co., Japan’s second-biggest generation company by revenue, lost 6.2 percent on a report the utility won’t pay a year-end dividend for the first time in 61 years.
The Nikkei 225 rose 0.1 percent to 9,015.42 as of 10:12 a.m. in Tokyo, with volume more than 10 percent above the 30-day average. The broader Topix (TPX) Index, which includes smaller companies less affected by currency fluctuations, slid 0.2 percent to 752.06, after rising as much as 0.5 percent earlier today. “The yen is getting weaker, supporting stock markets,” said Goya Nakao, a senior investment manager at Sompo Japan Nipponkoa Asset Management Co., which oversees about 5 trillion yen ($63 billion). “The risk to companies earnings are being eased by the currency as many assumed about 80 yen per dollar for their earnings estimates. The markets’ views toward the Bank of Japan are changing that the central bank may take action to weaken the yen.”

U.S. Stocks Erase Losses as Apple Offsets Earnings (Bloomberg)
U.S. stocks erased earlier losses, sending the benchmark Standard & Poor’s 500 Index higher for the first time in three days, as an advance in Apple (AAPL) Inc. shares overshadowed disappointing corporate results. Apple, the world’s most valuable company, jumped 4 percent and paced gains in technology companies. Peabody Energy Corp. (BTU), the largest U.S. coal producer by volume, surged 12 percent after earnings beat projections. Freeport-McMoRan Copper & Gold Inc. (FCX), the world’s biggest publicly traded copper producer, and SunTrust Banks Inc. (STI) retreated at least 1.4 percent after reporting earnings that missed analysts’ estimates. The S&P 500 rose less than 0.1 percent to 1,433.81 at 4 p.m. New York time, after falling 0.8 percent earlier. The Dow Jones Industrial Average added 2.38 points, or less than 0.1 percent, to 13,345.89. The Nasdaq-100 Index rose 0.6 percent to 2,694.56. Volume for exchange-listed stocks in the U.S. was 5.8 billion shares, or 3.4 percent below the three-month average.
“It really comes down to earnings at this point,” said Peter Jankovskis, co-chief investment officer for Oakbrook Investments in Lisle, Illinois, which manages more than $3 billion. He spoke in a telephone interview. “We’ve seen many companies beating earnings estimates. Yet investors are keeping an eye on their ability to grow revenue.” Third-quarter results at about 69 percent of S&P 500 companies beat analysts’ estimates, according to data compiled by Bloomberg. Sales missed forecasts at 59 percent of companies, the data showed.

U.S. Stocks Top All Other Assets for First Time Since ’95 (Bloomberg)
U.S. stocks are beating every major asset class for the first time in 17 years even as economic growth weakens and profits rise at the slowest rate since 2009. The Standard & Poor’s 500 Index has rallied 14 percent in 2012, beating Treasuries, corporate bonds, commodities, the dollar and equities in Asia and Europe, data compiled by Bloomberg show. The last time that happened, in 1995, the S&P 500 was posting the biggest annual advance of the last five decades. With a price-earnings ratio close to today’s level, the index gained another 93 percent in the next 2 1/2 years. For all the concern about unemployment and manufacturing growth, the best assets this year remain American companies after unprecedented steps by the Federal Reserve to support growth. Forecasts for a rebound in the U.S. economy and the central bank’s pledge to keep interest rates near zero for years convinced bulls the S&P 500 will extend gains. Bears say political gridlock will drag down prices after monetary stimulus wears off.
“We see good earnings growth and improving economic outlook, we see good equity valuations and easy monetary policy, we see skeptical investors and low positioning in equity assets,” said Max King, a multi-asset strategist at Investec Asset Management in London, which oversees $100 billion. “This is a major green light for equities and the fact that people don’t see it, is great.”

European Stocks Drop for Second Day; Veolia, Nexans Fall (Bloomberg)
European stocks fell for a second day as Japanese exports tumbled and investors speculated that victory in regional elections for Spain’s Prime Minister Mariano Rajoy reduces pressure for him to seek a bailout. Veolia Environnement SA retreated 5 percent after denying it’s working on a merger with Suez Environnement. Nexans SA (NEX) slid 6.6 percent after cutting its forecasts. Royal Philips Electronics NV climbed the most in more than a year after the world’s largest lighting company reported profit that beat estimates. Scania AB advanced 3.2 percent as the truckmaker’s orders declined at a slower pace. The Stoxx Europe 600 Index (SXXP) slipped 0.4 percent to 272.95 at the close, having earlier risen as much as 0.3 percent. The measure lost 0.8 percent on Oct. 19 as European Union leaders failed to discuss additional assistance for Spain at a summit in Brussels. The gauge has still rallied 17 percent from the June 4 low as the European Central Bank unveiled a bond-purchase program to support the economy.
“There remains plenty of uncertainty surrounding Spain and its next move, together with the fact that we still don’t have a firm date for when Greece will be injected with the second round of bailout funds,” Ishaq Siddiqi, a market strategist at ETX Capital in London, wrote in an e-mail. “Both issues will surely come back to haunt investors in the sessions ahead.”

Most Emerging Stocks Fall as Slowdown Weighs on Earnings (Bloomberg)
Most emerging-market stocks fell after the benchmark index delivered the biggest weekly gain in a month on concern the global economic slowdown is eroding corporate earnings. The MSCI Emerging Markets Index (MXEF) gained 0.1 percent to 1,007.31 at the close of trading in New York as 393 of the 818 shares in the measure declined. Brazil’s Bovespa Index retreated for a third day and South Korea’s Kospi gauge dropped to the lowest in a week. The Shanghai Composite Index (SHCOMP) advanced to the highest level in a month as shipbuilder China Rongsheng Heavy Industries Group Holdings Ltd. (1101) jumped the most in a year in Hong Kong.
Banco Bradesco SA (BBDC4), Latin America’s second-largest bank, fell the most in more than a week after its profit missed estimates. South Korea’s Kumho Petro Chemical Co. (011780) slid the most in two weeks, leading materials stocks lower, after saying that third-quarter operating profit dropped 76 percent. A report showed Japan’s exports slid 10.3 percent in September from a year earlier, the biggest drop since the aftermath of last year’s earthquake. “We’re seeing volatile trades as some corporate earnings and economic data disappoint,” Chu Moon Sung, a Seoul-based fund manager at Shinhan BNP Paribas Asset Management Co., which oversees about $30 billion, said by phone. The 21 nations in MSCI’s developing-nations gauge send about 13 percent of their exports to the U.S. and 30 percent to the European Union on average, according to data compiled by the World Trade Organization.
Brazil’s Bovespa index fell 0.4 percent, while Mexico’s IPC benchmark lost 0.6 percent. Russia’s Micex Index increased 1 percent and India’s BSE India Sensitive Index gained 0.6 percent. The Kospi Index retreated 0.1 percent.

Australian, New Zealand Dollars Touch One-Month Highs Versus Yen (Bloomberg)
The Australian and New Zealand dollars touched one-month highs against the yen on speculation the Bank of Japan (8301) will ease monetary policy as early as this month, boosting demand for higher-yielding currencies. Australia’s dollar gained versus most peers as Asian shares opened higher. The so-called kiwi held gains against the greenback before the Reserve Bank of New Zealand holds a policy meeting on Oct. 25. Australia’s currency remained lower versus the kiwi ahead of data tomorrow that may show inflation held near the slowest since 1999 in the larger country, providing scope for its central bank to cut interest rates. “Because of higher yields, Australia’s dollar is still preferred over the yen,” said Takuya Kawabata, a researcher at Gaitame.com Research Institute Ltd. in Tokyo, a unit of Japan’s largest currency margin company. Gains in the Australian and New Zealand currencies can be largely attributed to “speculation about additional monetary easing by the BOJ.”
The Australian dollar rose 0.2 percent to 82.63 yen, the strongest since Sept. 19, as of 11:08 a.m. in Sydney. The kiwi reached 65.47 yen, also the highest since Sept. 19, before trading at 65.39. The so-called Aussie rose 0.1 percent to $1.0335, while the New Zealand dollar was little changed at 81.77 U.S. cents after gaining 0.3 percent yesterday. Australia’s currency traded at NZ$1.2636 following a 0.3 percent decline to NZ$1.2621 yesterday. Government data due Oct. 26 will probably show that Japan’s consumer prices excluding fresh food declined in September for a fifth-straight month, according the median estimate of economists in a Bloomberg News survey. That’s far short of the central bank’s goal for inflation of 1 percent. The BOJ will hold a policy meeting on Oct. 30.

Yen Weakens Past 80 Per Dollar on Bets BOJ to Ease More (Bloomberg)
The yen weakened past 80 against the dollar as signs that the world’s third-largest economy is moving closer to contraction fanned speculation that the Bank of Japan (8301) will add further stimulus. The greenback maintained an eight-day gain versus the yen, the longest winning streak in seven years, after yields on U.S. two-year notes rose to the most since June versus their Japanese peers, attracting money to dollar-based assets. The Australian dollar held onto three days of losses before data forecast to show inflation held near the slowest in 13 years, providing scope for the Reserve Bank to cut borrowing costs. Lawmakers are “applying pressure to the BOJ to further loosen monetary policy,” said Derek Mumford, a Sydney-based director at Rochford Capital, a currency risk-management company. “It can only result in more monetization of debt which will weaken the yen. A widening of U.S.-Japan yield gaps won’t help the yen.”
The yen touched 80.01 per dollar, the weakest since July 6, before trading little changed at 79.97 as of 8:55 a.m. in Tokyo from the close yesterday. The Japanese currency fetched 104.54 per euro from 104.41, after reaching 104.59, the least since May 4. The euro was little changed at $1.3070 after adding 0.3 percent yesterday. Australia’s currency added 0.2 percent to $1.0337, after falling 0.6 percent over the previous three days. A government report on Oct. 26 will probably show that so- called core consumer prices in Japan declined in September for a fifth-straight month, according the economists surveyed by Bloomberg News. That compares with the central bank’s goal for inflation of 1 percent.

Won Undervalued 20%, Korean Bonds Appeal, Eaton Vance Say (Bloomberg)
Eaton Vance Management, which oversees $198 billion, estimates South Korea’s won is 15 to 20 percent undervalued, making the nation’s bonds attractive on prospects the currency will appreciate. The won has strengthened 4.4 percent this year, the third- best performance among Asia’s 11 most-used currencies, and reached an 11-month high of 1,102.50 per dollar last week. South Korea’s improving trade surplus and better economic growth prospects than developed countries suggest the currency is weaker than it should be, according to Eric Stein, a portfolio manager for Boston-based Eaton Vance. The central bank this month raised its 2012 projection for the excess on the current account to $34 billion, having forecast $20 billion in July.
“The Korean won is so structurally undervalued considering the strong current-account surplus, and that keeps me wanting to invest,” Stein said in an Oct. 18 phone interview. “Officials still seem to be somewhat concerned about inflation. For a country that imports so much oil, the central bank may let the currency appreciate to keep imported inflation in check.” Won-denominated assets accounted for 3.99 percent of the $6.5 billion Eaton Vance Global Macro Absolute Return Fund as of Sept. 30, according to a statement on its website. The fund returned 4.8 percent this year, outperforming 62 percent of its peers, data compiled by Bloomberg show. India’s rupee had the largest share at 7.69 percent. The firm’s Korean investments mainly consist of short-term central bank notes, Stein said. He declined to say whether he is adding to those holdings.
South Korea’s one-year central bank bonds yield 2.82 percent, compared with 0.12 percent for similar-maturity government debt in Japan and 0.18 percent for U.S. Treasuries, according to data compiled by Bloomberg. India’s notes due in a year yield 7.97 percent.

Hong Kong Dollar Forwards Rise Most Since March After Peg Tested (Bloomberg)
Traders increased bets Hong Kong will end a 29-year-old peg to the dollar after the currency reached the upper limit of its permitted range and triggered intervention by the city’s monetary authority. Two-year forwards strengthened 0.11 percent to HK$7.74 per dollar as of 4:46 p.m. local time, the biggest gain since March 9, according to data compiled by Bloomberg. The Hong Kong dollar’s value is kept at HK$7.75 to HK$7.85. Hedge-fund investor William Ackman, the founder of New York-based Pershing Square Capital Management LP, said Oct. 20 he is keeping a wager that would profit if Hong Kong allows its currency to appreciate.
Even with today’s advance, the forwards are only near their average level of the past three years and analysts surveyed by Bloomberg predict an end-2013 exchange rate of HK$7.76. The linked exchange rate has given Hong Kong companies stability in commercial contracts while tethering monetary policy to that of the U.S., where borrowing costs are being held down to spur hiring and prop up the housing market. Hong Kong’s jobless rate is near a four-year low and home prices are at all-time highs. “Any change in the peg would have certain costs but highly uncertain benefits,” Robert Minikin, senior foreign-exchange strategist at Standard Chartered Plc in Hong Kong, said yesterday. A shift “is likely to be long-delayed and perhaps come in the context of full yuan convertibility,” he said, adding that China’s currency is unlikely to trade freely for another 10 years or more.

Obama-Romney U.S. Auto Spat Turns on Saving U.S. Economy (Bloomberg)
President Barack Obama and Mitt Romney’s debate exchange over auto bailouts reignited a long- running dispute over whether the government’s financial-crisis rescue plan was a good deal for taxpayers. The answer: It depends. There’s little doubt the government won’t recoup the full $417 billion spent on the program. Proponents reply that whatever the loss, it was worth it to pull the world’s largest economy back from the brink of collapse and prevent the disappearance of whole sectors, like domestic carmakers. “We saved an auto industry that was on the brink of collapse,” Obama said in the Oct. 16 presidential debate at Hofstra University in Hempstead, New York. Republican challenger Romney wanted to put General Motors Co. (GM) and Chrysler Group LLC into bankruptcy “without providing them any way to stay open. And we would have lost a million jobs,” Obama said. Romney countered that bankruptcy was necessary “to get those companies back on their feet,” though at the time he opposed using taxpayer dollars.
Obama’s Treasury Department is seeking to wind down the Troubled Asset Relief Program that includes the auto bailouts, rescues for banks and insurer American International Group Inc. (AIG), and programs to stem home foreclosures. How much money the rescues end up costing taxpayers will depend largely on the government’s ability to sell its 32 percent stake in GM and 74 percent ownership of auto lender Ally Financial Inc. (ALLY)

Caterpillar Sees Sales Growth Slowing Next Year on Economy (Bloomberg)
Caterpillar Inc. (CAT), the world’s largest maker of construction and mining equipment, forecast sales growth for 2013 that would be slower than in the previous three years as the global economy decelerates. Sales next year will be from 5 percent below to 5 percent more than 2012 results, the Peoria, Illinois-based company said today in a statement. That compared with an average projection for an increase of 5.1 percent based on 17 analysts’ estimates compiled by Bloomberg. Revenue year-over-year grew 31 percent in 2010, 41 percent in 2011, and was estimated to increase 13 percent this year.
“The biggest concern is the declining backlog, which would imply a more challenging year next year, especially for mining, and whether or not North American construction will re- accelerate,” Larry De Maria, a New York-based analyst for William Blair & Co. who has a buy rating on the shares, said today by phone. “Caterpillar’s business is very economically sensitive. Due to the softening of the global economy and increasing uncertainty, order rates have declined.” The order backlog fell 18 percent to $23.1 billion at the end of the third quarter from three months earlier with the most significant decrease in the resource-industries segment, the company said. Production across much of the company has been reduced with temporary shutdowns and layoffs as it works through excess inventory, Caterpillar said in the statement.

POLL-China economy in feeble Q4 recovery, 25 bps RRR cut eyed (Reuters)
China could stage a tepid economic rebound in the fourth quarter as higher public infrastructure spending nudges the world's growth engine out of seven consecutive quarters of cooldown, but growth will remain lethargic through 2013 a Reuters poll showed.

China’s Factories Losing Pricing Power in Earnings Threat (Bloomberg)
Chinese factories are losing pricing power in the worst wholesale-cost deflation since 2009, signaling corporate earnings may deteriorate further and putting a damper on global inflation pressures. Steelmaker China Oriental Group Co. (581) says falling prices are wiping out profits, while Yunnan Copper Industry Co. (000878) cited the declines for a third-quarter loss. The producer price index (SHCOMP) fell 3.6 percent in September from a year earlier and may stay negative until the second half of 2013 without large stimulus, according to Mizuho Securities Asia Ltd. With the U.S. reporting the longest stretch in three years that Chinese imports have gone without a price increase, the trend also gives policy makers around the world more room for easing to support faltering global growth. Sluggish earnings growth may prompt the government to reduce corporate taxes to aid earnings and help boost spending after China’s expansion slowed for a seventh quarter.
“Reduced inflation pressure should expand the space for policy makers to take pro-growth actions in their countries,” said Shen Jianguang, chief Asia economist at Mizuho in Hong Kong. Chinese officials are likely to reduce banks’ reserve requirements ahead of a Communist Party congress next month, said Shen, who formerly worked at the International Monetary Fund and European Central Bank.

Japan Exports Tumble 10% as Maehara Presses BOJ to Ease: Economy (Bloomberg)
Japan’s exports fell the most since the aftermath of last year’s earthquake as a global slowdown, the yen’s strength and a dispute with China increase the odds of a contraction in the world’s third-largest economy. Shipments slid 10.3 percent in September from a year earlier, leaving a trade deficit of 558.6 billion yen ($7 billion), the Finance Ministry said in Tokyo today. The median forecast in a Bloomberg News survey of analysts was for a 9.9 percent export decline. Imports rose 4.1 percent. Economy Minister Seiji Maehara pressed the Bank of Japan for more action yesterday, saying the nation is “falling behind” in monetary stimulus and is at risk of another credit- rating downgrade. The BOJ today cut its view of eight out of nine regional economies while Taiwanese unemployment rose to a one-year high, underscoring weakness across Asia after China’s third-quarter growth was the slowest since 2009.
“There’s a high chance that Japan’s economy will have two consecutive quarters of contraction through December,” said Yoshimasa Maruyama, chief economist at Itochu Corp. in Tokyo. “The slump in advanced nations is spreading to emerging economies.” The yen weakened 0.6 percent to 79.78 per dollar as of 5:57 p.m. in Tokyo on speculation that the central bank will expand monetary stimulus. The currency’s decline pushed the Nikkei 225 Stock Average to a 0.1 percent gain, reversing losses of as much as 1.5 percent, by improving the outlook for exporters.

Indonesia Investments Rose Last Quarter on Mining, Transport (Bloomberg)
Indonesian investment rose last quarter as mining, transportation and food companies started new operations or expanded existing ones. Investment climbed 25.1 percent to 81.8 trillion rupiah ($8.5 billion) in the three months ended Sept. 30 from a year earlier, M. Chatib Basri, chairman of the Investment Coordinating Board, said in Jakarta today. In the first nine months of 2012, investments rose 27 percent to 229.9 trillion rupiah from a year earlier, the board said. President Susilo Bambang Yudhoyono is increasing spending and wooing overseas funds to spur growth in Southeast Asia’s largest economy and create new jobs as more people enter the labor force. Companies such as Toyota Motor Corp. (7203) and Taiwan’s Foxconn (2038) Technology Group are mulling investment opportunities in Indonesia, and L’Oreal (OR) SA will expand a cosmetics factory this month, Basri said in September.
“Strong foreign direct investment will offset a slowdown in exports,” Basri said today. The agency forecasts total investments may be more than 300 trillion rupiah this year, exceeding its previous target of 290 trillion rupiah, he said. Foreign direct investment climbed 22 percent to 56.6 trillion rupiah last quarter from a year earlier, mainly supported by companies in mining, chemical, pharmaceutical, transportation and telecommunication industries, the board said. Domestic investments during the July-to-September period rose 32.6 percent to 25.2 trillion rupiah, supported by mineral non- metals, food and textile industries, the agency said. Singapore was the biggest contributor to third-quarter foreign investment, accounting for $1.5 billion. Indonesia is targeting foreign and local investment of about 500 trillion rupiah in 2014.

Australia to Tighten Spending to Meet Budget Surplus Pledge (Bloomberg)
Australia’s government will tighten health-care spending and scale back family support payments to help deliver an election-year budget surplus, giving the central bank scope to further reduce interest rates. The underlying cash surplus will be A$1.08 billion ($1.11 billion) in the 12 months ending June 30, compared with a A$1.54 billion surplus seen in May, the government said in a midyear review released in Canberra today. Spending is forecast to be A$363.2 billion compared with a May projection of A$364.2 billion, while the revenue estimate was cut to A$367 billion from $A368.8 billion. “While global headwinds, a high dollar and changing consumer behavior are weighing on some sectors, the Australian economy is expected to outperform every major advanced economy this year and next, with growth underpinned by strong investment, strong growth in export volumes and solid growth in consumption,” Treasurer Wayne Swan said in a statement in Canberra today.
Prime Minister Julia Gillard is bidding to end four years of deficits heading into an election year with polls showing she will lose to the opposition Liberal-National coalition. As the government reins in spending, she’s putting the onus on the central bank to further reduce the highest benchmark rate among major developed nations to bolster a slowing economy.

Moody’s Cuts Ratings on Catalonia, Four Other Spanish Regions (Bloomberg)
Moody’s Investors Service, a week after deciding against cutting Spain’s credit-rating to below investment grade, lowered Catalonia and four other Spanish regions. Catalonia, which will hold an early election on Nov. 25 focused on whether to seek independence for the region that accounts for a fifth of Spain’s economy, was reduced two steps to Ba3 from Ba1, the ratings firm said in a statement dated yesterday. Extremadura was lowered to Ba1 from Baa3, Andalucia was slashed to Ba2 from Baa3, and Castilla-La Mancha was cut to Ba3 from Ba2 and Murcia dropped to Ba3 from Ba1. Moody’s decision to cut the regions was “driven by the deterioration in their liquidity positions, as evidenced by their very limited cash reserves as of September 2012 and their significant reliance on short-term credit lines to fund operating needs,” the ratings firm said. Moody’s also said that Catalonia, Andalucia and Murcia “face large debt redemptions” this quarter when retail bonds issued in 2011 are due to mature.
The ratings of Basque Country, Diputacion Foral de Bizkaia, Madrid, Castilla y Leon, Galicia, Valencia and four government-related entities in Valencia were all left unchanged. A week ago, Moody’s kept Spain’s sovereign rating at Baa3, the lowest level of investment grade, citing a reduction in the risk of losing market access because of the European Central Bank’s willingness to buy the nation’s debt. Spain avoided joining euro-region peers Cyprus, Portugal, Ireland and Greece as below investment grade. Standard and Poor’s has a negative outlook on its BBB- rating, one step above junk, and Fitch Ratings has Spain at BBB, two levels higher. Creditworthiness concerns have grown since Prime Minister Mariano Rajoy requested as much as 100 billion euros ($130 billion) in European Union aid to shore up Spanish lenders amid signals the nation may miss its budget deficit goals. S&P downgraded Spain on Oct. 10, saying it doubted the loans will be mutualized among euro-region nations.
 
EU Parliament Panel Opposes Mersch Move to ECB Executive Board (Bloomberg)
A European Parliament committee opposed the appointment of Luxembourg’s Yves Mersch to the European Central Bank’s Executive Board because of unhappiness about a lack of female candidates for the job. The non-binding opinion by the European Union assembly’s economic and monetary affairs committee today in Strasbourg, France, is a political appeal to euro-area government leaders to put forward women for top ECB posts. The recommendation on Mersch, Luxembourg’s central bank governor, now goes to the full EU Parliament for a vote on Oct. 25. Two women, Sirkka Haemaelaeinen of Finland and Gertrude Tumpel-Gugerell of Austria, previously sat on the ECB’s six- member Executive Board. If the five men currently there serve their full terms, another position won’t become available until June 2018 when Vice President Vitor Constancio retires.
“We are objecting to the EU’s most powerful institution being run by only men for the next six years,” Sharon Bowles, who chairs the 27-nation Parliament’s economic and monetary affairs committee, said in an e-mailed statement. “At a time when we are doing all that we can to change the culture of financial services and to avoid a repeat of the financial crisis, it is baffling that member states are not pushing for more women in key finance positions.” The ECB seat has been vacant since Jose Manuel Gonzalez- Paramo of Spain ended his eight-year term on May 31. Euro-region finance ministers then wrangled over his replacement until July. As Luxembourg’s representative on the ECB’s wider policy-setting Governing Council, Mersch is the 17-nation euro area’s longest serving central bank chief and has earned a reputation as an inflation hawk.
Bowles praised Mersch’s qualifications and held out the possibility that she would urge the full 754-seat Parliament to ignore the committee’s recommendation and endorse his candidacy should EU President Herman Van Rompuy pledge action to promote women in top European jobs. Van Rompuy is due to speak to the Parliament tomorrow about an EU summit last week. “Van Rompuy now has the last opportunity tomorrow, when he addresses the plenary, to show us that member states are ready to commit seriously to encouraging women into top positions,’ Bowles said. ECB President Mario Draghi has said that, while the gender imbalance calls for action, Mersch’s appointment to the Executive Board should go through to help the central bank tackle Europe’s three-year-old sovereign-debt crisis. The workload of the Frankfurt-based ECB has multiplied as it embarks on unprecedented unconventional monetary policy measures and takes on additional supervisory roles.

Greece Austerity Diet Risks 1930s-Style Depression: Euro Credit (Bloomberg)
Greece is spiraling into the kind of decline the U.S. and Germany endured during the Great Depression, showing the scale of the challenge involved in attempting to regain competitiveness through austerity. The economy shrank 18.4 percent in the past four years and the International Monetary Fund forecasts it will contract another 4 percent in 2013 as Greece struggles to reduce debt in exchange for its $300 billion rescue programs. That’s the biggest cumulative loss of output of a developed-country economy in at least three decades, coming within spitting distance of the 27 percent drop in the U.S. economy between 1929 and 1933, according to the Bureau of Economic Analysis in Washington. “Austerity has been destroying tax revenue and therefore thwarting the intended effect,” said Charles Dumas, chairman of Lombard Street Research, a London-based consulting firm. “There’s no avoiding austerity, though, because these people have no borrowing power. The deficits are there.”
Greece’s restructured bonds have benefited amid speculation that creditors are poised to release more bailout funds. Greek bonds maturing in 2023, which yielded more than 30 percent at the end of May, now yield about 16.4 percent. The next block of aid is slated to total 31 billion euros ($40.5 billion), mostly to recapitalize the nation’s banks.

20121023 1006 Global Commodities Related News.

DTN Closing Grain Comments 10/22 14:43 Grains Start Week Mostly Higher (CME)
Grain contracts started the week mostly higher following a quietly traded session. Soybeans had a solid day rallying double digits in nearby contracts on robust demand and possible concerns brewing over a less-than-ideal weather situation in South America. Corn drifted to a fractionally lower close, while wheat contracts finished with modest gains.

Pro Farmer: Wheat futures end higher  (CME)
Wheat futures ended mostly 5 to 8 cents higher across the board at all three exchanges, which was good for a mid- to high-range close. Wheat was supported by spillover from the soybean market, as well as tightening supplies in the Black Sea region. As reported last week, starting Nov. 15, Ukraine will stop exporting wheat and traders suspect Russia's exportable supplies will soon dry up as well.

Wheat Market Recap Report (CME)
December Wheat finished up 5 3/4 at 878 1/4, 6 1/4 off the high and 6 3/4 up from the low. March Wheat closed up 6 1/2 at 890 1/4. This was 7 1/4 up from the low and 5 1/2 off the high. December Chicago wheat traded marginally higher on the day seeing support from a weaker US Dollar but resistance continues to come from US wheat's uncompetitive price structure in the global market. Kansas City and Minneapolis wheat traded higher on the session as well. The higher trade overnight carried over to this afternoon but a weaker Crude Oil market and along with softer trade in other commodity markets weighed on price gains. Initial support continues to come from a more positive outlook for US exports after Ukraine announced it would ban wheat exports by November 15th. Export Inspections for the week ending October 18th were pegged at 16.4 million bushels which was up from last week's 7 million bushels but well behind the 25 million needed each week to reach this crop years USDA forecast. The current export pace is just 33% of the USDA export estimate vs. the 5 year average of 42%. The report was considered slightly supportive since most in the trade expected a number near 13 million bushels. It was announced this morning that Syria bought 100,000 tonnes of Black Sea wheat in their tender and it's being reported that Romania and Hungary were the cheapest offers for the 50,000 tonne Iraq tender. This added to the short term resistance in price action today. Taiwan Flour Mills issued a tender to buy 104,000 tonnes of milling wheat that can be sourced from the US or Europe so the trade will wait for results tomorrow. December Oats closed up 1 1/4 at 395 1/2. This was 1 3/4 up from the low and 4 1/2 off the high.

Pro Farmer: Corn futures chopped sideways  (CME)
Corn futures traded in a narrowly mixed range today but market bears wrestled control from the bulls ahead of the close. Futures ended fractionally to 1 3/4 cents lower. Corn futures chopped sideways today as traders are uncertain whether to place more emphasis on tight supplies or lackluster demand. With harvest winding down and farmer selling slowing, cash corn basis is historically high.

Corn Market Recap for 10/22/2012 (CME)
December Corn finished down 1/4 at 761 1/4, 5 3/4 off the high and 2 1/2 up from the low. March Corn closed down 1/4 at 759 1/4. This was 2 3/4 up from the low and 5 3/4 off the high. December corn traded both sides of the unchanged today and saw support from a lower US Dollar and surging soybean prices. Outside markets deteriorated throughout the day however which limited gains. The demand influences continue to be mixed for the corn market as the US export pace continues to add momentum to the bear camp. Export inspections for the week ending October 18th were reported at 9.6 million bushels which was down from 17.2 last week. Cumulative export inspections are only 9.8% of the USDA export estimate vs. the 5 year average of 13%. Export inspections need to average 26 million bushels in order to reach this year's USDA estimate. Traders are beginning to become a bit more optimistic towards US exports after the EU approved a GMO corn variety that will allow Brazil corn to be imported. The approval by the EU is a signal that corn and wheat supply is tightening in Europe. Rising cash prices in South America along with the potential for a demand shift from Asian importers to the US could be supportive to corn over the next 3-6 months. South American corn continues to trade at a discount to US but Ukraine's recent ban on wheat exports could limit additional sales of corn. The tightening global grain balance sheet may suggest that US corn exports will be needed long term which could be supportive to prices if realized. November Rice finished down 0.12 at 14.9, equal to the high and equal to the low.

Australia Wheat Harvest Seen Slumping 28% to Five-Year Low (Bloomberg)
Wheat production in Australia, the world’s second-biggest shipper, will probably decline 28 percent to the lowest level in five years, missing a government estimate, after dry weather reduced yields. The harvest (ALHVS) will total 21.2 million metric tons in the 2012-2013 marketing year, according to the median of estimates from four analysts and two traders compiled by Bloomberg. That compares with 23.25 million tons in a survey last month and an official forecast of 22.5 million tons. The crop was a record 29.5 million tons last year. Wheat climbed 34 percent this year as dry weather in parts of the European Union and Russia cut global stockpiles to the lowest in four years, helping boost food costs 7.7 percent the past three months. The U.S. Department of Agriculture cut its estimate for Australian output 12 percent to 23 million tons on Oct. 11. That may be lowered a further 2 million tons in coming reports because of dry conditions, said Rabobank International.
“Western Australia had a very prolonged dry stretch through the cropping year,” said David Johnson, general manager of risk and pricing at Emerald Group Australia Pty in Melbourne. Eastern Australia “hasn’t been getting convincing rain to be able to fulfill crop potential, so the crop has just been slowly declining.” The Australian Bureau of Agricultural and Resource Economics and Sciences, or Abares, will revise its estimate in December.

Oil Rebounds From Lowest in Two Weeks; Keystone Supply Curtailed (Bloomberg)
Oil rose for the first time in four days in New York amid signs its slide to the lowest level in more than two weeks was excessive. The Keystone pipeline won’t resume full deliveries until next month after a shutdown. Front-month futures gained as much as 0.7 percent, snapping a three-day, 3.7 percent loss. Prices rebounded after nearing technical support along the lower Bollinger band. Buy orders tend to be clustered near chart-support levels. The band is at about $87.08 today. Prices also advanced before a report tomorrow that may show new home sales in the U.S. in September rose to the highest in more than two years. “The markets said that given where we are, it could just be a little bit over done,” said Jonathan Barratt, the chief executive officer of Barratt’s Bulletin, a commodity newsletter in Sydney. “It’s been quite a dramatic decline.”
Crude for December delivery rose as much as 64 cents to $89.29 a barrel in electronic trading on the New York Mercantile Exchange and was at $88.94 at 10:09 a.m. in Tokyo. The November contract fell 1.5 percent yesterday to $88.73, the lowest close since Oct. 3. Brent for December settlement gained 14 cents, or 0.1 percent, to $109.58 a barrel on the London-based ICE Futures Europe exchange after losing 70 cents to settle at $109.44 yesterday. The European benchmark crude was at a premium of $20.65 to New York-traded West Texas Intermediate grade, compared with $20.79 yesterday

Recap Energy Market Report  (CME)
December crude oil prices trended lower during the US trading session, falling to their lowest level since October 4th in the process. The market was higher during the initial morning hours, supported by weakness in the US dollar and a rally in global equity markets. That seemed to change following earnings announcements from Caterpillar that showed higher than expected profit but lowered FY 2012 forecasts. This seemed to reignite slowing economic growth concerns. Meanwhile, the restart of TransCanada's Keystone pipeline served to calm supply disruption concerns in the mid-US, and that seemed to overshadow festering Middle East tensions.

Silver Market Recap Report  (CME)
Like the December gold contract, the December silver contract also forged a fresh new low for the move overnight in the face of soft Japanese export data and weakness in some global equity markets. However, silver was able to throw off the initial weakness a return to positive ground well ahead of mid session and therefore technical considerations might have fueled part of the bounce in silver prices today. The bull camp might point to a tailing off of open interest on the declines at the end of last week as a possible technical bottoming signal but the presence of a lower low this morning hurts that argument somewhat.

Gold Market Recap Report  (CME)
Gold was under early pressure but managed to recover despite seeing adverse equity and currency market action into the mid day trade. There were some reports of physical buying of gold today and perhaps some would-be buyers were moving back into gold ahead of the upcoming FOMC meeting as the Fed has consistently talked up its capacity to support the US economy. Some players also suggested that the inability to sustain the new low for the move early in the trading session fostered short covering and for some that might make the $1,725 level in the December gold contract a critical pivot point in the days ahead. A lack of scheduled data from the US ahead might leave US equities and currency market action as a major influence on gold prices.