Friday, December 28, 2012

Trader's Highlight

DJI - NEW YORK, Dec 27 (Reuters) - U.S. stocks fell more than 1 percent on Thursday after comments from U.S. Senate Majority Leader Harry Reid that the United States may be poised to go off the "fiscal cliff," while the yen hit a two-year low on expectations of aggressive monetary stimulus.

Democrat Reid criticized Republicans for refusing to go along with any tax increases as part of a U.S. budget remedy and said the economy seemed to be heading over the fiscal cliff of impending tax hikes and spending cuts.

Economists warn that the $600 billion in higher taxes and spending cuts set to kick in from January could push the world's largest economy into recession, dragging other countries with it.
For weeks, markets have been driven by any new information on the status of the fiscal cliff talks. All three major U.S. stock indexes fell more than 1 percent after Reid's comments and world stocks also were driven lower.

On Wall Street, the Dow Jones industrial average was down 132.98 points, or 1.01 percent, at 12,981.61. The Standard & Poor's 500 Index was down 15.23 points, or 1.07 percent, at 1,404.60. The Nasdaq Composite Index was down 31.96 points, or 1.07 percent, at 2,958.19.

Shares of U.S. retailers fell for a second day following the Christmas holiday. The Morgan Stanley retail index was down 1.4 percent while the SPDR S&P Retail Trust lost 1.1 percent.

The MSCI global index was last down 0.4 percent, while European shares ended down 0.04 percent.
Frank Lesh, a futures analyst and broker at Futurepath Trading in Chicago, said his clients have been delaying trading due to uncertainty about the negotiations' outcome, making the year-end period quieter than usual.

"With the added drama in Washington, we have got even more people sidelined," he said. "No one knows how this turns out or how the markets are going to react to it."
U.S. President Barack Obama is traveling back to Washington on Thursday, cutting short his holiday to try to get a budget deal with Republican lawmakers.


The dollar rose to 85.92 yen, its highest since August 2010. It was last up 0.4 percent on the day at 85.91 yen with option barriers cited at 86 yen and stop-loss buy orders above 86.10 yen.
Investors accelerated their yen sales after Japanese Prime Minister Shinzo Abe said his newly formed government would pursue a bold monetary policy, a flexible fiscal policy and a growth strategy to encourage private investment.

The yen has fallen roughly 10.5 percent versus the dollar in 2012, its biggest annual drop since 2005. At the same time, Japan's benchmark Nikkei is now up 22 percent for the year.
"Yen weakness, based on expectations that the new Japanese government will succeed in driving the dollar to 90 yen with a combination of more aggressive monetary and fiscal policy, is offering support to other currencies," said Marc Chandler, global head of currency strategy at Brown Brothers Harriman in New York.

The euro traded at $1.3216, down slightly for the day and below an eight-month high of $1.3308 hit last week.

The euro tends to benefit when U.S. budget negotiations run smoothly, but when there are snags, investor flows go into the safe-haven and highly liquid dollar.


Prices on longer-dated U.S. Treasuries were higher. The bond market began trimming its decline earlier on data that showed a bigger-than-expected drop in American consumer confidence in December, spurring worries about flagging consumer spending causing a U.S. recession.

Benchmark 10-year Treasuries prices were 12/32 higher in price, yielding 1.7077 percent, compared with being down by 2/32 before the confidence data and Reid's remarks.

Oil prices eased in choppy trading as the unresolved U.S. budget left open the possibility that looming mandated tax hikes and spending cuts could push the economy of the No. 1 oil consuming nation into recession.

Brent February fell 41 cents to $110.66 a barrel, while U.S. February crude was down 26 cents at $90.72.

NYMEX - NEW YORK, Dec 27 (Reuters) - U.S. crude futures eased on Thursday in thin, choppy trading as unresolved U.S. budget talks left open the possibility that looming mandated tax hikes and spending cuts could push the top oil-consuming economy into recession.

CBOT SOYBEAN - Dec 27 (Reuters) - Soybean futures on the Chicago Board of Trade fell for a second day Thursday in thin trade, pressured by long liquidation ahead of the year's end and worries about the U.S. "fiscal cliff" of impending tax hikes and spending cuts.
  • Spillover weakness from crude oil and equity markets, which fell after U.S. Senate Majority Leader Harry Reid warned that a deal to avoid fiscal austerity measures may not be reached by the Dec. 31 deadline.
  • CBOT March soybeans remained below chart resistance at the 200-day moving average of $14.40-1/2.
  • Trade expects USDA on Friday to show export sales of U.S. soybeans in the latest reporting week at 100,000 to 300,000 tonnes. Analysts said recent cancellations of U.S. soy purchases by top buyer China should partially offset fresh sales.
  • Weekly soymeal export sales estimated at 200,000 to 300,000 tonnes; soyoil sales at nil to 20,000 tonnes. USDA delayed its report by one day due to the Christmas holiday.
  • Firm cash market for soybeans underpins market. Basis bids for soybeans shipped to the U.S. Gulf Coast strengthened early on Thursday amid expectations for renewed demand from China.
  • CBOT soybeans are on pace to post an annual gain of 18 percent for 2012, rebounding from a 14 percent decline in 2011. CBOT soymeal is up 39 percent for this year while soyoil has fallen 7 percent.

FCPO - KUALA LUMPUR, Dec 27 (Reuters) - Malaysian palm oil futures climbed to a five-week high on Thursday on expectations for stronger demand and as monsoon-driven floods in the country's key producing regions sparked concerns of supply disruptions.

Malaysian crude palm oil cargoes are likely to be cheaper than rival Indonesia's with the former setting its January export tax rate at zero compared to the latter's 7.5 percent.

The price advantage could spur demand for Malaysian crude palm oil at a time when production is seasonally lower and faces potential disruption from heavy rains, lifting hopes that record stocks could come down after driving down prices by 22 percent this year.

"The gains today are mostly headline driven with the flood news and all that, although it (the flood) has been easing a bit after Christmas," said a dealer with a foreign commodities brokerage in Malaysia.

"There has also been active buying of palm as traders attempt to narrow its price gap to soybean oil at around a $280 per tonne level."

The benchmark March contract on the Bursa Malaysia Derivatives Exchange rose to 2,484 ringgit ($810) per tonne -- the highest level seen since Nov. 20 -- before settling at 2,479 ringgit, two percent higher than previous day's close.

Total traded volumes stood at 37,912 lots of 25 tonnes each, higher than the usual 25,000 lots.
Technical analysis showed that palm oil is expected to end the current rebound around 2,615 ringgit and fall to its Dec. 13 low of 2,217 ringgit over the next three months.

Malaysian palm oil futures are expected to recover in the first quarter of next year even after the market faces its biggest yearly loss since 2008 on expected stronger demand for crude palm oil.

Exports in the first 25 days of December rose as much as 3 percent due to bigger purchases from India, the world's top edible oil importer, and the United States, cargo surveyor data showed.

Brent crude oil slipped below $111 a barrel as nervous investors watched talks to avert a U.S. budget crisis that could push the world's biggest economy back into recession.

In other competing vegetable oil markets, U.S. soyoil for January delivery rose 0.9 percent in late Asian trade on expectations of strong Chinese food demand. The most active May 2013 soybean oil contract on the Dalian Commodity Exchange rose 0.5 percent.

REGIONAL EQUITIES - BANGKOK, Dec 27 (Reuters) - Southeast Asian stock markets posted small gains after a subdued session on Thursday amid cautions about a resolution to the U.S. fiscal cliff, but the Philippines bucked the trend on losses in recent rallying large caps such as SM Investments Corp

The Philippine Composite Index lost 0.65 percent to close at 5,794.89, reversing five sessions of gains that took the benchmark to a record finish of 5,832.83 on Wednesday. Shares in conglomerate SM slid 2.3 percent, off Wednesday's record close.

Bangkok's SET index Southeast Asia's best performer so far this year, rose 1.1 percent to close near the 1,400 mark amid strong buying interest in equity funds that offer tax breaks.

The Ho Chi Minh Stock Exchange's VN Index rose for a fourth session, adding nearly 1 percent to its highest close in more than four months.