Thursday, December 13, 2012

Trader's Highlight

DJI- NEW YORK, Dec 12 (Reuters) - Global shares rose and the euro jumped against the dollar on Wednesday after the Federal Reserve ramped up its monetary stimulus and said it would keep benchmark U.S. interest rates near zero until the jobless rate falls sharply.

But U.S. stocks ended little changed, giving up most of the day's gains after Fed Chairman Ben Bernanke reiterated that monetary policy won't be enough to offset damage from the "fiscal cliff."

Treasury prices fell, with 30-year bonds slumping the most, as the central bank said it would shift more of its purchases to the five-year sector in a new easing program. Expectations the move would boost the economy and support riskier assets such as stocks also hurt safe-haven government debt.

The Fed, which cut its forecasts for economic growth and inflation next year, committed to monthly purchases of $45 billion in Treasuries on top of the $40 billion per month in mortgage-backed bonds it started buying in September, as expected.

It will likely keep official rates near zero for as long as unemployment remains above 6.5 percent, inflation is projected to be no more than 2.5 percent one or two years ahead and inflation expectations remain contained.

"It's another round of easing. It is good for stocks and risk more generally," said Quincy Krosby, market strategist at Prudential Financial in Newark, New Jersey. "And they came out with an economic data point as a guideline. That's very important, because it helps the market anticipate an exit strategy."

The Dow Jones industrial average .DJI dropped 2.99 points, or 0.02 percent, to end at 13,245.45. The Standard & Poor's 500 Index .SPX gained 0.64 points, or 0.04 percent, to close at 1,428.48. The Nasdaq Composite Index .IXIC dropped 8.49 points, or 0.28 percent, to 3,013.81.

Bernanke "reiterated the fact that monetary policy has its hands tied as far as addressing the seriousness of going over the fiscal cliff," said Bucky Hellwig, senior vice president at BB&T Wealth Management in Birmingham, Alabama.

U.S. House of Representatives Speaker John Boehner said on Wednesday "serious differences" remain with President Barack Obama in talks to avert the steep tax hikes and budget cuts set for the new year.

The euro rose 0.5 percent to $1.3066 EUR= after hitting a session peak of $1.3096 after the Fed announcement.

The euro had jumped sharply minutes before the Fed announcement. Traders attributed the move to comments from Silvio Berlusconi, who said he would withdraw as a candidate in Italy's coming election if outgoing Prime Minister Mario Monti ran as the head of a "moderate" coalition.

The dollar fell to multi-month lows against higher-yielding currencies such as the Australian AUD= and New Zealand dollars NZD=.

Omer Esiner, chief market analyst at Commonwealth Foreign Exchange in Washington, said the scope for further dollar losses may be somewhat limited, given investor concern about the U.S. fiscal cliff, which could boost the safe-haven dollar.

"Uncertainty about the euro zone, concerns about Italy and the Japan election this weekend should also limit dollar losses," Esiner said.

The dollar rose to an eight-month high of 83.29 yen and was last up 0.8 percent at 83.18 JPY= on bets the Bank of Japan will implement more aggressive monetary easing after the election on Sunday, which is expected to yield a victory for the Liberal Democratic Party.

The new bond buying replaces the more modest "Operation Twist" program set to expire at the end of the month. The Fed will expand purchases to five-year notes from the current seven-, 10- and 30-year Treasuries.

"They are basically taking out the same amount of duration that they were in Twist, but they are buying less in the long end than they had been before," said Ira Jersey, an interest rate strategist at Credit Suisse in New York.

Oil prices rose. Brent crude futures LCOc1 gained $1.49 to settle at $109.50 a barrel. U.S. crude CLc1 rose 98 cents to settle at $86.77 a barrel.

NYMEX- NEW YORK, Dec 12 (Reuters) - U.S. crude futures rose more than 1 percent on Wednesday, boosted by Federal Reserve plans for more monetary stimulus and a fire at Motiva's Port Arthur, Texas, refinery that sent refined products futures higher.

CBOT SOYBEAN- Front-month soybean futures on the Chicago Board of Trade ended higher, lifted by firm cash soybean markets, but back months fell on prospects for large South American soybean crops, traders said.

• Cash values for soybeans at the U.S. Gulf export market firmed slightly amid slow farmer offerings, and some soy processors in the interior Midwest also raised basis bids.

• Deferred CBOT soybean contracts under pressure from beneficial rains falling over Brazil's southern grain producing states this week. The moisture should help what is expected to be a record Brazilian soybean crop - forecaster Somar.

• Ahead of USDA's weekly export sales report on Thursday, trade expects U.S. soybean sales of 600,000 to 850,000 tonnes, soymeal sales of 200,000 to 350,000 tonnes and soyoil sales of 15,000 to 40,000 tonnes.
• Soymeal gained against soyoil on inter-market spreads in anticipation that commodity index funds will buy soymeal and sell soyoil as part of annual rebalancing efforts in early 2013. The DJ-UBS Commodity Index announced in late October that it would add soymeal to its index and reduce its soyoil holdings for 2013.

• Grain and soy markets had little reaction after the U.S. Federal Reserve announced plans to ramp up its stimulus to the economy, although U.S. stocks rose and the euro rallied against the dollar following the news.

FCPO- SINGAPORE, Dec 12 (Reuters) - Malaysian palm oil futures dropped to a one-month low on Wednesday, as forecasts for a higher supply of rival soybean oil stoked concerns of a global vegetable oil surplus.

The bearish view of soybean oil from the U.S. Department of Agriculture (USDA), coupled with Malaysia's record high palm oil stocks in November, have put palm oil futures on track for their steepest annual loss since 2008.
"CBOT (Chicago Board of Trade) soyoil came down yesterday by about 90 points, and there were some traders who were trying to break the previous low," said a trader with a foreign commodities brokerage in Malaysia.

At the close, the benchmark February contract FCPOc3 on the Bursa Malaysia Derivatives Exchange slid 2.3 percent to 2,238 ringgit ($730) per tonne, slightly off a low at 2,229 ringgit, a level unseen since Nov. 12.

Total traded volumes stood at 35,105 lots of 25 tonnes each, higher than the usual 25,000 lots.

Traders are looking out for Malaysia's new crude palm oil export tax that will be formalised in a gazette on Dec. 17 under a new tax structure that aims to claw back market share from top producer Indonesia.

Despite higher supply of global vegetable oil, the steep discount between palm oil and soybean oil could stimulate high export demand for palm oil and send prices rising in early 2013, said Hamburg-based analysts Oil World.

Palm oil imports by India, the world's top vegetable oil buyer, are likely to have fallen in November from October levels, which were the highest in at least three years, as demand shrank with the start of cold weather that solidifies the oil, a Reuters survey showed.

In a bullish sign for palm oil, Brent crude held above $108 a barrel on Wednesday as OPEC reduced oil supply, although rising output from the United States and uncertainty about its budget for next year limited price gains.

In other vegetable oil markets, U.S. soyoil for January delivery BOZ2 fell 0.4 percent in late Asian trade, after falling by almost 2 percent in the previous session. The most active May 2013 soybean oil contract DBYcv1 on the Dalian Commodity Exchange closed 1.8 percent lower.

REGIONAL EQUITY- BANGKOK, Dec 12 (Reuters) - Southeast Asian stocks mostly gained on Wednesday as hopes of more monetary stimulus from the U.S. Federal Reserve buoyed sentiment, with Singapore rising for a sixth session to a 16-month high and Thailand climbing to a near 17-year peak.

Singapore's Straits Times index .FTSTI finished at 3,141.57, the highest close since August, 2011. Thai SET index .SETI ended at 1,354.57, the highest close since February 1996.

Malaysia .KLSE was up 0.5 percent, extending its gains for a seventh session. Indonesia .JKSE and Vietnam .VNI both produced a third-straight gain, edging up 0.45 percent and 0.4 percent, respectively.

Across the region, investors sought value buys, including shares in consumer related and construction sectors such as Singapore's United Overseas Bank Ltd UOBH.SI and Thailand's industrial conglomerate Siam Cement Pcl SCC.BK.

Bucking the trend, the Philippine main index .PSI ended down 0.2 percent at 5,819.79 on late selling, after earlier touching an all-time high of 5,859.54.