RTRS- ECB stops operations with some Greek banks

BERLIN/FRANKFURT, May 16 (Reuters) - The European Central Bank has stopped providing liquidity to some Greek banks as they have not been successfully recapitalised, the ECB said on Wednesday, confirming news earlier reported exclusively by Reuters.

The news sent the euro lower against the dollar , fanning concerns among investors and in Greece that the country may have to leave the euro zone.

The development highlights the weak state of the banking sector in Greece, where Greeks are pulling euros out of the banks in fear that their country may exit the European single currency despite the declared determination of EU powers Germany and France to keep Athens in the monetary union. [ID:nL5E8GGASZ]�

"As recapitalisation wasn't in place, the ECB stopped monetary policy operations," a euro zone central bank source told Reuters, declining to be identified. "They are now in the ELA of the Greek central bank."

The ECB only conducts its refinancing operations with solvent banks. Banks which fail to meet strict ECB rules but are deemed solvent by the national central bank (NCB) concerned can nonetheless go to their NCB for emergency liquidity assistance (ELA).

The sources did not name the banks concerned.

An ECB official later added: "Pending the recapitalisation of Greek banks that are severely undercapitalised as a result of the recent PSI (debt restructuring) operation, some of the Greek banks have been moved to Emergency Liquidity Assistance."

"Once the recapitalisation process is finalised, and we expect this to be finalised soon, the banks will regain access to standard Eurosystem refinancing operations," the official added. "The ECB/Eurosystem (of euro zone central banks) continues to support Greek banks."

It was unclear exactly how many lenders were affected but the development marked a increase in the number of Greek banks depending on emergency borrowing from the Bank of Greece.

One person familiar with the matter said four Greek banks' capital was so depleted they were operating with negative equity capital. According to its own rules, the ECB cannot provide liquidity to banks in such a situation.

ECB policymaker Luc Coene told the Financial Times in an interview released earlier this week Greek banks on ELA were still solvent.

Greece's cabinet on April 27 agreed a state bank support fund (HFSF) would provide the country's four big banks with 18 billion euros worth of European bonds as an interim solution until they are recapitalised later in the year.

The fund will allocate the 18 billion euros by next week to the country's four biggest lenders as an interim recapitalisation, its chief said on Wednesday. [ID:nA8E8E500T]

"Procedures to allocate the funds should be concluded by next week," the head of the Hellenic Financial Stability Fund (HFSF), Panagiotis Thomopoulos, told Reuters.

Athens is working with EU/IMF officials on technical aspects of a recapitalisation plan for its banks, likely to be unveiled after the national election.

About 50 billion euros ($66 billion) have been earmarked in Greece's second bailout to prop up its struggling banking sector.

ECB President Mario Draghi said earlier the central bank wanted Greece to remain in the currency bloc.

"I want to state that our strong preference is that Greece will continue to stay in the euro zone," he said in a speech, adding: "Since the treaty does not foresee anything on exit (from euro), this is not a matter for the ECB to decide."

RTRS- China 2012 corn output seen at record 197.5 mln T, soy down -CNGOIC

BEIJING, May 16 (Reuters) - China, the world's second largest corn consumer, will reap another record harvest of the grain this year as it planted more acres to meet surging demand at home, while soy output is set to drop again, according to estimates from an official think-tank.

China, traditionally a net corn exporter, has become a major importer of the grain in recent years as Beijing strives to supply livestock feed to meet fast-growing demand for meat amid near-record domestic corn prices.

China is expected to see a corn output of 197.5 million tonnes in 2012, up 3 percent from last year, the China National Grain and Oils Information Center (CNGOIC) said on Wednesday.

China's corn imports in the year to September 2013 are expected to jump almost 60 percent to 7.9 million tonnes, according to a Reuters' poll.[ID:nL4E8G75B5]

CNGOIC projected a 7 percent drop in soy production this year to 13 million tonnes, after a 10.5 percent fall in 2011, as farmers shift to grow corn due to higher returns.

The lower soy forecast would continue to boost imports by China, the world's top buyer of the oilseed.

The center expects the country's wheat output in 2012 to grow 2 percent on year, while paddy output is likely to rise 2.1 percent to a record high of 205 million tonnes.

Despite increases in output in 2011, China's wheat imports in the first quarter of 2012 jumped 347 percent on year to 1.12 million tonnes, which is almost as much as it imported in 2011.

RTRS- Indonesian palm oil markets shut for long weekend

    SINGAPORE, May 16 (Reuters) - Indonesian palm oil markets will be shut on May 17 and May 18 for a public holiday and will reopen on May 21 (Monday). 

Trader's Highlight

DJI- NEW YORK, May 16 (Reuters) - U.S. stocks and the euro slid on Wednesday on news that some Greek banks face emergency funding needs, while minutes from the Federal Reserve's April meeting showed U.S. economic prospects remain sobering.

The European Central Bank stopped funding operations for some Greek banks as they are undercapitalized, the ECB said, confirming a Reuters report that had fanned concerns about Greece's financial difficulties. [ID:nL5E8GGJDT]

The funding needs highlighted the weak state of the banking sector in Greece, where many Greeks are withdrawing money out of fear their country may soon leave the euro zone.

The euro slid and shares in Europe closed lower in choppy trading as worries mounted over the stability of the euro zone.

Greece plans to hold fresh elections in mid-June that likely will determine whether it remains in the common currency area.

"All eyes continue to be trained on Europe, what is going to happen in Greece, what the potential fallout from that is going to be," said Stephen Massocca, managing director at Wedbush Morgan in San Francisco.

The Dow Jones industrial average <.DJI> closed down 33.45 points, or 0.26 percent, at 12,598.55. The Standard & Poor's 500 Index <.SPX> fell 5.86 points, or 0.44 percent, at 1,324.80. The Nasdaq Composite Index <.IXIC> shed 19.72 points, or 0.68 percent, at 2,874.04.

Efforts by German Chancellor Angela Merkel and new French President Francois Hollande to quell talk of a possible Greek exit from the euro zone bolstered sentiment for much of the day.

But U.S. stocks retreated on the ECB news and the Fed minutes, which showed several members of the U.S. central bank's policy-setting committee had indicated that additional monetary policy accommodation could still be necessary. [ID:nW1E8FB04P]

Data showing U.S. industrial production posted its fastest growth in over a year in April and a surge in groundbreaking for new homes that suggested a rebound in U.S. housing was gaining some traction had spurred early U.S. stock market gains. [ID:nL1E8GG2R8]

Investors have also turned to Treasuries and other perceived safe-haven assets, however, on signs of slowing growth in China and jitters about banking in the wake of the $2 billion trading loss at JPMorgan Chase & Co , traders and analysts said.

"The (Treasuries) market is long and traders see the mess in Europe won't be resolved for a long time," said Thomas Roth, executive director of U.S. government bond trading at Mitsubishi UFJ Securities USA in New York. "The market is priced for Armageddon."

The euro slid for a fourth straight session, dropping to a four-month low against the U.S. dollar.

The euro was down 0.13 percent at $1.2713. The dollar index <.DXY>, a basket measuring the greenback's strength against other major currencies, rose 0.23 percent to 81.405.

NYMEX- NEW YORK, May 16 (Reuters) - U.S. crude futures fell a fourth straight session on Wednesday as political turmoil and banking problems in Greece raised new concerns about the euro zone's debt crisis.

Oil and Wall Street equities were pressured after the European Central Bank said it had stopped providing liquidity to some Greek banks as they have not been successfully recapitalized. [ID:nL5E8GGJDT]

The development highlighted the weak state of the banking sector in Greece, where Greeks are pulling euros out of the banks in fear that their country may exit the European currency. [ID:nL5E8GGASZ]

Earlier, U.S. crude briefly turned higher after Energy Information Administration data showed a smaller increase than that in an industry report earlier in the week. The increase was more than expected at 2.13 million barrels, but less than the 6.6-million-barrel jump reported on Tuesday by industry group the American Petroleum Institute. [EIA/S] [API/S]

U.S. crude stocks had been forecast to rise by 1.7 million barrels, a Reuters survey of analysts taken ahead of the weekly reports showed. Distillate stocks were pegged to be down 600,000 barrels and gasoline stocks to have fallen 500,000 barrels.

* On the New York Mercantile Exchange, June crude fell $1.17, or 1.24 percent, to settle at $92.81 a barrel after dropping to $91.81 to set the lowest intraday price since Nov. 3. It traded up to $94.16.

* U.S. President Barack Obama will seek support for tapping strategic oil reserves from other Group of Eight leaders at a summit this weekend before the European Union's July embargo of Iranian crude, Kyodo news agency reported. [ID:nL1E8GGEWR]

* Oil prices remain a threat to the fragile global economic recovery despite a recent fall, the International Energy Agency's chief economist said, adding the IEA remained ready to release emergency oil stocks if needed. [ID:nL5E8GGJZM]

CBOT SOYBEAN- Nearby soybean futures on the Chicago Board of Trade ended higher, gaining sharply against back months on firm cash markets and rumors of Chinese export demand for U.S. old-crop supplies, traders said.

* The premium for spot July soybeans over new-crop November rose to $1.18-1/2 by the closing bell, gaining 10-1/2 cents for the day and surging from 84-3/4 cents at the end of last week.

* Soymeal posted the biggest gains in the soy complex, while soyoil tumbled more than 2 percent on meal/oil spreading.

* Trade expects USDA on Thursday to report U.S. soybean export sales in the latest week at 1 million to 1.4 million tonnes, including 400,000 to 500,000 tonnes of old-crop soybeans. [ID:nL1E8GGF5D]

* Worries about the euro zone's debt crisis pressured back months. U.S. crude oil fell for a fourth session as political turmoil and banking problems in Greece reinforced concerns about

the euro zone. [O/R]

* As of 1:45 p.m. CDT (1845 GMT), ICE July soybean futures were up 9 cents at $14.22 a bushel, on volume of 1,078 contracts.

* ICE Futures Canada said it would raise margins for trading canola futures by about 16 percent, effective at the close of business on Thursday. [ID:nL4E8GGAES]

* The China National Grain and Oils Information Center projected a 7 percent drop in China's 2012 soy production to 13 million tonnes, after a 10.5 percent fall in 2011, as farmers shift to growing corn due to higher returns. [ID:nL4E8GG12H]

* Trade sources said CNGOIC raised its estimate of 2011/12 Chinese soy imports to 58 million tonnes, up 3 million from its previous estimate and up 2 million from USDA's current estimate.

FCPO- SINGAPORE, May 16 (Reuters) - Malaysian palm oil futures tumbled to their lowest in more than three months on Wednesday, as traders feared a prolonged political crisis in Greece could slow the global growth momentum and dampen commodity demand.

 

Greece's warring parties have refused to form a viable coalition, triggering new elections that could potentially result in a euro zone exit. [ID:nL5E8GG0S1]

The political uncertainty that dragged down global stocks and commodities also sent palm oil futures to a 2.8 percent year-to-date loss, compared to a more-than-5-percent gain just a week ago.

"Palm is not spared from the broad-based selling as commodities including crude oil, gold, silver, soybeans and soybean oil are all dropping," said a trader with a foreign commodities brokerage in Malaysia.

"People are just getting out the market. External factors are putting on a lot of pressure."

Benchmark August palm oil futures on the Bursa Malaysia Derivatives Exchange lost 3.9 percent or 124 ringgit to close at 3,085 ringgit ($990) per tonne. Prices earlier hit a low at 3,052 ringgit, a level last seen on Feb. 2.

Traded volumes stood at 63,019 lots of 25 tonnes each, more than double the usual 25,000 lots as traders rushed in to liquidate their positions.

In the latest development of an upcoming listing of Malaysian palm oil firm Felda Global Venture Holdings (FGVH), Fidelity Investments and Hong Kong's Value Partners have agreed to be cornerstone investors. [ID:nL4E8GG12W]

Commodities group Louis Dreyfus said on Monday it agreed to take a minority stake in Felda, conditional on a successful June stock market float. [ID:nL5E8GEHGX]

REGIONAL EQUITY- BANGKOK, May 16 (Reuters) - Shares in Philippines and Malaysia suffered their biggest daily loss in seven months on Wednesday as equity markets in southeast Asia followed a broad global selloff, touched off by worries that the euro zone's debt crisis would worsen.

The Philippine index <.PSI> finished down 2.3 percent at 4,864.23 while Malaysia's main share index <.KLSE> ended down 1.6 percent at 1,536.04.

Fears of a Greek exit from the euro zone gripped financial markets and traders warned of further weakness ahead.

"Our base case is that, we think it's a short term risk, we expect euro to be supported later on and you will still see weakness for a few weeks on the global market," said CIMB regional strategist Chang Chiou Yi.

"Southeast Asia had outperformed, especially for markets like the Philippines and Thailand. So these markets tend to see more fallout ... This short term risk aversion could continue for a week or so," she said.