Trader's Highlight

DJI- NEW YORK, June 8 (Reuters) - U.S. equities ended on Friday on a high note, with the benchmark S&P 500 index registering its best week of the year as investors returned to stocks on expectations Spain was closer to getting aid for its troubled banks.

Oil prices fell as diminished hopes for more stimulus from central banks fueled concerns about demand.

The euro slid against the dollar, weighed by a three-notch downgrade to Spain's credit rating and signs of economic weakness in Italy and Germany, though it posted its first weekly gain in six weeks.

Senior EU and German officials told Reuters that deputy finance ministers of the 17-nation single currency area would hold a conference call on Saturday morning to discuss Spain's request for an aid package for its ailing banks, although no figure had been set. [ID:nL5E8H83EF]

On Wall Street, the S&P 500 ended its best week in 2012. The strong gains came after the benchmark index fell more than 6 percent in May and dropped just below its 200-day moving average, signaling a technical bounce for equities.

"What's driving the market here," said Robbert Van Batenburg, head of equity research at Louis Capital in New York, "is the belief we're in the final innings of approaching some form of a solution to contain the Spanish problem. I don't buy it, but maybe there's this understanding out there."

The Dow Jones industrial average <.DJI> ended up 93.24 points, or 0.75 percent, at 12,554.20. The Standard & Poor's 500 Index <.SPX> was up 10.67 points, or 0.81 percent, at 1,325.66. The Nasdaq Composite Index <.IXIC> was up 27.40 points, or 0.97 percent, at 2,858.42.

Losses in world shares followed a three-day rally built on expectations of global coordinated efforts to bolster slackening economic growth. But investors were disappointed after neither the European Central Bank nor the U.S. Federal Reserve signaled near-term action.

U.S. President Barack Obama said on Friday that European leaders face an "urgent need to act" to resolve the region's financial crisis as the threat of a renewed recession there spells dangers for an anemic U.S. recovery five months before elections.

NYMEX-NEW YORK, June 8 (Reuters) - U.S. crude futures fell for a second day in a row on Friday as Spain's banking troubles, broader European economic problems and fading hopes about more U.S. Federal Reserve monetary stimulus darkened the outlook for global oil demand.

For the week, however, U.S. crude rose more than 1 percent, snapping five straight weeks of losses, helped by late surge in pre-weekend short-covering, traders said.

Rating agency Fitch downgraded Spain's credit rating and said further downgrades could come as the country struggles to restructure its troubled banking system. [ID:nL1E8H79DE]

Spain is expected to ask the euro zone for help in recapitalizing its banks this weekend, sources in Brussels and Berlin told Reuters. [ID:nL5E8H898X]

In Italy, industrial output fell in April and in Germany imports tumbled at the fastest rate in two years while exports dropped more than expected -- another sign that Europe's largest economy is beginning to feel the chill from the euro zone debt crisis. [ID:nR1E8GN00M] [ID:nL5E8H80N1]

Meanwhile, hopes for a further round of U.S. Fed monetary stimulus were fading fast, a day after Fed Chairman Ben Bernanke offered few hints in a congressional testimony that the central bank would consider doing that as had been speculated in recent days.

* On the New York Mercantile Exchange, July crude settled down 72 cents, or 0.85 percent, at $84.10 a barrel. For the week, it rose 87 cents, or 1.05 percent, snapping five straight weeks of losses.

* The U.S. trade deficit narrowed 4.9 percent in April as slower growth in Europe and China bit into exports and the soft U.S. economy clipped import demand, a Commerce Department report showed. [ID: nnL1E8H83G]

* Hedge funds and other big investors increased their net long positions of NYMEX crude futures and options by 1,582 contracts to 140,750 in the week to June 5, the Commodity Futures Trading Commission said in a weekly report.[ID:nEMS1CU25N]

* U.S. oil production rose to more than 6 million barrels per day for the first time in 14 years in the first quarter of 2012, lifted by the oil boom in North Dakota and Texas, the Energy Information Administration said. [ID:nL1E8H8DND]

* The global oil market is well supplied and can cope with the loss of Iranian crude to Western sanctions, oil officials and executives, including the heads of Total and Royal Dutch Shell said.

CBOT SOYBEAN- CBOT soybean futures were slightly lower at the close of pit trading at 1:15 p.m. CDT (1815 GMT) on Friday as the market set back from a three-day rally, traders said.

* A firm dollar and weakness in the crude oil market weighed on soybeans.

* For the week, CBOT soybeans were up 6.2 percent, the biggest weekly gain in percentage terms for the front-month contract since mid-October.

* The weekly gain snaps a streak of two straight down weeks.

* CBOT July soybeans briefly fell below the 50-day moving average during the session before finding support near that level.

* Private exporters reported the sale of 530,000 tonnes of U.S. soybeans to China and Egypt, U.S. Agriculture Department said on Friday. [ID:nL1E8H826Q]

* High temperatures to stress developing soybean crop around U.S. Midwest this weekend. Some light showers in the forecast for Sunday through Tuesday but rain will provide little relief to parched soils. [ID:nL1E8H83FH]

* Crop forecaster Lanworth pegged U.S. soybean production at 3.019 billion bushels, below the USDA's forecast of 3.205 billion, trade sources said. [ID:nL1E8H89E4]

FCPO- SINGAPORE, June 8 (Reuters) - Malaysian palm oil futures ended almost flat on Friday, as a firm demand outlook for the edible oil was offset by fears of slowing global growth that could crimp commodity demand.

Federal Reserve Chairman Ben Bernanke's testimony to a congressional committee offered little clue on any monetary stimulus policy, overshadowing initial positive market reaction to a Chinese interest cut. [ID:nL3E8H72AO]

Palm oil had a volatile trading week on macroeconomic concerns triggered by the ongoing European debt crisis, and ended the week down 1.1 percent.

"Market sentiment is still uncertain, and the palm market is tracking external factors, such as what happened in Europe and China," said a trader with a foreign commodities brokerage in Malaysia.

"Although there was a rate cut in China, Bernanke's testimony didn't mention QE3, and that has created a lot of uncertainty," he added, referring to market expectations for a third round of quantitative easing.

Benchmark August palm oil futures on the Bursa Malaysia Derivatives Exchange lost one ringgit to close at 2,973 ringgit ($934) per tonne. Prices touched a low of 2,925 ringgit on Monday, their lowest since Nov. 2, 2011.

Traded volumes stood at 31,567 lots of 25 tonnes each, higher than the usual 25,000 lots.

On the technicals front, palm oil will be neutral in a range of 2,925-3,038 ringgit per tonne, said Reuters market analyst Wang Tao. [ID:nL4E8H829U]

Palm oil prices are expected to be supported by healthy demand for the tropical oil as Muslims prepare to observe a month of fasting starting in mid-July.

Traders will be looking for clues to demand trends as cargo surveyors release June 1-10 export data on Monday. [PALM/ITS][PALM/SGS]

Market players were also betting on lower palm oil stocks, which probably fell to a 13-month low in May, as overseas demand and domestic consumption outweighed production, a Reuters survey showed on Wednesday. [ID:nL3E8H55J1]

Industry regulator the Malaysian Palm Oil Board (MPOB) will issue official stocks and output data, also on Monday.

The market has shifted its focus to external macroeconomic uncertainty that could hurt palm oil demand. The tropical oil may fall to 2,450 ringgit per tonne, said leading analyst James Fry on Friday. [ID:nL4E8H86YU]

Palm oil could fall to 2,700-2,800 ringgit with the euro debt crisis clouding economic outlook and crimping commodity demand, top oils analyst Dorab Mistry said. [ID:nL3E8H64AG]

REGIONAL EQUITY-BANGKOK, June 8 (Reuters) - Most Southeast Asian bourses edged lower on Friday, led by Singapore with commodity-related firms showing steady declines across markets on expectations of weak global demand.

Singapore's Straits Times Index <.FTSTI> ended down 0.77 percent at 2,737.89, down 0.28 percent on the week. The Philippines Stock exchange ended down 0.57 percent to 4,994.07.

Stocks in Malaysia <.KLSE> were also weaker, sliding 0.3 percent to 1,570.62, with a weekly loss of 0.19 percent.

Indonesia <.JKSE> eased 0.4 percent to 3,825.33, down 0.7 percent on the week, after its fourth-straight weekly loss.

Vietnamese stocks <.VNI> fell 0.4 percent, reversing Thursday's gain following the S&P upgrade of its credit outlook.

Bucking the trend, Thai SET index <.SETI> rose 0.8 percent on Friday amid late bargain hunting, dealers said.

RTRS-Malaysia palm stocks to fall further, support prices -MPOC

MUMBAI, June 7 (Reuters) - Palm oil stocks in Malaysia, the world's second biggest producer, are likely to fall further in the coming months as festival demand cuts into supply, a trade body executive said on Thursday, potentially supporting prices for the edible oil. 

Malaysian Palm Oil Council Chairman Lee Yeow Chor said there had been a slew of orders ahead of the Muslim holy month of Ramadan, when fasting in the day is followed by elaborate feasts at night. 

Strong orders ahead of Ramadan, which begins in the third week of July and heralds the start of the festival season in Asia, could help negate the impact of the euro zone debt crisis on demand for the oil. 

"Demand will improve in the next two months due to Ramadan. Pakistan and India will buy more," Lee, who is also the head of Malaysian palm oil firm IOI Corp , told reporters at a conference in Mumbai. 

Largely reinforcing Lee's views, a Reuters survey on Wednesday showed Malaysia's palm oil stocks probably dropped 2.9 percent to 1.79 million tonnes in May, the lowest since April 2011. 

Lee also said the Southeast Asian country's palm oil output in 2012 is likely to hover at 19 million tonnes, almost flat from 18.9 million tonnes a year ago. Exports will probably edge higher, he said, without giving an estimate. 

Thanks to tighter palm oil supply, Lee sees spot prices from 3,000 to 3,200 ringgit in the next three months. 

Benchmark August palm oil futures on the Bursa Malaysia Derivatives Exchange had fallen 1.4 percent to 2,962 ringgit per tonne by 0830 GMT on Thursday.  

Prices touched a trough of 2,925 ringgit on Monday, their lowest since Nov 2, 2011.

RTRS-Palm futures to drop on cloudy economic outlook-Mistry

KUALA LUMPUR, June 7 (Reuters) - Malaysian palm oil futures could fall to 2,700 ringgit-2,800 ringgit ($854-$886) per tonne with the euro debt crisis and lack of monetary stimulus clouding the global economic outlook and crimping commodity demand, a leading analyst said on Thursday. 

The forecast by Dorab Mistry, head of vegetable oil trading with Indian conglomerate Godrej Industries , represents up to a 10 percent drop from the current 3,000 ringgit per tonne as food demand from China and India has not been immune to slowing growth. 

"I no longer expect prices to reach 4,000 ringgit in view of the changed macro economic scenario," Mistry said in a speech to be delivered at an industry seminar in the Indian port city of Mumbai. 

"My forecast of the fundamentals of crude palm oil production was correct, but the macro situation has been very poor," he said, in reference to tight supply in Malaysia, the world's No.2 producer. 

If there is a repeat of the 2008 financial crisis, Mistry said prices could "collapse" to 2,200 ringgit although "the likelihood of that happening is no more than 20 percent." 

Palm oil prices may eventually recover to a level of 3,300 ringgit, he said without giving a time-frame, as the decline in the futures and falling production in Malaysia attracts more buyers. 

Any stimulus from the United States, Europe or China, could encourage a speedier recovery, Mistry said, with palm oil rising to a peak of 3,500 ringgit over the next few months. 

 PALM OIL SUPPLY SQUEEZE 

Mistry said "something odd" was happening in Malaysian plantations with combined output in the first five months of 2012 at less than 500,000 tonnes compared to a deficit of 53,969 tonnes in the same period in 2011. 

"I expect the same struggling performance from the oil palm in Malaysia in June and July also. It is conceivable that the year-on-year deficit January to July will be a record 900,000 tonnes, he said. 

The El Nino weather condition, which is set to emerge in August and brings a dry spell to Southeast Asia, could help prices recover, although Mistry said he would not be computing its effect into his forecasts this time. 

Hot weather usually accelerates the ripening of oil palm fruits. However, prolonged exposure to heat will trigger yield stress in the trees, eventually crimping production. 

When the last El Nino episode occurred in early 2010, yields weakened in Indonesia and Malaysia and lifted prices above 2,500 ringgit in the first quarter of that year. 

"There are now definite signals of an emerging El Nino. If those signals give us an El Nino, prices will recover faster than most people expect," he said. 

Trader's Highlight

DJI- NEW YORK, June 7 (Reuters) - The S&P 500 ended barely changed on Thursday as optimism about China's interest-rate cut was offset by Federal Reserve Chairman Ben Bernanke's comments that dimmed hopes for more U.S. stimulus. 

Both the Dow industrials and the Nasdaq ended off session highs, with the Dow rising modestly for the day and the Nasdaq slipping. 

Stocks lost ground following Bernanke's comments a day after experiencing the best one-day rally so far this year. Over the previous three days, the S&P 500 gained 2.9 percent, recovering some of May's losses.  

The surprising move by China's central bank to cut its benchmark interest rate by 25 basis points helped ease worries about faltering global demand.  

Speculation has been rising that central banks will take more action to combat escalating debt problems in Europe and slower global growth. Bernanke, in testimony Thursday, said the Fed was ready to take action but gave no hint of imminent steps.

His remarks were seen as offsetting more supportive comments from other Fed members in the last 24 hours, but still leaving the door open for more action at the Fed's next meeting on June 20. 

The Dow Jones industrial average <.DJI> advanced 46.17 points, or 0.37 percent, to 12,460.96 at the close. The Standard & Poor's 500 Index <.SPX> edged down 0.14 of a point, or 0.01 percent, to 1,314.99. The Nasdaq Composite Index <.IXIC> slipped 13.70 points, or 0.48 percent, to close at 2,831.02.  

NYMEX- NEW YORK, June 7 (Reuters) - U.S. crude futures fell on Thursday as comments from U.S. Federal Reserve Chairman Ben Bernanke diminished expectations for additional economic stimulus and countered the supportive interest rate cut unexpectedly announced by China. 

Ben Bernanke said the U.S. central bank was ready to help the economy if financial troubles mount but offered few hints that further monetary stimulus was imminent.

For investors wanting indications about the prospect for a third round of large-scale Fed bond buying, Bernanke's testimony disappointed. 

As the euro zone debt crisis drags on, Spain's credit rating was slashed by three notches by Fitch, which signaled it could make further cuts as the cost of restructuring the country's troubled banking system spiraled and Greece remains in political turmoil. 

China delivered two surprises on interest rates on Thursday, cutting borrowing costs to combat faltering growth while giving banks additional flexibility to set competitive lending and deposit rates.         

On the New York Mercantile Exchange, July crude  fell 20 cents, or 0.24 percent, to settle at $84.82 a barrel, but extended losses and fell below $84 in post-settlement trading. 

CBOT SOYBEAN- Chicago Board of Trade soybean futures rose to their highest level in nearly three weeks on Thursday, surging through key technical resistance by the close of pit trading at 1:15 p.m. CDT (1815 GMT) on a weaker dollar and hopes that top importer China will step up its soy imports, traders said.  

China, the world's biggest importer of soybeans, cut interest rates for the first time in four years in a bid to bolster economic growth. 

China will import more corn and soybeans next season to keep pace with growing domestic demand, the state-owned China Grain Reserves Corp (Sinograin) said. 

The benchmark CBOT July contract burst through technical resistance at its 50-day moving average during Thursday's session, the first time it has breached that level since May 21. 

CBOT July soybeans peaked at $14.30 a bushel, their highest level since May 18. 

CBOT showed another drop in soybean registrations late Wednesday, a possible sign of firming cash markets. Soybean registrations fell by 54 contracts, leaving a total of 43 lots. The number of contracts registered for delivery has dropped from 667 contracts as of May 30. 

FCPO- SINGAPORE, June 7 (Reuters) - Malaysian palm oil futures fell on Thursday, tracking lower crude oil as investors turned cautious on prospects of the United States introducing fresh monetary stimulus and European policymakers rescuing Spanish banks.   

Fed Chairman Ben Bernanke is due to testify on the U.S. economy before a congressional committee later in the day, and investors will be watching closely for any clues to policy that could boost global growth and commodity demand.  

Palm oil has been recovering on bargain hunting after  plunging to its 2012 low on Monday. But the market returned to the red on Thursday as most investors were still waiting for further cues before jumping in. 

"The market is playing a waiting game," said a dealer with a foreign commodities brokerage in Malaysia.  

"Traders are awaiting Bernanke's talk tonight and also Dorab's talk later in the day," he added, referring to top oils analyst Dorab Mistry, who is set to speak at a palm oil trade fair in India.     

Benchmark August palm oil futures on the Bursa Malaysia Derivatives Exchange lost 1 percent to close at 2,974 ringgit ($941) per tonne. Prices touched a low of 2,925 ringgit on Monday, their lowest since Nov 2, 2011. 

Traded volumes stood at 34,801 lots of 25 tonnes each, higher than the usual 25,000 lots. 

REGIONAL EQUITY- BANGKOK, June 7 (Reuters) - Southeast Asian stock markets traded mainly flat to higher on Thursday amid hopes about debt situation in Europe and gains in commodities-related stocks, with Vietnam leading the way after the credit upgrade by ratings agency Standard & Poor's. 

Vietnam's index of Ho Chi Minh Stock Exchange <.VNI> jumped as much as 2.4 percent and ended the day up 1.88 percent at a one-week high of 434.41. The Southeast Asia's best performer has racked up gains of nearly 24 percent so far this year. 

The upgrade stoked expectations of increased fund flows and lower borrowing costs. Foreign investment to Vietnam has been  negative so far this month, in line with others in the region.  Vietnam had $7.8 million in foreign outflows in June to Wednesday. For the same period, the Philippines <.PSI> reported $19 million in outflows, Thailand <.SETI> had $143 million in outflows and Indonesia <.JKSE> posted $158 million in outflows. 

Stocks in the Philippines, Malaysia <.KLSE> and Thailand <.SETI> gained 1.1 percent, 0.4 percent and 0.05 percent, respectively. Singapore <.FTSTI> and Indonesia <.JKSE> retreated from day highs to end a tad lower. 

Trader's Highlight

DJI- NEW YORK, June 6 (Reuters) - U.S. stocks jumped on Wednesday, giving the S&P 500 its best day since December, as talk of a rescue of Spain's troubled banks and hopes for more monetary stimulus sparked a rebound from recent selling.

After a 6 percent fall by the S&P 500 in May that took the index below its key 200-day moving average on Friday, the market was ripe for a rebound, analysts said. Buying was strong across the broad market, with all 10 S&P 500 sectors gaining ground.

The energy, financial and technology sectors, all of which are tied to strong global demand, led gainers Wednesday. Among the big banks, shares of Bank of America shot up 7.6 percent to $7.64 and shares of Morgan Stanley climbed 8.4 percent to $13.94, both extending gains just ahead of the close.

European sources said German and European Union officials were seeking solutions for Spain's weakened banks, the latest worry in the fiscally troubled euro zone. Madrid has not yet requested assistance and is resisting political conditions.

European Central Bank President Mario Draghi suggested earlier Wednesday that further stimulus to tackle the euro zone's debt crisis would not necessarily be forthcoming, but speculation persisted that the ECB could act if financial market tensions intensify further.

The ECB left interest rates unchanged following its meeting Wednesday.

The Dow Jones industrial average <.DJI> was up 286.84 points, or 2.37 percent, at 12,414.79. The Standard & Poor's 500 Index <.SPX> was up 29.63 points, or 2.30 percent, at 1,315.13. The Nasdaq Composite Index <.IXIC> was up 66.61 points, or 2.40 percent, at 2,844.72.

NYMEX- NEW YORK, June 6 (Reuters) - U.S. crude futures rose for a third straight day on Wednesday as European efforts to rescue troubled Spanish banks sent the euro higher, weakened the dollar and boosted equities and oil prices.

Oil prices also received support when a U.S. Fed official hinted at more monetary easing to support the economy. Germany and European Union officials are urgently exploring ways to rescue Spain's debt-stricken banks, although Madrid has not yet requested assistance and is resisting political conditions, European Union sources said.

The euro rallied against the dollar and the yen after the European Central Bank held its main interest rate at 1.0 percent, resisting international pressure to provide more support for the euro zone's economy.

On the New York Mercantile Exchange, July crude rose 73 cents, or 0.87 percent, to settle at $85.02 a barrel, having traded from $84.03 to $86.27.

CBOT SOYBEAN- June 6 (Reuters) - Soybean futures on the Chicago Board of Trade rose 2.7 percent by the end of pit trading at 1:15 p.m. CDT (1815 GMT) on Wednesday, the biggest daily rise in two months, on firm cash markets and news of old-crop sales to China, traders said.

Additional support stemmed from a weaker dollar <.DXY> and broad-based strength in commodities amid talk major central banks would act to bolster a slowing global economy.

Nearby soybean and soymeal contracts gained against back months on spreads, supported by ideas a farmers' strike in Argentina could steer more export business to the United States.

Argentine farmers halted grain sales on Wednesday at the start of a one-week strike over government farming policy -- their first national freeze on sales of grains and livestock for 18 months.

USDA confirmed sales of 120,000 tonnes of U.S. soybeans to China for 2011/12 delivery.

The U.S. Midwest should remain dry this week, with rainfall next week totaling 0.50 to 1.50 inches. Temperaturewill remain moderate this week with highs in the 70s to 80s Fahrenheit, warm into the 90s F by the weekend and return to the 70s F and 80s F next week.

FCPO- SINGAPORE, June 6 (Reuters) - Malaysian palm oil futures extended gains on Wednesday, as investors bet on rising Asian demand for the edible oil, although caution prevailed, inspired by concerns the euro zone crisis will crimp economic growth and commodity demand.

Palm oil closed at its lowest level in 2012 on Monday, setting the stage for a price recovery as market players went bargain hunting.

"After the shock on Monday, for the past two days prices have recovered lost ground. But on the backdrop, the euro zone problem is still not solved," said Ker Chung Yang, commodities analyst with Phillip Futures in Singapore.

"So although we are going to see some rebound, it's likely that investors will adopt a cautious attitude. They are more concerned about the upcoming Malaysian Palm Oil Board data to gauge the extent of the impact of the crisis."

Benchmark August palm oil futures on the Bursa Malaysia Derivatives Exchange gained 1.3 percent to close at 3,003 ringgit ($946) per tonne. Prices touched a low of 2,925 ringgit on Monday, their lowest since Nov 2, 2011.

Traded volumes stood at 25,208 lots of 25 tonnes each, just slightly higher than the usual 25,000 lots.

REGIONAL EQUITY- BANGKOK, June 6 (Reuters) - Indonesian shares jumped 3.3 percent on Wednesday, helping them post their biggest daily gains since September, while Thai shares snapped their two-session losing streak as banking shares rose after losses.

Jakarta's Composite Index <.JKSE> ended at 3,841.33, gaining for a second straight day as the technically oversold market lured bargain hunters.

Buying momentum has picked up, with Indonesia's index climbing above the "oversold" mark. Its 14-day relative strength index (RSI) closed at 40.5, compared with 28.9 on Tuesday and 17.95 on Monday. A level of 30 or lower indicates the market is oversold.

Among advancers, shares of the world's biggest microlender PT Bank Rakyat Indonesia surged 11.2 percent thanks to its strong loan growth, a broker said.

RTRS-INDONESIA MAY GIVE GREATER PRIORITY TO ASIA, E.EUROPEAN AND MIDDLE EASTERN PALM OIL BUYERS DUE TO POSSIBLE ENVIRONMENTAL RULES IN EUROPE AND US -ASSOCIATION

JAKARTA, June 5 (Reuters) - Indonesia may give greater priority to Asian, Eastern European and Middle Eastern palm oil buyers because of possible new environmental regulations in the United States and Europe, the Indonesian palm oil association (Gapki) said on Tuesday.

"We threat (threaten) EU and US to move our product to other regions because of too many non-tariff barriers," said Gapki official Tofan Mahdi.

The Southeast Asian palm oil industry failed in late January to meet greenhouse gas saving standards to qualify for the U.S. renewable fuels programme.

The U.S. Environmental Protection Agency (EPA) said palm oil converted into biofuels in Indonesia and Malaysia cut up to 17 percent of climate warming emissions, falling short of a 20 percent requirement to enter the world's largest energy market.

Gapki officials fear U.S. efforts to limit palm oil's uses based on environmental concerns could spread to Europe.

RTRS-UPDATE 2-Brazil gov't cuts soy estimate, raises corn view

SAO PAULO, June 5 (Reuters) - Brazil's government trimmed its 2011/12 soybean crop estimate on Tuesday after drought ravaged output in the world's second biggest producer this season, but raised its forecast of corn output to a record.

U.S. soybean futures rose after Brazil's food supply agency Conab cut its production forecast and U.S. crop ratings disappointed. [ID:nL3E8H553C]

Brazil's soy crop that finished harvest in May is now estimated at 66.37 million tonnes, after drought erased about 10 million tonnes from crop's potential, Conab data showed. The latest output number is down slightly from last month's estimate of 66.68 million tonnes.

Carry-over stocks of soybeans are set to drop to 1 million tonnes, Conab estimates, their lowest since 2008/09 and down about 65 percent from last year. No major revisions to the soy crop are expected in the coming months. Brazil harvested a record 75.3 million tonnes the year before.

Despite the drought, corn production jumped in Conab's ninth forecast of the grain crop to a record 67.79 million tonnes from the 65.90 million projected a month ago. It is the first time in over a decade that Brazil will harvest less soy than corn, which is mostly consumed by the local pork and poultry industry.

Producers have shifted more of their corn planting to the winter crop recently. This winter, or second crop, that is planted from January to March leapt 53 percent from last year to 32.9 million tonnes. The winter crop will be harvested in the coming weeks.

RTRS-Oil World sees US soy exports up 40 pct in 2012/13

AMSTERDAM, June 5 (Reuters) - US soybean exports will increase by nearly 40 percent from September 2012 to February 2013 to compensate for the shortfall in the South American crop which has been hit by drought, German-based analyst Oil World said on Tuesday.

"Insufficient South American export supplies of soybean, soymeal and oil will shift world demand to US origin in Sept-Feb 2012/2013," Oil World said.

"Such a huge shift has not been experienced before."

Oil World said that US soybean exports will reach 33.5 million tonnes in the first half of the US crop season, up 9.3 million tonnes or 39 percent from a year earlier.

Total world exports of soybeans in the same period will reach 43.4 million tonnes, Oil World said.

It said that exports from leading South American producers -- Argentina, Brazil, Paraguay and Uruguay - are expected to decline by 9 million tonnes in the same period.

"With our current us soybean crop estimate of 88.7 million tonnes, we consider it necessary that total US soybean stocks will be reduced to a multi year low of only 31.5 million tonnes as of end of February 2013," Oil World said.

"This is an unusually low inventory and sharply down from 38.7 million tonnes from a year earlier."

Oil World said that US crushings are likely to be boosted in response to reduced processing in South America and that it will probably reach 25.5 million tonnes in the period from September 2012 to February 2013.

Trader's Highlight

DJI- NEW YORK, June 5 (Reuters) - U.S. stocks rose on Tuesday, recovering some ground from last week's selloff, as data showing the vast U.S. services sector improved in May outweighed investor angst about the euro zone's fiscal crisis.

Financial stocks ranked among the best performers. The S&P 500 financial sector index <.GSPF> gained 1.7 percent, significantly outperforming other sectors.

Bank of America shares shot up 2.9 percent to $7.10 and JPMorgan added 3.2 percent to $31.98. The financial sector index, however, has lost 13 percent since the start of May.

But the rebound was expected to be temporary as market sentiment remained bearish in the face of the euro zone's debt crisis and a slew of recent data that showed the world's largest economy was experiencing slower-than-expected growth.

The market could also be setting itself up for disappointment, with the European Central Bank meeting on

Wednesday and Federal Reserve Chairman Ben Bernanke testifying on the economy before a congressional committee on Thursday.

The Dow Jones industrial average <.DJI> was up 26.49 points, or 0.22 percent, at 12,127.95. The Standard & Poor's 500 Index <.SPX> was up 7.32 points, or 0.57 percent, at 1,285.50. The Nasdaq Composite Index <.IXIC> was up 18.10 points, or 0.66 percent, at 2,778.11.

NYMEX- NEW YORK, June 5 (Reuters) - U.S. crude oil futures rose for a second straight day on Tuesday as the vital U.S. service sector grew faster than expected in May, the ISM industry report showed - a small, bright lining that followed a spate of gloomy economic reports.

Gains were limited, however, as euro zone debt worries deepened after Spain said credit markets were cutting off the country. That pulled the euro lower against the dollar, deterring investors from making more bullish bets on oil futures.

Ahead of weekly inventory reports, U.S. crude stockpiles were forecast 500,000 barrels lower last week, a Reuters poll of analysts showed. If confirmed, the drawdown will snap 10 weeks of continuous increase.

Distillate stocks were expected to show a 300,000 barrel increase while gasoline stocks were seen likely up 700,000 barrels. Refinery utilization was predicted to have risen 0.6 percentage point.

On the New York Mercantile Exchange, crude for July delivery settled at $84.29 a barrel, rising 31 cents, or 0.37 percent, after trading between $83.31 and $84.92.

CBOT SOYBEAN- Chicago Board of Trade July corn futures were up 1/2 cent at $5.68-1/2 at the 1:15 p.m. CDT (1815 GMT) close of pit trade Tuesday on tight stocks. December dropped 14-3/4 cents at $5.09 on stable condition ratings for the U.S. crop.

U.S. corn ratings held steady, topping analysts' expectations, despite continued dry weather in southern areas of the Corn Belt, U.S. Agriculture Department data released on Monday showed.

Dry and mild weather is expected to continue in the U.S. Midwest corn and soybean growing region for at least 5 days with hotter temperatures likely by the weekend.

"The next 5 days will be dry and some heat by the weekend in the 80s (degrees Fahrenheit) to 90s F but it will be brief and cool down again next week," said Kyle Tapley, meteorologist for MDA EarthSat Weather.

FCPO- SINGAPORE, June 5 (Reuters) - Malaysian palm oil futures rebounded on Tuesday, tracking a recovery in overseas markets, as investors looked to policymakers for new action to tackle the euro zone's debt crisis.

Palm oil closed at its lowest level in 2012 the previous day, reflecting the bearish sentiment seen in a global sell-down of most commodities including, crude oil and soybean oil. But investors took a more optimistic stance on Tuesday ahead of a conference call of the Group of Seven's finance chiefs that could produce some concrete measures to solve the crisis.

"The market is a bit stronger today, basically on short covering and retracement after the previous day's sharp fall," said a trader with a foreign commodities brokerage in Malaysia.

"The palm oil market is adjusting to external factors. It will still be volatile until the Greek election."

Benchmark August palm oil futures on the Bursa Malaysia Derivatives Exchange gained 0.4 percent to close at 2,966 ringgit ($927) per tonne. Prices touched a low of 2,925 ringgit on Monday, their lowest since Nov 2, 2011.

Traded volumes stood at 33,420 lots of 25 tonnes each, higher than the usual 25,000 lots.

REGIONAL EQUITY- BANGKOK, June 5 (Reuters) - Thai stocks fell to their lowest level in four months on Tuesday as growing political tension prompted broad based selling, but other Southeast Asian share markets pushed higher, helped by hopes for more action on the euro zone debt crisis.

Thailand's benchmark SET index <.SETI> fell 1.4 percent to 1,099.15, the lowest close since Feb 7, led by losses in big caps such as Siam Cement Pcl and Bangkok Bank Pcl .

Thai politics has heated up after anti-government yellow-shirted People's Alliance for Democracy activists blockaded parliament last week and forced the government to postpone debate on a national reconciliation bill.

Brokers said investors could still stick to defensive stocks such as food and retail counters, which have unusually joined the rout.

"While both issues could lead to rising political confrontation in coming months, it would not cause a political

U-turn into the chaos seen over the past years in our view," said Suchart Techaposai, head of Thailand Country Research in a report.

"We view any market correction relating to the matter as an opportunity to buy into the ongoing private investment up-cycle led by FDI and Thai companies intending to improve productivity and lower costs."

RTRS-UPDATE 1-Malaysia aims to parry Indonesia palm tax change

NEW DELHI, June 4 (Reuters) - Malaysia will soon take steps to make its palm oil exports competitive, the country's commodities minister said on Monday, as it moves to counter efforts by top producer Indonesia to promote its downstream industries.

Indonesia last year changed its export tax in favour of its refining industry, which narrowed margins for palm oil processors in Malaysia, the No. 2 producer of the vegetable oil.

Indonesia's export tax changes have put a spotlight on Malaysia's own tax-free quota on crude palm oil exports, which refiners say is further squeezing supply in a country where production growth has slowed because of limited expansion of acreage.

Malaysia has struggled to frame an immediate response to the new tax regime, allowing Indonesian refiners to export at a sizeable discount and grab market share.

"We have received a lot of complaints from farmers and industry," Malaysian Commodities Minister Bernard Dompok told reporters in the Indian capital after a meeting with Indian food minister K.V. Thomas.

"These are the things that the government has to consider. We are looking at the competitiveness of the entire palm oil industry."

Malaysia is studying the impact of Indonesia's tax changes on its palm oil industry, he added.

"I am preparing a submission to the cabinet to see how the tax structure promulgated by Indonesia can affect the industry in Malaysia," Dompok said. "We have not taken any decision, but this has to be considered soon."

Malaysia's palm oil output will rise in the next 2 to 3 months, helping the Southeast Asian nation hit its 2012 target, Dompok said, adding that production is expected to jump 2.3 percent to 19.3 million tonnes for a second consecutive rise.

Malaysia usually charges a high duty on crude palm oil shipments to protect its domestic refining industry. It does not impose any export taxes on processed palm oil.

Indonesia's tax changes have also hit processors in India, the world's top vegetable oil buyer, prompting them to demand import curbs. Industry body the Solvent Extractors' Association of India called Indonesia's move a "death blow" to its business.

Last week, sources said India could end a freeze on the base import price for refined palm oil to protect its refineries from cheaper imports from Indonesia.

Separately, India offered to sell wheat to Malaysia, Thomas said, but gave no details. India, sitting on huge stockpiles of wheat, is grappling with storage problems due to bumper harvests since 2007.

RTRS-U.S. corn condition seen falling on dryness

CHICAGO, June 4 (Reuters) - U.S. corn ratings were seen falling slightly, the second straight week of declines, due to dry weather in southern areas of the Corn Belt, analysts said.

The U.S. Agriculture Department's weekly crop ratings survey was expected to show that U.S. corn was rated 71 percent good to excellent, down 1 percentage point from a week earlier, according to the average estimate in a Reuters survey of 11 analysts.

From 2007-2011, corn ratings averaged 71 percent good to excellent in early June.

USDA also was expected to rate the soybean crop 69 percent good to excellent it its first estimate of soybean conditions for the year.

Dry and warm conditions through much of the spring allowed for a fast planting of both corn and soybeans, which most crop-watchers typically view as beneficial to crop development.

But the dry soils also raised concerns about crop deterioration. Some rain in many parts of the Midwest last week alleviated those worries but analysts estimated that about one-third of the Corn Belt still was dry.

Trader's Highlight

DJI- NEW YORK, June 4 (Reuters) - The S&P 500 ended flat on Monday after recent sharp losses, though worries about the European debt crisis and weaker U.S. data kept investors wary of equities.

Signs of economic weakness around the globe and Europe's intensifying debt crisis have rattled investors, who have been dumping riskier investments like commodities and equities for the safety of government bonds.

On Monday, U.S. data showed orders for manufactured goods dropped 0.6 percent in April, its third decline in four months and confounding expectations calling for a 0.2 percent gain.

In a potential boost to markets looking for measures to end the debt crisis, German Chancellor Angela Merkel is pressing for much more ambitious measures, including a central authority to manage euro-area finances and major new powers for the European Commission, European Parliament and European Court of Justice.

Spanish Prime Minister Mariano Rajoy is advocating a direct European rescue for the country's banks with moral support from the European Commission, but Germany appeared cool to such a move for the euro zone's fourth biggest member.

The Dow Jones industrial average <.DJI> slipped 17.11 points, or 0.14 percent, to 12,101.46 at the close. The Standard & Poor's 500 Index <.SPX> inched up just 0.14 of a point, or 0.01 percent, to 1,278.18. The Nasdaq Composite Index <.IXIC> rose 12.53 points, or 0.46 percent, to close at 2,760.01.

 

NYMEX- NEW YORK, June 4 (Reuters) - U.S. crude futures rebounded on Monday after four days of losses and last week's slide of 8.4 percent, as the euro rallied on hopes that European authorities can contain the euro zone debt crisis.

Bargain hunting also encouraged some buyers to step back in, after the recent sell-off had dragged prices to near eight-month lows and, according to a technical indicator, put the market in a sharply oversold condition.

Ahead of weekly inventory reports, domestic crude stockpiles were forecast to have fallen by 900,000 barrels in the week to June 1. That would snap 10 straight weeks of builds in government stocks data, with analysts citing lower imports.

On the New York Mercantile Exchange, crude for July delivery settled at $83.98 a barrel, gaining 75 cents, or 0.9 percent. It earlier dropped to a session low of $81.21, the lowest since Oct. 6.

CBOT SOYBEAN- Nearby July soybean futures on the Chicago Board of Trade were lower at the close of pit trading as traders exited long soybean/short corn spreads, traders said.

But back months rose on anticipation that funds would roll long nearby positions forward.

Trade was thin, with soybean futures volume near 130,000 contracts by the close of pit trade at 1:15 p.m. CDT (1815 GMT), about one-quarter less than the 250-day average.

New-crop contracts including November supported by USDA confirming sales of 165,000 tonnes of U.S. soybeans to China for delivery in 2012/13.

New-crop contracts also supported by weather forecasts showing mostly dry conditions in the U.S. Midwest for the next week to 10 days that could stress crops.

A Reuters poll of 11 analysts predicted that USDA in its first U.S. soybean condition ratings of the season later on Monday would show the crop rated 69 percent good to excellent.

USDA reported export inspections of U.S. soybeans in the latest week at 16.965 million bushels, above trade expectations for 12 million to 14 million.

CBOT reported late Friday that the amount of soybeans registered for delivery fell by 99 contracts and soyoil registrations fell by 125 contracts, a possible sign of firming cash markets.

Farmers in Argentina's biggest agricultural province, Buenos Aires, started a nine-day freeze on grains sales on Saturday to protest a tax hike by the cash-strapped local government. However, the protest is not expected to cause much disruption to corn and soy shipments.

FCPO- SINGAPORE, June 4 (Reuters) - Malaysian palm oil futures fell to the lowest so far this year on Monday, as investors rushed for the exits on growing global economic fears that also triggered a broader sell-off in other commodities markets.

Palm oil closed below the key 3,000-ringgit mark for the first time since December 2011, with investors bearish due to weak economic data and as the eurozone debt crisis rumbles on.

"Sentiment is bad across all risky assets, for example crude oil. On the demand side, however, palm oil is still positive," said Alan Lim, research analyst with Kenanga Investment Bank in Malaysia.

"Palm oil is more on the defensive side because it's used mainly for food, so demand should be sustainable. Investors will be looking closely at the Greece election on June 17, so the market will still be volatile for this week and next week."

The benchmark August palm oil futures on the Bursa Malaysia Derivatives Exchange slumped 1.6 percent to close at 2,958 ringgit ($923) per tonne after going as low as 2,925 ringgit, the lowest since Nov 2, 2011.

REGIONAL EQUITY- June 4 (Reuters) - Southeast Asian stock markets fell on Monday as investors dumped risky assets across the region on heightened fears of a global slowdown after disappointing data from U.S. and China.

Indonesia's Jakarta Composite <.JKSE> was one of the region's worst performers on Monday, losing 3.8 percent. The index had been among Asia's top gainers since the 2008 financial crisis.

Philippines' benchmark index <.PSI>, which hit a record high last month, fell 3.4 percent.

Earlier in the day, Asian share dived, with Tokyo stocks slumping to a 28-year low, on fears of a nightmare scenario of euro-zone breakup, U.S. economic relapse and a sharp slowdown in China.

While South East Asian countries sport relatively healthier economic growth than larger regional or global peers a slowdown in external demand is expected to take its tool hitting markets at a time when investors remain risk-averse.

Analysts at Malaysia's Affin Investment Bank said in a note to clients that weak manufacturing activity across the globe points to a further slowdown in growth over the second quarter in South East Asia.

Singapore's Straits Times index <.FTSTI> fell 1.7 percent to its lowest level in nearly five months led by commodities trader Olam International which slumped 5 percent. Global Logistic Properties fell 4.3 percent.

Trader's Highlight

DJI - NEWYORK,    NEW YORK, June 1 (Reuters) - U.S. stocks fell more than 2 percent on Friday, dragging the Dow into negative territory for the year after a dismal U.S. jobs report added to fears that Europe's spiraling debt crisis was dragging down the world economy. 

   The S&P 500 closed at its lowest since early January and  ended below its 200-day moving average for the first time in 2012 after the Labor Department said employers created just 69,000 jobs last month, the weakest in a year. 

   The bleak May jobs report caps a week of soft economic data from China and growing problems in Europe as Spain's bank crisis deepened.  

   The global flight to safety pushed U.S. and German government debt yields to record lows while the VIX , a gauge of U.S. stock market anxiety, jumped more than 20 percent for the week. 

   "The vast majority of investors are choosing to panic," said Brian Jacobsen, chief portfolio strategist at Wells Fargo Funds Management in Menomonee Falls, Wisconsin. 

   "It's been pretty clear for the last year that Europe was going to be a drag for the global economy." 

   Though steep, Jacobsen said he would view the pullback as a buying opportunity unless it pushed the S&P 500 below 1,250. 

   The Dow Jones industrial average fell 274.88 points, or 2.22 percent, to 12,118.57 at the close. The S&P 500 Index dropped 32.29 points, or 2.46 percent, to 1,278.04. The Nasdaq Composite dropped 79.86 points, or 2.82 percent, to 2,747.48. 

   The benchmark S&P 500 ended below its 200-day moving average, which was 1,284.53 late Friday afternoon. 

   Friday's decline was the largest daily percentage drop for the S&P 500 since Nov. 9, when a spike in Italian benchmark bond yields sent the broad U.S. stock index down 3.7 percent. 

   For the week, the Dow fell 2.7 percent, the S&P 500 lost 3 percent and the Nasdaq dropped 3.2 percent. 

   Financial sector stocks were among the worst hit in Friday's selloff, with the KBW bank index <.BKX> down 4.9 percent, its largest daily drop since early November. 

   "Most investors don't think the problem in Europe is going to infect the U.S. economy as much as it would the U.S. financial system," Wells Fargo's Jacobsen said. 

   More than six issues fell for every one that rose on the New York Stock Exchange, while on the Nasdaq, more than five stocks fell for every one that advanced. 

   Homebuilders ranked among the weakest stocks. Pulte Group plunged 11.8 percent to $8.26 while D.R. Horton lost 8.4 percent to $15.21. The PHLX housing sector index fell 6.3 percent, but it was still up nearly 14 percent for the year. 

   In one of the few positive moves of the day, Newmont Mining surged 6.7 percent to $50.30 and Barrick Gold added 7.3 percent to $41.91 as the price of gold scored its biggest one-day rise in slightly more than three years. 

   More than 8.3 billion shares changed hands on the New York Stock Exchange, the Nasdaq and Amex, about 21 percent higher than the year-to-date daily average of 6.85 billion shares.  

NYMEX - NEWYORK,     NEW YORK, June 1 (Reuters) - U.S. crude oil futures fell on Friday for the fourth day in a row, hitting their lowest levels in nearly eight months and extending losses to a fifth week, as weak U.S. jobs data, soft Chinese manufacturing and the deepening euro zone crisis sparked a broad market selloff. 

    All the bleak economic news spurred further oil demand worries just a day after U.S. government data showed that domestic crude stockpiles rose for the 10th straight week last week. 

    Crude oil futures sank with Wall Street, which dropped more than 2 percent. The Dow industrials average <.DJI> crossed into negative territory for the year. 

    Jobs growth in the United States, the biggest oil consumer, slowed sharply for a third straight month as only 69,000 jobs were added to nonfarm payrolls in May, less than half the number expected and the smallest rise in a year. The unemployment rate ticked up to 8.2 percent from April's 8.1 percent, Commerce Department data showed.

    China's manufacturing sector, as measured by its official purchasing managers' index, fell more than expected to 50.4 in May, the weakest level this year and down from its 13-month high hit in April. 

    In Europe, France and Germany's manufacturing industries contracted at the fastest pace in three years. The same sectors in Italy, Spain and Greece also weakened. Spain and Greece are also trying to grapple with serious financial setbacks. 

CBOT SOYBEAN,  Nearby soybean futures on the Chicago Board of Trade ended firm on Friday, gaining against back months on firm cash markets and ideas that recent declines were overdone, traders said. 

    * Spot July soybeans supported by news that CBOT soybean registrations for delivery fell by 352 contracts late Thursday, an indication of strengthening cash markets. 

    * But back months declined, joining a cross-market sell-off tied to weak U.S. jobs data, poor Chinese manufacturing figures and the euro zone's debt crisis. 

    * CBOT soybeans unofficially ended the week down about 3 percent on continuous charts, the second straight weekly decline and the fourth in five weeks.   

    * USDA reported export sales of soybeans in the latest week at 418,800 tonnes (old and new crop years combined), below trade expectations for 450,000 to 700,000 tonnes and the lowest total in four months.  

    * USDA reported weekly export sales of U.S. soymeal at a net 29,200 tonnes, below trade estimates for 100,000 to 150,000 tonnes. USDA reported weekly soyoil sales at 17,700 tonnes, in line with trade estimates.  

    * Worries about U.S. crop weather underpin the market. Less-than-stellar conditions are expected over the next few weeks in the U.S. corn and soy region with only light rain and moderate temperatures expected - forecaster World Weather Inc.

    * Brazil's soybean farmers, hit hard by drought this year, are laying the groundwork for a record comeback in 2013, buying plenty of seed and fertilizer with healthy revenues from advance sales of next year's crop, which won't be planted for months.

FCPO - SINGAPORE,  June 1 (Reuters) - Malaysian palm oil prices dropped to their lowest level in a week on Friday as investors worried about demand from China after weak manufacturing data and Spain's shaky finances, the latest signs that the euro zone debt crisis will further slow global growth.

   The decline in China's official purchasing manager's index showed output in the world's second largest economy was cooling, denting the optimism of traders who are betting on firm demand for palm oil ahead of the Muslim fasting month of Ramadan which begin in mid-July.

   Traders fretted more after Germany's manufacturing sector contracted at the fastest pace for almost three years and the euro tumbled against the dollar thanks to worries on the Spanish banking sector.  

   "The palm oil market just lost close to 100 ringgit in one session. People are nervous and forgetting about palm oil's bullish tone," said a trader with a foreign commodities brokerage in Kuala Lumpur.  

   "I suspect the investors will come in next week for bargain hunting unless there is more gloomy news in store." 

   The benchmark August palm oil futures on the Bursa Malaysia Derivatives Exchange tumbled 3.1 percent to end at 3,006 ringgit ($950) per tonne. It earlier went as low as 3,002 ringgit, a level unseen since May 24. 

   Reuters analyst Wang Tao kept his bearish target for palm oil prices at 2,993 ringgit per tonne, as its downtrend from an April 10 high of 3,628 ringgit is intact.

   Asian palm oil remains firm with cargo surveyors reporting a slight increase in Malaysian exports in May. 

   The bulk of the orders mostly come from Pakistan and the Middle East where Muslims are getting ready to observe the fasting month starting in mid July, which is followed by another month of feasting. 

   Stocks are likely to drop for a third month in May, traders say, as exports probably outpaced sluggish production in Malaysia, the world's second largest supplier. 

   Other global commodity markets also weighed on palm oil. Oil fell below $100 a barrel for the first time since October 2011. 

   U.S. soyoil for July dropped 1.2 percent in late Asian trade and the most active Jan 2013 soyoil contract on the Dalian commodity exchange lost 1.1 percent.  ($1 = 3.1717 Malaysian ringgit)  

Trader's Highlight

DJI - NEW YORK, May 31 (Reuters) - Stocks ended May with their largest loss in eight months and commodities also took a battering after a spate of worrying U.S. economic data on  Thu rsday hit markets already reeling from  Europe's debt troubles. 

   The euro had its worst performance since September too, repeatedly hitting a near two-year bottom. 

   U.S. bond yields fell to record lows as fears about Spain's troubled banks and Greece's possible exit from the euro zone spurred a global race for safe assets. 

   Many investors braced for another round of risk aversion on Friday should the monthly jobs report from the U.S. government contain weaker numbers than preliminary data issued by a payrolls processor on Thursday. 

   "Europe is the main issue, no question about it, but you have a supporting cast from the U.S. data," said Paul Zemsky, head of asset allocation at ING Investment Management in New York.       

    

   Spain remained the focal point of traders on growing speculation that Madrid would sooner or later ask for outside help to bail out its banks. Wall Street pared some of the day's losses on a report -- later denied -- of possible International Monetary Fund aid. But the European Commission has offered direct aid for a euro zone rescue fund to recapitalize distressed Spanish banks and more time for Spain to reduce its budget deficit. 

   Markets got an inkling of what was to come in Friday's U.S. jobs report after payrolls processor ADP said private employers created 133,000 jobs in May, fewer than the expected 148,000. New claims for unemployment benefits rose by 10,000 for the fourth straight weekly increase, the Labor Department reported.  

   Investors were dismayed by another report on economic growth and manufacturing in the U.S. Midwest that pointed to a slowdown.  

   At the close, the Dow Jones industrial average was down 26.41 points, or 0.21 percent, at 12,393.45. The Standard & Poor's 500 Index lost 2.99 points, or 0.23 percent, at 1,310.33. The Nasdaq Composite Index  fell 10.02 points, or 0.35 percent, to 2,827.34. 

   For the month, the S&P 500 was down 6 percent -- its sharpest loss since September. 

   European stocks closed down 7 percent for May and global equities tumbled 10 percent -- also marking their worst showing since September. 

   Commodities fell even more, with crude oil futures plunging 15 percent for the month both in London and New York for their biggest loss since December 2008. Copper lost 11 percent for the month. 

   "There's a lot of instability in the world, and along with the weak economic signals there's going to be significant volatility that I don't expect to end anytime soon," said Don Steinbrugge, managing partner of Agecroft Partners in Richmond, Virginia.  

   The benchmark 10-year U.S. Treasury note rose 12/32 in price, its yield at 1.578 percent -- down from Wednesday's 1.6 percent levels, which already marked a 60-year bottom. 

        

   NO ECB HELP 

   In Europe, ECB President Mario Draghi ruled out hopes that the central bank would step in to ease the pressure in financial markets as EU leaders grappled with measures to tackle structural problems in the debt crisis.

   "Can the ECB fill the vacuum of lack of action by national governments on fiscal growth? The answer is 'No,'" Draghi told the European Parliament. "Can the ECB fill the vacuum of the lack of action by national governments on the structural problem? The answer is 'No.'"  

   Concerns over Europe's debt crisis and the lack of a clear policy response have been rising since Spain unveiled unconvincing plans to recapitalize nationalized lender Bankia, raising the possibility it could need outside help.   

   Those worries kept Spain's 10-year bond yields at around 6.6 percent, not far from Wednesday's euro-era high of 6.79 percent and close to the crucial 7 percent mark, which has led to troubled nations like Portugal and Ireland needing bailouts.   

   The euro was last at $1.2358 to the dollar, after setting a 23-month low at $1.2335. The single currency was flat on the day and down nearly 7 percent on the month. 

   The flight from Spanish debt and Italian bonds, which are under threat of contagion from Spain, has boosted demand for the safety offered by German government paper. 

   Germany's two-year bonds traded just above zero percent on Thursday, while benchmark 10-year Bund yields hovered around their record low of about 1.25 percent. 

NYMEX - NEWYORK,     NEW YORK, May 31 (Reuters) - U.S. crude futures fell more than 1 percent on Thursday, and dropped 17.49 percent in May, as rising crude oil inventories, disappointing economic data and a deepening euro zone debt crisis pressured oil prices. 

    Crude stocks in the United States rose 2.21 million barrels in the week to May 25, the Energy Information Administration said in its weekly report. The increase exceeded expectations.

    The 10th straight rise in crude stocks reported by EIA was counter to the industry's American Petroleum Institute report released on Tuesday that showed crude stocks fell 353,000 barrels.

    The EIA reported gasoline stocks fell 833,000 barrels and distillate stocks fell 1.71 million barrels. 

    Crude stocks at Cushing, Oklahoma, delivery point for the U.S. light sweet crude contract, rose 54,000 barrels, the EIA said. 

    Crude stocks were expected to be up 600,000 barrels, gasoline stocks down 800,000 barrels and distillate stocks down 100,000 barrels, according to a Reuters survey of analysts taken ahead of the weekly inventory reports. 

    Oil and equities felt pressure from reports showing private payroll growth accelerated only slightly last month and claims for jobless benefits rose last week, indicating the U.S. labor market recovery was.

    A separate report showed factory activity in the Midwest slowed this month and U.S. economic growth in the first quarter was a bit softer than initially estimated. 

    The U.S. May nonfarm payrolls report is due on Friday. The data are expected to show a rise of 150,000, after the economy added 115,000 in April. 

    Crude pared sharp losses of more than 2 percent in afternoon trading, after Dow Jones reported that the International Monetary Fund was considering a rescue loan to Spain.  

    But later, IMF Managing Director Christine Lagarde said there was no such plan.

     

CBOT SOYBEAN - May 31 (Reuters) - Chicago Board of Trade soft red winter wheat futures fell to their session lows at the close of pit trading at 1:15 p.m. CDT (1815 GMT) on Thursday, hitting their lowest level in two weeks due to pressure from the ongoing harvest of this year's U.S. crop, traders said. 

    * CBOT wheat fell 0.3 percent in May, its fourth straight monthly decline. Prices have dropped 3.1 percent during the past four months. CBOT wheat's last four-month losing streak ended in October 2008. 

   * The benchmark CBOT July wheat contract has fallen for three straight days. Kansas City Board of Trade hard red winter wheat futures and MGEX spring wheat also were lower on Thursday, with KCBT July off 1.6 percent. 

    * Analysts were expecting a weekly U.S. Agriculture Department report on Friday morning to show wheat export sales ranging from 350,000 to 500,000 tonnes, down from 827,000 a week earlier. 

    * Spot basis bids for hard red winter wheat in the U.S. Plains were steady to weaker on Thursday morning as the advancing harvest boosted the the supply available to the market.  

    * Rainfall during the past week in key grain-growing areas of Russia and Ukraine raised hopes that drought damage to crops in those areas will not get any worse.

FCPO - JAKARTA, May 31 (Reuters) - Malaysian palm oil futures slipped to near a one-week low on Thursday and notched their biggest monthly loss since September 2009 as they tracked a wide sell-off in commodities due to worries over the effect of the euro zone debt crisis on the global economy.

    The hunt for safe-haven assets in Europe spread to Austrian and French bonds, although European shares and the euro regained some stability, as worries over Spain and its troubled banks weighed on market sentiment.

    The benchmark August palm oil futures on the Bursa Malaysia Derivatives Exchange ended down 0.3 percent at 3,101 Malaysian ringgit ($980) per tonne. Prices, which earlier hit a low at 3,083 ringgit, have slipped more than 10 percent this month. 

    "Macro again," said a Jakarta-based palm trader. "Last night all European stock markets were much lower and the soybean complex was also lower. 

    "But the downside is limited due to a weaker ringgit."
 

    Traded volumes stood at 15,106 lots of 25 tonnes each, compared with Wednesday's total at 17,601 lots.

 

    Last week when no significant breakthrough was made in resolving Europe's debt crisis, the benchmark fell to its lowest this year at 2,993 ringgit per tonne. 

    Palm oil is set to revisit its May 23 low of 2,993 ringgit per tonne, driven by a wave (5), said Reuters market analyst Wang Tao based on technical analysis.

    In related markets, oil edged up near $104 as buyers moved back in after Wednesday's heavy sell-off, but continuing nervousness around the demand outlook and the euro zone crisis kept oil on course for its biggest monthly percentage drop in two years.

    Chicago corn and soybeans inched lower and were headed for their biggest monthly decline since September amid the deepening euro zone debt crisis. 

    Earlier this week, benchmark palm prices had risen to their highest in almost two weeks, buoyed by weather conditions in the United States. 

    Helping to stem losses in palm oil were expectations of a rise in demand from India and Pakistan for Ramadan, where fasting in the day is followed by feasting in the evening. 

    Indonesia kept its export tax for crude palm oil at 19.5 percent for June.

    In Malaysia, the world's second-biggest palm oil producer after Indonesia, Prime Minister Najib Razak unveiled the $3.3 billion listing of palm oil giant Felda Global.

    Data from Malaysia also showed palm oil product exports during May rose 2.4 percent to 1,382,091 tonnes from 1,349,642 tonnes shipped from April.

    "Exports were within expectations," said a Kuala Lumpur-based trader. "But many are still hopeful of an improvement in shipments due to Ramadan." 

    Cargo surveyor Societe Generale de Surveillance said exports of Malaysian palm oil products for May fell 0.2 percent to 1,333,869 tonnes.

    In other vegetable oil markets, the most active Dalian soyoil September contract eased 1 percent.