Trader's Highlight

DJI - NEW YORK, Jan 3 (Reuters) - U.S. stocks edged lower on Thursday after minutes from the latest Federal Reserve meeting showed growing concern about the risks of its highly stimulative monetary policy.

Despite the concerns about the effects of its asset purchases, the Fed look set to continue its open-ended stimulus program for now.

The minutes from the December meeting showed a growing reticence about further increases in the central bank's $2.9 trillion balance sheet, which it expanded sharply in response to the financial crisis and recession of 2007-2009.

Stocks had pushed the benchmark S&P 500 index 4.3 percent higher during a two-day run as investors turned their focus to upcoming battles in Congress, including likelihood of bitter fights over spending cuts and raising the federal debt ceiling.

"As we look down the pathway here, there are some real issues in front of the market. There is going to be a new battle in two months over the debt ceiling and sequestration and fourth-quarter earnings are going to start to come into focus," said Stephen Massocca, managing director at Wedbush Morgan in San Francisco.

"There are some issues out there that could hold this market back, but on the other side of the ledger, zero interest rates are a tremendous stock market flotation device."

The rally in equities began on the last day of 2012 on optimism a deal would be reached to avert the "fiscal cliff," and avoid a possible recession. Gains continued on Wednesday, the first trading day of 2013, with Wall Street's best performance since Dec. 20, 2011 after Congress approved a fiscal compromise.

Retailers advanced after several major companies in the sector beat expectations of modest sales increases in December, with the S&P retail index up 0.8 percent and the Morgan Stanley retail index up 0.6 percent.

The Dow Jones industrial average dropped 17.47 points, or 0.13 percent, to 13,395.08. The Standard & Poor's 500 Index shed 2.30 points, or 0.16 percent, to 1,460.12. The Nasdaq Composite Index dipped 5.19 points, or 0.17 percent, to 3,107.07.

Economic data showed U.S. private-sector employers shrugged off a looming budget crisis and stepped up hiring in December, offering further evidence of underlying strength in the economy as 2012 ended.

The government's broader monthly payrolls report, due on Friday, is expected to show the economy created 150,000 jobs compared with 146,000 in November, according to a Reuters poll. The U.S. unemployment rate is seen holding steady at 7.7 percent.

Retailers advanced after several major companies in the sector beat expectations of modest sales increases in December, with the S&P retail index up 0.8 percent and the Morgan Stanley retail index up 0.6 percent.

Shares in Costco Wholesale Corp rose 1.4 percent to $102.85 after the company reported a better-than-expected 9 percent rise in December sales at stores open at least a year.

Gap Inc stock climbed 3.1 percent to $32.33 following news that the retailer will buy women's fashion boutique Intermix Inc, the Wall Street Journal reported.

Family Dollar Stores Inc stumbled 12 percent to $56.38 on the company's report of lower-than-expected quarterly profit. 

NYMEX - NEW YORK, Jan 3 (Reuters) - U.S. crude futures edged lower on Thursday, faltering after the previous session's 1.4 percent rally, traders and analysts said, as looming budget battles in Washington tempered optimism about the deal to avert the automatic tax hikes and spending cuts considered a threat to economic growth.

Late in the session, crude futures felt pressure when minutes from the latest policy meeting revealed signs of growing concern by the U.S. Federal Reserve about buying bonds to spur economic growth.

CBOT Soybean -  Soybean futures on the Chicago Board of Trade fell for a third

straight session, with the bellwether March contract touching a six-week low after China canceled orders of U.S. soybeans, traders said.

USDA said China canceled purchases of 315,000 tonnes of U.S. soybeans for delivery in 2012/13. The move follows Chinese cancellations of purchases totaling 840,000 tonnes in the week of December 16.

 

·        Also bearish, USDA's attache in Brazil raised its estimate of Brazil's 2012/13 soybean production to a record-large 83 million tonnes, above USDA's last official forecast of 81 million tonnes.

 

·        Additional pressure from strength in the U.S. dollar, which firmed after minutes from the Federal Reserve's latest meeting showed rising concern about the Fed's policy of buying bonds to stimulate growth. The policy has helped to buoy equity and commodity markets.

 

·        CBOT soymeal fell for a sixth day, with the front contract dipping below below $400 a ton for the first time in seven months.

 

·        CBOT March soyoil ended lower on profit-taking after Wednesday's 2.7 percent jump, halting a four-session rally.

 

·        Trade expects USDA to report weekly export sales of U.S. soybeans on Friday at 250,000 to 450,000 tonnes. The report was delayed by a day due to the New Year's Day holiday.

 

·        CBOT reported nine soymeal deliveries against January futures, 2,754 soyoil deliveries and no soybean deliveries.

FCPO - SINGAPORE, Jan 3 (Reuters) - Malaysian palm oil futures edged lower on Thursday after prices climbed to a two-month high the previous day, although hopes of a new export tax structure boosting demand had curbed losses.

The tropical oil started the year strongly by jumping to its highest since Nov. 2 on Wednesday after the United States reached a fiscal deal that prevented the world's largest economy from slipping into recession.

Market players are eyeing Malaysia's Jan. 1-10 exports data due next week, expecting higher demand from crude palm oil as the country imposed a zero percent duty in January for shipments of the grade.

"We see a bit of profit-taking coming in. Every time we go above 2,500 ringgit, there's no strong follow through," said a trader with a foreign commodities brokerage in Malaysia.

"The important issue now is with the new export tax structure and traders want to see how Malaysian exports will be for the first 10 days. Prices should be trading in a range of 2,450-2,550 ringgit."

At market close, the benchmark March contract on the Bursa Malaysia Derivatives Exchange fell 1.0 percent to 2,475 ringgit ($816) per tonne. Prices hit a two-month high of 2,524 ringgit on Wednesday.

Total traded volumes stood at 36,244 lots of 25 tonnes each, higher than the usual 25,000 lots.

Technicals appear to be bearish as palm oil is expected to retrace to 2,452 ringgit based on a wave analysis, Reuters market analyst Wang Tao said.

But prices may find support as lower December production and disruption to supply due to heavy rains could help ease record-high stocks of 2.56 million tonnes, traders said.

Industry regulator the Malaysian Palm Oil Board will release official data on December's stocks and output next week.

Investors are monitoring the impact of China starting to enforce its quality standards on edible oil imports. Palm oil which fails to make the grade could see cargoes turned away from Chinese ports, depressing demand a little.

Brent crude dropped below $112 a barrel on Thursday as the prospects of more budget battles in the United States and rising oil supply weighed on prices, although upbeat economic data from China limited losses.

In competing vegetable oil market, U.S. soyoil for March delivery fell 0.2 percent in late Asian trade. China's Dalian Commodities Exchange is closed for the New Year holiday and will resume trading on Friday.

RTRS - U.S. biodiesel tax credit revived through 2013 by Congress

WASHINGTON, Jan 2 (Reuters) - The $1 a gallon tax credit for biodiesel will run through 2013 at a cost of more than $2 billion under a provision of the mammoth legislation passed by Congress to avoid the so-called "fiscal cliff."

In reviving the credit, lawmakers made the extension retroactive to its expiration at the end of 2011. It now is set to expire at the end of this year.

The credit was one of an eclectic mix of handouts, takebacks and special-interest tax breaks included by Congress in the last-minute deal to avoid the automatic spending cuts and tax increases that otherwise would have kicked in for 2013.

Iowa Senator Chuck Grassley, a prominent backer of the credit, told reporters he expects the credit will be phased out at some point but that there is little sentiment to do so at the moment.

Roughly one-quarter of U.S. soybean oil is used in making biodiesel. Some 4.9 billion pounds of soyoil are forecast for conversion to the alternative fuel during the marketing year that ends on Sept 30.

Along with revival of the biodiesel credit, Congress extended the $1 a gallon credit for diesel fuel created from biomass and a 10-cent credit available to small agri-processors who make biodiesel. The steps were estimated to cost $2.2 billion over 10 years.

Also in the bill was an extension of a $1.01 a gallon credit for making biofuels from cellulose, found in woody plants, trees and grasses. Fuel produced from algae was made eligible for the credit as well. The one-year extension was estimated to cost $59 million.

Trader's highlight

DJI - NEW YORK, Jan 2 (Reuters) - U.S. stocks kicked off the new year with their best day in over a year on Wednesday, sparked by relief over a last-minute deal in Washington to avert the "fiscal cliff" of tax hikes and spending cuts that threatened to derail the economy's growth.

In 2013's first trading session, the S&P 500 achieved its biggest one-day gain since Dec. 20, 2011, pushing the benchmark index to its highest close since Sept. 14.

Concerns over Washington's ability to sidestep the cliff had driven the S&P 500 down for five straight sessions, before signs that a resolution was near sent the benchmark index higher on the final trading session of 2012.

The CBOE Volatility Index or the VIX , Wall Street's favorite gauge of investor anxiety, dropped 18.5 percent to 14.68 at the close. The VIX has fallen 35.4 percent over the past two sessions, the biggest 2-day percentage drop in the history of the index.

The Dow Jones industrial average jumped 308.41 points, or 2.35 percent, to 13,412.55 at the close. The Standard & Poor's 500 Index gained 36.23 points, or 2.54 percent, to finish at 1,462.42. The Nasdaq Composite Index climbed 92.75 points, or 3.07 percent, to end at 3,112.26.

Market breadth reflected the strong rally, with 10 stocks rising for every one that fell on the New York Stock Exchange. All 10 of the S&P 500 industry sector indexes gained at least 1 percent. The S&P financial index shot up 2.9 percent.

On Tuesday, Congress passed a bill to prevent huge tax hikes and delay spending cuts that would have pushed the world's largest economy off a "fiscal cliff" and possibly into recession.

The vote avoided steep income-tax increases for a majority of Americans, but failed to resolve a major showdown over cutting the budget deficit, leaving investors and businesses with only limited clarity about the outlook for the economy. Spending cuts of $109 billion in military and domestic programs were temporarily delayed, and another fight over raising the U.S. debt limit also looms.

"We got through the fiscal cliff. The next big thing, and probably more contentious thing, is negotiating the debt ceiling and possibly entitlement reform in early 2013," said Jim Russell, senior equity strategist for U.S. Bank Wealth Management in Cincinnati.

Hard choices about budget cuts and the critical need to raise the debt ceiling will confront Congress about the same time in two months "so the fur will be flying," Russell said.

U.S. stocks ended 2012 with the S&P 500 up 13.4 percent for the year, as investors largely shrugged off worries about the fiscal cliff. For the year, the Dow gained 7.3 percent and the Nasdaq jumped 15.9 percent.

Bank shares rose following news that U.S. regulators are close to securing another multibillion-dollar settlement with the largest banks to resolve allegations that they unlawfully cut corners when foreclosing on delinquent borrowers. 

Economic data from the Institute for Supply Management showed U.S. manufacturing ended 2012 on an upswing despite fears about the fiscal cliff, but the Commerce Department reported that construction spending fell in November for the first time in eight months.

Volume was heavy, with about 7.8 billion shares traded on the New York Stock Exchange, the NYSE MKT and the Nasdaq, well above the 2012 daily average of 6.42 billion.

NYMEX - SINGAPORE, Jan 2 (Reuters) - U.S. crude futures edged down toward $91 on Wednesday as investors nervously await a last-minute deal from the United States to stave off rising taxes and spending cuts that could trigger a recession and erode its fuel demand.

CBOT Soybean - Soybean futures on the Chicago Board of Trade erased early gains

and closed down 1.2 percent, posting a one-month low on

technical selling, while soyoil soared, traders said.

·         CBOT soyoil jumped nearly 3 percent, its biggest daily rise since August, after lawmakers included an extension of the $1 a gallon tax credit for soy-based biodiesel as part of their massive fiscal pact.

·         CBOT March soymeal fell 3.3 percent, plunging below its 200-day moving average on the way to a one-month low, as traders unwound meal/oil spreads. 

·         Funds hold a large net short position in soyoil, leaving that market vulnerable to short-covering.

·         Crop weather in South America is mostly satisfactory, with pockets of dryness and pockets of extreme wetness leading to some concern about crop planting and growth - MDA EarthSat Weather.

·         CBOT reported nine soymeal deliveries against the January contract, along with 3,034 soyoil deliveries and no soybean deliveries.

FCPO - SINGAPORE, Jan 2 (Reuters) - Malaysian palm oil futures rose to a 2-month high on Wednesday as the United States averted a fiscal crisis and as traders look forward to better demand for the edible oil on a lower export tax structure.

Investors were relieved after U.S. lawmakers approved a deal preventing huge tax hikes and spending cuts that would have pushed the world's largest economy into recession and hurt global commodity demand.

Market players were also betting on Malaysia's zero export tax in January to spur demand and help clear record-high stocks.

"The zero export tax will be long-term positive. But the short-term impact may be neutralised by tighter edible oil import rules by China," said Alan Lim Seong Chun, research analyst with Malaysia's Kenanga Investment Bank.

Stricter quality measures set to be enforced by Beijing on Jan. 1 could hurt demand for palm oil.

At market close, the benchmark March contract on the Bursa Malaysia Derivatives Exchange gained 2.7 percent to 2,503 ringgit ($825) per tonne, off its intraday high at 2,524 ringgit, a level last seen since Nov. 2.

Total traded volumes stood at 33,431 lots of 25 tonnes each, higher than the usual 25,000 lots.

Traders are looking out for official data on Malaysia's palm oil December inventory level due next week, which is expected to ease slightly from November's record-high 2.56 million tonnes.

But they said the drop could be limited as Malaysian palm exports during December fell as much as 7.9 percent from a month ago, according to cargo surveyor data.

Brent crude oil hit a one-month high above $112 per barrel on Wednesday after the U.S. Congress approved a deal to avert a fiscal crisis, while promising data from top energy consumer China also supported prices.

Soybean oil markets in the U.S. and China were closed for the New Year holiday.

Regional Equities - BANGKOK, Jan 2 (Reuters) - Most Southeast Asian stock markets rose on Wednesday, with Singapore climbing to a 17-month high and Philippines closed at a new record high as a positive resolution to the U.S. 'fiscal cliff' led to a broad rally in commodities and market large caps.

Some analysts and central banks in the region said although the U.S. fiscal deal would help support near term market sentiment, they were still cautious of a long term resolution of the U.S. budget crunch.

"This (agreement) could spawn risk appetite in the short run, resulting in funds flow towards emerging economies," said Philippine Central Bank Governor Amando Tetangco.

"But the markets will soon look for a more lasting solution to the U.S. debt problem. In the interim, we could see higher volatility in the financial markets," the governor said.

Singapore's Straits Times Index finished up 1.1 percent at 3,201.74, the highest since August, 2011. Philippine Composite Index was up 0.8 percent at 5,860.99, topping its record finish of 5,832.83 set on Dec. 26.

Thai main SET index, Southeast Asia's best performer in 2012, gained 1.1 percent to 1407.45, the level last seen on February, 1996. Malaysia main index, the region's 2012 worst performer, bucked the trend to fall 0.8 percent.

The Malaysian bourse said local institutions sold shares worth 113 million ringgit ($36.95 million) countering buying by foreign and retail investors of 98 million ringgit ($32.05 million)and 15 million ringgit ($4.91 million), respectively.

Trader's highlight

DJI - NEW YORK, Dec 31 (Reuters) - U.S. stocks closed out 2012 with their strongest day in more than a month, putting the S&P 500 up 13.4 percent for the year, as lawmakers in Washington closed in on a resolution to the "fiscal cliff" negotiations.

The S&P 500's gain for the year marks its best performance since 2009, as stocks navigated through debt crises in Europe and the United States that dominated the headlines. Still, with numerous issues involving budget talks unresolved, markets could still be open to a shock should the deal break down unexpectedly.

Fittingly, in the last session of the year, stocks bounced back and forth on the headlines out of Washington, as both President Barack Obama and Republican Senate leader Mitch McConnell issued statements indicating a deal to avert the cliff was close.

"The worst news could have been the president coming out and saying, 'We don’t have a deal and we’ve giving up,' and he didn’t say that," said Ron Florance, managing director of investment strategy for Wells Fargo Private Bank, based in Scottsdale, Arizona.

"My personal skepticism, I don’t trust anything out of Washington until it is signed, sealed and delivered, and it is not signed, sealed and delivered."

While a deal on the cliff is not yet official, investors may be ready to take on more risk next year in hopes of a greater reward.

McConnell said an agreement had been reached with Democrats on all of the tax issues in the potential deal, removing a large hurdle in the talks. An agreement is needed in order to avert a combination of tax hikes and spending cuts that many believe could push the U.S. economy into recession.

A source familiar with the matter said an emerging deal, if adopted by Congress and President Barack Obama, would raise $600 billion in revenue over the next 10 years by increasing tax rates for individuals making more than $400,000 and households earning above $450,000 annually.

Despite the uncertainty, the market encountered only occasional bouts of volatility this year. For the first time since 2006, the CBOE Volatility Index or VIX , the market's favored indicator of anxiety, did not surpass the 30 level, a threshold that usually signals heightened worry among investors.

“Given all the threats in 2012, the VIX was relatively tranquil," said Bill Luby, the author of the VIX and More blog in San Francisco, citing the crises in Spain and Greece, along with constant intervention from the Federal Reserve.

The Dow Jones industrial average gained 166.03 points, or 1.28 percent, to end at 13,104.14. The Standard & Poor's 500 Index gained 23.76 points, or 1.69 percent, to finish at 1,426.19. The Nasdaq Composite Index gained 59.20 points, or 2.00 percent, to close at 3,019.51.

Monday's gains enabled the S&P 500 to snap a five-day losing streak, its longest skid since September.

The S&P 500 closed out 2012 with a 13.4 percent gain for the year, compared with a flat performance in 2011. The Dow rose 7.3 percent in 2012 and the Nasdaq climbed 15.9 percent.

Volume was modest, with about 6.06 billion shares traded on the New York Stock Exchange, the Nasdaq and the NYSE MKT, slightly below the daily average of 6.42 billion.

Advancing stocks outnumbered declining ones on the NYSE by a ratio of 6 to 1, while on the Nasdaq, four stocks rose for every one that fell.

NYMEX - SINGAPORE, Dec 31 (Reuters) - U.S. crude futures slipped on Monday for a third straight session on worries that the United States may not reach a budget deal by Jan. 1 to prevent a fiscal crisis that could erode fuel demand at the world's largest oil consumer.

CBOT Soybean - CBOT soybean futures slipped on the last trading day of the year Monday as favorable crop weather in South America fueled expectations for large harvests.

 

·         Front-month January soybeans unofficially closed down 5-1/2 cents at $14.18-1/2 a bushel, while March soybeans were down 9 cents at $14.09 a bushel at the close of trading.

·         Improving weather in South America was particularly negative for deferred futures contracts, said Jack Scoville, vice president of Price Futures Group.

·         Brazil and Argentina will compete with the United States for export business after they harvest their crops in the spring.

·         USDA on Monday said private exporters struck deals to sell 140,000 tonnes of U.S. soybeans to unknown destinations for delivery this marketing year.

·         USDA said 35.5 million bushels of soybeans were inspected for export last week, within expectations for 35 million to 38 million.

·         Front-month soybeans have pulled back 20.1 percent since reaching a record high in September on concerns about crop losses from the worst U.S. drought in more than 50 years. The market in 2012 scored its highest yearly average price on record.

·         Front-month soybeans unofficially ended down 8.3 percent for the quarter, the biggest quarterly loss since the third-quarter of 2009. The quarterly loss breaks a string of four straight positive quarters. 

·         Front-month soybeans unofficially ended down 1.4 percent for the month, the fourth straight monthly loss and longest streak of monthly losses since five-months of declines from July to November 2008.

 

FCPO - SINGAPORE, Dec 31 (Reuters) - Malaysian palm oil futures fell on Monday, weighed by lower exports although losses were limited by expectations that heavy rains in the world's No.2 producer may disrupt production and bring down record high stocks.

Palm oil notched its worst annual performance since the financial crisis in 2008, losing more than one-fifth thanks to high stocks and a sluggish global growth that has dented edible oil demand.

For the coming year, traders are watching the impact of Malaysia's zero export tax for crude palm oil in January and a stricter import rule for edible oil to be enforced by China, the world's second-largest edible oil buyer.

"Malaysia's new export duty will be tested. There are more concerns on the tax structure because it is now an even playground for both countries (Malaysia and Indonesia)," said a dealer with a foreign commodities brokerage in Malaysia.

"I foresee an even fiercer price competition."

Malaysian cargoes are still likely to be cheaper as it set the January export tax rate at zero compared to Indonesia's 7.5 percent.

On the last trading day of the year, the benchmark March contract on the Bursa Malaysia Derivatives Exchange lost 2.6 percent to close at 2,433 ringgit ($796) per tonne.

Prices hit an intraday high of 2,517 ringgit per tonne -- a level last seen on Nov. 2, prompting some traders to book profits soon after.

Total traded volumes stood at 43,399 lots of 25 tonnes each, much higher than the usual 25,000 lots as traders squared their positions.

Malaysian palm exports during December fell 5.7 percent to 1,568,510 tonnes from 1,663,092 tonnes a month ago, said cargo surveyor Intertek Testing Services on Monday.

Another cargo surveyor, Societe Generale de Surveillance, reported a steeper drop at 7.9 percent for the same period.

Concerns of heavy rains in Malaysia disrupting supply persisted after the weather office upgraded its warning on Monday from yellow to orange stage for key producing states such as Pahang and Johor.

Brent crude slipped toward $110 per barrel on Monday, on worries the United States may not reach a deal by Jan. 1 to prevent a fiscal crisis that could erode fuel demand.

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.

EURO DIPS, YEN SLUMPS

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.

U.S. BONDS TRADE HIGHER, OIL EASES

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.