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FinNews for the week ending June 8, 2012 Top Stories Following a Thursday meeting, the Fed announced that while it's prepared to assist the U.S. economy if it weakens, there are no current plans to take action. The Fed chairman noted that economic growth is expected to continue at a moderate pace, and that the European debt crisis still presents a great risk to the U.S. market. (1) China initiated a 25 basis point cut in its benchmark lending rates, marking the country's first rate cut since the 2008 recession and countering expectations that it would refrain from making any rate changes. This cut implies either a slowing of Chinese growth or an easing of inflation, and signals the government's desire to boost the country's economy. (2) Spain is expected to seek recapitalizing assistance from the euro zone this weekend. On a conference call scheduled for Saturday morning the Eurogroup will discuss aiding Spain, and on a later call will discuss approving the request. Announcements regarding the meetings are anticipated Saturday afternoon. (3) Economic Releases & Statistics The U.S. trade deficit narrowed 4.9 percent to $50.1 billion in April, higher than forecasts for a $49.5 billion drop. Imports and exports both dropped from March's $52.6 billion. (4) The U.S. ISM non-manufacturing PMI rose to 53.7 in May, countering expectations for a fall to 53. Up 0.2 from April's 53.5, readings over 50 indicate expansion and growth. The unemployment index fell 50.8, down 4.2 from April's 54.2, consistent with May's poor job growth. (5) Applications for unemployment fell 12,000 to 377,000, lower than last week's 389,000. (6) Stocks & Earnings Prompted by China's lending rate cut, the stock market's biggest rally of the year faded following the Fed's announcement that it has no immediate plans to spur on the economy. (7) In an attempt to save money and gain better visibility, Kraft Foods Inc plans to transfer its stock to Nasdaq from the New York Stock Exchange later this month. The company aims to split into two companies later this year, both of which will trade under Nasdaq. (8) Though still down following its IPO, Facebook's stock grew 2.8 percent Friday, partly in response to the release of its App Center site. (9) Global Currencies Following China's reduction of borrowing costs, the euro rose to a 10-day high against the dollar, the Australian dollar rose to a three-week high, while others such as the New Zealand and Canadian dollars also saw gains. (10) The rupee also posted gains against the dollar in response to recovery from oversold conditions, breaking away from nine weeks of record lows. However, the rupee still fell due to concerns over Spain, anticipation over China, and U.S. economic woes. (11) Oil & Energies U.S. crude oil supplies fell 100,000 barrels to 384.6 million barrels, versus forecasts for a 1 million barrel drop. Gasoline supplies rose 3.3 million barrels to 203.5 million, a 1.7 percent increase, overshooting estimates for a 500,000 increase. Distillate fuel supplies increased 2.3 million barrels to 120 million, higher than forecasts for a 600,000 barrel rise. (12) Natural gas supplies rose 62 billion cubic feet to 2.877 trillion, higher than forecasts for a 53-57 billion rise. (13) Now nationalized, the Argentine oil firm YPF aims to invest an annual $7 billion from 2013-17 to increase oil reserves and output. This year, the firm will invest $3.5 billion to shift its current 6 percent annual oil decline into growth. YPF's plan will create 10,000 new jobs over five years. (14) Grains & Field Crops Monday's USDA Crop Progress reported 97 percent of corn emerged, seventy two percent of which is in "good" to "excellent" condition. With soybean planting finished, 79 percent of the crop has emerged; sixty five percent of which is in "good" to "excellent" condition. This quick progression was due in part to a continued dry, hot period over the corn belt. (15) Argentinean farmers initiated a one-week anti-government strike on Wednesday, halting grain sales. The strike is a reaction to rising land tax increases in the country's largest agricultural province. (16) As soy and other crops have already been collected, most ports have bolstered reserves to avoid interrupting exports. (17) In response to a heavy drought, Brazil lowered its 2011/12 soybean crop estimate slightly from 66.68 million tons to 66.37. The country's corn estimate shot up 1.89 million tons to 67.79 million. (18) Due to a large number of producers frontloading their shipments and the nation's weak economic growth, Brazil will export increasingly less soybean crops as the year progresses. (19) However, China is in the process of assessing Brazil's corn import risks, and will likely open its market doors to Brazil's corn surplus. (20) Precious Metals Due to the recent growth of India's middle and upper classes, and as a result of India's slowing economy, many are turning to gold. South Indian gold counters reported a 20 percent to 25 percent jump in sales. (21) China's gold bullion imports rose 62% in April, with a net import of 67.4 tons. (22) Estimates state a 4% decline in platinum this year to 6.14 million ounces, due to South African strikes and safety concerns. (23) Despite declining palladium production in Russian and South Africa, increased automotive demand from BRIC countries is forecast to drive demand up. (24) Other Commodities The International Cocoa Organization forecasts a weaker cocoa shortage during the 2011/12 season, falling short 43,000 metric tons instead of 71,000 mt. While the estimated shortage is a result of skyrocketing demand, excellent weather and higher grinds then expected are helping to curb the deficit. Ivory Coast's cocoa output estimate is up 5 percent, and Brazil's yield is 10,000 mt higher than earlier forecasts. These increases are slightly countered by Nigeria's even weaker expected yield and rising demand from Asian markets. (25) Ivory Coast and Ghana are both forecast to get rain over the next week, potentially improving pod development. Ivory Coast's current crop is estimated at 370,000 metric tons. (26) By 2016, the nation plans to triple container capacity at its main port of Abidjan to 2.3 million units, aiming to keep up with competition. (27) However, Ghana's cocoa yield is predicted to fall to 850,000 tons due to price falls and dry weather up to this point. (28) Heavy rainfall in Brazil has stopped sugar harvesting until June 8 at the earliest. (29) Brazilian coffee producers are currently unable to make larger deliveries to ICE Futures U.S., as an applied discount would force them to sell for 16 less cents a pound or more to be profitable. (30) Colombia is wary of a potential coffee sector crisis, as for the last four years the country's production has dropped by four million 130 pound bags. Already 16 million bags down, the Colombian government is investing $165.3 million to assist growers. (31) The country's output 689,000 bags last month, a 2 percent rise year on year. Though this follows an 11 percent rise in April, the overall crop harvest last year was 7.8 million bags, the lowest in three decades. (32) In Arkansas, heavy rainfall has spurred a growth in the state's cotton crop, setting the state for record yields. (33) Next Week:
2. http://www.cnbc.com/id/47719664/ 3. http://in.reuters.com/article/2012/06/08/idINL5E8H882S20120608 5. http://www.nasdaq.com/article/us-may-ism-non-manufacturing-index-rises-20120605-00975 6. http://www.businessweek.com/ap/2012-06/D9V8AM3G0.htm 7. http://www.jamestownsun.com/event/article/id/162560/group/Business/ 8. http://in.reuters.com/article/2012/06/08/kraft-nasdaq-idINL1E8H82GR20120608 9. http://www.suntimes.com/business/13058608-420/boost-in-facebook-stock-easing-post-ipo-decline.html 10. http://www.reuters.com/article/2012/06/07/markets-forex-idUSL5E8H755F20120607 12. http://seattletimes.nwsource.com/html/businesstechnology/2018367089_apuscrudeinventories.html 15. http://www.agprofessional.com/news/Crop-Progress-Corn-Belt-thirsts-for-rain-157036635.html 16. http://www.reuters.com/article/2012/06/06/argentina-farmers-idUSL1E8H656I20120606 17. http://af.reuters.com/article/energyOilNews/idAFL1E8H77D720120607 18. http://af.reuters.com/article/commoditiesNews/idAFE5E8EL03720120605 19. http://www.agriculture.com/markets/analysis/soybeans/brazil-to-run-out-of-soybes_10-ar24516 20. http://www.reuters.com/article/2012/06/06/corn-brazil-china-idUSL1E8H66G720120606 21. http://www.mineweb.com/mineweb/view/mineweb/en/page34?oid=152872&sn=Detail&pid=102055 22. http://goldnews.bullionvault.com/gold-bullion-china-hong-kong-imports-060720121 23. http://www.etftrends.com/2012/06/platinum-palladium-etfs-caught-in-risk-off-trade/ 25. http://www.confectionerynews.com/Markets/ICCO-cuts-cocoa-deficit-forecast 27. http://af.reuters.com/article/senegalNews/idAFL5E8H86F720120608 28. http://af.reuters.com/article/investingNews/idAFJOE85601I20120607 29. http://www.businessweek.com/news/2012-06-06/sugar-advances-as-rainfall-may-damage-brazilian-harvest 31. http://colombiareports.com/colombia-news/economy/24483-colombian-minister-warns-of-coffee-crisi.html 32. http://www.agrimoney.com/news/barcap-dampens-hopes-for-colombia-coffee-revival--4613.html 33. http://www.memphisdailynews.com/news/2012/jun/8/record-cotton-yield-possible-in-northeast-arkansas/ _______________________________________________________________________________________ Disclaimer: Trading and investing involve a substantial degree of a risk of loss and are not suitable for everyone. Past performance is not indicative of future results. Fundamental factors, seasonal and weather trends, daily news, and other current events may have already been factored into the markets. Some trading strategies have unlimited risk. Educate yourself on the risks and rewards of such investing prior to trading. The publisher, and/or its affiliates, staff or anyone associated with FinNews, do not guarantee profits or pre-determined loss points, and are not held monetarily responsible for the trading losses of others (subscribers or otherwise). Information provided is compiled by sources believed to be reliable. Financial Media Corp, and/or its principals, assume no responsibility for any errors or omissions as the information may not be complete or events may have been canceled or rescheduled. Any copy, reprint, broadcast or distribution of this report of any kind is prohibited without the expressed written consent of the publisher. |
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