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FinNews for the week ending August 3, 2012 Top Stories Knight Capital Group, a brokerage responsible for roughly 11 percent of all U.S. stock trades, faced massive losses due to a software glitch. The glitch prompted millions of unintended orders, which resulted in losses of $440 million in under an hour. (1) In a meeting this week, the European Central Bank developed a side deal involving the purchase of Italy's and Spain's bonds, under the condition that the euro government's bailout fund does so directly from their treasuries. While this measure will not going into effect for weeks or even months, it may lay the framework for further bond market support plans. (2) Economic Releases & Statistics At the FOMC meeting, which concluded Thursday, the Federal Reserve opted to leave rates unchanged and reiterated that it would continue to leave rates low through 2014 at the earliest. It did not announce a third round of quantitative easing, but did proclaim that if the need arises they "are ready to step in and take aggressive steps to bolster the U.S. economy." (3) Consumer spending fell 0.1 percent, countering estimates for a 0.1 percent increase. Household income grew by 0.5 percent, just slightly higher than forecasts for a 0.4 percent rise. Household saving grew 4.4 percent. (4) Construction spending grew 0.4 percent last month to a seasonally adjusted $842 billion, matching expectations. Residential construction grew 1.3 percent while nonresidential remained unchanged. (5) The Institute of Supply Management manufacturing PMI grew 0.1 to 49.8, falling short of forecasts for a growth to 50.2. July inventories grew 5.0 to 49.0, and new orders grew 0.2 to 48.0. (6) ISM non-manufacturing grew 0.5 to 52.6, surpassing estimates for no change. Employment rose 163,000 last month as the unemployment rate increased 0.1 to 8.3 percent, versus expectations for it to remain unchanged. (4) (7) Stocks & Earnings Kraft Foods announced a spin off for its grocery and snack products, which will launch on October 1 as Kraft Foods Group, which will trade on Nasdaq as KRFT. Kraft will change its name to Mondelez International Inc., MDLZ. (8) Global Currencies In order to increase confidence in its finances, the Spanish government aims to boost its savings plan by roughly 57 percent by 2014. Meanwhile, the Spanish Prime Minister admitted he would "consider asking for financial aid for his country only once the European Central bank has fleshed out its crisis-fighting plans for buying government bonds." (9) Over the last several years, banks have been switching from the London Interbank Offered Rate (Libor) to overnight-index-swap rates due to considerable discrepancies in funding costs across institutions. (10) Oil & Energies Natural gas storage grew 28 billion cubic feet to 3.217 trillion cubic feet, greater than forecasts for a 20-24 bcf growth. (11) Crude storage fell 6.5 million barrels to 373.6 million barrels, greater than estimates for an 800,000 barrel drop. Gasoline inventories fell 2.2 million barrels to 207.9 million, countering forecasts for a 500,000 barrel rise. Distillates declined 974,000 barrels to 124.3 million, versus estimates for an 800,000 barrel growth. (12) Argentine YPF aims to invest $7 billion a year from 2013 to 2017 to help counter Argentina's energy deficit. In order to, the company is considering issuing local bonds which would offer interest payments in fuel instead of cash. (13) Grains & Field Crops The weekly Crop Progress report revealed corn in good/excellent condition fell 2 percent to 24 percent of the crop. 94 percent of corn was silking and 37 percent doughing. U.S. soybeans in good/excellent dropped 2 percent to 29 percent. 88 percent of the soybean crop has bloomed. Spring wheat in good/excellent condition grew 3 percent to 63 percent, with 28 percent of the crop harvested. 85 percent of the winter wheat crop has been harvested. (14) On Thursday, Mexico purchased 1.516 million tons of U.S. corn, the largest single-day purchase in over two decades, marking "the first clear sign of global anxiety over the decimated U.S. crop." (15) Due to considerable rainfall, Argentinean farmers may potentially harvest 31 million tons of corn during the 2012-13 season, breaking the 22 million metric ton record. The country's soybean crop may also grow 45 percent to 56 million tons. Brazil is also set to harvest its largest soybean crop at 78 million tons. Due to cheaper prices and transportation cost, many Brazilian farmers plan to replace corn with soybeans, allotting a total of 66.7 million acres. Much of this growth is contingent on the arrival of an El Niño, which would bring an abundance of wet weather. (16) Precious Metals As new mines come on line in Ivory Coast, the country expects its annual gold output to grow to 25 tonnes a year by 2015. Current production is 15 tonnes, up from last year's 12. (17) Platinum demand continues to remain low due to the eurozone debt crisis, and its prices could fall by as much as 30 percent "if the eurozone crisis continues unabated." (18) South Africa is now the "number one spot in terms of gold grades," with six gold deposits with grades over 10g/t and fourteen deposits with over 5 g/t. (19) Other Commodities Due to July rainfall in the area which delayed the crop's start and weakened its quality, Brazil's arabica coffee harvest will end a month later than planned. (20) Due to rains in Brazil, Vietnam, and Indonesia and poor harvests, coffee prices are estimated to rise by as much as 30 percent over time. (21) Vietnam aims to more than double its arabica output to 96,000 tons by 2020 through expansion of its arabica area to 99,000 acres over the next eight years. (22) A drought over Ivory Coast that has persisted for roughly a month and a half has cocoa farmers worried as they begin to prepare for their main-crop harvest. (23) Meanwhile, the country has plans to open a grinding facility around the port of San Pedro, which will increase bean processing by roughly 56 percent to over 300,000 metric tons a year by 2015. The plant will be set up by Olam International Ltd. while current plants improve output, and will satisfy one of the IMF's requirements for Ivory Coast to receive $4.4 billion in debt relief. (24) As Ivory Coast works to reform its cocoa sector and boost farm incomes, the country has paid 29 billion CFA francs into a stabilization fund to guarantee floor prices. Ivory Coast plans to grow this number to 40 billion by the year's end, then 70 billion over time. (25) Next Week:
1. http://www.latimes.com/business/la-fi-0803-trading-chaos-20120803,0,1527952.story 3. http://moneymorning.com/2012/08/01/todays-fomc-meeting-we-could-wait-four-more-months-for-action/ 8. http://stream.marketwatch.com/story/markets/SS-4-4/SS-4-8565/ 10. http://www.chicagotribune.com/business/sns-rt-us-banks-accountingbre87215k-20120803,0,5956855.story 11. http://www.huffingtonpost.com/huff-wires/20120802/us-natural-gas-storage/ 12. http://online.wsj.com/article/BT-CO-20120801-712335.html 13. http://www.reuters.com/article/2012/08/03/argentina-ypf-debt-idUSL2E8J30BJ20120803 15. http://www.reuters.com/article/2012/08/02/usda-sale-idUSL2E8J276E20120802 16. http://www.bloomberg.com/news/2012-07-31/south-america-readies-record-crops-amid-u-s-drought.html 17. http://www.reuters.com/article/2012/08/01/ivorycoast-mining-gold-idUSL6E8J1JY820120801 18. http://allafrica.com/stories/201208030177.html 19. http://www.mineweb.com/mineweb/view/mineweb/en/page34?oid=156415&sn=Detail&pid=102055 21. http://www.profi-forex.us/news/entry4000003454.html 22. http://in.reuters.com/article/2012/07/26/vietnam-coffee-arabica-idINL4E8IQ32G20120726 ____________________________________________________________________________________ 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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