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FinNews for December 14, 2012 Top Stories The Federal Open Market Committee (FOMC) meeting ended with the Federal Reserve announcing that until the unemployment rate falls below 6.5 percent interest rates would hover close to zero. Moreover, in the hopes of stimulating the economy, through increasing consumer spending and improving the labor market's outlook, the Fed "committed to purchase $45 billion in longer-term Treasuries each month on top of the $40 billion per month in mortgage-backed bonds the U.S. central bank started buying in September." (1) For the first time in six months, the U.S. consumer prices fell. The Labor Department reported Friday that the CPI decreased by 0.3 percent for the month of November. (2) However, economists, who were surveyed by Bloomberg, projected only a slightly better forecast of a 0.2 percent drop. (3) U.S. Bureau of Labor Statistics reported that "the Producer Price Index for finished goods fell [another] 0.8 percent in November," on top of the 0.2 percent drop from October. (4) After falling 0.2 percent in October, the core PPI increase by a mere 0.1 percent versus an economist forecast of a 0.2 rise. (5) The 112th Congressional meeting was scheduled to end today; however, due to an inability to reach a compromise regarding the budget it has been extended indefinitely. President Obama and House Speaker John Boehner have been incapable of finding an alternative solution to overcome federal deficits and national debt so the fiscal cliff still looms in the nation's foreground. (6) Economic Releases & Statistics The Department of Commerce's Tuesday release of the U.S. International Trade in Goods and Services showed 42.2 billion dollar growth in the U.S. trade deficit, a 4.8 percent increase from September to October. (7) Both the closures of ports, due to super-storm Sandy, as well as the fragile state of the global economy have played a part in the 3.6 percent drop in exports and the 2.1 percent fall of imports. (7) Economists also blamed the continuing lag in fiscal cliff negotiations for the drop in consumer demand, thus aiding in the largest decline in U.S. exports in almost four years. (8) Retail sales in the U.S. recovered from the 0.3 percent fall in October to a 0.3 percent increase for November. Economists believe that some of the spending that would have normally taken place in October, which was cut short due to super-storm Sandy, moved into November; thus driving the minor increase. (9) "Economists polled by Reuters had [actually] expected an increase of 0.5 percent." (10) Thursday the Commerce Department reported a 0.4 percent increase in business inventories, bringing it "to $1.619 trillion, after rising 0.7 percent in September." (11) Therefore, regardless of the slight increase in sales, economists cite the fact that "sales are [still] running below inventory growth" as the reason behind the rise. (12) Stocks & Earnings Stocks rebounded on Tuesday, thanks to gains made by technology companies, despite fiscal cliff fears causing investors to seek profits before the proverbial fiscal cliff clock runs out and potential tax increases take place. After losing 5.3 percent in the previous seven sessions, the S&P 500 finally ended "at its highest level since Election Day." Apple stock showed a 2.2 percent rise, bringing it to $542.39, which gave Nasdaq the boost it needed to rebound as well. (13) Global Currencies The value of the "euro slipped from a seven-week high against the dollar on Wednesday." This is the first time the value of the euro has decreased in comparison to the US dollar in six trading sessions. Previously, hopes that Greece would receive a financial influx from foreign banks rallied the euro's value; however, concerns over Spain's economic situation prevailed, resulting in the decrease. (14) The dollar lost its earlier gains of 5.5 percent on the yen Friday, by dropping "0.1 percent to 83.52 yen," after the release of the Consumer Price Index. (15) The yen also "added 0.2 percent to 109.23 per euro." This widespread gain over foreign currencies by the yen is being attributed to a call on the Bank of Japan by Shinzo Abe, Japan's opposition leader, to supply "'unlimited easing' and set an inflation target of at least 2 percent." (16) Oil & Energies According to Wednesday's EIA report, the nation's crude oil supplies increased by 800,000 barrels to reach 372.6 million barrels, an upturn of 0.2 percent, which is 11.5 percent higher than last year's levels. This is quite contrary to analysts' predictions that there would be a 2.5 million barrel drop. National gasoline reserves rose as well by 2.4 percent, for an increase of 5 million barrels, which is a 0.8 percent decrease from last year's levels. However, it is double the 2.5 million barrel growth that was indicated by analysts. (17) "The price of oil rose to near $87 a barrel Friday, boosted by a survey that showed the recovery in China's manufacturing is gathering strength." (18) The EIA reported that natural gas supplies last week were up "by 2 billion cubic feet to 3.806 trillion cubic feet for the week ended Dec. 7," in spite of analysts' forecast that it would drop by 1 billion to 5 billion cubic feet. (19) Grains & Field Crops The USDA's most recent WASDE release estimated a 7.0 million ton increase in global coarse grain supplies. This expected increase is principally attributed to a larger corn crop report from China. With this increase in supplies comes a lowering of 1.0 million tons of coarse grain stocks, comparatively reflecting the higher corn exports from Argentina during 2011/12. The 2012/13 global corn production was also "raised 9.4 million tons with China's corn output up 8.0 million tons based on recent estimates from the National Bureau of Statistics. Strong price incentives to expand corn plantings and favorable summer rainfall, particularly in the northeast provinces, support increases in area and yields raising them to new records." (20) As noted by a Reuters news article, lower corn prices in the US enhanced the "demand from feeders, processors and exporters;" thus, causing inventories to continue to be low. The ending soybean inventory is also quite low, due to "crops hurt by the worst drought in half a century." (21) However, with the added speculations that "South America will not produce enough soybeans to meet demand" and potential planting and crop development difficulties arising in Argentina, the price of soybeans increased. (22) The end of the year global wheat stockpiles will beat market expectations, as a consequence of exports coming in lower than originally projected. The global wheat stock forecast was also raised slightly, from last month's prediction of 174 million tons, to 177 million tons, which is being credited to larger crop estimates from Australia and Canada, in addition to China. (21) Precious Metals After a commitment by the Federal Reserve to start stimulating the U.S. economy come January through buying 45 billion dollars' worth of Treasury securities a month, "gold futures rose to a one-week high." Furthermore, the February delivery for gold futures also rose to $1,717.90 an ounce, a 0.5 percent increase that could put it in the position to shows gains for 12 consecutive years, as central banks worldwide vowed to take a more active role in spurring economic growth. (23) In recent months, with platinum gaining nearly 8 percent and palladium increasing 19 percent the platinum grouped metals were able to outperformed gold. Much is being attributed to a "planned launch of the Sprott Physical Platinum and Palladium Trust" that "could buy more than 107,000 ounces of platinum and 253,000 ounces of palladium." (24) Other Commodities Live cattle futures waned down 0.325 cent to 125.275 cents per lb for December. February also fell 0.100 cent to 130.175 cents. "Cash cattle last week in Kansas and Nebraska brought $124, down $1 from the week before. Texas cash cattle moved at $124, compared with $126 to $128 a week earlier." Furthermore, demands for beef will begin to decrease as the year comes to an end. Feeder cattle was up to 149.825 cents per lb, an increase of 0.050 cent per lb, for January and March was also up by 0.050 cent per lb bringing it to 152.200 cents. These gains in futures were supported by lower prices for corn "following the government's monthly crop production report." (25) Despite the fact that they have already harvested nearly 75 percent of their crops, or about 1.1 million metric tons, and sold 360,000 tons, Vietnamese coffee growers are attempting to curtail sales in order to obtain a better price. A curb "on sales from Vietnam may support prices as global supplies increase from Vietnam may support prices as global supplies increase. Farmers worldwide will gather 56 million 60- kilogram bags of robusta in the 2012-2013 year, up from 53.3 million bags a year earlier, the International Coffee Organization estimates. Robusta has tumbled 13 percent since the end of September when harvesting began in Vietnam." (26) A longer than anticipated rainy season on Africa's Ivory Coast has extended the cocoa bean's growing season this year. A steady and plentiful crop is expected to until January due to the favorable weather which has led to a longer growing season. (27) Upcoming:
1. http://www.reuters.com/article/2012/12/12/us-usa-fed-idUSBRE8BB08A20121212 2.http://www.cnbc.com/id/100314911 4. http://www.bls.gov/news.release/ppi.nr0.htm 5. http://www.reuters.com/article/2012/12/13/us-usa-economy-prices-idUSBRE8BC0QZ20121213 6. http://www.cnn.com/2012/12/14/politics/fiscal-cliff/index.html 8.http://www.nytimes.com/2012/12/12/business/economy/decline-in-exports-hurts-us-trade-deficit.html 10. http://www.reuters.com/article/2012/12/13/us-usa-economy-instant-idUSBRE8BC0T120121213 11. http://www.reuters.com/article/2012/12/13/us-usa-economy-inventories-idUSBRE8BC0X020121213 13. http://www.reuters.com/article/2012/12/11/us-markets-stocks-idUSBRE8AP08020121211 14. http://www.reuters.com/article/2012/12/05/us-markets-forex-idUSBRE8AP01O20121205 15. http://www.reuters.com/article/2012/12/14/markets-forex-idUSL5E8NE98S20121214 17. http://www.boston.com/business/markets/2012/12/12/crude-oil-supplies-grew-barrels/CANsRmpjwMIvEPViiSxfmM/story.html 18. http://www.myfoxaustin.com/story/20343000/oil-rises-above-86-as-china-factory-data-improves 19. http://www.miamiherald.com/2012/12/13/3140531/us-natural-gas-supplies-grew-last.html#storylink=misearch 20. http://www.agprofessional.com/resource-centers/corn/key-reports/WASDE-Corn-price-outlooks-lowered--182971601.html?ref=601 21. http://www.reuters.com/article/2012/12/11/usda-crop-production-idUSL1E8NB25X20121211 22. http://www.theprairiestar.com/news/markets/excitement-returns-to-soybean-market-after-two-month-absence/article_aa8720d6-4481-11e2-8007-0019bb2963f4.html 23. http://www.bloomberg.com/news/2012-12-12/gold-trades-near-one-week-high-in-london-on-stimulus-speculation.html 24. http://www.reuters.com/article/2012/12/12/markets-precious-idUSL4N09M2LR20121212 25. http://www.reuters.com/article/2012/12/11/livestock-markets-cme-idUSL1E8NB3FZ20121211 26. http://www.bloomberg.com/news/2012-12-12/coffee-farmers-in-vietnam-curb-sales-after-fast-harvest-progress.html 27. http://www.brecorder.com/agriculture-a-allied/183/1267076/ _______________________________________________________________________________________ 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. The publisher, 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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