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10 Things You Need To Know This Morning
Good morning. Here's what you need to know.
- Asian indices were mixed in overnight trading with the Shanghai Composite up 0.1%. Major European indices are down and U.S. markets have opened lower.
- More terrible data from the UK. Manufacturing output for April was weaker than expected at -1.5% from the previous month but was up 1.3% year-over-year.
10 Signs That Wall Street Is About To Go Into Panic Mode
Can you smell the fear? Right now world financial markets are visibly nervous and many are worried that Wall Street is about to go into panic mode. It really is eerie how 2011 is shaping up to be so similar to 2008.
Major Wall Street banks are laying off workers in droves, oil prices are at very high levels, pessimism is permeating the financial markets, debt ratings are being downgraded all over the place and consumer confidence is stunningly low.
Sadly, none of the fundamental things that were wrong with the financial markets back in 2008 have been fixed. In fact, many believe that Wall Street is even more vulnerable now. A ton of bad economic numbers have come pouring in lately and that has put investors in a really sour mood. All it would probably take is for one really significant " trigger event" to take place for Wall Street to go into full-fledged panic mode.
Let us hope and pray that we do not see another Wall Street disaster this year. But right now things do not look promising. Japan has been absolutely devastated, Europe is struggling with the Greek debt crisis and the U.S. economy resembles a dead horse at this point. Meanwhile, world financial markets are getting more bad news on an almost daily basis. Many investors are holding their breath and hoping that a worst case scenario does not play out.
The following are 10 signs that Wall Street is about to go into panic mode....
Nearly all of the major Wall Street banks are planning huge layoffs
A " negative feedback loop" has " taken control" on Wall Street meaning that bad economic news is creating an " environment of pessimism" which creates even more bad economic news, etc. etc.
Image: MyEyeSees via flickr
Source:
CNBC
OPEC announced oil production levels will not be raised which will likely increase prices in the coming weeks. For the first time since 2008, U.S. energy expenditures have reached 9% of GDP
Pimco's co-chief investment officer, Bill Gross, is telling investors that for the Fed it will " be difficult to initiate a QE3," but without artificial stimulation the U.S. economy may start really struggling again
Image: why pamper life's complexity via Flickr
Source:
CNBC
Moody's recently warned that it may downgrade the debt ratings of Bank of America, Citigroup and Wells Fargo
On April 18th, Standard & Poor’s changed its outlook on U.S. government debt from " stable" to " negative" and warned that the U.S. could soon lose its AAA rating and China has been dumping short-term U.S. government debt
U.S. consumer confidence is lower than it was back in September 2008 when Lehman Brothers collapsed
Mike Riddell, of M& G Investments in London, told CNBC, " It seems that almost every bit of data about the health of the US economy has disappointed expectations recently."
Economist Nouriel Roubini recently warned about the next financial crisis
According to a new CNN/Opinion Research Corporation poll, 48% of Americans believe that it is either " very likely" or " somewhat likely" that the United States will experience a " depression" within the next 12 months
Don't let financial disaster put you in a panic mode
Once again, let's hope that financial disaster can be averted for as long as possible. The last thing the United States needs right now is another major crisis.
America has been hit by a whole series of
natural disasters in 2011. We have seen unprecedented tornadoes, historic flooding along the Mississippi River, and horrible wildfires in Texas and
in Arizona.
Thousands upon thousands of American families are deeply suffering tonight.
Dave Daubenmire recently visited Joplin, Missouri and what he witnessed there
was absolutely heartbreaking. Thousands of families there have lost absolutely
everything.
But for most Americans, the impact of a particular tragedy fades after the 48-hour news cycle has passed. If the television doesn't tell us that something is important then most of us are not likely to think about it much.
Most Americans think pretty much only of themselves. The vast majority of us are just so busy pursuing our own version of "
the American Dream" that we don't have much time for much else. The love of most Americans has grown cold and most of them are primarily interested in how they can make their own lives better.
But whoever " dies with the most toys" does not win the game of life. Rather, we should all be seeking to show as much love to others as we possibly can.
The next time the financial markets crash and Wall Street goes into panic mode, there will probably be another string of suicides as a lot of wealthy people watch their wealth evaporate.
Don't let your life be defined by how much money is in your bank account or by how much stuff you own. Life is about so much more than that.
We should probably panic about home prices too
Singapore shares fell by midday on Friday as Wall Street’s gains overnight failed to inspire investors to take more risks, but Singapore-listed Chinese shipbuilder Yangzijiang outperformed on the back of contract wins worth US$700 million ($861.6 million).
By the lunch break, the Straits Times Index (STI) < .FTSTI> was down 0.22%, or 6.74 points, at 3,090.83. The total value of shares traded in the morning session was $556.1 million, slightly higher than $530.4 million on Thursday.
However, local traders said the STI may have limited downside in the afternoon.
“It boils down to liquidity. Liquidity is not coming in because there are fears in the market and even foreign funds are not flowing into Singapore,” said Roger Tan, head of research at SIAS Research in Singapore.
“China inflation, US recovery and European debt problems are the usual fears,” he said. “On the economic level, Singapore has performed way better than a lot of other nations so investors might think it’s likely to normalize this year.”
Shares of Yangzijiang (YAZG.SI) rose as much as 3.9% after the firm secured contracts worth US$700 million to build seven container ships for Seaspan Corp (SSW.N).
At midday, Yangzijiang shares were up 2.6% at $1.57 on a volume of 18.9 million shares.
Singapore’s Keppel Corp (KPLM.SI), the world’s largest oil rig builder, rose as much as 1.4% after the firm announced it had won a $142 million contract from Seadrill (SDRL.N) (SDRL.OL) to build a drilling unit.
By the break, Keppel Corp stock was 0.7% higher at $11.16 with 3.5 million shares changing hands.
However, casino operator Genting Singapore (GENS.SI) fell after the Business Times reported the Singapore government had told rival Las Vegas Sands to cap the percentage of locals who visit its Marina Bay Sands casino in the city-state at around 30%.
“If the Singapore government has asked MBS to limit the percentage of visitors to its casino, then I would expect them to do a similar thing to RWS (Genting’s Resorts World at Sentosa),” said Teng Yee Tan, an analyst at CIMB Research.
“But I don’t think it’ll impact RWS’ business significantly because their revenue is still largely driven by the premium players,” he added. “Their clients are likely from Malaysia and Indonesia.”
At midday, Genting stock was down 1% at $1.95 on a volume of 56.1 million shares.
The stock has fallen around 10% since its first quarter results on concerns about easing gaming volume and Genting’s recent investment in resources, which analysts said is a diversion from its core casino and leisure operations.
SINGAPORE, June 10 (Reuters) - Singapore has signalled willingness to let its power generating firms sell electricity to neighbouring Malaysia beyond a June 15 deadline. " In response to Tenaga Nasional Berhad's request, the Energy Market Authority (EMA) granted the approval for PowerSeraya Ltd to export electricity to Malaysia till June 15, 2011," the energy regulator said on Friday in reply to a Reuters query. " EMA will consider requests for export of electricity on a case-by-case basis, taking into account the electricity demand and supply situation in Singapore and any system security concerns," it added. EMA said Singapore's total power generation capacity is about 9,800 megawatts (MW), while its peak demand for electricity is around 6,500 MW. Singapore recently began its first-ever cross-border sale of electricity to Malaysia, where supply has been disrupted by the maintenance shutdown of gas production platforms owned by state oil company Petronas [PETR.UL].[ID:nL3E7H90W5] PowerSeraya, which sold the electricity to Tenaga, is owned by Malaysian company YTL Power .
Today’s Focus
• Yangzijiang - A big leap into the large size containership market with US$700m contract secured.
Stocks are likely to open the session higher on the back of the overnight rebound on Wall Street and chances are that traders here will also be looking for near-term bargain opportunities after the recent market lull. Yangzijiang and MIDAS should rebound on news of contract wins after fallen to much oversold levels. Both their 8-wk RSI are below 30 and weekly stochastics are below 20.
Yangzijiang has inked shipbuilding contracts worth US$700m with Seaspan Corporation to build seven units of 10k TEU containerships. The contracts also come with options for additional 18 units of identical vessels totaling US$1.8bn, implying potential total contract value of US$2.5bn if all options are exercised. The Seaspan contracts have marked Yangzijiang’s foray into large size containership space, which has been dominated by Korean yards. The firm contracts of
US$700m (excl options) bring Yangzijiang’s YTD wins to US$1.541bn, outstripped our expectation of US$1.5bn for the year. We have revised up our FY11/12 order win assumption from US$1.5bn/US$1.7bn to US$2bn each year to account for the Seaspan order wins. Maintain Buy, TP S$2.70.
Midas has won a RMB62m contract from CNR Changchun to supply aluminium extrusion profiles for 246 train cars for the Shanghai Metro Line 12 project, which are to be delivered from 2011 to 2013. This will boost Midas' order book to about RMB1.3bn. Maintain Buy on Midas, TP: S$1.10.
A strong pipeline of residential supply is maintained in the 2H11 Government Land Sale (GLS) programme in response to the need to provide more mass market housing and the govt’s intention to keep accelerating prices in check. A total of 19 Confirmed and 24 Reserve list sites with a potential of 14,195 housing units (incl 2,320 ECs, 16% of total), 267,400sm of commercial GFA and 3,750 hotel rooms were introduced, of which 20 sites were carried over from 1H11 GLS. As per the
latest list, 8,115 residential homes, 435 hotel rooms and 110,950sm GFA of commercial space are on the Confirmed list, on par with the quantum in the 1H11 GLS.
Adjusting for the latest figures, residential completions of 68,887 units (of which 50% is unsold/not launched for sale at this point) from 2Q11-> 2015 represents 6.4 years of supply based on latest 5-year average demand of 10,800 units. Inclusive of the targeted launch of 26,000 HDB housing units to be offered by the govt this year, medium term stock is on the rise. This should cap mass market housing prices in the medium term. As for office supply, the government estimates there is 7.6msf of GFA to be completed between 2Q11 and 2013. At this point we believe much of the headwinds appear to have been factored in but near term catalysts are lacking and stocks could trade range bound. We would adopt a bottom-up stock picking strategy and prefer companies with a diversified business model and strong balance sheet capacity to acquire sites selectively such as UOL and Capitaland.
Changi Airport Group (CAG) has awarded the 3rd
Ground Handling licence to US-based Aircraft Service International Group (ASIG), from a tender exercise which saw proposals from 3 parties. The 10-year licence allows ASIG to provide the full suite of passenger, apron and cargo handling to airlines operating at Changi Airport. At this point, we see impact on SATS to be minimal given that ASIG does not have any significant presence in Asia. We have already assumed that SATS' market share in passenger handling, flights and cargo handled to drop by c.2ppt per year into 2013 as the re-introduction of a 3rd ground handler is not something new. Maintain Hold on SATS, TP S$2.91.
STX OSV has secured contracts from repeat customer, Island Offshore, for the construction of 2 PSVs, worth a total of c. NOK750m, scheduled for delivery in 1Q2013 and 3Q2013. Orderbook stands at an estimated NOK16.9bn, or a book-to-bill of c. 1.4x. Maintain Buy, TP: S$1.86.
Keppel Corp has secured its first order from Seadrill in 3 years for the construction of a newbuild semisubmersible drilling tender rig, worth US$142m, and scheduled for delivery in 2Q2013. This unit will be 8th semisub tender Keppel has built for Seadrill. This latest order brings KEP’s FY11 YTD order wins to c. S$6.8bn accounting for 76% of our full year assumption of S$9bn. Order backlog stands at around S$10bn, with book-to-bill ratio of around 2x. Maintain Buy, TP: S$13.55.
Keppel Land Ltd has acquired a 7.2-hectare residential property development site in Shanghai's Jiading district for RMB1.25bn. It plans to build about 1,000 high-rise apartments on the site with the first phase of the development expected to be launched in the second half of 2012.
Tiger Airways posted a 23% yoy jump in passenger volume for the month of May, while the load factor inched up one percentage point to 83%. For the 12
month period spanning June 2010 to May 2011, Tiger carried nearly 6.2m passengers, up 20% from 5.15m. The average load factor for the 12 months came in at 86%, up one percentage point from 85% previously.
US markets rebounded after data showed that the U.S. trade deficit unexpectedly narrowed in April, reflecting a plunge in auto and oil imports combined with record exports. Separately, a consumer confidence index by Bloomberg rose last week for the 3rd consecutive week as lower gasoline prices lifted Americans outlook for their finances. Indices may also have fallen to oversold levels after recent losses and this can trigger bargain hunting activities. Raw materials and bank stocks led gains.
Residential Sector: A strong GLS supply amidst ministerial worries
Summary: URA announced yesterday that the 2H11 GLS supply would match that of 1H11. Assuming 4k units were sold in Apr-May 11, we estimate the current pipeline of unsold units is ~50k units, which is at a three-year high. Despite this, we think many confirmed sites would still attract considerable interest. Seven sites are within walking distance to an MRT or LRT station. Two sites on the reserve list could also draw strong bids from CapitaLand due to their strategic locations beside existing landbank. We note that National Development Minister Khaw Boon Wan had expressed his worries about a “sharply rising property market” in his blog. Because we estimate the BTO income hike to have a muted impact on the private property market (see report titled “Closer look at the possible BTO ceiling hike” dated 8/6/11), we think there is a meaningful chance of more cooling measures. Maintain NEUTRAL on the residential property sector. BUY UOL with a fair value estimate of $5.57 (at 20% discount to RNAV). (Eli Lee)
Ascott Residence Trust (ART): Potential headwinds may tamper growth
Summary: The IATA has recently revised its yearly profit outlook for the global airline industry with a 54% cut from US$8.6b three months ago to US$4.9b. Total passenger traffic is also expected to grow by just 4.4% this year compared to last year – slower than the 5.6% forecast three months ago. We think ART’s hospitality growth, with its 43.2% and 10.7% exposure (asset values) in Europe and Japan respectively may be tampered by the softening of air travellers ahead. In Europe, business sentiments continue to be plagued by lingering debt crisis. We remain wary of the prospects of ART’s properties in UK, Belgium and Spain, on the back of further fiscal tightening and rising inflationary pressures. The performance of the service residences industry has historically been correlated to GDP growth and FDI inflows, and the current state of affairs certainly suggests a less positive outlook. We are however more positive on its Singapore properties (21.5% of asset value) on the back of rising international visitor arrivals (IVA) and escalating RevPau. Nonetheless, given ART’s exposure in Europe and Japan, its share price may face further secular headwinds in the form of weakening demand and continued inflationary worries. Maintain BUY albeit with a reduced fair value of S$1.30 (prev: S$1.34). (Ong Kian Lin)
Midas Holdings: Secures RMB62m contract
Summary: Midas Holdings (Midas) announced yesterday evening that its aluminium alloy division has secured a contract worth RMB62m from CNR Changchun Railway Vehicles Co for the Shanghai Metro Line 12 Project. This would entail the provision of aluminium alloy extrusion profiles by Midas for 41 train sets, or 246 train cars. Delivery is expected to take place from 2011 to 2013. In our view, this latest contract win is of a relatively small-scale and we are expecting stronger contract wins in 2H11 as China’s Ministry of Railways has recently recommitted its intention to invest RMB745.5b in 2011 after the corruption scandal surrounding its Minister of Railways. Prior to this announcement, Midas’ order book stood at RMB1.2b. We are keeping our estimates intact as our projections allow for such contract wins. Maintain BUY and S$1.10 fair value estimate (based on 20x FY11F EPS). (Wong Teck Ching Andy)
For more information on the above, visit www.ocbcresearch.comfor detailed report.
NEWS HEADLINES iocbc
- Special auditors of China Milk Products have unraveled several irregularities in the company's transactions and found significant payments made without board approval and documentation.
- Noble Group has thrown in a counter-bid for Australian iron miner Territory Resources in a cash offer that values the ASX listing at about A$132.6m (S$173.6m).
- In a bid to grow its cashflow and boost liquidity, First Ship Lease Trust has raised S$20m - or US$16.3m - from a private placement of 56m new units.
- Keppel FELS has clinched a US$142m contract for the construction of a semi-submersible drilling tender from offshore drilling contractor Seadrill.
- Subsidiaries of Yangzijiang Shipbuilding have entered into contracts worth US$700m to build seven 10,000-TEU containerships.
- NOL Group will be issuing S$300m worth of Euro medium term notes in what was a hugely oversubscribed offering.
- A wholly-owned subsidiary of Keppel Land has purchased a 7.2 hectare site in Jiading District, Shanghai, for RMB1.25b (S$237m).
Technically: cimb
• Noble Group (NOBL SP S$2.01, BUY) – Prices likely to resume rally when consolidation ends.
• China Animal Healthcare (CAL SP S$0.275, BUY) – MACD reconfirming its golden cross.
• PEC (PEC SP S$0.995, BUY) – Bullish divergence on both the MACD and RSI.
What's Relevant...
Singapore shares closed lower on Thursday with the blue-chip Straits Times Index down 5.4pts to 3,097.6. Volume was 1.2bn shares worth $1.0bn with losers leading gainers 229 to 179. We expect local market to track gains on Wall Street to open higher this morning.
Corporate News...
Singapore Property. The MND released additional land supply to potentially yield 14.2k residential units in the latest 2H11 GLS Programme similar to that in 1H11. We do not see property policies loosening anytime soon. Around 2.9msf of commercial space has been released, of which 1.8msf are outside the CBD. We see this move aimed at developing decentralized commercial hubs for the future and minimizing volatility in prime rents. In comparison, we believe the office sector climate is much more balanced, and thus expect gradual increases in rents. Maintain UNDERWEIGHT. CityDev our key UNDERPERFORM. OUE and F& N remain our top picks.
Keppel Corp secured US$142m semisubmersible drilling tender scheduled for delivery in 2Q13 the eighth drilling tender that Keppel will be building for Seadrill. Maintain OUTPERFORM TP S$14.00.
Indofood Agri’s 72%-owned PT Salim Invomas Pratama (PT SIMP) rose 14% to Rp1,250 per share on its trading debut yesterday at current price, PT SIMP offers a cheaper and direct exposure to Indofood Agri’s assets. Upgrade to NEUTRAL with lower TP of S$1.90. We recommend investors to switch to PT SIMP which offers higher upside to our target value of Rp1,713 per share.
Raffles Medical Group. The Ministry of Health’s immediate focus is not on lowering costs, but to review current funding framework and address capacity problem. RFMD’s management has already hinted at a gradual increase in medical charges this year across the board, which should provide stock catalysts for the group, in our opinion. Maintain OUTPERFORM and TP of S$2.64.
SATS. A third ground handler, US-based Aircraft Service International (ASIG), has been awarded a ten-year ground handling license by Changi Airport Group. Stiffer competition could possibly result in market share erosion for SATS, who is already facing headwinds from inflationary cost pressure and the aftermath of Japan's earthquake. Maintain UNDERPERFORM, TP S$2.56.
STX OSV secured two PSV contracts from Island Offshore worth NOK750m. Ytd, NOK3.5bn (35% of our FY11 target excluding Transpetro orders) of orders have been secured. 2Q11’s orders of NOK2.4bn have outpaced 1Q11’s orders of NOK1.1bn. Maintain OUTPERFORM and TP of S$1.70. STX OSV is our top pick among small-mid cap industrials.
Yangzijiang. Long anticipated Seaspan’s order of 10,000 TEU container vessels came in, with seven units worth US$700m and option for additional 18 vessels expiring in Apr-2012. Current contract win could lift YTD order win to US$1.2bn (60% of our US$2bn target for 2011). We see this win as a major milestone for YZJ as it climbs up the value chain with larger vessels, competing heads on with the Korean yards. Upgraded to OUTPERFORM, TP of S$2.05.
Libya rebels win aid, West sees Gaddafi exit
A man prays near the checkpoint in the town of Kalaa
By Andrew Quinn and Peter Graff
ABU DHABI/TRIPOLI (Reuters) - Libya's cash-starved rebels on Thursday won more than $1.1 billion (672 million pounds) of aid at a conference of Western and Arab powers that focussed on the end-game for Muammar Gaddafi and the country's civil war.
U.S. Secretary of State Hillary Clinton said talks were under way with people close to Gaddafi that had raised the " potential" for a transition of power, but added: " There is not any clear way forward yet."
Also referring to what he called multiple feelers from the Gaddafi government, Australian Foreign Minister Kevin Rudd said Gaddafi's end " may come sooner" than expected.
NATO warplanes relentlessly bombed Tripoli as the rebels said at the talks in Abu Dhabi that they hoped to restart oil production soon.
At the United Nations, the prosecutor of the International Criminal Court (ICC) said its investigators had found evidence linking Gaddafi to a policy of raping opponents.
A possible war crimes prosecution could be an incentive for Gaddafi to cling to power, but Senegalese President Abdoulaye Wade, offered to help ease his former African Union ally's exit from power and appealed to him to step down.
" It is in your own interest and the interest of all the Libyan people that you leave power in Libya and never dream of coming back to power," Wade said during a visit to the rebels' eastern stronghold of Benghazi.
" I can be one of those who help you pull out of political life and the sooner you leave the better," Wade, the first foreign head of state to visit the rebel city, said.
" PEOPLE CLOSE TO GADDAFI"
Clinton declined to give details of discussions over Gaddafi's future.
" There have been numerous and continuing discussions by people close to Gaddafi and we are aware that those discussions include among other matters the potential for a transition," she said at the end of the Libya contact group meeting.
A bipartisan group in the U.S. Congress urged President Barack Obama to use frozen Libyan government assets to pay for humanitarian aid for Libyan people caught up in the civil war.
NATO air strikes took place through Thursday after a lull following the heaviest day of bombings since March.
Rebel Oil and Finance Minister Ali Tarhouni said they hoped to restart production of 100,000 barrels a day " soon," without specifying a timeframe, and called for more aid, immediately.
" " Our people are dying ... So my message to our friends is that I hope they walk the walk," he told reporters.
Italian Foreign Minister Franco Frattini told Reuters Rome would give the rebels up to 400 million euros ($586.1 million) of cash and fuel aid backed by frozen Libyan assets.
Kuwait said it would immediately transfer $180 million to the rebels, while the UAE said it would make an announcement on financing and the diplomatic status of the rebels soon.
French Foreign Minister Alain Juppe said about 290 million euros in assets would be unfrozen by French banks. Turkey, which will host the next meeting in Istanbul during July, said it had set up a $100 million fund.
" END-GAME"
The 22-nation contact group, which includes Western and Arab countries as well as organisations such as the United Nations, is pressing the rebels to give a detailed plan on how they would run the country if Gaddafi stood down or was toppled.
" The international community is beginning to talk about what could constitute end-game to this," one senior U.S. official told reporters ahead of the meeting.
That official listed scenarios including a cease-fire, which Tripoli has demanded include leaving Gaddafi's fate open.
" We are for the people of Libya and only for the people of Libya," Turkish Foreign Minister Ahmet Davutoglu said. " But at the same time we need to find a political solution ... we need to have a roadmap to keep Libya as a united country and to complete this transitional period as a successful process."
The rebel Transitional National Council (TNC) and its Western allies have rejected Libyan government cease-fire offers that do not include Gaddafi stepping down first.
U.S. officials on Wednesday announced delivery of the TNC's first U.S. oil sale, which they hope will get money flowing.
One of the highest-ranking defectors, Libyan U.N. ambassador Abdurrahman Shalgam, said the rebels needed $3 billion to cover salaries and food costs for the next four months. Libyan assets in Italy could contribute to that sum, he said.
On the military front, U.S. Defence Secretary Robert Gates said that European countries flying the bulk of the air strikes are stretched thin and will find the NATO-led mission more painful unless other allies do more.
HELICOPTERS TO ACCELERATE ATTRITION
Rear Admiral Philippe Coindreau, who heads French operations over Libya, said that the strikes against Gadaffi's forces were increasingly wearing them down.
" Everyday I'm seeing the attrition of Gaddafi's assets and forces," Coindreau said in a videoconference from the Charles de Gaulle aircraft carrier. " The recently arrived helicopters bring added-value and accelerate this."
The alliance says the bombing aims to protect civilians from the Libyan military, which crushed popular protests in February.
The Libyan leader says the rebels are Islamist militants and NATO attempting to grab Libya's oil.
At the United Nations, the ICC prosecutor said its investigators have evidence linking Gaddafi to a policy of raping opponents and may bring separate charges on the issue.
At the United Nations human rights body, Libya's envoy rejected a separate U.N. report accusing its forces of crimes.
Rebels in the besieged western city of Misrata said thousands of pro-Gaddafi forces launched a major advance on the city killing at least 12 people on Wednesday.
" The situation is a stalemate --- both sides are adopting hit-and-run tactics," rebel spokesman Abdelsalam said from Misrata late on Thursday after more bombardments on the city. " NATO has to change something. Their goal is unclear."
NATO disputed the account.
" There were some small groups of pro-Gaddafi forces who were trying to advance towards the centre of Misrata ... but I think this is an embellishment," a NATO official said.
Gaddafi troops and the rebels have been deadlocked for weeks between the eastern towns of Ajdabiyah and the Gaddafi-held oil town of Brega. Rebels also control the western city of Misrata and the range of western mountains near the border with Tunisia.
(Additional reporting by Khaled al-Ramahi in Misrata, Sherine El Madany in Benghazi, Adrian Croft in London, Humeyra Pamuk, Martina Fuchs and Mahmoud Habboush in Abu Dhabi, Joseph Nasr in Rabat and Elizabeth Pineau in Paris Writing by John Irish and Joseph Logan Editing by Tim Cocks and Andrew Heavens)
Euro down as ECB rate hike expectations scaled back
* ECB holds rates at 1.25 pct July hike widely expected
* ECB inflation forecasts for 2012 unchanged
* Markets slightly pare back ECB rate increases
* Greece worries hurt euro BoE decision nips sterling (Updates prices)
By Steven C. Johnson
NEW YORK, June 9 (Reuters) - The euro fell on Thursday after the European Central Bank kept its 2012 inflation forecast unchanged, suggesting the pace of euro zone interest rate hikes may be slower than previously thought.
ECB President Jean-Claude Trichet did signal that the benchmark refinancing rate, now at 1.25 percent, would rise next month. But markets expected as much and had already priced in the prospect of a July hike.
Investors sold the euro after the ECB said inflation would hold at 1.7 percent in 2012, lower than analysts had expected. Investors now expect 75 basis points of tightening over the next year, from around 80 basis points before Trichet spoke.
Greece worries also weighed on the euro after Moody's said it would be tough to imagine private creditors participating voluntarily in a debt restructuring. For details, see [ID:nFAB016108]
Trichet said any private sector involvement would have to be voluntary. Earlier this week, German Finance Minister Wolfgang Schaeuble called for a " quantified and substantial" contribution from bondholders to any new bailout for Greece.
" It feels like selling euro upticks against the dollar will remain the bias, not least because the expected rate hike signal is out of the way and it is clear that many major decisions on how to navigate the Greek crisis have not been taken in either Athens or other European capitals," said Alan Ruskin, global head of G10 currency strategy at Deutsche Bank.
The euro fell 0.5 percent to $1.4511 < EUR=> , and Ruskin said $1.4450 was a reasonable short-term target.
Against the yen, the euro was unchanged at 116.53 < EURJPY> , while the dollar rose 0.4 percent to 80.28 yen < JPY=> .
Sterling fell 0.2 percent to $1.6366 < GBP=D4> after the Bank of England kept rates at record lows. [ID:nLAC005850]
'STRONG VIGILANCE'
The euro initially rose above $1.46 after Trichet said " strong vigilance" was warranted to curb inflation in the 17-country euro zone but then abruptly fell, triggering automatic sell orders at $1.4600, $1.4550, and $1.4500.
Investors have come to view the words " strong vigilance" as Trichet's way of signaling a rate increase the following month. For Trichet's remarks, click on [ID:nFAT007213].
The last eight times Trichet used those words, the euro appreciated in the 72 hours that followed, analysts said.
" Trichet uttered the fateful code words 'strong vigilance,' preparing the market for further tightening," said GFT Forex research director Boris Schlossberg. " However, Trichet also suggested that the central bank expects inflationary pressures to moderate in 2012, leading many market participants to conclude that the action in July may be a one-off event rather than the start of a series of rate hikes."
The focus could now come back to the Greek debt crisis. News on the debt-ridden country was mixed the last two days and short-term Greek borrowing costs remained elevated.
Sources told Reuters a new international bailout for Greece may total 120 billion euros. Schaeuble said Wednesday Greece needed 90 billion euros to get through 2014. [ID:nLDE75819V]
Jens Nordvig, head of G10 FX strategy at Nomura Securities, said the question in the longer run is whether Greece's debt woes infect sentiment toward other euro zone countries.
" The key unknown is contagion, and in this context the resilience of bigger countries -- Spain and Italy -- remains key," he said. (Additional reporting by Gertrude Chavez-Dreyfuss editing by Dan Grebler)
Wall St bounce fails to impress the skeptics
The New York Stock Exchange building
* U.S. new weekly jobless claims rise, trade gap narrows
* Semiconductor index holds key level
* Equity options pull/call ratio closed at 18-month high
* Dow up 0.6 pct, S& P up 0.7 pct, Nasdaq up 0.4 pct (Updates with volume, advancers and decliners)
By Angela Moon
NEW YORK, June 9 (Reuters) - Wall Street ended higher for the first time in over a week on Thursday, with the Dow and the S& P 500 rising 1 percent at one point, but many analysts saw the rebound as short-lived.
A report showing record U.S. exports in April eased some concerns about a stalled economic recovery, which had been weighing on the market.
A spike in oil prices helped lift materials and energy stocks. Investors also snapped up beaten-down stocks in the financial sector.
The S& P materials sector index rose 1.6 percent and the energy index gained 1.2 percent. The Morgan Stanley cyclical index, which is down more than 5.2 percent in June, rose 1 percent. The KBW bank index was up 1.2 percent.
Several economists said the spike in U.S. exports in April could prompt revisions higher of gross domestic product growth in the second quarter, interrupting a trend of lowered expectations.
But the mood remained fragile. Many analysts still expected the S& P to retest its March low of 1,250 after a string of data, including the latest payrolls report, provided little room for optimism.
Concerns about the future of equities after the Fed's $600 billion second round of stimulus expire at the end of this month also weighed on the market.
After falling for six straight days, " the market was looking for an excuse to bounce back and it got it" from the trade data, said Steve Blitz, senior economist at ITG in New York.
" You can't take just one day and draw a conclusion that the bear market is over."
Reflecting the bearish sentiment, the daily volume put/call ratio for equity options on the Chicago Board Options Exchange (CBOE) was at an 18-month high as of Wednesday's close, according to data posted on the exchange website, indicating investors are significantly bearish on the stock market.
The Dow Jones industrial average was up 75.42 points, or 0.63 percent, at 12,124.36. The Standard & Poor's 500 Index rose 9.44 points, or 0.74 percent, at 1,289.00. The Nasdaq Composite Index gained 9.49 points, or 0.35 percent, at 2,684.87.
The S& P had lost more than 6 percent in the last six days leading up to Thursday, while the Nasdaq had nearly erased its gains for the year.
BUYING OPPORTUNITY?
CBOE data showed that put/call ratio on equity options rose to 0.99 on Wednesday, which means 99 puts traded for every 100 calls, the highest ratio since Jan. 15, 2009. The average had been between 0.55-0.70 this year.
The high put/call ratio signals investors are actively hedging their bets and setting up for further market declines. But as in other cases, extreme bearishness could also be a contrarian indicator.
" A lot of fear came into the market as investors bought puts," said Jay Shartsis, director of options trading at R.F. Lafferty & Co in New York.
" (But) the high ratio identifies a good buy level for stocks. When a ratio turns this high, from a contrarian view, the risk-reward factor is now significantly skewed to the buy side," Shartsis said.
The PHLX semiconductor index bounced off its 200-day moving average and was holding near 410, a key level that offered strong support in March.
Texas Instruments Inc shares rose 0.7 percent to $32.91 even after the company cut its earnings and revenue forecasts late on Wednesday.
Reflecting the appetite for tech stocks, shares of Fusion-io surged 18.4 percent to $22.50 in their first day of trading -- up from an initial public offering price of $19. Earlier, the stock was up as much as 34.2 percent at a session high of $25.50.
But shares of China-based Taomee Holdings Ltd fell 8.6 percent to $8.23 in their stock market debut as U.S.-listed Chinese companies come under more scrutiny following a series of accounting scandals.
As U.S. regulators, brokers and investors are sharpening their look at Chinese companies, about half the top percentage losers on the NYSE and the Nasdaq with share prices over $2 were Chinese companies.
Volume was thin on the New York Stock Exchange, NYSE Amex and Nasdaq with just 6.31 billion shares traded, compared with the daily average of 7.59 billion.
Advancers beat decliners on the NYSE by 1,904 to 1,076. On the Nasdaq, advancing stocks outnumbered declining ones by 1,599 to 1,002.
Details of Thursday's economic data showed the U.S. trade deficit narrowed unexpectedly in April as U.S. exports rose to a record and imports from Japan tumbled more than 25 percent.
A separate report showed the number of Americans filing new claims for unemployment benefits rose by 1,000 last week, while continued claims fell more than expected. (Additional reporting by Rodrigo Campos in New York and Doris Frankel in Chicago Editing by Jan Paschal)
Libyan rebels get aid, blast heard in capital
By Peter Graff
TRIPOLI (Reuters) - NATO warplanes pummelled a town west of Libya's capital, state media said soon after Western and Arab powers promised more than $1 billion to help rebels fighting to end Muammar Gaddafi's four-decade rule.
A Reuters journalist also reported a loud explosion in Tripoli on Friday just after midnight, a common time for NATO strikes on the capital.
The 22-nation Libya contact group that includes The United States, France and Britain as well as Arab states such as Qatar and the UAE, met in Abu Dhabi to press the rebels to give a detailed plan on how they would run the country if Gaddafi stood down or was toppled.
U.S. Secretary of State Hillary Clinton said talks were under way with people close to Gaddafi that had raised the " potential" for a transition of power without giving details.
Also referring to what he called multiple feelers from the Tripoli government, Australian Foreign Minister Kevin Rudd said Gaddafi's end " may come sooner" than expected.
But there was frustration among the rebel leadership despite securing new aid commitments from France, Italy and Turkey.
" Our people are dying ... So my message to our friends is that I hope they walk the walk," rebel oil and finance minister Ali Tarhouni said, adding he hoped oil production of 100,000 barrels a day would restart soon.
Libyan state television reported on Thursday that the NATO-led military alliance had hit civilian and military targets in the town of Zuwarah, 120 km west of the capital Tripoli after earlier resuming strikes in the capital following the heaviest day of bombings since March.
Rebels said pro-Gaddafi forces shelled their positions in the Western Mountains region on Thursday night, adding NATO had not been doing enough to confront the renewed attacks.
" They (Gaddafi forces) are shelling Zintan (160 kilometres southwest of Tripoli) with Grad missiles," said rebel spokesman Abdulrahman late on Thursday. " There have been no NATO air strikes for a week."
Another rebel spokesman Juma Ibrahim in Zintan said the towns of Yafran and Nalut had also been shelled and that Gaddafi's forces were massing near the Tunisian border to try to retake the Wazin crossing from the rebels.
" STALEMATE"
Rebels in Misrata said shelling had also resumed after a " major advance" from Gaddafi loyalists on Wednesday. A NATO official earlier played down the reports of government advances.
" The situation is a stalemate -- both sides are adopting hit-and-run tactics," rebel spokesman Abdelsalam said from Misrata. " NATO has to change something. Their goal is unclear."
Another rebel spokesman said 22 people had been killed in fighting with pro-Gaddafi forces over the last week and asked why attack helicopters had not been deployed to support them.
Rear Admiral Philippe Coindreau, who heads French operations over Libya, said that the strikes against Gaddafi's forces were increasingly wearing them down and that the helicopters would " accelerate" the attrition of his forces.
The alliance says the bombing aims to protect civilians from the Libyan military, which crushed popular protests in February.
The Libyan leader says the rebels are Islamist militants and NATO is attempting to grab Libya's oil.
At the United Nations, the prosecutor of the International Criminal Court (ICC) said its investigators had found evidence linking Gaddafi to a policy of raping opponents.
A possible war crimes prosecution could be an incentive for Gaddafi to cling to power, but Senegalese President Abdoulaye Wade, offered to help ease his former African Union ally's exit from power and appealed to him to step down.
" It is in your own interest and the interest of all the Libyan people that you leave power in Libya and never dream of coming back to power," said Wade. He was the first foreign leader to visit the rebels' eastern stronghold of Benghazi.
Gaddafi troops and the rebels have been deadlocked for weeks between the eastern towns of Ajdabiyah and the Gaddafi-held oil town of Brega. Rebels also control the western city of Misrata and the range of Western Mountains near the border with Tunisia.
(Additional reporting by Khaled al-Ramahi in Misrata and Joseph Nasr in Rabat Writing by John Irish Editing by Andrew Heavens)
Shares set to follow Wall Street higher
SYDNEY, June 10 (Reuters) - Asian stocks are set to open higher on Friday after Wall Street posted gains for the first time in a week, boosted by a report showing record U.S. exports in April and easing concerns about a stalled global economic recovery.
Several economists said the spike in U.S. exports in April could prompt some upgrades in expectations for second-quarter economic growth, interrupting a trend of lowered expectations.
The main Wall Street indices climbed between 0.35 and 0.74 percent, ending six day losing streak.
British shares rose 0.85 percent, pushed higher by a rebound in mining stocks.
Copper eked out a modest gain by the close on Thursday, as expectations for a rebound in Chinese imports counterbalanced the negative macroeconomic impact from disappointing weekly U.S. jobless claims figures.
Both the Bank of England and the European Central Bank left interest rates on hold on Thursday. The BoE's decision was widely anticipated, but the ECB's move was less expected.
Asian stocks listed on Wall Street climbed 0.7 percent.
World stocks, as measured by the MSCI world equity index , were up 0.4 percent. The Thomson Reuters global stock index was higher by 0.8 percent, and emerging market stocks fell 0.3 percent.
The dollar rose 0.4 percent to 80.28 yen and the euro fell after the European Central Bank kept its 2012 inflation forecast unchanged, suggesting the pace of euro zone interest rate hikes may be slower than previously thought
Japanese markets, which inched higher on Thursday as foreigners continued bargain hunting, look set to test move higher. Nikkei futures traded in Chicago < 2NKc1> were 60 points above the last closing level in Osaka < JNIc1> . The support for the benchmark Nikkei average is seen at the psychological level of 9,400 and below that key technical support is at 9,317.
Australian stocks are set to open higher gaining from reviving investor appetite for commodity stocks. Share price index futures < YAPcm1> gained 21 points to 4,575.0, a 25.4-point premium to the underlying S& P/ASX 200 index .
HEADLINES:
> Clinton in talks about possible move to World Bank
> Citigroup data breach prompts security review
> Auditors face suits over US-listed Chinese blowups
> Stocks snap six-day decline commodities rally
> Glencore chairman caught up in Sino-Forest saga
> Record U.S. exports temper slowdown fears
> Rankled banks to fight against U.S. reforms
> Fed's Lockhart: QE3 unlikely despite weaker growth
> Newt Gingrich's campaign team resigns en masse
> ECB takes hard line on Greece in rebuff to Berlin
> Global corn supply tightens as U.S. grows less
> Picard aims for triple-word score in Madoff case
> Japan revolving leadership door may keep turning
> Is U.S. business abandoning middle class?-Freeland
> SPECIAL REPORT-Where's the next nuclear weak link?
--
KEY INDEXES pct change
Bank of New York Asia ADR index +0.71
Dow Jones Industrial Average +0.63
Nasdaq Composite Index +0.35
Nikkei futures in Chicago < 2NKc1> 9,540
Nikkei futures in Osaka < JNIc1> 9,480
--
TOP ASIA EVENTS:
For more Asian company earnings, see ASIA/EQTY
JAPAN - Corporate goods price for May
- Cabinet meeting followed by news conferences by Finance
Minister Yoshihiko Noda and Economics Minister Kaoru Yosano
- Toyota Motor Corp briefing on earnings forecast for
2011/12 year.
AUSTRALIA - Employment, May
HONG KONG - Legislative Council special meeting of Panel on Economic
Development to discuss the Hong Kong International Airport
GOSSIP: Today's Wall Street Buzz in 60 Seconds
Banks
Goldman Sachs
was fined $10 million and agreed to halt internal meetings known as " huddles." It seems that some clients were invited to meetings that others weren't, so the excluded clients were concerned that they were getting better stock tips.
And in other Goldman news, the SEC is looking at whether the bank
violated anti-bribery laws when it paid a $50 million fee to Libya as part of its well-known (by now) dealings with the Libyan sovereign wealth fund.
Citi
has to send out " tens of thousands" of replacement credit cards to customers who's accounts were " breached" -- aka hacked.
More
layoffs at BarCap today.
JPMorgan, Wells Fargo and Bank of America
have been banned from receiving payments from the Obama administration tied to the big federal foreclosure prevention program, until they make " substantial improvements" to their performance in the initiative.
Hedge Funds
Steve Eisman
is leaving FrontPoint at the end of the month and starting his own hedge fund.
Phil Falcone's Harbinger
has had $1 billion in redemption requests.
A girl who says she was sexually assaulted by former hedge funder Jeffrey Epstein, told lawyers that Prince Andrew would be able to offer insight into the " a lot of the truth"
about Epstein's criminal activities.
DSK's lawyers
asked for a laundry list of items belonging to their client, including: Books, papers, documents, photographs, tapes, electronic recordings, clothing, luggage, fingerprints, blood samples, fingernail scrapings, other tangible objects -- all of which are now in the hands of the Manhattan D.A. -- or " copies thereof."
And they've made special requests to ensure that any information on
DSK's mobile devices stays confidential.
Other bankery buzz
Hillary Clinton
may be seeking the World Bank presidency.
Here's how New York partying has changed since the financial crisis, according to one investment banker.
Hedge funder
Marc Mezvinsky and wife Chelsea Clinton
were at Craft in Gramercy last night for dinner with Bill Clinton, Keith Richards and Steve Bing. It was a fundraiser for Clinton's foundation.
Non-Wall Street Bonus
56% of registered voters in Anthony Weiner's district want him to stay in the job, despite Weiner-Gate.P
Prince William and now-Catherine, the Duchess of Cambridge,
attended their first official function as a royal couple at the 10th annual Absolute Return for Kids (ARK) gala dinner in London. Financier Arki Busson was there, who founded the charity.
World Markets Snap Shot
Red’s Bull Trader Alert: Several economists said the spike in exports from the United States in April could prompt revisions higher of gross domestic product growth in the second quarter.
But the mood remained fragile as many analysts saw the bounce as temporary and still expected the S& P 500 to retest its March low after a string of data, including the latest payrolls report, provided little room for optimism.
The S& P had lost more than 6% in the last 6 days leading up to Thursday, while the NAS had nearly erased its gains for the year.
CBOE data showed that Put/Call ratio on equity options rose to 0.99 Wednesday, which means 99 puts traded for every 100 calls, the highest ratio since January 15, 2009. The average had been between 0.55-0.70 this year.
The high Put/Call ratio signals investors are actively hedging their bets and setting up for further market declines. But as in other cases, extreme bearishness could also be a contrarian indicator. A lot of fear came into the market as investors bought puts.
Wall Street turned North after a 6-day losing streak Thursday, with the DJIA and the S& P 500 bouncing up 1%, after data on US exports eased concerns about a stalled economic recovery that had weighed on the market for days.
DJIA 12,147.10 98.20 0.81% 15:42
S& P 500 1,291.22 11.66 0.91% 15:41
NAS 2,690.68 15.30 0.57% 15:42
The DJIA and the S& P 500 rose 1%, but many analysts see this rebound as short-lived.
Reflecting the Bearish sentiment, the daily volume Put/Call ratio for equity options on the Chicago Board Options Exchange (CBOE) was at an 18-month high as Wednesday’s close, according to data posted on the exchange website, indicating some players are significantly Bearish on the stock market.
Players bought hammered-down stocks in growth-related sectors, following several days of decliner.
A spike in Crude Oil prices helped materials and energy stocks to move higher.
The S& P materials sector index .GSPM rose 2% and the energy index .GSPE gained 1.6%.
The Morgan Stanley cyclical index .CYC, which is down more than 5% in June, rose 1.2%.
Corporate announcements have been lacking in the last 24 hours, but Texas Instruments (NYSE:TXN) 33.08, +0.41 made headlines with news that it trimmed its forecast Q-2 due to lower demand from one of its wireless customers. The announcement precedes the latest quarterly report from peer National Semiconductor (NYSE:NSM) 24.61, +0.02, which is scheduled to post results after the close.
STOCKS END SIX-DAY LOSING STREAK: Here's What You Need To Know
Stocks snapped back after a six-day losing streak.
But first, the scoreboard:
Dow: +75.42
NASDAQ: +9.49
S& P 500: +9.44
And now the top stories:
- Asia had a generally positive night on little news.
- In Europe the ECB didn't move rates, but Trichet said the words " vigilant" indicating a rate hike next month. Meanwhile bad Greek GDP data and the leak of a Troika report to Der Spiegel caused Greek yields to surge.
- In the US, trade data was a bit better than expected and initial jobless claims were a bit worse. Then there was a big snapback rally after six days of losses. Interestingly the dollar bounced, contradicting the correlation between the weak dollar and the rally. Commodities rallied too, especially corn, after the USDA WASDE report.
- Late in the day, the Newt Gingrich campaign was shook up by the resignation of most of his senior staff. Aides cited differences over the direction of his campaign. The Tiffany's debt fiasco and his attack on the Paul Ryan medicare plan didn't help either.
Iraq's oil industry looks for OPEC growth role
Pump action: An Iraqi worker operates valves at Rumaila oil fields, near the southern city of Basra, Iraq as OPEC promises to keep supplies replenished. Picture: Nabil Al-Jurani Source: AP
As OPEC leaders prepare to meet in Vienna on Wednesday for their first gathering since unrest engulfed the Middle East and sidelined Libyan oil production, Iraq is emerging as one of the members most able to boost the group's output in the next few years.
Iraq, which now produces about 2.7 million barrels of oil a day, is eager to lift its oil revenue stream after three decades of lost or low production brought on by the 1980-86 Iran-Iraq war, the first Gulf War of 1990-91, and the U.S.-led invasion of 2003.
At the weekend, Deputy Prime Minister Hussain al-Shahristani said Iraq was ready to support an increase in OPEC output if that was the decision by the 12-nation organisation, which accounts for about one-third of the world’s oil supply. He said Iraq was likely to reach 3 million barrels a day by the end of this year, with a further increase next year as infrastructure improves.
In March the Iraqi Oil Ministry said the country was on track to reach 5.6 million barrels a day by 2014. By 2017, that figure could reach 12-13 mb/d if a lid is kept on insurgent activity and if progress goes smoothly with pipeline upgrades and long-term production-expansion contracts Iraq has signed with some of world’s biggest oil companies.
Iraq is a founding member of the Organisation of Petroleum Exporting Countries (OPEC), whose 11 other current members are Algeria, Angola, Ecuador, Iran, Kuwait, Libya, Nigeria, Qatar, Saudi Arabia, United Arab Emirates and Venezuela.
OPEC’s formal production target is 24.84 mb/d, although the International Energy Agency estimated last month that OPEC’s April output was 28.8 mb/d, which it said was “1.3 mb/d below pre-Libyan crisis levels.”
OPEC says in its latest Monthly Oil Market Report that “in 2011, required OPEC crude is expected to average 29.9 mb/d,” and notes that for the rest of the year “the growth drivers will continue to be the developing economies, particularly China and India.” According to figures by the energy information provider Platts, China’s apparent oil demand in May was 9.37 mb/d, the third-highest month on record.
Iraq, which has the world’s fifth largest proven oil reserves behind Saudi Arabia, Venezuela, Canada and Iran, is now seen as one of the more attractive investment destinations in the Middle East.
At an oil industry conference in London last month, observers rated it as highly prospective. Gati al-Jebouri, executive director and chief commercial officer for Russian energy company LUKOIL Mid-East, told the Platts conference that just a fraction of Iraq’s known fields were in development, and the world’s next big oil or gas field was likely to be found there. Iraq’s reserves, he said, “have barely been exploited.”
Mr Jebouri said that while Iraq was not part of OPEC’s quota regime it was likely to be reinstated before 2015. He said that if the same ratio was applied to Iraq as to Iran, then Iraq’s oil quota would be around 3.5 mb/d. But it was likely that to compensate for Iraq’s low production rate over the last 15 years, the actual quota could be set between 5-6 mb/d.
LUKOIL Mid-East’s assumption was that Iraq’s production would grow from 2.45 mb/d in 2010 to 3.15 mb/d next year, 5.58 mb/d in 2013, 8.28 mb/d in 2014 and 10.71 mb/d in 2015.
However, he warned those figures could be impacted by security and infrastructure constraints, such as pipelines, storage, reservoir management and the availability of oil rigs.
“So this suggests it would be more reasonable to extend the process,” he said.
Platts Middle East editor Kate Dourian.told the conference most experts thought a realistic number for Iraq production would be 8.0 mb/d from 2020 onwards. This is still well above the EIA’s World Energy Outlook estimate of about 4.8 mb/d.
At the weekend, Hussain Qaragholi, a managing partner with investment fund Phoenix Capital, said on the Platts Energy Week television program that Iraq now represented “the most opportune investment globally” as it focused on rebuilding its economy.
On the same program, Kenneth Kuhn, managing director of the Iraq Fund, a U.S.-based hedge fund, cited IMF projections of annual growth rates of 14 per cent for the next five years for his view that Iraq was “the most significant global investment opportunity in the world.”
On Sunday Iraq also signed two contracts to develop gas fields that it hopes will give fresh impetus to its energy industry. The contracts, covering the Mansouriya and Siba fields, are with Korea Gas Corp., Kuwait Energy Co. and Turkey’s Turkiye Petrolleri.
Food Prices and China
Food Fears on the rise in China, and government seeks to improve supervision
The Big Q: To Eat or not to Eat?
That it is the question many people in China have to ponder, as a new wave of food safety frights has renewed fears in over food safety problems.
A growing number of Chinese people are concerned with reports of tainted watermelon, pork, toxic milk, dyed buns and other foods in recent months. Many Chinese have taken to the Internet to express their concerns about food safety.
Compared with the pessimistic opinions shared by many citizens, government officials are casting the issue in a relatively positive light, arguing that food safety has improved in recent years and continues to improve.
The percentage of food products that meet acceptable safety standards has increased by about 3% Y-Y in Zhejiang since Y 2007, according to Ji Shenglin, deputy director of the Zhejiang Bureau of Quality and Technical Supervision. 93% of food products produced in Y 2010 met or exceeded these standards, Ji said.
Analysts say that heightened fears about food safety are not without a certain degree of irrationality.
“Forchlorfenuron, a plant hormone that caused some watermelons to explode earlier this year, is legal for agricultural use. It results in earlier harvests and is not dangerous to consume. The explosions were caused by farmers applying the hormone at the wrong time,” said Wang Jianwei, an official from the Zhejiang Department of Agriculture.
“In a similar case, there were media reports that ethylene was used to accelerate growth in bananas. These reports stirred public outrage, but in fact, using ethylene in this way is a common agricultural practice and is not dangerous in any way,” Wang said.
Experts have called for better education of the public when it comes to food safety, saying that food safety fears are largely fueled by a lack of knowledge in the areas of biology and agriculture.
Zhejiang Province Vice Governor Zheng Jiwei sees a bright side to the public’s sensitivity, however.
Several decades ago, when many people were struggling to break out of poverty, few people would even think of questioning the quality of their food, Zheng said.
The fact that people are paying more attention to health and food safety is a sign of increased social affluence, Zheng said.
In the meantime, the Chinese government has tightened regulations and worked to step up food safety checks since 2008, when six infants died and thousands of others were sickened after a well-known Chinese milk manufacturer was found to have sold milk tainted with melamine, a chemical compound used in manufacturing plastic and other materials.
China also adopted a food safety law in 2009 that requires food producers to be more responsible for the safety of their products.
However, policing China’s food supply is an arduous task. It has been reported that 80 percent of China’s 448,000 food producers and processors are small, decentralized workshops, many of them with fewer than 10 employees.
Add to that the task of monitoring and regulating more than 200 million small farms, and it is plain to see that the government faces a difficult challenge in trying to implement uniform food safety standards.
Experts also attribute the ineffectiveness of China’s food supervision to the fact that there are too many bureaucracies handling food safety issues simultaneously.
The Ministry of Health is the county’s primary agency for dealing with food safety problems, but the State Administration for Industry and Commerce is also involved, as are the State Food and Drug Administration and the Ministry of Agriculture.
The overlap of so many agencies leads to “blame games” when problems arise, leading some government officials to call for a new way to deal with food safety.
Some officials have called for the establishment of a new agency that will have the exclusive responsibility of ensuring food safety. As a result, food safety commissions have been set up in the cities of Beijing and Shanghai, as well as in Zhejiang and South China’s Guangdong Province.
Several local authorities have also started to include food safety as a criterion for evaluating the performance of regional government officials. Negligence and corruption can also be blamed for some of China’s food safety problems.
Ji Shenglin, vice director of the Zhejiang Quality Inspection Bureau, said that collusion between government officials and businessmen has obstructed investigations of companies that are suspected of engaging in illegal practices that may compromise the safety of China’s food supply.
“Stronger government supervision is needed, but it is not a cure-all,” Ji said.
“Companies should work to enhance self-discipline, and trade associations should also take responsibility for overseeing product quality,” Ji said.
Commodities Update
On the Commodities Front
July Crude Oil fell 1.2% to close at 99.01 bbl. Demand concerns, following last week’s weak econ data, and discussions that OPEC will raise output production at Wednesday’s meeting, pressured Crude Oil lower for the 2nd session.
July Nat Gas rallied for 2.6% to close at 4.83 per MMBtu. Forecasts for warmer weather across the country, expected to boost demand through air conditioning, helped prices trade back to near their Y 2011 highs at 4.879.
Despite strength in the USD, precious metals finished higher today, with August Gold gaining 0.3% to settle at 1546.80 oz while July Silver finished up 1.8% to 36.84 oz. The flight to safety helped Gold ended higher for a 2nd straight session.
Paul A. Ebeling, Jnr.
Paul Ebeling on Wall St
What to expect this week and down the line…
The US market indices remain inside their trading ranges. The S& P 500 and NAS have good support at the range lows.
Looking at our leaders: they are holding up after last week’s selling.
The focus this week will be the strength and commitment of the “buy on the dips” players if and when the sellers attack to try to force the action through the bottom of the trading range, that will be the test.
Usually after the kind of action we saw last week there is a bounce to test. This is an area and time that requires care, diligence and patience.
One or two days does not make a lot of difference IMO. Waiting to see where the market test is Key, I expect a bounce, a test and then a set up for the next leg up.
Again, patience and look for the upside plays in here on the based leadership and defensive issues. The downside plays look to me like they are finished for the time being
The market does not like the weak US economic data and so it is testing the trading range, the decline has been about 5% off of the April highs, that’s enough to call it a correction from my POV, though there is another 2% possible.
That makes for opportunity as I see it for the long term, the US is not headed for a double-dip recession, if anything it is building up for a stronger economic run, yes housing and employment remain big issues that take time to resolve, “slow but sure” is better than a “fast” recovery.
The Obama Admin and the US Fed are likely to extend QE in some form to keep the slow growth on track. And I see many good stock that are undervalued in this scenario. See them profiled daily on www.livetradingnews.com
Forget QE3, focus on foreign reserves: JPM's Chang
(Reuters) - A massive build-up in foreign reserves in emerging markets should snuff worries about the end of the Federal Reserve's bond-buying program, the global head of emerging market research at JPMorgan said on Monday.
The rapid accumulation of foreign reserves and the conservative stance central banks take when investing them means U.S. Treasuries are a major target for those funds, supporting the market as the Fed ends purchases.
The increase in foreign currency reserves last year was about $885 billion, of which 80 percent was held by emerging markets, said JPMorgan's Joyce Chang. By the end of the year, foreign currency reserves are expected to be close to $11 trillion, she said.
" If you think about that number, that's almost 50 percent higher than all of QE2," Chang said. She was referring to the Fed's $600 billion bond-buying program slated to end June 30 that is known as quantitative easing, or QE2.
The pace of reserves accumulation has surprised on the upside, and has helped suppress bond yields in the U.S. Treasury market the past couple of years, Chang said.
Seasonal factors could cut foreign buying of U.S. Treasury debt by one-quarter this summer, but central banks have few options when buying assets with their reserves, she said.
" If you're accumulating that much in foreign exchange reserves there aren't many places it can be deployed," she said.
Growth of foreign currency reserves in the developing world is just one factor that indicates the amazing strength of emerging market economies, she said.
Emerging markets are expected to grow 6.1 percent this year compared to 2.2 percent for the developed world, a rate that when combined with the level of their foreign reserves speaks volumes about the health of the developing world, Chang said.
" Any indicator that you look at, whether it is the fiscal or the debt indicators, still favors emerging markets," Chang told the Reuters
Investment Outlook Summit in New York.
EMERGING MARKET CORPORATE BOND MARKET BOOMS
Chang remains bullish on emerging markets. JPMorgan's 6.1 percent growth rate was revised from an earlier forecast this year of 5.9 percent.
A record $125 billion in corporate bond issuance in emerging markets in the first five months of the year is another strong indicator for the developing world, Chang said.
Growth in emerging markets corporate issuance is so strong Chang predicts it will match the size of the U.S. high yield market by 2014. The market cap for JPMorgan's global high yield index right now is $860 billion. The outstanding size for dollar-denominated corporate debt is about $650 billion.
" You have a lot of issuance over the last few months, but longer-term this is still a market where very much that growth story is still intact," Chang said.
" You could have this be a market that is $800 billion to $1 trillion over the next couple of years quite easily," she said.
The strong fiscal policies of governments in emerging markets and their low debt profile suggest emerging markets will remain in good shape for the foreseeable
future.
" This could be cyclical but it could be a much longer cycle than we have had in the past. You could be looking at a 25-year cycle," Chang said.
" Everyone says it is cyclical. Well the debt transformation and the fiscal transformation is one that developed countries will have to bear the burden of for years to come," she said.
China, of course, is key to the emerging markets story. A misstep by authorities on social issues could prove worrisome.
However, a high savings rate equal to more than 50 percent of gross domestic product, government control over the banking system, an undervalued currency and continued migration from rural areas to cities point to sustainable Chinese growth.
" That's why it has been very hard for me to buy into the China hard-landing scenario. I don't see how you can hard land in that much water," Chang said.
(Reporting by Herbert Lash editing by Andrew Hay))
