U.S. Stock-Index Futures Gain as Commodities Rebound on Outlook for Growth

U.S. stock futures rose, signaling the Standard & Poor’s 500 Index may rise for the fourth time this week, led by a rebound in commodities as reports from Germany to Hong Kong boosted confidence in the global recovery.
Exxon Mobil Corp. (XOM) and ConocoPhillips advanced in German trade as crude oil climbed above $100 a barrel. Healthcare companies may rise after JPMorgan Chase & Co. upgraded the industry, citing takeover activity. SunPower Corp. (SPWRA) dropped in Germany after the company forecast earnings that fell short of analysts’ estimates.
S&P 500 futures expiring in June gained 0.1 percent to 1,349.2 at 12:10 p.m. in London. The benchmark gauge yesterday erased earlier losses as commodities rebounded with a weaker dollar. Dow Jones Industrial Average futures rose 0.1 percent to 12,687 today. Nasdaq-100 Index futures also rose 0.1 percent, to 2,409.
The view that “the West is in trouble” is wrong when nations including Germany, Sweden, Australia and Canada are performing strongly, said Jim O’Neill, chairman of Goldman Sachs Asset Management, in a Bloomberg Television broadcast in Hong Kong today. Investors should “stop worrying so much.”
The S&P 500 has fallen 1.1 percent this month as gauges of energy and raw-materials producers slumped with metal and oil prices. The gauge has still climbed 7.2 percent this year as government stimulus measures and corporate earnings boosted confidence in the economic recovery.
Reports in Europe today showed Germany and France powered economic growth in the euro area in the first quarter as booming exports fueled domestic spending in the bloc’s core, offsetting sovereign debt concerns.

German, French GDP

German gross domestic product jumped 1.5 percent from the fourth quarter and French GDP rose 1 percent, exceeding economists’ median forecasts of 0.9 percent and 0.6 percent respectively.
In Hong Kong, the economy expanded 7.2 percent in the first quarter, the fastest pace in a year, beating all estimates in a survey of 17 economists. That compares with a revised 6.4 percent increase in the three months to December 31.
U.S. data today may show the cost of living climbed in April by 0.4 percent, led by gains in food and fuel prices, according to economists. That follows a 0.5 percent gain in March. The Labor Department report is due at 8:30 a.m. in Washington.

Economic Data

Separate data figures may show consumer confidence stagnated this month. Economists project the Thomson Reuters/University of Michigan preliminary index of consumer sentiment for May will be little changed at 70, compared with 69.8 in April, according to the Bloomberg survey. The data is due at 9:55 a.m. in New York.
Exxon climbed 0.3 percent to $81.33 and ConocoPhillips (COP) increased 0.3 percent to $71.70 as crude oil climbed for a second day after the strong economic data in the euro area fueled speculation fuel demand in Europe will increase.
Companies including UnitedHealth Group Inc. (UNH) and WellPoint Inc. (WLP) may advance after JPMorgan’s strategy team, lead by Thomas Lee, raised their recommendation for health care to “overweight” from “neutral”, citing improving fundamentals, stable regulatory risk and “attractive” valuations.
UnitedHealth and Wellpoint were named in the bank’s list of 18 “best ideas.”
SunPower lost 3.2 percent to $20.70 in Germany after the second-largest U.S. solar module manufacturer forecast second- quarter sales of no more than $550 million, falling short of the average analyst estimate of $594.4 million.
 

Severstal Agrees to Buy Access to Brazil’s Iron Ore Licenses

OAO Severstal, the largest steelmaker in Russia, agreed to buy 25 percent of a company that owns iron- ore exploration licenses in Brazil as the producer seeks higher profits by diversifying into mining and emerging markets.
Severstal, based in Cherepovets, Russia, has an option to buy another 50 percent of SPG Mineracao, owner of licenses in the northern Amapa state, after agreeing to pay $49 million for a quarter stake, the steelmaker said in a statement today.
“The acquisition in Brazil fits Severstal’s general drift towards emerging markets and mining, which currently offer a higher profit margin than steelmaking,” Dmitry Smolin, an analyst at UralSib Financial Corp. in Moscow, said by phone.
Severstal controls an iron ore project in Liberia and mines gold in Guinea and Burkina Faso. Last year, it bought a stake in a Philippine nickel project and agreed to build a joint venture steel mill in India with production capacity of 5 million metric tons a year in cooperation with state-run NMDC Ltd. (NMDC)
Severstal sold three of its five steel mills in the U.S. in March following losses. The company is seeking to become one of the world’s five most-profitable steelmakers, billionaire Chief Executive Officer Alexey Mordashov said in January.
 

Gold Futures Rebound With Crude Oil as Dollar Weakens; Silver Prices Fall

CPM's Christian Interview on Industrial, Precious Metals


May 12 (Bloomberg) -- Jeffrey Christian, managing director of CPM Group, talks about the markets for industrial and precious metals, and the outlook for gold and silver prices in 2011. Christian speaks with Carol Massar and Matt Miller on Bloomberg Television's "Street Smart." (Source: Bloomberg)
Gold futures rose, erasing an earlier loss, as higher energy costs and a weaker dollar boosted demand for the precious metal as an alternative asset. Silver fell.
Crude-oil futures rebounded after earlier dropping as much as 3 percent, and the dollar erased a gain, losing as much as much as 0.4 percent against a basket of currencies. Gold reached a record $1,577.40 an ounce on May 2 and has advanced 21 percent in the past year.
“Gold is trading in sympathy with oil,” said Matt Zeman, a strategist at Kingsview Financial in Chicago. “When oil was able to reclaim the $100 level and the dollar reversed, people were willing to step back into the metals market.”
Gold futures for June delivery rose $5.40, or 0.4 percent, to settle at $1,506.80 at 1:41 p.m. on the Comex in New York. Earlier, the price dropped as low $1,477.60.
The greenback rose to a three-week high against a basket of major currencies before retreating. The MSCI World (MXWO) Index of equities declined for the second straight day. China raised reserve requirements for banks for the fifth time this year to stem inflation.
“China is still taking steps to rein in its economy, and that’s bearish for commodities,” said Adam Klopfenstein, a senior market strategist at Lind-Waldock in Chicago. “The easy money has been made in the metals. The benefit to gold is that even as investors are liquidating commodities, there will be flight-to-quality buyers for gold.”

Accelerating Inflation

Accelerating inflation has increased speculation that central banks will raise interest rates. Last week, gold fell 4.2 percent and silver plunged 27 percent, leading a slide in raw materials.
Silver futures for July delivery fell 71.8 cents, or 2 percent, to $34.797 an ounce. Earlier, the price touched $32.30, the lowest since Feb. 25. The metal has plunged as much as 35 percent from a 31-year high of $49.845 on April 25.
Palladium futures for June delivery rose $1.45, or 0.2 percent, to $716.85 an ounce on the New York Mercantile Exchange. Platinum futures for July delivery dropped $6.80, or 0.4 percent, to $1,771 an ounce on the Nymex.
 

5 money moves one gold bug is making now

SAN FRANCISCO  — What’s in your wallet? Less buying power, for starters.
Inflation is taking a bigger bite out of household budgets, and as an investor who broods about worst-case scenarios mutual fund manager Charles de Vaulx is worried.

Charles de Vaulx
“There’s so much debt in the system, you have to be out of your mind to pay no attention to the big picture,” de Vaulx said. “When there’s a credit boom, you never know when the party will end. All you know is that the longer it lasts, the harder the fall.”
So de Vaulx is avoiding what he sees as the market’s potential land mines: momentum stocks, debt-riddled businesses, pumped-up emerging markets and companies and bonds that are likely to wither when both inflation and interest rates climb.
Instead, the co-manager of the IVA Worldwide IVWAX -0.17%  and IVA International IVIOX -0.53%  funds with Chuck de Lardemelle, is making investments that can withstand the challenging investment climate he expects — and even take advantage of it.

At such a time, capital preservation is paramount: “To finish first, you must first finish,” de Vaulx likes to say, quoting American race car driver Rick Mears.
Accordingly, De Vaulx has made five crucial investment moves into areas he believes can go right when things go wrong.

1. Buy inflation-proof stocks

First, the fund manager is buying inflation protection through shares of companies with the ability to pass higher prices to consumers.
Essential services providers, consumer-staples companies and fee-generating businesses are particularly attractive, de Vaulx noted. Three of his favorites: credit-card processor Mastercard Inc. MA +1.43% , retailer Wal-Mart Stores Inc. WMT +1.00%  and Sodexo FR:SW +0.47%   SDXOF +1.69%  , the French catering and services group.
Mastercard receives a percentage of every transaction, and the more inflation, the more money it makes, de Vaulx pointed out. “Owning Mastercard is owning a stream of free cash flow that can creep up through inflation,” he said. Similarly, Wal-Mart and Sodexo are two enterprises that should be able to maintain profit margins against rising food costs.

2. Own gold bullion

Each of de Vaulx’s funds had about 5% to 6% of assets in gold bullion at the end of March. The stake reflects a longstanding allocation for the fund manager.
“We control risk by owning gold,” de Vaulx said. “As long as the policymakers are being irresponsible, it’s good to own some gold, especially if the [U.S.] dollar keeps falling.”
 

Digging for value in gold, silver, commodities

SAN FRANCISCO  — Gold and silver have lost some luster with investors; the price of oil and other natural resources is lower, and speculation in many agriculture sectors has dried up. So why are three veteran money managers who can put money anywhere still holding on to commodities?
Because they believe that emerging markets will live up to their promise. They’re convinced that the growth of the world’s nascent economies will create a bold new consumer class, whose desire for more and better will feed demand for raw materials, industrial and precious metals, and — perhaps most critically — food and water.
GLOBAL INVESTING IN A POST-CRISIS WORLD

 

For investors, there's no way to escape global crises,
but there are ways to protect your portfolio. Veteran money managers at a MarketWatch Investing Insights event share their strategies.  

The dark days of the global financial crisis, with its fears of economic collapse, are now in the rear-view mirror. It’s going to take more than political turmoil and some natural disasters to rattle investors intent on getting their money back.

“The world is growing and using more commodities,” said Marshall Berol, co-manager with Malcolm Gissen of Encompass Fund ENCPX -0.56%  , which has been heavily invested in various resource stocks for several years.

“China, the Far East, the Middle East, India, Latin America, South America, Brazil, Argentina, Chile — these economies are growing,” Berol noted. “There are setbacks from time to time, but they’re growing, and as they grow, more people are employed, at better jobs; they have money and they want what we’re accustomed to in this country — houses and cars and cell phones and refrigerators.”
Berol is also a confirmed gold bug. “It’s going higher,” he predicted for gold. “It’s not at a top yet.”

Values and trades

Berol addressed his comments to MarketWatch’s Investing Insights live event held in San Francisco last month. The theme of the event was “Global Investing in a Post-Crisis World.” In addition to Berol, attendees heard views about precious metals and commodities from Michael Cuggino, manager of Permanent Portfolio PRPFX -0.06% , a mutual fund focused on capital preservation, and Cody Willard, principal of CL Willard Capital, who writes the Revolution Investing newsletter and an online blog called The Cody Word for MarketWatch.
Willard, the panel’s lone trader, differed with Berol and Cuggino on the bullish prospects for gold, silver and precious metals, but he shared their optimism about commodities.
“There’s a good trade — a good opportunity — where you can short gold and silver, and buy against that a basket of oil, cotton, corn, soybeans, anything you actually have to consume,” Willard said. “Because it’s the poor people who are driving commodities, and I don’t think they’re going to buy gold when they’ve having to figure out how to feed the kids.”
The event was held several weeks before both precious metals and commodities suffered a sharp blow. The wave of selling in early May could have been the result of speculators exiting with their profits after a mammoth rally. Or, more ominously, the downturn could reflect traders’ fundamental concerns that global economic health is weakening, which would curb demand for materials brought out of the ground, scarce or not.

Weathering storms

Yet big swings are to be expected with these investments. The panelists were well aware in April that prices for precious metals and commodities might have come too far, too fast. Indeed, over the following weeks investors in these alternative assets grappled with indications that U.S. economic growth is weaker than expected, and that soaring food and gasoline prices would quash demand — fears that ultimately did torpedo some of the momentum, especially for silver.
Berol and Cuggino acknowledged the potential for a correction in these markets at the April meeting, but noted that day-to-day or even quarter-to-quarter gyrations don’t concern them much. Instead, a long-term focus steers their portfolios through a sector’s booms and busts.
“We’re not looking to get in and out,” Berol said. “We’re looking for what is going to be worth more down the road.”
“I don’t get wrapped up in quarters,” Cuggino added. “You don’t have to worry about what the stock market is going to do every day, what’s the Fed’s going to do, what’s going to happen in the world.”
Cuggino’s mutual fund is unusual in that its constructed with an eye toward downside protection. Most of its assets are spread across gold, silver, natural resources stocks, Swiss francs and U.S. Treasurys.
“The way we go about the basic flaw in human nature of not being able to predict the future is by putting together a broad array of different asset classes in one portfolio that work at cross purposes,” Cuggino said.
The fund’s holdings individually might be highly risky, but together they work as a team to cover the bases and reduce overall portfolio volatility.
Gold, in particular, is Cuggino’s insurance policy against what he views as the ill-effects of the Federal Reserve’s policy of low interest rates and easy money — a stance, he said, that is stoking inflation, debasing the value of the U.S. dollar and putting a high floor under gold.

GLD 146.59, +0.05, +0.03%
SLV 33.32, -1.07, -3.11%

“You have demand picking up not only with emerging markets and more disposable income, but you have demand picking up on the investment side — whether that’s mutual funds, hedge funds, institutional investors, sovereign wealth funds or governments potentially,” he said.
“Last time I checked,” Cuggino added, “there wasn’t a huge increase in supply coming out of the ground. And with less confidence in paper money around the world, gold will take on a lot more importance as a store of value.”
Via - www.marketwatch.com
 

China: Is commodity demand falling?

For the past few years, Chinese demand for commodities such as oil, copper, iron ore and aluminum has been a huge factor in the commodity bull market.  In fact, I believe it has been much bigger than one would think even taking into account China’s 1.3 billion people.  Now, that may be changing.  This report from the excellent FT Alphaville Blog makes an important distinction[emphasis added]:
…As Capital Economics’ Julian Jessop noted it’s now particularly necessary to track volume data rather than import values:
Indeed, there are already warning signs in the recent data. For example, China’s demand for imported commodities has weakened sharply. The value of China’s imports is still growing rapidly, but this is a reflection of higher global prices. Focusing instead on the volume data, China’s imports of many key commodities are actually falling outright.
This chart from the same post shows the year-over-year change in both dollar value and volume of Chinese commodity imports.  Looking at dollar value, imports are still rising, but volume growth has either flatlined or fallen in several cases. This trend is of short duration, so we cannot make too much of it, but it certainly makes sense to me that, as prices go up, people buy less.

China’s impact on global commodities
Assuming demand is slowing down in China, that change could be very significant for worldwide demand as China has been a major purchaser of many basic commodities for years.
The roots of the commodities bull market
Commodities languished until late 2001 when the Fed dropped short-term interest rates in response to the attacks of September 11, 2001 and the short-lived recession later that year.  Unfortunately, the Fed under then-Chairman Alan Greenspan held rates very low and the rest is…history.  Commodities had been in a low trading range for years and a combination of easy money and low prices fueled the new commodities bull market, which is with us today.
The bull market in commodities may still be intact. In fact, corrections are essential to keeping a bull market intact.  However, it appears that the powerful forces that propelled commodities higher for the past 10 years are in abeyance for now.
 

Yen Rises as Stock, Commodities Losses, Pakistan Bomb Boost Safety Demand

The yen strengthened against all of its 16 major counterparts as stocks and commodities fell and a bombing in Pakistan killed at least 73 people, boosting demand for Japan’s currency as a refuge.

The dollar rose toward a six-week high against the euro after Treasury yields climbed and economists projected U.S. consumer confidence improved. U.S. housing starts advanced last month. South Korea’s won dropped to a one-week low after the central bank unexpectedly held off from increasing interest rates.

“The market is getting factors one after another, which stoke concern,” said Yousuke Hosokawa, a senior currency dealer in Tokyo at Chuo Mitsui Trust & Banking Co., a unit of Japan’s seventh-largest bank. “The market remains vulnerable to negative news. The yen is being bought.”

The yen climbed to 114.61 per euro as of 6:19 a.m. in London from 115.31 yesterday, when it reached 114.19, the strongest since March 28. The Japanese currency gained to 80.58 per dollar from 80.94. The greenback advanced to $1.4218 from $1.4246, after gaining to $1.4124 yesterday, the highest level since April 1. The won fell 0.3 percent to 1,088.00. per dollar.

Crude oil dropped 0.5 percent, erasing yesterday’s advance, while gold fell as much as 0.3 percent. The MSCI Asia Pacific Index of regional shares slipped 0.4 percent after rising 0.1 percent earlier today.

Bombers today targeted 15 buses carrying newly graduated members of Pakistan’s Frontier Constabulary, a paramilitary force, who were going home after a May 11 ceremony, said Ghufran Ali, a police official in Charsadda. Sixty-six of the dead are from the force, he said. The Tehreek-e-Taliban group said it carried out the attacks as a first act of revenge for bin Laden’s death, Pakistan’s Dunya TV reported.

The Thomson Reuters/University of Michigan preliminary consumer sentiment index rose to 70 this month from 69.8 in April, according to the median estimate of economists in a Bloomberg News survey before today’s data. Treasury 10-year yields climbed six basis points to 3.22 percent yesterday and were little changed today.

Via - www.bloomberg.com

 

U.S. Stocks Advance as Commodity Prices Rebound Amid Decline of Dollar

Credit Suisse's Cliggott Interview on U.S. Stocks, Fed

May 12 -- Doug Cliggott, U.S. equity strategist at Credit Suisse, talks about the outlook for Federal Reserve policy and the U.S. stock market. He speaks on Bloomberg Television's "InBusiness with Margaret Brennan."

Cisco's Chambers Interview

May 12  -- John Chambers, chief executive officer at Cisco Systems Inc., discusses the company's business strategy and growth outlook. Cisco, the largest maker of networking gear, yesterday forecast profit and sales that may miss analysts’ estimates amid price pressure in the markets for routers and switches, which direct Internet traffic. Chambers speaks with Betty Liu and Dominic Chu on Bloomberg Television's "In the Loop."
U.S. Stock Market Wrap

May 12  -- Bloomberg's Deborah Kostroun reports on the performance of the U.S. equity market today. U.S. stocks advanced, erasing the second straight decline for the Standard & Poor’s 500 Index, as the dollar fell and commodities rebounded from an early slump triggered by China’s efforts to curb lending. Bloomberg's Pimm Fox also speaks. (Source: Bloomberg)
U.S. stocks advanced, erasing the second straight decline for the Standard & Poor’s 500 Index, as the dollar fell and commodities rebounded from an early slump triggered by China’s efforts to curb lending.
Cliffs Natural Resources Inc. (CLF) and Schlumberger Ltd. (SLB) rose at least 1.5 percent. Symantec Corp. (SYMC), the biggest maker of security software, climbed 5.2 percent after forecasting higher revenue than analysts estimated. Tyson Foods Inc. (TSN) added 4.6 percent as the biggest U.S. meat processor announced a stock buyback. Cisco Systems Inc. (CSCO) slumped 4.8 percent and helped drag the market down earlier today after forecasting profit that missed estimates.
The S&P 500 rose 0.5 percent to 1,348.65 at 4 p.m. in New York, reversing a decline of as much as 0.8 percent. The Dow Jones Industrial Average added 65.89 points, or 0.5 percent, to 12,695.92. The Dollar Index, which tracks the greenback against the currencies of six major trading partners, declined 0.2 percent to 75.18 after gaining 0.4 percent.
“The more commodity-sensitive industries have been driving the market either up or down,” said Wasif Latif, vice president of equity investments at USAA Investment Management Co., which oversees about $50 billion in San Antonio. “One sector’s gain could be another sector’s pain. The recent decline in oil may not be that good for energy companies. However, consumer staples will do better because of lower input costs.”

Commodity Shares Slump

The S&P 500 has fallen 1.1 percent this month as gauges of energy and raw-materials producers have slumped at least 4.2 percent. Still, the S&P 500 is up 7.2 percent this year amid government stimulus measures and higher-than-estimated corporate profits.
Earlier today, stocks fell after China raised reserve ratios for its largest lenders by 0.5 percentage point to a record 21 percent. The central bank’s announcement followed reports yesterday showing inflation and lending exceeded economists’ estimates in April, with consumer prices rising more than 5 percent for a second month.
Federal Reserve Bank of Philadelphia President Charles Plosser said the U.S. economic recovery is nearing a point where the central bank should begin pulling back record stimulus.
“If the economy continues to make progress, then monetary policy will need to exit from its extraordinary accommodation in the not-too-distant future,” Plosser said today in a speech in Aventura, Florida. “While my expectation is that oil-price increases will level off and that the currently elevated inflation measures will reverse, the risks to the inflation outlook are tilted to the upside,” requiring that the Fed have a plan for tightening, he said.

Wholesale Costs

Wholesale costs rose more than forecast in April, led by food and fuel. Another report showed that retail sales gained 0.5 percent in April, the smallest increase since July. Sales excluding automobiles and gasoline rose 0.2 percent, less than half the median economist projection. First-time jobless claims decreased 44,000 to 434,000, Labor Department figures showed, topping the median economists forecast of 430,000.
Consumer confidence fell to a six-week low as the costliest gasoline in almost three years worsened Americans’ perceptions of their finances. The Bloomberg Consumer Comfort Index dropped to minus 46.9 in the period to May 8, the worst reading since March, from the prior week’s minus 46.2. Across regions, sentiment suffered the most in the West, where fuel prices exceed the national average.

Commodities Rebound

Commodities rebounded from earlier losses as the dollar reversed a gain, bolstering the appeal of energy and raw- materials as alternative investments. The Thomson Reuters/Jefferies CRB Index of commodities rose 0.1 percent, reversing an earlier decline of as much as 1.4 percent.
Cliffs Natural, North America’s largest iron-ore producer, gained 1.7 percent to $87.19. Schlumberger, the world’s biggest oilfield services provider, added 1.5 percent to $83.52.
Steven A. Cohen, the billionaire founder of hedge fund SAC Capital Advisors LP, said last week’s sell-off in commodity markets makes this a good time to buy stock in energy companies.
Energy is “an interesting sector,” he said yesterday at the SALT, or SkyBridge Alternatives, Conference in Las Vegas, speaking to a packed room with 1,750 seating capacity. “Energy stocks are discounting oil prices much lower than where we are trading today.”
Symantec climbed 5.2 percent to $20.42. The world’s largest security-software maker forecast higher revenue than analysts predicted, bolstered by demand for data backup cloud- computing programs, and the effect of a weaker dollar on overseas sales.

Tyson’s Buyback

Tyson added 4.6 percent, the most since Feb. 4, to $18.84. The biggest U.S. meat processor said it plans to buy back as many as 22.5 million shares.
First Solar Inc. (FSLR) advanced 6.3 percent, the most in the S&P 500, to $132.07. The world’s largest maker of thin-film solar modules received positive letters from the U.S. Energy Department on three projects.
Cisco Systems tumbled 4.8 percent to $16.93. The company, which has lost about $50 billion in market value in the last year, is revamping management and scaling back some businesses after losing share to rivals such as Hewlett-Packard Co.
Chief Executive Officer John Chambers said he’ll eliminate jobs while girding for weakness and lower public-sector spending this quarter. He ditched a longstanding prediction for annual sales growth of 12 percent to 17 percent.

Goldman Sachs Slumps

Goldman Sachs Group Inc. (GS) slumped 3.5 percent to $142.75. Richard Bove, analyst at Rochdale Securities, cut his recommendation for the stock to “sell” from “neutral,” citing pressure on the Justice Department to file a criminal lawsuit against the firm after a Rolling Stone Magazine article that the analyst called an “all-out attack.”
U.S. industrial companies will probably trail the rest of the market because of slowing demand overseas, MKM Partners LP’s Michael Darda said.
Manufacturers and transportation companies are poised to suffer amid a slowdown in China that may prove “sharp,” wrote Darda, the Stamford, Connecticut-based chief market strategist at MKM. Last June, Darda told investors to buy stocks, saying they were cheap relative to bonds. The S&P 500 Index (SPX) is up 30 percent since he made the recommendation.
“The changes are based on our stepped-up concern regarding a sharp slowdown in China and, to a lesser extent, India,” Darda wrote in a note to clients today. “We also have had an increasingly negative view of the euro zone.”
The Institute for Supply Management’s manufacturing index, which rose to 61.4 in February, the highest level since 2004, is in danger of falling back to 50 as global demand slows, Darda wrote. That could spur a decline of 10 percent or more in the S&P 500, which has gained 7.2 percent this year and reached an almost three-year high of 1,363.61 on April 29.
 

Japanese, Australian Stock Futures Increase After Commodity Prices Rebound

Japanese and Australian stock futures gained after commodity prices rebounded, easing concerns that global economic growth may slow.
American depositary receipts of Mitsubishi Corp. (8058), Japan’s biggest commodities trader, rose 0.5 percent from the closing share price in Tokyo. ADRs of Woodside Petroleum Ltd. (WPL), Australia’s No. 2 oil producer, climbed 1.1 percent. Those of Toyota Motor Corp. (7203) gained 0.5 percent after the Asahi newspaper reported production at the world’s largest automaker, cut by the March 11 earthquake, will return to normal by September.
“Increases in the commodity market eased excessive concerns,” said Juichi Wako, a senior strategist at Tokyo-based Nomura Holdings Inc. “Confidence about company earnings will likely support stocks.”
Futures on Japan’s Nikkei 225 (NKY) Stock Average expiring in June closed at 9,770 in Chicago yesterday, compared with 9,700 in Osaka, Japan. The futures were bid in the pre-market at 9,740 in Osaka, at 8:05 a.m. local time. Futures on Australia’s S&P/ASX 200 Index rose 0.6 percent today. New Zealand’s NZX 50 Index was gained 0.1 percent in Wellington.
Futures on the Standard & Poor’s 500 Index were little changed today. In New York, the index advanced 0.5 percent to 1,348.65 yesterday as the dollar fell and commodities rebounded from an earlier slump caused by China raising reserve ratios for its largest lenders by 0.5 percentage point to a record 21 percent, to curb lending.

Oil, Metals

Crude oil for June delivery increased 0.8 percent to settle at $98.97 a barrel yesterday in New York. Copper rebounded from a five-month low and the London Metal Exchange Index of six metals rose 0.2 percent. Gold futures gained 0.4 percent in New York.
The dollar fell versus the euro, after earlier reaching a six-week high against the shared currency. The dollar also depreciated to as low as 80.71 yen at midnight in Tokyo, compared with 81.09 at the close of stock trading yesterday. A weaker dollar cuts the value of U.S. income at Japanese companies when converted into their home currency.
The MSCI Asia Pacific Index lost 1 percent this year through yesterday, compared with gains of 7.2 percent by the S&P 500 and 2.2 percent by the Stoxx Europe 600 Index. Stocks in the Asian benchmark are valued at 13.4 times estimated earnings on average, compared with 13.6 times for the S&P 500 and 11.3 times for the Stoxx 600.
Today, 83 of the 1,022 companies in the MSCI index are scheduled to release earnings statements. Of the 555 companies in the MSCI index that have reported results for the latest quarter, 213 have exceeded analysts’ estimates, while 219 have missed them
Via - www.bloomberg.com
 

Food Prices May Extend Gains on Oil Costs

Food Prices May Extend Gains on Volatile Oil Costs, FAO Says

Global food costs rose to near a record in April as grain costs advanced, increasing inflationary pressure from Beijing to Brasilia and spurring central banks to raise interest rates. 

Food Prices May Extend Gains on Volatile Oil Costs, FAO Says

Grain production in the 2011-2012 crop year may rise to 2.27 billion metric tons from an estimated 2.18 billion tons in the current year, the U.S. Department of Agriculture said May 11. Photographer: Doug Kanter/Bloomberg
Food prices may extend gains, driven by higher crude oil costs, said the United Nations Food & Agriculture Organization, leading to accelerating inflationary pressure from China to the U.S.
“For the time being, food-price increases may continue because of high oil prices,” Hiroyuki Konuma, the FAO’s regional representative in Asia, said in an interview yesterday in Bangkok. “We’re very worried about volatile crude oil prices. There is no sign that prices will decline sharply.”
Global food costs rose to near a record in April as grain costs advanced, increasing inflationary pressure from Beijing to Brasilia and spurring central banks to raise interest rates. Food-price spikes have driven 44 million people into poverty since June last year, the World Bank said, and also contributed to riots across North Africa and the Middle East that toppled leaders in Egypt and Tunisia.
An index of 55 food commodities rose to 232.1 points last month from 231 points in March, the Rome-based FAO said in a report on May 5. The gauge climbed to an all-time high of 237.2 in February before dropping 2.6 percent in March. A further 10 million people may become impoverished if the index climbs 10 percent, the World Bank said April 16.
The decline in March “might not represent a reverse in the long-term trend as the overall conditions that have been forcing food prices higher have not changed,” Konuma said.

Meat, Oilseeds

Global food prices may rise 4.4 percent to a record 240 points by the end of the year, driven by demand for meat, oilseeds and grains used to make ethanol, William Adams, a fund manager at Zurich-based Resilience AG, which has $22.2 million of assets, said April 26.
Turmoil in oil-producing countries including Libya pushed crude above $100 a barrel in March and April. Higher crude prices make biofuels produced from crops more competitive, while raising the cost of tractor fuel and fertilizer for farmers.
“Planting area for wheat and corn appears to be on an increasing trend because farmers will choose to plant the most profitable commodity,” which will help slow food-cost increases, Konuma said.
Grain production in the 2011-2012 crop year may rise to 2.27 billion metric tons from an estimated 2.18 billion tons in the current year, the U.S. Department of Agriculture said May 11. Oilseed output may advance to 459.2 million tons next season from 449.3 million tons, it said.
Corn has surged 79 percent in the past 12 months on speculation that more planting in the U.S., the world’s largest grower, won’t be sufficient to rebuild global stockpiles. Wheat rose 54 percent over the same period and soybeans gained 38 percent as flooding ruined crops in Canada and Australia and drought reduced harvests in Russia and Europe.

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