Gold, Precious Metals Climb as Investors Seek to Store Value

Jan. 22 (Bloomberg) -- Gold rose, along with silver, platinum and palladium as investors sought a store of value amid tumbling New York and European equity markets.

The Standard & Poor’s 500 Index fell as much as 3.4 percent. Initial claims for unemployment benefits matched a 26-year high in the U.S. last week, while housing starts slumped to a record in December, raising concerns the recession is deepening. Some investors buy precious metals during turbulent times to protect value amid instability in equity and other markets.

“There is still some good fear buying, which could persist,” Stephen Platt, a commodity analyst at Archer Financial Services Inc., said in a telephone interview from Chicago. “Gold may retest the $1,040 area within a year.”

Gold futures for February delivery climbed $8.70, or 1 percent, to $858.80 an ounce on the New York Mercantile Exchange’s Comex division. Gold rose 5.5 percent last year, the eighth straight gain, as the S&P index fell 38 percent.

“U.S. equity indexes are down, and that is supportive for the gold price,” Bayram Dincer, Zurich-based commodity analyst at Dresdner Bank, said in an e-mailed note. “Still, gold is relatively weak and that is disappointing.”

A price below $800 an ounce is a “good entry level” in the gold market, Dincer said.

Gold has a mixed record as a long-term store of value against inflation and declines in other assets. On Jan. 21, 1980, the most-active contract touched $873 an ounce and closed at $834 in New York.

“Ask the investor who rushed out to buy gold precisely 29 years ago, at $845 an ounce,” said Jon Nadler, a senior analyst at Kitco Inc. in Montreal. “They could sell it for about $845 today as well. However, they would need to sell it for something near $2,200 just to break even, when adjusted for inflation.”

Commodity Index Falls

The UBS Bloomberg Constant Maturity Commodity Index fell for a third straight day, declining as much as 2.4 percent to 832.24, the lowest since Dec. 31.

The MSCI World Index of equities dropped as much as 1.9 percent and has declined 10 percent this month.

“The danger remains that stock-market price erosion could still engender margin-call related commodity liquidations among funds,” Nadler said. “Not even gold is immune from complete investment-liquidation scenarios such as the massive outflows from commodities seen in the July-November period last year.”

Among other metals, silver futures for March delivery rose 4 cents, or 0.4 percent, to $11.365 an ounce in New York.

Platinum

Platinum futures for April delivery rose $7.30, or 0.8 percent, to $934.90 an ounce. Platinum slid 5.2 percent last week and is down 60 percent from a record $2,308.80 on March 4.

“Platinum is going to hold its value,” Archer’s Platt said.

Palladium futures for March delivery rose 40 cents, or 0.2 percent, to $184.80 an ounce. The price fell 3.1 percent last week and has dropped 50 percent in the past year.

Builders began construction on homes at the slowest pace on record last month, as sales and mortgage financing dried up, the U.S. Commerce Department reported today. Housing starts fell to a 550,000 annual rate, the lowest since at least 1959, when record-keeping began.

First-time claims for unemployment insurance rose to 589,000 last week, matching a 26-year high reached last month, the U.S. Labor Department said. U.S. employers cut 2.6 million jobs last year, dimming prospects for a quick economic recovery.

Gold, which reached a record $1,033.90 an ounce in March 2008, may trade around $900 an ounce within a month and $850 in three months, according to John Reade, a UBS AG analyst in London. He previously forecast $800 in one to three months.

Crude Oil Falls on Increase in Stockpiles, Recession Concerns

Jan. 23 (Bloomberg) -- Crude oil fell after a U.S. government report showed a bigger-than-forecast gain in crude stockpiles, and as weak corporate earnings and economic data signaled a deepening recession.

Supplies of crude oil rose 6.1 million barrels to 332.7 million last week, the highest since August 2007, the Energy Department said yesterday. Stockpiles were forecast to climb by 1.4 million barrels, according to a Bloomberg News survey of analysts. Gasoline and distillate fuels also rose more than expected. U.S. stocks slid yesterday as companies from Microsoft Corp. to Fifth Third Bancorp reported disappointing earnings.

“The crude increase was significant and the gasoline number was huge,” said Nauman Barakat, senior vice president of global energy futures at Macquarie Futures USA Inc. in New York. “We saw product supplies increase despite a significant decrease in refinery runs and lower prices.”

Crude oil for March delivery fell 52 cents, or 1.2 percent, to $43.15 a barrel at 10:53 a.m. Sydney time on the New York Mercantile Exchange. Prices are down 2.1 percent so far this year and 51 percent lower than a year ago. Yesterday, crude oil future rose 12 cents to settle at $43.67 a barrel.

The oil market tracked equities yesterday, with the Dow Jones Industrial Average falling 105.3 points, or 1.3 percent, to 8,122.8.

Fuel Demand Drops

U.S. fuel consumption during the four weeks ended Jan. 16 averaged 19.4 million barrels a day, down 4.7 percent from a year earlier, the Energy Department report showed.

Supplies at Cushing, Oklahoma, where oil traded on Nymex is stored, climbed 0.7 percent to 33.2 million barrels last week, the highest since at least April 2004, when the department began keeping records for the location.

Stockpiles in the Mid-Continent, known as PADD 2, increased 1.7 percent to 82.2 million barrels, the highest since the week ended June 26, 1998, when oil was trading at about $14 a barrel. Oklahoma is in PADD 2.

Gasoline inventories increased 6.48 million barrels to 220 million, the Energy Department said. Stockpiles were forecast to climb by 1.8 million barrels, according to the Bloomberg News survey. Refineries reduced operating rates, or runs, by 2 percentage points as fuel consumption tumbled.

Gasoline futures for February delivery dropped 8.04 cents to $1.0934 a gallon at 2:50 p.m. in New York yesterday, the lowest settlement since Jan. 12. Futures are up 8.5 percent for the year and are 52 percent lower than a year ago.

April Oil

The price of oil for delivery in April is $2.16 higher than for March, and December futures are up $10.23 from the front month. This structure, in which the subsequent month’s price is higher than the one before it, is known as contango, and is often an indicator of oversupply.

Companies including Citigroup Inc.’s Phibro LLC, Royal Dutch Shell Plc and BP Plc have stored oil on tankers, as the contango allows them to profit from hoarding crude.

Refineries operated at 83.3 percent of capacity last week, the Energy Department report showed, the lowest for the week since 1991. Analysts forecast that there would be a 0.5 percentage point drop.

Housing starts and jobless claims signaled that the recession in the U.S., the world’s biggest oil-consuming country, is deepening.

Gasoline Prices

Housing starts fell 16 percent last month to an annual rate of 550,000, the lowest since the government started compiling statistics in 1959, the Commerce Department said yesterday in Washington. Another government report showed the number of Americans filing first-time claims for unemployment benefits rose last week, matching a 26-year high.

Regular gasoline at the pump, averaged nationwide, increased 0.2 cent to $1.85 a gallon, AAA, the largest U.S. motorist organization, said on its Web site yesterday. Prices have declined 55 percent from the record $4.114 a gallon reached on July 17.

Distillate supplies, which include heating oil and diesel, rose 790,000 barrels to 145 million barrels. Stockpiles were forecast to climb by 500,000 barrels.

Heating oil for February fell 3.74 cents, or 2.7 percent, to settle at $1.3486 a gallon in New York yesterday.

“We had a build in distillate supplies even though it’s January and freezing outside,” said Rick Mueller, director of oil markets at Energy Security Analysis Inc. in Wakefield, Massachusetts. “Any distillate build is very bearish at this time of year.”

Saudi Arabia, the world’s top oil exporter, decided to cut production by 300,000 barrels a day below its OPEC quota to prop up prices, Algerian Oil Minister Chakib Khelil told the state- run newspaper El Moudjahid. The desert kingdom will make the reduction before a March 15 meeting of the Organization of Petroleum Exporting Countries.

Brent crude oil for March settlement rose 37 cents, or 0.8 percent, to settle at $45.39 a barrel on London’s ICE Futures Europe exchange.

Yen Trades Near Record High Against Pound Amid Risk Aversion

Jan. 23 (Bloomberg) -- The yen traded near a record high against the British pound and the strongest level since 1995 versus the dollar as concern the global slowdown will worsen spurred investors to take refuge in Japan’s currency.

Sterling fell toward a 23-year low versus the dollar and traded near the weakest in two weeks against the euro before a U.K. report that may show Britain’s economy shrank in the fourth quarter by the most since 1990. The euro headed for a fourth weekly loss against the dollar before a European report that economists say will show manufacturing and service industries contracted for an eighth month in January.

“The U.K. and the eurozone seem to be the worst off among the major economies,” said Satoshi Tate, a senior vice president in the foreign-exchange division in Tokyo at Mizuho Corporate Bank Ltd., a unit of Japan’s second-largest publicly traded bank. “Risk aversion is still prominent among some investors, so the yen is likely to remain a haven currency.”

Japan’s currency traded at 123.45 per pound as of 8:50 a.m. in Tokyo, after advancing to a record 119.42 on Jan. 21. The yen was at 88.98 versus the dollar following a rally to 87.13 on Jan. 21, the strongest level since July 1995. The yen traded at 115.74 per euro after appreciating to 112.12 on Jan. 21, the highest since March 2002.

The pound traded at $1.3875 from $1.3877 in New York yesterday, after falling to $1.3622 on Jan. 21, the weakest since 1985. Against the pound, the euro was at 93.74 pence from 93.70 pence yesterday, when it reached 94.67 pence, the strongest since Jan. 5. The euro was little changed at $1.3006, after declining to $1.2825 on Jan. 21, the lowest in six weeks.

Carry Trade

The yen has strengthened against all of the 16 most-active currencies this week, rising 5.7 percent to 46.89 against New Zealand’s dollar and 4.9 percent to 58.21 versus Australia’s dollar. Investors tend to purchase the yen in times of market turmoil because of Japan’s current-account surplus and low interest rates.

Benchmark interest rates are 4.25 percent in Australia and 5 percent in New Zealand, compared with 0.1 percent in Japan, encouraging investors to borrow in yen and buy higher-yielding assets elsewhere.

In a carry trade, investors get funds in a country with low borrowing costs and invest in one with higher rates. The risk is that currency market moves erase those profits.

The British currency lost 5.7 percent versus the dollar and 3.9 percent against the euro this week as the U.K. government’s plan for a second bank bailout in three months raised concern that the financial crisis is worsening and the budget deficit is widening.

‘Credit Concerns’

“There’s a lot of credit concerns that have been driving the pound down,” said Jeffrey Hough, a vice president and currency options trader at Societe Generale in New York. “Until things are clearer, I expect this trend to continue. The financial system isn’t going to be rectified any time soon.”

The slide indicates investors are betting Britain will lose its AAA credit rating, Merrill Lynch & Co. strategists including London-based Emma Lawson wrote in a report yesterday.

Britain’s gross domestic product may have contracted 1.2 percent in the fourth quarter from the previous three months, according to a Bloomberg News survey of economists before today’s report from the Office for National Statistics.

“The general economy is really weighing on the pound,” said Terry Joyce, senior vice president of foreign exchange in Birmingham, Alabama, at Regions Financial Corp., the state’s biggest bank. “The pound’s just waiting to see what the government is going to do as far as how nationalized it’s going to make the banking institutions.”

The euro headed for a third weekly loss versus the yen as a composite index of Europe’s manufacturing and service industries dropped to 37.4 in January, the lowest since the survey began in 1998, according to a Bloomberg News survey of economists.

The index, which is based on a survey of purchasing managers by Markit Economics, will be released at 9 a.m. in London. A reading below 50 indicates contraction.

FCPO Commentary on 23/01/09

FCPO 3rd month April Futures contract surge RM61 higher to close RM1870 as compare to previous trading session with 8028 lots traded in the market. CPO was traded higher during last hour trading session before closing as soybean oil and crude oil electronic trading seems on some positive trading.

Technically, finally CPO price manage to breach the trend line in the hourly chart but only surge fiercely during last 2 hour trading session before close. We expect CPO price already finish the correction phase and will continue traded higher in the coming trading session provided support levels at RM1800 and RM1830 were not violated. Traders were advice to hold long position in the coming trading while be cautious around the resistance levels at RM1890 and RM1920 region.

FKLI Commentary on 23/01/09

FKLI December futures contract close marginally 1 points lower at 872 as compare to previous trading session with total 4812 lots traded in the market. FKLI was traded lower during the 2nd trading session as Dow Jones futures electronic trading sudden drops.

Technically, FKLI seems temporary support above the support trend line at 870 regions in the hourly chart. We expect FKLI would trade higher in the coming trading session provided if the trend line was not violated. However, we still think FKLI would have strong support at 861 and 870 levels. Traders were advice to hold long position in the coming trading session while be cautious around the resistance levels at 880 and 892 regions.

Yen Trades Near Record High Versus Pound on U.K. Bank Concern

Jan. 22 (Bloomberg) -- The yen traded near a record high against the pound as speculation that the deepening financial crisis will force the British government to nationalize banks boosted the haven appeal of Japan’s currency.

Sterling erased its decline yesterday against the dollar after touching the lowest since Margaret Thatcher was prime minister as equities climbed and Reuters reported the Group of Seven may discuss the pound’s slump. The dollar dropped to the lowest versus Japan’s currency since 1995 as traders quit buying the greenback to prevent it from sliding below 90 yen after options contracts expired.

“We have seen significant selling off of sterling in the past couple of days after the U.K. banking system came into its problems,” said Henrik Gullberg, a strategist in London at Deutsche Bank AG, the world’s biggest foreign-exchange trader. “Dollar-yen had been remarkably stable at 90 for some time.”

The pound traded at 124.75 per yen at 7:10 a.m. in Tokyo, after falling 0.1 percent yesterday and reaching an all-time low of 119.42. The British currency was at 93.28 pence per euro following a 0.7 percent decline. Sterling slid as much as 2.2 percent to $1.3622, the lowest level since September 1985, before trading at $1.3948.

The pound erased losses versus the dollar after Reuters reported the G-7 nations may discuss the currency’s plunge at its next meeting, according to unnamed person.

“It’s hard to imagine what kind of actual measure G-7 has up its sleeve, but clearly it’s enough to make sterling bears think twice about this sell-off,” said Mike Moran, a senior currency strategist at Standard Chartered Bank in New York.

Options Contracts

Traders abandoned the dollar when option contracts betting on its staying above 90 yen expired at 10 a.m. New York time yesterday, causing it to “collapse” versus the yen, according to Brian Dolan, chief currency strategist at FOREX.com, a unit of online currency trading firm Gain Capital in Bedminster, New Jersey.

“This is just allowing the yen to do what it couldn’t do for the past 10 days or so,” said Alan Ruskin, head of international currency strategy in North America at RBS Greenwich Capital Markets Inc. in Greenwich, Connecticut.

The dollar decreased as much as 2.9 percent yesterday to 87.13 yen, the lowest level since July 1995. The euro fell as much as 3.2 percent to 112.12 yen, the lowest level since March 2002.

The Swiss franc dropped as much as 1.2 percent yesterday to 1.4964 against the euro and 1.3 percent to $1.1615 after Swiss National Bank Vice President Philipp Hildebrand said officials may intervene to curb the currency’s appreciation. Last year the franc advanced the most since the euro’s debut in 1999, appreciating almost 10 percent. It gained 6.1 percent against the dollar in 2008.

Dollar Index

The ICE’s Dollar Index, which tracks the greenback against the euro, the yen, the pound, the Canadian dollar, the franc and Sweden’s krona, decreased 0.5 percent yesterday after touching 86.504, the highest level since Dec. 8.

Confidence in the dollar is “critical” to the U.S. economy, Timothy Geithner, President Barack Obama’s nominee for Treasury secretary, said at his confirmation hearing yesterday. The Standard & Poor’s 500 Index gained 4.4 percent on speculation a plan from Obama will shore up banks.

Sterling lost 5.3 percent versus the dollar and 3.5 percent against the euro in the past three days after the U.K. government’s plan for a second bank bailout in three months raised concern the financial crisis is deepening. Shares of Barclays Plc fell for a seventh day in London on concern the bank may take more writedowns and be nationalized.

Bank of England

The central bank may acquire securities such as corporate bonds and commercial paper to bolster lending, Bank of England Governor Mervyn King said in a Nottingham, England, speech on Jan. 20.

“The speech hurt the currency as it was more explicit than we expected,” said Geoffrey Yu, a foreign-exchange strategist at UBS AG in London. “The central bank is turning on the printing presses.”

The Bank of England will lower its benchmark rate by a half-percentage point to 1 percent at its Feb. 5 meeting, according to the median forecast of 28 economists surveyed by Bloomberg News.

The Monetary Policy Committee voted 8-1 to trim the main rate by a half-percentage point to 1.5 percent, minutes of the Jan. 8 decision published yesterday show. David Blanchflower voted for a full-point interest-rate cut.

“The U.K.’s imploding,” said Jonathan Gencher, Toronto- based director of currency sales at BMO Capital Markets, a unit of Canada’s fourth-largest bank. “The pound will remain under pressure until the BOE has cut rates until there is not much scope for further rate cuts.”

Gold to Gain Through 2012, Morgan Stanley Forecasts (Update2)

Jan. 21 (Bloomberg) -- Gold may average higher for each of the next three years and climb to a record driven by increased demand and a declining dollar as governments ramp up spending to battle the global recession, according to Morgan Stanley.

The metal may average $900 an ounce this year, up 20 percent from an earlier target of $750, the bank said today in a report. It may average $1,000 in 2010, $1,050 in 2011 and $1,075 in 2012, up as much as 34 percent from previous estimates, the report said. The commodity peaked at $1,032.70 on March 17.

Morgan Stanley joins Standard Chartered Plc in raising its target for gold prices amid concern that the dollar may drop as the supply of the currency is increased. President Barack Obama, sworn in yesterday, plans an $850 billion stimulus on top of a $700 billion bank-bailout package enacted under his predecessor.

“Devalued currencies, growing global incomes and a renewed appreciation for gold should keep prices higher,” Morgan Stanley’s New York-based analyst Hussein Allidina wrote. “A globally synchronous and aggressive fiscal and monetary stimulus may be needed to re-inflate the global economy, and we think this continues to present significant upside to gold prices.”

The International Monetary Fund has forecast that advanced economies including the U.S. will contract simultaneously this year for the first time since World War II, spurring stimulus plans backed by more state debt. Gold, regarded by some investors as a safe-haven asset, can rise when the dollar falls.

‘Weaker Dollar’

“Gold will remain relatively stable in the first half of the year, then later, a weaker dollar, pickup in inflation and flight to safety will help gold test its record high again,” said Chen Yonglin, an analyst at Citic Securities Co.

Gold climbed for an eighth year in 2008, gaining 5.8 percent “in a year when most other asset classes saw double- digit losses,” Morgan Stanley’s Allidina wrote. “The U.S. dollar should weaken as the global economy recovers.”

The metal for immediate delivery traded at $851.35 an ounce at 2:37 p.m. in Singapore, and has averaged $846.18 an ounce this year.

Standard Chartered said in a report e-mailed Jan. 15 that gold may average $971 an ounce in 2009, up 11 percent from the bank’s previous forecast. A weaker dollar, lower supply of the metal and safe-haven buying by investors should drive gold to more than $1,000 an ounce in the second half of this year, according to StanChart analysts led by Helen Henton.

Jim Rogers, the chairman of Rogers Holdings who correctly predicted in April 2006 that gold would reach $1,000 an ounce, said last month that he planned to buy more of the metal, adding that the price “will go much higher.”

Platinum may average $875 in 2009, $1,000 in 2010, $1,050 in 2011, and $1,150 in 2012, down as much as 42 percent from previous estimates, according to Morgan Stanley. Palladium may average $180 in 2009, $200 in 2010, $220 in 2011 and $240 in 2012, down as much as 39 percent from earlier calls, it said.

Oil Rises as Equities Rally on Bank-Rescue Plan Speculation

Jan. 21 (Bloomberg) -- Crude oil rose the most in three weeks, following equities higher, on speculation a bank-rescue plan from President Barack Obama will boost financial companies.

Oil climbed as much as 7 percent as stocks rallied on the new president’s plans to complete an assistance program that can be paired with the $825 billion stimulus package. The oil market closely tracked the Dow Jones Industrial Average today. March futures also advanced as traders narrowed the differential to later contracts amid rising inventories.

“There’s been a positive correlation between energy and equities, and this appears to be giving the oil market some support,” said Bill O’Grady, chief markets strategist at Confluence Investment Management in St. Louis.

Crude oil for March delivery rose $2.71, or 6.6 percent, to settle at $43.55 a barrel at 2:44 p.m. on the New York Mercantile Exchange, the biggest gain since Dec. 31. Oil has fallen 2.4 percent since the end of December and is 52 percent lower than a year ago.

February oil rose $2.23, or 6.1 percent, to $38.74 a barrel yesterday, the last day the contract traded, as the spread between it and March crude declined.

The Dow increased 279.01 points, or 3.5 percent, to 8,228.1. The Standard & Poor’s 500 Index rose 35.02 points, or 4.4 percent, to 840.24.

“The strength in the S&P is causing the front oil contracts to rise, and that’s causing the spread to come in,” said Addison Armstrong, director of market research for Tradition Energy in Stamford, Connecticut.

Higher in April

The price for oil for delivery in April is $2 higher than for March, down from a $4.45 premium on Jan. 16. December futures are up $10.09 from the front month, versus $15.04 at the end of last week. This structure, in which the subsequent month’s price is higher than the one before it, is known as contango.

“This was an extension of yesterday’s flattening of the curve,” said Tim Evans, energy analyst with Citi Futures Perspective in New York. “When you look out to 2010 you see that prices were down today. There’s a shift away from the steep contango spread that was based on concern about a glut to something that represents the true cost of carry.”

The spread has encouraged companies to increase stockpiles at Cushing, Oklahoma, where West Texas Intermediate, the grade traded on the Nymex, is stored. Supplies at the hub climbed 2.5 percent to 33 million barrels in the week ended Jan. 9. It was the highest level since at least April 2004, when the Energy Department began keeping records for the location.

Collapsing Contango

“As one and all moved to take advantage of the obvious contango, the trade began and is continuing to collapse under its own weight,” said John Kilduff, senior vice president of energy at MF Global Inc. in New York. “If the unwind continues, we might not see $35 crude oil for a while.”

Prices fell earlier on speculation that the department may say U.S. crude-oil inventories rose last week when it releases its weekly supply report at 11 a.m. tomorrow in Washington, a day later than usual because of the Martin Luther King Jr. holiday on Jan. 19.

The report may show that stockpiles rose 1.4 million barrels in the week ended Jan. 16, according to the median of 14 analyst estimates in a Bloomberg News survey.

“There’s a lot of oil floating around,” said Justin Fohsz, a broker at Starsupply Petroleum, a division of GFI Group Inc. in Englewood, New Jersey. “There’s an overhang, which isn’t going away anytime soon.”

Gasoline stockpiles rose 1.8 million barrels last week, according to the survey. Inventories of distillate fuel, a category that includes heating oil and diesel, probably increased 500,000 barrels.

Gasoline Rises

Gasoline futures for February delivery rose 3.07 cents, or 2.7 percent, to settle at $1.1738 a gallon in New York. Heating oil for February increased 1.02 cents, or 0.7 percent, to end the session at $1.386 a gallon.

The Organization of Petroleum Exporting Countries announced a record 9 percent cut in supply targets at a Dec. 17 meeting to reverse the plunge in oil prices, which have tumbled 70 percent since reaching a record $147.27 a barrel in New York on July 11.

Petroleos Mexicanos, the state-owned oil company, said crude output fell 9.2 percent to 2.799 million barrels a day in 2008, the largest decline since World War II, as production fell at its largest field. Pemex extracted 31 percent less crude last year from Cantarell, the world’s third-largest deposit, according to the company statement.

Brent crude oil for March settlement rose $1.40, or 3.2 percent, to settle at $45.02 a barrel on London’s ICE Futures Europe exchange.

Volume in electronic trading on the exchange was 471,825 contracts as of 3:06 p.m. in New York. Volume totaled 677,969 contracts yesterday, up 42 percent from the average over the past 3 months. Open interest that day was 1.25 million contracts. The exchange has a one-business-day delay in reporting open interest and full volume data.

FKLI Commentary on 22/01/09

FKLI December contract plunge 14 points lower to close at 878.5 as compare with previous trading session with a total of 5452 lots traded in the market. FKLI was open and traded lower during the trading session due to weak regional indices and Dow Jones futures electronic trading.

Technically, FKLI manage to reach our expect target around 880 levels but lack of immediate rebound after support levels was tested. However, RSI and MACD shows significant Bull divergence in the hourly chart which indicates reversal is nearby. We expect FKLI would trade higher in the coming trading session provided if support levels at 878 and 865 regions were not violated. Traders were advice to hold long position in the coming trading session while being cautious around resistance levels at 890 and 908 regions.

FCPO Commentary on 22/01/09

FCPO 3rd month April Futures contract closed RM18 lower to close RM1809 as compare to previous trading session with 7747 lots traded in the market. CPO was traded tight range during the entire trading session.

Technically, CPO price traded tight range within RM1820 and RM1800 range during the trading session. We expect CPO price would trade higher in the coming trading session only if support levels at RM1800 and RM1730 were not violated. Traders were advice to hold long position while be cautious around the resistance levels at RM1850 and RM1900 regions.

Yen Declines, Reversing Gain, as U.S. Stock Futures Advance

Jan. 21 (Bloomberg) -- The yen weakened, reversing a gain, on speculation an advance in U.S. stock futures will encourage investors to purchase higher-yielding assets funded in Japan’s currency.

The yen fell to 90.05 versus the dollar as of 11:14 a.m. in Tokyo from 89.76 late in New York yesterday. It earlier rose as high as 89.69. Japan’s currency dropped to 116.41 per euro from 115.85 late yesterday, after touching 115.30

Malaysia shares to follow Wall St; rate cut eyed

KUALA LUMPUR, Jan 21 (Reuters) - Malaysian shares are set
for a soft start on Wednesday after Wall Street notched a
record drop overnight as the global banking crisis showed no
signs of easing. Local dealers said Malaysian banking shares were
increasingly getting pulled into the global selloff especially
as mounting expectations of a possible rate cut of 25 basis
points today by the central bank could hurt margins. "The rate cut will start the flow of negative news for
Malaysian banks, who are trying to sell off their debt as seen
with Public Bank and others who are raising capital," said a
trader with a local investment bank. "We expect the KL composite index to buckle under pressure
from banks, since that sector accounts for 22 percent." Malaysia's third-biggest lender Public Bank (PUBM.KL) said
on Tuesday it plans to sell at least 1 billion Malaysian
ringgit ($277.1 million) in debt this year. Top two lenders Maybank (MBBM.KL) and CIMB (BUCM.KL) are
also currently raising funds to boost capital amid the rapidly
spreading economic downturn. "The activities of these banks suggest that Malaysia could
be heading for a technical recession in the first quarter of
this year," said another dealer. "Some analysts are talking about a more aggressive interest
rate cut of about 50 basis points, so we are not that insulated
from the rest of the world." The Dow Jones industrial average .DJI dropped 332.13
points, or 4.01 percent, to 7,949.09. The Standard & Poor's 500
Index .SPX slid 44.90 points, or 5.28 percent, to 805.22. The decline for the Dow marked the largest point and
percentage drop for the index since Dec. 1, 2008, and the first
time the Dow has been below 8,000 since Nov. 20, 2008. Malaysia's benchmark stock index .KLSE closed down 1.11
percent at 880.37 points. Traders pegged Wednesday's resistance
level at 800 points.

Oil Market Needs More Speculators, Deutsche Bank Says (Update1)

Jan. 20 (Bloomberg) -- The crude-oil market needs more speculators to help stabilize prices six months after the traders were blamed for pushing the commodity up to a record $147.27 a barrel, Deutsche Bank said in a report.

A lack of liquidity is distorting prices, particularly for near-term delivery, amid an oversupply of oil at Cushing, Oklahoma, said analysts led by Paul Sankey in New York in the Deutsche Bank report dated yesterday. This is sending the “wrong” price signals to refiners and producers.

“We clearly have a fundamentally imbalanced market, with far too much crude, that needs to be resolved,” the analysts said. “We need more market activity to correct these issues, but for technical, political and financial reasons, the liquidity of the market has dried up and the long-term price of oil is partly distorted.”

The market needs speculators who deal in physical crude oil, actually making and taking delivery of the commodity, the analysts said. Market speculators last year were “paper” speculators, trading oil as a financial instrument and never taking possession of the crude.

Also staying out of the market are mid-cap integrated oil companies who lost money on hedges in place when the market went up and refiners “unwilling” to tie up capital in holding physical oil during the current credit crisis, the report said.

OPEC producers such as Saudi Arabia and major oil companies such as Exxon Mobil Corp. don’t usually do forward sales on exchanges, the analysts said.

Cushing Supplies

Supplies at Cushing, the delivery point for New York futures, reached the highest in at least four years in the week ended Jan. 9, as inventories climbed 2.5 percent to 33 million barrels, according to the Energy Department. It began keeping records for the location in 2004.

Oil futures for delivery in March cost about $8.14 a barrel more than for delivery in February last week, allowing traders to profit by buying and holding oil, if they have the ability to store it. The differential was $2.10 a barrel today, as February oil expired.

Oil for delivery a year from now cost $16.97 a barrel, or 44 percent, more than for February 2009.

‘Bust Cycle’

“We are now in an over-supplied bust cycle, and we need lower prices either to encourage demand or decrease supply,” the analysts said. Production cuts by the Organization of Petroleum Exporting Countries haven’t helped enough because lower oil prices haven’t spurred an increase in demand.

The International Energy Agency, an adviser to 28 nations, said last week that oil demand will fall for a second year in 2009, the first back-to-back contraction since 1983, as a deepening recession erodes consumer spending.

“We don’t believe that OPEC is doing enough to address over-supply,” the analysts said in the report. The Organization of Petroleum Exporting Countries agreed to a record 9 percent reduction in supply targets at its last meeting in December to try to halt the plunging price of oil.

Crude oil for February delivery rose $2.23, or 6.1 percent, to expire at $38.74 a barrel on the New York Mercantile Exchange. Futures touched $32.70 earlier today, the lowest since Dec. 19. Prices are down 59 percent from a year ago.

Floor trading was closed for the Martin Luther King Jr. holiday yesterday. Electronic trades were booked today for settlement. The more-active March contract fell $1.73, or 4.1 percent, to $40.84 a barrel.

Yen Gains to Record Versus Pound on Global Economic Concerns

Jan. 21 (Bloomberg) -- The yen rose to a record high against the pound and gained to the strongest level versus the euro since October as concern a global slowdown will worsen prompted investors to sell higher-yielding assets.

Sterling fell to the lowest since 2001 against the dollar and declined to a two-week low versus the euro before a U.K. report that may show unemployment climbed at the fastest pace since 1991, backing the case for the Bank of England to cut interest rates next month. The euro declined to the lowest in six weeks versus the dollar before a German report that may show producer prices dropped for a second month, giving more scope for the European Central Bank to lower borrowing costs.

“The market is reflecting the downside risk of the global economy and an increase in risk aversion by investors,” said Toru Umemoto, chief currency analyst in Tokyo at Barclays Capital. “The yen carry trade is being unwound and the yen is the beneficiary. This move will continue for a long time.”

The yen rose to 124.55 per pound as of 9:20 a.m. in Tokyo from 124.47 late in New York yesterday. It reached an all-time high of 124.02. The currency advanced to 115.58 per euro from 115.85 yesterday. It touched 115.30, the strongest since Oct. 28. The yen was little changed at 89.79 against the greenback.

The dollar advanced to $1.2873 per euro from $1.2904 late in New York yesterday. It reached $1.2845, the strongest since Dec. 9. Sterling weakened to $1.3871 from $1.3928. It touched $1.3811, the lowest since June 2001. Against the euro, the pound slid to 92.79 pence from 92.62 pence yesterday when it reached 93.25 pence, the lowest since Jan. 5.

Jobless Benefits

Australia’s dollar slid 2.7 percent to 58.20 yen and New Zealand’s currency slumped 2.7 percent to 46.65 yen from late in Asia yesterday. The Nikkei 225 Stock Average fell 2.7 percent.

Benchmark interest rates are 4.25 percent in Australia and 5 percent in New Zealand, compared with 0.1 percent in Japan, encouraging investors to borrow in yen and buy higher-yielding assets elsewhere.

In a carry trade, investors get funds in a country with low borrowing costs and invest in one with higher rates. The risk is that currency market moves erase those profits.

The pound declined for a third day against the yen and the dollar as the number of people in the U.K. receiving jobless benefits rose by 81,000 in December, the most since March 1991, according to a Bloomberg News survey of economists. The Office for National Statistics will release the data at 9:30 a.m. in London today.

The trend for the pound versus the dollar is “clearly” down, Citigroup Inc.’s New York-based Tom Fitzpatrick and London- based Shyam Devani wrote in a research note to clients yesterday. A “firm breach” of $1.3682, a level last touched in June 2001, will allow the pound to decline to $1.3045, which would be the lowest level since 1985, according to the analysts, who use charts to predict currency moves.

Germany’s Producer Prices

The Bank of England will likely lower its benchmark rate by a half-percentage point to 1 percent at its Feb. 5 meeting, according to a separate Bloomberg survey.

Europe’s single currency fell for a third day versus the yen and the dollar as Germany’s producer prices fell 1.2 percent in December, after a 1.5 percent decline in November, another Bloomberg survey shows. The Federal Statistics Office will publish the report at 8 a.m. in Wiesbaden today.

The euro also weakened as Belgian Finance Minister Didier Reynders is seeking a second round of government intervention to aid banks in difficulties, news agency Belga quoted him as saying in an interview yesterday.

“Worries over the European economies and their financial sectors are weighing on the euro,” said Ryohei Muramatsu, manager of Group Treasury Asia in Tokyo at Commerzbank AG. “The slide in the euro seems to be accelerating.”

The euro may decline to $1.2845 and 115.30 yen today, Muramatsu said.

Investors increased bets that the ECB will cut rates further. The yield on the three-month Euribor interest rate futures contract due in March fell to 1.255 percent yesterday from 1.33 percent on Jan. 19.

FCPO Commentary on 21/01/09

FCPO February futures contract traded RM32 lower compare to previous trading session and close at RM1827 with a total 7760 lots traded in the market. CPO price was traded lower due to Domino effect of Crude Oil futures plunge during overnight trading session.

Technically, CPO price tested support levels at RM1800 for the 3rd time during trading session but RM1800 levels seems holding well against the selling pressure. Based on Parabolic SAR, we suspect a falling wedge was formed in the hourly chart. We expect CPO price would trade higher in the coming trading session provided support levels at RM1800 and RM1730 were not violated. Traders were advice to hold long position in the coming trading session while being cautious around resistance levels at RM1872 and RM1913 regions.

FKLI Commentary on 21/01/09

FKLI December contract plunge 14 points lower to close at 878.5 as compare with previous trading session with a total of 5452 lots traded in the market. FKLI was open and traded lower during the trading session due to weak regional indices and Dow Jones futures electronic trading.

Technically, FKLI manage to reach our expect target around 880 levels but lack of immediate rebound after support levels was tested. However, RSI and MACD shows significant Bull divergence in the hourly chart which indicates reversal is nearby. We expect FKLI would trade higher in the coming trading session provided if support levels at 878 and 865 regions were not violated. Traders were advice to hold long position in the coming trading session while being cautious around resistance levels at 890 and 908 regions.

Oil Rises as Traders Purchase Crude Before Contract Expiration

Jan. 20 (Bloomberg) -- Crude oil rose more than $2 a barrel in New York, the most in more than two weeks, as traders purchased futures for February delivery before the contract expired today.

Investors who made bets that February oil would fall further closed out their positions, an action called short covering. The February contract was less expensive than the subsequent month’s price, a condition known as contango. The March through February 2010 contracts are down more than $1.

“There were a lot of shorts holding out for the last day of trading and in the end they had to cover them,” said Peter Beutel, president of Cameron Hanover Inc., an energy consulting company in New Canaan, Connecticut.

Crude oil for February delivery rose $2.23, or 6.1 percent, to settle at $38.74 a barrel at 2:58 p.m. on the New York Mercantile Exchange, the biggest gain since Dec. 31. More than $7 separated the day’s high and low prices. Futures are down 57 percent from a year ago.

Floor trading was closed for the Martin Luther King Jr. holiday yesterday. Electronic trades were booked today for settlement. The more-active March contract declined $1.73, or 4.1 percent, to settle at $40.84 a barrel.

“Now that the February contract has expired, it will be interesting to see if over the next few days the March drops to the February level,” Beutel said.

Rising U.S. stockpiles and forecasts from the International Energy Agency and OPEC for declining world demand contributed to an 11 percent drop in Nymex crude oil last week. Prices are down 13 percent this year, after tumbling 54 percent in 2008.

Inventory Increases

“Given the contango, I would expect us to see further inventory increases for at least a couple weeks,” said Rick Mueller, director of oil markets at Energy Security Analysis Inc. in Wakefield, Massachusetts.

U.S. inventories probably rose 1.5 million barrels last week, the 15th gain in 17 weeks, according to the median of analyst estimates in a Bloomberg News survey. The Energy Department is scheduled to release its weekly inventory report on Jan. 22, a day later than usual because of yesterday’s holiday.

“Nothing is happening in the news today that explains the movement,” said Michael Lynch, president of Strategic Energy & Economic Research, in Winchester, Massachusetts. “All of the movement is due to expiration.”

The oil market needs more speculators to help stabilize prices six months after the traders were blamed for pushing the commodity higher, Deutsche Bank said in a report. A lack of liquidity is distorting prices, particularly for near-term delivery, amid an oversupply of oil at Cushing, said analysts led by Paul Sankey in New York in the report dated yesterday.

Imbalanced Market

“We clearly have a fundamentally imbalanced market, with far too much crude, that needs to be resolved,” the analysts said. “We need more market activity to correct these issues, but for technical, political and financial reasons, the liquidity of the market has dried up and the long-term price of oil is partly distorted.”

Brent crude oil for March settlement declined 88 cents, or 2 percent, to end the session at $43.62 a barrel on London’s ICE Futures Europe exchange.

Two geopolitical crises that bolstered prices earlier this month appear to have been resolved over the long weekend.

Russia and Ukraine signed 10-year natural-gas contracts, ending a dispute that squeezed supplies to the European Union for almost two weeks. Shipments resumed today. More than 20 European countries were affected, as 80 percent of Russian gas exports pass through Ukraine’s pipeline network.

Israeli Pullout

Israel began pulling its troops from the Gaza Strip after it declared a unilateral truce Jan. 18, ending a military operation to stop Hamas and other Palestinian militant groups from shooting rockets into the country. The fighting began on Dec. 27. Concern that the unrest would disrupt Middle East supplies has helped bolster prices this month.

“The Russia-Ukraine gas dispute has been settled, although I don’t know when there will be deliveries in Europe, and Israeli troops are leaving Gaza,” said Nauman Barakat, senior vice president of global energy futures at Macquarie Futures USA Inc. in New York. “Inventories are up and demand is poor. It’s hard to see a silver lining for the bulls.”

The Organization of Petroleum Exporting Countries announced a record 9 percent cut in supply targets at a Dec. 17 meeting to reverse the plunge in oil prices, which have tumbled 74 percent since reaching a record $147.27 a barrel in New York on July 11.

Oil may make a “swift and violent rebound” to $65 a barrel in the second half of 2009 as OPEC production cuts take effect and other producers trim output, Goldman Sachs analyst Jeffrey Currie said at a conference in London yesterday.

Volume in electronic trading on the exchange was 615,454 contracts as of 3:07 p.m. in New York. Volume totaled 530,274 contracts on Jan. 16, up 11 percent from the average over the past 3 months. Open interest that day was 1.25 million contracts. The exchange has a one-business-day delay in reporting open interest and full volume data.

Gold Rises as Bailouts Spur Speculation Recession Will Deepen

Jan. 20 (Bloomberg) -- Gold prices rose to the highest in more than a week on speculation that the recession will deepen as banks continue to fail, boosting the appeal of the precious metal as a haven. Silver declined.

The British government yesterday said it would spend an additional 100 billion pounds ($139.3 billion) to stabilize its banking system. About 250 billion pounds was committed in October. The U.S. has already spent about $350 billion to help banks as the credit crisis intensified. Gold rose 5.5 percent last year, the eighth straight annual increase.

“Gold is gaining on systemic fear,” said Frank McGhee, the head dealer at Integrated Brokerage Services LLC in Chicago. “These governments are going to have to infuse more money into the financial system, and that will eventually lead to inflation.”

Gold futures for February delivery rose $15.30, or 1.8 percent, to $855.20 an ounce on the Comex division of the New York Mercantile Exchange. Earlier, the price reached $866.60, the highest since Jan. 9. Floor trading was closed yesterday for the Martin Luther King holiday.

Silver futures for March delivery fell 4 cents, or 0.4 percent, to $11.175 an ounce. The metal slumped 24 percent in 2008.

Equities Fall

Equities fell in the U.S., Europe and Asia, and the Reuters/Jefferies CRB Index of 19 raw materials dropped as much as 2.2 percent. The dollar rose the most in a month against a weighted basket of six major currencies.

Gold generally moves in the opposite direction of the dollar. On days when they move in tandem, investors are seeking safety, McGhee said.

Investment in the SPDR Gold Trust, the biggest exchange- traded fund backed by bullion, was unchanged on Jan. 16 after reaching a record 795.3 metric tons the previous day. The fund’s assets grew 24 percent in 2008.

“New concerns over illiquidity and inflation stemming from new stimulus packages” will support gold, said Tom Pawlicki, an analyst at MF Global Ltd. in Chicago.

Gold futures reached an all-time high of $1,033.90 on March 17. Futures averaged $873.98 last year.

Breaking News-RTRS-Malaysia may scrap palm oil windfall tax-report

KUALA LUMPUR, Jan 19 (Reuters) - Malaysia may scrap a windfall tax on palm oil if the price rises further, the country's commodities minister Peter Chin was quoted as saying on Monday by state news agency Bernama.
The Malaysian government in June imposed a windfall tax on crude palm oil sales of above 2,000 ringgit ($559.3) per tonne, following a surge in palm oil prices that in March rose to above 4,000 ringgit ($1,119) a tonne.

Oil Falls Below $35 as Global Recession Reduces Fuel Demand

Jan. 20 (Bloomberg) -- Crude oil fell below $35 a barrel in New York on speculation faltering global economic growth will drive down fuel consumption for a second year.

Slowing world demand, reduced tension in the Middle East and settlement of Russia’s gas dispute with Ukraine could push prices toward last month’s four-year low of $32.40 a barrel, Goldman Sachs Group Inc. said yesterday. OPEC may have to cut output again should prices fall further, Algerian Oil Minister Chakib Khelil said Jan. 17.

“We’re pretty close to the bottom if we’re not there already,” Michael Lynch, president of Strategic Energy & Economic Research Inc. in Winchester, Massachusetts, said in a Bloomberg Television interview. “I don’t think the market can sustain a price much below this.”

Crude oil for February traded at $34.54 a barrel, down 5.4 percent from last week’s close, in after-hours trading on the New York Mercantile Exchange at 8:54 a.m. Singapore time. The contract, which expires today, fell as low as $33.89 yesterday, when floor trading was closed for the Martin Luther King holiday. Yesterday’s trades will be booked today for settlement.

“There’s light trading volume and the economic numbers are bearish globally,” Chris Jarvis, president of Caprock Risk Management LLC in Hampton Falls, New Hampshire, said yesterday. The February contract prices should be taken “with a grain of salt,” he said.

Oil Forecasts

The more-actively traded March contract was at $40.84, down 4.1 percent, after falling as low as $40.21 yesterday.

Near-term oil prices have been forced artificially low as the global financial crisis prompted fund managers to sell assets to generate cash, Strategic’s Lynch said. Prices need to rise and will probably reach $60 a barrel by year’s end, he said.

Brent crude oil for March settlement fell $2.07 or 4.4 percent, to $44.50 a barrel on London’s ICE Futures Europe exchange yesterday.

Stocks in Europe, Brazil and Canada fell yesterday as investors speculated government efforts to shore up the financial industry will fail to stem the deepening global recession.

The settlement of Russia’s natural gas dispute with Ukraine, and a cease-fire in the Gaza Strip had also increased selling pressure, Jim Ritterbusch, president of Ritterbusch & Associates in Galena, Illinois, said yesterday.

“There was a reduction of the geopolitical risk premium,” he said in a telephone interview.

Rising U.S. stockpiles and forecasts from the International Energy Agency and OPEC on declining world demand contributed to an 11 percent decline in Nymex crude last week. Prices are down 20 percent this year, after tumbling 54 percent in 2008.

Oil may make a “swift and violent rebound” to $65 a barrel in the second half as OPEC production cuts take effect and other producers also trim output, Goldman Sachs analyst Jeffrey Currie said at a conference in London yesterday.

Indian soyoil futures down on spot, lower crude

MUMBAI, Jan 19 (Reuters) - Indian soyoil futures fell on Monday afternoon as a sharp jump in edible oil imports late last year weakened spot demand, and crude oil prices eased.

At 3:34 p.m. (1004 GMT), the January futures contract NSOF9 on India's National Commodity and Derivatives Exchange was down 0.59 percent at 491.25 rupees ($10.1) per 10 kg. February futures NSOG9 had fallen 0.75 percent to 475 rupees.

Prices in the spot market in the western state of Maharashtra, the country's second largest producer, fell 0.9 percent to 438 rupees per 10 kg.

"There is enough cheaper imported oil available hence the demand for domestic soyoil has fallen," a senior official at the Soybean Processors' Association of India, a trade body, said.

India imported 1.24 million tonnes of edible oil, mainly palm oil, in the November-December period against just 620,000 tonnes in the same period last year as international prices tumbled to new lows, tracking lower crude.

There is no import duty on crude palm oil yet, which makes it a cheaper option than soyoil, the official said.

India meets more than 40 percent of its edible oil requirement through imports, buying crude and refined palm oil from Malaysia and Indonesia and soyoil from Argentina and Brazil.

Lower oil prices weighed as cheaper crude trims demand for soyoil from the biofuel sector. At 1007 GMT, crude oil prices CLc1 were down 1.73 percent at $35.91 a barrel. ($1=48.6 rupees) (Reporting by Abhishek Shanker, Editing by Mark Williams)

FCPO Commentary on 20/01/09

FCPO 3rd month April Futures contract rebound RM26 higher to close RM1859 as compare to previous trading session with 5793 lots traded in the market. CPO was traded sideways throughout the entire trading session.

Technically, CPO price traded within RM1865 and RM1835 range during the trading session. We expect CPO price would trade higher in the coming trading as CPO seems rested well above 50% Fibonacci retracement levels which same levels at EMA-80 and EMA100 in the hourly chart. However, CPO price must be able breach resistance levels at RM1900 and RM1950 in order for CPO price to break up from downtrend channel line. Traders were advice to hold long position for CPO trading in the coming trading session.

FKLI Commentary on 20/01/09

FKLI December futures contract close marginally 1.5 points lower at 892.5 as compare to previous trading session with total 4707 lots traded in the market. FKLI was mainly traded sideways throughout the entire trading session.

Technically, FKLI seems temporary support above 885 regions. We expect FKLI would test 61.8% Fibonacci support levels at 880 levels in the coming trading session. However, EMA-80 and EMA-100 seem converging in the hourly chart which leads to temporary sideways market. Traders were advice to hold long on correction in the coming trading session provided support levels 880 and 865 were not violated. Resistances were seen at 904 and 918 region.

Yen Weakens as Government Steps to Aid Banks Spurs Yield Demand

Jan. 19 (Bloomberg) -- The yen fell to a one-week low against the euro and declined versus the dollar on speculation government efforts to rescue ailing banks will revive global credit markets.

Japan’s currency weakened for a third day against Australia’s dollar as investors bet U.S. President-elect Barack Obama will step up efforts to recapitalize U.S. banks, boosting demand for higher-yielding assets funded in yen. The pound gained after U.K. Prime Minister Gordon Brown said the government will today announce a package of measures to encourage bank lending.

“Hopes over the Obama administration are improving risk- taking appetite,” said Yuji Saito, head of the foreign-exchange group in Tokyo at Societe Generale SA, France’s second-largest bank by market value. “The yen is being sold.”

The yen declined to 121.25 per euro as of 6:12 a.m. in London from 120.37 late in New York on Jan. 16. It reached 122.17, the lowest level since Jan. 9. Japan’s currency fell to 90.85 against the dollar from 90.72 at the end of last week. It touched 91.30, also the lowest since Jan. 9.

The euro advanced to $1.3346 from $1.3267 on Jan. 16 and the British pound climbed to $1.4839 from $1.4733. The Swiss franc strengthened to 1.1176 from 1.1197. Currency markets may be more subdued than usual today because U.S. financial markets are shut for a public holiday, Saito said.

The MSCI Asia-Pacific Index of regional shares gained for a second day, advancing 0.3 percent. Implied volatility on one- month dollar-yen options fell to 18.44 percent from 18.92 percent on Jan. 16, indicating a declining risk of exchange-rate fluctuations that can erode profit on so-called carry trades.

‘Aggregator’ Bank

The yen declined against 14 of the 16 most-active currencies as Obama’s team say they will use part of the $350 billion remaining from the Troubled Asset Relief Program to help stem foreclosures, according to people familiar with the matter.

Japan’s currency weakened the most against Norway’s krone, New Zealand’s dollar and Australia’s dollar as U.S. policy makers signaled the government will create a government-backed “bad” or “aggregator” bank to acquire hundreds of billions of dollars of troubled securities held by lenders.

“A lot of work has been done on an aggregator bank” and other ways of using the $700 billion financial-rescue fund “to let it go further when it comes to dealing with illiquid assets,” Treasury Secretary Henry Paulson told reporters on Jan. 16 in Washington.

The yen slid 1.1 percent to 13.2211 versus the krone, 1.3 percent to 50.21 against New Zealand’s dollar and 1.3 percent to 61.83 versus Australia’s dollar from late in New York on Jan. 16.

New Packages

“We’re going to see Obama coming out with some new stimulus-type packages and a lot of measures to support the economy in the U.S.,” Jim Vrondas, Sydney-based manager of corporate business at online foreign-exchange dealer OzForex Ltd., said in an interview with Bloomberg Television. “Risk appetite at the moment is looking pretty good. In the short term, the yen is going to remain a little bit weak.”

Benchmark interest rates are 3 percent in Norway, 2 percent in Sweden and 5 percent in New Zealand, compared with 0.1 percent in Japan, encouraging investors to borrow in yen and buy higher-yielding assets elsewhere.

In a carry trade, investors get funds in a country with low borrowing costs and invest in one with higher rates. The risk is that currency market moves erase those profits.

Eisuke Sakakibara, a former official at Japan’s finance minister, said the ministry may intervene to support the U.S. currency if it weakens beyond 85 yen, CNBC reported today.

Credit Losses

Losses in the yen may be tempered on speculation more than $1 trillion of asset writedowns worldwide and rising credit losses will hurt corporate earnings and deter investors from buying riskier assets.

U.S. companies reporting results this week after the Martin Luther King Day holiday today include International Business Machines Corp., Johnson & Johnson, United Technologies Corp., Microsoft Corp. and General Electric Co. Bank of America Corp. posted a fourth-quarter loss of $1.79 billion on Jan. 16, its first since 1991.

“A lot of firms will release results this week and their fourth-quarter earnings will likely be bad,” said Masashi Kurabe, head of currency sales and trading in Hong Kong at Bank of Tokyo-Mitsubishi UFJ Ltd., a unit of Japan’s largest publicly traded bank by assets. “These worries are probably causing the yen to recover.”

The pound gained for a fourth day against the yen and the dollar as the U.K. government’s measures are aimed at “getting lending moving in the economy” and will include banks declaring bad debts and losses, Prime Minister Brown said yesterday during a trip to Egypt.

“There’s some optimism about the U.K. government’s plan,” said Lee Wai Tuck, a currency strategist at Forecast Pte in Singapore. “This is positive for the pound,” which may rise to 137 yen and $1.50 today, he said.

The government is also due to unveil plans to guarantee lending for households and companies, Brown said.

Gold May Rebound on Speculation Dollar to Slide, Survey Says

Jan. 19 (Bloomberg) -- Gold may rebound this week on speculation that the dollar will slide, boosting the appeal of the precious metal as an alternative investment.

Eighteen of 32 traders, investors and analysts surveyed from Mumbai to Chicago on Jan. 15 and Jan. 16 advised buying gold, which fell 1.8 percent last week to $$839.90 an ounce in New York. Ten said to sell, and four were neutral.

Gold climbed 5.5 percent in 2008, the smallest gain since 2004, as the dollar advanced against a weighted basket of six major currencies for the first time in three years. Low interest rates and government bailouts may drive the greenback lower, analysts said.

Gold’s decline last week surprised most analysts responding on Jan. 8 and Jan. 9. The survey has forecast prices accurately in 145 of 246 weeks, or 59 percent of the time.

Last week’s survey results: Bullish: 18 Bearish: 10 Neutral: 4

Oil Falls on Speculation Slowing Economies Will Use Less Fuel

Jan. 19 (Bloomberg) -- Crude oil fell in New York on speculation recession in the world’s largest developed economies will cut demand for fuel and energy this year.

A report this week in the U.S., the world’s largest oil consumer, will probably show housing starts last month fell to the lowest annual rate since at least 1959, according to a Bloomberg News survey of economists. Global oil demand will shrink 0.6 percent to 85.3 million barrels a day this year, the first two-year decline since 1983, the International Energy Agency said Jan. 16.

“The near-term economic news and data is going to remain extremely weak and that’s just going to continue to test sentiment in energy and metals markets,” David Moore, commodity strategist at Commonwealth Bank of Australia Ltd., said by phone from Sydney today.

Crude oil for February delivery fell 60 cents, or 1.6 percent, to $35.91 a barrel in after-hours electronic trading on the New York Mercantile Exchange at 8:18 a.m. in Singapore.

The contract, which expires tomorrow, rose 3.1 percent to $36.51 on Jan. 16 as investors who had expected further declines in February crude bought oil back to limit losses ahead of today’s holiday in the U.S. Oil fell 11 percent last week as U.S. stockpiles rose and OPEC forecast a decline in demand.

The more actively traded March contract dropped 25 cents to $42.32. It fell 2.2 percent to $42.57 on Jan. 16.

‘Out of Synch’

Brent crude oil for March settlement fell 39 cents, or 0.8 percent, to $46.18. The contract dropped 2.3 percent to $46.57 on London’s ICE Futures Europe exchange on Jan. 16.

The Nymex February contract “is out of synch with the rest of the world, not just Brent,” Commonwealth’s Moore said. Weak economic data around the world is likely to place March prices under the same selling pressure, and it may be some time before production cuts by the Organization of Petroleum Exporting Countries are felt, he said.

The margin between the two contracts was at $6.01, having reached $8.14 at the Jan. 15 settlement. The spread between the January and February contracts reached a record $8.49 on Dec. 19.

OPEC produces about 40 percent of the world’s oil. The group agreed to cut output by 9 percent starting this month to prevent a glut and stem a six-month decline in prices.

Saudi Arabia, the group’s biggest producer, last week said it will reduce output further in February. Ministers should agree to fresh cuts at the group’s March 15 meeting if prices continue to slide, Algerian Oil Minister Chakib Khelil said Jan. 17.

There will be no floor trading in New York today because of the Martin Luther King Day holiday.

Yen Falls on Speculation U.S. Plan Will Inject Funds Into Banks

Jan. 19 (Bloomberg) -- The yen fell to the lowest in more than a week against the dollar on speculation U.S. President- elect Barack Obama will to back an increased financial-rescue effort that injects capital into banks.

The yen also dropped to a more than one-week low versus the euro as Obama’s team say they will use part of the $350 billion remaining from the Troubled Asset Relief Program to help stem foreclosures, according to people familiar with the matter. The yen weakened against all of the 16 most-active currencies today after the U.S. extended a $138 billion lifeline to Bank of America Corp. last week.

“Hopes over the Obama administration are improving risk- taking appetite,” said Yuji Saito, head of the foreign-exchange group in Tokyo at Societe Generale SA, France’s second-largest bank by market value. “The yen is being sold.”

The yen declined to 91.07 against the dollar as of 9:49 a.m. in Tokyo from 90.72 late in New York on Jan. 16. It reached 91.30, the lowest since Jan. 9. The currency weakened to 121.45 versus the euro from 120.37. It touched 122.17, the lowest level in more than a week.

Against the dollar, the euro advanced to $1.3336 from $1.3267 in New York at the end of last week. The British pound climbed to $1.4857 from $1.4733 and the Swiss franc strengthened to 1.1157 from 1.1197. Trading may be more subdued than usual because of the U.S. public holiday today, Saito said.

The Nikkei 225 Stock Average rose 0.7 percent and the MSCI Asia-Pacific Index of regional shares advanced 0.4 percent.

‘Aggregator Bank’

Japan’s currency weakened the most against Norway’s krone, New Zealand’s dollar and Sweden’s krona as U.S. policy makers signaled the government will create a government-backed “bad” or “aggregator” bank to acquire hundreds of billions of dollars of troubled securities held by lenders.

“A lot of work has been done on an aggregator bank” and other ways of using the $700 billion financial-rescue fund “to let it go further when it comes to dealing with illiquid assets,” Treasury Secretary Henry Paulson told reporters on Jan. 16 in Washington.

The yen slid 1.9 percent to 13.3143 versus the krone, 1.8 percent to 50.47 versus the New Zealand dollar and 1.7 percent to 11.302 against the krona.

Benchmark interest rates are 3 percent in Norway, 2 percent in Sweden and 5 percent in New Zealand, compared with 0.1 percent in Japan and as low as zero in the U.S.

In a carry trade, investors get funds in a country with low borrowing costs and invest in one with higher rates. The risk is currency market moves erase those profits.

‘Some Optimism’

The pound gained for a fourth day against the yen and the dollar after U.K. Prime Minister Gordon Brown said yesterday the government will announce a package of measures to encourage bank lending today.

“There’s some optimism about the U.K. government’s plan,” said Lee Wai Tuck, a currency strategist at Forecast Pte in Singapore. “This is positive for the pound,” which may rise to 137.00 yen and $1.50 today, he said.

The measures are aimed at “getting lending moving in the economy” and will include banks declaring bad debts and losses, Brown said in Egypt. The government is also due to unveil plans to guarantee lending in for households and companies.

FCPO Commentary on 19/1/09

FCPO 3rd month April Futures contract rebound RM27 higher to close RM1833 as compare to previous trading session with 7133 lots traded in the market. CPO was traded
Wild as crude oil and soybean oil was struggling to decide price direction.

Technically, CPO price seems tested support levels RM1800 the 3rd time during trading session but fails to penetrate the support levels. We expect CPO price would trade higher in the coming trading session as support levels RM1800; 50% Fibonacci retracement figure seems well support against the selling pressure. Traders were advice to hold long position in the coming trading session provided supports level at RM1800 and RM1730 were not violated. Resistances were seen at RM1890 and RM1930.

Oil Demand Set for 2-Year Drop on Recession, IEA Says (Update1)

Jan. 16 (Bloomberg) -- Oil demand will fall for a second year, the first back-to-back contractions since 1983, as a deepening recession erodes consumer spending, the International Energy Agency said.

The adviser to 28 nations cut its global 2009 forecast by 1 million barrels a day on expectations the economic outlook will deteriorate. The IEA estimates consumption will shrink 0.6 percent to 85.3 million barrels a day. Forecasters including OPEC, JPMorgan Chase & Co. and Deutsche Bank AG have already said demand will fall this year.

“It’s a major shift,” said Gareth Lewis-Davies, an analyst at Dresdner Kleinwort Group Ltd. in London who worked at the IEA. “The weakness in oil demand is significant. This year there will be a lot of attention on their forecasts and they don’t want to be accused of being behind the curve.”

Oil prices have plunged more than $100 a barrel from a record in July as the U.S., Europe and Japan face their first simultaneous recessions since World War II. This month’s IEA revision is its largest since at least 1996.

“The major institutions including the International Monetary Fund are in the process of revising down their forecasts and this month we’ve tried to pre-empt that,” David Fyfe, head of the IEA’s oil industry and markets division, said in a telephone interview from Paris. “It’s fairly certain the IMF will make a downside revision.”

China’s Economy

Forecast demand in the industrialized countries of the Organization for Economic Cooperation and Development was cut by 530,000 barrels a day to 46.3 million barrels a day. Demand in developing countries, while revised down 480,000 barrels a day, will still expand 1.8 percent to 38.9 million barrels a day, the IEA said.

“China’s economy, in particular, appears to have sharply slowed down as its main export markets tumble,” the report said. Chinese consumption is expected to climb 1.3 percent to 8 million barrels a day. That’s 300,000 barrels a day less than previously forecast.

The agency cut its assumptions for 2009 global economic growth in half to 1.2 percent. Last year oil demand fell 0.2 percent to 85.8 million barrels a day, according to the IEA.

Yesterday, the Organization of Petroleum Exporting Countries forecast global demand of 85.66 million barrels a day and said consumption of its own crude will fall 4.2 percent this year to 29.5 million barrels a day.

OPEC, responsible for more than 40 percent of the world’s oil, will have to provide about 29.9 million barrels a day this year to balance supply and demand, the IEA said, 900,000 barrels a day less than estimated in the previous report.

Supply Targets

At its last meeting in December, OPEC agreed to a record 9 percent reduction in supply targets, to take effect Jan. 1, extending two earlier resolutions to constrain production. The 11 members bound by quotas were within 2 percent of these at 27.7 million barrels a day as of last month, the IEA said.

The whole organization pumped 30.9 million barrels a day of crude oil in December, 330,000 barrels a day less than in November, the IEA said. Saudi Arabia, OPEC’s biggest producer, cut by 450,000 barrels a day last month to 8.45 million barrels a day, according to the agency.

This week Saudi Arabia said that next month it will curb output by more than was announced at the Dec. 17 summit in Algeria.

The IEA also trimmed its forecast for supplies from outside OPEC next year by 30,000 barrels a day to 50 million barrels a day, leaving a growth rate of 1 percent. Non-OPEC supply fell last year for the first time since 2005 to 49.5 million barrels a day because of disruptions in the Gulf of Mexico and Azerbaijan.

FKLI Commentary on 19/1/09

FKLI December futures contract closed 4 points higher at 894 as compare to previous trading session with total 4783 lots traded in the market. FKLI was mainly traded sideways during the trading session.

Technically, FKLI seems traded within 880 to 900 ranges after 2 consecutive trading days. We expect FKLI would trade higher to cover gap around 907 regions before starts to trading lower again. Traders were
advice to hold short position in the coming trading session while being cautious around the resistance levels at 920 and 932 regions. Supports were seen at 880 and 865 region.

Gold Climbs in New York as Dollar Weakens; Silver Advances

Jan. 16 (Bloomberg) -- Gold rose the most in five weeks as a weaker dollar boosted demand for the precious metal as an alternative investment. Silver also gained.

The dollar dropped as much as 1.2 percent against a weighted basket of six major currencies. Equities in Asia and Europe rose. Gold fell 5.6 percent in the previous four days as the dollar climbed 2.1 percent and the Standard & Poor’s 500 Index lost 5.2 percent. Last year, gold advanced 5.5 percent, the eighth straight annual gain.

“The dollar is weaker and the stock market is stronger, so people aren’t having to sell gold to cover losses in other markets,” said Matt Zeman, a metals trader at LaSalle Futures Group in Chicago. “There’s a general return to risk appetite.”

Gold futures for February delivery rose $32.60, or 4 percent, to $839.90 an ounce on the Comex division of the New York Mercantile Exchange, the biggest one-day advance for a most-active contract since Dec. 10.

Silver futures for March delivery gained 77.5 cents, or 7.4 percent, to $11.215 an ounce in New York. The metal slumped 24 percent in 2008.

U.S. equity indexes fell, giving up earlier gains, after the government said it would invest $20 billion in Bank of America Corp. and guarantee $118 billion of assets. Bank of America is the largest U.S. bank by assets and its bailout helped ease concerns that the credit crisis will deepen the recession.

Since the second quarter of 2007, banks worldwide have posted more than $1 trillion in credit losses and writedowns stemming from the collapse in the sub-prime mortgage market. By November, the U.S. had pledged $8.5 trillion to rescue financial companies and help the country recover from a recession.

Cash Hoarding

Investors earlier this week sold gold to cover losses in equity markets and hoard cash, boosting the dollar. Gold capped a second straight weekly loss while the dollar is poised for the third straight weekly advance.

“Advancing global stocks offered some relief to gold buyers and the government guarantees on toxic bank assets gave further room to maneuver in riskier assets,” said Jon Nadler, a senior analyst at Kitco Inc. in Montreal.

Gold may climb to a record in the first half of this year as historically low interest rates weaken the dollar and government bailouts spark inflation, London-based researcher GFMS Ltd. said yesterday in a report. Gold reached a record $1,033.90 an ounce on March 17.

Oil Rises as Traders Attempt to Profit From Price Differentials

Jan. 16 (Bloomberg) -- Crude oil rose in New York for the first time in three days as traders purchased contracts in an attempt to profit from higher prices in future months.

Oil for delivery later this year is more expensive than for the front month, allowing traders to lock in gains. The February contract, which expires on Jan. 20, is trading at a $6.06 discount to March, down from $8.14 yesterday. Investors who made bets that February oil would fall further closed out their positions today, an action called short covering.

There’s “short-covering ahead of the Tuesday expiration,” said John Kilduff, senior vice president of energy at MF Global Inc. in New York. The discount of February oil to March touched a record for the contracts yesterday, “so it was due for a bounce.”

Crude oil for February delivery rose $1.11, or 3.1 percent, to settle at $36.51 a barrel at 2:47 p.m. on the New York Mercantile Exchange. Futures declined 11 percent this week and 60 percent from a year ago.

There will be no floor trading in New York on Jan. 19 because of the Martin Luther King Day holiday.

The price of oil for delivery next December is 58 percent higher than the front-month contract. This structure, in which the subsequent month’s price is higher than the one before it, is known as contango.

The oil market may have also increased because of rising equity prices. U.S. stocks gained for a second day as investors snapped up shares in the Standard & Poor’s 500 Index trading at its cheapest valuation since 1991. The S&P 500 added 0.8 percent to 850.12.

‘Hostages’

“The oil price and the equity markets are hostages to people’s perceptions about the economy,” said Adam Sieminski, the chief energy economist at Deutsche Bank AG in Washington. “On the days when we think we’re starting to hit the bottom of the economy, the oil market and the equities markets go up.”

Crude-oil inventories at Cushing, Oklahoma, where West Texas Intermediate traded on the Nymex is stored, climbed 2.5 percent to 33 million barrels last week, the Energy Department said on Jan. 14. It was the highest since at least April 2004, when the department began keeping records for the location.

“Increasingly, the front month futures contract is trading in relation to supply and demand at Cushing, Oklahoma, as opposed to the global demand picture,” said Tim Evans, energy analyst with Citi Futures Perspective in New York.

OPEC agreed to a record 9 percent cut in supply targets at a Dec. 17 meeting to reverse the plunge in oil prices, which have dropped more than $100 a barrel in New York in the past six months. The group’s next scheduled meeting is on March 15.

Brent crude oil for March settlement declined $1.11, or 2.3 percent, to $46.57 a barrel on London’s ICE Futures Europe exchange.

Demand Forecast

Prices dropped earlier after the International Energy Agency said that global demand will decline for a second year, the first back-to-back contraction since 1983.

The IEA, which advises 28 nations on energy policy, cut its 2009 forecast by 1 million barrels a day on expectations the economic outlook will deteriorate. The agency estimates consumption will shrink 0.6 percent to 85.3 million barrels a day. OPEC, the U.S. Energy Department, JPMorgan Chase & Co. and Deutsche Bank AG have already said demand will fall this year.

“The IEA numbers certainly highlight how weak the economy is and the impact on demand,” said Rick Mueller, director of oil markets at Energy Security Analysis Inc. in Wakefield, Massachusetts. “The IEA report is joining a chorus of very bearish numbers.”

Higher Volume

Volume in electronic trading on the exchange was 428,966 contracts as of 3:49 p.m. in New York. Volume totaled 652,858 contracts yesterday, up 37 percent from the average over the past 3 months. Open interest yesterday was 1.26 million contracts. The exchange has a one-day delay in reporting open interest and full volume data.

Oil may fall next week, according to a Bloomberg News survey. Seventeen of 35 analysts, or 49 percent, said futures will decline through Jan. 23. Twelve respondents, or 34 percent, forecast oil will rise and six said there will be little change. Last week, 41 percent of analysts expected a gain in prices.

Euro Drops in Longest Stretch of Losses Since November on ECB

Jan. 17 (Bloomberg) -- The euro dropped against the dollar for a third week in its longest losing stretch since November as the European Central Bank cut borrowing costs by a half- percentage point and signaled it may lower interest rates again.

The 16-nation currency touched a six-week low versus the yen as Standard & Poor’s cut the credit rating of Greece and threatened to downgrade the debt of Portugal and Spain. The yen and the dollar gained against most of their major counterparts as losses at Bank of America Corp. and Citigroup Inc. encouraged investors to take refuge in the currencies.

“I am bearish on the euro,” said Neil Mackinnon, chief economist in London at ECU Group Plc and a former U.K. Treasury official, in an interview on Bloomberg Television. “The ECB is still behind the curve in my view. A half-point move is not enough.”

The euro fell 1.6 percent to $1.3267 yesterday from $1.3476 on Jan. 9, losing 5 percent so far in 2009. The currency dropped 1.2 percent to 120.37 yen from 121.81 and touched 116.23 on Jan. 15, the lowest level since Dec. 5. The dollar gained 0.4 percent to 90.72 yen from 90.39 a week earlier.

Russia’s ruble slid as much as 0.9 percent to 32.6675 per dollar yesterday, the weakest level since Russia redenominated the currency in 1998, after the central bank accelerated its devaluation to stem the drain on foreign-exchange reserves. Bank Rossii devalued the currency for the fifth time in six days, a central bank official said, more than twice the pace in November and December. The ruble depreciated 5 percent this week.

Weaker Won

Canada’s dollar posted its worst weekly performance since October as the nation’s trade surplus dropped in November to the narrowest level in more than a decade. The currency declined 4.7 percent to C$1.2431 per U.S. dollar.

South Korea’s won, Asia’s worst performer against the dollar last year, posted a fourth weekly loss on concern the deepening global recession will hurt demand for exports and further U.S. bank failures will prompt hoarding of dollars. The won dropped 1.1 percent to 1,358.20 versus the greenback.

The euro weakened versus the dollar on Jan. 15 as the ECB lowered the main refinancing rate to 2 percent, matching a record low, and signaled it’s likely to cut interest rates further. The benchmark borrowing cost compares with 1.5 percent in the U.K. and a range of zero to 0.25 percent in the U.S. The ECB isn’t planning to lower borrowing costs to zero, President Jean-Claude Trichet said in an interview with Japanese public broadcaster NHK yesterday.

S&P on Jan. 14 cut Greece’s sovereign credit rating by one level to A- after threatening to drop Portugal’s AA- and Spain’s AAA credit ratings earlier in the week.

‘Talk’ of Breakup

“Talk of a euro breakup on sovereign debt downgrades is premature at this point, although the talk is getting louder,” wrote Dustin Reid, director of currency strategy at RBS Global Banking & Markets in Chicago, in a note yesterday.

The U.S. currency gained 8.5 percent to 54.64 cents per New Zealand dollar as deepening losses at financial firms led investors to seek the relative safety of U.S. Treasuries.

Bank of America reported yesterday its first loss since 1991 and got a $138 billion federal lifeline, while Citigroup Inc. posted an $8.29 billion loss, twice as much as analysts estimated, and said it will be split into two.

The ICE’s Dollar Index, which tracks the greenback against the euro, the yen, the pound, the Canadian dollar, the Swiss franc and Sweden’s krona, touched 85.137 on Jan. 15, the highest since Dec. 11. U.S. Treasuries rallied this week, pushing the two-year note’s yield three basis points lower to 0.72 percent.

‘Vicious Cycle’

“There’s this risk of a vicious cycle, where the economy is weak, and that leads to further weakness in companies and maybe further bankruptcies,” said Meg Browne, a currency strategist at Brown Brothers Harriman & Co. in New York. “It’s a reminder of the risks we still face, and I think that’s a dollar positive.”

The yen gained 4.1 percent this week to 61.08 against Australia’s dollar and 7.8 percent to 49.61 versus New Zealand’s dollar. A 4.5 percent drop in the Standard & Poor’s 500 Index prompted investors to sell higher-yielding assets and pay back low-cost loans in Japan’s currency. Its 0.1 percent target lending rate compares with 4.25 percent in Australia and 5 percent in New Zealand.

Japan’s yen advanced to 113.64 per euro on Oct. 27, the strongest since 2002, as coordinated rate cuts by major central banks on Oct. 8 and financial-system bailouts in the U.S. and Europe failed to revive stock markets.