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Commodities Briefing 02.Oct 2008

Posted on 02 October 2008 by VRS |  Email |Print

From WSJ: Commodities took a wild ride in the third quarter, hitting new highs in early July, falling sharply into early September and rallying as the U.S. government took steps to stabilize the financial system.

When the quarter ended, it was the worst three-month period for the sector at least since 1970, when the Standard & Poor’s GSCI Commodity Index was introduced. Even after the late-September bounce, the index finished the quarter down 29% since the end of June. After big gains in the first half, commodities are still up for the year — just 0.96% higher…… Full Article: Source

Posted on 02 October 2008 by VRS |  Email |Print

From Telegraph: Chief executive Mick Davis blamed “extreme volatility and uncertainty” in the financial markets for his decision to pull the £33-a-share offer ahead of today’s deadline imposed by the Takeover Panel.

Xstrata said that while it could have secured the necessary $10 bln financing for the deal, “the current lack of clarity and certainty regarding the future availability of credit introduces significant risks into the financing package available”. ….. Full Article: Source

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From Global Pensions: Almost a third of institutional investors plan to increase their allocation to commodity-based Exchange Traded Funds (ETFs) over the next five years, according to Lyxor.

The asset management firm’s research found 15% of institutional investors currently invested in commodity-based investment products and twice as many (30%) said they planned to increase their commodity exposure in the coming five years. The ETF provider explained commodities were increasingly being used by investors for diversification purposes, as well as for performing other functions such as inflation hedging….. Full Article: Source

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From ETF Guide: According to the Investment Company Institute (ICI) the combined assets of U.S. exchange-traded funds (ETFs) rose $3.19 billion to $585.97 billion in August.

This is a 0.5% increase compared to July and an increase of 15.6% or $78.86 billion compared to August 2007, when ETF assets were $507.11 billion. During August the value of all ETF shares issued exceeded that of shares redeemed by $10.65 billion….. Full Article: Source

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From The Hindu: Asia’s oldest bourse Bombay Stock Exchange (BSE) on Wednesday launched the currency derivatives segment (BSE-CDX) that would enable participants to hedge their currency risks through trading in the U.S. dollar-rupee future platform.

The National Stock Exchange (NSE) had kicked off exchange-traded currency futures for the first time in the country on August 29, while leading commodity bourse Multi Commodity Exchange of India (MCX) is expected to launch the facility soon…… Full Article: Source

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From Market Watch: Google Inc. has unveiled a $4.4 trillion energy plan to greatly reduce U.S. use of fossil fuels by 2030 by tapping alternative sources, including wind and solar power.

Google has explored a number of alternative-energy initiatives through its nonprofit organization Google.org, including investments in startups developing related technology. As justification for its interest and investments in alternative energy, the Internet giant has cited a need for more efficient ways to power its data centers around the globe. Jeffery Greenblatt, Google.org’s climate and energy-technology manager, wrote that while the cost of Google’s plan would be significant, exceeding $4 trillion, it could result in net savings of $1 trillion over its 22-year span….. Full Article: Source

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From Business Week: In an odd twist on market economics, Europe’s ex-communist states are starting to exploit a new market. Thanks to the Kyoto climate-change agreement, they can, in effect, now make money off the pollution their onetime central planners were willing to tolerate as the price for rapid industrialization and universal employment.

Ukraine, Hungary, the Czech Republic and other countries of the region not exactly renowned for clean air have made or are close to signing deals to sell the rights to emit greenhouse gases, and their main customer is environmentally friendly Japan…… Full Article: Source

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From Industry Research: Metals prices could depreciate for one to three years amid weakening market conditions, resource investment house Lion Selection Ltd says. But the good news is demand for metals will continue to outstrip supply, the company’s Asian funds president Jon Dugdale said.

Major market corrections in Asia since the peak of the mining boom in November had affected the appetite of investment banks, equity markets and Asian investors, he said….. Full Article: Source

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From Commodity Online: Stock markets are in misery. Equities are under severe utter stress. Investment banks are gasping for breath. Financial markets have suddenly become instable, across the world.

When markets are caught in such turbulence, have commodities—especially hot ones like gold and crude oil—got any chance to cushion the worries of investors? Commodities may have weakened in the last one week, thanks to the US sub prime mess and the investment banking collapse in America and Europe. …. Full Article: Source

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From Guardian: The initial proposal for an emissions trading scheme (ETS) had promised to cap carbon dioxide emissions from European business, to require firms to obtain permits for their emissions, and to encourage the trading of these permits so that companies that cut their emissions can sell permits to firms which emit more than their permitted amount.

However, in practice, the scheme has been riddled with so many loopholes that, so far, the potential for big cuts in emissions has been lost. The UK Treasury’s recent announcement that it intends to auction a percentage of the permits is a welcome attempt to plug one of these holes – the practice of handing out pollution permits for free….. Full Article: Source

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From Investment Executive: The technical committee of the International Organization of Securities Commissions announced the creation of a task force to examine the regulation of commodities markets on Wednesday.

The task force, which will be co chaired by the U.S. Commodity Futures Trading Commission and Britain’s Financial Services Authority, will look at the evolution of commodities futures markets, considering issues such as technological development, globalization, product innovation and the increasing participation of new types of investors…… Full Article: Source

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From The Globe and Mail: Influential economist Robert Shiller believes the U.S. housing mess isn’t the only asset bubble investors have to worry about in the coming months – the equity and commodity markets still have some more hot air to exhale, too.

The Yale University professor, best known as the author of the definitive market bubble treatise Irrational Exuberance, said Wednesday that prices in both stocks and commodities remain unrealistically high, despite their recent losses. He added that a U.S. government bailout of the banking industry would be just a short-term fix for a residential mortgage system that stills requires a longer-term overhaul, and said Canada’s housing market may not be immune to its own bust…… Full Article: Source

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From Financial News: Nasdaq OMX may miss out on a crucial foothold in the emerging Indian market after the Bombay Stock Exchange hinted it may cancel a strategic deal with the transatlantic exchange and start working with a rival.

Nasdaq OMX signed an agreement in January this year to develop for the Indian market a new trading and clearing platform for derivatives and cash securities. But Jagdish Capoor, the chairman of the BSE, said today the exchange is considering walking away from the deal, citing his concerns over the timing of the delivery and the technical specifications of the OMX platform….. Full Article: Source

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From Baker City Herald: Following a record-setting decade for catastrophic forest fires, a new era may be on the horizon focusing on sequestering carbon dioxide in trees instead of letting them burn and pollute the atmosphere.

Mike Gaudern, executive director of the Oregon Small Woodlands Association, delivered that message to members of the Baker County Private Woodlands Association during a swing through Eastern Oregon last week.. …. Full Article: Source

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From Asia Times: All over the world, trade in gold had been the favored device for evading national foreign exchange controls from the end of World War II to 1971. In 1946, the Bretton Woods regime adopted in 1944 became operational, thereby forbidding the importation of gold for private speculative purposes in signatory nations.

Britain was a signatory but Portugal was not. Thus a gold-smuggling operation between the Portugal colony of Macau and the British territory of Hong Kong flourished until 1974, two years after the United States took the dollar off gold, in effect abolishing the Bretton Woods system of fixed exchange rates, when Hong Kong abolished a law that requires a special license to import gold for re-export….. Full Article: Source

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From Investment Executive: Sky-high commodities prices are set to come down to earth, says a new report by trade credit insurance company Atradius Group. Although low supply and growing demand from emerging economies could keep prices high for such materials as tin and nickel, the report says aluminum, lead, zinc and other commodities are likely to become less expensive in 2009.

“Though the run-up in commodities prices has been sharp and severe, demand has traditionally been cyclical depending on demand for the products in which they are found,” said Isidoro Unda, CEO of Atradius, in a statement….. Full Article: Source

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From Guardian: Global metals output will take a medium-term hit as the global credit crisis cuts financing to Latin America’s booming metals sector, forcing smaller miners to shelve new projects.

Mining stocks around the world took a beating on Wednesday as the U.S. Senate prepared to vote on a revised $700 billion plan to rescue the shaky financial sector. The downturn hit prospectors and mid-size miners as well as mining giants…… Full Article: Source

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From Delta Farm Press: The National Grain and Feed Association says forcing managed index and pension funds to “take delivery” on commodities such as wheat may be one way to solve the lack of convergence on Chicago Board of Trade futures contracts.

The NGFA said it was not recommending adoption of the practice yet but is establishing its own task force to analyze the concept of “demand certificates,” under which the maker of delivery could compel load out of the underlying commodity…… Full Article: Source

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From Bloomberg: New Zealand’s commodity export price index fell by the most in 21 years in September, led by dairy, aluminum and beef, ANZ National Bank Ltd. said. The index dropped 4.9 percent from August when it fell 3.3 percent, ANZ said.

Prices declined 1.9 percent from a year earlier. Commodity prices have surged 41 percent in the past two years, buoying farm incomes and exports, which make up 30 percent of the $105 billion economy. A slowing global economy is putting pressure on commodity prices, which will curb New Zealand’s expansion, said ANZ senior economist Khoon Goh….. Full Article: Source

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From Bloomberg: Indian bonds rose the most in more than two weeks on speculation inflation will slow as a global credit crisis damps demand for commodities such as crude oil.

Yields on 10-year notes fell from near the highest in a month as oil prices declined more than 6 percent this week after U.S. lawmakers rejected a $700 billion financial rescue plan for banks in the world’s largest economy. The UBS Bloomberg Constant Maturity Commodity Index of 26 raw materials has fallen more than 25 percent from its peak in July. Inflation erodes the value of the fixed payments from bonds….. Full Article: Source

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From Guardian: Commodity markets from gold to sugar rose on Wednesday as investors waited for a vote on a revised U.S. $700 billion rescue plan that lawmakers hope will unblock the log-jammed financial sector.

“The $700 billion bailout is going to happen in some form … and whereas financial securities are not the place to be — commodities fundamentally are a great buy,” said Mark Mathias, chief executive at London-based Quantum Asset Management…… Full Article: Source

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From Bloomberg: The Australian dollar fell for the seventh day and New Zealand’s declined as investors sold higher- yielding assets on concern the U.S. bailout won’t stop the world’s biggest economy sliding into recession.

The currencies also fell against the yen as U.S. manufacturing contracted in September at the fastest pace since the last recession, signaling global economic growth will slow. The Australian and New Zealand dollars have dropped more than 10 percent against the dollar in the past three months as prices of commodities the two nations export declined….. Full Article: Source

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From Financial Express: Any two-player or team- game in this real world ends up either in a win for one and a loss for the other or in the rarest of the situations both might end up in a tie.

It holds true except in the game of discovering the futures prices of the underlying instruments as played on the derivative exchanges, which gives both the players a win-win situation. At the end of the game, this not only ends up with both the sets of players leaving happy, but also lets their supporters live serenely. In this game of commodity futures all the stakeholders of the economy would also benefit by stable, social, economic and political conditions….. Full Article: Source

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From Forbes: From big oil companies to solar panel entrepreneurs to chemists creating the biomass fuels of the future, there’s one thing that everyone in the energy industry has in common: They hate Washington’s energy policy.

Policies, actually. In just the Bush years alone, Washington enacted two major pieces of omnibus energy legislation, the Energy Policy Act of 2005 and the Energy Independence and Security Act of 2007. In 2008 another piece of major legislation was introduced: the Lieberman-Warner bill, which would implement a nationwide cap-and-trade program on carbon emissions. That would instantly change the landscape for any energy producer…… Full Article: Source

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From Forbes: The Reserve Bank of Australia’s (RBA) index of commodity prices climbed to fresh all-time highs in September, driven by increases in coal prices. The RBA’s index increased by 0.5 percent in special drawing rights (SDR) terms to a record 269.

In Australian dollar terms, it jumped by 6.1 percent to a record 210.9. The Aussie dollar fell in September, lifting the value of commodities priced in U.S. dollars. The largest contributors to the rise in September were increases in the prices of coking coal and thermal coal. Prices of wheat, aluminium, copper and beef fell, the RBA said in a statement…… Full Article: Source

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From NDTV: Markets have received a new life via additional liquidity poured by central banks worldwide in recent past. European Central Bank, Bank of England, United States` Federal Reserve and other major central banks are fighting tooth and nail with current financial fiasco.

Markets have been rocked by news of problems in banks and funds exposed to risky investments in U.S. mortgage and asset-backed markets, provoking fears of a choking-off of the cheap credit that has been fueling global growth. Asian markets are not water proof i.e. sooner or later they are going to yield all gains of last year. The major central banks are creating a financial rescue blueprint for the anticipatory money market turmoil…… Full Article: Source

Posted on 02 October 2008 by VRS |  Email |Print

From The Australian: Copper prices fell 3.1 per cent in New York, pressured by continued worries over the global economy. The red metal dropped to its lowest level in more than a year and a half.

Nearby October copper fell US9.1 cents, or 3.1 per cent, to settle at $US2.7970 on the Comex division of the New York Mercantile Exchange, after dipping to $US2.7800, the lowest front-month copper price since March 12, 2007. Since Friday’s settlement, October copper has lost 9.3 per cent of its value. Most-active December slid US8.95 cents to $US2.7895….. Full Article: Source

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From Forbes: Rising energy demand from China and India has unleashed a worldwide race to secure access to scarce fossil fuel resources, a more difficult proposition with the emergence of national oil companies in the resource-owning countries.

While Western companies will likely feel the pain of increasing energy costs, there is a potential upside to global energy scarcity, according to experts from Wharton and the Boston Consulting Group: Renewable and nuclear energy present huge opportunities for investors and entrepreneurs, underscored by concern over a global stalemate surrounding curbs on carbon-dioxide emissions….. Full Article: Source

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From Business Standard: Responding to the Forward Markets Commission’s (FMC) call to act hard on illiquid contracts, domestic commodity exchanges have asked for 15 days’ time to submit the ‘action-taken report’.

Last week, the FMC had convened a meeting in which Chairman B C Khatua had sought reasons from senior executives of the bourses for the contracts’ liquidity crunch. He had also asked for methods to attract participants to futures trading in such commodities. However, exchanges unanimously cited the versatile nature of commodities, variable grain size and seasonal trading practices in the spot market as major factors for volumes not picking up on the platforms….. Full Article: Source

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From CNN: The price of oil fell Wednesday after a key inventory report highlighted concerns about waning demand and doubts emerged about the impact of the government’s proposed bailout plan.

Light, sweet crude for November delivery fell $2.11 a barrel to settle at $98.53 on the New York Mercantile Exchange. The contract tumbled more than $5 a barrel shortly after the Energy Department said supplies of crude oil and gasoline unexpectedly rose last week, suggesting that demand in the U.S. remains weak….. Full Article: Source

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From The Age: Australia posted its highest trade surplus in more than 11 years in August, as coal exports rose and imports fell. The trade surplus was $1.36 billion compared with a revised deficit of $697 million in July, the Bureau of Statistics said.

The median estimate of 22 economists surveyed by Bloomberg News was for a $200 million surplus. The surplus is the highest since the $1.54 billion recorded in June 1997. The second trade surplus this year supports the central bank’s assessment that exports will help offset falling household spending, which prompted Governor Glenn Stevens to cut borrowing costs last month for the first time in seven years…… Full Article: Source

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From Goldseek.com: “Money is the lifeblood of the economy.” This famous saying is easy enough to remember, yet how much easier is it to forget it when asset prices are pushed to unreasonable extremities.

Consumers and investors alike are now being reminded of the veracity of this statement in a big way as the money panic rages on. The term “credit crisis” can actually be broken down into two separate yet related categories. On the one hand the credit problem is a crisis in confidence. Confidence, after all, is the baseline requirement of any banking system. This is especially true for one as vast and reticular as the U.S. financial system……. Full Article: Source

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