May 2004 Archives

May 31 (Bloomberg) -- The dollar may drop against the euro for a fourth week on the belief that the U.S. currency's 5.4 percent advance from a record low already reflects forecasts for employment growth and higher interest rates, a Bloomberg survey indicates.

Sixty-seven percent of the 82 traders, investors and strategists polled Friday from Tokyo to New York advised selling the dollar versus the euro, double the number of a week earlier. For a second week, 61 percent said they would sell the dollar against the yen.

The dollar, which fell to an all-time low of $1.2930 on Feb. 18, has strengthened to as much as $1.1761 on expectations the Federal Reserve will raise its target rate next month. After the biggest two-month gain in jobs growth since 2000, figures for May need to be ``shockingly good'' for the dollar to extend its gain, said Tsutomu Soma, a currency trader at Okasan Securities Co.

By Kieran Falconer

A STUDENT grant of $100,000 (£55,000) is a bit above the average, but next month 15 students at the Institute of Capital Market Research in Vienna will each receive this amount — and get the chance to see what they can make with it on the markets.

Since October the 15 — undergraduates finishing their first degrees, or PhD students, at the University of Vienna — have used portfolio software, statistical analysis and information sources, such as Reuters and Bloomberg, to gain a grounding in the markets.

Investment Executive Staff

The overall prices of Canada's commodity exports hit a record high last month, powered by oil, the Bank of Nova Scotia reported today.

The bank's monthly commodity price index of price trends in major exports jumped in April by 3.1% over March and by 25.8% over April 2003. "Commodity prices have spurted ahead by a substantial 13.5% since last December, boosted by this year's more synchronized pace of global economic growth …. and the beginning of widespread raw material re-stocking in the United States, spurred by a recovery in manufacturing activity," said Scotia Economics commodity specialist Patricia Mohr.

By Matt Blackman

The hardest but also most important lesson to learn in trading is how to handle losses gracefully. Most traders will inevitably encounter a string of losses at some point, so those who can't lose without being thrown off their game won't survive the market. The traders who have realistic win/loss expectations and a trading system they trust have the best chance of prevailing over tough market conditions. Here we look at what kind of losses traders can expect and how they can adjust their focus and strategy to deal with these losses.

Losing Battles…
Every trader worth his or her salt knows that trading against the trend is not a good idea. So it seems logical that the best trading systems would be those that follow the trend: when the trend is going up, take long trades only, and when it's going down, it's time to go short. That being said, you'd think that trend-following systems would have the best win/loss ratios, right?

by Bill Cara for the Trader Wizard

With gold bullion up about US$6.40 to about 385 on Friday, and it being Victoria Day (the Queen Mum’s birthday) tomorrow, which in Canada is celebrated with the summer season’s first long weekend (and no trading Monday), I got to thinking of doing an update on gold stocks.

Have you ever visited the British Royal Family’s crown jewels on display in London? Laden with precious metals they are. I found the tour truly remarkable, as I do English history.

While my Dad’s Italian, my own mum is a descendant of the United Kingdom. Her father, a Neely, was an Irish protestant; her mother, a Dobson, a Scot. So, I have an affinity for the British Isles and for Europe. Today, in fact, the city of London is still my favorite to visit.

By Roberta Rampton

WINNIPEG, Manitoba (Reuters) - The 117-year-old Winnipeg Commodity Exchange said on Wednesday its shareholders had approved plans to trade grain futures contracts electronically, spelling an end for its storied "open outcry" pits.

Eighty-one percent of the WCE's shareholders voted in favor of the plan to move the exchange's canola, barley and feed wheat contracts to an electronic system owned by the Chicago Board of Trade by the end of the year, the exchange's president Mike Gagne said.

By Kevin Morrison

Nowhere is China's dramatic effect on global commodity prices over the past two years more visible than on the oil price, which recently jumped to more than $40 a barrel, stirring concerns of higher inflation and lower world economic growth.

Although India's fast-growing economy has also boosted energy consumption, it is the scale of China's demand that has helped propel energy prices, including crude oil, coal, diesel and jet fuel, to record highs this year. The mainland's increasing affluence has stoked a surge in car sales, road haulage and air travel, while the country's rapid industrialisation is straining the limits of China's power generation capacity.

By Jeremy Grant in Chicago

The Chicago Board of Trade plans to launch electronically traded gold and silver futures contracts in a move that could challenge the New York Mercantile Exchange's global leadership of precious metals trading, derivative exchange sources said.

The plans come as the world's largest derivatives exchanges battle for dominance of trading in futures and options amid unprecedented demand for such products from corporate risk managers, mutual funds and hedge funds.

By: Mark M. Rostenko, The Sovereign Strategist

Quite the interesting stock market environment we find ourselves in lately, is it not? The data is bullish, the so-called recovery appears to be in full swing (the operative word being “appears”) and yet the S&P 500 has broken under critical support to post a new 7-month low. The topping formation we’ve been discussing at The Sovereign Strategist for months looks to be confirmed, the “mini-bull” market hasn’t seen new highs in seemingly forever, and the light is now green for sharply lower stock prices in months to come.

Hey man! What gives? Isn’t this what the bulls have been waiting for? How can stocks be acting so cruddy when everything seems to be going so well? “Interest rates, man! They’re gonna’ raise ‘em. Not good for stocks.”

from knowledge@wharton

In the fierce debate on globalization, Jagdish Bhagwati, a highly regarded authority on international trade who has advised the United Nations on globalization, stands out as a voice of reason. Currently teaching at Columbia University, he argues persuasively for the world-wide embrace of free trade in a book which should respond to some of the concerns that globalization has raised.

Reason and hope are keynotes of Bhagwati’s new book, titled In Defense of Globalization. The author has need of both, since trying to make sense of the contending voices in the debate requires the patience and detachment of a philosopher. Indeed, the debate on globalization resembles the classic philosophical scenario where four observers of a traffic accident, each on different corners of an intersection, are interviewed for their eye-witness accounts. Each, because of where he stands, has a different perspective of the event.

by Stefan Karlsson

We have all heard how deflation is supposed to prevent growth and create a economic depression. Yet for the latest 2 quarters Japan has outperformed the US not to mention the UK and the Euro zone with a growth rate of more than 6% at an annual rate compared to 4% in the US and even lower in Western Europe, according to the latest report. This is "despite" a consumer-price deflation of 1,6% at an annual rate for the last 2 quarters. The boom seems relatively healthy given that it is entirely driven by soaring private domestic demand and a rising trade surplus, while government spending is flat. Broad money supply is also rising at the relatively modest 1,9% according to the Bank of Japan.

Another interesting feature of Japan's growth is that while US protectionists claim that the rise of China is a threat to the US economy, in Japan people know that China's boom is benefiting them. Of course, Japanese companies have "outsourced" much production to China but as this has increased Chinese growth and business ties with Japan, Japanese exports to China has soared.

NEW YORK, May 17 (Reuters) - Safe-haven buying lifted COMEX gold on Monday after bombings in Iraq and Turkey shook the dollar, but profit-taking cut gold's gain after news a weapon containing the nerve agent Sarin was found in Iraq.

June gold closed up $2.50 at $379.60 an ounce, backing off the top of its $376.80 to $383.70 range after the Army said a small amount of sarin was found in a shell that exploded in Iraq, having been rigged as an improvised explosive device.

The round, designed to mix sarin in flight, belonged to a class of weapon that the ousted government of Saddam Hussein claimed to have destroyed before the 1991 Gulf War.

By Jeannine Aversa, Associated Press Writer

WASHINGTON - Inflation appears to be stirring from its hibernation. Consumer prices are advancing in the first four months of this year at a pace twice as fast as the increase for all of 2003.

That in turn is increasing chances that the Federal Reserve will boost interest rates next month, according to a growing number of analysts. They point to a string of economic reports, from sizable gains in the nation's payrolls to brisk manufacturing activity, that paint a picture of an economic resurgence that is beginning to fan inflation.

Anthony Tran and Gladys Tang

With Chinese inflation rising at the fastest pace in seven years, commodity stock prices began to fall sharply yesterday amid concerns that Beijing would take measures to seriously slow down the economy.

Investors are increasingly worried that if China - now the world's largest consumer of many raw materials - slows markedly, the downtrend could trigger a global fall in commodity prices.

``This is an irrational sell-off,'' a Shanghai-based commodities specialist cautioned.

By: Gary North, Mises on Money

Gold is down. Stocks are down. Bonds are down.

What’s going on here?

Worries about interest rates are blamed by most commentators. But why should worries over interest rates push all three markets lower? These markets are usually thought to move independently or even conversely to each other.

What commentators tend to ignore is that there are multiple causes for rising rates. Also, factors that push long-term rates up or down sometimes push short-term rates in the opposite direction.

The Commodity Futures Trading Commission is proposing to raise the reporting levels at which futures commission merchants, clearing members and foreign brokers must file large-trader reports in certain commodities. In addition, the CFTC is proposing changes in the way certain new products, such as exchanges of futures for swaps, and how should be reported under the CFTC’s rules.

A third proposal would amend CFTC rules dealing with data transmission practices “to foster innovative means” of filing Forms 102 by reporting firms, and to eliminate Form 103 for the submission of special call data by large traders.

By Andrew Balls in Washington

Anthony Santomero, the president of the Federal Reserve Bank of Philadelphia, yesterday rejected warnings that rising commodity prices were a significant threat to US inflation, while inflation expectations in the US remained controlled.

"For commodity prices to increase the rate of inflation on asustained basis, they would have to rise continuously and represent a significant component of the total cost of final goods and services," he said.

By Melita Marie Garza

Plant-based fuel additive finds widespread favor

CHICAGO -- Ethanol has come of age.

Once considered an expensive, experimental additive to make gasoline burn cleaner and more efficiently, it has become a staple like soybeans, eggs and pork bellies.

So much so, that the New York Board of Trade introduced a futures contract for sugar-derived ethanol Friday and will introduce an options contract today. The Chicago Board of Trade (CBOT) plans to introduce a futures contract for corn-based ethanol late this year.

May 10 (Bloomberg) -- China's economy is twice the size and its imports three times as large as when the central bank last raised interest rates in 1995, fueling concern this year's curbs on lending will have a larger global impact than nine years ago.

Chief executives, including Ericsson AB's Carl-Henric Svanberg and Nucor Corp.'s Daniel DiMicco, say slower growth in the world's seventh-largest economy is needed to sustain expansion in the years ahead. Premier Wen Jiabao's plan to cut growth to 7 percent this year from 9.1 percent in 2003 will pull down commodity prices worldwide and may cause a deeper slump that would slow global growth, said economist Tim Condon.

By Elizabeth Wine in New York

As commodities continue to surge, with the price of oil hitting a fresh 13-year high last week and metals still near long-term peaks, many investors are beginning to believe the asset class is in the early stages of an enduring bull market. That means large blocks of money are poised to shift into commodities for the long haul.

State Street Global Advisors, which manages more than $1,000bn for institutional clients, is rolling out two new ways for institutions to invest in commodities. The first product, out this month, will be passively managed, tracking the Goldman Sachs Commodity Index (GSCI). A second, actively managed, is set to debut soon.

by Murray N. Rothbard

Inflationary Fiat Paper

For nearly a half-century the United States and the rest of the world have experienced an unprecedented continuous and severe inflation. It has dawned on an increasing number of economists that the fact that over the same half-century the world has been on an equally unprecedented fiat paper standard is no mere coincidence. Never have the world's moneys been so long cut off from their metallic roots. During the century of the gold standard from the end of the Napoleonic wars until World War I, on the other hand, prices generally fell year after year, except for such brief wartime interludes as the Civil War.[1] During wartime, the central governments engaged in massive expansion of the money supply to finance the war effort. In peacetime, on the other hand, monetary expansion was small compared to the outpouring of goods and services attendant upon rapid industrial and economic development. Prices, therefore, were normally allowed to fall. The enormous expenditures of World War I forced all the warring governments to go off the gold standard,[2] and unwillingness to return to a genuine gold standard eventually led to a radical shift to fiat paper money during the financial crisis of 1931-33.

By Chris Temple

Following the last major bull market peak for precious metals as well as gold (primarily) related shares in mid-2002, I wrote a commentary similar to what follows. The observations contained in that item, I hoped, would be taken by the precious metals community as they were intended; to help one and all, guru and investor alike, better themselves financially. To do so, I said, one needs to approach this sector, as any, with a clear head, common sense and a sound strategy. Unfortunately, those are attributes lacking in most investors; even more (and tragically) so, it seems, when it comes to investors in the precious metals arena.

CHICAGO (Reuters) - Crude oil prices set 13-year highs and gasoline prices set another record Wednesday on worries about potential supply problems this summer due to ongoing violence in Iraq and the Middle East.

The dollar stumbled Wednesday, making dollar-denominated metals like gold and copper more attractive to overseas buyers. Lumber prices soared on a strong cash market but wheat prices fell back on lack of confirmed demand from China.

At the New York Mercantile Exchange, NYMEX crude oil for June delivery closed up 59 cents at $39.57 a barrel, the highest closing price since October 1990, two months after Iraq invaded Kuwait in the first Gulf War.

May 3 (Bloomberg) -- Brazilian exports fell in April as prices for the country's commodities such as aluminum and iron dropped and a work slowdown by port inspectors held up shipments from South America's largest economy.

Exports dropped 17 percent from March to $6.59 billion, cutting the trade surplus to $1.96 billion, a government report showed. Imports fell 13 percent to $4.63 billion. Development and Trade Minister Luiz Fernando Furlan said that the work slowdown, which began April 6, cut exports by $500 million in the month as ports and roads clogged.

``The strike worsened the problem we have every year of channeling the harvest through roads and ports that are not capable of coping with the load,'' said Alexsandro Agostini, an economist at consultancy Global Invest in Curitiba, Brazil.

CHICAGO, May 3 (Reuters) - Volume at the Chicago Board Options Exchange rose 39 percent in April compared with year- earlier levels, the largest U.S. options market said on Monday.

The CBOE said last month's exchange-wide volume totaled 31,678,263 contracts from 22,772,736 contracts in April 2003.

April average daily volume was up 39 percent to 1,508,489 contracts. At the end of April, open interest stood at 130,092,022 contracts, up 41 percent from April 2003.

Bill Cara for the Trader Wizard

Commodity prices, like the metals group, are mostly the product of economic supply and demand factors – longer term. But like all capital markets prices, they are materially affected in the short-term by fear and greed emotions. They are also a reaction to interest rates. This week, we have the double whammy: investors afraid of rising interest rates.

To help me forecast the trends and cycles of commodity prices, I examine various inter-relationships in all the capital markets. When the headlines scream that metal prices are collapsing because China demand has fallen, I naturally look for confirming proof in the non-China affected markets. So far, I have yet to see it.

Secular trend reversals are never established as overnight reactions to market news. They take time to develop. So, this week’s splash and crash in commodity metal prices has me looking to see where the immediate pressure is coming from.

CHICAGO (Reuters) - Prices of gold and silver rose Friday, recouping steep losses two days ago fueled by an expected slump in demand from China, while soybeans posted a second day of gains amid continued concerns over supplies.

In other commodity markets, crude oil futures ended the day with marginal gains, supported by concerns over gasoline supplies ahead of the peak summer driving season.

COMEX silver futures roared back after two straight days of losses sparked by China's move to take stringent measures to rein in runaway economic growth. The world's sixth-largest economy is a major consumer of metals like copper and silver.