Asia Stocks Rise as H Shares Head for Bull; Soybeans Gain

                      Asian stocks rose, with a gauge of Chinese shares in Hong Kong heading toward a bull market, while Treasuries and oil slipped as investors await data on U.S. services before the Federal Reserve meets this week. Soybeans and corn rallied.

The MSCI Asia Pacific Index (MXAP) added 0.3 percent by 12:33 p.m. in Tokyo, following last week’s 1.4 percent advance. The Hang SengChina Enterprises Index climbed to 11,105.70, more than 20 percent above a March 20 closing low, while trading volume in Shanghai surged. Standard & Poor’s 500 Index futures lost 0.1 percent and the yield on 10-year U.S. notes climbed one basis point after the equity benchmark retreated from a record. Oil in New York and London dropped at least 0.4 percent. Soybean and corn futures jumped at least 0.9 percent.

U.S. reports on services activity and pending home sales are due before the Fed meets to discuss monetary policy, while Goldman Sachs Group Inc. said last week rising yields may spur a retreat in global stocks and bonds over the next three months. Chinese industrial-company profits jumped the most last month since September, data yesterday showed. Israel resumed its offensive against Hamas militants in the Gaza Stripafter a lull in fighting, while the U.S. said it has photos of Russia shelling into Ukraine.

“Sentiment has turned in favor of growth and cheap valuations in the Chinese market,” said Khiem Do, who helps oversee about $60 billion as the Hong Kong-based head of Asian multi-asset strategy at Baring Asset Management Ltd. The shares have “been lagging for a long time so they’re catching up with world markets. The Fed has communicated to the market that the first Fed-fund rate hike will be more like next year than this year, so should they change their mind then that would be quite negative.”

Asian Valuations

The Hang Seng China Enterprises Index climbed 1 percent today, after it jumped 5.3 percent last week, the most since March. The Hang Seng Index advanced 1 percent while the Shanghai (SHCOMP) Composite Index surged 2.1 percent, with the number of transactions about 170 percent above the 30-day average for the time of day.

The gauge of Chinese shares in Hong Kong trades at 7.7 times estimated earnings, compared with 13.6 times for MSCI’s Asia-Pacific measure. The S&P 500 is at 16.6 times.

Profits at industrial companies in Asia’s largest economy increased by 17.9 percent in June from a year earlier, after gaining 8.9 percent in May, data from China’s statistics bureau yesterday showed. It was the biggest gain since an 18.4 percent climb in September of last year and came after a private gauge of Chinese manufacturing advanced to an 18-month high, data last week showed.

Price Gap

The Hang Seng China AH Premium Index climbed 1.7 percent to 91.65, signaling a narrowing gap between the Hong Kong and mainland share prices of companies with dual listings. A link between the Shanghai and Hong Kong bourses will start from Oct. 13, the National Business Daily said, citing an unidentified brokerage.

The S&P/ASX 200 Index (AS51) was little changed in Sydney, while South Korea’s Kospi index climbed 0.6 percent. Markets in Indonesia, Malaysia and Singapore are closed for holidays.

Goldman Sachs cut its rating on stocks to neutral, the equivalent of hold, for the next three months, according to a quarterly research report from its portfolio strategy group July 25. The bank also lowered corporate credit to underweight and predicted U.S. government bond yields will increase.

U.S. Notes

Amazon.com Inc. drove U.S. stock declines July 25, sliding almost 10 percent after reporting the widest loss since 2012, distracting investors from an earnings season where 79 percent of S&P 500 members have exceeded analysts’ profit estimates. The benchmark U.S. equity gauge fell 0.5 percent to 1,978.34 July 25, declining for the first time in four days.

Yields on 10-year Treasuries climbed to 2.48 percent after slipping four basis points July 25. Australian bonds due in a decade paid 3.42 percent, after rates rose six basis points, or 0.06 percentage point, last week.

The gap between rates on 30-year Treasury notes and five-year debt narrowed to the least since 2009 last week as uncertainty over whether the U.S. economic recovery is on a strong footing vied with concern that the Fed may raise rates earlier than previously anticipated.

The Treasury will auction $29 billion in two-year securities today, $35 billion in five-year debt tomorrow and $29 billion in seven-year bonds July 30. It will also sell $15 billion in two-year floating-rate notes July 30.

Employers probably added 231,000 workers to nonfarm payrolls in July, after a 288,000 increase in June, according to 69 economists’ estimates compiled by Bloomberg before Aug. 1 reports.

Copper, Lead

The Markit Economics composite and service industries purchasing managers’ indexes for the U.S. are due today, along with data on pending home sales. An update on second-quarter gross domestic product is scheduled for July 30, with the FOMC meeting July 29-30.

Copper for delivery in three months on the London Metal Exchange fell as much as 0.5 percent to $7,090 a ton. Freeport-McMoRan Inc. said July 25 that it will resume full operations in Indonesia at its Grasberg copper operation, the world’s third-largest, and plans to restart exports next month after resolving a dispute with the government.

Lead on the LME rose as much as 0.8 percent to $2,284 a ton, heading for the highest close this year. The metal gained 3.7 percent last week, the biggest advance since January. Aluminum was up 0.7 percent to $2,010.50 a ton. - Bloomberg

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Stand-up traders fined for bending LME rules

                                The London Metal Exchange (LME) has fined almost all of the dealers buying and selling copper on its open-outcry floor a total of £13,750 and suspended one for standing up during a session.

Seven traders were fined £1,250 each for breaking a rule that states dealers must remain seated at all times while dealing on the LME floor, known as the ring, the bourse said in a notice dated last Friday.

Two traders were each given £2,500 fines because it was their second offence in three to six months, according to the notice.

There were 11 LME floor-trading companies when the rule was broken on July 11.

The LME, which accounts for more than 80% of industrial-metals futures trading, operates Europe’s last open-outcry floor. Ten companies are entitled to trade in the ring, where dealers sit on red leather sofas in a circle measuring 6m in diameter.

On the New York Mercantile Exchange, traders are in a pit with steps that allow them to see above each other. "The LME operates a ring, not a pit," Kathy Alys, an LME spokeswoman, said.

"Dealers that stand create an unfair advantage and might obstruct the view of other dealers and LME pricing committee members."

LME open outcry dates back to the 1800s, when merchants drew a circle in sawdust to trade tin and copper. While traders no longer wear top hats and tails, they still must comply with a formal dress code and rules, including buttoned shirts and a chewing gum ban. Breaches bring fines and penalty points, the accumulation of which results in temporary suspension.

The seven traders committing first offences were also given 20 disciplinary points apiece.

The two repeat offenders each received 40 points, and one of them was suspended because he had accumulated 60 points within three months.

Trading in the ring might be "unmanageable" and monitoring of trades more difficult when traders stood up, said Paddy Crabbe, a consultant and author of the Metals Trading Handbook. - bdlive

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Base metals close higher

              Base metals on the London Metal Exchange (LME) have closed higher, after a senior Federal Reserve official said the bank may keep pumping money into the US economy beyond October.

At the close of open-outcry trading in the London ring on Friday, LME 3-month copper was 0.7 per cent higher on the day at $US7,295 a metric ton.

Aluminum rose 0.9 per cent to $US1,840 a ton, while nickel closed 1.2 per cent higher at $US13,985 a ton.

In early European trading, the metals were lifted as the US dollar weakened against other currencies including the euro, making dollar-priced assets more appealing to buyers holding the other currencies.

Analysts said book-squaring ahead of the end of the month and end of the quarter was lending support to prices.

Later, Charles Evans, president of the Federal Reserve Bank of Chicago, suggested the central bank could refrain from winding down its support for the economy until 2014.

'We could make a decision in October,' Evans said on the sidelines of a bank conference in Oslo

'We need to see further developments of the positive variety for the economy to have that added confidence. It wouldn't surprise me if we go a little bit longer.'

The Fed's bond-buying program has supported demand for base metals by stoking activity in industries that consume the metals, such as construction and manufacturing.

Some market watchers said this week's moderate price gains were likely to be short-lived. Starting October 7, the base metals industry will gather in London for the exchange's annual LME Week.

'In the run-up to LME week in London, global manufacturing is showing signs of improvement and base metals may get a short-term price lift,' noted Barclays analysts in a report on Friday.

The bank added that emerging markets, big consumers of commodities, still look fragile, with much of the improvement in Chinese growth stemming from policy support to stabilise rather than boost growth.

Recent price gains will be difficult to sustain, said the bank, without a corresponding improvement of the supply-and-demand fundamentals that underlie industrial metal prices.

'We favour selling into this price strength,' it said. - bigpondnews.com

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Copper Below $7,000 for First Time in 18 Months as Metals Slide

             Copper in London fell below $7,000 for the first time in almost 18 months as data from Europe to China, the biggest user, raised concern that demand is faltering. Aluminum, nickel, zinc, tin and lead also retreated.

Copper for delivery in three months on the London Metal Exchange plunged as much as 4 percent to $6,800 a metric ton, the lowest level since October 2011, and was at $6,840.25 at 9:38 a.m. in Shanghai. Metal for delivery in August was at 50,530 yuan ($8,175) a ton, declining by a daily limit, on the Shanghai Futures Exchange. The July futures contract on the Comex dropped 3.1 percent to $3.1035 per pound.

European car sales are sliding to a 20-year low as demand plunged last month in Germany. TheFederal Reserve said yesterday in its Beige Book business survey the U.S. economic expansion remained “moderate.” China’s first-quarter gross domestic product growth and fixed-asset investments, as well as March industrial production trailed economists’ forecasts.

“After breaching key technical levels, copper is in a downward trajectory,” Xu Liping, an analyst at HNA Topwin Futures Co., said by phone from Shanghai.

Courtesy : Bloomberg

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