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

Read More

IMF Reduces Growth For US & China Lowering Implied Demand For Oil

                    On Thursday the International Monetary Fund has lowered its 2014 global economic growth forecast, warning of “negative surprises” from the United States and China and geopolitical risks in Ukraine and the Middle East. The IMF projected global growth of 3.4 per cent for this year, down from its April estimate of 3.7 per cent. In 2013, the world economy grew 3.2 percent. The downgraded 2014 growth outlook reflects “both the legacy of the weak first quarter, particularly in the United States, and a less optimistic outlook for several emerging markets,” the IMF said, in an update of its semiannual World Economic Outlook.

The downgrade weighed on implied demand for energy products. The brief update showed the IMF increasingly concerned by escalating geopolitical tensions. “Geopolitical risks have risen relative to April: risks of an oil price spike are higher due to recent developments in the Middle East while those related to Ukraine are still present,” the report said. Despite the worse-than-expected global growth outlook for 2014, the IMF left its 2015 forecast unchanged at an annual rate of 4.0 per cent, the fastest pace since 2011.

The lower growth rates weigh on commodity demands, but at the same time the increase in geopolitical concerns pushes the price of crude oil on worries over supply and production disruption. WTI slipped $1.05, or 1 percent, to end at $102.07. The volume of all futures traded was 23 percent below the 100-day average for the time of day. Brentdeclined 96 cents, or 0.9 percent, to close at $107.07 a barrel 

West Texas Intermediate crude declined with gasoline as U.S. inventories of the motor fuel expanded for a third week, threatening to depress refining margins. Gasoline stockpiles grew by 3.38 million barrels last week and supplies around New York Harbor, where futures contracts are delivered, were at the highest seasonal level since 2008, Energy Information Administration data showed. Gasoline futures ended at the lowest price in almost six months. Gasoline futures for August delivery dropped 2.33 cents to $2.8368 a gallon on the Nymex, the lowest settlement since Feb. 28. Ultra low sulfur diesel dropped 0.45 cent to $2.8709.

Natural gas gained after the release of the weekly EIA inventory report. Gas climbed to trade at 3.847 adding 8 points this morning. The report showed a net increase of 90 Bcf from the previous week. Stocks were 561 Bcf less than last year at this time and 683 Bcf below the 5-year average of 2,902 Bcf with the total working gas below the 5-year historical range. - fxempire

Read More

Copper jumps 1% after China PMI hits 18-month high

                      Copper futures rallied to a more than one-week high on Thursday, as investors cheered better than expected manufacturing data out of China, the world’s largest consumer of the red metal.

On the Comex division of the New York Mercantile Exchange, copper for September delivery rose to a session high of $3.253 a pound, the most since July 16, before trimming gains to last trade at $3.248 during European morning hours, up 1.27%, or 4.1 cents.

Copper ended Wednesday’s session down 0.03%, or 0.1 cents, to settle at $3.207. Futures were likely to find support at $3.192, the low from July 23 and resistance at $3.255 a pound, the high from July 16.

Data released earlier showed that China’s HSBC Flash Purchasing Managers Index, the earliest indicator of the country's industrial activity, rose to an 18-month high of 52.0 in July from a final reading of 50.7 in June. Analysts had expected the index to rise to 51.0 this month.

Copper traders consider shifts in the HSBC PMI an indicator of China's copper demand, as the industrial metal is widely used by the sector.

The Asian nation is the world’s largest copper consumer, accounting for almost 40% of world consumption last year.

Elsewhere on the Comex, gold for August delivery shed 0.43%, or $5.60, to trade at $1,299.10 a troy ounce, while silver for September delivery dipped 0.41%, or 8.7 cents, to trade at $20.90 an ounce.

Later in the day, the U.S. was to produce data on unemployment claims, manufacturing activity and new home sales, amid ongoing speculation over when the Federal Reserve may start to raise interest rates. - investing.com

Read More