Sunday, June 24, 2012

Euro Gains Against Dollar As Officials Address Crisis; Yen Falls


The euro strengthened against the dollar after the European Central Bank eased terms for collateral, boosting speculation the central bank will announce a third set of long-term loans.
The 17-nation currency gains were limited amid reports investors to take losses in a Spanish debt restructuring and German Chancellor Angela Merkel said direct bailout funding to banks violates the region’s treaties. The yen weakened as Japanese lawmakers in the lower house prepared to vote on a bill to double sales tax. Risk-sensitive currencies such as New Zealand’s dollar and Mexico’s peso rallied as stocks and commodities rebounded.
“The move by the ECB can help ease some of the funding issues for Spain,” said Joe Manimbo, a market analyst in Washington at Western Union Business Solutions, a unit of Western Union Co. (WU) “The euro is finding a little bit of footing with markets really turning to next week’s EU summit.”
The euro gained 0.2 percent to $1.2570 at 5 p.m. New York time, after adding as much as 0.4 percent. The U.S. currency was 0.2 percent higher against the yen at 80.43, after appreciating to 80.57, the strongest level since May 2. The yen lost 0.4 percent to 101.10 per euro.

Market Forces

The Standard & Poor’s 500 Index rose 0.7 percent and the Standard & Poor’s GSCI Index of 24 raw materials increased 0.8 percent. Crude oil futures rallied 2.5 percent.
Futures traders decreased their bets that the euro will decline against the U.S. dollar, figures from the Washington- based Commodity Futures Trading Commission show.
The difference in the number of wagers by hedge funds and other large speculators on a decline in the euro compared with those on a gain -- so-called net shorts -- was 141,066 contracts on June 19, compared with net shorts of 195,187 a week earlier. They reached a record of 214,418 the week ended June 5.
Canada’s dollar added 0.5 percent to C$1.0246 after touching C$1.0300, its lowest in a week as a rally in crude oil outweighed a report showing inflation advanced at the slowest pace in two years.
New Zealand’s dollar was the best performer against the dollar, gaining 0.5 percent to 79.06 U.S. cents. Mexico’s peso, added 0.4 percent to 13.8624.

Financial Strength

“Financials are rebounding quite strongly, so the market may be set for a reprieve,” said Andrew Wilkinson, chief economic strategist at Miller Tabak in New York. “It’s quite clear that fiscal and banking unions are needed in Europe but what’s needed right now is a timeline.”
The euro retreated as Merkel, speaking to reporters in Rome today at crisis talks before a June 28-29 summit, said Spain is responsible for its own banks and that direct bailout funding of banks violates treaties.
Spanish policy makers considered forcing investors who hold equity and junior debt in banks to absorb losses in a restructuring, according to a person with knowledge of the plan.
“The market sees this as a signal that there is another longer-term refinancing operation coming,” said Steven Englander, head of Group of 10 currency strategy at Citigroup Inc. in New York. “They are targeting the same banks as they did in the first instance, in a sense the LTROs were limited only by the collateral that peripheral banks could bring to the ECB to get the money.”

Euro Range

The shared currency is down from this year’s high of $1.3487 on Feb. 24 and has depreciated about 6.6 percent in the past 12 months, according to Bloomberg Correlation-Weighted Indexes that measure 10 developed-market currencies.
The Dollar Index (DXY), which IntercontinentalExchange Inc. uses to track the greenback against the currencies of six U.S. trading partners, fell 0.1 percent to 82.212 after touching 82.465, the strongest level since June 13.
The dollar climbed above 80 yen yesterday for the first time in a month. Prime Minister Yoshihiko Noda’s Democratic Party struggled to overcome internal resistance to his bill to double Japan’s consumption tax before a lower-house vote that may come as soon as today.
The dollar’s rise versus the yen may stall, according to data compiled by Bloomberg. The greenback faces so-called resistance at the 100-day moving average of 80.41 yen, and may find support at 79.84, the 50-day moving average, the data show.
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Qatar Seeks $5 Billion China QFII Quota, Securities Journal Says


Qatar’s sovereign wealth fund is applying for a license and a $5 billion quota to invest in China under the nation’s Qualified Foreign Institutional Investor program, the China Securities Journal said on its website, citing Energy and Industry Minister Mohammed Bin Saleh al-Sada.
Qatar will allocate the funds mainly for the domestic A- share equity market and initial public offerings, with some investment in bonds, al-Sada said in Beijing, according to a separate report by the Xinhua News Agency said. The decision was made based on Qatar’s confidence in China’s long-term growth potential, Xinhua cited the minister as saying.
Central banks, sovereign wealth funds and financial institutions are looking to China to diversify their assets as Europe’s debt crisis roils financial markets. China said this month it will lower the entry barrier for foreigners seeking to invest in the nation’s capital markets under the QFII program after more than doubling the total quota to $80 billion in April.
Introducing more long-term overseas funds will help improve confidence, promote stable growth in China’s capital markets and provide “robust” returns to domestic investors, the China Securities Regulatory Commission said in May.
The commission said on June 20 it plans to cut the minimum requirement for assets under management to $500 million from $5 billion for companies seeking a QFII license. It will also allow them to invest in the country’s interbank bond market.

Investment Quota

The CSRC will complete the license approval for the Qatar Investment Authority as soon as possible and “actively assist” it in obtaining an investment quota, the China Securities Journal said, citing unnamed officials from the regulator. The newspaper said al-Sada was in Beijing for a China-Qatar investment and cooperation meeting.
The State Administration of Foreign Exchange decides on the amount of foreign-currency funds an institution can invest. It said last month it will speed up the approval process.
Guo Shuqing, the commission’s head, is spurring efforts to give the nation’s bond market a bigger role in financing growth and help divert risk from the state-owned banking system that provides 75 percent of the nation’s credit.
The Shanghai Composite Index, the nation’s benchmark stock gauge, fell to its lowest level in three months on June 21 on concern the nation’s economic growth is slowing. The index has dropped 8 percent since this year’s closing high on March 2.
The Qatar sovereign wealth fund’s planned investment would exceed the current limit of $1 billion per single foreign investor allowed under the QFII program, according to Xinhua and the China Securities Journal.

Quota Increase

Bank of Korea, the Kuwait Investment Authority and the Monetary Authority of Singapore are among the 172 entities granted QFII licenses since the program was introduced in 2002 to allow foreign institutions to buy and sell yuan-denominated securities. Of the total, 145 have been awarded a combined quota of $27.26 billion, the CSRC said on June 20. The total amount allowed before April’s increase was $30 billion.
Singapore’s state-owned investment company Temasek Holdings Pte has already applied to increase its quota after the regulator’s April announcement, according to an e-mailed statement on June 14.

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Tropical Storm Curtails Gulf Of Mexico Energy Output


Anadarko Petroleum Corp. (APC)BP Plc (BP/) and other oil and natural-gas companies curtailed production in the Gulf of Mexico as a weather system strengthened into Tropical Storm Debby, the fourth named storm of the year.
The U.S. Bureau of Safety and Environmental Enforcement said 7.8 percent of oil production and 8.2 percent of gas output in the Gulf has been halted. Anadarko shut four platforms, and BP started closing some oil and gas wells. Apache Corp. (APA) and two other companies began evacuating non-essential workers from some facilities.
Debby was moving slowly northward as of 5:00 a.m. New York time with maximum sustained winds of 50 miles (80 kilometers) per hour and swells as high as 19 feet (six meters), according to the National Hurricane Center. The storm’s projected path indicated it was heading for the Louisiana coast west of New Orleans and would make landfall as early as Monday afternoon before moving west toward Texas. The storm has a 29 percent chance of intensifying to a hurricane by June 26, according to the forecast.
“We do have it strengthening, and it certainly can’t be ruled out that it will reach hurricane strength, but right now all we’re projecting is a tropical storm,” Dennis Feltgen, a spokesman for the hurricane center in Miami, said in a telephone interview.

Early Evacuations

The Gulf of Mexico is home to 6.5 percent of U.S. gas production, 29 percent of oil output and 40 percent of refining capacity. Offshore oil and gas platforms need to carry out evacuations well in advance of a storm’s arrival, so any system in the Gulf can cause production disruptions.
BP, Apache and Chevron Corp. (CVX) said on their websites that they began withdrawing non-essential personnel from some Gulf facilities yesterday. ConocoPhillips (COP) said it’s taking non- essential employees off its Magnolia platform. BP began shutting some wells as it pulled workers and contractors from offshore platforms and rigs in the expected path of Debby, Brett Clanton, a Houston-based BP spokesman, said in an e-mail.
Anadarko halted production at its Neptune, Independence Hub, Constitution and Marco Polo facilities in the eastern and central Gulf of Mexico, the company said on its website. The company will evacuate all employees from the platforms, it said.

Neptune, Shenzi

BHP Billiton Ltd. (BHP) shut the Neptune and Shenzi platforms, which can together produce 150,000 barrels of oil a day and 100 million cubic feet of gas, on June 22. Murphy Oil Corp. (MUR) began evacuating non-critical workers on the same day, as did Anadarko, Marathon Oil Corp., Nexen Inc. (NXY), Enterprise Products Partners LP and Hess Corp. (HES)
Royal Dutch Shell Plc (RDSA) may remove some non-essential workers from rigs in the central and western Gulf in the next few days, the company said on its website.
ERA Helicopters LLC of St. Charles, Louisiana, reported ferrying workers from offshore platforms. Melanie Landry, a spokeswoman for ERA, declined to comment on which companies had called for evacuations.
Jim Rouiller, senior energy meteorologist at Planalytics Inc. in Berwyn, Pennsylvania, said this is the first real threat of the year in the Gulf of Mexico. With the relatively mild start to summer, he said, “this will get the traders looking and saying, ‘Hey, we got something ominous for the Gulf.’”
Wind shear is pushing most of Debby’s wind speed and thunderstorms to the Gulf’s eastern edge, said Mike Pigott, a senior meteorologist with State College, Pennsylvania-based AccuWeather Inc.

Gain Strength

“As long as it remains over the open, warm waters of the Gulf, it could continue to gain strength,” he said. “If the shear relaxes, it could become a hurricane before reaching Texas.”
A storm gets a name when its winds reach 39 miles (63 kilometers) per hour and becomes a hurricane at 73 miles per hour.
Debby is the fourth storm of the Atlantic hurricane season, which runs from June 1 to Nov. 30. It’s the first time since record-keeping began in 1851 that four storms have formed in the Atlantic before July 1, Feltgen said.
“This is the seventh Atlantic season in recorded history where three storms have formed before July 1,” he said. “We have never gone with four storms before July 1.”

Norway Oil Workers Shut Platforms As Mediation Talks Fail


Norwegian offshore workers shut two platforms after mediated talks on pensions and wages failed, curtailing output in Europe’s second-largest crude and natural gas producer.
A government-led mediation was unable to bridge a divide over pensions with the labor unions, Industry Energy, Safe and Lederene, the Norwegian Oil Industry Association said today in an e-mailed statement. The talks had pushed past a midnight deadline before a strike was called.
“Completely unreasonable pension demands from Industry Energy, SAFE and Lederne show they are clearly placing themselves apart from other workers in Norway,” Jan Hodneland, chief negotiator for the association, said in a statement.
The strike will cut oil and gas output as shut production at Statoil ASA (STL)’s Oseberg and Heidrun fields, and close BP Plc (BP/)’s Skarv development, according to the group. About 700 workers are being taken off the job in the initial phase of conflict, which will also hurt operations at Europe’s biggest methanol plant.
“We can’t accept that the employers rob us of our pensions,” Leif Sande and Hilde-Marit Rysst, leaders at the Industry Energy and Safe unions, said in a separate statement.
The platforms will take four to five days to close, the industry association said. BP’s Skarv output start risks being delayed by the conflict, which will cost 150 million kroner ($25 million) a day in lost revenue, the group said.

Production Affected

The strike by oil-platform workers, which is the first industrywide action since 2004, targets about 165,000 barrels of oil equivalent a day, according to the Industry Energy and Lederne unions. That’s equal to about 3.9 percent of average daily production of oil, natural gas and condensate in Norway this year, according to Bloomberg calculations based on data from the Norwegian Petroleum Directorate.
Oseberg has produced an average of about 194,000 barrels of oil equivalent a day in 2012, while Heidrun’s output has averaged 64,000 barrels, according to NPD data. Skarv is due to start production in the fourth quarter according to BP.
All production will be halted at Heidrun while output from Oseberg will be cut by between 94,000 and 101,000 barrels of oil equivalent, Per Helge Oedegaard, an official with the Lederne union, said on June 18. Output from the 2,500 metric tons-a-day Tjeldbergodden methanol plant will also stop after a single day’s strike because gas supplies would halt, he said. The plant is Europe’s biggest, according to Statoil, which owns more than 80 percent of the facility.
Norway, the world’s third-richest nation per capita, last suffered an oil worker strike in 2006 when oil-service employees disrupted drilling for 34 days. Platform workers last went on strike in 2004, according to the Safe labor union, which is part of the action. The employers are represented by the Oil Industry Association.
Norway produced an average of about 2.01 million barrels of oil, natural gas liquids and condensate a day in May, according to the NPD. That includes average oil output of about 1.633 million barrels.

Egypt Stocks Post Biggest Gain Since February; Abu Dhabi Falls


Egypt’s benchmark stock index rose the most in more than four months before the North African country announced the results of its first free presidential elections. Shares in Abu Dhabi declined.
Orascom Construction Industries, the nation’s biggest publicly traded builder, climbed the most since May and Commercial International Bank Egypt SAE (COMI) rose 3.2 percent. Egypt’s EGX 30 index rallied 3.3 percent, the most since Feb. 13, to 4,166.32 at the 2:30 p.m. close in Cairo. The gauge tumbled 8.8 percent last week. The Bloomberg GCC 200 Index (BGCC200)fell 0.4 percent as Abu Dhabi’s ADX General Index (ADSMI) retreated 1.1 percent, the most since March 7.
Egypt’s shares rose “especially after different political factions announced that they will not resort to violence and will accept the choice of the people,” said Wafik Dawood, director of institutional sales at Cairo-based Mega Investments Securities.
Egypt will announce the results of the presidential vote after the market closes today. The Muslim Brotherhood has denied it plans to resort to violence if their candidate, Mohamed Mursi, doesn’t win the race. The Brotherhood will continue peaceful protests against the military’s move to limit the powers of the next president and increase its influence in the writing of a new constitution, Mursi said at a televised press conference over the weekend.
Still, analysts such as Said Hirsh of London-based Capital Economics say the results may spark unrest if former air force commander Ahmed Shafik is declared winner.
Orascom Construction advanced 2.5 percent, the most since May 13, to 221.5 pounds. Commercial International, the country’s biggest publicly traded lender by assets, rallied to 22.28 Egyptian pounds. About 75 million shares were traded in Egypt today, compared with a 12-month daily average of 86 million.

Oil’s decline

In the Persian Gulf shares retreated after oil declined 5.1 percent last week to $79.76 a barrel, extending losses this year to 19 percent. The six-nation Gulf Cooperation Council, including the United Arab Emirates and Saudi Arabia (SABIC), holds about one-fifth of the world’s proven oil reserves.
“All markets across the region are soft on very light activity,” said Julian Bruce, the Dubai-based director of institutional sales trading at EFG-Hermes Holding SAE. “An air of enhanced caution pervades as we await political developments in both Europe and the region.”
Greece will push its creditors to extend fiscal deadlines under the country’s bailout program by at least two years, according to a policy document drawn up by the three parties in the country’s governing coalition.
Dubai’s DFM General Index (DFMGI) retreated 0.7 percent, while Oman’s MSM30 Index (MSM30) lost 0.2 percent and Qatar’s QE Index (DSM) decreased 0.3 percent. Kuwait’s measure tumbled 1.2 percent and Saudi Arabia’s Tadawul All Share Index (SASEIDX) fell 0.4 percent.

Trading Debut

Tokio Marine Saudi Arabia, a company that offers Shariah- compliant property and casualty insurance, closed at 77.5 riyals on its trading debut in Riyadh.
In Israel, the benchmark TA-25 Index (TA-25) lost 0.8 percent at 3:40 p.m. in Tel Aviv. Protalix BioTherapeutics Inc. (PLX) posted its biggest intraday drop in more than a month, slumping 10 percent to 23.27 shekels, after the European Union rejected the biotechnology company’s first drug on the market. Teva Pharmaceutical Industries Ltd. (TEVA) jumped the most in more than seven years, surging 11 percent to 161.3 shekels, after a U.S. federal district judge ruled that competitors’ drug applications for the multiple sclerosis medicine Copaxone infringe its patent.
The yield on Israel’s 5.5 percent benchmark Mimshal Shiklit government bonds due January 2022 rose two basis points, or 0.02 percentage point, to 4.39 percent.