LME Inventory

LME DATA:
COPPER UP 2300,
TIN DOWN 15,
LEAD UP 50,
ZINC DOWN 200,
ALUMINIUM UP 1625,
NICKEL DOWN 258,

Impact: Data is negative for Copper, Lead and Aluminium, While positive for Tin, ZInc and Nickel.

US EONOMY UPDATE

Dollar softens further across against most currencies into US session.Technically speaking, break of intraday support levels indicates last week's recovery in the greenback has likely completed and further downside will likely be seen. Though, price volatility may be limited as the economic calendar is light, with wholesale inventory featured only. Low yield majors, the yen and swissy remains pressured in crosses.BoJ will announce rate decision in the coming Asian session and is widely expected to keep rates unchanged at 0.50%. Meanwhile, the Swissy is weighed down by SNB Roth's comment yesterday that the bank has no plan to raise rates again from the current 2.75%.

Currecny Update

Dollar remains pressured against most currencies after FOMC minutes. While further rate cut is generally expected by the end of this year, opinions are still divided on whether that will be delivered in the Oct or Dec meeting. Unsurprisingly, recent market turmoil and credit tightening were the main focus of the meeting the members judged loosening monetary policy was an appropriate response to the tightening in credit. Even though, there is no specific plan for further rate cuts and "further actions would depend on how economic prospects were affected by evolving market developments and by other factors", members are generally concerned that "outlook for economic activity as characterized by particularly high uncertainty, with the risk to growth skewed to the downside." On inflation, the members "recognized that incoming data on core inflation continued to be favorable, and they generally were a little more confident that the decline in inflation earlier this year would be sustained." Though, "inflation risks could be heightened if the dollar were to continue to depreciate significantly."

Where do you expect GOLD prices on this Diwali???

Where do you expect GOLD prices on this Diwali???

Enter your vote today! A new poll has been created for thecommoditytalk group:

Where do you expect GOLD prices on this Diwali???
o Above 10500
o Range 9200-9800
o Below 9000
o Can't predict

To vote, please visit the following web page:http://groups.yahoo.com/group/commoditytalk/surveys?id=1931261

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Thanks!

Kamlesh Jogi

Nymex Crude Oil

Source: Future Source

Nymex crude traded in a narrow range earlier in the day on Friday, holding on to the 1.9% leap noted in the previous session, as market participants waited for fresh cues to move prices. Nymex crude slipped by almost a dollar as dollar strengthened after the positive job's data eased expectations that Fed may impose another cut in interest rates and on lack of immediate threat to the energy infrastructure in the Gulf of Mexico from storm activity.
Dollar rose after reports noted that Non-farm payrolls rose 110,000 in September. Also August data was revised to an 89,000 rise from a previous estimate of a 4,000 decline. Earlier, the August report showed the first decline in jobs in four years, sparking concerns that the US subprime mortgage problems were affecting larger economy.
Concerns that US subprime market woes may affect larger economy induced US Fed to impose a sharper than expected cut in interest rates. Oil prices rallied last month when the Fed cut rates more than forecast, because it was expected this would aid economic growth and therefore energy demand.
While the stronger jobs data bode well for the economy, oil traders have been focusing on dollar movements in recent weeks and a slump in the currency has been a factor in helping push prices to their record. A weaker dollar gives oil producers extra incentive to drive prices higher. It also renders dollar-denominated crude oil cheaper in other currencies
Nymex crude fell earlier this week following some correction in the market after the rally witnessed last week however the losses were recouped on Thursday as funds indulged in buying after the dip in prices and also as US weekly petroleum report noted an unexpected decline in gasoline and distillate stocks.
Easing storm concerns, The US National Hurricane Center said Friday it did not expect any of six Atlantic low pressure systems it is watching to develop into a tropical cyclone Friday.
Yesterday, Nymex crude Nov. contract settled at $81.22 per barrel with a decline of 22 cents and traded in a range of $80.51 to $81.68 per barrel.
Over the week, front month contract noted a decline of 44 cents or 0.5% and moved in a range of $78.87 to $81.75 per barrel. It noted a 4 cent rise in the previous week. Nymex crude slipped over last week after noting five weekly gains
Yesterday, ICE Brent crude Nov. contract settled at $78.90 per barrel with a decline of 7 cents and traded in a range of $78.17 to $79.21 per barrel.
Over the week, front month contract noted a decline of 27 cents or 0.3% and traded in a range of $76.56 to $79.54 per barrel. It dropped by 13 cents in the previous week
Middle-East crude oil Dec. contract on ICE ended yesterday at $74.51 per barrel with a decline of 3 cents while Oman crude oil contract for Dec. delivery on Dubai Mercantile Exchange ended yesterday at $75.47 per barrel with a gain of 32 cents.
As per the COT report, speculators for Nymex light sweet crude oil futures trimmed their long and short positions but continued to be net long for the week ended Oct. 2. They raised their net long position by 12906 contracts or 29.6% in the report week after trimming it by 19.6% in the previous week.
Nymex crude front month contract noted a modest fall over last week after jotting five straight weekly gains. As per a survey by Bloomberg, crude oil prices may decline in the coming week on speculation that US inventories will rise because of refinery maintenance and increased OPEC output
While there are no immediate storm concerns, the Atlantic hurricane season is far from over. Also Colorado State University forecasters expect above-average hurricane activity in October and November, with four named storms, two hurricanes and one major hurricane.
In the coming week traders will look ahead for the International Energy Agency's monthly oil market report which will be released Oct. 11 and US Energy Information Administration's winter fuel outlook due Oct. 09.
The reports could hold more weight than the agencies' regular monthly reports because the record crude prices have been largely driven by forecasts of a supply deficit in the fourth quarter and early 2008. Any expectations for a warmer-than-normal winter, or expectations of slowing demand, could hurt price perceptions, while on the other hand, decreases in non-OPEC production or a shrugging of subprime concerns could have the other effect.

Copper seen at USD9,000 in April-May,'09

Source: Bloomberg

Copper prices should rise to $9,000 a metric tonne by April-May, 2009, as a combination of a physical demand and a peak in index fund holdings takes its toll, Bloomsbury Minerals analyst Chris Welch said Friday.

Copper's price forecasts have systematically been underrated, Welch said, because many statistics fail to take into account the consumption of unreported stocks, mine production has been over-forecast and the requirement for working stock has been ignored in a growing industry. Additionally, he said long-only investment in copper has been confused with speculative trade. Speaking at the 20:20 Investor Series seminar in London, Welch said Bloomsbury predicts a surplus of 25,000 tonnes of copper in the third quarter of 2007, which is smaller than many had expected. In the fourth quarter of 2007, demand from western Europe and the US will be very weak but the fate of the copper market is determined by consumers in China, India, Russia, Central Europe and the Middle East, Welch said. Strikes in Peru and Mexico are also important to price forecasts, Welch added. Welch said Bloomsbury sees reference to BRIC - Brazil, Russia, India and China - as a distraction to where real copper demand is coming from. Most demand is coming from a combination of Brazil, India, Indonesia and China, where consumption has increased the most between 2002 and 2007 by 2.36-million tonnes.

Another important grouping is the UAE, Turkey, Egypt, Saudi Arabia, where copper demand grew by 2,60,000 tonnes between 2002 and 2007, Welch said. Demand in Germany, Italy, Russia, Poland grew by 9,05,000 tonnes. Meanwhile, demand for copper in the UK, US, Australia and Greece declined by 6,45,000 tonnes. In 2008 and 2009, reduced annual growth in essential working stocks will create a tiny commercial deficit, with raw materials supply predicted to remain tight.

Welch said on top of a deficit in the refined copper market in 2007, there is also one in the concentrates market. But mine production is expected to speed up in 2009-2010, and then roughly 15% of the next four years' production growth will go to rebuild concentrates stocks to more normal levels.

Welch forecast a commercial copper market surplus for 2010-2011, largely because it is assumed the "once per decade" global recession will occur then. However, he said if there isn't a global recession then copper market conditions will be tight until new projects currently going through the feasibility stage come on stream. Much of this new output is expected from 2012 onwards.

Bullion

Gold futures went on a roller-coaster ride with the euro Friday, first tumbling with the single European currency after a stronger-than-expected US jobs report but soon shooting higher again.

December gold rose $3.40 to $747.20 a troy ounce on the Comex division of the New York Mercantile Exchange. More significantly, it closed up $15 from an early-day electronic low of $732.70.

As pit trade was closing, the December contract at the Chicago Board of Trade was up $3.60 to $747.20. Comex December silver fell a penny to $13.49, but bounced from a low of $13.31. Shortly after it closed, CBOT December silver was down 0.2 cent to $13.494.

Interest rate Decisions

Both ECB and BoE left interest rates unchanged as widely expected.Euro dips mildly, in particular against Sterling, as market interprets Trichet's remarks in the following press conference as less hawkish than expected. No "vigilance" is used as widely expected. To some's surprise, Trichet dropped the description of "on the accommodative side" to interest rates. Also, Trichet emphasized the need to "gather additional information and examine new data before drawing further conclusions for monetary policy". Trichet highlighted that "particular" caution is needed to be given to the financial market development which heightened risks to growth of the Eurozone economy. Though Trichet does noted recent climb in HICP inflation and that medium term risks to inflation remain on the upside and ECB stand ready to counter these risks.

US Preview

Asian stocks today closed mixed with the Nikkei index up +0.90%, but with Hong Kong closing -2.55%. The Chinese stock market remains closed for the Golden Week holidays. The European DJ Stoxx 50 is slightly higher by +0.06%

Mortgage applications – Today's weekly MBA report showed a -2.7% decline in the MBA mortgage applications index, a -1.8% decline in the purchase mortgage sub-index to a 5-month low, and a -3.8% decline in the refinancing sub-index. Last week, the weekly MBA mortgage applications index fell –2.8%, the purchase sub-index fell –7.2%, and the refi sub-index rose +3.3%. Mortgage applications are now fading after initial strength seen after the mortgage crisis began in early-August as people tried to push through purchase and refi mortgage applications before conditions became any worse. However, anecdotal information suggests that banks are turning down more than the usual number of mortgage applications due to the tighter underwriting restrictions. That means that the mortgage applications index is overstating the number of mortgages that are actually being closed. Yesterday’s Aug pending home sales report fell sharply by –6.5%, adding to the –10.7% plunge seen in Augus t. The 2-month plunge in pending home sales is a negative leading indicator for existing home sales and mortgage applications. The only thing the housing market has going for it right now is lower mortgage rates. The 30-year mortgage rate has fallen sharply by a net 32 bp to the latest level of 6.42% from the 14-month peak of 6.74% seen in mid-June. That has made mortgage cheaper and homes more affordable, at least for those that can still qualify for a mortgage.

ISM non-manufacturing index – Today’s Sep ISM non-manufacturing index is expected to show a modest decline of -1.2 to 54.6 following August’s report of unchanged at 55.8. The expected report of 54.6 would leave the index at the third lowest level in 2 years, just 0.4 points above the 2-year low of 52.4 posted earlier this year in March. Still, the index would remain above the boom-bust level of 50, indicating a continued expansion in the US service sector. The markets are continuing to watch the US economic data very closely for signs of a possible significant drop in business and consumer confidence due to the housing and financial market crisis.
Dec S&Ps this morning are trading lower due to some negative technology stock news for Intel/AMD and Micron Technology and due to some long liquidation pressure after Monday's rally. The US stock market yesterday closed mixed following Monday's sharp rally (Dow -0.29%, S&P 500 -0.03%, Nasdaq Composite +0.22%). The stock market yesterday held Monday's gains as the market was encouraged that UBS and Citicorp came clean on writing down fixed income portfolios and as buying emerged at the beginning of the quarter. There is general optimism that the US economy will continue to chug along at a decent pace, supported by global growth and demand for US exports. Moreover, US stock market valuations remain reasonable.",1]


ISM non-manufacturing index – Today’s Sep ISM non-manufacturing index is expected to show a modest decline of -1.2 to 54.6 following August’s report of unchanged at 55.8. The expected report of 54.6 would leave the index at the third lowest level in 2 years, just 0.4 points above the 2-year low of 52.4 posted earlier this year in March. Still, the index would remain above the boom-bust level of 50, indicating a continued expansion in the US service sector. The markets are continuing to watch the US economic data very closely for signs of a possible significant drop in business and consumer confidence due to the housing and financial market crisis.

US Economy Update

Markets' focus is turning to services data and ADP employment report today. ISM non-manufacturing index is expected to drop slightly from 55.8 to 55 in Sep with price paid index dropping from 58.6 to 57. With Friday's highly anticipated NFP in sight, the employment component of the ISM non-manufacturing report will be closely watched. This employment component surprisingly dropped to contractionary level at 47.9 in Aug, marking first contraction since Jul 04. The private ADP employment report, which serves as a preview to NFP is expected to show 53k job growth in Sep. Monday's recovery in the employment component in the ISM manufacturing report provided some support to a rebound in NFP in Sep. Markets will look into whether the ISM non- manufacturing employment and ADP provide further support or offset that positive data.

Currency Update

Dollar continues to recover against most currencies as markets are preparing for key event risk of NFP on Friday. Meanwhile, despite strong rally in global and US stock markets, the Japanese yen also recovers mildly against dollar and in crosses. UK construction PMI, Eurozone PPI and unemployment as well as US pending home sales will be featured today. But markets seems to have passed a climax in near term and further choppy trading will likely be seen, at least before ECB and BoE rate decision on Thursday.

Todays US Data

Todays US Data : 2 Oct US Pending Home Sales, Total Vehicle Sales, Domestic Vehicle Sales

LME Warehouse Stocks

LME Zinc Warehouse Stocks -125 MT To 60,725 MT
LME Aluminum Warehouse Stocks -525 MT To 936,875 MT
LME N Amer Alloy Warehouse Stocks -120 MT To 120,720 MT...
LME Copper Warehouse Stocks +175 MT To 130,850 MT
LME Lead Warehouse Stocks -225 MT To 22,325 MT
LME Nickel Warehouse Stocks +0 MT To 0 MT
LME Alu Alloy Warehouse Stocks -400 MT To 69,900 MT
LME Tin Warehouse Stocks -170 MT To 13,820 MT