IRCo – Rubber Market Watch: 7 – 11 May 2012

By Yium Tavarolit

Why Global Economies Are Not Out Of The Woods Yet

Greed in mindsets of some people who are stronger today is destroying peacefulness in global society as these people are not satisfied with what they have, and they cannot judge what they should give to and take from their societies and nature. And these people still try to take more benefits from weaker ones.

The latest global financial crisis in late 2008 should be a good lessen for leaders of the U.S., the euro-zone countries, China, Japan, and giant financial institutions in these countries if they are not too complacent and greedy for profits in too extreme Capitalism.

It is noticeable that the global economic recovery during 2009 – 2011 was unsteady and short-lived after the leaders of the U.S. and euro-zone countries had stolen their taxpayers’ money to bail out giant financial institutions and auto makers. At the same time, very low interest rates loan policies were introduced so as to increase liquidity and to help lower manufacturing costs and to stimulate consumer spending. However, everything failed because non-competitiveness of the U.S., the euro-zone countries, and too strong Japanese yen piled up their national trade and budget deficits.

Furthermore, it is sadly disappointed that commodity exchanges return to be lively again after commodity prices plunged sharply in late 2008 mainly caused by panic selling. Speculation and manipulation on soft-and-hard commodities worldwide spurred commodity prices from the beginning of 2010 to early 2011 and then fell continuously amid the slowdown in global growth and natural disasters worldwide for the rest of 2011.

On the energy front, speculators pushed up crude oil futures from May 2010 to a peak in May 2011 before crude oil futures fell to the trough in October 2011 due to the global economic slowdown and the aftermath of tsunami and earthquake on 11 March 2011 in Japan. Speculators again pushed up crude oil futures after they saw the resilience of the U.S. economy in 4Q11, but crude oil futures diverged from their uptrend in early May 2012.

As a result, it is not much surprised why global economies still meander along the bumpy road until today. Things will be better only if mindsets of human beings are corrected. Greed and selfishness are the core problems that must be lowered. Cooperation among different colors must be created to replace competition and protectionism, and every body has to jointly take care of environment seriously.

The Movements of Global Stocks, Finance and Energy

Slow factory growth in China and J.P. Morgan Chase’s US$2 billion trading loss in the last six weeks dragged down Asian stock markets on Friday. Japan’s Nikkei was down 0.6% to 8,953.31, Australia’s S&P ASX 200 was down 0.2% to 4,285.10, while Korea’s Kospi fell 1.4% to 1,917.13. The China Shanghai SE Composite fell 0.6% to 2,394.98. The Hang Seng Index inHong Kong dropped 1.3% to 19,964.63, bringing to an end its worst week since September.

European stocks ended a choppy session in positive territory on Friday after upbeat data on U.S.consumer sentiment, while Spanish banks remained under pressure after the country’s government unveiled its latest plan to clean up its troubled financial sector. The Stoxx Europe 600 index rose 0.4% to close at 251.97 after dipping as low as 248.22. The index still saw a weekly loss of 0.4%. The German DAX 30 index also reversed higher, rising 1% to 6,579.93. The French CAC 40 index ended virtually unchanged at 3,129.77. London’s FTSE 100 index turned higher, gaining 0.6% to 5,575.52.

A US$2 billion trading loss at J.P. Morgan Chase in the last six weeks dampened market sentiment and pulled down most stocks on Wall Street on Friday. The Dow Jones Industrial Average fell 34.44 points, or 0.3%, to 12,820.60. The Standard & Poor’s 500-stock index retreated 4.6 points, or 0.3%, to 1,353.39, but the Nasdaq Composite rose 0.18 point, or less than 0.1%, to 2,933.84. In fact, U.S. consumer sentiment improved in early May, according to a Thomson Reuters/University of Michigan index, bucking economists’ expectations for a decline, as the Producer Price Index was down 0.2% in April.

Major currencies traded in a narrow range on Friday as investors were still cautious aboutGreece’s ability to form a new government. The euro was at US$1.2919 from US$1.2934 late Thursday, according to EBS via CQG. The dollar was at Y79.94 from Y79.93 late Thursday, while the euro traded at Y103.27 late Friday from Y103.40, according to EBS via CQG. Elsewhere, the dollar traded at CHF0.9297 against the Swiss franc late Friday, from CHF0.9286 late Thursday, according to EBS via CQG. The U.K. pound was at US$1.6070 from US$1.6145.

Crude oil futures on New York Mercantile Exchange fell in the seventh out of the last eight sessions on Friday to settle lower at US$96.13, down 1%, or 95 cents, for the day as market sentiment and investors’ confidence didn’t improved, after J.P. Morgan Chase reported its US$2 billion trading loss late Thursday, according to Dow Jones Newswires.

Rubber Markets

Prolonged European debt crisis and an unsettled struggle among Greek political parties to form a government after the previous Sunday general election dampened global stock markets and commodity exchanges, including rubber futures in Asia during the week.

The fall in Chinese industrial production to 9.3% in April from 11.9% in March and the unexpected emergence of a US$2 billion trading loss of J.P. Morgan Chase late reported on Thursday were also major negative factors that dragged down rubber futures and physical rubber markets in the region amid a gradual increase in rubber supply, after the wintering season in major producing countries ended in early May.

As a result, rubber prices fell across the board on Friday comparing with an earlier Friday as per the table below.

 Stop-loss selling throughout the week on rubber futures in the wake of losing investor confidence, except for technical buying and short covering on Thursday, reversed rubber price improvement on an earlier Friday and pulled back IRCo’s technical MACD and Signal Line to lower levels in negative territory on Friday. In the meantime, IRCo’s RSI also fell to 30.35% on Friday from 55.23% on an earlier Friday.

While rubber market sentiments were very weak during the week, the following two auto makers were optimistic about their auto sales in 2012. Toyota Motor Corp. on Wednesday said it expected its net profit to more than double to 760 billion yen (US$9.53 billion) in the fiscal year through March 2013 on a sales rebound after a 31% profit drop in the last fiscal year. On Friday, Nissan Motor Co. reported that its robust sales in fast growing markets doubled its net profit of 75.3 billion yen (US$943 million) in 1Q12, up from 30.8 billion yen from 2011.

In China, passenger cars and commercial vehicles sales fell 1.33% year on year to 6.42 million units from January to April due to the slowing economy, the removal of subsidies and high fuel prices deterred buyers. At the same time, the total production rose 0.47% year on year to 6.43 million, according to the China Association of Automobile Manufacturers (CAAM) on Wednesday. Nonetheless, some 5.05 million passenger cars were sold in the four-month period, up 1.9% year on year because of a structural adjustment of the domestic auto industry, Yao Jie, vice secretary of the CAAM said.

Due to the above mentioned data and information, there are still many rubber variables which are unpredictable in the near term. Therefore, the best way to monitor rubber prices at this moment is to follow the trend.

 Source: http://www.irco.biz/BlogMoreDetial.php?id=294&ShowContent=market_watch