North China: Farming suffers severe drought

CCTV News

A drought of record proportions. In Shangnan county of Shaanxi province, the only local water source -- the Xianhe reservoir -- is experiencing a severe water shortage. It’s left some 60,000 residents in the county struggling to get make do.

"We need to reuse the water from washing, cleaning and cooking just to flush the toilets," Local resident Yu Xia said.

The town’s tap water has been suspended for over a month. Instead, each day, the local government sends 30 trucks to fetch water from a river located 20 kilometers away, after treatment, the water is deliver to each home. But with still no precipitation expected in the near future, maintaining this routine could become an even more daunting task.

Meanwhile, Pingdingshan city in Henan province is seeing its worst drought in 30 years. Rainfall is down 90 percent from the previous year, making it the dryest year since 1975. Twenty-one reservoirs used for agricultural irrigation have dried up. And farmers are becoming desperate to save their crops.

Over 860,000 hectares of agricultural fields in Henan have been affected by the drought weather. Local authorities have launched an emergency response plan, using some 5,000 motor-pumped wells to irrigate the fields.

In Xinjiang Uygur Autonomous Region and Inner Mongolia Autonomous Region, parched grasslands have meant hungry and thirsty livestock.

"In order to make up for the lack of grass, we will buy grass from other parts of the country and make full use of our own agricultural straw. We need to provide 3 million tons of grass for our 6 million livestock animals," Niu Zhengfu, vice chief of Yili Autonomous Prefecture, Xinjiang, said.

In Inner Mongolia Autonomous Region, the local government is also mobilizing funds and personnel to dig up wells and build water pipelines to keep the water flowing until Mother Nature can take over again.

Xinhua: More Chinese Internet Companies should Go Abroad

Xinhua.
During his trip to Brazil last week, Chinese President Xi Jinping, together with his Brazilian counterpart Dilma Rousseff, witnessed the launch of the Portuguese version of China's Baidu search engine.
It is not the first time that a Chinese Internet company has launched a non-Chinese search engine, but it is the first time that a Chinese state leader has helped promote its services.
More Chinese Internet companies should compete internationally, as they now have the ability and can make the world's cyber environment more balanced and just.
Thanks to over three decades of rapid industrialization, China has become one of the biggest exporters, and its exports have upgraded from primary goods and light industrial products to mechanical and electrical products, and now high-speed railway systems and nuclear power plants.
During Xi's visit, China and Argentina agreed to build a heavy water reactor power station in the South American country. And earlier in Brazil, the two countries agreed to cooperate in high-speed railway construction.
But this time, Internet services are on the Chinese leader's marketing list. From products to services, it shows China's industrial structure is changing.
Recent years have witnessed rapid development in China's Internet sector and other high-tech emerging industries, which has pushed the number of Internet and mobile Internet users to over 600 million, the biggest number of netizens of any country. Among the top 10 websites in 2012, only one website was based in China, but in 2013, four China-based websites entered the top-10 list.
Not only Baidu.com, but also qq.com, sina.com and other websites, have won abundant users in China and other countries that are home to Chinese speakers. Alibaba.com and taobao.com are among the world's top B2B and B2C/C2C platforms in terms of trading volume and number of clients.
Chinese Internet companies are starting to get their voices heard worldwide, as they now have the capacity to provide services outside the country.
In addition, Chinese Internet service companies going abroad has strategic significance, as search engines are highly monopolized by a few websites and the international community is rightly concerned over cyber security after Edward Snowden's leaks about intelligence project PRISM.
Breaking the information monopoly and building a fairer and safer cyberspace have become the need and consensus of many countries, bringing new opportunities for Chinese Internet service providers.
However, these companies face a long journey to really internationalize. They must study the preferences, customs and interests of Internet users overseas, and they also have to face established Internet giants' advantages in brands, technology and customer groups.
A small step for Chinese Internet companies going abroad will probably have a big impact on the computerized world, and also provide an opportunity for cooperation between newly emerging markets.

Latest IMF projections for World Output

IMF Olivier Blanchard,Global Economic Recovery.Transcript of a Press Briefing on the World Economic Outlook (WEO) Update

SPEAKERS:
Olivier Blanchard
IMF Economic Counsellor and Director of Research Department

MR. BLANCHARD: Speaking about Global Economic recovery

"The recovery continues, but it remains a weak recovery, indeed a bit weaker than we forecast in April. The headline number, namely the revision of the forecast of world growth in 2014 from 3.7 percent in April to 3.4 percent today, makes things look worse than they really are. To a large extent, it reflects something that has already happened, namely the large negative U.S. growth rate in the first quarter. But it is not all due to that. It also reflects a number of small downward revisions, both in advanced and in emerging economies.

The overall story remains largely the same as before:

Advanced economies are still confronted with high levels of public and private debt, which act as brakes on the recovery. These brakes are coming off, but at different rates across countries.

Emerging markets are slowing down from pre-crisis growth rates. They clearly have to address some of the structural problems that they did not address earlier in time and have to take a number of structural reforms. And they have to do this in an environment which is a world environment which is changing due to the normalization of monetary policy in the United States, which has implications for the rest of the world.

So let me start with the U.S. Growth in the first quarter in the U.S., as currently reported, and I must say that the number is so surprising that I would not be surprised if it was revised up when the statistics are available, but the number as it was, was a large negative growth rate of the U.S., far worse than anybody, including us, had forecast. In retrospect, it looks very much like a one-off type of event, which is due to the undoing of eventual accumulation earlier, which is due to unusually harsh weather, so factors which do not have obvious implications for the future, but just explain why growth was so bad in that quarter.

Now to give you a more optimistic view of things, which is, as you know, we have a growth rate for 2014 for the U.S. of 1.7 percent, but if we look at the rest of the year, starting in the second quarter, we have an annual rate, a growth rate of about 3 percent, and for next year, a growth rate also of about 3 percent. So looking forward, growth in the U.S. is reasonably strong.

One of the main policy issues at this point are mostly on the monetary policy side. 

The main one is the speed of monetary policy normalization, and that’s a hard one because there is a lot of uncertainty about, for example, how to interpret the low level of labor participation, uncertainty about what the natural equilibrium unemployment rate is. For the moment, we think the current plans, which is the end of tapering later this year, and then an increase in the policy rate sometime in the middle of next year, are appropriate plans, based on what we know today. But there’s enough uncertainty that we should not be surprised if there was some adjustment which was made along the way—if the policy rate was increased a bit earlier, or a bit later. I think this is the kind of uncertainty that we’re clearly facing.

The other issue that comes from the accomodative monetary policy is the potential for excessive risk taking, due to very low interest rates, the argument being that when safe rates are very low, there is a reach for yield, there is excessive risk taking and the BIS has worries quite a bit about this. So we have looked and we come to a different conclusion which is that it is true that we see, in some financial markets, valuations which are, we think, fairly optimistic.

The reason we are not that worried is that this is happening in an environment where the leverage of the principal actors, the investors, is not very high. So that even if there was an adjustment, say in stock prices, it would not be catastrophic in the sense of leading to bankruptcies of financial actors. It would look a bit like what we saw in 2001 with the bursting of the tech bubble. We don’t have such a bubble, but what happened then is that there was a bursting of the bubble. 

Let me turn to the Euro Area. The numbers are not great. The recovery remains weak and inflation remains far below the implicit target of the ECB, so our forecast for the Euro Area are roughly unchanged from April. It’s 1.1 percent for 2014. It’s 1.5 percent for 2015. These numbers hide a number of differences across countries and not always in the way that you would have predicted them. So for example, we have revised the forecast for Germany on the upside. We have revised the forecast for France on the downside. We have revised the forecast for Spain up, for Italy down. So there is a lot of diversity in the evolution of these different countries. Now this being said, it’s clear that the job is not done in the Euro Area, and that there is a lot more to do, both on the demand and the supply side.

So if you look at most Euro countries at that stage, it is clear that the unemployment rates far exceed reasonable equilibrium rates so that there is a lot of unemployment slack, there is a lot of output slack. Typically you’d have two instruments, fiscal policy, monetary policy. Fiscal space is very limited. Debt levels are high, so the norm would still be fiscal consolidation at the slow rate with fiscal consolidation. So the help has to come from monetary policy. The ECB has taken a number of steps and has introduced a number of measures in the last month, which strike us as potentially very good for demand. It’s too early to tell how these measures are going to work and it may be that if inflation remains very low, more measures should be considered. There’s still a bit of margin to play with.

The point to make here is that monetary policy cannot do the job alone. This is something that central bankers keep repeating, that is correct. In the case of Europe, there are many more things which need to be done in order to increase demand and then increase supply. One thing which is crucial is the asset quality review, which is now in train and run by the ECB to look at the balance sheet of banks and do whatever has to be done in order to make them healthier. That’s a very important process. It will repair the financial intermediation part of the economy, which is playing a central role in slowing down the recovery. And then looking beyond this, there are clearly structural reforms to be taken. The potential growth rate in the Euro Area is very low. It has to be increased. The reforms will vary from country to country. It may be reforms to re-enfranchise the youth; the unemployment rate of the youth is extremely high in many of these countries. It may be to increase competition in the non-tradable sector. It may be in some countries to increase infrastructure spending which could be done and help both demand in the short run and supply in the longer run.

Japan

We have revised our forecasts for Japan to 1.6 percent in 2014. That’s a revision upwards. This reflects I think the success of economics so far. We’re seeing increases in consumption, partly due to the VAT shifts but we’re also seeing increases in investment, which we were not seeing before so there is some reason for optimism here. The fundamental challenge of Japan remains how to both decrease the level of public debt, which is, as you know, extremely high, and increase growth, not only in the short run, through demand measures, but also in the longer run with structural measures.

A glimpse of the difficulty that Japan is facing is reflected in the forecast that we have for Japan in 2015, which is 1.1 percent only and that reflects the fact that one of the factors which is going to lead to lower growth we think is the increase in the consumption tax, which is going to come at the end of the year, showing the difficulty of taking measures to make debt sustainable while maintaining growth. So, so far, so good, but one has to watch out.

Let me turn to emerging market and developing economies. So our forecast for growth for emerging markets and developing economies is 4.6 percent in 2014. That’s a small revision down, and 5.2 percent for 2015, a small revision down, but again, let me emphasize that these are fairly high numbers in the first place and aren’t quite as good as the forecast we had last April, but they are still fairly strong.

Let me not go through the whole set of countries, but just through the largest downward revision relative to the April WEO forecast, is Russia, where we have revised growth for 2014, from 1.3 percent, 2.2 percent, 0.2 percent and for 2015 from 2.3 percent to 1 percent. Some of these revisions actually have been announced earlier, after the April WEO, but before today, but those are revisions relative to the April WEO. What does this reflect? For the moment it reflects a deterioration of business confidence. There is nearly a freeze in investment decisions by domestic investors. There is near freeze in terms of FDI. There are large capital outflows. All this I think is easily explained by the geopolitical uncertainty which affects Russia at this point.

Let me turn to China. So what we have seen there is a slowdown in housing investment. And we think this is going to go on for a while and it's going to have an impact on growth in China. However, the government seeing this slowdown has taken a number of measures, stimulus measures such as railway investment, social housing. In the recent months we have seen an increase in credit flows. We have seen an increase in infrastructure investments, so the government is taking measures to partly offset the effect of the decreasing housing. The result is that our forecast for China is more or less the same as it was in April, around 7.5 percent, so we do not see a major increase in growth in China, in the short run.

This being said, the challenge of China remains the same. They have an economy in which the share of investment is very very large, the share of investment in consumption is small. They have to rebalance and this rebalance is still to come. The plan is to do it, but it really hasn't started on a visible scale. Let me end my presentation by talking about the challenges that face emerging markets and developing economies more generally and I’ll take two.

The first one is to implement structural reforms, to rebalance the economies and re-strengthen their growth.

The second challenge, my last point, facing emerging market countries, is the changing world environment, which comes from the recovery in the U.S. and the normalization of policy. That’s mixed news. On the one hand, recovery in the U.S. implies higher exports from emerging market countries and clearly Mexico is the prime beneficiary of what happens in the U.S. But it also implies that the normalization of monetary policy is going to lead some of the capital flows which had gone to emerging market countries because of very low rates in the U.S. to actually, at least in part, go back to the U.S. And what this means is we are likely to see a tighter financial environment in a number of emerging market countries.

If everything goes well, this will be a relatively smooth process and everybody's hoping that it will be, but given what I said about the complexity of the exit from unconventional monetary policy in the U.S., the uncertainty about the exact timing of the increase in the policy rate, I think you have to expect that there will be bumps in the road, of a type and of a magnitude that we saw in May of 2013. But I think we have to be ready for periods of volatility much higher than what we are now seeing.

So let me conclude. I think in short, the recovery continues. There is no stalling here. But it remains weak and it is still in need of I would say tender and loving care, namely policies to help both on the demand and on the supply side". 

Eyeing Freeport's Indonesia copper exports, China smelters freeze spot buys

 Chinese copper smelters are holding off on spot purchases of raw material concentrate, betting they can charge higher processing fees on imports once Freeport-McMoRan Inc resumes exports from Indonesia, sources at smelters and traders said.

Indonesia said on Friday it expects to sign a memorandum of understanding with U.S. miner Freeport on Friday that would allow it to ship 756,000 tonnes of copper concentrate in the second half of the year. A resumption of the exports has been anticipated by the copper market.
Chinese smelters, the world's biggest importers of copper concentrate, buy up to half of their requirements in the spot market, and a postponement of purchases will force trading houses and other sellers to find alternative buyers.

The sellers will also have to fork out more to the smelters in spot processing fees once Freeport's concentrates from Indonesia hit the market.

Sellers of concentrate pay treatment and refining charges

(TC/RCs) to the smelters to convert the raw material into refined metal, with the charges deducted from the smelters' sale prices. The charges rise or fall in line with concentrate supply.

"Freeport's resuming exports would have a big impact. TC/RCs could jump to $110/11 cents immediately after the Freeport restarting," said an executive at a state-backed copper smelter in China, who declined to be named because he was not authorised to talk to media.

The executive said his firm was going to put purchase of spot concentrate on hold while waiting for Freeport's exports from Indonesia to resume. It was not immediately clear when the exports would restart.

A trading manager at a large state-owned smelter also expects spot TC/RCs to rise to about $110 per tonne and 11 cents per pound shortly after Freeport's restarting. Those levels of the processing fees were last seen in March.


ASIAN BUYING

Chinese smelters had already started reducing purchases of spot concentrate since late May, betting on Freeport resuming exports in the third quarter and on a rise in TC/RCs. But TC/RCs have continued to fall since then because of strong spot buying by other Asian smelters, traders and the smelter sources said.

Sellers this week offered to pay TC/RCs of $84-$90 per tonne and 8.4-9 cents per pound for spot standard, clean copper concentrates to China, compared to around $100 and 10 cents in late May.

The offers were also lower than the $95.5 and 9.55 cents paid by Anglo-Australian miner BHP Billiton to at least one large Chinese smelter for term concentrate shipments in the second half of 2014.

The trading manager at the large state-owned smelter said the firm was likely to buy two to three shipments of spot concentrate imports if TC/RCs rose to $100-$110 and 10-11 cents.

China's copper concentrate imports surged 47 percent on-year to nearly 1 million tonnes in June, the third-highest monthly number ever.
The jump in June imports was due to increased arrivals of term shipments, the smelter sources said.

Source: Reuters

Freeport set to resume Indonesian copper exports

Freeport-McMoRan Inc clinched a deal with the Indonesian government on Friday allowing the miner to resume copper concentrate exports from the country, effectively ending a six-month tax dispute and paving the way for more miners to follow suit.

Freeport, which is expected to export 756,000 tonnes of copper concentrate in the second half of this year, received its permit from the trade ministry on Friday after signing a memorandum of understanding (MoU) with the government, Freeport Indonesia CEO Rozik Soetjipto said.

With its export permit in the bag, Indonesia's top copper miner said it will resume full operations immediately, with concentrate shipments expected to resume next month from Grasberg, one of the world's largest copper mines.

"In terms of permitting, everything is OK," Soetjipto said.

"We still have to load the ship, and this may take a few days."

Freeport shares were up 1.79 percent on the New York Stock Exchange on Friday.

The company will now be subject to higher royalties, which will increase to 4 percent for copper and 3.75 percent for gold, up from 3.5 percent and 1 percent respectively, and the U.S.-based miner will also have to pay export duties on shipments until it builds a smelter in the Southeast Asian nation.

In January, the government introduced a controversial escalating tax on metal concentrates that climbed to 60 percent by 2017. Under a revision of the tax, Freeport will pay a 7.5 percent duty on its copper concentrate exports, but that rate falls as it spends on its smelter, hitting zero once investment in the project exceeds 30 percent of total cost.

The deal is expected to take some of the pressure off President-elect Joko Widodo, who has said resolving the dispute, which has sapped government mining revenues, would be one of his top priorities when he takes power in October.

The export tax was meant to force miners to develop local mineral processing facilities, allowing the government to derive bigger returns from Indonesia's mineral resources.

But rather than pay it, most miners stopped exporting from Southeast Asia's biggest economy, resulting in $1.3 billion in lost copper concentrate shipments. It also led Indonesia's second-biggest copper producer, Newmont Mining Corp, to file for international arbitration earlier this month over the new export rules it said were in breach of its contract.

A spokesman for Newmont Mining Corp , which owns the Batu Hijau mine on the Indonesian island of Sumbawa, said it is in talks with the government on a separate MoU that would allow it to resume operations at its massive copper mine.

"We are encouraged by the news about Freeport, which we hope will pave the way for construction of a copper smelter and lead to an economically sustainable resolution of the export ban," Newmont spokesman Omar Jabara said.

Freeport currently smelts some 30 to 40 percent of its output from its Grasberg mine at a copper smelter in Gresik, East Java. The company has previously said it plans to work with Indonesia's state-owned miner Aneka Tambang (Antam) to build the country's second copper smelter.

It is not clear whether that project will be ready before Indonesia's ban on concentrate exports begins in less than three years time.

Source: Reuters

Copper under pressure from Indonesia supply prospects

Copper slipped on Wednesday, under pressure from the prospect of increased supplies from Indonesia, but further falls were limited by encouraging economic data from top consumer China.

Benchmark London Metal Exchange copper dipped after news that supply could improve with Indonesia potentially exempting some shipments of concentrate from its export ban.

Copper hit an intraday high of $7,198.25 per tonne, not far from a 4-1/2 month high of $7,212 hit in early July, before trading at $7,132 a tonne at 1418 GMT, down 0.4 percent.

"We had a good day yesterday on the back of Chinese PMI data, which boosted all the base metals. Today is about consolidating gains for copper," said Vivienne Lloyd, base metals analyst at Macquarie.

China's factory activity expanded at its fastest in 18 months in July, data showed on Thursday, reinforcing confidence over the demand outlook from the world's top copper consumer.

"Copper had a strong day yesterday but is more muted today. It's encountering resistance just below $7,200/t currently and I'm not sure the fundamentals are strong enough to push it through that line."

Freeport-McMoRan Inc and Indonesia reached a deal over a contract dispute that is expected to pave the way for a resumption of copper exports after a six-month stoppage, a company executive said on Friday.
After signing the memorandum of understanding, Freeport Indonesia CEO Rozik Soetjipto told reporters he hoped copper concentrate exports could resume as early as August.

"If they are able to resume output at full capacity, this could provide modest near-term downside to the copper price over the next few months," Matthew Kates at Nomura said in a daily note.

Goldman Sachs said it expects copper to underperform other base metal prices over the next 12 months, citing the metal's heavy exposure to China's property sector, which it expects to remain bearish this year and next.

LME lead rose to its highest since December at $2,279 a tonne on Friday as investors bought the contract that has underperformed its peers on growing economic optimism over China. It later pared gains to trade at $2,267, up 1.4 percent.

LME zinc traded at $2,395 a tonne, up 0.3 percent on Thursday's close to hit a fifth consecutive three-year top.

Source: Reuters

Oil slips below $107 as ample supply outweighs risk premium

Oil fell below $107 a barrel on Friday as plentiful supply outweighed concerns over conflicts in the Middle East and Ukraine.

Brent crude for September delivery traded 18 cents lower at $106.89 a barrel by 1400 GMT. The contract had closed 96 cents lower on Thursday.

"There is ample prompt supply of crude oil, but the geopolitics in Ukraine, Gaza, Iraq and Libya is providing support," said Olivier Jakob, an analyst at Petromatrix in Zug, Switzerland.

He added that poor refining margins in Europe pointed to slack demand in the region.

U.S. crude for September delivery underperformed, falling 87 cents to $101.14 a barrel, after settling $1.05 lower.

Traders said that higher-than-expected gasoline stocks at the U.S. oil hub in Cushing, Oklahoma had led to lower refinery margins and an expectation that currently robust demand from U.S. plants would dry up.

German business sentiment fell for a third consecutive month in July, suggesting firms in Europe's largest economy are worried about global political crises.

In Libya, oil production has risen to 500,000 barrels per day, but there is no progress on reopening its Brega oil port after an agreement to end a protest there, a spokesman for state-run National Oil Corporation said.

Authorities in Gaza said Israeli forces shelled a shelter at a U.N.-run school on Thursday, killing at least 15 people as the Palestinian death toll in the conflict exceeded 760 and attempts at a truce remained elusive.

Members of the European Union on Thursday considered proposals targeting state-owned Russian banks vital to Moscow's faltering economy in what would be the most serious sanctions so far over the Ukraine crisis. 

U.S. ECONOMY, OIL INVENTORIES

Oil prices were also supported by U.S. Labor Department unemployment data, which suggested the economic recovery remained on track with initial weekly jobless claims at their lowest since February 2006.

However, the International Monetary Fund cut its 2014 forecast for global economic growth to take into account weakness early in the year in the United States and China, the world's two biggest economies.
Oil inventories in Cushing fell another 163,000 barrels over the four days to July 22, data from Genscape Inc showed on Thursday, deepening a slump that had already dragged stockpiles to their lowest in six years.

Drawdowns at Cushing - delivery point for West Texas Intermediate contracts - have dropped stocks there to near what traders consider to be minimum operating levels, fuelling a sharp rise in prompt U.S. crude oil prices.
Source: Reuters

EU reaches preliminary deal on economic sanctions against Russia

European Union ambassadors reached a preliminary agreement on Friday to push ahead with hard-hitting economic sanctions against Russia over the Ukraine crisis but details remained to be worked out, diplomats said.

The 28-nation EU has toughened its stance towards Moscow since last week's downing of a Malaysian airliner in an area of eastern Ukraine held by Russian-backed separatists.

After a discussion that lasted all day Thursday and part of Friday, ambassadors asked the EU's executive Commission to draw up a legal text setting out economic sanctions that the EU would impose for possible agreement next week.

Key measures suggested by the Commission included closing EU capital markets to state-owned Russian banks, an embargo on arms sales to Moscow and restrictions on the supply of energy and dual-use technologies. They would not affect current supplies of oil, gas and other commodities from Russia, diplomats said.

One EU official said there was "an overall preliminary agreement on the concept" but ambassadors would hold more discussions next week on the basis of the legal text.

Maja Kocijancic, spokeswoman for EU foreign policy chief Catherine Ashton, said there was still work to be done.

"The direction of travel here is very clear but we are still travelling," she told reporters.

It was not immediately clear if the legal text would include all the options identified by the Commission. But EU officials said it would cover all four areas where sanctions have been proposed - restrictions on Russian access to European financial markets, defence and energy technology and equipment useful for both defence or civilian purposes.

Separately, the EU was due to publish later on Friday the names of 15 individuals and 18 entities, including companies, subject to asset freezes for their role in supporting Russia's annexation of Crimea and destabilisation of eastern Ukraine.


"STOP ARMING SEPARATISTS"

Member states will scrutinise the draft legal text over the weekend and give their feedback to the Commission on Monday, one diplomat said. A revised draft may be adopted on Tuesday, he said.

Remaining stumbling blocks were over issues such as existing contracts as well as on a so-called "off-ramp" - how to scale back sanctions if Russia began to play a more constructive role in de-escalating the situation in Ukraine, the diplomat said.

Dutch Prime Minister Mark Rutte, whose country is seen as having a key role in shaping the EU response because it lost 194 citizens in the plane crash, said he would back sanctions unless Moscow halts weapons supplies to the rebels.

"We want as a country that has acquired a certain moral obligation as a result of this tragedy to promote Europe taking a common line on this," he told a parliamentary committee in The Hague.

"All indications are that Russia is continuing to arm the separatists," Rutte said, telling lawmakers he had spoken six times to Russian President Vladimir Putin since the disaster.

"There's an easy way out for Russia: to distance themselves from the separatists, and stop arming them."

The issue of upholding existing contracts with Russia is sensitive for France, which has agreed to sell Mistral helicopter carriers in a 1.2 billion euro ($1.61 billion) deal.

Another difficulty is balancing the pain of imposing the sanctions among EU member states. Britain is strong in financial services, Germany in technology and machinery, France in arms sales, while Italy is heavily dependent on Russia for energy.

"To a degree everyone is reverting to trying to protect their own national interests from harm," a senior European diplomat said.

It remains to be decided whether a special summit of EU leaders will be needed to approve the proposals. European Council President Herman Van Rompuy is expected to contact leaders to consult them on the way forward, an EU source said.

European Commission spokesman Jonathan Todd said the economic sanctions would require a "political level decision" but it was up to member countries to decide "whether or not the heads of state or government would actually physically have to come to Brussels and sit in a room to give their agreement."

Under proposals put forward by the Commission, the EU would target state-owned Russian banks vital to financing Moscow's faltering economy.

Under the proposal, European investors would be banned from buying new debt or shares of banks owned 50 percent or more by the state. These banks raised almost half their 15.8 billion euro ($21.29 billion) capital needs on EU markets last year.

The EU is also weighing restricting exports of technology for deep-sea drilling, shale oil and Arctic energy exploration.

Source: Reuters

The European equity markets are moving mostly to the downside in afternoon action

The European equity markets are moving mostly to the downside in afternoon action, following a disappointing read on German business sentiment, while geopolitical concerns continue to fester and the International Monetary Fund lowered its global growth outlook. The German Ifo Business Climate Index-a survey of 7,000 executives-declined for a third-straight month to 108.0 in July, from 109.7 in June, and compared to the 109.4 rechwaading that economists had anticipated.
The U.K. FTSE 100 Index is dipping 0.1%, Germany's DAX Index is declining 0.5%, France's CAC-40 Index is decreasing 0.8%, Italy's FTSE MIB Index is moving 0.3% lower, and Switzerland's Swiss Market Index is trading 0.4% to the downside, while Spain's IBEX 35 Index is increasing 0.5%.

Source: Schwab

Orders for durable U.S. goods rose 0.7% in June

 Orders for durable U.S. goods rose 0.7% in June amid gains in most categories, the Commerce Department said Friday. Economists surveyed by MarketWatch had expected durable-goods orders to rise 0.2%. Stripping out defense, orders rose 0.7%. Bookings excluding the volatile transportation sector were up 0.8%. Orders for core capital goods - a measure of business investment - climbed 1.4% in June after a revised 1.2% decline in May. Shipments of core capital goods, a category used to calculate quarterly economic growth, fell 1% in June.

Source: Marketwatch

Brent crude dipped below $108 a barrel on Thursday

Brent crude dipped below $108 a barrel on Thursday as unseasonably weak demand from European refiners and plentiful supplies offset strong Chinese factory data.

Brent for September delivery was down 30 cents at $107.73 a barrel by 1117 GMT, after closing 70 cents higher on Wednesday. U.S. crude was down 28 cents at $102.84 a barrel, after gaining 73 cents in the previous session.

"Oil is moving in a small range. It opened relatively high and was supported in Asia on the back of the Chinese/HSBC data," said Ole Hansen, senior commodity strategist at Saxo Bank.

"But Brent is in contango, reflecting weak demand from European refiners," Hansen added. Contango is a situation in which the price of oil for near-term delivery is cheaper than that for delivery further into the future.

China's factory activity expanded at its fastest in 18 months in July as new orders surged, a preliminary HSBC survey showed.  China is the world's second-biggest oil consumer, so the data is positive for demand.

However, the picture in Europe is more sobering as refiners remain under pressure due to an influx of oil products from the United States. European refiners have been cutting runs at what should be one of the busiest times of the year, or idling plants altogether.

"The market is comfortably supplied with seasonal demand in Europe still slackening despite a slight improvement to refinery margins," said Andrey Kryuchenkov, oil analyst at VTB Capital.

Physical crude prices are under pressure as a result, with West African and North Sea barrels selling slowly even at bargain levels.

These weak fundamentals filtered through to the futures market earlier this month, triggering heavy liquidation of hedge funds' long positions. Analysts and traders said the market was now in a consolidation phase, moving sideways.

"The longs liquidation in London drove the market to three-month lows earlier this month and it is only natural for the market to take a breather," Kryuchenkov said.

Prices had pushed higher on Wednesday after data from the U.S. Energy Information Administration showed that U.S. crude stocks fell by 4 million barrels last week. Analysts had expected a decrease of just 2.8 million barrels. [EIA/S]

Crude stocks at the Cushing, Oklahoma delivery hub for U.S. benchmark oil fell by 1.5 million barrels.


NO SUPPLY CONSTRAINTS

Conflicts in Eastern Europe and the Middle East are also keeping a floor under prices, but crude supply from Iraq remains unaffected by fighting in the country.

Analysts foresee no sustained gains in oil prices unless supply is disrupted, but some believe the market has become complacent about the risks.

"When the battle for Baghdad starts, then Iraq will be back as a price input," Olivier Jakob, an oil analyst at Petromatrix, told Reuters' Global Oil Forum. "Right now it is too low on the radar screen."

In another supply development, South Korea and Japan have purchased the first condensate cargoes to be exported from the United States since the easing of a 40-year ban on U.S. crude exports.

"It means very little in itself, but because of current events it takes on a more political or symbolic importance," said Alex Yap, a senior oil analyst at FG Energy.

"If the U.S. wants its allies to be less dependent on the likes of Russia and Iran, it has to show some willingness to step up as a supplier instead of keeping the bounty from shale production within its own market."
Reuters

Copper, zinc gain as China's factory growth rebounds

Copper climbed to its highest in 10 days and zinc hit a near three-year peak after better-than-expected Chinese factory data calmed fears about economic growth in the world's biggest metals consumer.

News that China's factory sector grew at the fastest clip in 18 months in July prompted investors to shrug off news that Indonesia may soon resume copper concentrate exports that could smooth out kinks in supply. 

"This is a good number and the market reaction is saying that the worst is over of the slowdown and we're not headed for a hard landing," said Stephen Briggs, metals strategist at BNP Paribas in London.

China accounts for about 40 percent of global copper demand, but slowing growth in manufacturing and property has dragged on the demand outlook for the metal while a surplus is expected to seep into the market in the second half of the year.

Three-month copper was the top gainer on the London Metal Exchange, climbing as high as $7,166.50 a tonne, its loftiest since July 14.

It failed to trade in official midday open outcry activity and was last bid up 1.3 percent at $7,140 after closing little changed in previous session.

The most-traded copper contract on the Shanghai Futures Exchange closed up 1.5 percent at 50,650 yuan ($8,200).


"Copper is particularly exposed to the property sector in China, which has been the worry area, and copper has clearly underperformed the sector over the past few weeks so it was more due an upside correction," Briggs said.

The market also absorbed more upbeat news from the euro zone, where surveys showed the private sector expanded at the fastest rate in three months in July.
There was also support from production issues at the world's biggest copper producer, Codelco, which admitted for the first time that its newest mine was behind schedule because of problems with its roaster.
But investors shrugged off a looming resumption in concentrate shipments from miners in major exporter Indonesia.

"Consensus was that they would probably resume exports this year. There just wasn't a lot of clarity over when," said analyst Joel Crane of Morgan Stanley in Melbourne.

A senior Indonesian official told Reuters that Jakarta will revise its rules on mineral export taxes next month, paving the way for the country's multi-billion dollar mining industry to resume full production. Freeport-McMoRan said it was close to signing a deal to resume exports.

ALUMINIUM, ZINC

LME zinc edged to a fourth consecutive near three-year top of $2,394 a tonne, before slightly paring gains in official rings to $2,390, a rise of 1.1 percent.

Aluminium failed to trade in official rings and was last bid up 1.0 percent at $2,035.50 a tonne, recovering some losses from Wednesday when it shed 1.3 percent.

The metal had gained about 10 percent since the start of the month until touching a near 17-month peak on Tuesday, as investors expected a deficit to hit the market after several years of surpluses.

But Paul Adkins of Beijing-based consultancy AZ China said the high prices were vulnerable since they were spurring Chinese smelters to restart production that had been closed.

"We still doubt the price surge phenomenon will be sustained, since most restarting plants are being backed by government subsidies. And overall, we are still concerned that fundamental demand drivers are not backing the current surge," he told the Reuters Global Base Metals Forum.

"Over-supply is still a concern, with more than 1 million tonnes due into the (Chinese) market by year-end."

Tin edged up 0.2 percent to $22,275 a tonne in official trading and lead climbed 0.9 percent to $2,227. Nickel failed to trade in official rings and was bid at $19,150, up 0.5 percent.

Reuters

European stocks rise on euro zone factory data

 European stocks hit 2 1/2-week highs and the euro rallied from eight-month lows against the dollar on Thursday after the region's private sector expanded at its fastest rate in three months in July.

Russian debt insurance costs rose after European Union leaders proposed sanctions on Russian banks which are majority-owned by the government. Those measures were proposed after a Malaysian Airlines plane was downed over Ukraine last week, killing 298, possibly by a missile furnished by Russia.

European stocks <.FTEU3> rose 0.4 percent and the euro hit the day's highs at $1.3484, pulling off eight-month lows, after Markit's Composite Purchasing Managers' Index (PMI) of companies across the euro zone, a good early indicator of overall growth, rose to 54.0 in July from 52.8, its highest since April. Any number above 50 indicates expansion.

The services sector across the 18-member bloc performed better than any of the 39 economists polled by Reuters had forecast. Manufacturers also reported a stronger month than the median Reuters forecast had predicted.

"The activity data offsets some of the weakness we saw last month and that has helped the euro," said Geoff Yu, a currency strategist at UBS.

The dollar index <.DXY> dropped from an earlier six-week peak, although the U.S. currency hit a one-week high against the yen at 101.64 .

Russia's five-year credit default swaps rose 17 basis points to 214 bps from earlier on Thursday, according to Markit, following the EU sanctions proposals, which the EU said were likely to be adopted next week.

That means it costs $214,000 a year for five years to insure $10 million of Russian debt against default. Russian government bonds fell.

"If the Europeans do manage to pass some of the new sanctions that are being talked about, and it's a big if, then it really would be a big step for Europe," said Viktor Szabo, portfolio manager at Aberdeen Asset Management.

Emerging-market stocks  rose 0.25 percent to 17-month highs after stronger-than-expected HSBC flash PMI data for China, the world's second-largest economy.

The index came in at 52.0 for July, well above forecasts and the highest reading in 18 months. There was also good news on the outlook, with a sub-index of new orders reaching 53.7.
U.S. stock futures were indicating a higher open on Wall Street after the S&P 500's record close on Wednesday. Those gains were powered by Apple Inc , while late trading was dominated by Facebook Inc , whose shares rose 5.5 percent after hours when its results beat forecasts.

A better-than-expected U.S. earnings season is helping sentiment generally. Barclays estimates that of the 22 percent of S&P 500 companies that have reported quarterly results since July 1, 64 percent beat earnings expectations and 65 percent beat revenue estimates.

The prospect of more sanctions against Russia over the Ukraine crisis maintained a safety bid for high-rated bonds.

For U.S. Treasuries, investors were buying more liquid shorter-dated paper, nudging two-year yields below 0.48 percent. But German Bund yields , which have been trading near record lows, edged up on the euro zone data to 1.170 percent.

Gold eased to 1,298.30 an ounce, close to earlier one-week lows.

Crude oil prices ran into renewed selling after a bounce on Wednesday. Brent crude for September delivery fell 26 cents to $107.77 a barrel. U.S. crude lost 28 cents to $102.84.

Reuters

Jobless claims lowest in more than eight years

The number of unemployed workers applying for jobless benefits tumbled in the most recent weekly data to the lowest level in more than eight years, signaling that employers are letting go of very few workers.

Applicants for regular state unemployment-insurance benefits in the week that ended July 19 dropped by 19,000 to 284,000 — the lowest level since February 2006, the U.S.Labor Department reported Thursday. Economists surveyed by MarketWatch had expected initial claims of 310,000 in the most recent weekly data.

The yield on the 10-year Treasury   edged higher, indicating traders growing slightly more confident in the economy.

Source: Marketwatch

U.S. crude inventories fall more than expected in week -EIA

U.S. crude stocks fell more than expected last week even as refineries cut output, government data showed on Wednesday, but a build of 5 million barrels in combined inventories of gasoline and distillates raised questions about demand.

Crude inventories fell 4 million barrels in the last week, data from the Energy Information Administration showed. Analysts had expected a decrease of just 2.8 million barrels.

Crude stocks at the Cushing, Oklahoma, delivery hub fell 1.5 million barrels, EIA said.

The weekly refinery utilization rate held steady at 93.8 percent, EIA data showed.

U.S. gasoline demand over the past four weeks fell 1 percent to 9 million barrels.

"Refiners are still refining oil like crazy, especially in the Midwest," said Phil Flynn, analyst at the Price Futures Group in Chicago. "What seems to be taking away a little of the bullish momentum is that we saw a build in gasoline supply and distillate."

Refinery crude runs fell by 28,000 barrels per day, EIA data showed.

Gasoline stocks rose by 3.4 million barrels, compared with analysts' expectations in a Reuters poll for a 1.3-million-barrel gain.

Distillate stockpiles , which include diesel and heating oil, rose by 1.64 million barrels, versus expectations for a 2.1-million-barrel increase, the EIA data showed.

U.S. crude rose after the data, and was up 82 cents a barrel at $103.21 by 11:30 a.m. EDT (1530 GMT).

"The crude draw bought a little buying, but when you keep utilization up at these high levels, you keep piling fuel into the storage tanks and that’s not a strong sign for demand," said Gene McGillian, analyst at Tradition Energy in Stamford, Connecticut.
Source: Reuters

Facebook's unintentional success speaks for itself

 Facebook's unintentional success pretty much speaks for itself. Founder Mark Zuckerberg stated unequivocally in February 2012 when the social network set out its plan to go public that he had embarked on a social mission from his Harvard dorm room, not to create a company. That probably explains his understated response to the impressive second-quarter results. Some $190 billion of market value later, though, it's clear Facebook's significance lies squarely in the commercial realm.

"We had a good quarter," was the laconic quote from Zuckerberg that accompanied the latest results on Wednesday. Active users grew to equal the size of China's population and Facebook is wringing ever more advertising dollars from each of them. Revenue grew 61 percent from a year ago, to $2.9 billion. And even though the company is spending more, its operating margin is steadily rising. It reached an enviable 48 percent in the quarter. Earnings more than doubled. Hefty investment in Instagram, WhatsApp, video advertising and other services should set the stage for further lucre.

While Facebook's prosperity is unquestionable, its services are also being used more and more on a practically begrudging basis. Complaints about algorithms that suppress status updates, enlisting users unwittingly to be guinea pigs in a social experiment, and the growing number and poor quality of ads fill the namesake site. Privacy matters remain an ongoing concern as do demographic questions.

Zuckerberg's goal of changing how people relate to each other, government and social institutions, as he put it in his letter in the initial public offering documents, seems increasingly out of reach. He can shrug off the capitalist success all he likes, but it may turn out to be his crowning if accidental achievement.
Source: Reuters

China July factory activity at 18-month high on new orders

China's factory activity expanded at its fastest pace in 18 months in July as new orders surged, a preliminary HSBC survey showed on Thursday, the latest indication that the economy is picking up as government stimulus measures kick in.

The HSBC/Markit Flash China Manufacturing Purchasing Managers' Index rose to 52.0 in July from June's final reading of 50.7, beating a forecast of 51.0 in a Reuters poll.

It was the highest reading since January 2013, and above the 50-point level that separates growth in activity from contraction for the second consecutive month.

"Economic activity continues to improve in July, suggesting that the cumulative impact of mini-stimulus measures introduced earlier is still filtering through," said Qu Hongbin, chief economist for China at HSBC.

"We expect policy makers to maintain their accommodative stance over the next few months to consolidate the recovery."

Mainland China stocks <.CSI300> jumped after the PMI report while shares in the rest of Asia edged higher. The Australian dollar hit a three-week high on prospects of stronger exports to China.

A breakdown of the survey showed most of 11 sub-indices that measure output, domestic and foreign demand improved substantially from June.

A sub-index measuring new orders, a gauge of demand at home and abroad, hit a 18-month high of 53.7, while the sub-index for output also rose to a 16-month high in June.

The employment index also improved from May, though it was still a shade under 50, which implies that jobs are still being lost in the manufacturing sector.

Any marked weakening in the labour market would raise alarm bells for China's government, which regards healthy employment levels as a top policy priority and an important condition for social stability.

Premier Li Keqiang said last week that economic growth of slightly more or less than 7.5 percent this year would be acceptable as long it still led to new jobs and higher wages.

China's economy grew slightly faster than expected in the second quarter as the burst of official stimulus paid dividends, but some analysts say the recovery appears largely dependent on government assistance.

Economists believe Beijing will likely need to offer further support to meet its growth target of around 7.5 percent for the full year, particularly if the already cooling property market begins to deteriorate more sharply.

Since April, China has steadily loosened policy by reducing the amount of cash that some banks have to hold as reserves, instructing regional governments to quicken their spending, and hastening the construction of railways and public housing.
Source:Reuters

Alibaba, lenders team up for SME financing

Alibaba Group Holding Ltd teamed up with seven banks on Tuesday, jointly offering loans of up to 10 million yuan ($1.6 million) to China's small and medium-sized enterprises as the e-commerce conglomerate looks to further build a credit rating system based on online transaction histories.

The cooperation involves Bank of China Ltd, China Construction Bank Corp, Ping An Bank Co Ltd, China Merchants Bank Co Ltd, Bank of Shanghai Co Ltd, Postal Savings Bank of China Co Ltd and Industrial Bank Co Ltd.

According to the Hangzhou-based e-commerce giant, companies that had export transactions of more than $100,000 through Alibaba's online platforms over the past six months can apply for such loans. They can get 1 yuan worth of bank credit for every $1 in exports.

The online transaction record is the only thing required for the loan.

Wu Minzhi, vice-president of Alibaba Group, said that about 89 percent of SMEs in China find it difficult to get loans because they can not satisfy banks' requirements.

"As an e-commerce company with lots of transaction data on our platforms, we want to make it easy for all of the export-focused companies to do business," Wu said.

By narrowing the credit gap between SMEs and banks, Alibaba is looking at the bigger picture of building an environment based on big data that can facilitate every aspect of trade, from information to data and logistics, he said.

Wei Qiang, general manager of Shenzhen One Touch Business Services Co Ltd, Alibaba's export service subsidiary, said that more than half of the export-focused companies are expected to move their brick-and-mortar trade business to online platforms in the next 10 years.

"That will create a trade service market that is estimated to be as big as 10 trillion yuan," he said.

As they cope with rising production costs in China, many Chinese exporters are keen to get financing services. He Guodong, manger of Shenzhen Xingjisheng Electronics Co Ltd, said he secured a loan of 5 million yuan from China Construction Bank through the financing service offered by Alibaba.

"My company had an export volume of 260 million yuan in 2013. In the past, banks rarely lent to us, because they didn't trust the financial data we offered," he said. He said transaction records provided by Alibaba are very convincing, as it acts as the third party for such transactions.

Li Ye, an analyst at the Internet consultancy Analysys International, said traditional banks can actually benefit from the financing service provided by Alibaba.

"The costs for banks to do due diligence in order to grant loans to SMEs are very high. There are so many SMEs and the amounts they want to borrow aren't much compared with big enterprises. So big data can be used as an important way for banks to control credit risks without making heavy investments," she said.

Source: China Daily

Corn, wheat and soybeans bounce following heavy falls

U.S. corn rose on Wednesday, bouncing off a new contract low hit on prospects of bumper U.S. crops, while wheat rallied after dropping to its lowest in more than a week.

Soybeans moved up, snapping four sessions of decline on expectations that buyers would emerge after the soy market plunged to a contract low on Tuesday.

Chicago Board Of Trade December corn rose 0.1 percent to $3.68-3/4 a bushel at 1029 GMT, bouncing from a contract low of $3.67-1/4 a bushel hit earlier on Wednesday.

Front-month September wheat rose 0.1 percent to $5.25 a bushel after earlier hitting $5.20-1/4, its lowest since July 14. November soybeans rose 0.2 percent to $10.60-1/4 a bushel, after sliding 1.3 percent on Tuesday to hit a contract low of $10.57 a bushel.

"I think the markets are starting to look a little oversold especially when you look at the chart RSIs (relative strength indexes) which could be generating some bottom-level buying to pick the markets up from these extremely low levels," said Ole Hansen, head of commodity strategy at Saxo Bank.

"But fundamentally I do not see any changes to the positive harvest outlooks, especially in the United States, so it may be that the bounce is short-lived."

Grains have been hammered by expectations of excellent U.S. crops this week.

The U.S. Department of Agriculture (USDA) on Monday rated 76 percent of the U.S. corn crop in good to excellent condition, the highest ratings for this time of year in a decade.  Some analysts expect a U.S. national corn yield of 170 bushels per acre, above the USDA's current forecast for a record high 165.3 bushels per acre.

The USDA rated 73 percent of the U.S. soybean crop good to excellent, up 1 percentage point from last week and the highest rating at this time since 1994.

Bearish news for wheat came as big spring wheat yields were projected in southern North Dakota as abundant soil moisture and cool weather helped foster crop development, scouts on an annual crop tour found.

But expectations low prices could tempt more buyers into the market supported soybeans and wheat.

The USDA on Monday reported hefty sales of 120,000 tonnes of U.S. soybeans to China for delivery in the 2013/14 marketing year ending on Aug. 31.

Traders are expecting U.S. wheat to win some business as it has become competitive in the global market after losing about a quarter of its value since the beginning of May.

"We think Chicago wheat is undervalued relative to a lot of other origins," a Melbourne-based analyst said. "We think soft red winter wheat has potential to win some of the tender business at these levels." Grains prices at 1029 GMT

Thai sugar prices flip to discount on rising Brazilian supply -traders

Thai sugar prices flipped to a discount this week versus premiums earlier this month, as rising supply from a rapidly progressing cane crush in top producer Brazil eroded demand for the sweetener from the Southeast Asian country, traders said.

Dealers noted a big lineup of sugar vessels at Brazilian ports in June and July for Asian destinations, notably to China and India, while queues in Thailand were thin.
Thai 2013/14 raw sugar for prompt shipment was traded at 10 points below New York October raw sugar futures this week, the traders said on Wednesday, compared with offers of 10-20 points premium seen earlier this month.

At this level, sugar from the world's No.2 exporter was still more expensive than supplies from Brazil, they said.

"In fact, buyers bid as low as 50 points below New York prices, but (Thai) sellers were reluctant to sell at that low," a trader from an international trading firm said on the sidelines of an industry conference in Bangkok.

A surplus from the current 2013/14 crop is dragging on the global sugar market. New York sugar prices , currently at 17.16 cents a lb, have gained 5 percent this year, up slightly from a sharp 49 percent drop seen over the past three years.

While the international sugar market is expected to swing to a deficit in the year to September 2015, after four years of surplus, gain in global prices of the sweetener will be capped by higher carried-over stocks, Platts Kingsman said on Tuesday.

The data provider reiterated its forecast for a 2014/15 sugar deficit of 2.1 million tonnes and cautioned that risks to production in Thailand and top producers Brazil and India remained.

But as of now, Brazilian raw sugar is seen seizing market share from Thai exports due to narrowing price differentials.

"Some lots of Brazilian sugar were offered as low as 30 points below New York prices and that was much more competitive compared to Thai prices," said another Thai trader.

Source: Reuters

Zinc near 3-year peak as stocks fall, supply tightens

Still, some investors question whether zinc can maintain its strength, because while inventories have fallen they remain substantial and easily available.

Zinc held near a three-year peak on Wednesday with supply set to tighten while aluminium dipped from multi-month highs but could turn higher again as inventories fall and demand rises.

Still, some investors question whether zinc can maintain its strength, because while inventories have fallen they remain substantial and easily available.

"At the moment, it's pure momentum after the technical signals got sparked. But fundamentally there are questions," said analyst Dominic Schnider of UBS Wealth Management in Singapore.

"We still have a modest overweight in zinc, but it can overshoot. At $2,450-$2,400 that risk for an overshoot is still there. But as we reach these levels I'm really wondering, where is the upside? We still have inventories around."

Benchmark three-month zinc on the London Metal Exchange was $2,365 per tonne in official rings after hitting its highest level since August 2011 at $2,376 earlier in the session. It closed at $2,362 on Tuesday.

LME zinc prices are up 15 percent this year, gaining around half of that in July, as global exchange stocks fall and amid a dearth of new mining projects to replace the world's biggest zinc mine, Century in Australia, which is drying up.

But while zinc inventories in LME-monitored warehouses have fallen more than 20 percent since March, they remain a hefty 655,000 tonnes.

There are also no lengthy waiting times to access zinc, unlike aluminium stored in some LME-monitored warehouses where buyers have to wait for months.

In its quarterly metals report, broker Sucden Financial said the market has been anticipating for almost a year that zinc supply will tighten in the second half of 2015 and into 2016,

"suggesting prices may be running ahead of events".

Higher zinc prices are also likely to encourage a pick-up in production in China, the Sucden report said.


ALUMINIUM SENTIMENT TURNS

Sentiment towards aluminium has turned quite bullish, the Sucden report said, with inventories falling and premiums - the amount paid over LME prices for spot metal - remaining high.

Benchmark LME aluminium was $2,030 a tonne in rings after touching $2,054 on Tuesday, the highest level since February last year. It is still up 13 percent so far this year.

"Yesterday we had quite strong gains in the aluminium market mainly because fundamentals have supported prices in the last few trading sessions," said Myrto Sokou, senior research analyst with Sucden Financial.

"However, today it seems there is a small correction lower within the recent range. It could just be a healthy correction lower following the recent gains."

She said demand for the metal, used in drinks cans and automobiles, is picking up and inventories in LME-monitored warehouses are falling.

LME stocks have fallen to 4.930 million tonnes, LME data shows, their lowest level since September 2012.

In other metals, LME copper was $7,070 a tonne in rings from $7,040 at Tuesday's close.

Underlining expectations of improving copper supply, BHP Billiton said copper production increased to 1.7 million tonnes in fiscal 2014 and would rise to 1.8 million in the current year. [ID:nL4N0PX61F]

Traders have been watching Indonesian elections for signs a new government may relax minerals export laws that since January have halted shipments of nickel, bauxite and copper ores and concentrates, tightening global supplies and lifting prices.

New Indonesian President Joko "Jokowi" Widodo said he wants to sit down with mining companies and other parties in a bid to resolve a row over mining policies that has halted $500 million of metal exports per month.
Under Jokowi, Indonesia's regulatory environment might become more accommodating for foreign investment and mining in general, consultancy WoodMackenzie said in a research note.

"Mining-friendly regulatory change is possible, however it is likely to be incremental rather than exponential," it said.

Benchmark LME lead was $2,210.50 a tonne from $2,217 at the close on Tuesday and nickel was $19,060 from $19,000. Tin , untraded in rings, was bid at $22,150 a tonne from $22,125.

Reuters

Brent oil rises towards $108 on global tensions, dollar caps gain

Brent crude rose towards $108 a barrel on Wednesday as threats to supplies from oil-producing regions overshadowed weak demand and a stronger dollar.

The European Union threatened Russia with harsher sanctions on Tuesday after the downing of the Malaysian airliner in Ukraine, straining the EU's relationship with the world's second-largest oil exporter.

"When the U.S. and the EU impose more sanctions on Russia, that will impact the mid-term production profile of the Russian oil industry," said Andy Sommer, senior oil analyst at Axpo Trading in Dietikon, Switzerland.

Brent crude for September delivery was up 45 cents at $107.78 a barrel by 1135 GMT, after slipping 35 cents in the previous session. U.S. crude for September delivery was 13 cents higher at $102.52 a barrel.

U.S. crude's discount to Brent was $5.26, close to a three-month low as traders waited for U.S. government data on domestic oil stocks due later in the day. [EIA/S]

Brent has fallen by about 7 percent since mid-June as weak demand from refineries in Europe amid low profit margins has crimped consumption.

In Libya, oil production fell to around 450,000 barrels per day (bpd), a drop of nearly 20 percent, with escalating violence threatening a hard-won deal to restore oil exports.

The OPEC country's exports could increase, however, with the Brega oil port expected to be operating in a few days after the government reached a deal with protesting security guards.

Traders were also monitoring fighting in the Gaza strip. Top U.S. and United Nations diplomats are seeking talks on halting the conflict that has claimed more than 600 lives.

The euro slipped to an eight-month low against the dollar on diverging interest rate outlooks for the United States and euro zone, with fears that further sanctions on Russia could damage Europe's economy.

A stronger dollar tends to weigh on commodities priced in the U.S. unit as it makes them more expensive for holders of other currencies.


U.S. EIA DATA

Energy traders will focus their attention on the weekly crude oil inventory report from the U.S. Energy Information Administration (EIA) due at 1430 GMT. Stocks are expected to have declined by 2.8 million barrels in the week to July 18, according to a Reuters survey.

Domestic crude stocks fell by 7.5 million barrels the previous week in their biggest drawdown since January, reflecting a sharp increase in refinery activity. 

The American Petroleum Institute, an industry group, said on Tuesday that U.S. crude inventories fell 555,000 barrels last week to 374.7 million, with stocks at the Cushing, Oklahoma, delivery point of the U.S. crude contract down 1.4 million barrels. 

Source: Reuters