CRB index hits 21-month high as oil, gold rally for week

Oil and gold rose for a second week and a key commodities index hit 21-month highs on Friday as violence in Iraq fueled oil supply worries and investors bought bullion on the notion an interest-rate hike from the U.S. Federal Reserve was a long way off.

Even though bullion and Brent crude prices dipped on Friday, the weekly rally boosted oil and gold prices out of the range-bound trend they had seen for nearly a month. Analysts expected commodities to start stronger in the second half.

"Escalated geopolitical tensions and inflation concerns are providing new excitement so to speak in commodities," said Adam Sarhan at New York's Sarhan Capital. "If the Middle East tensions get beyond the tipping point, you could see a massive premium come in to the oil market."

The run-up in oil particularly lifted the 19-commodity Thomson Reuters/Core Commodity CRB Index <.TRJCRB>, which hit its highest levels since September 2012. With nearly a quarter of its weighting made up of crude oil, the CRB index ended up 0.4 percent for the session and 1 percent on the week, while heading for a near 12 percent gain on the year.

Both benchmark Brent and U.S. crude prices ended up for a second straight week as Iraqi government-led forces were concentrated north of Baghdad to strike back at Sunni Islamists headed toward the capital.

"The events unfolding in Iraq will continue to dictate the direction on the market and support the oil price for the time being at a high level," said Barbara Lambrecht, analyst at Commerzbank in Frankfurt.

Brent settled at $114.81 a barrel, up 1.2 percent on the week, but down 0.3 percent on the day after some profit-taking. U.S. crude finished at $107.26, up 0.3 percent on the week and 0.8 percent higher on the session. [O/R]

Gold scored its biggest weekly gain in four months, helped by safe-haven buying related to the Iraq conflict and a softer dollar after the U.S. central bank's comments on inflation.

On Wednesday, the Fed sounded comfortable about the inflation outlook despite recent signs of a pick-up in price pressure. That dashed some expectations the U.S. central bank might have to start lifting interest rates earlier than expected, driving the dollar down and gold up. [ID:nW1N0L300P]

The spot price of gold held above $1,314 an ounce by 5:00 p.m. EDT (2100 GMT), showing a 3 percent gain on the week and a 0.4 percent decline for the session. [GOL/]

Base metals were among other strong gainers in commodities on Friday. Copper ended up 2.5 percent on the week at$6,820 a tonne, its biggest weekly gain since March after a six-day rally. Zinc hit 16-month highs of $2,182. [MET/L]

Source: Reuters

Zinc regains price premium over sister metal lead

June 20 (Reuters) - Zinc is set to retain its premium over sister metal lead after recapturing that position this week, as investors price in the closure of big mines that will create deeper shortages of zinc than lead.

Three months zinc on the London Metal Exchange traded $37 a tonne higher than lead on Friday, regaining its dominant position after several years of being at a discount as the market was burdened by surpluses.

The flip in the relationship of the metals has been swift - less than two months ago lead was $106 more expensive than zinc.

Zinc traded slightly higher than lead briefly during 2012, but it has not sustained a large premium since 2010, when it was $245 stronger at one point.

The two metals are usually found in the same mines and their spread and ratio are traditional trading strategies.

While both metals are due to record deficits this year, recent data from mining companies has shown that shortages in zinc are due to be more severe than in lead as big mines come to the end of their commercial lives.

"We think it's completely right that zinc should outperform lead," said Nic Brown, head of commodities research at Natixis.

"You have an abrupt halt in growth of zinc supply whereas lead has been substantially less affected than we had anticipated."

Zinc's deficit in the first four months of the year expanded to 107,000 tonnes while lead's shortfall was only 12,000 tonnes, the International Lead and Zinc Study Group said this week.

Brown has forecast a deficit this year in zinc of 476,000 tonnes, at the top end of analyst estimates, while he has pencilled in a lead deficit of only 45,000 tonnes.

The combined loss of zinc output at four major mines that are closing - including Century in Australia and Lisheen in Ireland - is over 1 million tonnes by next year, according to metals strategist Stephen Briggs at BNP Paribas.

These losses will only be partially offset by new mines starting up, he added.


RECYCLING BOOSTS LEAD SUPPLIES

Although lead is also produced at the same mines, that market may not be as seriously affected largely due to the big market in recycled metal, mostly from lead batteries.

"These mine closures hit zinc harder because lead is so well supplied by the secondary market," said Vivienne Lloyd at Macquarie.

"I think it's entirely feasible that you'd see zinc moving into the premium position again over lead because it has the stronger fundamentals eventually."

Brown expects the zinc price to average $2,185 a tonne this year and $2,450 in 2015, while Briggs expects zinc to surge to $2,300 by late this year and $2,500 by the middle of next year.


Trading the zinc/lead ratio and spread is difficult, however, due to uncertainties in the lead market, said Brown.

Lead recycling in North America is shifting to Mexico from the United States and significant amounts of secondary lead are appearing in China, although it was unclear if those supplies were being imported or being generated domestically, he added.

"For us, it's a very easy call to be long zinc, it's less clear to us what happens to lead prices. It's hard to know exactly where that price ratio will end up," Brown said.

Briggs is also shunning the lead/zinc ratio, instead advising clients to go long zinc and short copper due to surpluses developing in that market.

He forecasts the copper/zinc ratio to move to 2.5 from 3.1 currently and compared with 3.58 at the start of the year.

Briggs is also suggesting investors buy out-of-the money call options in zinc at a strike of $2,500 for the fourth quarter or December of this year.

Colombia ups interest rate to 4 pct, buying more dollars

Colombia's central bank on Friday raised its benchmark lending rate by 25 basis points for the third straight month, an increase aimed at containing a recent rise in still-low inflation after a surge in first-quarter economic growth.

The seven-member policy-making board increased borrowing costs a quarter point to 4.00 percent, the first time the rate has been that high since January 2013. The decision, reached unanimously, came a day after strong 6.4 percent first-quarter growth was announced.

The bank also extended and doubled the size of its dollar purchases with a plan to buy up to $2 billion between July and September to bolster reserves and compound ongoing efforts to weaken the peso which the government says is too strong.

"We have ample and sufficient ammunition to take part in the foreign exchange market ... to avoid the peso being over-valued," Finance Minister Mauricio Cardenas, a member of the central bank's board, told reporters after the meeting.

The existing dollar purchase program expires at the end of June with planned purchases of $1 billion since April.

Cardenas said expanded currency intervention would also plump up a "cushion" against external shocks to which emerging markets have been particularly vulnerable in recent years, with low interest rates in large economies redirecting speculative capital towards developing economies.

Cardenas said this week Colombia's strong first-quarter growth was the fastest in Latin America and bucked a slowdown in growth that the region's largest economies were currently experiencing.

A Reuters survey of analysts on Monday showed that 20 of 23 expected the quarter-percent rate increase, but four switched their view on Thursday to a half-percent increase after the surprisingly strong growth data was released.

Friday's rate increase was the third quarter-point rise in as many months. Policymakers say smaller incremental increases to contain inflationary pressures early will avert larger monetary adjustments later on.

Bank director Jose Dario Uribe said the economy's strong performance could lead to greater inflationary pressures and take full-year 2014 inflation above 3 percent, the midpoint of the central bank's 2-4 percent target inflation range.

Source: Reuters

China sends four oil rigs to South China Sea amid regional tensions

China has sent four more oil rigs into the South China Sea in a sign that Beijing is stepping up its exploration for oil and gas in the tense region, less than two months after it positioned a giant drilling platform in waters claimed by Vietnam.

The announcement comes at a time when many countries in Asia are nervous at Beijing's increasing assertiveness in the potentially energy-rich waters, where sovereignty over countless islands and reefs is in dispute. 
Coordinates posted on the website of China's Maritime Safety Administration showed the Nanhai number 2 and 5 rigs had been deployed roughly between China's southern Guangdong province and the Pratas Islands, which are occupied by Taiwan. The Nanhai 4 rig was towed to waters close to the Chinese coast.

Earlier this week, the maritime body gave coordinates for a fourth rig, the Nanhai 9, which would be positioned just outside Vietnam's exclusive economic zone by Friday.

Wang Ching-hsiu, deputy director of Taiwan's Land Administration Department, said Taipei claimed an exclusive economic zone around the Pratas Islands, but declined to comment on the rig deployments.

China, which regards Taiwan as a renegade province and claims about 90 percent of the South China Sea, said the rigs were in waters close to Guangdong province and Hainan island. The Philippines, Vietnam, Malaysia, Brunei and Taiwan also have claims to parts of the sea.

"For these normal activities there is no need for over-reading or to make any particular links," Chinese Foreign Ministry spokeswoman Hua Chunying told a daily briefing in Beijing. "Please don't worry, there won't be any problem."

In Washington, the U.S. State Department said it did not have enough information about the placement of the rigs and so would withhold judgment but repeated its long-standing view that it would be troubled if they were in disputed waters.

"If a rig were placed in disputed waters, that would be a concern," State Department spokeswoman Jen Psaki told reporters in Washington. "We certainly have a national interest in the maintenance of peace and stability in the region."

All four rigs are listed as being operated by China Oilfield Services Ltd (COSL) <2883.HK>, the oil service arm of state-run China National Offshore Oil Company (CNOOC) Group, according to COSL's 2013 annual report.

Three are deepwater platforms and one is a jackup rig used in shallow water.

Reached by telephone, COSL Chief Executive Li Yong said he had seen the maritime announcement but declined to comment. A CNOOC spokesman also declined to comment.

The Global Times, a popular tabloid published by the Communist Party's official People's Daily, quoted Zhuang Guotu, director of the Center for Southeast Asian Studies at Xiamen University, as calling the rig deployment a "strategic move".

"The increase in oil rigs will inevitably jab a sensitive nerve for Vietnam and the Philippines," Zhuang said.


CNOOC HAS LONG EYED DEEPWATER

State oil behemoth CNOOC Ltd <0883.HK>, a subsidiary of CNOOC Group, has said it had four new projects scheduled to come on stream in the western and eastern South China Sea in the second half of 2014.

It was unclear if the four rigs were part of those projects, but the company has long said that in a bid to boost production it wanted to explore in deeper waters off China. 
CNOOC has said it would increase by up to a third its annual capital spending for 2014, to almost $20 billion. That, combined with output declines at major offshore fields in Bohai Bay in eastern China, made it inevitable that Chinese state oil firms would push into the South China Sea, analysts said.

"It does not surprise us that more rigs are being deployed into the South China Sea - especially over the summer, which is a high-drilling-activity period," said Scott Darling, head of Asia Oil and Gas Research with JPMorgan in Hong Kong.

Roughly 60 percent of CNOOC Ltd's existing production in China comes from its ageing fields in Bohai Bay.

Anti-Chinese violence flared in Vietnam last month after a $1-billion deepwater rig owned by CNOOC Group was parked 240 km

(150 miles) off the coast of Vietnam.

Hanoi says the rig is in its 200-nautical-mile exclusive economic zone and on its continental shelf. China has said the rig was operating completely within its waters.
Source: Reuters

China's first IPOs in four months draw robust demand

SHANGHAI, June 20 (Reuters) Four mainland Chinese IPOs drew huge demand after a four-month hiatus on offerings, with auto parts maker Shanghai Lianming Machinery Co Ltd <603006.SS> attracting interest around 515 times the amount on offer in the online portion of its sale.

This year saw the resumption of mainland Chinese listings after a 14 month drought imposed by regulators who were concerned about overpricing. But after a two month flurry of activity, no offerings were approved until last week, when seven firms got the go-ahead.

The four companies raised a total of 1.8 billion yuan ($290 million), according to statements from the firms published on the Shanghai and Shenzhen stock exchanges.

The deals drew in a combined 380 billion yuan in bids, the China Securities Journal reported. Most of the unsuccessful bids will only be returned to the investors on Monday, meaning the market will see a large inflow of money early next week which could help sentiment.

Shanghai Lianming Machinery Co Ltd <603006.SS>, which will list on the Shanghai stock exchange, sold 20 million shares at 9.93 yuan a piece. Its IPO price was set at a price-to-earnings ratio of 13.43 times, compared with an average of 20.81 times for its listed peers on the Shanghai stock exchange.

The sale was underwritten by China Securities Co Ltd.

The other three were Wuxi Xuelang Environmental Technology Co Ltd, Shandong Longda Meat Foodstuff Co Ltd and Feitian Technologies Co Ltd which will list on smaller Shenzhen stock exchanges and which had oversubscription rates of between 120 and 218 times.

The China Securities Regulatory Commission is planning about 100 IPOs for the rest of this year, bringing the full-year tally up to 150, about half the number forecast by consultants including PwC.

Source: Reuters

U.S. Report Casts Doubt on Legal Structure of Alibaba, Other Chinese Firms

     

  The WSJ reports, "A U.S. government commission warned that investors face "major risks'' if they buy shares in Chinese companies like e-commerce firm Alibaba Group Holding Ltd.

A report released this week by a commission that advises Congress on U.S.-China economic issues took aim at the legal structure underpinning Alibaba as well as a host of other Chinese Internet firms, calling it "a complex and highly risky scheme of legal arrangements." It warned that the structure could lead to losses by shareholders in the U.S".

"U.S. shareholders face major risks from the complexity and purpose" of the structure, said the report, released on Wednesday by the U.S.-China Economic and Security Review Commission. The group, an independent agency directed by Congress, has in the past issued critical reports about China.

While the commission doesn't directly make policy, its research can inform the work of policy makers and regulators, from members of Congress to agencies focused on securities listings, acquisitions and the U.S. economy.

Other Chinese firms structured similarly include Baidu Inc.,  a longtime U.S.-traded search company sometimes called the Google  of China, and Alibaba rival JD.com Inc., which listed in the U.S. last month. A Baidu spokesman said it thoroughly disclosed its structure in its filings. He referred to a Moody's Investors Service report from last month that said the search company could manage the risk related to its structure.

The commission frequently publishes reports about major Chinese industries, often including extensive analysis about specific companies. This week's report mentioned several Internet companies besides Alibaba, including Baidu.

The report focuses on a structure called a variable-interest entity, or VIE. Chinese companies seeking to sell shares on U.S. markets use the structure to circumvent Chinese government restrictions on foreign ownership of businesses in sensitive industries, including Internet-related businesses.

The VIE structure solves the problem of foreigners investing in prohibited industries by splitting companies into two entities. One, based in China, controls licenses and other assets required to do business in China. Foreign investors can buy shares in the foreign-listed parent of the second entity, which is based offshore.

Under a typical VIE structure, the Chinese entity pays fees and royalties to the foreign entity based on a series of contracts, thus ensuring the economic benefits of the Chinese operations flow to shareholders in the foreign entity.

The structure has drawn criticism from some corporate governance specialists. They argue that it gives foreign investors little control over some assets of the company, which generally remain under the control of the Chinese entity and its owners. In a 2011 dispute that highlighted the problems of such corporate structures, the individuals who controlled Alibaba's Chinese entity split off the assets of a payments unit and put them under the control of Alibaba founder Jack Ma, over the objections ofYahoo Inc., YHOO -1.82% a large shareholder in the foreign entity.

Investors haven't seemed too concerned about VIEs. Several companies including Baidu and JD.com have so far have been winners for investors.

"These VIEs are something that we're used to. They're part of the cost of investing in China," said Jane Snorek, senior research analyst at Nuveen Asset Management, which oversees $120 billion.

"It's to be expected from a Chinese IPO," she said. "Baidu has the same thing, and their stock was a home run."

Ms. Snorek said VIEs and governance issues related to Chinese companies sometimes dent the price investors are willing to pay for shares, but these issues take a back seat to the company's financial prospects. Given Alibaba's growth, "at the right price, it looks very attractive," she said."

Some observers said Alibaba and others have moved to address some concerns by shrinking the share of revenue that comes from the Chinese part of the VIE structure. In the fiscal year ended March 31, Alibaba said 11.8% of its revenue came from its VIEs.

"They've gotten the religion," said Paul Gillis, a visiting professor of accounting at Peking University's Guanghua School of Management and a critic of the structure, referring to both Alibaba and JD.com. "Experts and regulators have been harping on the dangers of VIEs for the last several years. It's clear that both Alibaba and JD.com have structured VIEs to minimize that risk."

Still, in its IPO filing in the U.S., Alibaba warned that contracts between the Chinese and foreign-based entities "may not be as effective as direct ownership in providing us with control over our variable-interest entities." The Chinese entities that own important licenses and assets are controlled by Mr. Ma and not by Alibaba itself, the filing said.

Ukraine's Poroshenko declares week-long ceasefire, warns rebels

KIEV, June 20 (Reuters) - Ukrainian President Petro Poroshenko on Friday ordered a seven-day ceasefire in the fight against pro-Russian separatists, but also warned them they could face death if they did not use the time to put down their guns.

In Moscow, the Kremlin, whose support Poroshenko needs for his plan to end the insurgency in the rebellious east, denounced the ceasefire as an ultimatum to separatists rather than a peace offering. 
Poroshenko, installed only three weeks ago as president after seven months of turmoil in the ex-Soviet republic, ordered government forces to cease firing to allow his peace plan for the region to take root.

But after fierce fighting on Thursday about 100 km (60 miles) from the Russian border that apparently caused heavy losses for separatists and some deaths on the Ukrainian side, Poroshenko backed his declaration with a warning to the rebels.

Interfax news agency quoted him as telling military officers in the east that the temporary ceasefire would give the rebels just one week to lay down their arms, after which "they will have to be eliminated."

The ceasefire "does not mean that we will not fight back in the event of aggression towards our military. We will do everything we can to defend the territory of our state," his website quoted him separately as saying.

The ceasefire will run from 10 p.m. on Friday until 10 a.m. on June 27, it said.

After announcement of the ceasefire, Poroshenko launched a 15-point peace plan to end the insurgency in the Russian-speaking east which erupted in April after street protests in the capital Kiev toppled the Moscow-backed Viktor Yanukovich.

Russia subsequently annexed Ukraine's Crimean peninsula. Kiev's new authorities quickly saw the hand of Moscow when separatist groups took control of strategic buildings and towns in the east, declaring "people's republics" and declaring they wanted to join Russia.


SEPARATISTS UNIMPRESSED

In Donetsk, the main industrial hub in the region, the rebels remained unmoved by Poroshenko's ceasefire gesture or the unveiling of a peace plan on Friday.

"What kind of reaction do you expect? When they (the Kiev side) pull out their army, then you will have our reaction," a spokeswoman for the self-styled Donetsk People's Republic said.

The first soldiers for a people's republic army would take oaths of allegiance on Donetsk's Lenin Square on Saturday, she announced defiantly.

A spokesman for government forces said about 300 separatists were killed in fighting on Thursday in an eastern area about 100 km from the border and fighting continued there on Friday.

Ukrainian forces lost seven servicemen, he said. The rebel casualties could not be verified independently.

Earlier on Friday, Kiev said government forces had regained control of the border with Russia and could now stop supplies being sent to arm pro-Russian separatists - something Poroshenko needed to hear before calling a ceasefire.

Poroshenko is now gearing up for a round of high diplomacy to sell his peace plan to allies and adversaries alike in a bid to end the insurgency that threatens the unity of the country.

His biggest challenge will be to win real support from Russian President Vladimir Putin for his plan, despite relations being at rock bottom amid Ukrainian accusations that Moscow fomented the unrest.

But the Kremlin, in a quick reaction, denounced the ceasefire move. "This is not an invitation to peace and negotiations but an ultimatum to militias in the southeast of Ukraine to lay down their arms," it said in a statement.

It also said a Russian border post had come under fire and demanded "an explanation and an apology" from Kiev.

Moscow denies orchestrating the troubles and supporting the rebels. It has urged Ukraine to end "punitive" action against the separatists and engage in dialogue with them.


PEACE PLAN DETAILS

Poroshenko's peace plan would offer a safety corridor out to Russia for rebels and volunteer Russian fighters on condition they lay down their arms.

It also calls for establishment of a 10 km (6.25 mile)-wide

"buffer zone" along the 1,900 km (1,180 mile)-long border.

The plan would offer freedom from prosecution for separatists who put down their arms and had not committed

"serious crimes" and require all hostages to be freed.

It calls for "decentralisation" of powers and full Russian-language rights to address the grievances of people in the east.

Ukraine says fighters from Russia and supplies of guns and other military equipment have been pouring into the country to support the separatists.

But though relations with Russia have deteriorated sharply, the pro-Western Poroshenko is under pressure all the same to secure support from Moscow, as well as from his backers in the West, for his plan.

On Thursday, he openly appealed to Russian President Vladimir Putin for his support when he outlined the plan in a telephone conversation, his website said.

Poroshenko's new foreign minister will present the blueprint on Monday to his European Union counterparts in Luxembourg. Their support assumes added value after the political association agreement signed between the two sides on June 27.

There were no clear details on the flow of battle on Friday east of Krasny Liman, a town controlled by government forces about 100 km (60 miles) from the border with Russia.

"Military action is continuing," government forces spokesman Vladyslav Seleznyov said.

At the border crossing point of Izvarino on Friday, there was a two-kilometre tailback of cars, buses and minivans of people trying to cross into Russia to escape the fighting. Many vehicles were packed with bags and personal belongings, children's toys, water and food.

"We dropped everything, our house and property. Packed whatever we could carry and now we're going to Moscow and further on," said Natalya Bryalkova, 45, from a small town near Luhansk which was the scene of heavy fighting this week.

"Ukraine has gone nuts. I'm hoping to return but I don't think it will work," she said.

WSJ: U.S. Commercial Property Prices Pick Up Steam in May

"Good news for commercial property investors: prices are on the rise.

After months of sluggish growth, U.S. commercial property values grew 2% in May, according to the Green Street Commercial Property Price Index, released Thursday.

The index, which focuses on higher-quality properties around the country owned by real estate investment trusts, is up 4% year-to-date, and 9% above its 2007 high.

The increased momentum comes as REITs have enjoyed something of a rally in the first half of the year, reversing a 2013 slump as worries about rising interest rates have subsided. The Dow Jones Equity All REIT Total Return Index is up more than 15% since January, compared with less than 2% for the Dow Jones Industrial Average.

“It’s likely the trend continues,” Peter Rothemund, an analyst at Green Street Advisors, said in a news release. “Real estate pricing currently looks attractive.”

JPMorgan's gold miner picks

JPMorgan's gold miner picks • 3:22 PM

• It's a good idea to have exposure to gold stocks in one's portfolio, say JPMorgan analyst John Bridges and team, but beware of sector plays (GDX-1.3%), and instead pick and choose carefully.
• Goldcorp (G +0.1%) is a "simple decision stock," says the team, thanks to its strong balance sheet, growth profile, and disciplined management. Names like Barrick (ABX -1.2%), Newmont (NEM +1.1%), and Kinross (KGC -1.9%) would fare better in a gold bull market, but today's "back-to-basics phase" means valuations are driven by strong operations and accretive deals.
• Another theme is to own players with operations in the safest locations, an idea paying off for Agnico (AEM +0.7%), but the team also recently initiated B2Gold (BTG +1.1%) with positive coverage on the idea some companies can learn how to operate successfully in "more complex locations."
• Another favorite is laggard Buenaventura (BVN -0.5%) which is likely to see improved results in H2.

         Source: Seeking Alpha

Wall St touches new high on rate view; dollar rises

Wall Street equities hit new highs on Friday, boosted by money managers convinced that U.S. policymakers will keep a lid on interest rates through 2016, while oil prices backed away from nine-month peaks triggered by worries about the turmoil in Iraq.

Prices of U.S. Treasuries steadied after early declines blamed on a weak government sale of inflation-linked bonds, and the dollar rose as investors chased higher U.S. bond yields.

The benchmark Standard & Poor's 500 index hit a third straight intraday high as it headed for a sixth day of gains, what would be its longest winning streak since mid-April. The Dow Jones industrial average <.DJI> also touched a new peak.

The Dow Jones industrial average <.DJI> rose 34.69 points, or 0.21 percent, to 16,956.15, the S&P 500 <.SPX> gained 2.12 points, or 0.11 percent, to 1,961.6, and the Nasdaq Composite <.IXIC> dropped 1.12 points, or 0.03 percent, to 4,358.21.

"There continues to be this hope that the economy improves, that growth improves. But for the markets, a slow steady growth environment is pretty much nirvana," said Tim Ghriskey, chief investment officer of Solaris Group in Bedford Hills, New York.

Federal Reserve Chair Janet Yellen on Wednesday effectively cleared the way for more Wall Street gains by suggesting that interest rates will remain low through 2016, some of the top U.S. money managers told Reuters. [ID:nL2N0P101B]

A continued rally could easily put the S&P 500 on track to surpass the 2,000 mark.

"What I have is a sweet combination of a self-sustaining, long-lasting economic expansion joined with a long-lasting monetary accommodation," said Steven Einhorn, vice chairman of Leon Cooperman's hedge fund Omega Advisors Inc, which has $10.5 billion in assets under management.

Europe's major exchanges inched up, although the MSCI index of world shares <.MIWD00000PUS> dipped 0.13 percent from record highs reached on Thursday.

U.S. Treasuries' yields rose during early trading in part on follow-through from Thursday’s weak sale of 30-year Treasury inflation-protected securities.

Some traders saw the Fed growing more tolerant of price inflation, which suggests a later return to increased interest rates than has been generally expected.

Benchmark 10-year notes were flat in early afternoon, with the yield unchanged at 2.62 percent, after yields earlier rose as high as 2.659 percent.

“There’s the thought that maybe they will let inflation run a little bit higher and not raise rates,” said Dan Mulholland, managing director in Treasuries trading at BNY Mellon in New York.

The higher yields helped the dollar, with the dollar index <.DXY> up 0.16 percent at 80.444. Against the yen, the dollar was last up 0.2 percent, at 102.12 yen , while the euro slipped 0.17 percent to $1.3585 . [ID:nL6N0P12UG]

Brent oil prices backed away from a nine-month peak as concerns that violence in Iraq, OPEC's second-largest producer, might lead to supply disruptions. Brent dropped 42 cents to $114.66 from a high of $115.71 touched on Thursday. U.S. oil added 75 cents to $107.18.

Source: Reuters

Freeport-McMoRan Oil & Gas (FM O&G), has completed its previously announced sale of its Eagle Ford Shale assets

Freeport-McMoRan Completes Sale of Eagle Ford Interests for $3.1 Billion

2014-06-20 12:00 ET - News Release

PHOENIX -- (Business Wire)
Freeport-McMoRan Copper & Gold Inc. (NYSE: FCX) announced today that its oil and gas subsidiary, Freeport-McMoRan Oil & Gas (FM O&G), has completed its previously announced sale of its Eagle Ford Shale assets to a subsidiary of Encana Corporation (Encana) (TSX, NYSE: ECA) for cash consideration of $3.1 billion, before closing adjustments from the effective date of April 1, 2014, through the closing date. The Eagle Ford assets include all of FM O&G’s interests on approximately 45,500 net acres with estimated net proved reserves totaling 59 million barrels of oil equivalents (BOE) and estimated net proved and probable reserves of 69 million BOE at year-end 2013.
The company expects to complete the acquisition of interests in the Deepwater Gulf of Mexico from Apache on June 30, 2014.
FCX is a premier U.S.-based natural resources company with an industry-leading global portfolio of mineral assets, significant oil and gas resources and a growing production profile. FCX is the world’s largest publicly traded copper producer.

FCX’s portfolio of assets includes the Grasberg minerals district in Indonesia, one of the world’s largest copper and gold deposits; significant mining operations in the Americas, including the large-scale Morenci minerals district in North America and the Cerro Verde operation in South America; the Tenke Fungurume minerals district in the Democratic Republic of Congo; and significant oil and natural gas assets in North America, including reserves in the Deepwater GOM, onshore and offshore California and in the Haynesville shale play, and an industry-leading position in the emerging shallow water Inboard Lower Tertiary/Cretaceous natural gas trend on the Shelf of the GOM and onshore in South Louisiana. 

Iraq's Top Shiite Cleric Calls for New Government

         The WSJ reports,"Iraq's most influential Shiite cleric called on Friday for Prime Minister Nouri al-Maliki to step aside, breaking ranks with the leader of the Shiite-dominated government after nearly two weeks of fighting with Sunni militants that has left the country's military humiliated.

In a sermon to worshipers in the holy city of Karbala, a spokesman for Grand Ayatollah Ali al-Sistani didn't mention the prime minister by name. But Ahmed al-Safi said it was time for a different administration in Iraq, which is beset by a powerful Sunni insurgency led by the Islamic State of Iraq and al-Sham.

"It is necessary for the winning political blocs to start a dialogue that yields an effective government that enjoys broad national support, avoids past mistakes and opens new horizons toward a better future for all Iraqis," Mr. al-Safi said.

Were Mr. Maliki to heed the grand ayatollah's call, it would mark a stunning reversal of fortune for the Iraq's premier, who had been planning for a third, four-year term after his electoral coalition won a plurality of votes in parliamentary elections only a few weeks ago.

Iraqiyya television, which was created by U.S. forces following the U.S. invasion of Iraq in 2003 but has since become an important mouthpiece for Mr. Maliki, cast the turmoil in Iraq as a religious conflict and focused its reports on the necessity to rise to the militant Sunni challenge to the Baghdad government.

Mr. Obama, in his speech on Thursday, signaled some limited support for Iraq's fight against Sunni rebels but made clear he wouldn't launch airstrikes against the insurgents or deploy U.S. ground troops to the country. He said, however, that he would send 300 military advisers to assist the Iraqi military.

Iraqi Foreign Minister Hoshyar Zebari appealed to the Obama administration on Wednesday to launch airstrikes against the Sunni militants, whose two-week military offensive launched in northern Iraq has shocked American and Iraqi officials and put some of its forces within 35 miles of Baghdad.

On Friday, the Muslim day of prayer, there was little reported fighting.

Hundreds of Iraqi security forces were still holed up in Iraq's largest oil refinery, surrounded by ISIS fighters who were in control of the plant and the nearby town of Beiji. There were no signs that government forces were mounting an operation to rescue the troops and retake the badly-damaged facility.

The battle for the Beiji refinery has become emblematic of the Iraqi military's flailing efforts to protect the country's main cities and economic installations.

The refinery's stalled operations have already affected Iraq's oil-dependent economy.

By Wednesday, oil production for the North Oil Company, which operates the Beiji plant, had fallen to 30,000 barrels a day from a usual output of 650,000 barrels a day. The company used to send 200,000 barrels a day to the Beiji facility.

About 97% of Iraq's budget comes from oil production.

In New Delhi, India's Foreign Ministry said Friday that 40 Indian construction workers kidnapped in Iraq earlier this week were unharmed. It added that India is "knocking on all doors" to secure their release".