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Sunday 29 November 2015

EURO LITTLE CHANGED AFTER REGIONAL DATA

The euro traded lower against the dollar on Thursday, despite several economic reports from the euro zone that were mostly positive.

Spain’s gross domestic product rose last month, in line with expectations.

Instituto Nacional de Estadistica said in a report that Spanish GDP rose to 0.8%, compared with 0.8% in the preceding month and matching analysts' forecasts.

Separately, there were a couple of economic reports from the European Central Bank which said that Euro Zone M3 Money Supply rose to 5.3%, from 4.9% in the preceding month. Analysts had expected Euro Zone M3 Money Supply to remain unchanged at 4.9% last month.

The ECB also reported that Euro Zone Private Sector Lending climbed to 1.2%, from 1.1% in the preceding month. Economists had expected it to rise to 1.2% last month.

A report from Reuters speculating that the ECB is discussing the introduction of two-tiered bank charges and a broader composition of asset purchases has boosted expectations for more aggressive easing to be announced at the December 3 meeting.

EUR/USD was last seen at 1.0610, down 0.12%.

EUR/GBP was higher 0.19% at 0.7036.

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Saturday 28 November 2015

OIL DECLINES THURSDAY AS GLUT PERSISTS

Oil fell on Thursday, after six days of gains, as worries that violence in the Middle East would disrupt supply waned, and the focus returned to a persistent oversupply.

Brent crude was down 1.36% at $45.54 a barrel, while WTI futures lost 0.52% to trade at $42.82.

Earlier this week, oil prices were driven up by concerns that the downing of a Russian jet by Turkey could raise geopolitical tensions that could hit supplies. However, by today, those concerns faded and had done little to remove the view that global production will stay high even as stockpiles rise.

A stronger dollar also weighed on oil as it makes it more expensive for holders of other currencies.

The Organization of Petroleum Exporting Countries is determined to continue pumping oil to defend market share, alarming some of the cartel's weaker members who fear prices may drop towards $20.

Analysts meanwhile noted that stocks were building all of last year and in 2015 as well. It's starting to strain inventories and storage space is beginning to shrink.

However, while stockpiles are high and are on the rise in the United States and many European economies, in China, commercial crude oil stocks at the end of October were down 4.4% from the previous month in their biggest fall since at least 2010, the official Xinhua News Agency reported on Thursday.

In November, Brent has lost nearly 8% and is down by 20% this year, after tumbling from above $115 per barrel last year.

U.S. crude had been buoyed on Wednesday by a smaller-than-expected build in U.S. inventories and by a decline in oil rigs, signalling that drillers were awaiting higher prices before returning to the well pad. The data supported WTI futures earlier Thursday.

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Friday 27 November 2015

YEN RECOVERS AFTER DATA; CHINESE SHARES PLUNGE 4%

The Japanese yen recovered Friday although a mixed data set of household spending, consumer prices and unemployment had sent it lower earlier.

USD/JPY traded at 122.38, down 0.15%, while AUD/USD traded at 0.7213, down 0.18%.

In Japan, household spending for October dropped 2.4%, missing the 0.1% year-on-year gain seen and down 0.7% month-on-month, compared to an expected 1.1% gain.

Closely monitored national core consumer prices dropped the expected 0.1% year-on-year for October, but the unemployment rate fell to 3.1% from an awaited 3.4%.

Market players also hope that Japan’s central bank will extend stimulus, after minutes showed officials are open to further action if inflation targets are not reached.

In the stock market, Chinese shares tumbled 4.4% overnight, while markets in the U.S. were closed Thursday for the Thanksgiving holiday.

Chinese authorities’ investigations into two major Chinese brokerages over suspected violations put shares in Shanghai under pressure Friday, pushing the market lower for the week. China’s largest stock broker, Citic Securities Co., said it would cooperate with China’s stock regulator in an investigation of the company for suspected violation of securities rules. Guosen Securities, the country's third-largest broker by assets, reported it is also under investigation for suspected violations, according to a company filing.

Shares of Citic dropped 6.6% in Shanghai and 4.2% in Hong Kong on Friday. Shares of the Hong Kong-listed Guosen dipped 6%.

The Shanghai Composite Index was on track to lose 4% this week, with most of the losses on Friday, when the benchmark tumbled 4.6%.

Concerns over China’s financial-market investigations also weighed on Hong Kong’s Hang Seng Index which lost 1.8% on Friday and is on track to lose around 3% for the week.

Japanese shares lost 0.3% Friday after the Nikkei neared the 20000 level earlier this week.

Australia’s S&P/ASX 200 lost 0.16% and South Korea’s Kospi fell 0.08%.

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Wednesday 25 November 2015

POUND SLIGHTLY CHANGED AFTER DISAPPOINTING DATA FROM U.K.

The pound sterling was unchanged against the dollar, but lower versus the euro after industry data showed that U.K. CBI realized trades fell unexpectedly last month.

GBP/USD was unchanged at 1.5125, while EUR/GBP was last seen at 0.7044, up 0.32%.

Confederation of British Industry said in a report that CBI realized trades fell to 7, from 19 in the preceding month. Analysts had expected CBI realized trades to rise to 25 last month.

The euro was buoyed after Germany released upbeat economic reports, but gains were limited, as head of the European Central Bank Mario Draghi said on Friday that the ECB is ready to act quickly to boost inflation in the euro zone and can also change the level of its deposit rate to boost the impact of quantitative easing.

In the U.K., Bank of England Governor Mark Carney is currently testifying to MPs. Carney is expected to provide and insight into the current state of the UK economy. The session is available here online.

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Tuesday 24 November 2015

GOLD RISES BUT REMAINS NEAR MULTI-YEAR LOWS WITH U.S. GDP IN FOCUS; IRON ORE SINKS

On Tuesday gold prices slightly recovered but remained near the prior session's five-and-a-half-year low as investors anticipated the release of revised U.S. third quarter economic growth data later in the day for a fresh reading on the strength of the economy.

Comex gold for December delivery rose 0.72%, to trade at $1,074.50 a troy ounce.

On Monday, prices fell to $1,065.00, not far from last week's low of $1,062.00, a level not seen in almost six years.

Gold futures are down more than 6% so far this month amid growing expectations the U.S. central bank will raise rates for the first time in nearly a decade at its mid-December meeting.

The U.S. is to release preliminary figures on third quarter economic growth at 8:30AM Eastern Time Tuesday. The report is expected to show that the economy grew 2.1% in the three months ended September 30, compared to last month's advance estimate of 1.5%.

Meanwhile, silver futures for December delivery rose 8.3 cents, or 0.59%, to trade at $14.11 a troy ounce. On Monday, prices hit $13.85, the weakest since August 2009.

Platinum futures for January delivery lost 0.42% to trade at $843.80, while palladium for delivery in March was at $543.60, up 0.33%.

Copper prices rose 0.53% to trade at $2.031. They were still not far above the prior session's six-year low on Tuesday as expectations of higher borrowing costs in the U.S., a stronger greenback and slower global economic growth, especially in China, pressured the metal.

Prices of the red metal have lost over 12% so far this month as persistent worries about future demand from top consumer China and a stronger greenback slammed commodities.

Also Tuesday, iron ore sank to the lowest level in at least six years amid speculation that mills in China are reducing steel output, hurting demand for the raw material while supplies from the biggest miners expand.

Ore with 62% content delivered to Qingdao fell 1.9 percent to $43.89 a dry metric ton, the lowest in daily data dating back to May 2009, according to Metal Bulletin Ltd. The commodity is headed for a third annual retreat, and Tuesday’s fall offset the previous trough of $44.59 set in July.

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Friday 20 November 2015

GOLD PRICES SURGE AS FED UNCERTAINTY FADES

Gold prices rose on Thursday, on a short-covering and bargain-hunting bounce after prices dropped to a 5.5-year low Wednesday.

Comex gold for December delivery last traded at $1,082.10, up 1.24%, while December Comex silver was last seen at $14.305 an ounce, up 1.63%.

Market players are still discussing the minutes of the last Federal Reserve Open Market Committee (FOMC) meeting, which showed that the committee members agreed U.S. economic conditions are now in place for an interest rate increase in December.

Gold prices saw a rebound and U.S. stock indexes extended gains in a classic "sell the rumor, buy the fact" scenario, after so much market worries in recent weeks and months over when the Fed will make its first interest rate rise in nine years.

One dovish element in the FOMC minutes was the reference that any future U.S. interest rate increases will be gradual. Many market observers had already believed the Fed will increse interest rates by 0.25% in December and Wednesday’s FOMC minutes bolstered this view. Most market participants will be glad when the rate hike finally happens, to remove the uncertainty of the matter and so the general discourse of trading and markets can focus on something else.

With gold’s decline to a 5.5-year low Wednesday, fresh longer-term chart damage was inflicted to suggest a challenge of the $1,000.00 level in the coming weeks or few months. However, from a longer-term perspective, looking out over the horizon in the coming years, Jim Wyckoff from Kitco News reiterates: gold, silver and many other markets’ prices at present low levels do present a longer-term "value-buying" potential for investors. He is referring to the "buy and hold" investors, rather than the shorter-term to intermediate-term traders.

He writes that he is confident that gold prices will touch a new record high in the coming years, and possibly sooner than most would ever imagine. If you examine the charts, markets’ price history shows that raw commodities experience cycles of boom and bust are well-defined. The present bust cycle in the raw commodity sector, Wyckoff says, is very mature and will possibly end sometime next year. The fact that so many market observers are now very bearish raw commodities is another clue that the bottom of the bust cycle is not far off.

In other news, China’s central bank reduced its interest rate on its standing lending facility to 2.75% on an overnight basis and to 3.25% on a seven-day basis. The move was not considered a major monetary policy action, but highlights the People’s Bank of China’s incline toward further monetary stimulus.

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Thursday 19 November 2015

U.S. STOCKS OPEN IN THE GREEN TERRITORY AFTER HOUSING DATA; FED MINUTES ON TAP

U.S. stocks opened higher Wednesday ahead of minutes from the Federal Reserve. Market players were also evaluating data from the U.S. housing market, as well as comments from Federal Reserve officials.

The Dow Jones Industrial Average opened 29 points, or 0.2%, higher at 17,518, while the S&P 500 index was up 5 points, or 0.3%, at 2,056. The Nasdaq Composite Index started up 19 points, or 0.4%, to 5,005.

Shares of Norfolk Southern Corp. jumped 5.6% after Canadian Pacific Railway Ltd. on Tuesday proposed a merger to create a transcontinental railroad company with potential for stronger earnings growth.

Earlier, Federal Reserve Bank of New York president William Dudley said he did not expect a huge surprise or big market reaction when the rise does happen.

And Cleveland Fed president Loretta Mester said the US economy could now handle a modest 25 basis point increase.

Meanwhile, Federal Reserve Bank of Atlanta President Dennis Lockhart, who supported a rate increase in September but backed consensus for standing pat the following month, has said there is more data to evaluate before deciding whether to raise rates in December.

U.S. housing starts in October fell to a seven-month low as single-family home construction in the South dropped. Meanwhile, a surge in building permits suggested the housing market remained robust.

The U.S. Commerce Department said on Wednesday that groundbreaking dropped 11% to a seasonally adjusted annual pace of 1.06 million units, the lowest since March.

Still, October was the seventh consecutive month that starts stayed above 1 million units, the longest streak since 2007, suggesting a sustainable housing market recovery.

The sector is supported by rapidly rising household formation, mostly driven by young adults leaving their parental homes and a tightening labor market.

While residential construction accounts for only over 3% of gross domestic product, housing has a broader reach in the economy, with increasing home prices boosting household wealth and thus buoying consumer spending.

Housing has added to GDP growth in each of the last six quarters and is eclipsing some of the slowdown from a weak manufacturing sector.

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Wednesday 18 November 2015

U.S. STOCKS OPEN HIGHER FOR SECOND CONSECUTIVE SESSION ON EARNINGS, ECONOMIC DATA

U.S. stocks opened slightly higher on Tuesday, following rising global equities, as well as economic data from the U.S.

The S&P 500 opened 1 point or less than 0.1%, higher at 2,053. The Dow Jones Industrial Average climbed 20 points, or 0.1%, to 17,505. The Nasdaq Composite began the day up 3 points, or 0.1%, at 4,987.

Investors assessed positive earnings report from retailers such as TJX Companies and Wal-Mart Stores and a couple of mixed economic reports.

Consumer prices in the U.S. rose for the first time in three months, - up 0.2%, core prices also added 0.2%.

Industrial production in the U.S. fell in October, dipping by 0.2% after a 0.2% decline in September. That compares to expectations of a 0.1% rise last month.

In Europe, stock markets have bounced sharply today, as investors put aside concerns that last week’s terror attacks will hurt the global recovery.

France's CAC 40 was the leader rising 2.33%, while Spain's IBEX 35 rose 2.15%. British FTSE 100 and German DAX added around 1.8%, while Italy's FTSE MIB climbed 1.88%.

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Monday 16 November 2015

AUSSIE SURGES ON HIGHLY ROBUST JOBS DATA; YEN SLIGHTLY LOWER

The Aussie jumped in Asia on Thursday after data showed a huge rise in jobs last month. The yen was slightly weaker after mixed data.

AUD/USD traded at 0.7141, up 1.13%.

In Australia, employment data showed a whopping gain of 58,600 jobs in October compared with a gain of 15,000 jobs seen, dropping the unemployment rate to 5.9% from 6.2% in a participation rate of 65%, higher than the 64.9% expected.

Australia's S&P ASX was 0.02% higher, while China's Shanghai Composite gauge lost 0.43%. Hong Kong's Hang Seng surged 2.12%.

In Japan, the corporate goods price gauge dipped 3.8% for October, compared with a fall of 3.5% seen year-on-year, as well as core machinery orders for September fell 1.7%, less than the decline of 4.0% seen year-on-year.

USD/JPY was last at 122.95, up 0.07%.

Earlier in the session, the greenback was edging lower, tracking the overnight selling pressure with investors locking in profits on the currency’s recent gains. But a late-morning rise in the Nikkei Stock Average, albeit at only a moderate pace, helped brighten the mood, prompting yen selling. The Nikkei 225 closed up 0.03%.

Elsewhere in the currency trading, the euro rose against the greenback on short covering after a mixture of hawkish and dovish comments related to possible monetary-policy decisions at the European Central Bank’s Dec. 3 meeting.

ECB governing council member Ardo Hansson said in an interview with The Wall Street Journal there was no necessity currently for the ECB to slash its policy rates, including the deposit rate.

EUR/USD was last at 1.0753, up 0.08%.

The euro rose against the pound with EUR/GBP last seen at 0.7070, up 0.13%.

Market players are becoming more convinced that the U.S. Federal Reserve will increase short-term rates in December. However, as analysts admit, they still aren’t fully confident about the U.S. central bank’s timetable.

Investors are looking to see if Fed officials including Chairwoman Janet Yellen later Thursday will offer any hints about the central bank’s plans for its December policy-setting meeting.

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Sunday 15 November 2015

COPPER TUMBLES TO LOWEST SINCE 2009; GOLD NEAR 5-YEAR LOWS

On Thursday copper prices dropped to the lowest level since July 2009, as the higher odds of increasing borrowing costs in the U.S. and slower global economic growth spurred risk appetite.

Comex copper for December delivery dropped 2.35%, to trade at $2.166 a pound during morning hours in New York. Earlier, the metal fell to $2.160, a level not seen in over six years.

Three-month copper on the London Metal Exchange slumped 1.99% to $4,828.75 a metric ton.

Since May, prices for the red metal are down more than 25% amid signals of a slowdown in China which fuels fears over lackluster demand for the industrial metal.

Elsewhere, gold prices re-approached the lowest level in five years, as investors awaited comments from a range of Federal Reserve speakers, including Janet Yellen for further indications on the likelihood of a December rate hike.

December Comex gold was last seen at $1,078.00 an ounce, down 0.65%, while December Comex silver dropped 0.44% to trade at $14.210 an ounce.

Fed Chairwoman Janet Yellen is expected to give “welcoming remarks” at 9:30 a.m. Eastern at a monetary policy conference in Washington D.C. After the markets closure, at 6 p.m. Eastern, Fed Vice Chairman Stanley Fischer will speak on the transmission of exchange rate changes to output and inflation at the same event.

At 10:15 a.m. Eastern, Chicago Fed President Charles Evans will speak on the economy and monetary policy at the National Communities Council Fall Leadership Forum in Chicago.

New York Fed President William Dudley will speak to The Economic Club of New York at noon Eastern, talking about the economic outlook and what it means for monetary policy.

Weekly jobless claims are due at 8:30 a.m. Eastern, followed by September job openings at 10 a.m. Eastern and the Federal monthly budget for October at 2 p.m. Eastern.

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Saturday 14 November 2015

WALL STREET OPENS LOWER AS GLOBAL STOCKS, OIL SLIDE

U.S. stocks opened lower on Thursday closely tracking declining global equities and commodities.

The S&P 500 opened 11 points, or 0.5%, lower at 2,063. The Dow Jones Industrial Average dropped 125 points, or 0.7, to 17,576. The Nasdaq Composite began the day down 24 points, or 0.5%, at 5,042.

Oil futures continued their slide, falling nearly 3% on top of yesterday's 3% drop.

December Nymex crude oil futures last traded at $41.90 per barrel, down 2.4%.

Brent futures for January delivery lost 1.91% to trade at $45.78 a barrel.

Meanwhile, St. Louis Fed President James Bullard said it was prudent to raise rates and shrink the Federal Reserve’s balance sheet toward more “normal settings”.

Richmond Fed president Jeffrey Lacker said earlier Thursday that a weak Philips curve relationship does not reduce the Federal Reserve's ability to determine inflation over time. The Phillips Curve is the relationship between unemployment and inflation. In the simplest definition, the lower that unemployment goes, the higher inflation goes.

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Friday 13 November 2015

THERE ARE SIGNS OF PHYSICAL DEMAND FOR GOLD - HSBC, COMMERZBANK

Two major lenders have recently noticed signs of physical demand for the yellow metal.

HSBC said in a late-Tuesday note:

“The drop below $1,100/oz has stimulated Indian buying, which has been very sluggish for weeks.”

“We also suspect demand is increasing from China and other emerging markets. The most recent data from China show deflationary trends persisting, but this should not impact the demand for gold jewelry bars and coins noticeably, we believe.”

What Commerzbank added on Wednesday was:

“Physical gold demand in China still appears to be robust and indeed to be picking up, given that the premiums on the Shanghai Gold Exchange have risen to $4-5 per troy ounce as compared to world market prices.”

Meanwhile, Citi pointed out in a note that gold may be oversold, now that expectations for a Fed rate increase in December are soaring.

Gold had already sold off going into the Nov. 6 jobs data on ideas that Fed officials may have become more hawkish, with the metal declining below Citi’s fourth-quarter forecast of $1,110 an ounce and continuing on to a low below $1,090. Citi noted that the robust job numbers left someone with the impression that a soft report for September was a blip rather than start of a weakening trend.

“That said, while October job growth was unquestionably strong, in our view, the current sell-off in gold may be somewhat overdone given continued uncertainty around emerging markets and global growth and a Fed that has proven to be easily swayed by market volatility; we see potential for a modest rebound in the yellow metal over the coming weeks,” Citi says.

Gold-price moves on nonfarm-payrolls Fridays are likely to pale in following trading sessions “due to investors sometimes ‘overshooting’ to the downside on NFP Fridays,” Citi says.

“Based on this, we think the yellow metal may see some upside from here, particularly as investors continue to question the Fed’s reaction function.”

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Thursday 12 November 2015

EURO SLIGHTLY HIGHER AFTER GERMAN DATA

The euro was slightly higher against the dollar after official data showed that German consumer price inflation remained unchanged last month, matching analysts' expectations.

In a report, Federal Statistical Office Germany said that German CPI remained unchanged at a seasonally adjusted 0.0%, from 0.0% in the preceding month.

EUR/USD was last 1.0746, up 0.03%.

EUR/GBP climbed 0.10% to 0.7069.

In the U.K., data showed earlier Thursday that RICS house price balance rose more-than-expected last month.

U.K. RICS house price balance climbed to a seasonally adjusted 49%, from 44% in the preceding month. Analysts had expected the price balance to rise to 45% last month.

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Wednesday 11 November 2015

U.S. STOCKS OPEN LOWER WITH S&P 500 ON TRACK FOR FIFTH CONSECUTIVE DECLINE

U.S. stocks opened in the red territory on Tuesday with the benchmark S&P 500 on track to post its fifth day of declines.

A steep fall on Monday followed a modest recovery as investors continue to reflect on whether the U.S. Federal Reserve will hike borrowing costs in December.

At the beginning of the session, the S&P 500 was 2 points, or 0.1%, lower at 2,075. The Dow Jones Industrial Average lost 36 points, or 0.2%, to 17,696. The Nasdaq Composite began the day down 23 points, or 0.5%, at 5,072.

Earlier, data showed that U.S. imports declined more than expected last month, as costs of petroleum and a series of goods declined, a sign that a firm dollar and soft global demand continued to exert downward pressure on imported inflation.

Strong greenback and a steep decline in oil prices have weighed on inflation, which is still below the Federal Reserve's 2 percent target.

However, analysts generally agree that weak inflation pressures will hardly prevent the U.S. central bank from raising interest rates next month after job growth surged in October and the unemployment rate fell to 7-1/2-year lows of 5.0 percent.

Fed policy-makers are now given confidence that inflation will gradually move toward its target, since the labor market is tightening.

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Tuesday 10 November 2015

DOLLAR DECLINES AFTER HITTING 7-MONTH PEAK FRIDAY; ODDS OF FED HIKE IN DECEMBER SOAR

The greenback slipped lower against the other major currencies on Monday, as traders locked in profits after the greenback hit a huge seven-month peak on Friday after the release of strong U.S. employment data.

On Monday the dollar was lower against the euro, with EUR/USD up 0.40% at 1.0783, off Friday’s seven-month trough of 1.0701.

The greenback strengthened broadly after the Labor Department reported that the U.S. economy added 271,000 jobs last month, beating the expected 180,000 - the largest increase since December. The unemployment rate dipped to a seven-and-a-half year low of 5.0%.

The strong data increased chances for the Federal Reserve to raise borrowing costs at its December meeting, a move that would make the dollar more appealing to yield-seeking investors.

USD/JPY rose 0.22% to trade at 123.43 - the highest since August 21.

The dollar was lower against the pound and the Swiss franc, with GBP/USD adding 0.29% to 1.5097 and with USD/CHF shedding 0.4% to 1.0025, pulling away from Friday’s eight month highs of 1.0075.

Bond yields rose on Fed expectations.

Treasury yields continued to edge higher in Europe having surged on Friday. The key 2-year yield, the most sensitive to a near-term rate hike, was at a 5-1/2-year high.

German Bund yields were pushed higher too.

Portuguese government bond yields hit a 10-week high, as leftist parties agreed to form an alternative government in their attempt to oust the center-right in a vote this week. The yield (or interest rate) on 10-year Portuguese bonds has climbed from 2.67% to 2.77%, a ten-week high. That is not a major move, but a sign that investors are anxious about events in Lisbon.

There was also uncertainty in Spain, as on Monday Catalan separatists are expected to approve in the local parliament a motion saying the process to split the northeastern region from Spain has started.

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Monday 9 November 2015

COPPER JUMPS AS CHINESE STOCKS RECOVER; GOLD UNCHANGED

On Thursday copper futures edged higher, one day after falling to a two-week low on the back of lingering concerns over future demand growth from top raw materials consumer China.

Comex copper for December delivery inched up 0.63%, to trade at $2.375 a pound during morning hours in London.

Sentiment towards the red metal was boosted as China's Shanghai Composite recovered from the prior day's sudden sell-off to finish the session up 1.44%. Hong Kong's Hang Seng was down 0.63%, while Japan's Nikkei was 0.64% in the red.

On Wednesday, copper shed 0.5 cents, or 0.21%. It earlier fell to $2.330, the lowest since October 8.

In recent weeks, copper prices have been under heavy selling pressure in recent weeks as fears of a China-led global economic slowdown spooked traders and rattled sentiment.

Chinese government data released earlier in the week showed third-quarter economic growth slowed to 6.9%, beating the expectation of 6.8%, but below Beijing's target of 7%.

Elsewhere in metals trading, December Comex gold was last up 0.01%, to trade at $1,167.20 an ounce, as market players continue to speculate over the timing of a U.S. rate hike.

The U.S. is to release a weekly report on initial jobless claims at 8:30AM ET Thursday, followed by a report on existing home sales for September at 10:00AM.

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Sunday 8 November 2015

AUSSIE LOWER AFTER DOWNBEAT NAB SURVEY

The Aussie was slightly lower on Thursday after a downbeat business confidence survey.

AUD/USD traded at 0.7208, down 0.03%.

In Australia, the NAB quarterly business confidence survey dropped to flat from plus-4 in the previous quarter, while conditions increased to plus-11 from plus-5.

USD/JPY was last at 119.74, down 0.15%.

Overnight, the dollar moved slightly higher against the other major currencies, as the previous session's U.S. housing sector data continued to lend support. Trading was expected to remain subdued with no major U.S. data out thoughout the day.

The greenback strengthened mildly after the U.S. Commerce Department reported on Tuesday that housing starts climbed 6.5% to 1.206 million units last month from August’s total of 1.132 million units. The report also showed that the number of building permits issued dropped by 5.0% to 1.103 million units from August’s total of 1.170 million.

Market players were awaiting the weekly report on U.S. jobless claims due later in the day after a batch of mixed U.S. economic reports spurred fresh uncertainty over the timing of a U.S. rate increase.

Meanwhile, sentiment on the single currency slightly weakened ahead of the European Central Bank's monthly monetary policy decision, expected later Thursday.

The ECB was expected to keep its monetary policy unchanged but could flag plans to enlarge its stimulus program.

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Saturday 7 November 2015

WALL STREET HIGHER AT OPEN, FRESH EARNINGS REPORTS WEIGH

U.S. stocks opened on a positive note Wednesday as deal news and an expected market debut of Ferrari lifted sentiment.

Investors continued to digest earnings reports, including results from General Motors, Boeing Co and Coca-Cola.

The S&P 500 opened 7 points, or 0.3%, higher at 2,037. The Dow Jones Industrial Average rose 50 points, or 0.3%, to 17,275. The Nasdaq Composite began the day up 21 points, or 0.4%, at 4,902.

Stocks in Europe rose after shaking off early losses. Asian stocks showed mixed action, with Japan’s Nikkei closing up 1.9% but the Shanghai Composite ending 3.1% lower for its biggest drop in a month.

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Friday 6 November 2015

WHY LOW INTEREST RATES ARE HERE TO STAY FOR LONGER THAN EXPECTED - VIEW

Whether you’re a government, a big company or a tiny startup, it has never been cheaper to obtain capital than right now. And it is quite disturbing for macroeconomists.

Noah Smith, Bloomberg's columnist, reflects upon what has been happening with interest rates since 1980s. He reminds that since that time interest rates of all kinds have been in decline. That looked like a simple regression to the mean.

Central banks tightened a lot in early 80s in an effort to restrain inflation. But the decline during the past 15 years or so - and particularly since the financial crisis - goes way beyond a simple normalization, Smith writes.

For macroeconomists, this signals that old theories may be wrong. It’s disturbing for central bankers because it limits their actions (nominal interest rates can’t be pressed below zero) even as it raises the uncertainty under which they are forced to make decisions.

Why so low?

Interest rates are established in markets, where borrowers meet lenders. Falling rates can be explained by an increased desire to lend, a decreased desire to borrow, or both.

One theory imposes the responsibility on central banks, and it makes sense to most people, as everyday we hear that the Fed or the Bank of England has a policy of keeping rates near zero. But it still doesn’t mean that they have to work very hard to reach this goal. If private markets tend to low interest rates themselves, it means that in fact central banks have been a sideshow.

There is a ground for thinking central banks are not the most significant drivers of low rates:

Not just nominal rates that are historically low, real inflation-adjusted rates are also down. Most analysts believe that real interest rates can’t be affected by monetary policy for very long.
Economists think that if central banks are keeping rates below what private markets want, we should be seeing high inflation, but we are not!
The end of the Fed’s bond-buying program of quantitative easing seemed to have only a small effect.
Does savings glut drive low rates?

Former Fed Chairman Ben Bernanke expressed this hypothesis in 2005. The idea was that developing countries, like China, were saving more than they were investing. The excess capital was flowing into the U.S. reducing borrowing costs.

Savings rates have climbed in the U.S. as well after the financial crisis. Households are squirreling away more of their paychecks, and businesses are hoarding cash. The savings surplus might have gone global.

Demand side of the equation

Smith highlights another reason for low rates which is underestimated in his opinion, which comes from the demand side of the equation. Overall, there is little desire to borrow.

Households in the U.S. and other countries that suffered a big housing bust have large overhangs of debt, and the crash showed them that debt was more dangerous than they had thought it would be. Businesses in Europe are unwilling to borrow to invest, given the running political indecision surrounding the euro and the sovereign debts of countries such as Greece. That may apply to Japan as well. Moreover, these rich countries have sharply declining populations. Dwindling domestic markets discourage firms from expanding.

In the U.S. companies may be holding back investment because they are afraid of weakness in export markets. China's economy is expanding less slowing many other developing countries. The recent wave of technological disruptions that make it more difficult for companies to plan ahead may represent another factor. Big investments demand big bets, and amid massive disruption, no one knows which bets to place. And even as disruption is rising, overall productivity is slowing.

How the era of low interest rates may be changed?

Central banks will hardly change it, Smith says. As long as private markets keep pressing rates down, central bankers will barely risk causing recessions by attempting to increase them.

Some factors may indeed stop the decline. American households will at some point work off their debt overhang - already, the housing market is rebounding.

In the meantime, China is rebalancing toward a more consumption-based economy. That should do a little to reduce the savings glut, at least when China’s current steep slowdown has run its course.

However, such long-term trends as declining global population growth and lingering technological disruption, witness of a very long period of low interest rates.

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Thursday 5 November 2015

COMMODITY-EXPOSED CURRENCIES LOWER AS CHINA STOCKS DROP

Commodity-dependent currencies like the Aussie and kiwi fell on Wednesday as Chinese stocks slid, while trade data from Japan hinted at a recession approaching the world's third-largest economy.

The yen dipped against the dollar and the euro after Japanese exports showed at the slowest pace of growth since mid-2014 mainly due to weakness in China. That also raised chances of more quantitative easing from the Bank of Japan.

USD/JPY was last at 119.92, up 0.05%, while EUR/JPY traded at 136.19, up 0.14%.

The Australian dollar, which is used as a more liquid proxy for Chinese investments because of Australia's strong trade links to China, dipped 0.57% to $0.7218, while the New Zealand dollar fell 0.33% to trade at $0.6730.

The drop came as the Shanghai Composite closed more than 3 percent lower. Other emerging market stocks also fell after recent data pointed to a dim growth outlook.

European stock markets got rid of initial gains in the London session, with Europe's benchmark gauge falling 0.2%.

Elsewhere in the currency trading, the euro was up 0.18% to $1.1365, adding to Tuesday's gains.

Traders believe the euro will suffer from modest volatility ahead of the ECB policy meeting on Thursday. While the ECB is not likely to ease this month, investors expect the central bank to hint at more stimulus later this year.

Data released on Tuesday showed that euro area banks had loosened their lending standards more than expected over the last few months despite volatility in the global markets. That slashed the need for the ECB to expand its 1 trillion euro asset purchase program.

Meanwhile, the Canadian dollar fell with USD/CAD last up 0.17% to 1.3005. The main focus is now on the Bank of Canada's policy decision due on Wednesday with most analysts predicting the policy to stay unchanged.

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Wednesday 4 November 2015

YEN SLIGHTLY LOWER AS JAPAN TRADE DATA SHOWS WEAK EXPORTS

On Wednesday the yen was slightly weaker in Asia after trade data that showed weak exports. The dollar was almost unchanged after Tuesday's housing data.

USD/JPY traded at 119.90, up 0.04%, while AUD/USD changed hands at 0.7230, down 0.42%.

Data from Japan showed that imports fell 11.1% in September year-on-year, a bit better than the 11.7% drop seen, while exports rose 0.6%, disappointing the expectation of a 3.4% gain. The trade balance for September came in at a deficit of ¥115 billion, compared to a surplus of ¥84 billion expected.

In Australia, the Westpac-MI leading index rose 0.12 points to 97.60, in line with the Reserve Bank's forecast for growth to stay below trend. However, growth signaled by this index makes Westpac's forecast for 2016 look fragile, it said.

Elsewhere in the currency trading, the dollar was almost unchanged after data on Tuesday signaled the number of housing starts issued in the U.S. rose more than expected in September, while building permits fell more than forecast, providing a blurred picture of the economy.

The U.S. Commerce Department said yesterday that housing starts rose 6.5% to 1.206 million units last month from August’s total of 1.132 million units, while analysts had expected 1.140 million.

The number of building permits released dropped by 5.0% to 1.103 million units from August’s total of 1.170 million. Economists expected building permits to fall by 0.9% to 1.164 million units in July.

EUR/USD was last at 1.1351, up 0.05%.

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Tuesday 3 November 2015

LONDON TO BECOME MAJOR OFFSHORE HUB FOR RENMINBI TRADING

Although there was a talk three years ago that the U.K.-China relations deteriorated after U.K. Prime Minister David Cameron met with the Dalai Lama, the exiled Tibetan leader, developments that take place today show it's not a problem anymore.

As London is hosting China's president Xi Jingping, a People’s Bank of China official told a British executive that the central bank already expects London to be the worldwide center for renminbi trading, Bloomberg has reported without naming the person.

The yuan wasn’t even allowed outside its own borders before 2004, but China is opening up now, driving predictions that it will become a reserve currency eventually rivaling the dollar. London already has 40 percent of global foreign-exchange trading and wants to build on its dominant position by grabbing a major share of offshore renminbi trading.

London’s dominance in foreign-exchange trading has been a widely-spread topic in the past week as bankers and politicians cite a statistic from TheCityUK, a financial services lobby group: London trades more dollars than New York, and more euros than all of Europe combined.

For the British capital-city, intensifying its renminbi trading could mean more financial services jobs and more investment. In the past 15 years, over $50 billion of Chinese cash has flowed into British assets, according to Standard Chartered estimates. The two countries agreed on 14 billion pounds ($22 billion) of trade deals during Chinese Premier Li Keqiang’s visit in 2014.

A research commissioned by Euronext NV expects as much as $5 trillion of Chinese money over the next three to five years to flow into assets on European exchanges.

Data supports the belief that London’s gravity is pulling in renminbi trading. Peak transactions in the offshore currency against the greenback occur at 7 a.m. London time, reflecting the handover from Asia when London forex traders are at their desks, ICAP Plc data shows.

In the past year, trading has more than doubled at that time on ICAP’s EBS Brokertec platform. The dollar-renminbi cross has surged to its third-most traded pair from 14th in 2013. Last year, the broker and market operator created a 24-hour, six-person team focusing on the Chinese currency.

In the past six months, offshore renminbi trading more than doubled on Thomson Reuters Corp. markets to $192.5 billion in September. This included spot and forwards transactions. That is up from $127.1 billion a year earlier and $28.2 billion in 2013.

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Monday 2 November 2015

LOONIE, CANADIAN BOND RISE AS LIBERAL PARTY LEADER WINS FEDERAL ELECTION

The Canadian dollar strengthened Tuesday after Canadians voted for Liberal Party leader Justin Trudeau as the country’s new prime minister in the federal election.

The nation-wide vote, held on Monday, led to the ouster of Stephen Harper, who was running for what would have been his fourth term as prime minister.

Justin Trudeau will now become Canada’s 23rd prime minister. The Liberal party, which claimed 184 seats in the newly expanded 338-seat House of Commons, became the first ever to vault directly from third party status to government, says National Post.

The country’s new leader campaigned on a plan that included running C$25 billion in deficits over three years to stimulate the economy with infrastructure spending, while increasing taxes on top earners and cutting them for the middle class, says Bloomberg.

The Canadian dollar strengthened by 0.34% to 77.06 U.S. cents, paring a decline from Monday’s session. It traded at 76.79 late Monday in New York.

The yield on the Canadian 10-year sovereign bond rose 6.1 basis points to 1.52%, according to FactSet data.

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Sunday 1 November 2015

U.S. STOCKS OPEN LOWER AS INVESTORS DIGEST EARNINGS, ECONOMIC REPORTS

U.S. stocks opened slightly lower on Tuesday as investors digested a slew of earnings reports and better-than-expected housing data.

The S&P 500 opened 3 points, or 0.1%, lower at 2,030. The Dow Jones Industrial Average fell 40 points, or 0.2%, to 17,190. The Nasdaq Composite began the day down 6 points, or 0.1%, at 4,898.

U.S. housing starts jumped to a nearly an eight-year high in September as builders ramped up construction of apartments.

The Commerce Department reported that housing starts rose 6.5% to 1.206 million units last month from August’s total of 1.132 million units, while analysts had expected 1.140 million.

The number of building permits released dropped by 5.0% to 1.103 million units from August’s total of 1.170 million. Economists expected building permits to fall by 0.9% to 1.164 million units in July.

The third-quarter earnings season was set to enter its peak on Tuesday, with 20 companies slated to report, says S&P Capital IQ.

For the third-quarter reporting season so far, aggregate earnings for the S&P 500 stand at $28.62 per share, down 4.77% from a year earlier, according to data from S&P Capital IQ. That’s 64 basis points better since last Monday, when the first full week of earnings season began.

More than 110 companies are expected to release earnings this week.

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