OPEC weekly average oil prices drop again

September 8, 2009
OPEC's weekly average oil prices dropped again last week to 67.56 U.S. dollars per barrel, down 3.86 dollars compared to the previous week, the Vienna-based cartel said Monday.

After only a one-week recovery, OPEC oil prices kept going down last week, falling from 70.37 U.S. dollars a barrel on Aug. 31 to 66.03 U.S. dollars on Sept. 4. The price only increased by 0.01 U.S. dollars on Sept. 3.

Analysts say that although the current supply and demand relationship on the international energy market remains unchanged, a series of data shows that the global economic recession has bottomed out. The prospects for international crude oil demand growth is expected to improve.

However, in the meantime, the data for consumption was not optimistic.

A continuous rise in oil prices has weakened an upward trend, and the prices kept fluctuating between 62-72 dollars.

OPEC leaders will meet Sept. 9 to discuss future oil production quotas.

The rotating chairman of OPEC, Jose Maria Botelho de Vasconcelos, said that because of the world economy and the current level of international oil prices, OPEC would not rule out the possibility of maintaining its current quotas.

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Global economic outlook still gloomy, says UN report

September 8, 2009
The global economic outlook is still gloomy and no early recovery from the current recession can be expected, a United Nations report said on Monday.

Despite some "green shoots" of economic recovery, "the economic winter is far from over," said the Trade and Development Report 2009, released by the UN Conference on Trade and Development (UNCTAD).

"Tumbling profits in the real economy, previous overinvestment in real estate and rising unemployment will continue to constrain private consumption and investment for the foreseeable future," said the report.

According to the report, the current crisis is unprecedented in depth and breadth, with virtually no economy left unscathed. Given this background, global economy is expected to fall by more than 2.5 percent in 2009.

Global economic growth may turn positive again in 2010, but it is unlikely to exceed 1.6 percent.

UNCTAD economists expect GDP in developed nations to contract by some 4 percent in 2009, and output in the transition economies to fall by more than 6 percent.

In developing countries, growth is expected to decelerate from 5.4 percent to 1.3 percent in 2009, implying a reduction of average per capita income.

But some developing and emerging-market economies have proved less vulnerable to the current crisis, notably those in East and South Asia, whose economic growth is expected to grow by 3-4 percent during 2009.

The leading economies in East and South Asia -- in particular China and India -- have resisted recessionary forces better than others because their domestic markets play a more important, and increasingly growing, role in total demand, the report said.

Moreover, the rebound in China in the second quarter of 2009 proves the efficacy of government deficit spending if it is applied quickly and forcefully, it added.

In the report, UNCTAD cited deregulation of financial markets as the main cause of the global financial and economic crisis. It also reiterated the need for more stringent financial regulation as well as the reform of the international monetary and financial system.

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U.S. unionization rate slightly higher despite recession: study

September 8, 2009
The percentage of all employed workers who are union members has been slightly higher over the past two years in the United States, despite the worst economic recession in decades, according to a study released here Monday.

The unionization rate in the country has risen almost half a percentage point in the two years since 2006-2007, from 12.0 percent to the current rate of 12.4 percent, found the annual analysis of the labor movement by UCLA Institute for Research on Labor and Employment.

According to "the State of the Unions in 2009," which was released in conjunction with the national holiday of Labor Day, there are about 15.8 million American workers who are currently members of different labor unions.

The UCLA study found that union members in the United States got paid about 20 percent more than non-union workers in 2008-2008,and were far more likely to have access to retirement, medical and paid sick leave benefits than their non-union counterparts.

Citing statistic figures in Los Angles, California and the United States, the report also suggested that the more education works had, the higher their unionization rate tended to be.

However, the study noted that the stable unionization rate over the past two years was against a long-term downward trend, as the figure has suffered serious decline for several decades.

"The Unionization rate in the United States declined steadily for several decades and is now only showing slight increases," said Lauren Appelbaum, research director of UCLA Institute for Research on Labor and Employment and the lead author of the study.

The loss of many private sector jobs during the current economic recession many have contributed to the relative increase in unionized workers, since public sector jobs have higher rates of unionization than does private sector employment, the report said.

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G20 finance officials pledge to boost global economic recovery

September 7, 2009
Finance ministers and central bank governors of Group of 20 (G20) pledged on Saturday to boost the global economic recovery and to plan an exit strategy from the extraordinary economic stimulus when time is mature to take actions.

A communique issued at the end of a meeting of the G20 top finance officials said that "we will continue to implement decisively our necessary financial support measures and expansionary monetary and fiscal policies, consistent with price stability and long-term fiscal sustainability until recovery is secured."

Since the G20 summit meeting in London in early April, the global economy has improved with the sign of recovery emerging in many countries. Finance ministers and central bank officials from rich and developing countries representing 80 percent of world economic output met here amid mounting signs of an economic recovery. Japan, Germany, France and Australia have already recorded growth in the second quarter of this year while Britain and the United States are expected to do so in the third quarter.

There is no doubt that the darkest time of global economic recession in the past 70 years has passed and the dawn of economy recovery is emerging.

However, there are also many uncertainties in the road of recovery and many analysts and government officials have predicted that the recovery will be slow and weak at least in the next year.

It is under such a uncertain situation that the G20 finance ministers and central bank governors stressed that the stimulus policy should continue until the recovery is confirmed.

Meanwhile, when and how to exit from the extra-large and extraordinary economic stimulus measures implemented by many economies is another important issues facing major economics. If they exit too soon from the stimulus policy, the fragile world economy could easily deteriorate again and lapse into another contraction. To exit too late will increase the risks of inflation and soaring government debt, posing new risks for the long-term economic growth.

The G20 communique said that "we agreed the need for a transparent and credible process for withdrawing our extraordinary fiscal, monetary and financial sector support as recovery becomes firmly secured".

|On how to implement the exit strategy, the G20 finance officials stressed that, working with the IMF and other international organizations, "we will develop cooperative and coordinated exit strategies" and, at the same times, "recognizing that the scale, timing and sequencing will vary across countries and across the types of policy measures."

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U.S. Treasury Secretary urges to bring greater urgency to financial reform

September 7, 2009

U.S. Treasury Secretary Timothy Geithner on Saturday stressed the need to bring greater urgency to the financial reform agenda.

After a meeting of the G20 finance ministers in London this weekend, Geithner said the G20 officials have broad agreement on a very strong set of principles and objectives for building a more stable global financial system.

The United States is to put in place stronger constraints on risk taking across the financial system, to bring comprehensive oversight to key institutions and to critical markets, such as derivatives, to reform the securities markets and to provide the tools necessary to wind down firms that fail, he said.

Geithner stressed that a crucial part of financial reform is to change compensation practices, adding that "we have proposed legislation to require firms to submit compensation practices to an approval by shareholders."

Another critical part of the reform agenda is building stronger international financial institutions, the U.S. treasury secretary said.

"We need these institutions to play a greater role in preventing future crises, with stronger surveillance by the IMF, need the multilateral development banks to focus their efforts on the key priorities of fighting poverty, supporting higher productivity in agriculture, building the institutions necessary for private investment and growth, and facilitating the transition to a green economy," he said.

He added: "We must reform the institutions' governance structures to better reflect the important role of emerging market and developing economies."

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Brown to G-20: Economy at 'critical juncture'

September 6, 2009
BRITISH Prime Minister Gordon Brown called on Group of 20 leaders to make a strong and clear commitment to continued efforts to boost global growth, saying today that the world economy is at a "critical juncture."

Addressing finance officials from the G-20 rich and developing countries at the start of their talks here, Brown warned against "complacency or overconfidence" in the face of mounting signs of at least a modest economic upturn.

Japan, Germany, France and Australia all recording growth in the second quarter. Britain is widely expected to do so in the third quarter.

"We meet at a critical juncture for co-operation in the global economy," Brown told officials from countries representing 80 percent of the world's output. "The G-20 needs to agree a clear and unambiguous mandate for the G-20 to give priority to the resumption of global growth and to help countries achieve sustainable growth going forward."

Taking the unusual step of pulling rank on his Treasury chief Alistair Darling, the host of the London meeting, Brown also stressed the need for reform of the banking system to restrict bonus payments and called for sanctions against tax havens to be put in place early next year.

The G-20 finance officials are meeting in the British capital to debate the next steps for the recovering global economy and lay the groundwork for the G-20 leaders' summit in Pittsburgh later this month.

The timing of a so-called exit strategy from the recent massive economic stimulus to drag the world economy out of recession is not yet agreed upon.

Germany has pushed for G-20 nations to start talking about when and how they will withdraw stimulus measures, but others have warned that withdrawing the massive amounts of money injected into the ailing world economy any time soon could risk a double-dip recession.

"Given the risks we face, this is not the time for economic complacency or overconfidence, the stakes are simply too high to get these judgments wrong," said Brown. "To decide now that it is time to start withdrawing and reversing the exceptional measures we have taken would in my judgment be a serious mistake."

There has also been a difference in emphasis for the London meeting, which began with a working dinner yesterday, as European countries push for a crackdown on bankers' bonuses, while the US has stressed the need to boost bank reserves to prevent a repeat of the financial crisis.

Developing countries, meanwhile, used the gathering yesterday to press for reform of global financial governance, proposing shifts in voting power at the International Monetary Fund and the World Bank in favor of developing countries.

Brown expressed broad support for all those measures, saying they were necessary to underpin recovery of the world economy.

Brown also called on G-20 nations to toughen action against tax havens and "commit to what sanctions we are going to take and implement by March next year."

Britain, France and Germany have vowed to clamp down countries that refuse to share taxation information with others and help tax evasion. The sanctions they want would include cutting investment, imposing taxes on funds held in tax havens and withdrawing development aid, Brown said in July.

Several countries - including Switzerland and Liechtenstein - have moved swiftly to increase how much tax information they swap with other authorities after the Organization for Economic Cooperation and Development put them on a "gray list" of tax havens that don't meet information exchange standards.

US Treasury Secretary Timothy Geithner is using the meeting to push talks on a new international accord to increase banks' capital reserves.
The Obama administration's proposal would establish stronger international standards for the reserves banks are required to hold to cover potential loan losses. The US wants to reach agreement on an accord by the end of 2010, with countries agreeing to implement the plan by the end of 2012.

Brazil, Russia, India and China - the so-called BRIC grouping - held their own mini-summit yesterday, calling for faster action on changes to give them a greater say in governance of financial markets.

The G-20 countries have agreed to review the leadership of institutions like the World Bank and IMF, which has received pledges of more money to help struggling countries. The top posts at IMF and the World Bank are customarily occupied by either a European or an American.

The BRIC quartet want a shift in voting power at both the IMF and World Bank in favor of developing countries.

The G-20 includes 19 countries: Argentina, Australia, Brazil, Canada, China, France, Germany, India, Indonesia, Italy, Japan, Mexico, Russia, Saudi Arabia, South Africa, South Korea, Turkey, Britain and the United States. The European Union, represented by its rotating presidency and the European Central Bank, is the 20th member.

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US jobless rate highest in 26 years

September 6, 2009
THE unemployment rate in the United States rose to 9.7 percent in August, the highest since June 1983, as employers eliminated a net total of 216,000 jobs.

Analysts expect businesses will be reluctant to hire until they are convinced the economy is on a firm path to recovery. Many private economists, and the Federal Reserve, expect the unemployment rate to top 10 percent by the end of this year.

While the jobless rate rose more than expected, the number of job cuts is less than July's upwardly revised total of 276,000 and the lowest in a year, according to Labor Department data released yesterday. Economists expected the unemployment rate to rise to 9.5 percent from July's 9.4 percent and job reductions to total 225,000.

If laid-off workers who have settled for part-time work or have given up looking for new jobs are included, the so-called underemployment rate hit 16.8 percent, the highest on record dating from 1994.

The recession has eliminated a net total of 6.9 million jobs since it began in December 2007. There are now 14.9 million Americans unemployed.

Other economic data released this week have been positive. The Institute for Supply Management, a trade group, said on Tuesday that the manufacturing sector grew in August for the first time in 19 months. On Thursday, the ISM said its service sector index rose to 48.4 last month, the highest level in nearly a year. Home sales, meanwhile, have increased for several months and prices are stabilizing.

Federal Reserve policy makers said in minutes from an August meeting that they expect the economy to recover in the second half of this year. But labor market conditions are still "poor," the Fed minutes released on Wednesday said, and many companies are likely to be "cautious in hiring" even as the economy picks up.

Some economists credit the Obama administration's US$787 billion economic stimulus package of tax cuts and spending increases, along with the Cash for Clunkers program, with contributing to a recovery. But they worry about what will happen when the impact of the stimulus efforts fades next year.

Vice President Joe Biden defended the stimulus package on Thursday against Republican critics who criticized it as too costly.

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U.S. government highlights Recovery Act impact

September 5, 2009
The U.S. government asserted the stimulus package a success in revitalizing the economy, according to a report released by the Treasury Department on Friday.

The report, issued around the 200 day anniversary of the American Recovery and Reinvestment Act (Recovery Act), details funds provided to states, local communities, and families through a variety of programs, including the Making Work Pay Tax Credit, payments for renewable energy production, funds for affordable housing development, and Build America Bonds.

"In 200 days, the Recovery Act has made significant progress in revitalizing our communities and providing the basis for economic growth," said Treasury Deputy Secretary Neal Wolin.

Recent data indicate that the economy is getting better, at least less bad than expected.

But "less bad is not enough," said Alan Krueger, Treasury Chief Economist and Assistant Secretary for Economic Policy, on a media briefing, "the labor market remains severely challenged."

The Labor Department reported Friday that the country's unemployment rate rose to 9.7 percent in August, the highest in 26years, and up from 9.4 percent a month ago.

The White House press secretary Robert Gibbs said Friday that the unemployment rate will "exceed 10 percent."

Despite the progress of the economy, the effectiveness of the government stimulus policy has criticism.

The Heritage Foundation, a Washington based think-tank said that the Obama Administration's 787 billion dollars stimulus package failed, at least in terms of employment.

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Gold declines as safe-haven demand wanes

September 5, 2009
Gold futures on the COMEX Division of the New York Mercantile Exchange took a break on Friday after a two-day rally, hovering below the key level of 1,000 U.S. dollars per ounce as investors were cautious ahead of the long Labor's Day weekend and safe-haven demand for gold decreased upon the jobless data. Silver edged down, but platinum gained.

Gold price for December delivery fell 1 dollar, or 0.1 percent, to finish at 996.70 dollars an ounce.

The U.S. Labor Department reported that job losses last month hit a one-year low as non-farm employers cut 216,000 jobs in August, fewer than the 276,000 lost in July and better than the 225,000 figure analysts had been expecting.

The encouraging jobless data provided some support to the stock market, easing investors' worries on the economy recovery and reducing gold's appeal of safe-haven.

Profit-taking ahead of the long weekend also pressured on gold especially after the yellow metal rallied more than 4 percent over the past two sessions.

Worries about the global economy and the sustainability of stock market gains have pushed the precious metal to a six-month high on Thursday, almost topping 1,000 dollars an ounce for the third time in history.

December silver finished at 16.285 dollars per ounce, down 0.5 cents. October platinum gained 5.30 dollars to 1,259.10 dollars an ounce.

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Dollar dips amid U.S. non-farm employment data

September 5, 2009
The dollar dipped against most major currencies on Friday as U.S. non-farm employment data in August boosted risk appetite.

Non-farm payrolls fell by 216,000 in August, smaller than expected, the U.S. Labor Department reported on Friday. It was the smallest monthly decline in a year. The Unemployment jumped unexpectedly by 0.3 percentage points to 9.7 percent, the highest in 26 years.

The report added to evidence that U.S. labor market improved with slower paces of job loss, but remains very weak. Job cuts continued in most sectors in August, except education and health care industries.

Since the recession began in December 2007, the number of unemployed persons has risen by 7.4 million, and the unemployment rate has grown by 4.8 percentage points.

The dollar strengthened in early trading as the surprise jump in unemployment rate weighed on market sentiment. The U.S. currency lost grounds later as investors turned to focus on positive signs in the job report.

The euro bought 1.4309 dollars in late New York trading compared with 1.4251 dollars it bought late Thursday. The pound rose to 1.6399 dollars from 1.6320 dollars.

The dollar fell to 1.0862 Canadian dollars from 1.1039 Canadian dollars, and fell to 1.0605 Swiss francs from 1.0626 Swiss francs. It rose to 93.02 Japanese yen from 92.57 Japanese yen.

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No floor in sight for natural gas as prices plunge

September 4, 2009
NATURAL gas prices tumbled again yesterday, hitting new seven-year lows as the U.S. pares down on energy usage and more unused supply is put into storage.

In other trading, benchmark crude for October delivery fell 9 cents to settle at US$67.96 a barrel on the New York Mercantile Exchange. In London, Brent crude dropped 54 cents to settle at US$67.12 on the ICE Futures exchange.

On Monday, Spokane, Washington-based utility Avista Corp. said it wants to reduce natural gas prices for its Oregon customers to the lowest levels in five years. And in the Midwest, Alliant Energy Corp. and Wisconsin Public Service Corp. both predicted heating bills would drop around 20 percent.

That will mean huge savings for a lot of Americans this winter when the heating bill arrives.

"Any savings we get, they get," Alliant spokesman Scott Drzycimski said.

Natural gas for October delivery gave up 20.7 cents to settle at US$2.508 per 1,000 cubic feet on the Nymex. Prices dropped as low as US$2.50 per 1,000 cubic feet - the lowest since March 2002 - after the government reported that U.S. natural gas supplies grew again last week and are now nearly 18 percent above the five-year average.

Natural gas, a key energy source for power plants, has plummeted to less than a third the price it fetched last summer, and its contract on the Nymex lost nearly 23 percent in the past six trading days.

The United States Natural Gas fund, an exchange-traded fund that tracks natural gas prices, has fallen steadily this year, giving up 76 percent of its value and it hit a 52-week low of US$8.94 a share on yesterday.

The Institute for Supply Management showed yesterday that the service sector shrank in August, though hospitals, retailers, financial services companies and other industries covered by its index posted their best reading in 11 months.

Also, the Paris-based OECD said that while the world economy is headed for an earlier recovery than previously forecast, the pace of any rebound will likely remain modest for some time to come.

In other Nymex trading, gasoline for October delivery lost 1.58 cents to settle at US$1.7928 a gallon and heating oil fell by 1.55 cents to settle at US$1.735 a gallon.

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Dollar mixed ahead of U.S. non-farm employment report

September 4, 2009
The dollar was mixed against major currencies on Thursday as investors were waiting for the closely-watched U.S. non-farm employment report to be released on Friday.

Most analysts forecast that non-farm payrolls will continue falling, but with a slower pace. The unemployment is expected to rise slightly.

Should the non-farm job data come out to be much worse or better than expectations, the dollar will strengthen, some analysts said. A weak job report will hurt risk appetite and boost safety demand for the U.S. currency. A strong report may reduce correlation between the dollar and risk sentiment, supporting investors' confidence in the greenback.

U.S. initial claims for jobless benefits declined to 570,000 last week, the Labor Department reported on Thursday. Continuing jobless claims rose to 6.234 million, and the four-week average of initial claims edged up to 571,000. The report showed that the labor market, which remains very weak, is stabilizing in slow paces.

The Institute of Supply Management reported that its index of U.S. service sector rose 2 points to 48.4 in August, roughly in line with expectations. The sub-index of business activity rose 5.2 points to 51.3, higher than the contraction/expansion threshold for the first time since September 2008.

New orders index increased slightly, and new export orders index jumped 6.5 points. The price paid index soared by 21.8 points to 63.1. Export demand for U.S. service industry is picking up, while domestic orders remain weak, analysts said.

The euro bought 1.4251 dollars in late New York trading compared with 1.4273 dollars it bought late Wednesday. The pound rose to 1.6320 dollars from 1.6279 dollars.

The dollar fell to 1.1039 Canadian dollars from 1.1060 Canadian dollars, and rose to 1.0626 Swiss francs from 1.0604 Swiss francs. It rose to 92.57 Japanese yen from 92.15 Japanese yen.

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U.S. government proposes bigger reserves at banks

September 4, 2009
The U.S. government unveiled a plan Thursday to require banks to apply stronger international standards for their capital reserves and liquidity, aiming at preventing any future financial crisis.

The Treasury Department released a 14-page outline for Secretary Timothy Geithner to discuss the U.S. proposals during two days of meetings in London among the Group of 20 nations that begin Friday.

The proposal requires higher capital cushions and liquidity standards for banking firms deemed to pose a threat to the overall stability of the financial system.

According to the Treasury Department's statement, the global regulatory framework failed to prevent the build-up of risk in the financial system in the years leading up to the recent crisis. Major financial institutions around the world had reserves and capital buffers that were too low; used excessive amounts of leverage to finance their operations; and relied too much on unstable, short-term funding sources.

The resulting distress, failures, and government bailouts of these firms imposed unacceptable costs on individuals and businesses around the world, the department said.

"Today the Treasury Department set forth the core principles that should guide reform of the international regulatory capital and liquidity framework to better protect the safety and soundness of individual banking firms and the stability of the global financial system and economy," said the statement.

Geithner's proposal says a comprehensive international agreement should be reached by the end of 2010 with countries agreeing to implement the measure by the end of 2012.

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U.S. stocks rise on mixed economic data

September 4, 2009
Wall Street rose on Thursday as investors digested fresh reports on job market, consumer spending and service industries.

The U.S. Labor Department said the number of unemployed workers filing for jobless benefits fell last week by 4,000 to 570,000, but that was still more than the 560,000 figure the market had expected.

Meanwhile, the market closely looked at sales reports from major retailers for more insight on consumer spending that accounts for 70 percent of the U.S. economy. Early reports showed six retailers missed analyst expectations while three exceeded estimates.

Costco's shares, which were upgraded by JPMorgan, climbed 8.6 percent to 55 U.S. dollars, while Target gained 1.7 percent to 47.07 dollars.

Mining company shares rose after gold prices climbed to 997.20 dollars an ounce, the highest since late February. Newmont Mining Corp and Freeport-McMoRan Copper & Gold Inc both rose more than 4 percent.

The Institute for Supply Management's index of non-manufacturing businesses, which make up almost 90 percent of the economy, rose from 46.4 in July to 48.4 in August, exceeding forecasts and representing the highest level in 11 months.

The Dow Jones average rose 63.94, or 0.7 percent, to 9,344.61. The S&P 500 index rose 8.49, or 0.9 percent, to 1,003.24, while the Nasdaq composite index rose 16.13, or 0.8 percent, to 1,983.20. 　

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Wall Street falls ahead of economic data

September 2, 2009
Wall Street fell in early trading Tuesday, as investors awaited reports on manufacturing activity, home sales and construction spending for further evidence of the economy's health.

The Institute for Supply Management is expected to report that U.S. manufacturing rises from 48.9 in July to 50.5 in August, the first expansion in 18 months. A reading above 50 indicates growth.

Meanwhile, a reading on pending U.S. home sales is forecast to rise in July for the sixth straight month, providing more evidence that the housing market is stabilizing. And construction spending is expected to be flat in July.

Sales reports from automakers will also be closely watched. Many automakers are set to post strong sales results for August thanks to the U.S. government's Cash for Clunkers program.

The Dow Jones fell 38.46 to 9,457.82. Broader indexes also went lower. The Standard & Poor's 500 index dipped 3.73 to 1,016.89 and the Nasdaq fell 6.84 to 2,002.22.

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Gold gains as tumbling equity markets fuel safe-haven demand

September 2, 2009
Gold futures on the COMEX Division of the New York Mercantile Exchange ended higher on Tuesday as the plunging stock markets raised gold's safe-haven appeal. Silver rose, but platinum went down.

Gold price for December delivery gained 3 U.S. dollars, or 0.3 percent, to finish at 956.50 dollars an ounce.

Earlier in the session, a stronger dollar and weak oil put much pressure on the yellow metal, which fell below the previous closing level. Dollar index, a gauge measuring the greenback's value against six other currencies, rose 0.7, or 0.9 percent, and oil in New York slid to a new two-week low by the end of gold floor trading time.

On the economy front, the National Association of Realtors said pending U.S. home sales rose 3.2 percent to 97.6, the highest level in more than two years as first-time buyers rushed to take advantage of a tax credit that expires this fall.

Meanwhile, the Institute for Supply Management said its manufacturing index rose to 52.9 in August from 48.9 in July. It's the first reading above 50, which indicates expansion, since January 2008.

However, ignoring the encouraging economic data, the U.S. stock markets plunged as investors worried that the economy's recovery is not as optimistic as expected. The Dow Jones industrials lost about 170 points when gold closed, refueling the precious metal's appeal as safe-haven to avoid economy turmoil risk.

December silver finished at 15.06 dollars per ounce, up 13.7 cents. October platinum lost 17.20 dollars to 1,226.80 dollars an ounce.

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Oil prices fall as stock markets decline

September 2, 2009
OIL prices dipped again yesterday despite new indications that the U.S. manufacturing and housing industries may be on the mend.

Benchmark crude for October delivery fell US$1.91 to settle at US$68.05 a barrel on the New York Mercantile Exchange.

The contract Monday lost US$2.78 to settle at US$69.96, meaning crude has fallen almost 6 percent this week.

However, it appeared energy prices were rebounding yesterday after the Institute for Supply Management, a trade group of purchasing executives, said its manufacturing index rose to 52.9 in August. That is the first reading above 50, which indicates expansion, since January 2008. It's also the highest since June 2007.

The National Association of Realtors said pending U.S. home sales rose to the highest level in more than two years as first-time buyers rushed to take advantage of a tax credit that expires this fall.

That type of news this year has pushed energy prices higher because if heavy industries are ramping up production and people are buying homes, it is likely that spending on energy will rise as well.

The bounce in energy prices yesterday was short-lived and both equity and energy markets reversed course before noon.

PFGBest analyst Phil Flynn questioned whether the manufacturing report gave a skewed image of the economy.

"The question is the sustainability," he said.

Another possible reason for the volatile prices yesterday is the low volume on the floor of the Nymex.

It is typical for futures prices to swing in the week before a holiday and some traders said there was nothing to be read into falling prices before the Labor Day weekend begins.

"I'm not putting anything on what we see this week," said oil analyst and trader Stephen Schork.

Looking ahead, there is little to suggest that the supply of crude or gasoline will be constrained.

Even though most energy experts believe the government will report a draw-down in gasoline and crude stocks Wednesday as part of its weekly report, levels remain very high and the driving season is coming to a close.

Gasoline consumption fell 5 percent for the week ended Friday from a year ago when approaching Hurricane Gustav caused a spike in consumption along the Gulf of Mexico, according to the MasterCard Spendig Pulse report. Consumption was down from the previous week by 2.9 percent, in part because of bad weather along the East Coast caused by tropical storm Danny.

MasterCard's report is based on aggregate sales activity in the MasterCard payments network, coupled with estimates for all other payment forms, including cash and check.

In other Nymex trading, gasoline for October delivery fell by 2.77 cents to settle at US$1.7822 a gallon and heating oil fell 4.96 cents to settle at US$1.7589 a gallon. Natural gas shed 15.6 cents to settle at US$2.821 per 1,000 cubic feet.

In London, Brent crude fell US$1.92 to settle at US$67.73.

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Gold declines as commodity markets plummet

September 1, 2009
Gold futures on the COMEX Division of the New York Mercantile Exchange ended lower on Monday as the commodity markets plunged after China's stock markets dipped 6.7 percent overnight. Silver rose, but platinum went down.

Gold price for December delivery dropped 5.30 U.S. dollars, or 0.5 percent, to finish at 953.50 dollars an ounce.

On concerns of a tightening in bank lending, Chinese equity markets saw the largest daily loss since last June on Monday, as the Shanghai Composite Index tumbled 193 points, or 6.7 percent, to a three-month low.

This weighed much on the U.S. commodities as investors worried the economy's recovery will be delayed. The benchmark crude oil for October delivery in New York lost 2.82 dollars, or 4 percent, to 69.92 dollars a barrel and COMEX copper lost 12.4 cents, or 4.4percent, to 2.8265 dollars per pound by the end of gold floor trading time.

The commodities' big loss eased investors' worries about inflation, reducing gold's appeal of storing value against rising price.

Dollar fell against many of the major rivals. The dollar index, a gauge measuring the greenback's value against six currencies, fell 0.5 percent to as low as 77.995 shortly before gold closed, which helped the precious metal pare some losses during the session.

December silver finished at 14.923 dollars per ounce, up 10.8 cents. October platinum lost 1.90 dollars to 1,244.00 dollars an ounce. 　

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Dollar dips against most major currencies

September 1, 2009
The dollar fell slightly against most major currencies on Monday after strong economic data reduced safety demand.

The dollar rose in Monday's early trading as falling Asian stocks hit market sentiment in New York. It lost some grounds later after the Chicago purchasing managers index (PMI) turned out to be better than expected.

The Chicago PMI rose by 6.6 points to 50 in August, according to a survey of corporate purchasing managers. It is the highest level of the index since September 2008. Readings higher than 50 indicate overall business expansion and readings lower than 50 indicate contraction. Economists attributed the strength to the re-start of the U.S. auto industry, aided by the "cash for clunkers" program.

Although the index has no significant overall economic value by itself, the report did bolster optimism as investors took it as a good sign. The closely watched national manufacturing index of the Institute of Supply Management (ISM), which is due on Tuesday, would be stronger than previous forecasts, analysts said.

There are other key economic reports coming later this week, including non-farm employment and factory orders. The Federal Reserve will release minutes of its recent monetary policy meeting. The European Central Bank is expected to hold rates at record low levels at its meeting on Thursday. Analysts anticipate that the currency market will fluctuate in wider ranges than in previous sessions.

The euro bought 1.4329 dollars in late New York trading compared with 1.4287 dollars it bought late Friday. The pound fell to 1.6266 dollars from 1.6269 dollars.

The dollar rose to 1.0946 Canadian dollars from 1.0931 Canadian dollars, and fell to 1.0596 Swiss francs from 1.0608 Swiss francs.It also fell to 92.99 Japanese yen from 93.60 Japanese yen.

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US economists: No need for second stimulus package

September 1, 2009
The US economy does not need a second fiscal stimulus package, instead the government should cut spending over the next two years, according to a survey of business economists released yesterday.

Most economists in the National Association for Business Economics (NABE) semi-annual poll were concerned about the outlook for the US government budget. Also, they doubted health-care reforms proposed by the Obama administration would lower costs while increasing access and maintaining quality.

"This is one of the fastest-moving and most controversial economic policy environments we have experienced in a generation," said NABE President Chris Varvares. "The more vexing policy challenges about which there is less agreement are federal healthcare ... budget policies."

The government early this year stepped in with a $787 billion package of spending and tax cuts to break the worst recession since the Great Depression of the 1930s. Separately, it bailed out banks to prevent the financial system from collapsing.

Those actions left the economy saddled with a $1.58 trillion budget deficit in fiscal 2009, and a shortfall of about $9 trillion between 2010 and 2019.

The ballooning budget deficit is causing alarm and feeding into opposition to President Barack Obama's central policy priority of overhauling the US healthcare system, whose price tag is $1 trillion.

While economists in the NABE survey acknowledged that the stimulus package had helped to brake the pace of the economy's decline in the second quarter, only 35 percent viewed fiscal policy as being "about right".

Half of the respondents saw fiscal policy as too stimulative. About 266 members took part in the poll which was conducted between Aug 3-18. The US economy contracted at a 1 percent annual rate in the second quarter after collapsing 6.4 percent in the first three months of the year.

"Fully 76 percent do not believe a second stimulus package is needed. Three-quarters responded that they would like to see fiscal policy become more restrictive over the next two years, but only 28 percent expect that it will be," the NABE said.

"In fact, the largest share, nearly 42 percent, expects fiscal policy to become even more stimulative than it is now."

Just over half believed that fiscal stimulus would add between 0.5 and 1.5 percentage points to gross domestic product growth in the second half of 2009, while over a third saw it as adding less than half a percentage point.

About 58 percent felt the stimulus would add between half and 1.5 percentage points to growth from the fourth quarter of 2009 to the fourth quarter of 2010, the survey showed.

Nearly 70 percent of economists believed that monetary policy was "about right". About 56 percent of respondents expected the Federal Reserve to keep interest rates unchanged over the next six months, while 44 percent saw an increase.

The Fed has cut interest rates almost to zero and pumped around $1 trillion into financial markets via a range of credit easing measures to prevent lending from freezing up, amid a global credit crisis sparked by the collapse of the US housing market.

"Half of the economists do not believe quantitative easing actions of the Fed will be inflationary over the next couple of years, while 41 percent think they will," the NABE said.

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