Morning Brief: 4 November 2010

Peso rise won’t be blocked Authorities ‘not going to fight the market’ -- Palace spokesman MALACAÑANG IS CONCERNED over the economic impact of a strengthening peso but will not move to bar its rise, officials yesterday said. "We’re not going to fight the market for long. The best thing to do is [ensure that the appreciation] does not happen too rapidly," Presidential Communications Group Secretary Ricky A. Carandang said in a telephone interview. The currency continued to gain against the US dollar yesterday, closing at a nearly two and a half year high of P42.590 to the greenback. The gain has been attributed to strong capital inflows, which analysts expect to be further boosted by the US Federal Reserve’s awaited announcement this morning of a fresh stimulus effort. The peso has strengthened by over 8% this year, making Philippine exports less competitive and reducing the value of overseas Filipino workers’ (OFWs) remittances, a key driver of consumption. Exporters have so far been relatively silent, unlike during the currency’s 2008 rally. Yesterday Philippine Exporters Confederation President Sergio Ortiz-Luis, Jr. reiterated claims that some firms had stopped taking orders or were downsizing. "The exporters are not competitive anymore. Most of are small-medium [enterprises], [and] certainly it will affect employment," he said. The Bangko Sentral ng Pilipinas (BSP) has ruled out capital controls and last week further liberalized foreign exchange rules to facilitate dollar outflows. "[What authorities] can do is make the journey gentler. We can’t reverse where the market is leading," Mr. Carandang said, adding that the situation remained manageable. "... I’m happy to report that other countries are feeling the appreciation of their currencies more than we are. So to some extent, we’re cushioned from the effect," he said. Presidential spokesman Edwin Lacierda, meanwhile, told reporters: "There is a concern because you have to balance exporters and the OFWs and all other concerns." "We have to study the matter. The BSP will be on top of the situation," he added. The central bank yesterday said last week’s forex rule adjustments were not expected to have an immediate effect -- they have not been even officially published -- on exchange rates. "[The] market only knows about it," BSP Deputy Governor Diwa C. Guinigundo said in a text message. The peso’s 16.5-centavo gain yesterday to P42.590 per dollar -- the strongest since it closed at P42.480 on May 9, 2008, was due to "portfolio inflows in the equity market and the dollar remittances from OFWs," said Jonathan L. Ravelas, Banco de Oro chief market strategist. Marcelo E. Ayes, senior vice-president at Rizal Commercial Banking Corp., added that "the pending [US Fed] announcement of the second round of quantitative easing is also a factor on the positive momentum of the peso." The Fed is expected to announce early this morning a new round of US debt purchases in a bid to boost the country’s struggling economy. With more dollars becoming available, Mr. Ayes said: "the peso will remain volatile, it may go from P42.50 to P42.25 at the maximum or bounce to P42.75, but it will surely bounce back to P43 before the year ends." Banks’ capital floor raised THE CENTRAL bank has set higher capital requirements for investors setting up new rural banks. “The Monetary Board believes the existing minimum capital requirement for RBs (rural banks) is no longer adequate to sustain competitive and robust banks,” the Bangko Sentral ng Pilipinas (BSP) said in a statement yesterday. The new minimum capital requirement will apply to new rural banks. In the case of existing rural banks, the new capital requirement will apply if any the following conditions is satisfied: • conversion of the rural bank into a higher category; • relocation of the head office in areas of higher classification; • when bulk of the rural bank’s assets or deposits are regularly accounted for by branches located in areas of higher classification; and • when the rural bank applies for grant of special banking authorities such as limited trust, foreign currency deposit unit operations, and acceptance of demand deposits and notice of withdrawal or NOW accounts. Rural banks with head offices in Metro Manila must meet a minimum capital requirement of P100 million (up from P26 million, while those in the cities of Cebu and Davao, P50 million (up from P13 million). The new requirement for rural banks setting up head offices in other cities has been set at P25 million; in first to fourth class municipalities, P10 million; and fifth to six class municipalities, P5 million. Aside from setting higher amounts, the central bank also simplified its grouping of cities and municipalities to facilitate the imposition of the new capital requirement. “Affected stakeholders,” the BSP said, were consulted. The new capital requirement will take effect 15 days after the circular containing the rules is published in a newspaper of general circulation. The circular has not been published yet. Rural Bankers Association of the Philippines President Ma. Corazon L. Miller said in a telephone interview yesterday the group supports the new rules. “We agree with the rules. Existing rural banks are not really affected,” she said. “This (new capital requirement) is justified particularly for new rural banks since the cost of operations is high,” she said further. Those planning to set-up new rural banks, she pointed out, will have to purchase a lot for its office and with lot prices as they right now, a small capital will not be enough.

U.S. Stocks Rise as Fed Announces Additional Treasury Purchases U.S. stocks rose, with the Standard & Poor’s 500 Index ending near its highest levels of the day, after the Federal Reserve’s announcement of $600 billion of Treasury purchases sent banks higher. JPMorgan Chase & Co., Fifth Third Bancorp and Bank of America Corp. advanced at least 1.1 percent to help lead gains among lenders.Hartford Financial Services Group Inc. climbed 9.2 percent after lifting its earnings estimate this year. Ford Motor Co. rose 5.2 percent after saying sales increased 15 percent in October. The S&P 500 climbed 0.4 percent to 1,197.96 as of 4 p.m. in New York, the highest since May 3. The Dow Jones Industrial Average added 26.41 points, or 0.2 percent, to 11,215.13, its highest close since the week Lehman Brothers Holdings Inc. filed for bankruptcy in September 2008. “Some people were expecting $500 billion, some thought it’d be spread out over a year,” said James Swanson, chief investment strategist at Boston-based MFS Investment Management, which oversees about $204 billion. “So it was slightly positive for the markets and for the economy.” After fluctuating most of the day, stocks rose after the Fed said new purchases will be about $75 billion a month through June. Policy makers said they will “adjust the program as needed to best foster maximum employment and price stability.” The majority of economists surveyed by Bloomberg expected the Fed would add at least $500 billion to the financial system. Fed Chairman Ben S. Bernanke is trying to boost growth after near-zero interest rates and $1.7 trillion in securities purchases helped pull the economy out of recession without bringing down unemployment from close to a 26-year high. Treasury 30-Year Bonds Tumble as Fed Purchases Other Securities Treasury 30-year bonds fell the most in two months after the Federal Reserve said it will buy fewer of the securities than anticipated by investors in its $600 billion program of purchases to boost the economy. The difference between rates on 30-year bonds and Treasury Inflation Protected Securities touched the widest since May 2008 on concern the Fed will be successful in reigniting inflation. The Fed said in a statement at the end of a 2-day Federal Open Market Committee gathering that it will make 4 percent of its purchases in the 17- to 30-year sector. In its first round of purchases, ended in March, the Fed bought $1.7 trillion in securities, including $300 billion in Treasuries, in an effort to spur economic growth strong enough to lower unemployment from near a 26-year high. “The yield curve should start to steepen because the Fed will focus on 5- to 6- years,” said William Larkin, a fixed income portfolio manager in Salem, Massachusetts, at Cabot Money Management, which manages $500 million. “The risk once they finish is that inflation will be elevated. There’s a good chance we’ll be rip-roaring in terms of growth and inflation.” Thirty-year bond yields rose 11 basis points to yield 4.04 percent at 5:07 p.m. in New York, after earlier reaching the biggest rise since Sept. 9. The 3.875 percent bonds due in August 2040 rose 1 30/32, or $19.38 per $1,000, to 97 4/32.

Crude Oil Increases to Six-Month High on U.S. Fuel-Supply Drop, Fed Move Oil rose to the highest level in six months after a U.S. government report showed that fuel supplies tumbled and the Federal Reserve said it will buy an additional $600 billion of Treasuries through June to boost the economy. Oil jumped 0.9 percent as gasoline inventories fell 2.69 million barrels to 212.3 million last week, the lowest level since Nov. 20, 2009, the Energy Department said. The dollar touched a nine-month low versus the euro after the Fed said it will boost asset purchases to spur economic growth. The product supply drop “caused a knee-jerk reaction, and prices rallied,” said Matt Smith, a commodities analyst for Summit Energy in Louisville, Kentucky. “The Fed move is going to create weakness in the dollar and it shows that the Fed is going to be proactive about stimulating the economy in the long term. Both of those factors are bullish for crude.” Crude oil for December delivery advanced 79 cents to $84.69 a barrel on the New York Mercantile Exchange, the highest settlement price since May 3. Futures have risen 6.4 percent in the past year.

Sources: Bloomberg, Reuters, www.inquirer.net, www.philstar.com, www.bworldonline.com, www.cnnmoney.com

Jonathan Ravelas
Chief Market Strategist
(632) 858-3145

Rhys Cruz
Junior Researcher
(632) 858-3001

Philippines Markets: 3 November 2010

03 November 2010

USD/PhP: 42.590 - 0.165 PSEi: 4381.86 + 40.12
USD/JPY: 80.640 PFINC: 1026.02 + 20.55
EUR/USD: 1.4042 BDO: 63.40 + 0.85
GBP/USD: 1.6048 BPI: 60.80 + 1.80
PDSTF3M: 3.8212 MBT: 83.05 + .3.15
Prices as of 4:00pm Source: Bloomberg, Reuters

Republicans grab share of power, in blow to Obama

Resurgent Republicans smashed the Democratic power monopoly Tuesday, exit polls projected, in a debilitating blow to President Barack Obama just two years after he took power on a tide of hope and history.

Exploiting fear and fury over the stuttering economic rebound, Republicans grabbed back the House of Representatives, though Obama's beleaguered Democrats looked certain to cling onto the Senate, though with a badly reduced majority.

"We've come to take our government back!" cried Rand Paul, a hero of the ultra-conservative Tea Party movement, after winning a Senate seat in Kentucky.

"There's a Tea Party tidal wave," he said, in a coming-of-age moment for the ultra-conservative movement set up to challenge what critics see as Obama's "big-government" takeover of American life.

Television networks showed Republicans on track to easily exceed the 39 seat net gain they needed to take the 435-seat House, in a result which will likely paralyze Obama's reform quest and cast doubt on his 2012 reelection hopes.

Both CNN and MSNBC projected that the Republicans would post a net gain of at least 50 seats.

The result will spell the end of Democrat Nancy Pelosi's historic four-year reign as the first female House speaker, with Ohio lawmaker John Boehner now all but certain to take the gavel in January.

Democrats however looked sure to keep the Senate after Joe Manchin won the firewall Senate seat of West Virginia, the state where he is currently governor.

Republicans had so far picked up a net three seats on the way to approaching parity in the upper House.

But barring huge upsets on safe Democratic turf, they looked certain to fall short of the 10 seats they needed for their own majority.

As well as Paul, charismatic Florida Tea Party favorite and Cuban-American Marco Rubio, who is tipped for even higher office, also surged to victory in the Senate under the ultra-conservative group's banner.

Rubio however warned that Republicans must embrace fiscal responsibility, saying that voters had rejected the incumbent party in power, not necessarily found new love for the opposition.

"We make a grave mistake if we believe tonight these results will somehow embrace the Republican Party," he said at his victory party.

"What they are is a second chance. A second chance for Republicans to be what they said they were going to be, not so long ago."

All eyes were now turning to Nevada, where Senate Majority leader Harry Reid was battling for his political life against another Tea Party favorite, Sharron Angle, after a bitter and inflammatory campaign.

Television networks said the race was still too close to call.

Earlier, in a last-minute bid to stem Democratic losses, Obama had pleaded with voters over the airwaves and the Internet, to reject what he says is a Republican bid to revive policies which sparked the economic meltdown.

"Today, the country will make a choice about the direction we take in the years ahead," he said in an email to supporters.

"This movement was never just about one election. It was about building a movement for change that endures."

Obama was scheduled to make his first public comments on the election in a White House news conference on Wednesday which could be crucial in setting the tone for a tough run up to his 2012 election campaign.

Under Boehner, Republicans are promising to reverse Obama's sweeping health reforms and promise a budget crunch and tax cuts which they claim will cut the deficit and ignite growth.

All year, voters have made clear that the sluggish rebound from the worst crisis since the Great Depression, with unemployment standing at 9.6 percent, was their major concern.

"I'm unemployed for almost one year," said Republican voter Tom Gutierrez, 41, in Miami's Little Havana neighborhood. "I need to find a job and I'm sure I will not get it with the Democrats."

But Liberty, Missouri, schoolteacher Jane Boswell said she was switching her vote to Democratic because Obama needed more time to pursue his agenda and scolded voters who "think that change has to happen overnight."

"I'm frustrated with adults who think that it has to happen immediately," Boswell said. "Right now, it's like a runaway train, switching tracks all the time."

Obama, who leaves on a nine-day tour of Asia on Friday, must now launch a re-examination of his presidency, as he seeks to renew his bond with voters in the run-up to his 2012 reelection fight.

He could choose to seek common ground with emboldened Republicans who have already said their top priority is to deprive him of a second term.

Alternatively, with his veto pen and the megaphone of the presidency, he could opt to stand his ground, hoping Republicans overreach.

Jonathan Ravelas
Chief Market Strategist
(632) 858-3145

Rhys Cruz
Junior Researcher
(632) 858-3001

Morning Brief: 3 November 2010

Aquino hit on Arroyo pork ,Pampanga rep is no sacred cow, says senator Sen. Alan Peter Cayetano Tuesday said the Aquino administration was treating former President Gloria Macapagal-Arroyo, now a Pampanga representative, like a “sacred cow” by setting aside P2.2 billion in public works funds for her district in the proposed national budget for 2011. “Why is she being babied instead of being punished? It appears that she is still well-connected with this administration,” Cayetano said. He said Arroyo was allocated the huge amount despite being painted by the Aquino camp as enemy No. 1 in the May national elections. Cayetano, who supported Sen. Manuel Villar in the presidential election, said the administration should practice what Mr. Aquino had preached during the campaign by adopting a “tuwid-na-daan” (straight-path) budget. “I really cannot understand why GMA is still getting preferential treatment under this new administration? Why are they trying to equalize the budget among all congressmen when the best solution is to redistribute Arroyo’s P2.2-billion pork barrel to poorer provinces that deserve it,” he said. While hearing the budget, the House of Representatives discovered that P2.2 billion was allocated for Arroyo’s district in the P90-billion proposed budget for 2011 of the Department of Public Works and Highways (DPWH). In contrast, five House members have zero allocation in their districts, while others have less than P50 million. Narrowing gap To partly close the gap, Malacañang and a House committee agreed to tap P1.2 billion in lump sums in the proposed DPWH budget to bring to at least P50 million the infrastructure fund for each congressional district. The P50 million is on top of the P70 million in Priority Development Assistance Fund (PDAF), pork barrel allotted annually to members of the House. Senators are each entitled to P200 million in PDAF. Party-list representatives are entitled to the PDAF, but not to the additional P50 million and to the road users’ tax, which are available to district lawmakers. Unfair Cayetano said the situation was unfair considering that Arroyo acted “vindictively” over the past five years by withholding the pork barrel releases of her critics in Congress. He questioned Public Works Secretary Rogelio Singson’s failure to include infrastructure funds in Arroyo’s district among the P3.2-billion worth of infrastructure projects that he discontinued and placed for rebidding. “They should have moved to renegotiate these contracts and have them bid out like the other projects voided by Secretary Singson. Why is the former President being treated as an exception?” Cayetano asked. Review budget system Cagayan de Oro Rep. Rufus Rodriguez said the bicameral committee should look into the distribution of infrastructure funds by region and by district in the P1.645-trillion proposed budget for next year, and rectify “inequities.” He said a lot of money was being given to Luzon, especially Pampanga, referring to Arroyo’s home province. After approving on second reading the proposed 2011 budget, the House is collating proposed amendments for its eventual approval on third reading. Once the House and the Senate approve the budget measure, they will convene the bicameral conference committee to reconcile their versions. Open to realignment House leaders did not rule out the possibility that the P2.2-billion allocation could be realigned, or even slashed at the bicameral committee. “We should find out what it’s for. I think its benefits go beyond the district and maybe even beyond the province,” Speaker Feliciano Belmonte Jr. said by text in reply to a question. But he added: “If it’s a political thing, certainly it should be reallocated, reduced or even deleted. And the bicam is the proper place as you said.” Cavite Rep. Joseph Emilio Abaya, chair of the House appropriations committee, agreed. “That’s very possible. It will boil down to the merits of the project,” he said when asked on the possibility of slashing the amount at the bicameral committee. But he added: “The bulk is foreign-assisted projects. Politics shouldn’t get into it.” Foreign-assisted While she was still the President, Arroyo managed to raise the public works budget in Pampanga’s second district with foreign-assisted projects amounting to P2,220,526,000, according to Akbayan party-list Rep. Walden Bello. These will be funded by P564.359 million from the national budget, and P1.678 billion in loans from the Japan Bank for International Cooperation and the Korean Development and Cooperation Fund, he said. Singson has authorized only P22 million public works funds for Pampanga in 2011, but the rest of the infrastructure funds worth P2.2 billion are loans contracted by the then President. If the bulk of the P2.2 billion would be funded by foreign loans, the government has to comply with the conditions of the loan agreements, Budget Secretary Florencio Abad said. “I understand from Secretary Singson that the P2.2 billion is a foreign-assisted project, and therefore covered by a loan agreement. In which case Congress cannot ignore the conditions of the loan,” he said by text message. Singson echoed Abad’s position, saying that Congress can only realign the amount if it stopped the projects altogether. “If those projects are stopped, the foreign funders will complain. I don’t think it’s correct to realign this. What’s important is to do this right,” he said. Hazard-mapping project Singson said these undertakings were part of a massive, multiphase project in Central Luzon initiated years ago to clear and clean up river systems that flow into Manila Bay, and it just so happened that these straddled Arroyo’s district. The two major projects are the Pinatubo hazard-mapping project and the Korean-funded roads contracted as early as 2003, according to reports. Deputy Majority Leader Romero Federico Quimbo, whose second district in Marikina City was allotted a measly P1 million in infrastructure funds for 2011, also backed the proposed review of the budgeting system. “There should be a more careful [study] of the entire budgeting system. There should be fixed guidelines in terms of allocation,” he said by phone, noting that the differing allocations showed “lapses in the budget system.” Ma. Elena Bautista-Horn, the spokesperson for Arroyo, said Congress couldn’t slash the P2.2 billion without risking penalties. “It’s a foreign loan. Bicam can’t slash it. They can hold the (Philippine government) counterpart but we will be paying the interest just the same, plus the penalties for the delay,” she said in a text message. Amid the dispute, Sen. Teofisto Guingona III filed Senate Bill No. 2185 which seeks to open to the public the bicameral meeting on the budget to ensure transparency. Most of the horse-trading and last-minute insertions are made during the meeting of the bicameral committee. Peso breaks into 42:$1 territory Remittances, ‘hot money’ boosting local currency The peso broke into the 42:$1 territory and closed at its highest level in two-and-a-half years, buoyed by a surge in remittances sent by Filipinos abroad and the influx of “hot money” into the local stock market. The peso closed Tuesday at its intraday high of 42.755 against the dollar, its strongest finish since May 16, 2008. The intraday low settled at 43:$1. Volume of trade moved above the $1-billion mark to reach $1.08 billion, up from $912.2 million registered before the market closed prior to the long weekend. Traders said the appreciation of the peso was aided partly by an increase in remittances as the Christmas season drew near and as enrollment for the second semester began. But traders said that remittances accounted for just half of the story of the peso’s rise. They said optimism of investors on the Philippines and Asia in general was boosting the peso and other Asian currencies. “The rise of the peso also had to do with optimism given impressive macroeconomic fundamentals of the country and talks that the Philippines actually deserves an upgrade in its credit ratings,” said Marcelo Ayes, senior vice president at Rizal Commercial Banking Corp. The country’s economic managers have been harping on the country’s improving fundamentals, including its growing dollar reserves, benign inflation and robust economic growth. In the second quarter, the economy, as measured by the gross domestic product, expanded 7.9 percent year-on-year, the fastest pace in more than 30 years. Ayes said the outlook on the Philippine economy was consistent with that for other countries in Asia, which is expected to lead this year’s global economic growth. Jonathan Ravelas, market strategist for Banco de Oro, said the peso could strengthen further in the next few weeks to as high as 42.50 to $1. “Any pullback is limited to only 43:$1,” he said, noting that given the trend of rising foreign capital entering the Philippines and Asia, the peso was unlikely to weaken beyond 43:$1. Ayes projected that the peso would end the year anywhere between 42.25 to 42.50 against the greenback. Meanwhile, the BSP has been intervening in the foreign exchange market due to the sharp rise of the peso, traders said. If not for the central bank’s intervention, done through heavier dollar buying, the peso could have been even stronger, they said. BSP officials have said that while the central bank adopted a general policy of keeping a flexible exchange rate, it would intervene from time to time to avoid a sharp and sudden rise or fall of the peso. They said a sharp volatility was disruptive to business. Before the long weekend, the BSP issued new rules on foreign exchange that were aimed at tempering the rise of the peso. Under the new rules, individuals and businesses may bring out dollars from the country easier after the BSP removed documentary requirements for some foreign exchange transactions. Philippine Peso Update Presently trading at 42.55, given the strong surge of remittances and portfolio flows to the local markets, the peso has strengtthened by 7.5 percent since June. The local currency has still some gas to try the 41.50-42.00 levels in the near-term. any pullback (if any) could be limited towards the 43.00 levels. Year-end expectations is seen at the 42.00 levels.

Wall Street climbs ahead of election results, Fed decision US stocks closed higher on Tuesday as traders eyed key congressional and local elections and a meeting of the Federal Reserve that would likely decide on new economic stimulus. Stocks traded in positive territory throughout the session as Americans began voting in the mid-term elections which appeared set to give Republicans control of the House of Representatives, while President Barack Obama's Democrats were expected to keep a narrow majority in the Senate. "The global equity markets are nicely higher as traders are optimistic that the results of today's US mid-term elections will prove favorable for future policy making surrounding business activity," said analysts at Charles Schwab. A gridlock in Congress would limit the passage of new laws that could affect the markets and reduce uncertainty, in the eyes of many traders. The blue-chip Dow Jones Industrial Average rose 64.10 points (0.58 percent) to close at 11,188.72 points, while the broader S&P 500 index advanced 9.19 points (0.78 percent) to 1,193.57. The tech-rich Nasdaq composite index was up 28.68 points (1.14 percent) to 2,533.52. The Charles Schwab analyst also noted "stocks are being supported by elevated expectations of the deployment of further stimulus efforts by the Fed after its two-day policy meeting, which began today, pressuring the US dollar and lifting commodity prices." The Fed's policy-setting panel, the Federal Open Market Committee, is expected to announce on Wednesday a decision to renew large-scale asset purchases, known as quantitative easing, in a bid to boost the weak economic recovery. And while the stocks markets have steadily risen in recent weeks in anticipation of the stimulus, traders were nevertheless anxiously waiting to find out its scope and depth. Shortly before the opening bell, Pfizer reported a third-quarter profit of $866 million, a 70 percent drop from the same period a year ago, which the world's biggest drugmaker attributed to acquisition costs. The company reported earnings per share of 54 cents, beating most analysts' expectations by three cents. Pfizer shares declined 0.9 percent. And Kellog said its third-quarter profit fell six percent from last year to $338 million as result of a drop in cereal sales and a massive June recall. Its shares fell two percent. In other corporate news, Oracle announced on Tuesday it will buy e-commerce software developer Art Technology Group for $1 billion as more and more technology firms seek to expand their online services. Oracle shares were up 1.4 percent, while Art Technology Group saw its stocks soar 45 percent on the news. The bond market rose. The yield on the 10-year US Treasury bond dropped to 2.59 percent from 2.63 percent on Monday, while that on the 30-year bond fell to 3.93 percent from 4.02. Bond yield and prices move in opposite directions.

Oil Advances to Six-Month High on Weaker Dollar, Fed Stimulus Speculation Oil rose to a six-month high after an industry report showed U.S. crude inventories declined and on expectations the dollar will drop following Federal Reserve economic stimulus measures. The Fed today may announce a plan to purchase at least $500 billion of long-term securities, according to economists surveyed by Bloomberg News. This policy, known as quantitative easing may weaken the dollar and increase investors’ interest in commodities. U.S. crude stockpiles fell 4.1 million barrels, the most since July, in the week ended Oct. 29, the industry-backed American Petroleum Institute said yesterday. “The news tonight from the Fed on the quantitative easing will be the big thing for the oil market,” said Serene Lim, an energy and commodity strategist at Australia and New Zealand Banking Group Ltd. in Singapore. “Everyone is a bit cautious ahead of the report. The inventory levels being drawn down are seen as a positive.” Oil for December delivery rose for a third day, gaining as much as 60 cents, or 0.7 percent, to $84.50 on the New York Mercantile Exchange, the highest since May 4. It was at $84.32 at 10:35 a.m. in Singapore. Oil closed at $83.90 yesterday, the highest since May 3, and has risen 6.1 percent the past year. The greenback has dropped 9.1 percent versus the euro since Aug. 27, when Fed Chairman Ben S. Bernanke said in a speech that the central bank “will do all that it can” to sustain economic growth, fueling speculation that a resumption of quantitative easing would debase the dollar. Crude has risen as the dollar’s fall increased the appeal of commodities as an alternative investment. The U.S. currency declined against most its major counterparts yesterday, falling 1 percent to $1.4034 per euro in New York, from $1.3893. It traded at $1.4012 per euro at 10:06 a.m. Singapore time. Stockpiles Fall Brent crude for December settlement gained as much as 47 cents, or 0.6 percent, to $85.88 a barrel on the London-based ICE Futures Europe exchange today. The contract rose 79 cents, or 0.9 percent, to $85.41 a barrel yesterday, the highest level since May 4. U.S. crude stockpiles fell 1.1 percent last week to 367.6 million barrels, the API said. Gasoline supplies slumped 3.2 million barrels to 219.7 million and distillate inventories dropped 4.7 million to 161.4 million, the group said. A government report is forecast to show that U.S. supplies of distillate fuel, including diesel and heating oil, are at their lowest level since July. Inventories probably declined 1 million barrels last week, according to the median of 17 analyst responses in a Bloomberg News survey before today’s Energy Department report. All those surveyed said supplies would fall. U.S. crude stockpiles probably increased 1.5 million barrels, the survey showed. They rose 5.01 million barrels to 366.2 million in the week ended Oct. 22, the highest level since July and 13 percent above the five-year average.

Sources: Bloomberg, Reuters, www.inquirer.net, www.philstar.com, www.bworldonline.com, www.cnnmoney.com

Jonathan Ravelas
Chief Market Strategist
(632) 858-3145

Rhys Cruz
Junior Researcher
(632) 858-3001