Oil falls below $100

Crude extends decline to near $99 a barrel on increase in U.S. crude supplies.

SINGAPORE (AP) -- Oil prices fell further Thursday after dropping by more than a dollar in the previous session on larger-than-expected increases in U.S. crude and gasoline supplies.

Prices remained supported near Tuesday's record close of $100.88 a barrel as the U.S. dollar tumbled to fresh lows against the euro and worries about the American economy drove more money into energy futures as a hedge against inflation.

The report by the U.S. Energy Department's Energy Information Administration showed that country's crude oil inventories rose by 3.2 million barrels, or 1%, to 308.5 million barrels.

Although that number is slightly lower than levels a year ago, it is well ahead of the 2.4 million barrel gain analysts had been expecting, according to a survey by Dow Jones Newswires. It was the seventh straight week the report showed a rise in crude inventories, suggesting the U.S. at least has more than enough oil to meet demand.

Light, sweet crude for April delivery lost 36 cents to $99.28 a barrel in Asian electronic trading on the New York Mercantile Exchange, late afternoon in Singapore.

The contract fell $1.24 to settle at $99.64 a barrel Wednesday after surging as high as $102.08 a barrel, a trading record. On Tuesday, the contract jumped $1.65 to settle at a record $100.88 a barrel.

The EIA data showed gasoline inventories also jumped more than expected -- by 2.3 million barrels to 232.6 million barrels; analysts had expected a more modest rise of 400,000 barrels. Refinery activity also increased much more than expected.

The weakening U.S. dollar also helped prop up prices. The 15-nation euro jumped to a record $1.51 against the greenback, meaning that crude remains a relative bargain for buyers overseas. Gold - another commodity seen as a hedge against inflation - also struck a record Wednesday.

In his testimony to the U.S. Congress Wednesday, Federal Reserve Chairman Ben Bernanke warned of sluggish business growth ahead, and signaled a willingness by the central bank to cut interest rates again. But Bernanke also noted that the Fed must keep a close watch on inflation given the sharp rise in energy prices and other costs.

Heating oil futures lost 1.16 cents to $2.7595 a gallon while gasoline futures dropped 2.12 cents to $2.4565 a gallon.

Natural gas futures advanced 3.8 cents to $9.098 per 1,000 cubic feet.

Brent crude rose 31 cents to $97.96 a barrel on the ICE Futures exchange in London.

House approves $18B in oil taxes

Bush to veto bill rolling back tax breaks for oil

Stockholm shares slightly lower midmorning hit by weak US dollar

Shares were slightly lower in midmorning trade on profit taking following yesterday's weak US data and on concerns after the US dollar fell to 15 year lows against the Swedish krona.

At 10.50 am, the OMX Stockholm index was down 0.38 pct at 323.08 points, while the OMX Stockholm 30 was 0.48 pct lower at 975.37 points. Turnover amounted to 4.588 bln skr.

Big exporting companies exposed to the dollar were among the biggest losers, with Volvo B down 1.31 pct at 94.25, Electrolux B down 2.12 pct at 103.75, Ericsson (NASDAQ:ERICY) B down 0.80 pct at 13.65, and Atlas Copco A down 1.73 pct at 99.25.

Handelsbanken A was up 0.28 pct at 177.00 skr after its sharp fall yesterday. Keefe, Bruyette & Woods (KBW) downgraded shares in the bank to 'underperform' and slashed its 2008 and 2009 EPS estimates by 6 pct and 10 pct respectively, following the bank's weaker-than-expected fourth quarter results.

'Handelsbanken reported a weak Q4 result, missing consensus on the net interest income, fee and cost line by 1 pct, 3 pct and 9 pct. We are particularly concerned with the cost development which has previously been SHB's strongest card,' said KBW.

Among the other banks, Nordea was down 0.85 pct at 93.70, Swedbank A down 1.14 pct at 173.50, and Skandinaviska Enskilda Banken A down 0.93 pct at 159.50.

TeliaSonera (PINKSHEETS:TLSNF) was outperforming, up 1.43 pct at 49.50, after Dagens Industri reported the company's CEO Lars Nyberg is in discussions with Russian telecom investment company Altimo over a possible deal.

Scania B was down 0.63 pct at 157.00. Scania's Martin Lundstedt seen as likely successor to Leif Ostling as CEO of company reported Dagens Industri.

Hennes & Mauritz B was down 0.85 pct at 351.00. Swedish retail sales increased 4.8 pct in December from a year earlier, the Central Statistical Bureau reported. Market expectation was for a rise of 6.6 pct, according to a survey by SME Direkt.

Elsewhere in the market, Sandvik was down 0.23 pct at 106.25, Tele2 B down 0.92 pct at 107.75, and SCA B down 1.47 pct at 100.50.

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Euro Holds 1.5100 As Data Continues to Shine, Where is the Top?

Talking Points

• Japanese Yen: Bounces to 106.50
• Euro: Holds 151.00 as labor retail data prove supportive
• Pound: No event risk today
• Swiss Franc: employment expands for 11th quarter in a row
• US Dollar: GDP on tap

EURUSD made itself comfortable at its new home above the 1.5000 level, holding on to the 1.5100 figure for most of the night. The news out of the EZ continued to be constructive as both labor data and Retail PMI numbers demonstrated that the underlying fundamentals in the 15 member region remain sound.

German unemployment declined more than expected dropping by -75K from -48K forecast, as EZ largest economy continued to expand. More importantly German Retail PMI readings recovered from their sharp drop last month of 44.2 to end up above the 50 boom/bust level once again printing at 52.1. Overall, the EZ Retail PMI numbers stood at 52.4 – comfortably in expansion territory.

The overnight economic news goes a long way towards explaining ECB’s rather sanguine attitude towards growth. With labor markets continuing to generate jobs and with consumer demand in the region relatively healthy, ECB sees little need to lower rates anytime soon. As we’ve noted before, as long as EZ employment environment remains supportive, the ECB will have all the political protection it needs to maintain its hawkish policy.

Nevertheless, with EURUSD trading at such lofty highs the pair is overbought on a short term basis, as popular sentiment has clearly shifted to the euro. When the demise of the dollar becomes the top story on the Drudge report, a near term top in the EURUSD is not far behind. Yet any retrace in the pair is likely to be corrective and short lived. For the time being the fundamental story stands squarely on the side of euro bulls and if US data shows no signs of improvement, the pair could easily move higher after a short term pause.

To that end, today’s US GDP numbers could provide some fireworks in today’s North American session. The market expects an upward revision to 0.8% - still a paltry rate of growth - but slightly better than the initial 0.6% read. If the data surprises to the upside, it may quell some of the doom and gloom forecasts of an imminent recession that dogged the greenback. If, however, the news is even worse than the bears believe, the greenback could come under fresh selling pressure stoking fears that the recession is already here as EURUSD will continue its dally journey to new highs.

After 1.50, what’s next for the Euro?

Forex Report with FMCI Update by Forex Metrics - Feb.28/2008

Forex Report with FMCI Update by Forex Metrics - Feb.28/2008

FMCI is down by 54 pips to 1.2210 level with 4 out of 10 currencies up.

Today, after the US economic data release, FMCI dropped substantially due to the fear of recession gripping the global economy. Although Euro was high against USD and Pound, the overall global trend shows sign of economic slowdown.

FMCI reflects the current trend of global economies as a whole, from the value of major global currencies. Fall in FMCI indicates a global slowdown.

Economic data released on Feb/27 was negative for US.

* US Durable Goods Orders m/m fell -5.3% confirming reduction in consumer durable goods buying power.
Core Durable Goods Orders fell -1.6% m/m.
New Home Sales dropped to 588K, again showing no sign of recovery.
USD Crude Oil Inventories dropped to 3.2M and oil prices shot above $100 a barrel pushing inflationary pressure upward.

Finally, Bernanke acknowledged inflation risks but said “it is important to recognize that downside risks to growth remain.”
All these factors accelerate dollar its Record Breaking Declines. Also, Fed clearly indicates substantial interest rate cut which will increase interest rate gap between major economies.

* Germany figures were consistent with expectation, which made EU outlook positive and gave a boost to EURO to an all time high against USD.

* The UK GDP rose 0.6% q/q and 2.9% y/y in Q4 of 2007, which is considered positive, but not strong enough. Value of pound is at a level where exports may remain stable.

US recession fear is for real and interest rate cut at measured pace will only support growth, as any substantial cut will not help the economy. It appears that fed is under panic situation and more concerned about depression than recession.

Whereas Euro is not acknowledging the global slow down, which may be affecting EU in other half of 2008.

Trading with caution is recommended, as the only factor that is consistent globally today is, Change.

Major currencies were overall trending upwards with exception of USD.

Forex Report with FMCI Update by Forex Metrics - Feb.26/2008

Forex Report with FMCI Update by Forex Metrics - Feb.26/2008

FMCI shot up by 110 pips to 1.2245 level with 9 out of 10 currencies up.

Today, FMCI rose substantially with a relatively positive economic data. Major currencies were volatile in upward direction.

Economic data released on Feb/25 was positive in a way for US and UK.

* US existing-home sales fell a less-than-expected by 0.4% on m/m to a 4.89 million annual rate in January. This catalist signifies the possibility of avoiding recession and gave boost to USD, although there was negative news, that inventories of homes available for sale increased 5.5% at the end of January to 4.19 million.

* UK house prices fell 0.2% m/m in February, pushing annual house price inflation to a 22-month low, showing a sign of economic slowdown. Bank of England’s Monetary Policy Committee member Kate Barker commented “Recession remains outside the main possibilities….We have got this combination of shocks coming from abroad and it’s difficult….We certainly expect a period of greater volatility this year,” Definitely inflation is under check and cut in interest rate would be a suitable move for boosting the economic growth.
Major currencies were overall trending upwards, but still range bound.

Weekly Forex Update - Week09 : Feb.24/08 - Mar.01/08

Weekly Forex Update - Week09 : Feb.24/08 - Mar.01/08

ForexMetrics Currency Index (FMCI)

Last week FMCI was stable and consistent above 1.2100 level. Since FMCI is stable, major currencies do not have a definite direction as yet due to uncertainty on global economic slow down. Stable FMCI indicates that major currency pairs may remain range bound, which is suitable for conservative trader. Please be advised that we do not recommend forex trading, as FMI works on its own strategy of “TradeVestment”. For our trading strategy and techniques, range bound currency pairs are most favorable.

Monitor FMCI for fundamental economic analysis and daily report, before trading.
USD

US data definitely points towards continuing slow down of economy but at a reducing rate, as impact of rate cuts starts percolating towards grass root level. Reason for slowdown is liquidity crunch impacting housing sector and the ripple effect has slowed down consumer durables and automobile sector. The basic issue that US faces today is unavailability of cheap liquidity and this cannot be solved just by cutting interest level. US economy is currently under catch 22 situation. If Interest rate drops down to 2% in next 2 quarters, it may be a boost to economic growth but, drop in interest rate is causing inflationary pressure which may even out economic growth in short run.

Federal bank has to be very vigilant in deciding interest rate and has to balance inflation and growth. Bernanke’s decision would be very critical from now onwards, as 50 bps cut, which is widely expected, may not only boost growth, but increase inflation and inflationary pressure at all levels. This may lead US economy to stagflation, which would be undesirable.

Due to political pressure, coming election and external global factors, federal bank appears to be all set to cut more interest rate, as they may not have patience to wait till impact of rate cuts percolate deep into economy, which would be atleast 2 quarters. FMI-Team views that, the balancing act to boost growth and control inflation in current situation, can be performed only by holding interest rates and gradually cutting interest rate at measured pace depending on economic global data.

USD, during recession, may not necessarily get weaker as other economies, as US still contributes to 28% of global business.

What would make USD weaker is not recession or slow economic growth, but high rate of inflation. Currently, we view USD as range bound with majors only because USD is highly dependent on economic data and interest rate decision. Any more drastic cut may lead US to stagflation and USD may change its trend from Neutral to Downward.

European Union (Euro)

Last week, European Union data was kind of soft as the central bank has viewed inflation pressure reducing in next quarter and also forecasting a slower economic growth rate, but is not concerned about recession. We totally agree with this view as these subtle comments make us believe that EU central bank will try to hold interest rate as long as it is possible based on economic data.

There is nothing wrong with this view. However, in our opinion, EU central bank should cut its interest by 25 bps, only in the event of US federal cut as a preemptive move. The reason being to keep EU growth rate stable and well above inflation rate.

We see Euro as range bound currently, but any further increase in interest rate gap between US and UK, may lead to strengthening of EURO. Not good for economy specially in global slow down.

Sell Euro on strength.

Expected EUR/USD Range : 1.4887 to 1.4502

British Pound (GBP)

UK economic growth has been diminishing and inflation is stable. Sustaining growth rate at current interest rate level is tough. Expect interest rate cuts. Delay in interest rate cut by 25 bps may cause substantial slow down in British economy. This is with the view in mind, that liquidity crunch and expensive cost of borrowing will cause a ripple effect in slowing down economic growth.

Sell Cable against USD on strength.

Expected GBP/USD Range : 1.9892 to 1.9383
Expected EUR/GBP Range : 0.7569 to 0.7393

Conclusion:

Economic data from US, UK and EU was weak last week.

Euro will stay strong against USD and Cable.

USD may consolidate and shall remain range bound.

Pound may get stronger against USD and Euro.