IRCo's WEEKLY MARKET SNAPSHOT: 6 - 10 December 2010

IRCo's DCP rose consecutively during the week and ended at 450.84 US cents/kg on Friday. Rubber futures and physical markets also closed the week higher than an earlier week due mainly to persistent supply tightness in major producing countries, i.e. Thailand, Indonesia and Malaysia caused by persistent rains in some rubber planted areas and lower rubber stocks than usual in these countries while demand from tire and non-tire manufacturers remained steady. At the same time, persistent volatility on the greenback against its rival currencies still influenced investors and speculators to hold long positions in commodities, including crude oil futures and rubber futures during the week.

The People's Bank of China (PBOC) again raised the reserve requirement ratio for banks by 0.5 percentage point on Friday, the sixth time this year. The new rate will be effective from 20December. Despite the PBOC didn't reveal a reason for the latest hike, investors believed that the measure is intended to dry up excessive liquidity from the country's financial system and to put a lid on surging property prices and rising inflation, which rose from 4.4% in October to 5.1% in November, according to the National Bureau of Statistics of China on Saturday.

Asian stock markets finished the week mostly lower after the PBOC raised the reserve requirement ratio on Friday, but European stock markets rose due partly to a rise in the auto sector. Wall Street also gained on Friday as investors felt a brighter U.S. economic outlook supported by the incoming positive economic data in early December and a rise in U.S. exports in October to their highest levels in more than two years, according to Dow Jones on Friday. It is expected that global stock markets will be subdued for the rest of the month as companies are closing their annual financial accounts and consumers are in a holiday mood. In addition, Asian currency exchange rates against the greenback moved in a narrow range during the week.

On the energy front, crude oil futures retreated slightly and settled at US$87.79 a barrel on the New York Mercantile Exchange on Friday because investors liquidated their long positions after the sixth hike in the reserve requirement ratio by the PBOC on Friday. However, many analysts said the global recovery remains supportive for crude prices in the longer term as economic growth continues in emerging economies and spare production capacity declines. Morgan Stanley commodities analysts on Friday predicted crude prices would average US$100 a barrel in 2011 and US$105 a barrel in 2012.

(Source: http://www.irco.biz/MarketWise.php)