IRCo - Market Watch 9 – 13 May 2011: The Third Round of Strategic and Economic Dialogue between China and the U.S.

By Yium Tavarolit

The third round of China – U.S. Strategic and Economic Dialogue (S&ED) was held in Washington on 9 – 10 May 2011. Vice Premier Wang Qishan and State Councilor Dai Bingguo who are special representatives of Chinese President Hu Jintao and Secretary of State Hillary Clinton and Treasury Secretary Timothy Geithner who are special representatives of U.S. President Barack Obama co-chaired the S&ED.

The outcomes of the Dialogue covered energy, environment, science & technology, transportation, forestry, and climate change. The two countries agreed to strengthen coordination and communications on macroeconomic policies in order to boost the stable and healthy growth of the two economies. They also agreed that the international community should push forward the reform of global economic governance and gradually establish a fair and rational new international economic order.

They consented to complement each other and intensify cooperation on such infrastructure as railway and grid and in the fields of clean energy, green economy and technological innovation in the process of changing the economic growth mode and readjusting the economic structure. They committed to build an opener trade and investment system and relax control over the high-tech products export to China. Bilateral investment protection agreement and intellectual property protection will be emphasized, together with promotion of the Doha Round negotiations and opposition to trade and investment protectionism.

On the financial cooperation, they agreed to increase information sharing and cooperation between the important agencies in the regulatory system and on shadow banking, credit rating agencies, reform of the remuneration system and fighting against illegal financing and to make concerted efforts to accelerate the reform of international financial system. The U.S. welcomes the investment from Chinese financial institutions and recognizes the remarkable regulatory progress China has made in capital adequacy ratio and consolidated statement.

On the geopolitical front, The U.S. reiterated it welcomes a prosperous, strong and successful China and a bigger role of China in the international affairs and respects China’s core interests and does not seek to contain China. The Chinese side emphasized its adherence to the path of peaceful development. And the two sides decided to establish the China – U.S. strategic security dialogue under the framework of the strategic dialogue. They also agreed to join hands together and work with other countries in Asia and Pacific to maintain peace and stability.

Lastly, they the two sides recognize the importance of cooperatively dealing with emerging problems and challenges worldwide so as to maintain and promote peace, stability, and prosperity in the world.

The Movements of Global Stocks, Finance and Energy

Chinese and Hong Kong stock markets rose for the first time in three sessions a day after the People's Bank of China further increased banks' reserve requirements, while Indian shares were boosted by early results of some state elections. China's Shanghai Composite index added 1% to 2,871.03. Hong Kong's Hang Seng index rose 0.9% to 23,276.27. India's Sensex climbed 1.1% to 18,531.28. However, Japan's Nikkei Stock Average fell 0.7% to 9,648.77. South Korea's Kospi slipped 0.1% to 2,120.08.

The Stoxx Europe 600 index dropped 0.5% to close at 280.50, as a weaker tone on Wall Street added to the pressure on European shares. Portugal's PSI 20 index fell 0.1% to 7,766.62, while the Greek ASE Composite held on to a 0.1% gain at 1,356.24. The French CAC 40 index ended down 0.1% at 4,018.85 as bank stocks moved mostly lower on peripheral debt worries. The German’s DAX 30 index was down 0.6% to 7,403.31. The U.K.’s FTSE 100 index fell 0.3% to close at 5,925.87

Worries about Greece pulled down the Dow Jones Industrial Average dropped 100.17 points, or 0.79%, to 12,595.75. The Nasdaq Composite shed 34.57 points, or 1.21%, to 2,828.47, while the Standard & Poor's 500-stock index fell 10.88 points, or 0.81%, to 1,337.77, with every sector in the red. The financial and materials sectors posted the biggest declines.

Concerns about global economic growth and euro-zone debt pushed up the dollar to its highest levels in a month. Also, a steep slide in commodities, oil and other high-yielding assets caused the dollar to strengthen as traders sought safe harbor from volatile markets. Late Friday, the euro was at US$1.4122 from US$1.4245 late Thursday, according to EBS via CQG. The dollar was at Y80.84 from Y80.93, while the euro was at Y114.14 from Y115.32. The U.K. pound was at US$1.6210 from US$1.6288. The dollar was at CHF0.8929 from CHF0.8842.

A weaker dollar pushed up crude and other dollar-denominated commodities, but lingering worries about sovereign debt in the euro zone gave the dollar some room to rebound, forcing oil down to US$97 near midday. Light, sweet crude oil futures for June delivery settled 68 cents higher at US$99.65 a barrel. ICE Brent crude for June settled up 85 cents at US$113.83 a barrel, Dow Jones reported.

Rubber Market

The table below shows that rubber futures and physical rubber markets in the region ended the week higher than an earlier week due mainly to short covering on rubber futures after rubber prices had slipped consecutively in an earlier week. Furthermore, the daily trading volume on Tokyo rubber futures on Friday was almost one-third lower than an earlier Friday that might be because investors and speculators were cautious about current volatility on commodity markets.

IRCo’s MACD still pulled down its Signal Line in negative territory, but its RSI rebounded slightly and stood at 23.67% on Friday. Technically, rubber prices could rebound further in the coming week if stock and commodity markets are steady. Nevertheless, unsteady natural rubber production cause by persistent adverse weather in major producing countries will be a variable that investors and speculators on rubber futures have to be cautious.

(Source: http://www.irco.biz/BlogMoreDetial.php?id=227&ShowContent=market_watch)