Volume of the Week Generated: 2:38:.5 PM (NPT) (-5:54 GMT)
DEC 09

Mercantile Exchange Nepal Limited is the largest online commodity marketplace in Nepal. Started out as a futures commodity exchange in Nepal, it is now the forerunner in the online trading industry of the country. Providing quality services to its clients, it has received ISO 9001:2008 certification. It is a member of Nepal Chamber of Commerce, Federation of Nepalese Chambers of Commerce & Industry (FNCCI) and Management Association of Nepal (MAN). MEX Nepal is one of the most recognized financial institutions in Nepal.

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FED news

Rise in MarketSpending Increases, New-Home Sales Drop
American consumers’ spending and incomes climbed in November, indicating the biggest part of the economy is poised to strengthen as the labor market recovers.

Purchases rose 0.5 percent as households took advantage of discounts on autos and electronics, figures from the Commerce Department showed today in Washington. The gain was smaller than anticipated as unseasonably warm weather depressed utility use. Another report showed new-home salesunexpectedly fell as potential buyers were discouraged by the scheduled expiration of a tax credit. The tax break was later extended.

The biggest income gain in six months helped maintain savings even as purchases improved, showing growing wages are giving consumers the wherewithal to shop at retailers such as Best Buy Co.

The looming end of the tax credit and competition from mounting foreclosures may have hurt builders such as Beazer Homes USA Inc.

“The consumer isn’t really leading the recovery, the consumer is going along for the ride,” said Nigel Gault, chief U.S. economist at IHS Global Insight in Lexington, Massachusetts, who correctly forecast the gain in purchases. “As incomes improve, so will spending.” Housing “will show gradual improvement, particularly as the labor market starts to recover.”

Stocks advanced, propelled by rising shares of commodity producers as oil and copper rallied. The Standard & Poor’s 500 Index rose 0.2 percent to close at 1,120.59. The S&P Homebuilder Supercomposite climbed 0.5 percent.

Less Than Forecast

The median estimate of 72 economists surveyed called for a 0.7 percent increase in spending. Projections ranged from gains of 0.4 percent to 0.9 percent. The government revised the October increase in purchases to 0.6 percent from 0.7 percent.

The report also showed incomes climbed 0.4 percent, the biggest increase since May, and inflation cooled. Wages and salaries grew 0.3 percent last month, the biggest gain since April.

Pay rose as firings eased and companies asked existing staff to work more hours. Payrolls dropped by 11,000 workers in November, the smallest decrease since the recession began in December 2007, and the average number of hours worked climbed by the most in six years, figures from the Labor Department showed earlier this month.

The increases in spending and incomes left the savings rate unchanged at 4.7 percent in November. The rate dropped to a record low 0.8 percent in April 2008.

Prices Steady

The report showed prices stabilized, reflecting discounting by retailers. The Federal Reserve’s preferred price measure, which is tied to spending patterns and excludes food and fuel, was unchanged in November from the previous month, the first time it didn’t increase this year.

Adjusted for inflation, spending climbed 0.2 percent in November. Outlays on services fell 0.1 percent, depressed by a 3.5 percent drop in utility bills. This November was the third warmest in 115 years of record keeping, according to the National Climatic Data Center.

Inflation-adjusted spending on durable goods, such as autos, furniture, and other long-lasting items, climbed 1.2 percent last month, and purchases of non-durables increased 0.6 percent.

Best Buy, the largest U.S. electronics retailer, is promoting discounted notebook computers and $299 flat-screen televisions to lure consumers. As a result, the Richfield, Minnesota-based company will see its gross margin decline by as much as 1 percentage point in the fourth quarter, Chief Executive Officer Brian Dunn said on a Dec. 15 conference call with analysts.

Sentiment Rises

Fewer job losses and discounts may be brightening consumers’ moods. The Reuters/University of Michigan final index of consumer sentiment climbed to 72.5, less than anticipated, from 67.4 in November. The figure was lower than the preliminary 73.4 reading, reported on Dec. 11.

Sales of new houses dropped 11 percent to an annual pace of 355,000, lower than the lowest estimate of economists surveyed by Bloomberg News, the other report from the Commerce Department showed. The median sales price decreased 1.9 percent from November 2008.

Sales were projected to climb to a 438,000 annual pace, according to the median estimate in a Bloomberg survey.

President Barack Obama and Congress extended an $8,000 first-time buyer credit and expanded it to include current homeowners in a bid to boost demand. Still, the measure may have pulled sales forward and could result in fewer purchases in coming months, economists said.

Credit’s Influence

“The tax credit put a Band-Aid over the housing problem and in October and November we ripped it off” as it was set to expire, said Mark Vitner, a senior economist at Wells Fargo Securities LLC in Charlotte, North Carolina, who projected sales would fall. “Demand for housing is not likely to pick up on a consistent basis until we start to see some improvement in employment.”

Atlanta-based Beazer last month said orders rose 2.4 percent in the fourth quarter, and early debt repayment contributed to its first quarterly profit in three years.

“We experienced some moderation in negative market trends,” Chief Executive Officer Ian McCarthy said in a statement. “Elevated unemployment and rising foreclosure activity make it difficult to predict when and to what extent the housing market will sustainably recover.”

Fed Says U.S. Economy Still Needs Low Rates After Markets Heal

Federal Reserve officials declared financial markets healthy enough to remove most emergency aid without going as far on their support for the U.S. economy.

The Fed, after concluding a two-day meeting yesterday, said most of its lending programs would expire as scheduled Feb. 1 because of “improvements in the functioning of financial markets.” Policy makers said the labor market is stabilizing yet kept a pledge to keep interest rates“exceptionally low” for an “extended period.”

The statement reinforced economists’ forecasts that the Fed will wait from six months to a year before raising borrowing costs. By confirming plans to end its aid to bond dealers, short-term debt markets and money-market mutual funds, the Fed signaled it sees a waning in the “unusual and exigent” conditions that prompted creation of the programs in 2008.

“The nastiness of the storm has dissipated,” said Paul Ballew, a former Fed economist who’s now a senior vice president at Nationwide Mutual Insurance Co. in Columbus, Ohio. “Concern about the financial market has passed, but they’re looking at weak labor markets and sluggishness in the real economy.”

The Fed’s Open Market Committee, in a unanimous decision, left its target for the benchmark interest rate unchanged in a range of zero to 0.25 percent. The central bank cut the rate on overnight interbank loans to that level a year ago.

The Senate Banking Committee is scheduled to vote today on recommending Fed Chairman Ben S. Bernanke’s nomination for a second term to the full Senate for approval. The panel meets at 9:30 a.m. in Washington. While a majority have said they will probably support Bernanke, some lawmakers fault his handling of the financial crisis and plan to oppose his reappointment.

Stocks Rally

Stocks have rallied as low interest rates have caused investors to seek higher returns. The Standard and Poor’s 500 Index is up 23 percent this year. The Fed’s purchases of $1 trillion in mortgage-backed securities helped push the average rate on a 30-year fixed-rate home loan to 4.71 percent in the week ending Dec. 3, the lowest since mortgage buyer Freddie Mac of McLean, Virginia, began keeping records in 1971.

The Libor-OIS spread, a gauge of banks’ willingness to lend, has narrowed to 0.10 percentage point, from a record 3.64 points in October 2008. The TED spread, the difference between what the Treasury and banks pay to borrow dollars for three months, has narrowed to 0.22 percentage point, from as high as 4.64 percentage points in October 2008.

Yesterday, the central bank retained its March deadline of completing the $1.25 trillion in mortgage-backed securities purchases and $175 billion of federal agency debt. Officials are gradually slowing the pace of purchases.

‘More Supportive’

Data since the FOMC’s last meeting Nov. 3-4 indicate that “economic activity has continued to pick up and that the deterioration in the labor market is abating,” the statement said. “Financial market conditions have become more supportive of economic growth,” while the economy is “likely to remain weak for a time,” policy makers said.

“They upgraded the growth outlook a bit,” said James O’Sullivan, chief economist at MF Global Ltd. in New York. “Officials are signaling more optimism on growth and more confidence in a sustained recovery. They are not ready to signal an imminent rate hike yet.”

Central bankers omitted a sentence from previous statements saying the Fed will “employ a wide range of tools” to promote growth and stable prices, and another saying the Fed is “monitoring the size and composition of its balance sheet.”

Dollar Loans

The Fed said it would end four emergency-lending programs as scheduled Feb. 1, keeping a deadline set in June, and work with foreign central banks to close currency swaps that provided dollar loans to banks outside the U.S.

The programs include aid to money-market funds, which began in September 2008 after the failure of Lehman Brothers Holdings Inc.; a backstop to the market for commercial paper, or short- term debt issued by corporations, which started in October 2008; and two plans backing bond dealers, which began in March 2008.

The total balances of the assistance plans dropped to $30.5 billion as of Dec. 9 from $1.17 trillion a year earlier.

“By allowing these programs to expire, the Fed no longer thinks we’re in unusual and exigent circumstances, although we are in circumstances that still require zero percent interest rates for an extended period,” said John Ryding, founder and chief economist at RDQ Economics LLC in New York and a former Fed researcher.

Employers cut payrolls by 11,000 jobs in November, the fewest in 23 months, and the unemployment rate fell to 10 percent from 10.2 percent.

Bernanke said in a Dec. 7 speech that the economy still faces “formidable headwinds” in the form of tight credit and a weak labor market.

“The real test will be: Will the Fed really end mortgage- backed securities purchases by the end of the first quarter?” said John Silvia, chief economist at Wells Fargo Securities LLC in Charlotte, North Carolina. “It will cause mortgage rates to rise because the Fed is such a big buyer. A lot of builders and real estate agents are going to be screaming.”

Central Banks Avoiding Dollar to Kill 2010 Rally, Barclays Says

The U.S. dollar’s gains may end in the middle of 2010 as central banks shy away from adding greenbacks to their reserves and the Federal Reserve raises rates at a slower pace than investors expect, Barclays Plc said.

Long-term demand for dollars is set to weaken after the currency’s share of global reserves added in the third quarter slid to less than 30 percent, a decline “unprecedented in a period of U.S. dollar weakness,” Barclays said in a note to clients. The dollar stemmed 11 months of declines versus the 16 most-traded currencies in December, gaining against all but two, after investors increased bets the Fed will remove monetary stimulus next year as the economy recovers.

“We see the dollar strengthening in the first six to nine months of 2010 when the focus is on liquidity withdrawal and tightening of rates,” said Steven Englander, chief U.S. currency strategist at Barclays in New York, in a telephone interview. “Once the market gets past this initial fear of tightening, the reality will be that the Fed isn’t going to be tightening very fast and we’ll see dollar selling again.”

The Dollar Index -- which measures the currency against the euro, yen, pound, Canadian dollar, Swiss franc and Swedish krona -- has dropped 4.2 percent this year. It has climbed 4.1 percent in December and traded at 77.928 as of 9:28 a.m. in Tokyo. The U.S. dollar has registered its biggest declines against the Brazilian real, Australian dollar and South African rand dropping by more than 25 percent this year against each.

Global Reserves

Global reserves probably gained by about $180 billion in the third quarter with U.S. dollar-denominated reserves accounting for about $50 billion or less than 30 percent, Barclays estimated, using data from the International Monetary Fund and U.S. official reports.

The bank adjusted for changes in the value of currencies over that period to capture “actual buying and selling, rather than passive gains and losses” Englander wrote in the note.

The dollar declined against all but the yen among the 16 most-active currencies this year. That prompted China and Russia, holders of the world’s biggest and third-biggest currency reserves, to express concern about their U.S.- denominated investments.

“Emerging market central banks are selling their local currencies and buying U.S. dollars to prevent appreciation of their currencies,” Englander said. “They’re avoiding having a bigger concentration of U.S. dollars in their portfolio by turning around and selling dollars against the euro and other currencies.”

Canadian Dollars

Canada’s Finance Minister Jim Flaherty said this week that China, may be poised to buy Canadian dollars as it seeks to shield its $2.3 trillion worth of reserves against the U.S. dollar’s decline. Russia’s central bank said last month it will add Canadian dollars to its reserves and may include more currencies to reduce its dependence on the U.S. dollar.

Declines in the greenback mostly stalled this month as traders bet on a 48 percent chance that Fed Chairman Ben S. Bernanke will increase the target rate for overnight lending between banks by June. Policy makers will end most emergency lending programs and debt purchases by March because of “improvements in the functioning of financial markets” and stabilizing labor markets, the Federal Open Market Committee said on Dec. 16.

Unemployment, Retail

Reports this month showed the U.S.’s jobless rate unexpectedly fell, retail sales beat forecasts and purchases of existing homes rose to the highest level in almost three years in November. Benchmark rates are as low as zero percent in the U.S. compared with 8.75 percent in Brazil and 3.75 percent inAustralia. They are 0.1 percent in Japan and 1 percent in the Euro region.

Barclays forecasts that the Federal Reserve will begin raising rates at the end of the third quarter of next year, while the European Central Bank’s tightening cycle will begin at the start of 2011. The Fed’s target rate will reach 2 percent by the end of 2011, Englander said.

Barclays on Dec. 10 forecast the euro will fall to $1.40 in six months before rallying to $1.45 by the end of 2010. The euro traded at $1.4333 today.

Fed’s Evans Tells CNBC Unemployment Rate May Rise

Federal Reserve Bank of Chicago President Charles Evans said the U.S. jobless rate will probably stay “quite high” next year while inflation, excluding food and fuel, will be little changed.

The unemployment rate may rise a “few tenths” of a percentage point before declining by the end of 2010, Evans said in an interview broadcast on CNBC television. The so-called core inflation rate of about 1.5 percent will stay at that level for the next two years, Evans said.

Last week, Fed policy makers said most of their emergency lending programs would expire as scheduled Feb. 1 because of “improvements in the functioning of financial markets.” Officials said the labor market is stabilizing, yet kept a pledge to keep interest rates “exceptionally low” for an “extended period.”

The economy will probably expand at about a 3 percent to 3.5 percent pace for the next 18 months, Evans said. The unemployment rate will be in the “mid-nines” at the end of next year, he said. The rate was 10 percent in November.

The extended-period language to Evans signifies about three or four Fed policy meetings, he said. “I don’t see an urgent need to recalibrate” the central bank’s stance, he said. The Federal Open Market Committee’s next four meetings are scheduled for Jan. 26-27, March 16, April 27-28 and June 22-23.

Evans said that while the “extended period” of low rates wouldn’t stretch into 2012, Fed policy may still be “accommodative,” or aimed at boosting economic growth, for several years to bring down the jobless rate.

‘Accommodative Policy’

With the unemployment rate declining in 2011 to 7 or 8 percent, “a lot of accommodation will be required even if we’re recalibrating policy so that rates are rising at that time,” Evans said. “It will still be an accommodative policy, and so I think that’s the type of environment we will be seeing for the next couple years.”

Evans said he wasn’t concerned by the recent fluctuations in the dollar.

“We always look for the implications in changes in the dollar’s value and how that feeds into inflation, how that might be changing demand for goods and services,” he said. “At the moment I don’t see those pressures being very important. Inflation continues to be relatively muted.”

Technical Commentary


When the market opened on Monday, the spot gold showed a decline in the price on a note of strength in dollar and also the Ichimokus’ three signals have clearly confirmed that the price will fall. Not only Ichimoku, but the MACD is also confirmed the fall in price as the 12 day moving average moved below the 26 day moving average. The signal line moving below the negative territory clearly indicates the market will move down. The two days the price of the gold established a support at 1076.96 and resistance at 1118.44.  As the trade continued further, the price of the gold started showing a bullish trend on a note of weakness in dollar affected by the fundamentals. The bearish trend reversed back when the dollar against euro started weakening and the Ichimokus’ three signals started supporting the trend above. The gap between 12 and the 26 day moving average started expanding and has entered the positive area indicating a bullish trend.


Just like gold, the opening of the silver showed a downtrend as a result of the strength in dollar providing an oversold condition to the investors to take up the sell position. The signal line entering into the negative area confirms the bearish trend establishing the support at16.51 and resistance at 17.32. As the trade continued further, on Wednesday the price of the silver started showing the bullish trend but the support and resistance is still submitted between the levels established before.

Crude Oil

When the market opened on Monday, The Organization of Petroleum Exporting Countries decided to leave production levels unchanged, which may stabilize the price of the crude oil establishing a support at 71.54 and resistance at 74.97.But as the trade continued further, the Bullish Divergence seen in MACD weakened the bearish trend establishing the support at 72.68 and resistance at 76.97 further confirmed by the weakness in dollar.

Futures Market

Gold FEB
The futures market was moving just as the spot market started showed down and up trend. Gold Feb Futures contract was started declining on an account of the stronger dollar establishing a support at 26331.73 and resistance at 26974.40. As the trade continued to next day there was further decline breaking the initial support to 25972.28. The following day when the dollar started weakening, the price of the gold Feb futures started rising establishing a support at 26076.04 and resistance at 26601.24.

Even with the silver, when the market opened the price of the silver was showing the bearish trend on an account of the strength in dollar establishing a support at 410.27 and resistance at 419.68. As the trade continued to next day there was further decline breaking the initial support to 405.68. The following day when the dollar started weakening, the price of the Silver March futures started rising establishing a support at 408.53 and resistance at 418.54.

Crude Oil Feb

The price of the crude oil was showing bearish trend on a note of stronger dollar. The following day The Organization of Petroleum Exporting Countries decided to leave production levels unchanged, which may stabilize energy prices establishing a support at 5459.42and resistance at 5624.43.since Wednesday the price of the Crude oil Feb futures started rising as dollar started weakening establishing a support at 5575.45 and resistance at 5800.50.

Daily Market Data
Date 21-Dec-09      
Item Open     High      Low Close
COFMAR10 241.92 243.44 240 239.92
COPMAR10 519.28 524.8 518.56 520.72
COTMAR10 123.84 125.3 123.82 124.14
CRUMAR10 5632.75 5706.75 5550.75 5557.5
CRUFEB10 5562.75 5643 5487.75 5496
CRUJAN10 5477.25 5523.75 5471.25 5498.25
GOLFEB10 26811.25 27025.74 26302.74 26375.04
HEAJAN10 38.7 39.43 38.33 38.34
HEAFEB10 39.05 39.77 38.7 38.72
MCRUFEB10 5567.25 5649 5493.75 5502
MGOLFEB10 26820.89 27035.38 26312.38 26384.68
SBOJAN10 63.42 63.98 63.26 63.4
SBOMAR10 63.98 64.66 63.92 64.04
NAGJAN10 434.85 444.675 421.875 425.4
NAGFEB10 438.675 448.425 425.25 428.7
SILMAR10 415.08 422.52 409.44 411
SOYMAR 28.11 28.32 27.76 27.77
SOYJAN10 27.89 28.11 27.55 27.58
WHTMAR10 14.53 14.61 14.3 14.3
Daily Market Data
Date 22-Dec-09      
Item Open     High      Low Close
COFMAR10 240.48 240.96 232.64 235.2
COPMAR10 520.08 522 514.72 517.92
COTMAR10 123.94 124.42 121.56 121.98
CRUMAR10 5568 5670 5514 5630.25
CRUFEB10 5507.25 5618.25 5454 5582.25
GOLFEB10 26346.12 26481.08 25926.78 26148.5
HEAJAN10 38.35 38.96 37.9 38.7
HEAFEB10 38.8 39.39 38.35 39.11
MCRUFEB10 5513.25 5624.25 5460 5588.25
MGOLFEB10 26355.76 26490.72 25936.42 26158.14
SBOJAN10 63.34 63.74 62.26 62.98
SBOMAR10 63.96 64.4 62.92 63.62
NAGJAN10 424.5 432.525 414.825 428.85
NAGFEB10 428.625 436.2 419.1 434.55
SILMAR10 410.88 414.48 404.64 410.04
SOYMAR 27.78 28.05 27.34 27.48
SOYJAN10 27.59 27.83 27.13 27.27
WHTMAR10 14.28 14.47 14.2 14.4
Daily Market Data
Date 23-Dec-09      
Item Open     High      Low Close
COFMAR10 234.88 237.12 233.2 236.96
COPMAR10 517.44 530.96 516.56 529.44
COTMAR10 122.02 122.44 121.28 122.1
CRUMAR10 5639.25 5818.5 5619 5790.75
CRUFEB10 5589 5775 5568.75 5745
GOLFEB10 26158.14 26447.34 26044.87 26240.08
HEAJAN10 38.71 40.38 38.65 39.91
HEAFEB10 39.09 40.8 39.04 40.29
MCRUFEB10 5595 5781 5574.75 5745
MGOLFEB10 26167.78 26456.98 26054.51 26249.72
SBOJAN10 62.88 63.3 62.62 63.1
SBOMAR10 63.64 64.04 63.28 63.74
NAGJAN10 429.15 438.825 419.85 438.75
NAGFEB10 432.75 443.55 424.425 443.325
SILMAR10 409.8 415.8 406.8 413.04
SOYMAR 27.52 27.82 27.49 27.76
SOYJAN10 27.31 27.61 27.28 27.53
WHTMAR10 14.41 14.58 14.3 14.56
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