Commodities Decline Before U.S. Jobs Data; Euro Weakens

Commodities snapped two days of gains before a report forecast to show the U.S. isn’t adding jobs fast enough to cut the unemployment rate. The euro weakened, while stocks and equity-index futures were little changed.

The Standard & Poor’s GSCI gauge of 24 raw materials slid 0.4 percent at 7:45 a.m. in New York, with copper falling 0.7 percent and oil dropping 0.8 percent. The Stoxx Europe 600 Index rose 0.1 percent and S&P 500 futures added less than 0.1 percent. The euro declined 0.5 percent to $1.2883 as the dollar strengthened against all but two of its 16 major counterparts.

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Pedestrians are reflected in a window in front of an electronic stock board outside a securities firm in Tokyo. Photographer: Tomohiro Ohsumi/Bloomberg

5:26

Nov. 2 (Bloomberg) -- Russell Jones, global head of fixed-income strategy at Westpac Banking Corp., talks about the outlook for today's U.S. October non-farm payrolls report and post-election fiscal policy. He speaks from Sydney with Mark Barton on Bloomberg Television's "First Look." (Source: Bloomberg)

While U.S. employers took on 125,000 workers in October, that wasn’t enough to keep the jobless rate from rising to 7.9 percent from 7.8 percent, according to the median of 91 economist estimates in a Bloomberg survey before the Labor Department report today. Manufacturing output in the euro-area contracted in October, snapping two months of advances, London- based Markit Economics said.

“Employment lags the soft patch from which the U.S. economyappears now to be escaping,” Kit Juckes, head of foreign-exchange research at Societe Generale SA in London, said in an e-mail today. “The risk of disappointment leaves me nervous about sentiment into the weekend and in the final run-in to the presidential election next week.”

The S&P GSCI gauge of commodities is heading for the third weekly decline, the longest stretch since June 1. Oil in New York fell to $86.38 a barrel as two refineries remained shut in New Jersey in the aftermath of Hurricane Sandy.

Alcatel-Lucent

The Stoxx 600 (SXXP) is up 1.3 percent this week. Beiersdorf AG, the maker of Nivea skin cream, rose 5.4 percent to the highest since at least 1996 as the company raised its forecast for sales growth and reported third-quarter profit that beat estimates. Alcatel-Lucent SA sank 5.6 percent today, the biggest drop in three weeks, after the French phone-equipment maker swung to a loss in the third quarter.

Greece’s ASE Index (ASE) rose 2.7 percent, trimming this week’s decline to 11 percent. The nation’s shares have tumbled as coalition government lawmakers squabble over austerity that a Bundesbank official warned must be enforced to ensure the country receives international bailout funds.

The cost of insuring against default on European corporate debt fell for a second day, with the Markit iTraxx Crossover index of credit-default swaps linked to 50 mostly junk-rated companies dropping 4.5 basis points.

LinkedIn Sales

The S&P 500 has advanced 1.1 percent this week after Hurricane Sandy shut U.S. markets on Oct. 29 and Oct. 30. LinkedIn Corp. (LNKD) climbed 8.6 percent in early New York trading after the biggest professional-networking website reported third-quarter sales that exceeded analysts’ forecasts. Starbucks Corp., the world’s largest coffee-shop operator, advanced 7.6 percent as fourth-quarter profit topped estimates.

Today’s announcement by the Labor Department at 8:30 a.m. in Washington will be the last of the monthly employment reports before Barack Obama and Mitt Romney face off in the Nov. 6 presidential election.

The U.S. 10-year Treasury yield was little changed at 1.72 percent, declining three basis points this week.

The dollar advanced 0.2 percent against the yen, while the euro weakened 0.4 percent versus Japan’s currency.

Manufacturing Falls

A gauge of manufacturing in the euro area fell to 45.4 from 46.1 in September, Markit Economics said. That compares with an initial estimate of 45.3 published on Oct. 24. A reading below 50 indicates contraction.

The MSCI Emerging Markets Index (MXEF) advanced 0.5 percent. The Hang Seng China Enterprises Index of mainland companies added 1.2 percent, up 20 percent from a Sept. 5 low, marking the start of a bull market. The Shanghai Composite Index (SHCOMP) rose 0.6 percent today, India’s Sensex index climbed 1 percent and Russia’s Micex Index gained 0.2 percent.

South Korea’s Kospi index jumped 1.1 percent as Samsung Heavy Industries Co., the world’s second-large shipbuilder, rallied the most in eight months on better-than-estimated profit.

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PRECIOUS-Gold falls as dollar strengthens ahead of US jobs data

* Traders focus on U.S. non-farm payrolls at 1230 GMT

* AngloGold Ashanti suspends operations at S. African mine

* Barrick Gold posts sharp drop in third-quarter profit

By David Brough

LONDON, Nov 2 (Reuters) - Gold fell on Friday, pressured by gains in the dollar ahead of a closely watched jobs report that will give the last major signal on the state of the world's largest economy before U.S. elections next week, and could set the tone for monetary policy.

U.S. non-farm payrolls data, due at 1230 GMT, is expected to show theeconomy added 125,000 jobs last month, a Reuters poll showed, though the unemployment rate is seen at 7.9 percent, against 7.8 percent the previous month.

Ahead of the data, the dollar rose to a near four-month high against the yen and a near three-week high against the euro as investors bet on an upbeat report after private employers added jobs at the fastest pace in eight months.

Spot gold was at $1,709.26 at 1102 GMT, down 0.63 percent, while U.S. gold futures for December fell $5.80 to $1,709.70. In the short term, it could benefit from a positive reading of the U.S. jobs market.

"The stronger dollar is bringing down a number of markets including gold," Standard Chartered analyst Daniel Smith said.

He said the payroll data was likely to show strong job creation after a recent run of positive U.S. economic data, which augured for a weaker dollar and higher gold prices.

"More surprising than not, we'll see good numbers today, and generally that will be pro-risk -- I think we're going to see higher metals prices and higher gold on the back of that, because the dollar is likely to weaken."

But in the longer term, a positive reading could weigh on gold if it trims expectations for monetary easing. The U.S. authorities have explicitly tied the extent of monetary stimulus measures - news of which sent gold above $1,795 an ounce in October - to the health of the jobs market.

Looser monetary policy stokes longer-term inflationary fears and maintains pressure on interest rates, both good for gold.

"A downside surprise in non-farm payrolls is likely to help fuel a gold rally, in our view," HSBC said in a note.

FESTIVAL SEASON

Gold importers in India, historically the world's biggest gold consumer, rushed to stock up ahead of major festivals after prices of the metal fell to their lowest in nearly a month.

India is approaching the height of its festival season, with the Diwali and Dhanteras later this month. Gold is a key part of gifts and is used for dowries at weddings, which are popular at this time of year.

Data released by the Istanbul Gold Exchange on Friday showed Turkey's gold imports fell to 3.7 tonnes in October from 7.49 tonnes a year earlier, and 3.84 tonnes in September.

In South Africa, AngloGold Ashanti suspended operations at one of its mines on Friday, a sign that labour tensions continue to bubble in the sector despite the official resolution of weeks of wildcat walkouts.

The world's top gold producer, Barrick Gold Corp, reported a sharp drop in third-quarter profit, nudged back the production date for its massive Pascua-Lama gold and silver mine and increased its estimate on costs.

Platinum and palladium were both headed for their first weekly gains after three weeks of straight falls, although spot platinum lost half a percent to $1,553.24 and spot palladium fell 0.84 percent to $605.47.

October auto sales data pointed to still-sluggish car demand, curbing consumption expectations for platinum and palladium, which are chiefly used in catalytic converters.

France posted its twelfth straight monthly fall in new car registrations on Friday, while German new car registrations rose by slightly more than 1 percent in October, having slumped 11 percent in September, according to a source.

Silver was down 0.62 percent at $32.01 an ounce.

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FOREX-Dollar firm vs yen and euro before U.S. jobs data

* Upbeat U.S. private payrolls data boosts dollar
    * Yen hampered by Japan's trade deficit, economic woes
    * Euro has been hit by Greek court ruling on austerity steps

    By Philip Baillie
    LONDON, Nov 2 (Reuters) - The dollar rose to a near four
month-high against the yen on Friday as investors bet on an
upbeat U.S. payrolls report after private employers added jobs
at the fastest pace in eight months.
    The euro fell to a three-week low against the dollar on
selling by long-term investors.
    The euro has also been under pressure since a Greek court
ruled on Thursday that pension reform demanded by foreign
lenders may be unconstitutional. That raised concerns about
Athens' ability to implement the austerity measures needed to
secure bailout funds. 
    All these drove the dollar index to a seven-week high
of 80.389, breaking above its 55-day moving average of 80.14.
    The dollar was up 0.2 percent on the day at 80.31 yen, just
shy of last week's four-month high of 80.38. Traders reported an
option barrier at 80.50 yen with hedge funds ready to buy the
dollar on dips if the U.S. jobs numbers disappointed.
    A break of resistance at 80.60-65, a chart triple top marked
between May and June and a 50 percent retracement of the
dollar's March to September decline, could signal further gains.
    "A good U.S. jobs number will no doubt give a leg up to
dollar/yen," said John Hardy, currency strategist at Saxo Bank.
    "From a medium-term view, we are bullish on dollar/yen and
the pair has established a base around 79 yen for a rally to 88
yen in a year's time," he said.
    The yen has come under pressure because recent Japanese data
and corporate earnings have been soft. Third-quarter economic
output data, due on Nov. 11, is also likely to have contracted.
    By contrast, recent U.S. data have pointed to a recovery.
Payrolls processor Automatic Data Processing said private
employers added 158,000 workers last month, bolstering
expectations that the non-farm payrolls report due at 1230 GMT
may beat forecasts. 
    A Reuters poll forecasts a rise of 125,000 U.S. non-farm
payrolls in October. The unemployment rate is seen ticking up to
7.9 percent. 
    Any market reaction to the jobs data may be short-lived
given the uncertainty of the outcome of Tuesday's U.S.
presidential election.
    
    EURO ZONE STRUGGLES
    Some, however, are less sure about a sustained rise in the
dollar as investors fret over the so-called "fiscal cliff" of
looming tax rises and spending cuts in the United States.
    "Over the course of the next month we would expect to move
lower in dollar/yen, any upside above 81 would be surprising
driven by U.S. negativity surrounding the fiscal cliff," said
Christian Lawrence, currency strategist at Rabobank.
    The euro fell 0.4 percent to $1.2885, a three-week
low, as traders sold the single currency, triggering an option
barrier at $1.2880. Bids from Asian central banks and Middle
East investors were cited below $1.2850.
    However, the euro held within the $1.2800-3200 range seen
since September, underpinned by the European Central Bank's
pledge to buy bonds of indebted euro zone countries that seek
aid.
    Signals in the option market showed the pair was likely to
trade in a range in coming weeks. The one-month implied
volatility on euro/dollar options fell to fresh five-year lows
around 7.50 percent.
    Data on Friday showed peripheral euro zone countries were
still struggling. Spain's manufacturing sector shrank last month
at it fastest pace since July, while Italian factory activity
shrank in October for the 15th month running.
    Commodity currencies eased after rallying earlier in the
day. The Australian dollar hit a five-week high of $1.0420
before giving up gains to stand at $1.0380 as caution
set in before the U.S. jobs data. 
    The currency was helped by Thursday's improvement in
manufacturing data from China, Australia's main export market.

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FOREX-Yen rallies after BOJ, Italy debt sale lift euro

 Yen hits one-week high vs dollar, two-week high vs euro
    * BOJ eases policy, but some had expected more
    * Euro up versus dollar as Spain Q3 GDP less bad than feared
    * Italy debt auctions also help euro
    * Volumes thin as giant storm closes U.S. market

    By Nia Williams and Anooja Debnath
    LONDON, Oct 30 (Reuters) - The yen rose broadly on Tuesday
after monetary easing steps from the Bank of Japan disappointed
some market players who had positioned for a more aggressive
increase in asset purchases.
    The euro also gained against the dollar after data showed
the Spanish economy contracted slightly less than expected in
the third quarter and Italy's borrowing costs at a sale of five-
and ten-year debt.
    Volumes were thin with U.S. markets closed as one of the
biggest storms ever to hit the United States battered the
eastern seaboard. 
    The BOJ increased its monetary stimulus for a second month
runinng, this time by 11 trillion yen ($138.5
billion). The yen gained after this, with traders
saying there had been speculation of a bigger stimulus.
    "It was a very sceptical response to the BOJ policy meeting,
made worse by the fact they have revised lower the growth and
inflation outlook. That has seen the yen unwind a lot of the
softer tone we saw going into this meeting," said Jane Foley,
senior currency strategist at Rabobank.
    The dollar hit a one-week low of 79.28 yen on EBS
trading platform, breaking below important chart support at the
200-day moving average at 79.52. It was last down 0.4 percent on
the day at 79.43 yen.
    Friday's four-month peak of 80.38 was expected to act as
resistance for the dollar.
    The euro also fell to a two-week low of 102.175
yen before paring losses to last trade down 0.1 percent at
102.87 yen.
    
    SPAIN, ITALY NEWS LIFT EURO
    The euro climbed 0.4 percent against the dollar to
$1.2935 as data showed the Spanish economy contracted for a
fifth straight quarter in the three months to September at a
slightly slower rate than forecast. 
    It was also helped by improved demand at an Italian debt
auction. 
    "There's been a little bit of speculative buying of
euro/dollar because the Spanish GDP data was not so bad as
feared," said Paul Bednarczyk, head of research at 4CAST.    
    In Madrid, Cortal Consors economist said any suggestion that
the GDP number marked an upturn for Spain was "a mirage". 
    Market players cited bids at $1.2850-80 which should help
limit any losses, and expected buying ahead of the 200-day
moving average at $1.2834.
    "We are very much in a range trade at the moment of
$1.28-$1.32," Bednarczyk said.
    Gains for the euro looked likely to be capped by concerns
about whether Greece can agree a deal on more austerity, and
uncertainty over when Spain might request financial aid.
    Spanish Prime Minister Mariano Rajoy said on Monday he would
seek a credit line from the euro zone's rescue fund "when I
think it is in the interests of Spain". 
    Still, expectations the European Central Bank will start a
bond buying programme after Madrid asks for a bailout limited
speculative euro selling.
    Traders reported option expiries at $1.2900 and $1.2925,
which could keep the euro close to those levels.
    Strategists said it was too early to tell what impact the
destruction caused across the Atlantic by the giant storm Sandy
might have on currency markets.
    Demand for the dollar tends to rise in times of reduced
appetite to take on risk, but if widespread damage prompted
speculation the Fed might ease policy further to shore up the
economy, the dollar could fall.
    The U.S. dollar earlier hit a three-month high
against the Canadian dollar of C$1.0020 and broke back above
parity, seen as a key technical level.

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Chile's Collahuasi copper mine taps Codelco exec as new CEO.

Oct 30 (Reuters) - The world's No.3 copper mine, Chile's Collahuasi, said on Tuesday it has appointed as its new chief executive Codelco's vice president for central-south operations, Jorge Gomez Diaz, in a push to turn around the troubled operation.
Last year Collahuasi was dragged to its lowest copper output since 2007 and has been hit this year by a combination of work stoppages, heavy rains and fatal accidents, prompting Anglo , Xstrata and Japanese partner Mitsui to step in, appointing interim co-chief executives and a recovery plan.

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3 Undervalued Coal Stocks to Buy.

Arch Coal's (NYSE: ACI) HUGE Upside!
As risky as the coal market is right now, Arch is worth the bet. After taking over International Coal, the company became burdened with $4 billion in leverage at one of the worst times possible. As Morningstar has emphasized, natural gas prices hit a low as utility inventories rose to seeming endless peaks. This has resulted in a weak margin outlook that will be complemented by a leverage ratio of around 4x as debt maturities near. However, the worst looks like it is factored in.
In my DCF model on Arch, I make several assumptions: (1) double-digit growth ranging from 10% to 21% over the next 6 years and 2.5% into perpetuity, (2) consistent operating metrics, and a (3) 10% discount rate. Based on these inputs, I find that the fair value of the stock is $14.31, which implies significant double-digit upside should the company just close its value gap. Fortunately, it comes on top of strong momentum from the company adding in low cost operations that helped boost reserves by 1.3 billion tons.
Going forward, much of the company's upside will come from metallurgical coal. Morningstar points to several bullish talking points that I agree with: First, Asian demand will keep volumes elevated even if competition cuts into margins. Furthermore, the company's leading control of the Powder River Basin will help limit any margin erosion that comes from emerging entrants and peer growth. With the potential to increase met production in the years ahead, the pricing power is thus strong and will grant the company great leverage to takeover struggling producers.
Peabody (NYSE: BTU) and CONSOL Energy (NYSE: CNX) Also Undervalued
If you are looking for some safety, consider Peabody. At around 6x past earnings, the worst has been factored in. By contrast, growth has not been fully factored in, as evidenced by the PEG ratio of around 0.3x.
If the company meets expectations, it will be worth $51.72 at a 12x multiple by 2016. At a discount rate of 10%, the present value of the stock is $32.11, which is at a significant premium to yesterday's closing value. In terms of operations, fundamentals are trending surprisingly smooth. At around a price of $165 per ton, the company has 3.6 million tons of met coal that can be delivered to the market. Put differently, Peabody has an excellent ability to meet demand.
Although the company is reserved on the next quarter given Australian cost inflation, Europe appears to indicate a movement towards cheaper coal sources. As a takeover target, the company's operations could be catalyzed through greater scale that spreads out costs and reduces costs even more in a way that is attractive to beleaguered economies.
I am further optimistic on CONSOL, which is even safer than Peabody. At a PEG ratio of 0.5x but a high beta, it is positioned technically to gain from a price multiple expansion and a full recovery. Management has taken the right steps to prepare itself for the full recovery by cutting corporate sales and reducing unnecessary steps in the supply chain to pass savings onto customers for greater volumes.

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Yen rallies broadly as BOJ easing underwhelms

* Yen hits one-week high vs dollar, two-week high vs euro
* Euro climbs vs dollar, but outlook clouded
* U.S. markets stay closed as storm Sandy batters U.S.
By Nia Williams
LONDON, Oct 30 (Reuters) - The yen rose broadly on Tuesday after monetary easing steps from the Bank of Japan's disappointed some market players who had positioned for a more aggressive increase in asset purchases.
The BOJ increased its monetary stimulus for the second monthly in a row, this time by 11 trillion yen ($138.5 billion).
"It was a very sceptical response to the BOJ policy meeting, made worse by the fact they have revised lower the growth and inflation outlook. That has seen the yen unwind a lot of the softer tone we saw going into this meeting," said Jane Foley, senior currency strategist at Rabobank.
The dollar hit a one-week low of 79.25 yen, breaking below its 200-day moving average at 79.52, important chart support. It was last down 0.4 percent on the day at 79.45 yen.
Some strategists said Friday's four-month peak of 80.38 would act as resistance for the dollar, and further moves in the safe-haven yen would depend on how developments in the United States and the euro zone affected investor appetite to take on risk.
"The dollar has probably hit a near-term peak last week. After the BOJ's easing, the market's focus will probably move on to whether the Federal Reserve will take steps in December to deal with the fiscal cliff," said Ayako Sera, senior market economist at Sumitomo Trust Bank.
The dollar was likely to stay trapped in its well-worn trading range around 77.50-80 yen, she added.
The euro also slipped against the Japanese currency, to a two-week low of 102.175 yen, before paring losses to trade down 0.2 percent at 102.78 yen.
WAITING GAME
The single currency climbed 0.3 percent against the dollar to $1.2935, helped by lower Spanish and Italian bond yields. Market players cited bids at $1.2850-80, and said there was buying ahead of the 200-day moving average at $1.2834.
Traders reported option expiries at $1.2900 and $1.2925 and said volumes were likely to be thin. U.S. markets were closed as Sandy, one of the biggest storms ever to hit the United States, battered the eastern seaboard.
Gains for the euro looked likely to be capped by concerns about whether Greece can agree a deal on more austerity, and uncertainty over when Spain might request financial aid.
Spanish Prime Minister Mariano Rajoy said on Monday he would seek a credit line from the euro zone's rescue fund "when I think it is in the interests of Spain".
Data on Tuesday showed Spain's recession extended to a third quarter, while inflation stayed high.
"Spain's economy is suffering terribly, which will continue to hit government revenues, and a modest decline in bond yields will not solve the problem," said Kit Juckes, strategist at Societe Generale.
Despite that, expectations the European Central Bank will start a bond buying programme after Madrid asks for a bailout limited speculative euro selling, and kept the currency within the $1.28 to $1.3170 range it has been in since mid-September.
The U.S. dollar was steady against the Canadian currency at C$1.0001. It earlier hitting a three-month high of C$1.0020 and broke above parity, seen as a key technical level.
Strategists said it was too early to tell what impact the destruction caused by Sandy might have on currency markets.
Demand for the dollar tends to rise in times of reduced appetite to take on risk, but if widespread damage prompts speculation the Fed may ease policy further to shore up the economy, the dollar could fall.

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