Forex Investment

Updated from 1:04 p.m. EST

Energy futures fell on Friday at the New York Mercantile Exchange as an anticipated easing in gasoline prices lured crude lower.

The April contract for light sweet crude oil closed the session 2.6% lower at $60.04 a barrel. Crude prices ended the week even. Reformulated gasoline was down 3 cents at $1.90 a gallon, and heating oil slipped 5 cents to $1.71 a gallon.

The near-term contract for natural gas fell 16 cents to $7.08 per million British thermal units.

Crude oil and gasoline futures fell despite figures released this week showing a tightening of inventories. News about rising violence in the Nigerian Delta and a sabotaged pipeline in the region also failed to support crude prices.

According to Max Pyziur, energy analyst at CPM Group in New York, energy futures markets and recent inventory numbers reported by the Energy Information Administration are sending mixed signals to traders.

Spreads between near-month futures contracts and contracts that are further out, known as calendar spreads, can indicate how market participants view the direction commodity futures will move, says Pyziur. Larger spreads account for unknown future risks that could affect markets. Narrow spreads suggest that markets in the near term will be tight, possibly because of risks to supplies of commodities.

“In early March, the calendar spread curve for gasoline was flat, which indicated that traders were anticipating a near-term tightening of gasoline supplies,” Pyziur says. “The curve is beginning to normalize, suggesting that worries of tight supplies in the short term are easing. This sentiment is moving up the supply chain and lowering crude prices today,” he said.

The notion that gasoline and crude oil markets may be easing runs counter to the EIA inventory numbers released Wednesday that were extremely bullish. Gasoline inventories fell by 3.8 million barrels the previous week, whereas analysts had predicted a 400,000 draw. The EIA figures sent gasoline and crude prices soaring.

Also influencing markets was the impending meeting of the Organization of Petroleum Exporting Countries. OPEC will meet next Thursday to decide whether it will adjust quotas for the export of crude oil. Most analysts expect that it will stand pat on current production levels.

Elsewhere, energy stocks were mostly higher. The iPath Goldman Sachs Crude Oil (OIL) ETF was down 2.3% at $36.71.

Exxon Mobil (XOM) edged 1% higher to $71.14. ConocoPhillips (COP) was 23 cents higher at $67.80. Shares of Chevron (CVX) finished the day unchanged at $68.46.

Halliburton (HAL) was upgraded by Calyon Securities from neutral to add, and its stock target price was raised from $36 to $41. Halliburton was up 0.8% cents at $32.

Verasun Energy (VSE) was upgraded by Thomas Weisel from underweight to market weight, and its stock jumped 2.9% to $17.95. Provident Energy Trust (PVX) was upgraded by BMO Capital Markets from underperform to market perform, and its shares advanced 0.5% to $10.67.

The Yen has already dropped to a 3-week low against the worlds major currencies as forex traders move to put the crash in global capital markets behind them. Volatility, the factor that many analysts consider the bane of the carry trade, is also declining. Tomorrow, the Bank of Japan is expected to announce that interest rates will be left unchanged, and probably will remain at current levels until the end of the year. This announcement should further put the minds of traders at ease. All in all, it looks like the Yen will resume its gradual downward path that it was pursuing prior to the bounce it received from the crash. Forbes reports: Recently, sharp falls on equity marketshad sparked some unwinding of carry trades. Investors have begun the week by resuming them following firm US inflation data last week and solid gains in equity markets. Read More: http://www.forbes.com/markets/feeds/afx/2007/03/19/afx3529711.html

Nymex Holdings (http://www.businessweek.com/ticker/) confirmed on Feb. 23 that it’s planning to sell more stock, after the energy-futures exchange already jumped out of the gate with a more than 136% gain in price in its initial public offering on Nov. 17.

The company’s next stock sale could be valued at more than $1 billion, the Wall Street Journal reported before Nymex’s official announcement, citing people familiar with the matter. In November Nymex had sold $383.5 million of its more than $12 billion total shares, as investors buzz about the globalization of the company’s industry.

Nymex, which owns the New York Mercantile Exchange, said in a press release Feb. 23 that its proposed secondary offering will be determined around March 7. The number of shares to be included in the deal will depend on the interest of stockholders participating, Nymex said. The company is also thinking about adopting a dividend policy, but adds the caveat that any dividend announcement will take place no sooner than June 30. From 2002 until Nymex’s initial public offering, the company paid cash dividends at least twice per year.

Investors sold Nymex stock 1.5% to $138.61 per share in late trading on Feb. 23. The stock, which trades with a relatively small number of public shares outstanding, has soared in price since opening in November at $59 per share.

When Nymex announced that deal in November, the company said it was trying to get increased visibility in a marketplace where rivals already are or will be publicly held companies. Nymex also said it may use some of its recently raised funding to acquire businesses, but added that no such deal specifically has been planned and the money hasn’t been earmarked for that (see BusinessWeek.com, 11/17/06, http://www.businessweek.com/print/investor/content/nov2006/pi20061117_939296.htm). In its Securities and Exchange Commission statement filed Feb. 23, Nymex said the next offering is for “general corporate purposes.”

Stock exchange CEOs have been scrambling in recent months to become the next heavyweight in the world?s eyes. NYSE Group’s (http://www.businessweek.com/ticker/) CEO John A. Thain took the New York Stock Exchange public in the past year, with spectacular results. Thain is now pushing to buy the European bourse Euronext (see BusinessWeek.com, 11/13/06, http://www.businessweek.com/bwdaily/dnflash/content/nov2006/db20061113_953026.htm). In another example, the Chicago Mercantile Exchange (http://www.businessweek.com/ticker/) announced plans to buy the Chicago Board of Trade (http://www.businessweek.com/ticker/) in October (see BusinessWeek.com, 10/17/06, ).

BEIJING (XFN-ASIA) - The People’s Bank of China (PBoC), or central bank, might hike its benchmark rate by 27 basis points (bps) in the second quarter if inflation picks up in the first quarter, Standard Chartered Bank chief Asia economist Stephen Green said.

Commenting on the remarks made by Yi Gang, assistant governor of the PBoC, that the primary aim of monetary policy in China is currency stability, Green noted that the central bank is striving to maintain a negative spread of 250-300 bps or so against dollar LIBOR rates.

A widening gap in the rates on the two currencies could prevent dollars being converted into yuan to realise a higher return on appreciation of both the yuan and the assets the yuan are parked in because this would reduce yields on the yuan, Green said.

An interest rate hike in China would narrow the spread, therefore causing capital inflows into yuan-denominated assets and subjecting the currency to upward pressure, he added.

“If inflationary pressure continues to build though, the PBoC will be increasingly caught between a rock and a hard place,” Green said.

However Green said the central bank need not worry too much about China’s two main classes of assets - stocks and real estate - lose their appeal, which seems to be happening now.

“Real estate and stocks… look pretty fully valued, at least in the short-term, and while the former is now increasingly heavily taxed, the later is looking volatile”, he said.

Green noted that if one takes such assets out of the equation, and assumes the current rate of yuan appreciation is sustainable, the rationale for the yuan carry trade looks weak.

“We are sticking to the view that an apparent investment surge and inflation worries in the first quarter will spook enough people in Beijing to push through a 27 bps bank rate hike in the second quarter,” he added.

jianbo.wu@xfn.com

For more information and to contact AFX: www.afxnews.com and www.afxpress.com

Businessesshould treat employees better if they want to keep the public’s trust, a survey ofcorporate “opinion leaders” says.

After making quality products, “corporate social responsibility (CSR)” isthe key trust issue, a survey by the public relations firm Edelman shows.

And withinCSR, “employees are the new green,” the survey says.

Fair treatment of employees edges out environmental practices as the most important CSR factor.

It also says that unethical labour practices are the single biggest issue that undermines trust in companies, ahead of a list of corporate negatives that includes excessive payfor executives, defective products andenvironmental problems.

Trust matters because the respondents say that if they don’t trust a company, they won’t buy its product, will ignore its attempts to market itself and will support more government regulation of the company.

The issues that undermine trust in companies:

- Unethical labour practices.
- Environmental problems.
- Defective products.
- Accounting scandals.
- Excessively large executive pay.
- Investigation by a regulator.
- Large layoffs.

Human rights, poverty and global warming are three key issuesthat companiesshould address to improve trust.

Edelman, an international PR firm, based its conclusions on half-hour interviews with 3,100 business leaders from 18 companies. Most countries, including Canada, had 150 people in the poll; the U.S. had 450.

The subjectshave a post-secondary education, are in the top quarter of household incomes, are between35 and 64, andwork in “media, economic and policy affairs,” the Edelman presentation says.

Among other conclusions:

- In the Canadian sample, NGOs are the most trusted institution, followed by business, with religionvery slightly ahead of mediaand government, which aretied for last.
- Trust in all institutionshas fallen since last year, back to the level of two years ago.
- By industry, technology is the most trusted, followed by health care and biotech; media is the last.
- Canadian companies are in the top ranks worldwide.