Will it be a positive outlook

The market is reacting positively on the move and the potential for some sort of patchwork type of agreement to come through before the end of the year. The markets are focused on the impact of a budget deal on economic growth in 2013. Economists warn that going over the cliff could push the U.S. economy back into recession.

U.S. President Barack Obama is holding White House talks with the top four congressional leaders - Democratic and Republican Senate leaders Harry Reid and Mitch McConnell, Republican Speaker of the House John Boehner and Democratic House Minority Leader Nancy Pelosi, as the deadline for avoiding the fiscal cliff approaches. If there is no deal by 1st January, nearly every American will see his or her taxes go up.

The worries about the fiscal cliff have been holding the oil market back. With the president cutting his vacation short, some suspect there may be a grand deal in store. Oil is rising in part on concerns of reduced oil flow out of the Kurdish areas of Iraq into Turkey over a pay dispute.

If major economies can avoid recessionary headwinds as the U.S. faces the fiscal cliff, then the investors will also focus on policy developments in China under the new leadership of the world’s second largest economy.

Natural rubber also rallied above the ¥300 per kg level for the first time since May as Japan’s currency dropped to a 27 month low on prospects for additional stimulus driven by Prime Minister Shinzo Abe’s new government. The yen slid to the lowest level against the dollar since September 2010 on expectations that the new government will push for more cash infusions to bolster the economy.

The weakening yen pushed up Tokyo rubber prices. Rubber for delivery in June advanced to ¥302.9 a kg on the Tokyo Commodity Exchange, the highest settlement for the most-active contract since May. Today, RSS4 grade rubber in India advance and closed at `.161.50 a kg and the price of RSS3 grade closed with a positive note at `.177.75 per kg at Bangkok, while Malaysian SMR 20, which Indian tyre makers prefer to import, closed at `.162.43 a kg. On the Tokyo Commodity Exchange, January futures series currently trades at ¥289 per kg, February at ¥288.6, May at ¥299.2 and June 2013 at ¥302.9 per kg.

Rubber also advanced on concern that supplies from key exporters will decline after Indonesia forecasted lower natural rubber production next year. Output in Indonesia may drop 8.9% to 2.77 million tonnes next year as the country limits production and shipments in coordination with other growers.

Read lot more in Rubber4U – 1st January 2013 issue