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  1. #1
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    Thumbs up Empire Global FX ECN market news & analysis.


    Empire Global FX ECN CFD'S broker brings you the latest market news and market analysis to assist you in the improvement of your investment trading.

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    Post GLOBAL MARKETS-World stocks, euro slide on Greece default fears

    * US stocks fall more than 1 pct as financials weigh

    * Euro drops to 8-1/2 month low versus dollar

    * Bank shares down in Europe on fears of Greece default



    NEW YORK, Oct 3 (Reuters) - World stocks fell on Monday and the euro slid to an 8-1/2 month low versus the dollar as growing fears of a Greek default stoked appetite for safe-haven U.S. Treasury bonds.

    Better-than-expected U.S. economic data initially cushioned a fall in U.S. stocks as Wall Street indexes briefly turned positive after the release of a key manufacturing activity index. But they fell more than 1 percent in the afternoon as financials weighed.

    Bank shares were also battered in Europe as investors feared the impact of a Greek default on holders of the country's bonds, such as Franco Belgian financial group Dexia (DEXI.BR), whose stock slumped more than 10 percent.

    Greece admitted it will miss its deficit target of 7.6 percent this year, making a Greek debt default look more likely. In a draft budget sent to parliament on Monday, the government forecast a deficit of 8.5 percent of gross domestic product for 2011.

    "This news isn't surprising, but if Greece continues to have problems, that could really drag Europe into recession, and possibly the U.S. as well," said Randall Warren, chief investment officer of Warren Financial Service in Exton, Pennsylvania.

    European policymakers appeared no nearer to agreeing on a definitive solution to the crisis. Officials meeting on Monday were discussing ways to leverage the bloc's rescue fund and pressure Greece to implement agreed structural reforms. For details, see [ID:nL5E7L20LD].

    "Ultimately, Greece would need to see its debt written down by more and with that you need probably some kind of shoring up of the banking sector," said Alec Letchfield, chief investment officer at HSBC Asset Management.

    U.S. stocks extended losses in the afternoon as the KBW bank index .BKX fell 2.4 percent. On Friday, stocks closed their worst quarter since 2008.

    The Dow Jones industrial average .DJI lost 184.02 points, or 1.69 percent, at 10,729.36. The Standard & Poor's 500 Index .SPX was down 22.41 points, or 1.98 percent, at 1,109.01. The Nasdaq Composite Index .IXIC was down 53.89 points, or 2.23 percent, at 2,361.51.

    The MSCI All-Country World index .MIWD00000PUS was 2 percent lower, near a 14-month low set in September. The FTSEurofirst 300 .FTEU3 of top European shares ended 1.2 percent lower.

    The October-December period is, traditionally, the best quarter for equities. Reuters data shows that since 1971, world stocks have on average risen 3.7 percent in the fourth quarter.

    Dexia closed 10.16 percent lower after credit agency Moody's announced a rating review for possible downgrade on concerns about liquidity. French daily Les Echos said on Friday that Belgian and French finance ministers would meet to discuss ways of shoring up the firm's balance sheet.

    U.S. crude oil CLc1 fell 1.5 percent to $77.99 a barrel.

    The euro EUR=EBS fell as low as $1.32372 EUR=EBS on trading platform EBS, a fresh 8-1/2-month low. It was last down 0.9 percent at $1.3261.

    Against the safe-haven yen, the euro was down 0.9 percent at 102.194 yen EURJPY=EBS on EBS, not far from its decade low of 101.946 struck in September.

    "Euro zone bank issues remain a big issue and we expect the euro's downside to continue," said George Saravelos, G10 FX strategist at Deutsche Bank.

    The benchmark 10-year U.S. Treasury note US10YT=RR was up 33/32 in price, causing its yield to fall to 1.802 percent. Treasuries prices were also supported by the Federal Reserve's first bond purchase for Operation Twist, its latest bond program aimed at helping the U.S. economy.

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    Moody's slashes Italy credit rating


    (Reuters) - Moody's lowered its rating on Italy's bonds by three notches on Tuesday, saying it saw a "material increase" in funding risks for euro zone countries with high levels of debt and warning that further downgrades were possible.


    The agency downgraded Italy to A2 from Aa2, a lower rating than it holds on Estonia and on a par with Malta and kept a negative outlook on the rating.

    The euro pared gains against the dollar and Japanese yen immediately following the announcement which comes after Moody's rival Standard and Poor's cut its rating on Italy by one notch to A/A-1 on September 19.

    The cuts underline growing investor concern about the euro zone's third largest economy, which is now firmly at the center of the debt crisis and dependent on help from the European Central Bank to keep its borrowing costs under control.

    "The negative outlook reflects ongoing economic and financial risks in Italy and in the euro area," Moody's said in a statement.

    "The uncertain market environment and the risk of further deterioration in investor sentiment could constrain the country's access to the public debt markets," it said.

    It added that Italy's rating could "transition to substantially lower rating levels" if there were long term uncertainty over the availability of external sources of liquidity support.

    Italy's mix of chronically low growth, a public debt mountain amounting to 120 percent of gross domestic product and a struggling government coalition has caused mounting alarm in financial markets.

    Moody's decision came as little surprise after the agency said on September 17 that it would finish a review for possible downgrade of its rating on Italy within a month.

    But it highlights the growing vulnerability of the euro zone, which is already struggling to contain the crisis in the far smaller Greek economy and which would be overwhelmed by a crisis of a similar scale in Italy.

    "It's not that unexpected but it doesn't help the situation at all," said Robbert Van Batenburg, Head of Equity Research at Louis Capital in New York.

    "They have already traded as if there was somewhat of a downgrade in the works, so it will probably force Italian policymakers to embark on more austerity programs. It will put another fiscal strait-jacket on them."

    VULNERABILITY

    Moody's said the likelihood of a default by Italy was "remote" but it said the overall shift in sentiment on the euro area funding market implied a greater vulnerability to a loss of market access at affordable rates.

    Italy's relatively modest budget deficit, conservative financial system and high level of private savings had kept it on the sidelines of the euro zone crisis while countries like Greece and Ireland were sucked down.

    "Italy is being punished not because its finances suddenly deteriorated, but because investors have become more sensitive to its long-standing weaknesses," said Nicholas Spiro, managing director of Spiro Sovereign Strategy in London.

    He said markets appeared to be focusing on the weakened center-right government's lack of progress in stimulating the stagnant economy, which many analysts expect to stall or even slip into recession next year.

    "The bond markets are more concerned about Italy's ability to grow than its commitment to reducing a fiscal deficit that is already one of the smallest in the euro zone," he said.

    Prime Minister Silvio Berlusconi shrugged off the downgrade immediately, saying the Moody's announcement had been expected and the government was committed to its public finance target, which sees the budget being balanced by 2013.

    The government last month pushed through a 60 billion euro austerity package -- bringing forward its original balanced budget target by one year -- in return for support for its battered government bonds from the ECB.

    Berlusconi's center-right coalition has been deeply divided over policy and personal issues and further distracted by an array of scandals surrounding the prime minister.

    Opposition leaders have called repeatedly for the government to resign over its handling of the economy and there is widespread speculation that Berlusconi could be forced out of office before his term expires in 2013.

    Italy's borrowing costs have soared over the past three months and have only been kept under control by the ECB support but in recent weeks they have begin to climb back to potentially dangerous levels.

    An auction of long term bonds last month saw yields on 10 year BTPs rise to 5.86 percent, their highest level since the introduction of the euro more than a decade ago.

    The center-right government has been under heavy pressure over its handling of the escalating crisis and recently cut its growth forecasts through 2013.

    It is now expecting the economy to expand by just 0.6 percent next year, down from a previous projection of 1.3 percent.

  4. #4
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    Post Buyers rush in as Wall Street toys with bear market

    (Reuters) - Investors rushed in to buy technology and other beaten-down sectors as the S&P 500 dipped in and out of a bear market on Tuesday, and a late rally drove the index to its largest gain in more than a week.

    Markets once again turned on news out of Europe.

    Reports that European finance ministers agreed to prepare action to safeguard their banks, following the first lender bailout as a result of the crisis, were cited as giving stocks a boost heading into the close.

    Others pinned the comeback on technical levels and on bargain hunting after the broad S&P 500 briefly fell more than 20 percent from its 2011 closing high set four months ago.

    "To me, it looked mostly technical. It looked like the capitulation on the sell side," said Keith Springer, president of Springer Financial Advisors in Sacramento, California.

    He said the reports out of Europe just added to the buying frenzy that had started earlier.

    "You could see it (the market) starting to turn anyway and that gave people an excuse" to buy, he said.

    Chip makers and large-cap technology companies led the way even after Apple Inc fell 0.6 percent to $372.50 as the unveiling of its latest iPhone didn't live up to the hype. Apple shares had earlier fallen more than 5 percent.

    Volume increased late in the day - with nearly 15 percent of the day's composite trading taking place in the last half hour of the session. The Dow industrials rose 345 points in the last hour of trading.

    The Dow Jones industrial average gained 153.41 points, or 1.44 percent, to 10,808.71. The S&P 500 gained 24.72 points, or 2.25 percent, to 1,123.95. The Nasdaq Composite gained 68.99 points, or 2.95 percent, to close at 2,404.82.

    Despite the large gains, it is still not clear whether the latest reports mean there is progress in Europe's effort to keep its sovereign debt crisis from spreading out of Greece and into the banking system.

    The European finance ministers put their heads together for a plan to shore up their banks after collapsing confidence in municipal lender Dexia forced France and Belgium to rush to its aid.

    The Dexia bailout came as euro-zone finance ministers delayed a vital aid payment to debt-stricken Greece, which could run out of cash shortly.

    Investors fear that a Greek default will force banks to write down billions of dollars from their books and kick-start another credit crisis like the one that brought lending to a halt three years ago and generated a recession.

    The U.S. bank sector index, down nearly 30 percent since the 2011 market high hit on April 29, posted strong gains. The index finished the session up 4.1 percent.

    Morgan Stanley shares gained 12.3 percent to $14.01 but are still off 48.5 percent this year. Shares of Bank of America rose 4.2 percent Tuesday to $5.76.

    About 13.1 billion shares traded on the New York Stock Exchange, NYSE Amex and Nasdaq -- more than 60 percent above the daily average so far this year of 8 billion shares.

    Advancing stocks outnumbered declining ones on the NYSE by a ratio of about 3 to 2, while on the Nasdaq, about three stocks rose for every one that fell.

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    Stocks rise on hopes for bank support steps


    (Reuters) - World stocks rose for a second day Thursday while government bonds fell as expectations grew policymakers would take steps to support European banks, under threat from the impact of a possible Greek default.

    German Chancellor Angela Merkel said Wednesday Berlin was ready to recapitalize its banks if needed, adding to pledges by European finance ministers to safeguard banks in the face of mounting concerns about a Greek default [ID:nL5E7L53W7]

    The Financial Times reported Thursday that the European Banking Authority, mid-way through a two-day crisis meeting to assess the potential hit of mass sovereign restructurings, is re-examining the strength of the region's banks.

    Investors are focusing on euro zone and UK central bank policy meetings for hints on future monetary easing.

    A majority of analysts predict the European Central Bank will refrain at least until next month from cutting interest rates and the Bank of England from pumping more money into the economy. But there are those in both markets who see a risk of such moves already Thursday and the ECB is expected to take further steps to help banks.

    Hopes for near-term policy measures -- both from politicians and central banks -- are helping investors to take a break from a sell-off triggered by growing concerns about the damage to the banks from any Greek sovereign default.

    "Significant talk of bank recapitalization is certainly the driving factor behind positive sentiment," said Keith Bowman, equity analyst at Hargreaves Lansdown.

    "But there is still a lot of uncertainty. Speed is of the essence and that would make a difference. If we see another week or so go by without some significant step forward, that is likely to inject nerves back into the markets."

    The MSCI world equity index .MIWD00000PUS was up 0.9 percent, having hit a 15-month low earlier this week. The index is around 5.6 percent above this low.

    U.S. stock markets also finished higher Wednesday. VIX index .VIX, Wall Street's fear gauge, fell 7 percent to 37.81 Wednesday, down sharply from this week's peak of 46.88, lending support to investors cautiously putting some risk back on in the near-term.

    European stocks .FTEU3 rose 0.4 percent and emerging stocks .MSCIEF added 2.2 percent.

    U.S. crude oil gained a quarter percent to $79.91 a barrel.

    Bund futures fell slightly on the day.

    Spain will sell up to 4.5 billion euros of bonds, with comments from the IMF that it may buy peripheral bonds seen helping, although the fund later stepped back from a firm pledge to do this.

    The dollar .DXY against a basket of major currencies

    The euro fell 0.2 percent to $1.3324.

    "Inflation fears may not allow the ECB to cut rates, but we're bound to see some form of support for Europe's banking system -- and that should help the euro rise," said Katsunori Kitakura, chief dealer at Chuo Mitsui Trust and Banking in Tokyo.

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    Euro steady, market holds breath before ECB

    (Reuters) - The euro held steady against the dollar on Thursday as uncertainty gripped markets before an ECB meeting that could see rates cut or the rebirth of long-term lending to banks, while Europe's efforts to resolve its debt crisis and solid U.S. data provided tentative support for riskier assets.

    The euro, last at $1.3331, maintained most of its overnight gains made after Germany said it would help its own banks if necessary and opened the possibility of using a regional bailout fund to strengthen the euro zone banking system.

    Investor focus now shifts squarely to the European Central Bank's monetary policy meeting, whose outcome -- due at 7:45 a.m. EDT -- seems increasingly uncertain.

    The ECB has been widely expected to keep rates unchanged at 1.5 percent, but calls for a cut have grown louder amid signs the euro zone economy is deteriorating further and as Greek default fears weigh heavily on confidence in the bloc's banks.

    "Inflation fears may not allow the ECB to cut rates, but we're bound to see some form of support for Europe's banking system -- and that should help the euro rise," said Katsunori Kitakura, chief dealer at Chuo Mitsui Trust and Banking.

    Kitakura cited measures such as more liquidity, bringing back the ECB's 12-month tender last used at the end of 2009, and, possibly, the resurrection of its program for buying covered bonds.

    In a Reuters survey taken last week, 56 out of 75 economists said they expected the ECB to hold rates this time around, though 13 saw a 25 basis-point cut and 7 predicted a 50 basis-point cut.

    JP Morgan Chase is forecasting a drastic 50 basis point cut by the ECB saying the bank's move to "balanced" inflation risk at the last meeting came sooner than expected especially since the "inflation hump" is far from over.

    "Because the market remains split in its views on what the ECB should do, it's hard to say to what extent any move is already priced in the euro," said a trader for a Japanese bank.

    He added that if there is no cut, but additional measures like more liquidity are implemented, the euro could jump to take out stop losses looming between $1.3400 and $1.3450.

    A decisive break above that level could pave the way for a correction toward $1.3680 -- the 38.2 percent retracement of the $1.4550-$1.3145 slide.

    The single currency has lost about 10 percent against the dollar since that late August peak at $1.4550, but stands well-off a nine-month trough of $1.3145 struck this week.

    WAITING FOR SOLUTION

    European finance ministers agreed to safeguard banks, many of which could face heavy losses if a planned second bailout package for Greece does not go ahead, after France and Belgium agreed to bail out the debt crisis' first banking casualty, Dexia.

    The countries are expecting to finalize the rescue of the troubled lender, but disagreements remain over details of the plan as the two countries try to defend their respective national interests.

    "The crisis is far from over and I'm still negative on the euro looking beyond the ECB," said Minori Uchida, senior analyst at the Bank of Tokyo-Mitsubishi UFJ, adding that the currency may eventually drift below $1.30 in the coming days.

    The Netherlands votes on widening the role of the EFSF euro zone bailout fund, as agreed in July, after Malta delayed its ratification of the facility, while Slovakia -- the last country to vote on the issue next week -- is bitterly divided over it.

    "They are voting over it, but these measures are already seen as not satisfactory and the wholistic structural solution is still far away," said Uchida.

    The British pound shed 0.3 percent to $1.5425 as the Bank of England was due to meet on Thursday amid talk it may open the way for more quantitative easing.

    The single currency hovered around 1.2318 Swiss francs, having hit its highest since May on Wednesday.

    With markets highly concerned about the threat of a systemic shock in Europe, they barely took notice of another round of better-than-expected U.S. data showing the economy is still growing, albeit slowly.

    The recent flow of data suggests fears of recession in the U.S. and a hard landing in China are possibly overdone. A good number from Friday's U.S. non-farm payrolls could set the stage for a rally in risk assets.

    The dollar index came off a nine-month high of 79.838 earlier in the week to last trade at 79.028. It was steady against the yen at 76.74, off a three-week peak of 77.26 struck on Monday.

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    Post Euro rises on Barroso comments, ECB could support

    Barroso comments on recapitalising banks push euro to session high

    * Rates seen on hold, liquidity measures likely from ECB

    * Euro spikes versus Swiss franc, traders cite media report




    LONDON, Oct 6 (Reuters) - The euro climbed versus the dollar on Thursday after a top euro zone official said policymakers are proposing coordinated action to recapitalise banks, raising expectations the region's banking sector would be ringfenced from the Greek debt crisis.

    The euro was last up 0.3 percent on the day versus the dollar, near a session high of $1.3397. It jumped sharply following European Commission President Jose Manuel Barroso comments, and stops were cited above $1.3420.

    Investors were also focused on the European Central Bank meeting where policymakers are expected to provide longer-term funding to banks and keep interest rates on hold.

    But there was some speculation of a rate cut and that uncertainty meant some investors were more likely to go into the announcement at 1145 GMT with positions squared.

    Some market players were reluctant to initiate fresh positions ahead of ECB President Jean-Claude Trichet's last policy meeting. He could pave the way for a cut before year-end, even if rates are kept on hold at 1.5 percent today.

    "We expect there will be no rate cut today which should be some kind of support for the euro as long as the market does not come to the conclusion the ECB is behind the curve and not taking action quickly enough," said Lutz Karpowitz, currency analyst at Commerzbank.

    Calls for a cut have grown louder amid signs the euro zone economy is deteriorating further and as Greek default fears weigh heavily on confidence in the bloc's banks.

    In a Reuters survey taken last week, 56 out of 75 economists said they expected the ECB to hold rates this time around, though 13 saw a 25 basis-point cut and 7 predicted a 50 basis-point cut.

    Analysts said other measures to support Europe's banking system could include more liquidity, bringing back the ECB's 12-month tender last used at the end of 2009, and possibly the resurrection of its programme for buying covered bonds.

    A trader at a Japanese bank said if there was no cut, but additional measures like more liquidity are flagged, the euro could rise, taking out stop losses between $1.3400 and $1.3450.

    A decisive break above that level could pave the way for a correction towards $1.3680 -- the 38.2 percent retracement of the late August to early October slide from $1.4550 to $1.3145, a nine-month trough struck this week.

    WAITING FOR SOLUTION

    Optimism that Germany was taking steps to safeguard the financial sector and improved U.S. economic data provided some support for the single currency after a volatile week in which the French and Belgian governments pledged to rescue troubled bank Dexia .

    European finance ministers have agreed to safeguard banks, which could face heavy losses if a planned second bailout package for Greece does not go ahead, but analysts said event risk for the euro remained high.

    "The crisis is far from over and I'm still negative on the euro looking beyond the ECB," said Minori Uchida, senior analyst at the Bank of Tokyo-Mitsubishi UFJ, adding that the currency may eventually drift below $1.30 in the coming days.

    The single currency jumped to a four-month high of 1.2430 Swiss francs . Traders cited media reports quoting a senior Swiss official as saying a higher exchange rate floor in euro/Swiss would be better for the economy.

    Sterling fell 0.2 percent versus the dollar to $1.5438 ahead of a Bank of England rate decision, also on Thursday, amid talk policymakers may open the way for more quantitative easing.

    Once ECB and BoE rate decisions are out, market attention is likely to focus on the U.S. economy. A good number from Friday's U.S. non-farm payrolls could set the stage for a rally in risk assets.

    The dollar index came off a nine-month high of 79.838 earlier in the week to last trade at 79.055. The greenback was steady against the yen at 76.71 , off a three-week peak of 77.26 struck on Monday.

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    World stocks keep firm tone after BoE, eyes on Trichet

    (Reuters) - World stocks kept a firmer tone on Thursday after the Bank of England surprised the market by launching a fresh round of monetary easing this month, before cutting gains as the European Central Bank left interest rates on hold.


    The euro hit the day's low and German government bonds rose after the ECB held interest rates at 1.5 percent, disappointing some who had expected a cut in borrowing costs this month.

    Such expectations grew after the Bank of England pledged to buy a bigger-than-expected 75 billion pounds in assets to bolster the UK economy -- a move that pushed sterling to a 14-month low against the dollar.

    Investors are now focusing on ECB President Jean-Claude Trichet's news conference at 1230 GMT -- his last, and at which he is expected to announce a set of fresh liquidity measures to help banks.

    Growing hopes that policymakers would take coordinated steps to support European banks, under threat from the impact of a possible Greek debt default, kept the underlying tone positive for risky assets.

    European Commission President Jose Manuel Barroso proposed a coordinated recapitalization of banks to restore confidence, while the European Banking Authority said it was examining the resilience of lenders' capital positions.

    Optimism over near-term policy measures -- both from politicians and central banks -- are helping investors to take a break from a sell-off triggered by growing concerns about the damage to the banks from any Greek sovereign default.

    "It's a good injection of capital. We now just need to see a coordinated effort from the rest of Europe to sort out the recapitalization of European banks and it should form a decent base to move forward," said IG Index sales trader Yusuf Heusen.

    "It takes away quite lot of risk. This is positive for the market."

    The MSCI world equity index .MIWD00000PUS rose 1 percent, off the day's highs, having hit a 15-month low earlier this week. The index is now around 6 percent above that point.

    U.S. stock futures were up 0.1 percent, pointing to a slightly higher open on Wall Street.

    European stocks .FTEU3 rose 1 percent and emerging stocks .MSCIEF added 2.6 percent.

    The dollar .DXY rose 0.3 percent against a basket of major currencies. The euro fell 0.5 percent to $1.3264.

    "The ECB is now likely to prepare an interest rate cut within the next four months, by March at the latest," said Berenberg Bank economist Holger Schmieding.

    Sterling hit a 14-month low of $1.5270 after the BoE announcement.

    Bund futures erased earlier losses to rise 17 ticks on the day.

    The cost of insuring peripheral euro zone debt against default fell earlier. Five-year credit default swaps on Italian government debt fell 18 basis points to 450 bps, according to data monitor Markit.

    Equivalent CDS prices fell for Spain, Portugal and Belgium.

    U.S. crude oil gained 0.7 percent to $80.28 a barrel.

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    Wall Street extends rally after payrolls data

    (Reuters) - Stocks opened higher, rising for a fourth day on Friday after stronger-than-expected payrolls data suggested the economy may avoid another recession.


    The Dow Jones industrial average .DJI gained 80.19 points, or 0.72 percent, to 11,203.52. The S&P 500 .SPX rose 4.50 points, or 0.39 percent, to 1,169.47. The Nasdaq Composite .IXIC added 0.71 points, or 0.03 percent, to 2,507.53.

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    Exclusive: Gold to stay strong, top performing funds say

    (Reuters) - Gold will stay strong due to a lack of alternative havens for investors operating in a slowing global economy, top performing commodity fund managers told Reuters after taking a defensive approach and going into cash during September's gold sell off.

    "We consider the current weakness in gold as temporary and also the slump in commodity prices should come to an end soon," said Kurt Hug, an investment adviser for the Antares Precious Metals Fund.

    The fund came third in the Lipper Global commodity sector rankings in the third quarter of 2011 by keeping a high percentage of "strategic liquidity" in Swiss francs in anticipation of "a severe, but short-lived commodity shock."

    Fund research and analysis organization Lipper, a Thomson Reuters company, covers more than 108,000 funds. The commodity segment covers funds investing in both commodities futures and natural resources-related equities.

    Reuters approached the best performers to ask for details of their winning strategies.

    Also staying defensive was Paula Bujia, manager of the $330 million Schroders Gold and Precious Metals Fund, which came fourth. Steering clear of precious metals other than gold, and investing in mid-cap gold miners rather than seniors and juniors, helped her outperform, she said.

    The gold price has risen by nearly 17 percent so far this year, having hit a record $1,920.20 an ounce in early September before correcting sharply downwards. It was around $1,655 an ounce on Friday.

    Bujia said gold's correction from its peak was still only half of its declines in 2008 and she would wait for more selling of gold, particularly in exchange traded funds (ETF), before she felt able to resume aggressive buying of other precious metals and of mining equities.

    "In this environment, it's very difficult to believe that other precious metals could do well," she said. "Until we see more capitulation in gold and more ETF outflows it is not the right time to turn aggressive."

    Bujia is sticking with her gold tilt, saying the recent correction has been meaningful, but gold is not yet at a capitulation point. She believes gold may trade sideways for another couple of months, or come off another 10 percent.

    Precious metals funds dominated the upper end of the Lipper league table of over 130 funds in the third quarter.

    The LGT Dynamic Gold Fund came first, returning 9.36 percent over a quarter which saw the commodity index S&P GSCI fall 11.69 percent.

    Peter Sigg, head of investment management for commodities at LGT Capital Management, said the $73 million fund had been invested between 96 percent and 115 percent over the quarter.

    "We have been slightly leveraged during the move to (gold at) $1,900 (an ounce) and we were slightly invested in cash during the sell-off in September," he said.

    TESTING QUARTER

    Reuters' analysis of the Lipper data showed that the third quarter was testing for all commodity managers, with the average actively-managed fund in the Lipper Global commodity sector down 8.34 percent.

    S&P said equity market weakness and U.S. dollar strength had culminated in the worst quarter for the S&P GSCI since the fourth quarter of 2008.

    Energy prices came under pressure due to fears of slowing demand and even precious metals did not escape, with profit-taking overwhelming the market in September. The S&P Precious Metals index ended September down more than 14 percent.

    "Our conclusion of the last month is that gold is not immune in a very negative global commodity and equity market environment, which was similar to the autumn 2008 experience," said LGT's Sigg.

    But, like Bujia and Hug, he remains relatively bullish on gold, saying that whilst the recent sell off had washed out the CFTC net long positions held by professional investors, individual investors had only marginally reduced their physically-backed gold ETF holdings.

    Bujia also noted that an equity exposure of just 20-25 percent may have protected her from stock market losses, helping her outperform those with higher equity tilts.

    There is still a big gap between the performance of gold futures and gold mining stocks, which she said is partly because the miners are unable to decouple from overall equity markets.

    "When you have a fear trade, gold can perform well but not the equities," she said.

    She believes gold equities offer great value, with record earnings and cash levels and increasing dividends, but these fundamentals will not come good until the stock market calms down.

    Bujia remains cautious, focusing on mid-caps such as Randgold Resources, Yamana Gold and Eldorado which she said have good production growth.

    Among the more diversified funds, Neuberger Berman's $100 million Enhanced Commodities fund, managed by Gresham Investment Management, also acquitted itself well largely due to a fairly high exposure to precious metals.

    Douglas Hepworth, director of research at Gresham, added that a tilt to crude oil over natural gas, and to meats over grains and softs, had helped.

    "Macroeconomic factors have been the drivers of the entire commodities asset class for several months, and nothing there looks particularly encouraging," he said.

    The worst-placed funds were the BI Basic Long Commodity Fund, which invests in natural resource equities and futures and cannot go short, and the BBGI Commodities fund which invests in a mix of commodity ETFs and commodity equities.

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