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Thursday, December 04, 2008
Asian Stocks Trade Mixed; BHP, MUFG Fall More Than 5%
Chris Oliver
MarketWatch Pulse
HONG KONG -- Asian stocks traded mixed to lower early Friday, with the financial sector under pressure in Tokyo, while commodity stocks also retreated in the wake of overnight falls in crude-oil prices. Among stocks on the decline, BHP Billiton's shares were down 5.2%, while Mitsubishi UFJ Group slumped 5.4%. Shares of Nomura Holdings were up 3.2% after the broker, Japan's largest, announced Thursday it will cut up to 1,000 jobs to slim payroll costs following its acquisition of some of the operations of now-defunct Lehman Brothers Inc. January crude-oil futures were down 2 cents at $43.65 a barrel. Among indexes, Australia's S&P/ASX 200 was down 0.5% at 3,515.10, Japan's Nikkei 225 was up 0.4% at 7,955.62, South Korea's Kospi added 0.6% at 1,012.02 and New Zealand NZSX-50 eased 0.2%% to 2,726.52.
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FOX Translator
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No, it's not a dance craze. Contago is a condition of supply and demand, essentially a fancy word to say that prices for items, typically commodities, are cheaper now than they would be at some point down the line.
Anything that¿s sold in the futures market can be in a case of contango. Futures are exactly that: a contract to buy an item or asset at a price in the future. This is the case with oil, with traders buying and selling contracts to acquire a barrel of oil in months down the line. When a market is in contango, spot prices, or the price of a commodity if you were to buy it right now, are lower than forward prices.
Why is that important? Well, it usually tells you the supply of a given commodity is plentiful (since, according to Economics 101, a large supply usually leads to cheap prices).
Incidentally, if you think contango is a mouthful, its opposite condition is known by the equally tongue-tying term backwardation.
