Geopolitical tensions in East Asia, especially the Korean peninsula, increased as the North Korean media reported that its Dear Leader Kim Jong Il died. Asian stocks declined as the uncertainty arose after the Kim's death, such as how long would Kim Jong Un (Kim Jong Il's son) stay in power, the flee of refugee from North Korea to nearby countries including South Korea and Japan and possibility of reunification of the 2 Koreas, may cause instability in the region. Most Asian bourses fell with the Seoul Composite plunging more than -4% because of the news.

Investors fled to safe-haven assets and the US dollar was obviously their shelter. The market lost interests in Japanese yen this time as Japan is geographically near North Korea. Should Kim's death triggered destabilization in the region, Japan would have to suffer. Indeed, Japan's Prime Minister Yoshihiko Noda said that a crisis management team on North Korea has been set up today so as to verify the announcement of Kim's death and to gauge its implications.

Besides the news, the financial market continued to be pressured by the gloomy outlook in the Eurozone. Fitch Ratings lowered France's credit outlook to negative despite affirmation of the AAA rating. It warned that credit ratings of Belgium, Spain, Slovenia, Italy, Ireland and Cyprus may be cut. Meanwhile, Moody's cut Belgium by 2 notches to Aa3, with a negative outlook, on Friday, citing the contingent liabilities from the Dexia bailout, sluggish economic growth and increasing borrowing costs were major threats of the country's debts.

On the dataflow, the US' NAHB housing market index probably stayed in 20 in December. In China, November's house price index was so far the worst this year. According to the national statistic bureau, new home prices in 49 of the 70 cities monitored fell on monthly basis in November, while 33 cities reported declines in October.

Commitments of Traders

Speculators were mixed towards the energy complex, being bearish on crude oil and heating oil but bullish over gasoline and natural gas, in the week ended December 13. Net length for crude oil futures plunged -6 501 contracts, to 149 303. Net length for heating oil declined -3 713 contracts to 11 365 while that for gasoline rose +1 866 contracts to 56 080. Net short for natural gas futures fell -6 116 contracts to 160 372.

With the exception of silver, speculators were bearish on precious metals. Net length for gold futures declined -9 208 contracts to 150 503 while that for silver climbed +1 037 contracts to 13 667. For PGMs, net length for platinum slipped -1 011 contracts to 19 735 while that for palladium increased +353 contracts to 6 016.

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