Against the Grain

The equities continue to dominate proceedings the DJI posted a 2% rise with a 550 point trading range in the last hour leaving all the US equities in a mixed state. The cart went off the rails in Asia as poor results and growth fears battered the region’s equities Nikkei off 9.6%, Hang Sang -4.5%, ASX 2.5% and Korea tumbled 11.7%. The latter followed the release of South Korean Q3 GDP at +0.6% (Q2 +0.8%). In Japan Sony reported poor results and the world’s second largest auto manufacturer Toyota reported Spt quarter sales decline 4.5% the first quarterly fall in 7 years. Some good news Spt Singapore industrial production rose 2.4% (Aug -12.5%) accounting for 25% of the economy the two major components electronics fell 14.6% (-8.2%) and pharmaceuticals jumped 44.4% (-36.2%).

The metals having ended y/day in a rather buoyant mood dropped away in Asia as the gravitational pull of equities, stronger US$ and lower oil encouraged sellers. The Shanghai cu and zn contracts recommence trading Mon with a 4% price limit, while the exchange’s weekly stocks saw cu fall 3737 tonnes to 31,053; al down 275 tonnes at 204,407 and zn up 167 tonnes to 72,693. This gave the metals a small bounce then the Oct flash Euroland PMI estimated the composite index would be 44.8 (Spt 46.9), manufacturing 41.3 (45.0) and service 47.0 (48.4). The Oct Italian business confidence was 77.7 (Spt 81.8). The LME stock release was delayed 30 minutes by a technical fault but the result was the same rising cu and al stocks. On the week cu rose 500 tonnes; al jumped 21 kt; zn up 2 kt; pb down 5 kt with 20% stock cancelled; ni increased 1032 tonnes and sn off 500 tonnes. In Vienna, OPEC agreed a 1.5 mbpd production cut from Nov the initial reaction of the market was disappointment. The flash UK Q3 GDP contracted 0.5% the first quarterly decline since ’92 (Q2 0%) and yoy +0.3% (+1.5%). The FTSE tumbled nearly 9% and the electronic screens the US S&P and DJI futures were limit down, if the index falls 10% trading is halted for an hour. Both Russian equity indices fell 14% and suspended till Oct 28.

The metals touched lows in the official rings and since then begun to gain ground especially gold with a low of 680. With growing talk on the newswires of a US equity meltdown it would be no surprise to see investors look again at hard assets either that or after all the talk a giant anti climax or the futures down was a circuit breaker. At 15:00 good news Spt US existing home sales rose 5.5% to 5.18 mill units per annum the highest level in a year (Aug -2.2% at 4.91 million units). The rest of the afternoon was watching the equities and some profit taking ahead of a weekend.

On the week cu flopped 1031 with half the fall occurring outside London hours on the back of US and Asian equity moves, al eased back 35, zn off 60, pb down 189, ni off 400, sn fell 1650, gold down US$ 55 / oz, oil fell US$ 7.2 / bbl, the DJI declined 500 and US 10 year bond yields off 0.33%