Against the Grain

Overnight US car sales recorded another poor month as Jan saw then off 37% to 9.57 million units on an annualised rate, the lowest level since ’82. Of the companies, Chrysler sales were off 55%, GM 49%, Ford 40%, the three Japanese manufactures down an average of 30% while Korean models increased sales. The month saw Chinese annualised sales at 10.7 million units over take the US. The weekly ABC / Washington Post consumer sentiment was -52 off previous record low of -54. In Australia Dec retail sales jumped 3.8% (Nov +0.4%) as government tax cuts kicked in. While UK Jan consumer confidence was down at 40 (Dec 48), no surprise when you hear how negative the press is. The Jan Chinese official manufacturing PMI was 45.3 (Dec 41.2) similar to other country numbers new orders improved to 45 (37.3). While we concede these numbers indicate continued contraction being below the magic 50, it is worth taking note they are stabilising.

The January service sector PMI data appeared today and like manufacturing have stabilised, worst first Japan 34.1 (37.0), Russia 36.8 (36.4), Italy 41.1 (40.3), France 42.6 (40.6), Germany 45.2 (46.6), Euroland 42.2 (42.1) and UK 42.5 (40.2). Metals relatively quiet with a bid tone to them which was helped by LME stocks, cu up while al fell on a day of little movement the others little changed. The newswires are reporting sources supposedly close to the Chinese SRB saying the latter is looking to raise it cu stocks from 300 k to 1 million tonnes. Prices remained firm as mining equities rallied and both keyed off each other helped by Jan LME option declaration. BHPBilliton reported Escondida cu mine output in ‘08 fell 15.4% to 257 kt of cathodes and 997 kt of cu in concentrate as lowers grades and mechanical problems slowed output. While Southern Copper predicted ’09 output would be 470 kt, 3.6% below ’08 production of 488 kt. Even star cu performer in’08, Antofagasta sees its Chilean output falling 9.4% in ’09.

Some preliminary employment data ahead of Fri Jan non farm payrolls, the Jan ADP private national employment report saw 522 k jobs lost (Dec 693 k) and the number of planned job cuts rise to a seven year high in the Challenger, Gray & Christmas report of 242 k (Dec 166 k). At 15:00 the Jan non manufacturing PMI lifted to 42.9 (Dec 40.6). The run of better data is starting to give some real momentum to the pick up in metal prices.