Against the Grain

For those looking for the “green shoots of recovery” (like us) Asia is the focus of attention, with China to the fore. In the past month there have been quite a few articles in the business press along the same theme. The Asia crisis of the ’97 came to a head because of the region’s dependence on foreign investment. The countries learnt from that lesson recovering by building a strong export sector that produced large budget / trade surpluses. These were recycled into the countries buying these exports. However the reliance on the G7 as customers has again seen them come to grief. Fortunately most have the national balance sheets to launch strong stimulus plans as seen in China and Singapore. The entrepreneurial drive of the region remains in tact and commentators believe recovery needs to be built on a change tack away from exports towards strong domestic consumption. What appears clear is having gone into the downturn last the emerging market sector has the youth and flexibility to come out first.

The metals again quiet in Asia with support coming from the US equities continued recovery after the London close. In Australia a revised stimulus package was passed by the Senate as expected which should see the equivalent of a 1.3% boost to GDP in ’09. The weekly Shanghai stocks all rose cu 5328 tonnes to 33,861; al 2099 tonnes to 201,082 and zn 599 tonnes at 63,640. London opening was rather quiet. The LME stocks daily movements were dull while on the week cu rose 15 kt, al up 59 kt, zn increased 225 tonnes; pb rose 925 tonnes, ni jumped 4 kt and sn fell 270 tonnes. This week we have hear of good buying of Far East cu and zn warrants both of which could have topped 7 kt so it will be interesting to watch cancelled warrant data in that region to see if the material begin to move. At present cancelled warrants represent 1.2% of total cu stocks and 2.9% of zn. The news was not good from Europe  Q4 German GDP fell 2.1% (Q3 -0.5%) the lowest since Q1’87 as yoy growth was down 1.7% (+0.8%), preliminary  Italian Q4 GDP was -1.8% and yoy off -2.66%. In Jan European new passenger car registrations slumped 27% to 958 k the lowest in 20 years. Admittedly in low turnover however most of this week has seen metals prices fall in the premarket steady then move higher in the ring session before sliding back after 14:00, perhaps signalling there is trade buying around.

The US director of national intelligence told Congress that the global economic turmoil and the instability it could ignite had outpaced terrorism as the most urgent threat facing America. The preliminary Feb Uni of Michigan consumer confidence survey disappointed back to 56.2 (Jan final 61.2), while the current index improved to 67.1 (66.5) expectations slumped to 49.1 (57.8).  The metals followed the equities in the afternoon.

The US celebrates President’s Day on Mon looks like everything closed.

Over the week cu fell 110, al off 90, zn down 47, pb drifted 20, ni dropped 1300, sn up 150, gold rose US$ 23 / oz, oil down US$ 4 / bbl, DJI declined 380 points and US 10 year bond yields off 0.14%.