Against the Grain

Overnight gold moved sharply higher on worries that some EU countries could see their sovereign debt down graded as the recession gathers pace most at risk are Ireland, Spain and Greece, this impacted onto the €. In the metals zn gained ground on talk the SRB is again about to step into the markets and bid for metal to relieve the pressure on smelters (this was quickly discounted once London came on line) while cu posted good volumes on Select with over 2,000 lots trading in a US$ 95 range.

Metals were under slight pressure a general concern over future economic growth kept the sellers on top. Chinese Customs said Jan cu imports rose 27.7% to 202 kt while scrap declined 56.2% at 180 kt. The LME stock were again dominated by inflows to al, zn (cancelled warrants in Sing 2450 and Johore 525 saw the total reach over 5% of free warrants), cu and ni. On the economic front Jan Singapore non oil domestic exports fell 34.8% yoy (Dec -20.8%) with electronics down 38.4% yoy and pharmaceuticals falling 4.5%. Further Jan Singapore port container volume dropped 19.6% to 1.97 million twenty tonne units (TEU). In Europe Jan UK CPI fell 0.7% rising 3% yoy, core CPI was down 0.8% however up 1.3% yoy and the RPI declined 1.3% to advance 0.1% yoy – on the whole less than expected as the weak £ kept import prices high. In Feb the German ZEW investor expectations sentiment survey improved to -5.8 (Jan -31).

The US NY Fed Empire State manufacturing survey was poor -34.65 (Jan -22.2) with new orders and employment suffering. The Chilean state research group Cochilco said the country produced 5.33 million tonnes of cu in ’08 down 4.1% from ’07. At 14:30 with the President creating greenhouse gases on his way to sign the stimulus package in Denver the DJI plummeted 300 points as gold bolted to US$ 970 / oz. The markets were spooked by falls in Asia and Europe and worries over GM and Chrysler bailout strategies. Against all the bad sentiment the base metals tried hard to hang on in.

Correction – y/day we said Minmetals bid for Noranda in the 90’s in fact they proposed a friendly takeover in Spt ’04, how time flies we have had boom and bust since then!