Against the Grain

Very little news about overnight as markets consolidated recent moves. London metals opened on a brighter note with cu leading the way. It looks like the Australian Senate will hold an inquiry into the recent spate of Chinese bids for the country’s natural resources. While in Chile the government welcomed the prospect of Chinalco acquiring 15% (half of Rio Tinto’s share) in the Escondida cu mine. It is clear the Chinese are using this downturn to secure a share of raw material assets in preparation for the next upturn emulating a policy the Japanese established in the ‘60’s and India and other emerging nations have begun. It remains to be seen how comfortable resource rich nations are “selling the farm”.

From Russia Jan retail sales rose 2.4% yoy (Dec 4.8% yoy) with unemployment rising to 1.8% the highest since Mch ’05. The LME stocks again dominated by al (global inflow Rott 13 k, Sweden 5 k, Asia 6 k and Korea 2.5k with small US) with increases also in cu, zn (Johore 1225 & NO 1700) and ni (Rott 816). Cancelled zn warrants in Johore were 4175 tonnes rising to 6% of total stock and we expect this to keep rising. As a comparison, the global breakdown of zn in warehouse is Europe 13%; Mid East 7.5%; Far East 52.5% and US 27% compared to pb where is Europe 50%; US 49.8% and Far East 0.2%, is there a move to sweep zn out of Asian warehouses. On the cu front we hear warrant purchases continue apace which coincides with the Chinese SRB desire to replenish its stockpile.

The US weekly jobless claims were steady at last week’s revised 627 k as Jan PPI was recorded rising 0.8% (Dec -1.9%) as ex food and energy was up 0.4% (+0.2%). At 15:00 the Feb Philadelphia Fed manufacturing business activity index was reported at -41.3 significantly below expectations (Jan -24.3). The Conference Board leading economic indicators rose 0.4% to 99.5 with a comment that the level of intensity of the downturn should ease. The coincident index fell 0.5% to 103.3 while the lagging index declined -0.1% to 113.9. In a low volume session two things stood out those metals that saw the biggest LME stock rises perform best price wise while cu led the price direction and in the afternoon it keyed off US equities.