Against the Grain

What a difference a year makes from the AtG Feb 22 ’07 - The commodity stampede continued its momentum Thurs (which strong gains in the base metals) despite poor US economic data, the Feb Philadelphia Fed index came in at -24, below an expected recovery to -10 (Jan -20) and the Jan Conference Board index of leading economic indicators fell by 0.1% (Dec -0.1%). On top of this the Federal Reserve reduced its growth forecast for the US, the EU did similar for Euroland and the OECD chief said world growth would be lower than his organisation had predicted in Dec. Note how the economy was already slowing back then but investors ignored it, at the time cu was 8830, al 2232, zn 2530 and pb 3335. Are we beginning to see the reverse effect now with investors throwing in the towel as signs of growth appear in China and Asia although admittedly the West could do better.

Overnight equities slumped again as investor fled the US financials seeing the DJI off 3.4% to a 12 year low on fears the banks, insurance and car makers will need more taxpayer cash. Despite the fall in equities gold could not breach US$ 1000 / oz. In Asia reports are the Chinese SRB will meet zn smelters Wed to discuss new purchases (100 kt mentioned) as a further 5 kt of warrants were bought in Johore. There seem to have a nice little arbitrage going sell Chinese material at a premium to the LME to the government and buy in LME priced material. The LME stocks saw inflows in the case of zn withdrawals and cancellations in Asia are being offset by deliveries into New Orleans which we believe is Asian material. In Europe French Feb consumer confidence index was -43 (Jan -42) while Italy’s improved to 104.1 (102.6) and the German Ifo business climate index was 84.3 (Jan 86.8), current sentiment index 82.6 (83.0) and expectations 80.9 (79.4). See Newsweek article edition Mch 2 by Fareed Zakaria “To Pack a Real Punch” quoting 97% of lead acid batteries are recycled (www.newsweek.com).

The US data remains grim the Dec Case Shiller 20 city home price index declined 18.8% yoy (Nov 18.2%) there is a large disparity between Denver -4% and Phoenix -34%. Then the Feb Richmond Fed manufacturing index was reported at -51 (Jan -49) and the shipment index at -56 (-54). Finally, the Feb Conference Board consumer confidence index was 25.0 a record low (Jan 37.7), the present situation deteriorated to 21.2 (29.7) and expectations 27.5 (29.7). Fed Chairman Bernanke appeared before the Senate Banking Committee to present his twice yearly report pushing a well trodden path committing all available resources to the problem while warning things could get worse. After that everything then focused on the equity arena, initially DJI rushed up 90 points then dipped back to unchanged the roared back over 120 points higher in just over an hour. Cu led the metals higher testing 3300 while gold fell sharply back testing 960 late while the Japanese yen has weakened against the US$, a encouraging sign for economic recovery.

This entry was posted on Tuesday, February 24th, 2009 at 6:17 pm and is filed under Uncategorized. You can follow any responses to this entry through the RSS 2.0 feed. You can leave a response, or trackback from your own site.