Against the Grain

A rest day on the economic front ahead of US Jul employment data Fri. In Asia the metals continued their on their high octane volatility, although not being able to scale 6200 cu led the pack trading over 3000 lots on Select in a US$ 180 range, opening London at almost mid point of the pitch.

In Japan the Jne leading economic index a broad look at the economy rose to 79.8 (May 76.9). Australian Jul unemployment rate was steady at 5.8% as 32 k part time jobs were created. Italy’s Jne industrial output fell 1.2% against an expected rise (May flat) and yoy off 21.9% that is doldrums territory (-19.8%). Better news from Germany Jne factory orders rose 4.5% (+4.4%) though still 25.3% down yoy (-29.4%). The UK Jul new car registrations rose 2.4% yoy as consumers took advantage of the scrapping incentives (-15.7%). BoE left rates unchanged at 0.5% and increased its quantitative easing programme to £ 175 billion from £ 125 bill. The BoE said the UK recession appears to have been deeper than previously thought but the pace of contraction has moderated and the trough in output could be close at hand. UK equities took heart as the “the free lunch in capital markets”, seems set to continue. The worrying thing is the central bankers are more cautious any slowdown could see the metals give back 35 / 45% this years rally by end of ’09 and still look in good shape. The ECB followed suit leaving rates unchanged at 1%.

London saw oil move quickly above US$ 72 / bbl supporting the metals. The LME stocks were routine. A really volatile spread has been the pb / zn spread 23/07 it was at 30 start of this week out to 120 then today into level and closing at 10. The Baltic Dry Freight index fell 4.7% today on speculation Chinese coal and iron ore imports will ease. At the same time a European bank said emerging markets had peaked after their 72% rally this year and a US bank said hedge funds are shorting miners and oil stocks. In Russia an investment bank said more than 50% of the stock market is controlled by the state.

In the US the only data is weekly jobless claims 550 k from previous 584 k. Into the afternoon and the markets were not sure which direction to take but on the grounds of probability it seemed to be up unless the coin has come up heads too many times recently. Well it seemed heads had come up too many times as markets “equity & US$ surfed” the afternoon away. Well as they say in sport the game is evenly poised for tomorrows employment data, one bank has revise it estimate to down 150 k from previous estimate of -325 k, lets see.