Against the Grain

Looks like panic over as metals plough higher after the recent poor US & Chinese data in Asian time helped by a weaker US$ and stronger oil, then this morning investors took heart from the fact German investors agreed with their outlook as the German Aug ZEW economic sentiment survey jumped to 56.1 (Jul 39.5). In another sign of “where is the customer” Jul Japanese department store sales fell 11.7% yoy (Jne -8.6%) for the seventeenth consecutive month. The Jne leading index was 79.9 (79.8).

The focus in the metals was on al where buyers latched onto the news of an accident at Russia’s biggest hydro electricity plant that supplies RUSAL Siberian plants with the energy to power the smelters. As with all Russian events the real truth of the damage will take sometime to come out. As for investors they overlooked the news y/day but took hold of it when prices moved higher. It must also be remembered that RUSAL’s al partner Glencore took over 800 kt of stock off their hands in May locking it up in a financing deal. The LME stock registered an al rise of 20 kt as some third Wed material was delivered. A report on Bloomberg quotes a Canadian  bank as saying “Copper, nickel and other base metals stockpiled by speculative Chinese investors including pig farmers maybe sold when market sentiment turns. A price surge and easy credit this year encouraged pig farmers, stockbrokers and businessmen to buy copper and nickel for speculation”. In the am session metals lacked the real upward momentum of late, perhaps it’s the quiet time of the month for investors, new funds allocated and too early to window dress.

The UK inflation data was more benign that expected Jul CPI was flat at +1.8% yoy as computer game prices offset food and fuel declines. The Retail Price Index fell 1.4% yoy (Jne -1.6%).

Late y/day the Aug US NAHB home index rose to 18 (Jul 17). The US data came at the opening of the session and was poor Jul PPI decline 0.9% double what was expected (Jne +1.8%), core PPI -0.1% (+0.5%), energy -2.4% (+6.6%). Then Jul housing starts fell 1% to 581 k units (+6.5% at 587 k units) and building permits -1.8% at 560 k units (+10% at 570 k units). With no more data the metals headed to the beach to “surf” equities and the US$, choppy waves to start with, then the surf was up but they fell off the board around 16:00 before recovering. Interestingly all these antics as DJI, € and oil plodded higher.

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