Against the Grain

In late London trading cu literally went into free fall dropping US$ 200 to 7047 as major technical lines were broken and failed to show any traction as things unfolded in the US. The Fed FOMC left rates unchanged (0.25%) with an upbeat take on the economy saying “economic activity has continued to strengthen and that the deterioration in the labour market is abating”. This was followed by a vintage Obama speak however the markets know he can do that what they are more circumspect about is the President’s ability to act. As we said yesterday zero interest rates are not the foundation of economic recovery only the cornerstone of investor decisions and when they lose faith in their positions anything can happen.

Cu is close to the psychological 7000 area after the late sell off without reacting to a recovery in global equities. The Select cu volume in Asia was close to 5000 lots as it bears the brunt of trader focus in volume and volatility. Early London trading saw other supports coming in higher equities, US$ have strengthened below 1.40 weakening and oil recovering. In China the curb on property loans is seen affecting the construction industry demand as the seasonally strong Mch / Apr period arrives. The LME stocks saw al keep moving out (cancelled warrants also fell) and cu coming in (NO while some out of Busan). An 8 k rise in cancelled US pb warrants. After an attempted pre market rally by 11:00 cu was testing 7000. A rally after the officials seemed to point at some forward buying at these lower prices but this recovery again faltered into the US data as the US$ strengthened below 1.40. Barclays reported that inflows into commodity investments rose US$ 68 billion in 2009 to assets under management of US$ 256 billion.

From Asia has come more evidence of what has troubled us most in the recovery of the past year, the lack of final demand, Japanese Dec retail sales fell 1.2% (Nov unchanged), yoy -0.3% (-1.1%), well under expectations. The Reserve Bank of NZ left rates unchanged at 2.5%. In Europe Jan Italian business confidence 83.2 (82.4) then German Jan unemployment rose 8.2% (8.1%). The Jan Euroland economic confidence survey 92.5 (91.3); business climate indicator -1.12 (-1.3); consumer confidence unchanged -16.0; industrial confidence improved -14 (-16.0) and service confidence up -1 (-3.0).

In the US the weekly jobless claims fell 8 k to 470 k (478 k) and Dec durable goods rose 0.3% less than expected +2% (+0.2%), ex transportation was better +0.9% (revised to -0.4% from -0.7%). The Dec Chicago Fed national activity index slipped to -0.61 (Nov -0.39). After some initial uncertainty buyers appeared pushing things higher but expect the metals to equity surf, as there is no other data.

Note early closes off to a meeting.