Against the Grain

Looking back over the past fortnight it seems the market reaction has been more corrective from an overbought situation than a fundamental change in the macro outlook.

In Asia metals bounced well one suspects rather in relief than earnest, the DJI Fri managed to scramble back above 10,000 and in the frozen north of Canada the G7 finance ministers agreed things are improving but it was too early to start scaling back government stimulus activity. Finally on the problem children of the EU the message seemed to be fix it internally. Good but not heavy Select trading saw the arb twins cu and zn post the best gains. The problem is now all Asian activity is attributed to the LME / Shanghai arbitrage, lazy broker speak which makes it hard to know what other issues are in play. The LME stocks were note worthy for another big fall in al and total zn stocks moving higher through 500 kt. The flick up in price saw reasonable warrant activity focused on cu in Korea. The pr market saw nervous trading by 11:00 total of 5500 cu lots had traded (less than half in London time yet the bid / offer spread often US$ 10. The Russian Federal Customs Service reported ’09 cu exports rose 150% to 509 kt; al exports were up 5.3% to 3.62 million tonnes.

Very little data out today after the recent flurry, in Japan the Jan Eco Watchers outlook survey rose to 41.9 (36.3) and current reading 38.8 (36.3). The Feb Euroland Sentix investor confidence index slipped to -8.2 (-3.7). With no data before the US equities it was very easy, cu up US$ 10 oh US$ must be a touch weaker or cu down US$ 10, ah US$ stronger. We think cu has pulled in a lot of professional day traders as volatility and volumes of late where the best in the business. As Reuters points out up to last week Select had only seen ONE 20,000 volume day, last week every day saw that volume. Today we have just scrapped over 10,000 lots.