Against the Grain

The financial players are back in full control and it looks like the Chinese will return to a “limit up” Shanghai market (last year they came back to a “limit down” market and an emergency settlement was needed to let the longs out). Away from problems in Europe keep an eye on Africa in the past fortnight political problems have increased or reappeared in five countries; Zimbabwe, Kenya, The Gambia, Guinea and Ivory Coast. In a recent Bloomberg article it is pointed out that a DRC parliamentary commission has found that over half of the US$ 50 million signing bonus paid by three Chinese companies to the state owned Gecamines mining group for the US$ 6 billion agreement of infrastructure for metals deal has gone missing.

Without most of Asia, investors kept the upward momentum in metals helped by a weaker US$. This movement continued into London trading with heavy turnover led by cu and ni as technical funds are turned around and the US$ weakness speeds up. Like clockwork the LME al stock pours in (at the same time cancelled warrants jumped 22 kt – material in and immediately out to the car parks – an accountancy move) after third Wed (US) with rises in cu, zn and pb, however in the present mood doubt the market will take any notice. In Spain workers at Lundin’s Neves Corvo cu mine (’08 – 89 kt) have gone on two hour strike at the start of each shift over pay.

In Australia the Jan NAB business confidence rose to 15 (Dec while the business conditions reading fell to 3 (10). The UK Jan CPI unexpectedly fell 0.2% (+0.6%) yoy +3.5% (+2.9%) as the R(etail)PI was unchanged ( +0.6%), yoy +3.7% (2.4%). The Feb German ZEW economic sentiment survey dipped 45.1 (47.2), current situation improved -54.8 (-56.6) and expectations down 40.2 (46.4) with the Euroland economic sentiment a poor 40.2 (46.4). A good example of the uncertainty in the markets is two Bloomberg articles on the Russia one says - emerging-market stocks rose to their highest in almost two weeks, led by Russian equities, as increases in commodity prices boosted the earnings outlook for energy and materials companies; the other - options traders are making the most bets in 14 months that Russian stocks will drop on concern demand for commodities from China and Europe will weaken.

In the US the Feb NY Fed Empire manufacturing index 24.9 (15.9), as with Fri good US data boosted metals despite a steady to firm US$ and when the DJI came in up the race higher was back on led by ni. The Fed reported China continued to sell US government securities reducing its holdings to Feb ’09 levels. We end the report as we began the investors are back in full control.