Against the Grain

Overnight the Fed Jan FOMC meeting minutes painted a more positive economic outlook for 2010 predicting annual GDP between 2.9% and 3.2% with unemployment peaking later in the year. Attention now turns to how the bank will exit its monetary stimulus package supporting the growing view that the only way is for the policy to tighten and interest rates remain at present levels or going up. This news saw the US$ strengthen towards a 10 month high against the €, as the US recovery looks to be coming sooner and faster than the European Union still mired in slow growth and wrangling between its members. The BoJ left rates unchanged at 0.1%.

In two days a seismic shift in the LME warehousing sector as US investment banks snap up a position (Goldman Sachs is said to have acquired Metro and JP Morgan - H Bath). A stronger US$ threw a spanner in the recent metals rally despite a stronger DJI. The metals are still suffering from the absence of the Chinese so Asian volumes are light. The London open saw light currency related selling with LME stocks dominated by a rise in cu (Rott 6 k and St L 1 k) and decline in al (Rott) and ni (Rott and Sing)– very little attention was paid to it with focus on the US$. An article in the NYT highlights how shipping companies have slowed ships to reduce fuel costs and emissions, achieving two savings (www.nytimes.com/2010/02/17/business/energy-environment/17speed.html?emc=eta1). In light volume the metals micro traded around the US$ move. Y/day the IMF announced it will offer gold for sale in the second phase of its 403 metric tonne approved sale. As we reported last week Teck’s Alaskan Red Dog zn mine’s permitting issue is now to the fore and likely to add support. After a quiet morning prices pushed higher as the larger than expected inflation data set off buying in the commodities with cu over 7300. Like y/day a strong US$ halted the rally into the close.

In Asia Japanese Dec leading index was 94.3 (94.0) and Jan nationwide department store sales were down 5.7% with the focus on Tokyo (-5%). The Hong Kong unemployment rate in the three months to Jan was 4.9% higher than expected. The Feb advanced Euroland consumer confidence survey slipped to -17 (-16.0). The UK  posted its first Jan monthly budget deficit since such records began in 1993.

The US weekly jobless claims rose 31 k to 473 k (442 k). The Jan PPI jumped 1.4% (+0.4%) led by energy prices, yoy +4.6% (4.4%), while ex food and energy up 0.3% (0%) and yoy 1.0% (+0.9%). At 15:00 the Feb Philadelphia Fed economic index rose to 17.6 (Jan 15.2) and Jan Conference Board leading index rose 0.3% to 107.4 (1.2%), the coincident index up 0.2% at 100.1 and lagging index fell 0.1% to 108.0.