Against the Grain

All eyes were on the reopening of China and the metal caught up with the LME however the rise was just under the 5% daily limit while the Shanghai equities had no truck with DJI led rally dipping 0.17% or 6 points. In China the focus is on a growing body of opinion that believes the authorities will appreciate the currency to throttle back inflation and slow foreign investment. In the FT Feb 22, a good balanced article on China by Geoff Dyer, “No one home”, (www.ft.com).

The volume on Select in Asia showed interest in cu trading 3300 lots and zn 1800 lots while al had only a 245 lot turnover. The Asian trading saw cu off its Fri close but no real selling momentum. The LME stocks dominated by declines in al (the usual Rott and US) & ni (Asia and Rott). The market has a very strong bullish bias and we expect prices to continue attract investor interest. The LME launched cobalt and molybdenum contracts, interestingly their contract is in US$ / tonne were the physical market convention is to trade US$ / lb. The IAI said world daily average primary al output rose to 64.4 kt in Jan (64 kt in Dec ’09), the total production in Jan was 1.995 million tonnes (1.984 million tonnes in Dec and Jan ‘09 was 2.094 million tonnes). Very quiet and tight ranged trading as the session went to the floor and in US trading. The markets just seemed to lack traction, was it a stronger US$, disappointment China did not do better or just some consolidation?

Last Fri we mentioned the influence of high frequency trading today the FT said a recent survey shows the average size of trades on major equity exchanges have fallen over 50% in the past 10 years. Very little economic data today in Australia Jan new vehicle sales fell 3.4% (Dec +3.1%) and yoy +15.6% (17.0%). Then in the US Jan Chicago Fed national activity index +0.02 (-0.58) then at 15:00 the Dallas Fed manufacturing activity -0.1% well below expectations (+8.3%).