Against the Grain

All quiet on the Asian front as we seem to be in a calm before the next storm whatever that will be with trading US$ driven. A common theme for this calm seems to be the upcoming appearance before both the houses of Congress on Wed and Thurs with the focus on how long will the Fed maintain low rates with the general expectation a long time. Just a word of caution on the recent European, US and Chinese data it covers a time of very heavy winter weather that has sent consumers in hibernation and industry trying to cope the best they can.

In London the metals immediately latched onto the US$ and as it weakened so metals strengthened. The LME stocks saw falls bigger than gains, with the declines in cu (out of Korea into US), al (Rott & US) and ni (Sing), the latter most interesting have grown strongly throughout 2009 they are now flowing out on bullish signs in the stainless steel industry and suspect some moves into dead stock. The ICSG reported that in the year to Nov ’09 refined cu was in 144 kt surplus (‘same period ’08 58 kt). Just as quickly as the € strengthened in turned lower following the poor European data below and by 11:30 was on its low at 1.356 with the commodities on their lows, cu at 7250, oil 78.6 and gold 1106. The currencies are like a tank of water being tipped from side to side with other financial instruments the flotsam and jettison, as the currency volatility picked up so did the volume in the metals. Barclays reports investments in commodities fell in Jan to US$ 245 billion (Dec 257 billion) the first monthly fall since Nov ’08. You could hear the sigh of relief as the DJI opened higher and metal traders could go back on a bullish tack, then the US data renewed the selling. After 15:00 it became a very fractious market as dealers traded against the US$ and equities. Interesting the cu volumes were significantly higher on another down day.

We continue to worry about final consumer demand last week the US data was reasonable, poor in Canada and UK and now Jan French consumer spending is reported falling 2.7% more than expected (Dec revised to +1.3 from +2.1%) yoy +1.5% (+5.8%). The Jan French CPI fell 0.2% (Dec +0.3%) yoy +1.2% (+1.1%). In Italy, Fiat halted vehicle production in the country for two weeks after demand fell as the car scrappage scheme ended, as their Feb consumer confidence index dipped to 107.7 (111.6). The Feb German Ifo business climate survey 95.2 (95.8), current assessment 89.8 (91.2) and expectations 100.9 (100.6). Further to Italy above the ending of government incentives are beginning to tell, in the UK the British Bankers’ Association reported a 24% decline in Jan mortgages after the re introduction of stamp duty. Total borrowing was £ 8 billion the lowest monthly level in eight years.   In South Africa Q4 GDP rose 3.2% annualised (Q3 +0.9%), the African Development Bank sees the continent growing 5% in ’10.

The Dec US S&P / Case-Shiller home price index 145.9 (146.3) the composite 20 city index  +0.32% (+0.26%). At 15.00 the Feb Conference Board consumer confidence index slumped to 46.0 (55.9) current reading 19.4 (25.2) and expectations 63.8 (77.3).  Then the Richmond Fed manufacturing index improved to 2 (-2) however was overlooked.