Against the Grain

Well major news is at the front and back of the day. In China Wen Jiabo predicted GDP would grow at 8% in ‘10, the same level that has been surpassed in the last 5 years. He went on to warn of latent risks in the banking and public finance sectors are increasing. In Europe, Germany meets Greece over finances and how to keep the latter from going to the IMF for help. Then this afternoon US employment data view non farm payrolls down and unemployment unchanged (when compiled the figures took account of the bad weather).

The slowest day of the week in Asia with prices up a tad. Bloomberg had an article with the second largest cu smelter Tongling saying demand was weak especially from the power industry that earlier this year announced a large cutback in ’10 investment spending. The top smelter Jiangxi  plans to increase ’10 production to 900 kt (800 kt ’09), it has smelting capacity for 600 kt from concentrate and 200 kt out of scrap that can be ramped up, interesting their outlook real demand as so – so but relying on investment demand to boost prices. There was little change in weekly Shanghai stocks cu down 858 tonnes at 148,620; al rose 5555 tonnes to 376,233 and zn dipped 202 tonnes to 223,400. The recent LME stock trend of withdrawals continued, on the week cu was down 6 kt, al 30 kt, zn 1 kt, pb rose 5 kt, ni down 1.8 kt and sn off 400 tonnes. The LME initial margins on al, ni, pb and sn have been reduced. The pre market saw the metals dancing on a pin (cu 7480 / 7500 range) ahead of employment but which way will the US$ 200 move be after that? The immediate reaction was a touch higher cu and stronger US$ ahead of US equities with the DJI posting a 50 point gain. The momentum was upwards into the end of the week, the Greek problem has passed, all the signs are interest rate will remain low and growth is building allowing risk to be increased despite a stronger US$.

In Europe the Feb UK input PPI was 0.1% (Jan +2%), yoy +6.9% (revised to 7.7% from 8.4%) and output PPI rose 0.3% (+0.4%) yoy +4.1% (+2.5%). The Jan German factory orders jumped 4.3% (-2.3%) yoy +19.6% (+7.3%). The OECD Jan composite leading indicators continue to signal improvements in G7 economic activity while in the BRIC’s China and Russian continued to expand while India and Brazil saw recovery losing momentum. Iceland holds a referendum Sat on whether to repay British and Dutch government monies outstanding from their collapsed banks.

The Feb non farm payrolls declined by 36 k, the low end of expectations (Jan revised to -26 k from -20 k), factory jobs rise 1 k (Jan 20 k), construction -64 k (-77 k) and services +24 k (+27 k). Unemployment steady at 9.7%, average hourly earnings rose 0.1% (+0.2%) and the average weekly hours 33.8 (33.9).

Another week of everything posting gains cu 340, al 115, zn 146, pb 48, ni 1350, sn 250, gold US$ 23 / oz, oil US$ 81.6 / bbl, DJI at time of writing 204, 10 year US bond yields rose 0.07, US$ / € 0.004 except Shanghai equities fell 21.