Against the Grain

Following the hosing down of the Greek debt fear we begin the week with a very benign macro economic outlook that should see investors push the markets higher. There is little economic data this week before Fri US retail sales and then early next week the Fed FOMC meets and any change in policy would be a shock. Looking forward what will change this outlook, unknown, unknowns. The hottest topic now is will China allow the yuan to appreciate and by how much, there is a lot of analyst, economist and professorial posturing but little from the people who will make the decision and they usually post a web message when the market least expects it. In another move the Chinese authorities plan to nullify all future guarantees local governments provide for loans taken out by their financing vehicles. This time last year the Chinese authorities and investors were getting unison, stimulus and low rates spurring a rush into commodities, now it seems they are on opposing sides the Chinese trying to slow the pace while investors push the price.

A quiet and firm start to activity in Asia that extended into London as the market was happy to go with the flow. The LME stock moves continued the recent trend, al, cu and ni down with pb up. Over the weekend Vale’s Inco ni unit saw wage talks breakdown continuing the strike that began in Jul ’09. Last week we hear Chinese cu smelters hinting at slowing demand this week has started with Jinchuan, the large ni group saying they expected lukewarm demand growth and prices averaging US$ 18,000 this year. Anglo American said it had received strong interest for its zn assets presently on the block. The Chinese Hunan Group saw the country’s zn demand growing by at least 15% this year. By 14:00 more al had traded on Select than cu, a long time since we last saw that.

Over the weekend the Chinese Commerce Minister said the trade surplus for Jan / Feb was 50.2% less than the same period in ’09, we suspect reflecting the recovery in imported raw materials. We see a flow of Chinese Jan / Feb data on Thurs. The Feb Japanese Economic watchers survey rose to 44.8 (Jan 41.9), the outlook was 44.8 (41.9). In France the Feb BoF business sentiment dipped 102 (104). Finally the Jan German industrial production rose 0.6% (-1.0%) yoy +2.2% (-5.75).

No US data so that leaves the US$ and equities to drive prices.