Against the Grain

With few macro developments markets began the day on an extremely steady note. A UK newspaper The Independent had a very good comment in it by the HSBC Chief Economist, Stephen King “By now we should have recognised that the consensus gets things badly wrong. It maybe the best measure at any point in time the “central expectation” of economists and investors but a central expectation hardly captures the hopes, fears and worries that are part of everyday life”. At present we suspect consensus is too bullish just as last year we said it was too bearish. That is why when we see the crowd massing behind a view we go looking for why they could be wrong.

The quiet market conditions flowed out of the US and into Asia with prices arriving back in London little changed and that could be an overstatement. The LME stock trends continued al, cu and ni down however traders paid no attention. The proportion to cancelled warrants in cu and al are declining steady as material is withdrawn while pb at 8% reflects the large cancellations a month ago that has not moved. The next test for al is Mch third Wed, next week to see if we get the now regular monthly flood inflow. The pre market saw metals dragged down by a firmer US$ and lower equities in light volumes. The week has begun with a feeling we are “in the eye of the storm”.

The data out of Asia shows the strength of the Pacific Basin recovery China’s Feb passenger car sales rose 55% to 943 k, while total vehicle sales rose 46% to 1.21 million sales supported by the New year holiday and stimulus package. The Feb Australian NAB business confidence index improved to 19 (Jan 15) as business conditions was 8 (3) and Feb ANZ job advertisements jumped 19.1% (-8.1%). In Japan Jan leading index was up to 97.1 (94.3) and coincident index 99.9 (97.4). On Thurs we get the Feb data from China. The NYT reports the country’s chief currency regulator, State Administration of Foreign Exchange, renewed its commitment to US Treasury market and said wary of substantially boosting gold holdings. They also expected more capital inflow partly reflecting expectations of a strengthening currency. The UK Jan trade deficit widened to £ 8 billion the widest since Aug ’08 as imports fell 1.6% and exports declined 6.9%.

No data from the US, as the equity gains offset the US$ strength.