Against the Grain

As expected the Fed left rates unchanged (0.25%) with an upbeat statement that boosted equities and weakened the US$. They reaffirmed rates will be low for an extended period, which was last week defined by an FOMC member as three to four meetings out that takes us to the early Spt meeting. This was followed by the BoJ holding its rate at 0.1% with more stimulus which weakened the yen and boosted Asian equities. All this telescoped into a rise in metals during Asian trading. Elsewhere, there is no let up in the China “boom or bust” debate, perhaps best to sit back and take a six month view otherwise you will drown in the print, what we have picked up is a focus on 2012 when the present hierarchy hands over to a new team, till then stability and status quo are the watch words. As a friend said today “there is probably nothing more difficult than trying to make day to day sense of a process which is set to take decades to work out. The world is in a major paradigm shift and that is coupled with a significant state of collective denial. (He) I suppose that part of living and working in markets is understanding that capital has no political affiliations or moral scruples. Even less does it have a long term view”.

The metals continue to lack a mind of their own preferring to be correlated to the general macro move. With the US$ holding around the low of its trading € 1.380 the metals steady just below their highs. Ni got a boost from news that a problem at the hydrogen plant has halted production at BHPBilliton’s Kwinana refinery in Western Australia. The LME stocks saw more al in (Sing 10 kt, less than we expected) and cu down (globally) though neither was enough to influence prices. The Peruvian government has said Doe Run must restart its La Oroya smelting operation by the end of Jul or face “other measures”, closed since Jne they employ around 20 k people and recently got a credit line from Glencore. In the oil market OPEC met today and left output quotas unchanged estimating 2010 world growth at 4 / 4.5% (OECD is looking for 3.4%), each 1% of growth is estimated to add 500 kbpd to world oil demand. Pitiful Select volumes as London struggled to make its mind up with the a touch better and FTSE a bit higher. After 13:30 double D kicked in with DJI trumping US$ however the volumes remained low. Perhaps no better signal of the uncertainty in the metals is to look below at their move on the day.

In Asia the Jan tertiary industry index rose 2.9% much stronger than expected (Dec -0.9%) and Australian Q4 dwelling starts jumped 15.1% (Q3 +11%). The World Bank in a report has upgraded Chine 2010 growth to 9.5% (Nov 8.7%). In Europe the focus was on Feb UK employment data saw jobless claims fall 32.3 k much better than an expected rise leaving unemployment unchanged at 7.8%, £ stg jumped above 1.53. The Euroland Jan construction output fell 2.2% (Dec revised to -1% from +0.5%) yoy -12.5% (-2.5%) weather will be blamed.

Overnight the weekly ABC consumer confidence had a strong improvement to -43 (-49). The weekly MBA mortgage applications down 1.9% (+0.5%) as bond rates remained high. At 12:30 the Feb PPI fell 0.6% against a small rise (Jan +1.4%) yoy 4.4% (4.6%) and ex food and energy +0.1% as expected (+0.3%) yoy unchanged at 1%. The US Senate passed an employment bill (68 votes to 29)  for the President to sign.