Against the Grain

Been travelling for the past few days but macro wise nothing seems to have changed with the US$ and DJI dominating the metal direction. Metals came out of Asia on a weaker note as schisms in the EU family of nations over money continue to hit the €. With Portugal joining Greece having its sovereign debt rating reduced. In the US we saw a strong rise in treasury bond yields as a recent tender met investor resistance, 10 years moved to 3.82% from 3.69%. Then in London time is was announced the US healthcare bill has to head back to Congress for another vote after some procedural errors in it.

The metals were on the defensive early then turned higher as the US$ weakened after German Chancellor Merkel supported a Greek support package including IMF support. The LME stocks are back into their recently monthly routine led by al receding after the recent deluge. On the physical front attention has turned to Europe as companies look to restock after a fairly harsh winter. In excess cold foundries and other process have to take a break and we heard quite a bit of that happened. A ICSG report earlier this week pointed out the cu mine capacity utilisation was at 80.6% last year (recent high 90.8% ’04) with refinery capacity at 78% (’06 high 83.9%). In Peru unions have threatened to strike Mch 31 including Freeport’s Cerro Verde SXEW cu mine, by law companies must share 8% of their profits with employees and unions think they are under reporting earnings. The second ring coincided with US weekly jobless data and a recovery in the US$.

The dreary pre election UK budget was overshadowed this morning by some strong Feb retails sales data rising 2.1% driven by higher energy demand (Jan -3%) and yoy +3.5% (-0.8%) and sparking a £stg recovery. Now roll on the election to get the politicians off the scene. In Europe Apr German GfK consumer confidence was unchanged at 3.2 and Feb French consumer spending fell 1.2% (-2.5%) yoy +1.6% (+1.5%). Not much better in Italy were Jan retail sales slipped 0.5% (0%) yoy -2.6% (+0.5%).

The only data from the US weekly jobless claims 442 k (456 k). To catch up the weekly ABC consumer sentiment survey slipped to -44 after the previous strong gain to -43. Feb durable goods orders rose 0.5% (+3.9%). Ex transportation +0.9% (-0.6%) and Feb new home sales declined 2.2% to 308 k (-8.7% at 315 k), the lowest level since records began in 1963. Before Congress Fed Chairman Bernanke reaffirmed rates will remain low. With little else about the US$ and DJI called the shots, with the metals electing to follow the latter.