Against the Grain

We have been impressed by the resilience of the metals in the light of the deteriorating economic outlook and yesterday’s action supported this (the last time the DJI was below 10,000 in early Jul cu was 6600). As the US equity came under pressure after a strong start the metals quickly switched horses to the currency where the US$ weakened as foreign exchange strategists began to opine that the departure of the Japanese central bank governor to the Kansas Fed Jackson Hole economic symposium could him seek agree for intervention in the markets against the strength of the yen that recently hit a multi year high against the US$. The threat of the unknown is a powerful driver in an arena where greed and fear rule. This was combined with consensus that today’s revision to US Q2 GDP will be significantly lower and it was, 1.6% (2.4%) though better than feared. However then the markets settled back to see what Bernanke would say at Jackson Hole. The Chairman uttered the words the Fed “will do all it can” not a ringing endorsement but confirm the kitchen sink will be thrown at the economy if necessary and comforted the buyers ahead of next weeks Aug data.

Metals held their gains in Asia in quiet conditions that are likely to continue in London as the big news will be in the US as Fed Chairman Bernanke speaks at the Fed gathering. The LME stocks were all down except sn, on the week cu off 1.6 kt; al fell 19 kt; zn up 4 kt; pb dipped 375 tonnes; rose 2.5 kt and sn slipped 185 tonnes. The weekly Shanghai stocks saw cu rise 211 tonnes to 110,582; al off 723 tonnes at 490,765 and zn fell 4404 tonnes to 231,589. The turnaround in oil came right on the key as weather forecasters predicted a tropical storm building in the Atlantic, it never ceases to amaze that the driving fundamental of the oil market is the rise and fall of storms in the Gulf of Mexico (rather like cu is ruled by earthquakes in Chile). The US data and Bernanke saw the buyers on top into the close.

In Japan the July National CPI declined 0.9% yoy (Jne -0.7%),Tokyo Aug CPI was off 1% yoy (Jul -1.2%). The Jul unemployment rate was 5.2% (5.3%) and household spending rose 1.1% (0.5%). The UK revised Q2 GDP was revised to 1.2% (1.1%) surprising is the collapse in total business investment to -1.6% (7.8%). The Aug final Uni of Michigan consumer confidence 68.9 (Jul 67.8), current 78.3 (76.5) and expectations 62.9 (62.3).

The LME is closed Mon (US closed next Mon) and be warned when one or other market is closed, mice like to play and Bernanke might have laid out the cheese..