Against the Grain

Having feasted last week on the Aug statistics the markets are now in a period of reflection. Overnight the central bank of two contrasting economic scenarios saw them leave rates unchanged, Japanese BoJ at 0.1% and Australian RBA 4.5%. In Australia the incumbent has fallen across the line with the 76 politicians needed to form a government. Then in the US President Obama announced a US$ 50 billion six year infrastructure stimulus package and while steelmaker shares increased on the news there is one major obstacle. The package needs the approval of Congress as they embark on midterm elections.

The metals eased back in Asia led by cu and ni, as a stronger US$ and lower equities weighted. In China a government forecast predicts 2H industrial production growth will be 10% after Jul was 13.4% and contrasting with 1H growth of 17.6%. The Japanese Q4 primary al premium with producers was agreed at US$ 118 / tonne over LME for up to 120 kt of imports. LME stocks saw all the metals fall led by al except for pb. A quick sweep around our contacts highlight an extremely slow physical market as the high prices throttle consumers across Asia. Even the Chinese find the going tough in Africa, today Zijin Mining terminated plans to acquire Platmin Congo Ltd a cu miner after the agreement expired. The miner was to partner the China-Africa Development Fund. The metals were already under pressure in the morning and the poor German factory orders figure dampened the mood further, cu off US$ 180. Sn bucked the trend as another story appeared about Indonesian supply falling short. Traders then waited for the US reaction to Mr. Obama’s stimulus moves. On the dot, gold jumped US$ 10 at US opening, everyday its biggest move occurs at that time. After that it was purely equity surfing until late in the session when metals ignored the equities and US$ to outperform again.

In Japan the Jul leading index was 98.2 (Jne 99.0) the coincident index 101.8 (101.3). The Australian Aug construction index was 43.2 (43.3). The Aug UK car sales fell 17.5% yoy (Jul -13%) at 55 k units, private car sales fell 38%. The Jul German factory orders unexpectedly fell 2.2% (3.6%) and yoy 17.7% (24.7%). That is the data for the day.