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Commodities Briefing 28.Aug 2015

Posted on 28 August 2015 by VRS |  Email |Print

Falling demand, rising production and faltering growth in the world’s second-largest economy China have sent many major commodities plummeting to their lowest level since 2009, with some experts predicting the start of a new cycle.
Oil prices this week dived to 6.5-year lows as commodities tumbled over concerns that China’s slowing economy will curb demand for metals and other vital raw materials which have helped feed its astonishing growth over the past three decades………………………………………..Full Article: Source

Posted on 28 August 2015 by VRS |  Email |Print

With oil prices surging after the global market turmoil of “Black Monday,” could investors regain their faith in commodities? If China fired enough stimulus into its economy, a longer-term bounce back in commodities could be on the horizon.
“We certainly think that the authorities in China have the firepower in terms of monetary and fiscal policy to enact enough stimulus for the economy to at least meet the growth rate they’re targeting,” Caroline Bain, senior commodities economist at Capital Economics, said………………………………………..Full Article: Source

Posted on 28 August 2015 by VRS |  Email |Print

Africa is home to a tenth of the planet’s oil, a third of its mineral reserves and produces two-thirds of its diamonds. High prices may pep up the continent’s short-term economic growth, but scholars have long suspected that its plentiful natural resources also breed instability and violence. Politicians and their cronies cannot resist skimming off some of the huge profits, the theory goes, which enrages those who are left out.
Struggles over these wealths have played a part in many African troubles, from militias in the Democratic Republic of Congo to Sudanese civil wars. However, identifying a systematic link between natural resources and violence in Africa has proven tricky for economists, who must usually work with small or insufficiently detailed datasets………………………………………..Full Article: Source

Posted on 28 August 2015 by VRS |  Email |Print

Oil rocketed more than 10 percent higher on Thursday, posting its biggest one-day rally in over six years as recovering equity markets and news of diminished crude supplies set off a short-covering scramble by bearish traders.
Snapping back from a deep two-month slump that knocked U.S. crude to 6-1/2 year lows below $40 this week, oil climbed as world stock markets rose on hopes Chinese government measures to stimulate the economy would pay off, while the dollar strengthened as risk aversion eased………………………………………..Full Article: Source

Posted on 28 August 2015 by VRS |  Email |Print

Hard-hit Venezuela has been contacting other OPEC members to push for an emergency meeting in coordination with Russia to come up with a strategy to stop the current oil price rout, people familiar with the matter said.
According to these people, Venezuela has been in touch with some members of the Organization of the Petroleum Exporting Countries, including Qatar’s oil minister and president of the OPEC conference, Mohammed al-Sada, to try again to find common ground to defend crude prices………………………………………..Full Article: Source

Posted on 28 August 2015 by VRS |  Email |Print

Saudi Arabia and its OPEC allies are counting on strong growth in demand coupled with slower growth in non-OPEC supply to rebalance the oil market in 2016. But the experience of the “lost decade” after prices slumped in 1986 suggests rebalancing could take longer than some OPEC members and market analysts expect.
Following the price slump in 1985/86, the oil market struggled with persistent surpluses for much of the next 17 years. In real terms, oil prices did not rise above the 1986 crisis level on a sustained basis until 2003……………………………………….Full Article: Source

Posted on 28 August 2015 by VRS |  Email |Print

Iran’s Oil Minister Bijan Zanganeh blamed the latest drop in oil prices on some members of Opec and questioned whether any Opec emergency meeting would reach an agreement, the oil ministry’s news agency Shana reported.
“To balance the oil price… Opec members should balance their production. An emergency meeting has been requested and we don’t have a problem with that,” Shana cited Zanganeh as saying. “But as you know the result of Opec meetings should be approved by all members, I think some members do not want the price of oil to be high and they want to damage other countries by low prices.”……………………………………….Full Article: Source

Posted on 28 August 2015 by VRS |  Email |Print

When the market is shaky, seek safety in … natural gas. Wait – what? Citigroup Inc. is touting natural gas – a commodity so notorious for volatility that its most renown bet is called the “widow maker” – as a possible haven for investors weary of the market’s wild swings.
A sluggish global economy, a staggering China and plummeting oil prices have sent commodity, currency and stock markets spiraling this summer. But they mean very little for U.S. gas futures, which have been stable for more than two months and even briefly entered a bull market in the late spring………………………………………..Full Article: Source

Posted on 28 August 2015 by VRS |  Email |Print

Gold has recovered slightly after hitting a one-week low overnight as expectations of a US rate hike in September were lowered – but after a sharp decline some analysts are now saying the recent rally is “over”.
As US stocks surged on the back of a huge injection of stimulus by Chinese authorities to support its ailing markets, the safe haven of gold lost out to a move by investors to take on more risk and touched a low of $1,117 an ounce at one point. This, Reuters notes [1], was its lowest level for a week and marked a 1.3 per cent decline for the day, the steepest fall since 20 July………………………………………..Full Article: Source

Posted on 28 August 2015 by VRS |  Email |Print

Gold prices fell on Thursday as gains in U.S. equities on the back of upbeat economic data and a stronger dollar dulled trader interest in haven assets. Gold for December delivery, the most actively traded contract, fell $2, or 0.2%, to settle at $1,122.60 a troy ounce on the Comex division of the New York Mercantile Exchange.
A rally in U.S. stocks triggered by brighter economic data pushed gold to its fourth straight day of losses as investors revisited their expectations for higher interest rates………………………………………..Full Article: Source

Posted on 28 August 2015 by VRS |  Email |Print

Gold prices have increased in August, recovering from a lacklustre performance over the last few years, after market volatility ramped up. While gold hasn’t been rising in tough periods as many investors would expect, it does appear that investors have been buying into the commodity this month, following a positive 3.35 per cent return from the S&P GSCI Gold Spot index.
The obvious guess as to why this is the case is the global volatility we have experienced in recent months. This came to a head on Monday, when the FTSE 100 had £74bn wiped off its value, the Dow Jones ended the day down 558 points and the Shanghai Composite dropped by 8.5 per cent………………………………………..Full Article: Source

Posted on 28 August 2015 by VRS |  Email |Print

Russian aluminum producer Rusal said Thursday in its second quarter results that the increase in exports of aluminum semi-finished products from China is the main reason behind a global surplus this year. “The main change to the supply environment resulted from the export of aluminum semis from China. Net exports of semis rose by 47% year on year in H1 2015,” the company said.
The producer noted that overcapacity in the Chinese market continued throughout Q1 with a record supply of 7.45 million mt, up 8.3% year on year. As a result, Rusal believes total aluminum stocks in China grew to 3 million mt in Q1, an increase of 1% year on year………………………………………..Full Article: Source

Posted on 28 August 2015 by VRS |  Email |Print

Investors who stayed bullish on industrial metals are finally being rewarded as renewed optimism for the demand outlook pushed prices to their biggest rally in more than two years.
In the US, economic growth last quarter exceeded all forecasts in a Bloomberg survey, while in China stocks rebounded to halt a five-day rout. The countries are the world’s biggest metals consumers. Zinc surged the most since June 2012, copper climbed more than 4 per cent and aluminum and nickel advanced………………………………………..Full Article: Source

Posted on 28 August 2015 by VRS |  Email |Print

Dr. Copper apparently does not approve of the prescription ordered by the Chinese authorities to stem the slowdown in that nation, namely another 25 basis point interest rate reduction and a lowering of bank reserve requirements. The red metal cannot sustain any upside action for long before sellers emerge to whack it again.
No matter how one slices or dices it, this sector is signaling slowing growth due to a combination of excess supply and lagging demand. Remember, back during the hey-day of the commodity sector, prices soared leading to massive ramp ups in production. That new supply came onto the market at the same time that global growth began slowing. The combination was lethal for prices………………………………………..Full Article: Source

Posted on 28 August 2015 by VRS |  Email |Print

Low volatility ETFs delivered in what has been a decidedly rocky month for global markets. China’s yuan devaluation, intended to shore up its economy, sent U.S. and international stocks into a tailspin in August.
Against that backdrop, smart beta ETF investment strategies that focus on less volatile stocks held up relatively better. Smart beta ETFs screen and select stocks based on alternative weighting methods or specific factors such as volatility………………………………………..Full Article: Source

Posted on 28 August 2015 by VRS |  Email |Print

The recent sharp sell-off in global equity markets has focused investors on the importance of holding diversifying investments that can help mitigate volatility and potentially cushion their portfolios during times of market stress. Given their unique nature, alternative investments are proving to be useful tools to help investors weather the current market storm.
As the chart1 below illustrates, a basket of alternatives — based on Invesco’s alternatives framework as explained in my previous blog post How to approach the alternative investments puzzle — has historically delivered equity-like returns with low levels of volatility (as measured by standard deviation) and lower maximum……………………………………….Full Article: Source

Posted on 28 August 2015 by VRS |  Email |Print

China devalued its currency, the resignation of the Greek prime minister revived doubts about the Euro, and the markets were expecting that in a few weeks the Federal Reserve was going to begin raising the interest rates. These three strikes—connected with monetary manipulations—was followed by a large decline in the stock market.
It is natural that those of us who follow economic policy will try to find connections. Those who champion central banks and government monetary manipulation argue that their goal is to bring stability. Those of us who argue that monetary bureaucrats continue to fail, see the current scene as providing another chance to point at their failures and as another opportunity to call for sound money………………………………………..Full Article: Source

Posted on 28 August 2015 by VRS |  Email |Print

After years of pegging its currency to the dollar, China has taken the unexpected step of allowing its currency to depreciate. It is unclear exactly how much the renminbi will be allowed to fall, but there have been tangible consequences on global investments already.
In the UK, many companies banking on strong Chinese sales growth were shunned by investors. Luxury retailer Burberry fell more than 7% on the 3% slide in renminbi that started on 11 August, while consumables giant Unilever lost almost 5%………………………………………..Full Article: Source

Posted on 28 August 2015 by VRS |  Email |Print

Regardless of which party wins the Oct. 19 federal election, Canadians can look forward to being ripped off for billions of dollars in the international carbon trading market. Carbon trading is intrinsic to both NDP Leader Tom Mulcair’s and Liberal Leader Justin Trudeau’s carbon pricing plans, since both would use cap-and-trade schemes, supposedly to reduce Canada’s industrial greenhouse gas (GHG) emissions.
But even Prime Minister Stephen Harper’s Conservatives — the least worst of the three major parties on this issue — have proposed buying international carbon credits to meet the government’s emission reduction targets………………………………………..Full Article: Source

Posted on 28 August 2015 by VRS |  Email |Print

The emissions trading program in the northeastern United States—the Regional Greenhouse Gas Initiative (RGGI)—is responsible for about half the region’s emissions reductions—an amount far greater than reductions achieved in the rest of the country.
The study in the journal Energy Economics determined that even when controlling for other factors—the natural gas boom, the recession, and environmental regulations—emissions would have been 24 percent higher in participating states without RGGI (subscription)………………………………………..Full Article: Source

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