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Commodity Price Crunch Puts Pressure on Credit Lines

Posted on 19 February 2016 by VRS  |  Email |Print

Energy, mining and related manufacturing companies are renegotiating revolving credit lines to avoid defaulting on their loans. That’s leading to tighter terms and shrinking borrowing capacity. Bankers and analysts expect to see the trend accelerate amid tumbling prices for oil and gas and other commodities.
Joy Global Inc., a Milwaukee, Wisc.-based mining equipment maker, late last year approached its syndicate of banks, led by Bank of America Merrill Lynch, to avoid breaking terms on its $1 billion revolving credit line. Company executives were worried they could breach a debt covenant that restricted Joy’s ratio of net debt to ebitda to under three times………………………………………..Full Article: Source

As Commodities Plummet, Banks Edge Towards Undercapitalization

Posted on 19 February 2016 by VRS  |  Email |Print

Analysts from Bernstein Research state that European investment banks and US brokers are in general still undercapitalized, despite 6 years of spending aimed at remedying the situation. According to the analysts, Deutsche Bank’s tangible equity is just 2.7% of its tangible assets.
This is when we exclude the deferred tax assets. The only bank that has it worse is Credit Agricole with 2.3%. A little better is Credit Suisse with 3.0%. Standard Chartered looks good for now (7.3%) but it’s being heavily pushed by the markets that bank with commodity exposure………………………………………..Full Article: Source

Gold Posts Slight Gains as Bargain Hunters “Buy The Dip”

Posted on 18 February 2016 by VRS  |  Email |Print

Gold prices ended the U.S. day session with slight gains Wednesday, as traders “bought the dip” in prices that occurred earlier this week. However, increased trader and investor risk appetite in the marketplace so far this week is a bearish element working against the safe-haven gold market.
April Comex gold was last up $1.20 at $1,209.40 an ounce. March Comex silver was last up $0.006 at $15.34 an ounce. Most global stock markets are seeing gains this week, on ideas crude oil prices may have bottomed out and can work sideways to higher in the coming weeks. Equity markets have been closely tracking daily movements in the crude oil market recently………………………………………..Full Article: Source

Private-Plane Purchases Drop 3.1% as Commodities Market Tumbles

Posted on 11 February 2016 by VRS  |  Email |Print

Spending on business aircraft fell 3.1 percent last year as a commodities downturn crimped demand for long-range jets in emerging markets. Companies and wealthy individuals spent $18.7 billion on private jets, according to the General Aviation Manufacturers Association. The report is adjusted because Bombardier Inc. hasn’t reported fourth-quarter results yet.
Sales of large-cabin planes, such as Bombardier’s Global 5000, were pinched by Brazil’s recession, sanctions against Russia and a stronger U.S. dollar that made aircraft more expensive for foreigners, said Peter Arment, an analyst at Sterne Agee CRT. Some non-U.S. manufacturers price aircraft in dollars………………………………………..Full Article: Source

U.S. Farm Income Will Drop for Third Year in Commodity Slump

Posted on 10 February 2016 by VRS  |  Email |Print

The U.S. Department of Agriculture forecast that farmers will face a drop in profit for the third straight year as persistent surpluses depress crop and livestock prices. Farm net income will be $54.8 billion in 2016, the USDA said Tuesday in a report on its website, 2.8 percent less than the $56.4 billion estimated for 2015.
The hard times follow an era of record profit that peaked at $123.3 billion in 2013, when rising global demand combined with a domestic drought that crimped supplies of corn and cattle, while a virus devastated hog herds. Direct government farm-program payments are forecast to rise 31 percent to $13.9 billion in 2016 with the 2014 Farm Bill’s price-loss and risk coverage accounting for almost two-thirds of the total………………………………………..Full Article: Source

Iran wants euro payment for new, outstanding oil sales

Posted on 08 February 2016 by VRS  |  Email |Print

Iran wants to recover tens of billions of dollars it is owed by India and other buyers of its oil in euros and is billing new crude sales in euros, too, looking to reduce its dependence on the U.S. dollar following last month’s sanctions relief.
A source at state-owned National Iranian Oil Co (NIOC) told Reuters that Iran will charge in euros for its recently signed oil contracts with firms including French oil and gas major Total, Spanish refiner Cepsa and Litasco, the trading arm of Russia’s Lukoil………………………………………..Full Article: Source

S&P turns negative on 20 oil and gas companies

Posted on 04 February 2016 by VRS  |  Email |Print

Standard and Poor’s said Tuesday it had cut or was considering cutting the investment-grade credit ratings at 20 oil and gas giants, including Chevron Corp. and Exxon Mobil Corp. The ratings actions, which spanned integrated and independent producers, are an acknowledgement that $30 oil could shake the creditworthiness of even the largest oil and gas companies.
Chevron’s credit rating was cut one notch from AA to AA-. Exxon Mobil, which remains at the agency’s highest credit rating of AAA, was put on notice that its long-term credit rating was up for review………………………………………..Full Article: Source

Investors chase gold bonds in falling stock market

Posted on 29 January 2016 by VRS  |  Email |Print

The second tranche of India’s sovereign gold bond received a better response than the first, a government official said, as a price discount and its safe haven appeal amid a slide in equities attracted investors. The world’s second biggest gold consumer plans to sell 150 billion rupees in bonds linked to the metal in the financial year ending March 31, to wean investors off buying physical gold and stem the outflow of foreign exchange spent on gold imports.
In the second tranche, 316,000 applications were received for 2,790 kg of gold worth 7.26 billion Indian rupees ($106 million), far higher than the 62,169 applications for the first tranche for 915.953 kg of gold in November………………………………………..Full Article: Source

Commodity AUM Reflect Big Q4 Moves: Citi

Posted on 26 January 2016 by VRS  |  Email |Print

Citi’s Aakash Doshi and team take a look at commodity flows in hedge funds, ETFs, and indexes Monday, writing that asset under management estimates for the end of 2015 suggest a “sharp” 18% year over year drop, well below their 2011 highs.
Doshi writes that oil’s big losses in the fourth quarter were behind an $11 billion loss in passive index valuations, a trend he sees continuing this month. “The passive index market, valued at c$125Bn, is now c$100Bn below levels seen during the height of the commodity super cycle.” Meanwhile, market caps of commodity ETFs slid 8% in the fourth quarter, in large part thanks to gold’s decline in the face of an interest rate hike from the Federal Reserve………………………………………..Full Article: Source

China is a $US460 bln a winner from the commodities rout

Posted on 25 January 2016 by VRS  |  Email |Print

The pain from the rout in global commodity prices is sweeping through nations from Brazil to South Africa. The biggest beneficiary? Arguably it’s China, the nation often blamed for driving prices lower due to its slowing economic growth. China’s annual savings from the commodities rout amount to $US460 billion, according to calculations by Kenneth Courtis, former Asia vice chairman at Goldman Sachs Group Inc.
About $US320 billion of that is from cheaper oil, with the rest from other energy, metals, coal and agricultural commodities. Benefits are rippling through the economy, pushing down or steadying prices of everything from home heating and petrol prices to the cost of raw materials at factories. That’s also boosting China’s efforts to recalibrate its economic growth model away from a reliance on heavy industries and investment toward consumption and services………………………………………..Full Article: Source

Commodities rout exacerbated by speculative bets

Posted on 25 January 2016 by VRS  |  Email |Print

Arrium director and former Rio Tinto strategy chief Doug Ritchie said the dramatic fall in commodities has been exacerbated by speculative bets placed by hedge funds, which has resulted in steeper price falls for iron ore, coal and copper than in previous mining busts.
“With derivatives, when sentiment is upwards its going to have the impact of pushing commodity prices higher. And when sentiment is negative it is going to have a big impact pulling prices lower,” says Doug Ritchie, Arrium………………………………………..Full Article: Source

Gold monetisation acquires new polish

Posted on 25 January 2016 by VRS  |  Email |Print

Those who have not opted to participate in the Centre’s gold monetisation scheme (GMS) so far, and have gold idling in their bank lockers, may like to consider it now. The Reserve Bank of India on Thursday announced a few changes to the scheme to make it customer-friendly.
GMS offers to pay you interest based on the weight of the old gold (in the form of jewellery, coins or bars) that you deposit with the bank. The minimum deposit is 30 grams (995 fineness). The scheme is available for short terms of one to three years, a medium term of five to seven years and long term of 12-15 years………………………………………..Full Article: Source

IMF cuts global growth forecast as China slows

Posted on 20 January 2016 by VRS  |  Email |Print

The International Monetary Fund cut its global growth forecasts for the third time in less than a year on Tuesday, as new figures from Beijing showed that the Chinese economy grew at its slowest rate in a quarter of a century in 2015.
To back its forecasts, the IMF cited a sharp slowdown in China trade and weak commodity prices that are hammering Brazil and other emerging markets. The Fund forecast that the world economy would grow at 3.4 percent in 2016 and 3.6 percent in 2017, both years down 0.2 percentage point from the previous estimates made last October. It said policymakers should consider ways to bolster short-term demand………………………………………..Full Article: Source

Deals to be had in commodities rout

Posted on 19 January 2016 by VRS  |  Email |Print

The hottest deals in mining in 2016 will be the buying and restructuring of companies out of insolvencies, and picking up assets miners are selling to help fix balance sheets, advisers say. And the dire market for initial public offerings in mining, which produced only two floats on the ASX in 2015, could be the “new normal”, at least for 2016, Perth-based adviser Liam Twigger told The Australian Financial Review.
Charles Fear, chief executive of Perth-based corporate advisory firm Argonaut, said the market for most commodities was bouncing along the bottom, and mergers and acquisitions typically led a recovery, as assets were picked out of distressed companies at reasonable prices………………………………………..Full Article: Source

To Divine Chinese Commodity Demand, Keep Eye on Credit

Posted on 19 January 2016 by VRS  |  Email |Print

When China slows, commodities crash. If only it were that simple. Understanding the real cause and effect relationship between the two takes a bit more homework. Much of the weakness in global commodities isn’t China’s fault—at least not directly.
Oil at $30 and the attendant tumble in prices of iron ore, coal, copper and soybeans is as much a function of too much supply as slack Chinese demand. But China exerts powerful direct effects, and they are especially worth watching with the nation’s industrial economy in such a precarious position………………………………………..Full Article: Source

Commodities slide triggers ‘freight recession’ on US rails

Posted on 15 January 2016 by VRS  |  Email |Print

On the railways criss-crossing the western US farm belt, grain trains are so abundant you can’t give one away. Big agricultural commodity traders have been offering as much as $200 per covered hopper car to anyone willing to sublet their 110-car shuttle trains.
“You actually have to pay someone to take your cars,” says Dan Mack, vice-president of agricultural transportation and terminals at CHS, a large US grain merchant. Spare capacity in the US freight rail system underlines the breadth of a commodities rout that just entered its sixth year………………………………………..Full Article: Source

OPEC waiting for US oil companies’ bankruptcy

Posted on 12 January 2016 by VRS  |  Email |Print

OPEC will cut crude production and export in order to raise oil prices, after the US companies extracting hydrocarbons go bankrupt due to the current low energy prices, said Alexander Razuvayev, economist and director of the analytical department at Russian company Alpari.
Alpari is one of the leading companies offering forex trading in Russia. “The price war will end sooner or later,” he told Trend Jan. 11. “We can expect positive changes this year. As a result of falling oil prices, budgets are running out, shale companies go bankrupt. Those, who survive the crisis, will take the new position on the market at comfortable prices.”……………………………………….Full Article: Source

Hedge Funds Burned by Commodities Lose $40 Billion Since ‘08

Posted on 15 December 2015 by VRS  |  Email |Print

The biggest commodities meltdown in a generation has cost hedge funds more than $40 billion in seven years. Losses due to poor performance and investor withdrawals have left assets at the top 10 commodities hedge funds at less than $10 billion, compared with more than $50 billion in 2008, according to estimates from Trafigura Pte Ltd.’s annual report.
The trader and asset manager said the perception of commodities as an investable asset has been replaced by a “generalized aversion.” “Commodities as an asset class are not as attractive as before and we are seeing the consequences on our asset management division,” ……………………………………….Full Article: Source

Commodities are still no asset class to own

Posted on 15 December 2015 by VRS  |  Email |Print

The commodities research team at Julius Baer has produced a 2016 outlook. The commodity super cycle is in its final innings and structural headwinds should ease but cost deflation and abundant supplies should keep a lid on prices. While lower commodity prices brought tailwinds to consumers in 2015, 2016 might see increasing economic risks in resource-dependent countries and industries.
Abundant shale oil supplies warrant low oil prices for longer while soft currencies and structurally slowing Chinese demand growth should continue to weigh on metal prices. Gold is set to remain out of favour among investors given the outlook for sound growth, higher interest rates and muted inflation………………………………………..Full Article: Source

With oil hedges rolling off, U.S. shale producers face stiff test

Posted on 15 December 2015 by VRS  |  Email |Print

Cash-strapped U.S. shale oil producers are facing another sharp sell-off in a 18-month-old crude slump with reduced hedging protection, risking a severe hit to earnings if prices fail to recover. A Reuters analysis of hedging disclosures from the 30 largest oil producers showed the sector as a whole reduced its hedge books in the three months to September.
“Producers have survived 2015 as they benefited from large reductions in service costs while having a significant amount of production hedged at high prices,” said John Arnold, the Texas billionaire formerly at hedge fund Centaurus Advisors………………………………………..Full Article: Source

Private equity, pension funds eye more metal streaming deals

Posted on 15 December 2015 by VRS  |  Email |Print

Private equity and pension funds may provide the next wave of funding to the slumping mining sector through metal streaming deals as dedicated funding sources struggle to raise their own cash, industry sources said. With many miners unwilling to issue equity given their weakened shares amid falling commodity prices, streaming may help them avoid credit downgrades and fund new mines.
About $4.5 billion worth of these deals, an alternative form of financing where miners are paid cash upfront for future output, have been inked this year, making 2015 a record year for metals streaming as miners slash debt five years into a commodities downturn………………………………………..Full Article: Source

Russia plans for seven more years of $40 oil in message to Opec

Posted on 14 December 2015 by VRS  |  Email |Print

Russia is battening down the hatches for a Biblical collapse in oil revenues, warning that crude prices could stay as low as $40 (Dh147) a barrel for another seven years. Maxim Oreshkin, the deputy finance minister, said the country is drawing up plans based on a price band fluctuating between $40 and $60 a barrel as far out as 2022, a scenario that would have devastating implications for Opec, the Organisation of Petroleum Exporting Countries.
It would also spell disaster for North Sea producers, Brazil’s offshore projects and heavily indebted Western producers. “We will live in a different reality,” Oreshkin told a forum in Moscow. The cold blast from Russia came as US crude slipped to $36.14, pummelled by the continuing fallout from the acrimonious Opec meeting last week. Record short positions by hedge funds have amplified the effect………………………………………..Full Article: Source

Commodities Slump Hammers Sector’s Junk Bonds

Posted on 07 December 2015 by VRS  |  Email |Print

Deep losses on bonds from junk-rated U.S. energy and mining firms are rattling even seasoned investors, underscoring the challenges facing these companies amid a prolonged slump in commodity prices. Many bond prices are down 60% or more this year. Oil prices are still low due to a global supply glut, and metals prices are declining as China’s economic growth slows.
The moves are prompting worries that defaults could increase in the coming months, potentially sparking a fresh bout of selling that could spread to other parts of the junk-bond market. Among this year’s worst performers: some Linn Energy LLC bonds have fallen nearly 80%, Penn Virginia Corp. bonds are down 75% and Chesapeake Energy Corp. bonds are down 60%, according to figures from MarketAxess Holdings Inc. All three firms produce oil and natural gas in the U.S………………………………………..Full Article: Source

Moody’s: Stress in commodity sectors will be a key credit hazard in 2016

Posted on 03 December 2015 by VRS  |  Email |Print

The global commodity downturn is exceptionally severe in its depth and breadth and is expected to be a substantial factor driving the number of defaults higher on a global basis in 2016, says Moody’s Investors Service. “Commodity sectors are facing staggering adverse conditions driven by a potent mix of slower-than-expected global demand and excess supply,” said Mariarosa Verde, a Moody’s Group Credit Officer and lead author of the report.
Collapsing commodity prices have placed a significant strain on credit quality in the oil and gas and metals and mining sectors. These sectors have accounted for a disproportionately large 36% of downgrades and 48% of defaults among all corporates globally so far this year. Moody’s anticipates continued credit deterioration and a spike in defaults in these sectors in 2016, according to the report, “Growing Stress in Commodity Sectors is a Credit Hazard for 2016.” (Press Release)……………………………………….Full Article: Source

When bank balance sheets become scarce commodities

Posted on 27 November 2015 by VRS  |  Email |Print

Distortions are occurring in collateralised funding and swap markets meaning secured funding is weirdly costlier than unsecured. Bankers are blaming post-crisis leverage ratio regulation for the anomaly. But what really does the aberration in the collateralised Fed-funds spread reflect?
Credit Suisse’s FI team puts it relatively simply this Thursday: it’s all about the cost of balance-sheet rental, which is now as scarce a commodity as oil: Not only have intermediating dealers not yet fully priced in balance sheet costs, but we also expect that they won’t do so in the near future as well………………………………………..Full Article: Source

Banks turning their backs on Chinese commodities

Posted on 26 November 2015 by VRS  |  Email |Print

Banks are sceptical of and reluctant to lend to the commodities trade in China, due to the downturn in price and the risk of fraud and default. Over the course of a day-long conference in Beijing, commodity traders, bankers and lawyers all signalled that banks have been forced to re-evaluate their lending practices in China.
While many banks have been scaling back on commodities lending globally, the situation is aggravated in China, where a number of high-profile fraud and document-keeping scandals have ebbed away at trust in the sector. It’s led to consolidation in the market, where banks are focusing on their core business, leaving fewer willing to dabble in perceived higher-risk markets, and leaving producers and traders scrambling for the little finance available to them………………………………………..Full Article: Source

Banks face new pressure on commodity activities

Posted on 04 November 2015 by VRS  |  Email |Print

US banks that handle physical commodities will be forced to hold large new capital cushions under bold new Federal Reserve plans to hedge against costly disasters such as tanker spills or gas pipeline explosions. The Fed wants to use capital charges to discourage banks from risky activities that could threaten their survival in the event of a catastrophe, according to people briefed on the matter.
New restrictions would affect banks led by Goldman Sachs, Bank of America Merrill Lynch and Citigroup, some of which are already rethinking their role in commodities due to pressure from regulators and a decline in profitability in the area………………………………………..Full Article: Source

Fed mulling higher capital cushion for banks handling commodities

Posted on 04 November 2015 by VRS  |  Email |Print

The U.S. Federal Reserve is considering requiring banks that handle physical commodities to increase their capital buffers as a hedge against accidents, such as tanker spills or gas pipeline explosions, the Financial Times reported on Tuesday.
The paper, citing people briefed on the matter, said the U.S. central bank wants to use the new capital requirements to discourage banks from risky activities that could threaten their survival in the event of a catastrophe. The report suggests the Fed may be closer to finalizing new rules as part of a years-long review of its oversight of banks’ physical commodities operations………………………………………..Full Article: Source

Lenders must act to avoid another round of commodity defaults

Posted on 02 November 2015 by VRS  |  Email |Print

Shortly after he had been hiding under an overcoat as rebel soldiers tried to storm the Miraflores Palace, the Venezuelan president Carlos Andrés Pérez said: “Give them bullets. I want to be back in soon.” The attempted coup of February 1992 was the dramatic culmination of a sequence of collapsing oil prices, financial turmoil and the “Caracazo” anti-austerity riots of 1989 that left hundreds dead.
Venezuela defaulted on its debts in 1990, 1995 and 1998, following a well-established pattern. “Spikes in commodity prices are almost invariably followed by waves of new sovereign defaults,” note Carmen Reinhart and Kenneth Rogoff in their authoritative survey of global financial crises. Countries dependent on commodity revenues run up their budgets during the good times. Their currencies are buoyed by exports, and they surf domestic housing and credit booms………………………………………..Full Article: Source

Attention, Indians! Your gold will soon earn money for you

Posted on 26 October 2015 by VRS  |  Email |Print

The gold monetisation scheme will be launched in the coming weeks, Indian Prime Minister Narendra Modi announced on Sunday. “We have brought gold monetisation scheme and will launch it in the coming weeks before Diwali and Dhanteras, when gold is particularly sought after,” Modi said.
“Gold can be converted from dead money to an economic force. To leave gold lying as dead money is behaviour not in sync with the modern times,” he said. Noting that accumulating gold as a form of economic security is deeply rooted in India’s social tradition, Modi exhorted people to help convert gold to the nation’s economic strength by joining in various schemes to be launched soon………………………………………..Full Article: Source

Commodity contagion sparks second credit crisis as investors panic

Posted on 12 October 2015 by VRS  |  Email |Print

The collapse in commodity prices has sparked a second credit crisis as investors dump high-yield bonds, shattering the fragile confidence necessary to support global markets. Those calling it a Lehman moment forget their history. Current events have chilling similarities to the Bear Stearns collapse and mark the start of a new crisis, not the end.
The world of commodity trading has been thrown into chaos as the cost of borrowing to fund operations soars. Glencore has become the poster child for the sector’s woes as its shares have more than halved in value during the past six months. More worrying has been the impact on the group’s credit profile………………………………………..Full Article: Source

Bank of England quizzing UK banks over commodities exposure

Posted on 09 October 2015 by VRS  |  Email |Print

The Bank of England has asked British banks to report their exposure to commodities and ensure they are mitigating risks effectively, a source familiar with the situation said on Thursday. Prices for oil and other commodities have fallen sharply in recent months, and earlier on Thursday the Financial Times reported the BoE move had been triggered by the sharp fall in the shares of commodities and mining company Glencore.
“This is something being done in the course of normal supervision,” the source said, adding that the request had been made by the Prudential Regulation Authority, the arm of the BoE in charge of day-to-day bank regulation………………………………………..Full Article: Source

Risk of global financial crash has increased, warns IMF

Posted on 08 October 2015 by VRS  |  Email |Print

The risk of a global financial crash has increased because a slowdown in China and decline in world trade are undermining the stability of highly indebted emerging economies, according to the International Monetary Fund (IMF). The Washington-based lender of last resort said the scale of borrowing by emerging market countries, whose debts are vulnerable to rising interest rates in the US, mean policymakers need to act quickly to shore up the financial system.
José Viñals, the IMF’s financial counsellor, said the threat of instability and recession hanging over economies including China, Brazil, Turkey and Malaysia was one of a “triad of risks” that could knock 3% off global GDP………………………………………..Full Article: Source

Global Oil to Cut Spending by $130 Billion, OPEC Says

Posted on 07 October 2015 by VRS  |  Email |Print

Global oil investments are set to be slashed by $130 billion this year, crimping supplies and ultimately boosting prices, the chief of the Organization of the Petroleum Exporting Countries said.
OPEC Secretary-General Abdalla Salem el-Badri said global investments in petroleum projects will be reduced by 22.4% to $521 billion in 2015. Lower supply will result in “less supply in the very near future. Less supply means high prices,” he said………………………………………..Full Article: Source

Commodity Traders Win Billions in Loans Amid Glencore Storm

Posted on 07 October 2015 by VRS  |  Email |Print

For all the fears that Glencore Plc could buckle under its weighty debt load, a wave of new bank loans this month shows the concerns aren’t spreading across the commodity-trading sector.
Banks are granting new credit lines to Glencore’s biggest trading rivals, including a record $8 billion of loan facilities on Tuesday to Vitol SA, the Swiss unit of the world’s biggest independent oil trader. Trafigura Pte Ltd. won improved terms on a $2.2 billion loan refinancing deal on Oct. 1 via a group of 28 banks. Swiss commodity traders Gunvor Group Ltd. and Mercuria Energy Group Ltd. are also marketing credit facilities totaling $2 billion………………………………………..Full Article: Source

Commodity Collapse Has More to Go as Goldman to Citi See Losses

Posted on 06 October 2015 by VRS  |  Email |Print

Even with commodities mired in the worst slump in a generation, Goldman Sachs Group Inc., Morgan Stanley and Citigroup Inc. are warning bulls that prices may stay lower for years.
Crude oil and copper are unlikely to rebound because of excess supplies, Goldman predicts, and Morgan Stanley forecasts that weaker currencies in producing countries will encourage robust output of raw materials sold for dollars, even during bear markets. Citigroup says the sluggish world economy makes it “hard to argue” that most prices have already bottomed………………………………………..Full Article: Source

Banks’ Troublesome Ties to Commodities Traders

Posted on 06 October 2015 by VRS  |  Email |Print

Fears around slumping commodities have whacked shares of Standard Chartered. But the U.K.-based and emerging-markets focused bank isn’t alone in lending to the world’s biggest metals, fuels and foods traders. Rivals such as HSBC and Royal Bank of Scotland have chunky loans to such firms as do big French banks, and MUFJ of Japan and Citigroup of the U.S., according to estimates from Bernstein analysts.
But what is critical is how big these exposures are compared with bank equity. Standard Chartered still stands out with loans to Trafigura that amount to 2.5% of the bank’s tangible net asset value, according to Bernstein, and loans to Glencore that amount to 1.3%………………………………………..Full Article: Source

Europe Banks’ Profit Outlook Dims on Commodities, Berenberg Says

Posted on 02 October 2015 by VRS  |  Email |Print

European banking profitability is set to worsen as falling commodity values weaken loan books and central bank actions from China to the U.S. cause economic uncertainty, according to analysts at Berenberg Bank.
“Developments in commodity markets matter for banks, given what they tell us about economic growth and the implications for asset quality,” Berenberg analysts Nick Anderson and James Chappell said in an note dated Sept. 29. “The financialization of commodities (their widespread use as collateral) underpins asset-quality concerns.”……………………………………….Full Article: Source

Credit and commodities run out of steam

Posted on 01 October 2015 by VRS  |  Email |Print

The world has been firing on two cylinders over recent years: commodities and credit. These did not quite deliver soaring growth, but were enough to keep things sputtering along. The tank, however, is running dry. Asia is especially exposed. While this need not portend imminent financial stress, growth is bound to disappoint for a while.
Consider the big picture. With the collapse of demand in the west following the global financial crisis, China has been holding up the roof. The mainland’s contribution to world growth occurred mainly through commodities. True, China imported everything from German cars and French handbags to Japanese excavators, but it was its appetite for raw materials that powered the world………………………………………..Full Article: Source

Credit, Commodities and Currencies Weigh on Stock Markets

Posted on 01 October 2015 by VRS  |  Email |Print

Call it a triple-C market—that is, one dominated by credit, commodities and currencies. A triple-C rating describes a speculative credit well down on the quality scale. In recent days, the market increasingly is looking askance at borrowers of lesser quality, especially those related to commodities.
That reduced esteem for lower-quality credits is hitting the equity market for the simple reason is that stocks never have been so dependent on borrowed money. Nor, for that matter, have commodities. The producers of metals, energy and agricultural goods went heavily into hock to expand production. Cheap credit funded the expansion of supplies not only of energy products but also metals that boomed in the so-called commodity super cycle………………………………………..Full Article: Source

Bad quarter for stocks; dire one for commodities

Posted on 01 October 2015 by VRS  |  Email |Print

The third quarter has been a bad one for global markets, with a rout in commodities putting the asset class among the hardest hit by China slowdown fears and U.S. interest rate uncertainty. Copper prices plunged to a six-year low earlier this week, while Brent crude oil prices were on course for a 23 percent fall during the period.
“We’ve pushed raw materials down so far, we must be getting to the point where they start to base out,” Marc Ostwald, a strategist at ADM Investor Services, told CNBC……………………………………….Full Article: Source

Glencore Crash: Sharing in the Commodities Giant’s Misery

Posted on 30 September 2015 by VRS  |  Email |Print

Asian commodities house Noble Group has been under siege since critics began assailing its accounting in February. Now, the woes of trading peer Glencore are adding to the sense of peril regarding Noble.
The 29% plunge Monday in miner-cum-trader Glencore’s London shares triggered a 10% drop in Noble’s Singapore-listed stock Tuesday. Noble’s 2020 bonds at one point Tuesday also fell by 20 cents on the dollar to around 60 cents, according to traders………………………………………..Full Article: Source

Commodities are Battered among the Asset Classes

Posted on 28 September 2015 by VRS  |  Email |Print

Commodities, one of the most important asset classes, have received a beating since 2014, largely due to global oversupply. This downtrend is seen in all the commodity sectors, including energy, industrial metals, precious metals, and agriculture. Commodity mutual funds have also followed this trend.
Commodities movement historically does not correlate with any other asset class like equities or bonds. They generally have a positive correlation with inflation. Hence, they are considered to be an attractive investment option from a diversification point of view. But investing in commodities involves higher risk compared to equities or bonds. So, exposure to commodities using mutual funds reduces the risk………………………………………..Full Article: Source

Oil price plunge forces Norway to cut rates to record low

Posted on 25 September 2015 by VRS  |  Email |Print

Norway’s central bank cut interest rates to a fresh record low as it battled to overcome a slump in oil prices that has hit the economy of western Europe’s biggest petroleum producer harder than during the financial crisis.
Norges Bank cut its overnight deposit rate, the amount that banks earn by parking their spare cash at the central bank, by 25 basis points to 0.75 per cent and warned that more cuts were possible………………………………………..Full Article: Source

Gold vs Debt: The Big Picture

Posted on 24 September 2015 by VRS  |  Email |Print

Gold prices peaked in January 1996 and then fell for 3.5 years into a multi-decade low. It was the age of stocks, debt, leverage, and good times; nobody needed or wanted gold. Since the gold price peak in 2011 the Federal Reserve has “generously” supplied the world with trillions of dollars of newly created digital and paper debt, all backed by nothing but faith and credit.
Bonds have rallied and the S&P is higher by 50% or so. The Japanese Central Bank has similarly produced trillions of yen, bought stocks and bonds, and extended their recession several more years………………………………………..Full Article: Source

Short bets on suffering commodities netting major returns in meltdown

Posted on 21 September 2015 by VRS  |  Email |Print

The biggest collapse in commodity prices in a generation is giving some investors the best returns of any asset class. Over the past 12 months, eight of the 10 best-performing U.S. exchange-traded funds were securities that benefited from declines in raw-material prices, with five more than doubling their money, according to data tracked by Bloomberg on more than 1,600 ETFs across asset classes, including equities, fixed income and mixed allocation.
With commodity prices languishing near a 16-year low because of excess supplies, money has been flowing out of funds linked to metals, crops and energy. But for the investors that took on more risk with leveraged short bets, the payoff has been big. The VelocityShares Daily 3x Inverse Crude ETN, by far the top gainer, surged 241 per cent over the 12 months through Wednesday as oil prices tumbled 50 per cent in New York………………………………………..Full Article: Source

China August commodities output weak as economic slowdown bites

Posted on 15 September 2015 by VRS  |  Email |Print

China’s output of key industrial commodities including coal and steel weakened in August, as government measures to cut smog ahead of World War Two commemorations further cut production already lowered by a slowing economy.
Growth in China’s investment and factory output missed forecasts in the month, pointing to a further cooling in the world’s second-largest economy that will likely prompt the government to roll out more support measures………………………………………..Full Article: Source

Plummeting Commodity Demand Slams Nigerian, Brazilian Debt

Posted on 14 September 2015 by VRS  |  Email |Print

Nigeria and Brazil may be in different continents, but they had something in common last week: There’s no hiding behind bad fiscal and monetary policies when commodity demand dries up. JPMorgan said it would boot Nigeria from its benchmark local-currency Government Bond Index-Emerging Markets, citing foreign-currency restrictions and a lack of liquidity.
But Nigeria defended policies that it argues curb speculative trading and volatility. Its oil-dependent economy is revenue starved, and new President Muhammadu Bhuari has been slow to appoint a new cabinet. The Global X MSCI Nigeria exchange-traded fund (ticker: NGE) has fallen 23% this year………………………………………..Full Article: Source

Local Funds Key to Shielding India From China Swings

Posted on 14 September 2015 by VRS  |  Email |Print

Foreign investors’ sway over Indian stocks is set to wane as local mutual funds take a bigger slice of the $1.4 trillion market, providing a buffer against price swings sparked by events like China’s yuan devaluation last month, according to Tata Asset Management Co.
Even as the worst emerging-markets rout in four years rubbed off on India’s benchmark S&P BSE Sensex, domestic stock funds took in a net 92 billion rupees ($1.4 billion) in August, 50 percent more than July, data from the Association of Mutual Funds in India showed last week. Global investors, on the other hand, sold the most shares since October 2008………………………………………..Full Article: Source

Major banks’ commodities revenue down 25 pct in first half-report

Posted on 09 September 2015 by VRS  |  Email |Print

Global commodities-related revenue at the top 10 investment banks tumbled by a quarter in the first half of the year, due to a retreat in business from the power and gas sectors after last year’s surge, a consultancy said on Tuesday. Revenue earned by leading banks from commodity trading, selling derivatives to investors and other activities in the sector fell to $2.6 billion from $3.5 billion in the same period of 2014, financial industry analytics firm Coalition said.
“Despite increased volatility in oil prices and better corporate activity, commodities revenues declined due to (the) absence of prior-year gains from the unusually cold winter,” Coalition said………………………………………..Full Article: Source

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