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Commodities Briefing 04.Sep 2015

Posted on 04 September 2015 by VRS |  Email |Print

Collateralized loan obligations that were created after the financial crisis in the U.S. have material exposure to the commodities sector, which poses an increased risk to investors due to the plunge in crude prices.
That’s the finding of a report published yesterday by Moody’s Investors Service, which shows that as of June the top 20 individual CLOs with the largest exposures to companies in the commodities-related sector ranged from 14.4 percent to 21.3 percent of their holdings. A fund managed by GoldenTree Asset Management LP had the biggest exposure followed by two CLOs issued by Halcyon Asset Management LLC, the report shows………………………………………..Full Article: Source

Posted on 04 September 2015 by VRS |  Email |Print

Commodities tend to run in long cycles. The huge run-up in their prices, which peaked in 2011, has now degenerated into a rout. People who think that this situation will stabilize and turn around anytime soon are kidding themselves. China’s pell-mell growth was the stimulus for the so-called commodity super-cycle , which began around 2002.
But the huge nation’s expansion couldn’t go on forever at a double-digit clip. China’s deceleration to a 7% rate, while pretty good by Western standards (the U.S. grows at a 2% pace), is enough to squelch the commodity boom, and keep it squelched for a good long while. Not to mention, plunge stocks into correction territory , as we’ve seen lately………………………………………..Full Article: Source

Posted on 04 September 2015 by VRS |  Email |Print

The National Oceanic and Atmospheric Administration’s (NOAA) latest El Niño update, released Monday, put the chance that El Niño conditions will continue through the winter at 90% and into early spring at 85%. The destruction a severe El Niño can wreak is staggering. A prolonged episode from 1789-1793 has been blamed for a famine in India that killed 600,000.
Between 1997 and 1998, an especially severe El Niño caused an estimated 23,000 deaths and $35 billion in damage worldwide. Given the sheer destructive potential of El Niño, it should come as little surprise that it can have a significant economic impact, particularly on commodity prices………………………………………..Full Article: Source

Posted on 04 September 2015 by VRS |  Email |Print

The recent decline in commodity prices resembles a downhill mountain biking expedition. The price drop has been so severe that we’ve seen a nearly one-sided market, with buyers largely absent in futures, commodity indices, and exchange-traded funds (ETFs).
As a result, many commodity hedge funds have closed and are returning capital, despite their ability to trade short. Indeed, we knew it was getting serious when the phrase “market correction” was slowly replaced by the word “carnage.” Yet, if you believe in the commodity super cycle – defined as the decades-long price movements in a wide range of commodities – then this shouldn’t have been entirely surprising………………………………………..Full Article: Source

Posted on 04 September 2015 by VRS |  Email |Print

Spain’s economy minister says his country is a winner from the plunge in oil prices and is well insulated from the Chinese slowdown that’s partly driving the decline. In a Bloomberg Television interview in Madrid, Luis de Guindos said lower energy costs for consumers and companies are helping to drive an acceleration in Spain’s expansion this year.
The economy grew 1 percent in the second quarter, more than three times the euro-area average. “We import the majority of the commodities, especially in the case of energy,” de Guindos said in the interview in Madrid on Wednesday. “So for Spain it’s a gain-gain situation.”……………………………………….Full Article: Source

Posted on 04 September 2015 by VRS |  Email |Print

President of Venezuela Nicolas Maduro suggested discussing how to stabilize the situation on the global oil market during a meeting with his Russian counterpart Vladimir Putin on Thursday.
“We could talk about what we can do to stabilize the oil market and to stabilize the prices, which would allow us to overcome the lengthy conjuncture characterized by low oil prices. We have some pretty good ideas on this matter,” Maduro said. Global oil prices have significantly dropped compared to those seen in the summer of 2014, falling from $100 to some $50 per barrel for Brent crude, primarily as a result of worldwide oversupply………………………………………..Full Article: Source

Posted on 04 September 2015 by VRS |  Email |Print

Andy Hall, one of the best-known oil traders who’s bullish on prices, said the decline in the oil market isn’t a repeat of 1998 or 2008. The absence of “extreme contango,” which occurs when commodities prices close to delivery are cheaper than those to be delivered at later dates, suggests that “the world, whilst moderately oversupplied, is not awash in oil,” Hall said in a letter to investors.
Oil prices, which plunged 32 percent in 1998 and 54 percent in 2008, are down more than 50 percent in the past year. Hall, who runs hedge fund firm Astenbeck Capital Management, said U.S. crude output through the remainder of 2015 will decline 6 percent from the first half’s average. He said he expects to see a decline in production forecasts by the International Energy Agency………………………………………..Full Article: Source

Posted on 04 September 2015 by VRS |  Email |Print

Iran’s Oil Minister Bijan Namdar Zanganeh says most of the Organization of Petroleum Exporting Countries (OPEC) members believe $70 to $80 per barrel for crude would be a “fair” price, compared to the recent weakness in prices which has seen U.S. crude dip below $40 per barrel, Bloomberg reports.
However, a global glut of oil, which contributed to oil’s price sink, appears to see little relief as Iran commits itself to ramping up production in the run up to a lifting of sanctions against the country, and U.S. shale gas producers also making a return. “Some OPEC members believed last year that lower prices could push expensive oil from the market,” said Zanganeh………………………………………..Full Article: Source

Posted on 04 September 2015 by VRS |  Email |Print

Gold prices will continue to sag into the start of 2016 while a strong dollar and low inflation continue to pressure sentiment, JP Morgan said. In a research note on Thursday, the broker lowered its average gold price forecast to $1,050 for the fourth quarter of the year and to $1,040 for 2016. The spot gold price was last at $1,130.80/1,131 per ounce, down $2 on Wednesday’s close.
“While in the near term gold prices may receive some greater strength than we were previously anticipating as global growth worries and concerns about the ramification of the strong US dollar make a first Fed hike in September less probable, the conviction by the FOMC to raise rates has not materially wavered,” it said………………………………………..Full Article: Source

Posted on 04 September 2015 by VRS |  Email |Print

Respected economist and historian and the editor of the ‘Gloom, Boom & Doom Report’ Marc Faber warned on Bloomberg TV’s Market Makers yesterday that there are now “no safe assets” including deposits and said that he is focusing “on precious metals.”
In another informative and interesting interview, Faber spoke about dangerous central bank policies and the stupidity of QE, the cause of inequality including competitive currency devaluations and warned that even deposits are no longer safe………………………………………..Full Article: Source

Posted on 04 September 2015 by VRS |  Email |Print

Platts assessed the spot price of 553-grade silicon metal imported into Japan at $1,630-$1,650/mt CIF Japan Thursday, up from $1,590-$1,620/mt CIF last week as some Chinese producers raised offers on output cuts. Japanese secondary aluminum alloy smelter Daiki Aluminium Industry on Wednesday closed a buy tender for over 800 mt/month of silicon metal for October-December delivery, sources said.
Some Chinese producers participated, offering less than $1,600/mt CIF Japan to win large volumes. But prices were higher in the spot market for 100-200 mt for September-October loading, Japanese traders said………………………………………..Full Article: Source

Posted on 04 September 2015 by VRS |  Email |Print

On the London Metal Exchange (LME) benchmark nickel for three-month delivery is currently trading around $10,000 per tonne. Which, as with all the other industrial metals traded on the LME, is the lowest it has been since the Global Financial Crisis in 2008-2009.
But whereas the likes of copper and aluminium are still comfortably above the troughs recorded during the worst of the manufacturing meltdown that followed the financial meltdown, nickel is actually there. Nickel hit a low of $9,100 during its “flash crash” of Aug. 12, within spitting distance of the low of $8,850 recorded in October 2009, the month after the fateful “Lehman Moment”………………………………………..Full Article: Source

Posted on 04 September 2015 by VRS |  Email |Print

Copper prices jumped to their highest level in more than three weeks on Thursday after a national holiday in China put a pause on negative news from the world’s leading metals consumer.
The most actively traded contract, for December delivery, rose 5.50 cents, or 2.4%, to settle at $2.3845 a pound on the Comex division of the New York Mercantile Exchange. This was the highest settlement since Aug. 10, when prices closed at $2.400 a pound………………………………………..Full Article: Source

Posted on 04 September 2015 by VRS |  Email |Print

Summer 2015 saw investors sweating it out on the markets as the U.S. stock market ran into a correction territory thanks to the China gloom, Fed uncertainty, emerging market weakness and slumping commodities. Perhaps they should have stuck to the popular trading adage “Sell in May and Go Away”.
After all, the May end to early September period has historically been known for melting profits at the bourses. This time around, the markets went berserk with performances swinging from sky-high in certain sectors to dreadful by others. Will the markets continue to shake in fall as well?……………………………………….Full Article: Source

Posted on 04 September 2015 by VRS |  Email |Print

After a worldwide brutal stretch in August, the investing cohort must be keenly following the market movement in September. In any case, September is a seasonally cursed month having underperformed historically especially when it comes to stocks. According to the Stock Trader’s Almanac, September ended in red 55% of the time while S&P Dow Jones Indices indicated an average fall of 1.03% return over the last 87 years in September.
There is no end to hurdles in the global market, with China being the main culprit. The world’s second-largest economy completely derailed the market in August by devaluing its currency yen by 2%, to presumably maintain export competitiveness and by revealing six-and-a-half-year low manufacturing data for August………………………………………..Full Article: Source

Posted on 04 September 2015 by VRS |  Email |Print

The Market Vectors Gold Miners ETF is 25.6% year-to-date and nearly 46% over the past year. In some cases, losses for gold miners exchange traded funds are worse than those posted by GDX, the largest gold miners ETF.
Falling gold prices are obviously problematic for GDX and rival gold miners funds, but some analysts see another, arguably surprising negative catalyst emerging: Copper. The iPath Dow Jones-UBS Copper Subindex Total Return ETN is down 17.2% over the past three months and that affects GDX and other miners funds because some big-name gold miners are also copper producers………………………………………..Full Article: Source

Posted on 04 September 2015 by VRS |  Email |Print

Commodity hedge fund Krom River, which managed around $1 billion at its peak, is returning money to investors as it plans a shift in focus following a tough period for commodities funds. The Swiss-based fund, co-founded by former Armajaro Asset Management trader Chris Brodie, currently has around $60 million in assets, according to a person familiar with the company.
The fund has lost money over the past three calendar years, and was down around 2% year-to-date to June. Mr. Brodie will be taking a sabbatical until the end of the year………………………………………..Full Article: Source

Posted on 04 September 2015 by VRS |  Email |Print

US Treasury Secretary Jacob Lew said on Thursday (Sep 3) that the United States would hold China responsible for the political and economic impact of its currency policies after last month’s yuan devaluation. “They have to understand, and I make this point to them quite clearly, that there’s an economic and a political reality to things like exchange rates,” Lew said.
“They need to understand that they signal their intentions by the actions they take and the way they announce them,” he said, referring to Beijing’s sudden devaluation of the yuan, or renminbi, on Aug 11 that triggered shock waves in global markets………………………………………..Full Article: Source

Posted on 04 September 2015 by VRS |  Email |Print

India will raise the recent currency devaluations by the Chinese central bank and its ramifications to the global economy in the upcoming in G-20 meet in Turkey. “The recent devaluation of major currencies followed by currency depreciations in a large number of Asian emerging markets raise the risk of competitive devaluations. Competitive currency devaluations, at a time when global demand is sluggish, is a major threat to stability in the global economy,” an official statement from the finance ministry said.
The statement comes on the eve of Finance Minister Arun Jaitley leaving for a two-day conference of G-20 finance ministers and central bank governors, who will take stock of the global economic situation and review the member nations’ growth strategies………………………………………..Full Article: Source

Posted on 04 September 2015 by VRS |  Email |Print

In recent days, President Obama has painted the risks of climate change in apocalyptic terms. Speaking in Anchorage, AK on Monday, Obama warned that without quick action to slow or reverse global warming, “entire nations will find themselves under severe, severe problems: More drought. More floods. Rising sea levels. Greater migration. More refugees. More scarcity. More conflict.”
Yet for all his tough rhetoric, Obama’s own policy proposals are rather modest. After failing to convince Congress to enact a “cap and trade” system to limit carbon emissions, Obama has increasingly relied on a regulatory approach such as his recently-announced limits on use of fossil fuels by power plants………………………………………..Full Article: Source

Posted on 04 September 2015 by VRS |  Email |Print

The Australian government has released its final draft for a cap on greenhouse gas emissions. The “safeguard mechanism” will form part of the government’s central climate policy, and will fine large businesses for exceeding emissions baselines.
Businesses that produce over 100,000 tonnes of greenhouse gases each year will have their emissions capped. The scheme makes some allowances for power generators and landfill (which produces greenhouse gases as rubbish breaks down), as well as those that expand production while improving their emissions efficiency………………………………………..Full Article: Source

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