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Commodities Briefing 01.Apr 2015

Posted on 01 April 2015 by VRS |  Email |Print

If you thought US plans to cap speculative activity in commodities were broad, then take a glance at what’s unfolding on the other side of the Atlantic.Policy makers in Europe want to place position limits, or caps, on the number of contracts speculators may control, on around 1,900 commodity derivatives (and securities priced off commodities), according to calculations by the UK’s Financial Conduct Authority.
To put that figure in perspective, the US Commodity Futures Trading Commission position limit plan extends to just 28 contracts………………………………………..Full Article: Source

Posted on 01 April 2015 by VRS |  Email |Print

Looser credit conditions or fiscal stimulus may temporarily boost China’s demand for coal, copper, and iron ore, but the bounce would be fleeting. Mined commodity prices are unlikely to recover from recent lows, as China’s structural economic transition diminishes the main source of global demand growth.
Falling input costs and global overcapacity have reshaped the global steel industry: Prices will be lower for longer. Weak crop prices and low farmer incomes are a significant headwind for fertilizer and seed companies, but we don’t expect the breeze will be too strong………………………………………..Full Article: Source

Posted on 01 April 2015 by VRS |  Email |Print

Investors are bailing out of commodity funds at the fastest pace on record, and the exodus shows no signs of ending. US exchange-traded funds linked to broad baskets of raw materials saw a net outflow of $1.23bn over the first three months of the year, the most of any quarter since the securities were created in 2006, data compiled by Bloomberg show. Bank of America says ample supplies have unleashed price wars, and Goldman Sachs predicts a 20% drop for commodities already near a 13-year low.
Morgan Stanley and Société Générale also have cut forecasts for a whole range of items. Rising supplies created bear markets over the past year as drillers unlocked more oil and natural gas, copper mines expanded and farmers harvested record maize and soya bean crops. The strongest dollar in at least a decade encouraged countries with weaker currencies to export more………………………………………..Full Article: Source

Posted on 01 April 2015 by VRS |  Email |Print

Australian equities and commodities are firmly out of favour with international investors who prefer exposure to Europe, technology and health care. Institutional investors are bearish on the outlook for the local market because stocks look expensive, along with the prospect of the Australian dollar plunging and concerns around Australia’s reliance on China as a source of demand, a survey of respondents at the Credit Suisse Asian Investment Conference revealed.
In spite of this, Australian stocks have just posted the best first-quarter since 1991 with a return of 9 per cent sealed on Tuesday. Low interest rates and compelling yields on offer in equities have supported a wave of buying at odds with dour expectations for the domestic economy………………………………………..Full Article: Source

Posted on 01 April 2015 by VRS |  Email |Print

21 of 24 commodities lost in FY15 with the flagship indices, S&P GSCI and Dow Jones Commodity Index (DJCI), losing 39.5 per cent and 25.9 per cent, respectively. In the past quarter, six commodities are positive: silver, cotton, gasoil, unleaded gasoline, gold, and feeder cattle. In the past month, one-third of commodities are in backwardation, measuring shortages that could be supportive for silver, copper, live cattle, feeder cattle, Kansas wheat, unleaded gasoline, heating oil and gasoil.
This highlights the positive impact of falling oil prices on the petroleum commodities that use crude oil as an input. Each commodity has its own supply and demand model so is impacted by different factors from weather to geopolitical risk. Rising interest rates, Chinese demand from stockpiling, and the possibility of rising oil prices may support commodities this year………………………………………..Full Article: Source

Posted on 01 April 2015 by VRS |  Email |Print

Oil prices fell Tuesday as a deal on Iran’s nuclear program appeared more likely, raising the chances of increased Iranian crude-oil exports. Tuesday was the deadline for Iran and six other nations to outline the main elements of a deal constraining Iran’s nuclear program in exchange for lifting international sanctions. The U.S. State Department said the parties made enough progress to merit staying at the talks until Wednesday. The deadline for a final agreement is the end of June.
Iran, which has 10% of the world’s crude-oil reserves, has seen its production and export capacity sharply curtailed by sanctions. Its crude exports dropped from 2.5 million barrels a day in 2011 to 1.1 million barrels a day in 2013, according to the U.S. Energy Information Administration………………………………………..Full Article: Source

Posted on 01 April 2015 by VRS |  Email |Print

An unlikely location for oil markets, to be sure, but that is where U.S. Secretary of State John Kerry is meeting with Iran’s Mohammad Javad Zarif for intense negotiations over Iran’s nuclear program. The so-called P5+1 countries and Iran hope to come to an 11th hour agreement that could pave the way for a historic thaw in relations. The deadline for a deal is the end of the month, or Tuesday night.
Although nuclear weapons proliferation is the headline item, one of the most significant side effects of the negotiations will be their effect on the price of oil. Iran, as a member of OPEC and a major oil producer on the world stage, still has substantial influence on oil markets………………………………………..Full Article: Source

Posted on 01 April 2015 by VRS |  Email |Print

Air strikes in Yemen and nuclear talks with Iran are pulling the price of crude in different directions. Betting on oil is perhaps more akin to blackjack than to roulette -some skill is involved but it’s still gambling. There are simply too many unpredictable variables for the market itself to be predictable.
Nonetheless, broad political and economic developments usually mean it’s possible to make an educated guess. It’s particularly tricky to guess the price right now, however, because there are good reasons to think it could surge or tank, depending on how two political situations in the Middle East develop………………………………………..Full Article: Source

Posted on 01 April 2015 by VRS |  Email |Print

OPEC oil supply has jumped in March to its highest since October as Iraq’s exports rebounded after bad weather and Saudi Arabia pumped at close to record rates, a Reuters survey found, a sign key members are sticking to their effort to regain market share.
The increase from the Organization of the Petroleum Exporting Countries adds to excess supply in the market, despite some signs that the halving of crude prices since June 2014 is encouraging higher oil demand………………………………………..Full Article: Source

Posted on 01 April 2015 by VRS |  Email |Print

Metals Focus sees a more stable gold price this year despite a forecast for a wider market deficit, it said. It sees the metal averaging $1,190 in 2015 after bottoming out at $1,080, it said in a report on Tuesday, This suggests reduced volatility in the market this year, with gold currently trading around $1,180 per ounce, effectively unchanged since the start of the year.
Selling pressure will emanate from a forecast 73-percent drop in net investment in ETF holdings following a drop of 80 percent in 2014, it said. But pressure may well be limited by better prospects for gold bar sales in Asia, following a slump in demand in 2014 owing to a reversal in the Chinese market. ……………………………………….Full Article: Source

Posted on 01 April 2015 by VRS |  Email |Print

Look for continued weakness in the short term, with the price maybe bottoming out $100 per ounce below where it is today, says Metals Focus in its inaugural Gold Focus report.The seers naturally trot out Asian demand as helping to save they day, but more interestingly suggest 2015 as the year the tremendous growth in supply over the past two decades comes to an end.
Further, producer hedging - selling future supply today - is expected to remain flat at levels far lower than seen a few years back.As for rate the start of U.S. rate hikes - widely anticipated and hurting gold’s price at least in dollar terms - it could be a sell the rumor, buy the news moment for the yellow metal as punters realized the pace of hikes will be slow, with real rates remaining negative for years to come………………………………………..Full Article: Source

Posted on 01 April 2015 by VRS |  Email |Print

The gold price could average $1,150 and $1,055 per ounce in 2015 and 2016 respectively as the normalisation of Federal Reserve monetary policy and further currency weakness in Europe and Japan drive the dollar higher, Natixis said in a report released on Monday.
The members of the Fed’s policy board are locked in what has become an increasingly public debate on when will be the right time to raise interest rates, which have been near zero since December 2008. The current market consensus is that the first increase will happen in the second half of this year………………………………………..Full Article: Source

Posted on 01 April 2015 by VRS |  Email |Print

Macroeconomic consultantancy Capital Economics has reiterated its above consensus forecast for the silver price of $23 per ounce for the end of the year, rising to $26 for the end of 2016. Julian Jessop, head of Commodities Research at Capital Economics, said in a note on March 27: “Silver has out-performed gold this year during periods when the prices of both have been rising, as usual, but it has also held on to more of its gains when both have struggled. This supports our relatively bullish view on the outlook for silver prices over the remainder of 2015 and in 2016.”
Jessop continues to see plenty of upside for silver, which has massively under-performed gold since2011. He cited the ratio of the price of an ounce of gold to that of silver is now around 70 ($1,200/$17), compared to a long-run average of around 60………………………………………..Full Article: Source

Posted on 01 April 2015 by VRS |  Email |Print

Silver prices should track gold at an average ratio of 72:1 as larger economic trends prove more potent than supply/demand fundamentals, JP Morgan said on Tuesday. “The large macro themes – US rate hikes, strong dollar, potential for upticks in geopolitical risk – that will drive gold prices will also largely influence silver prices throughout 2015 and 2016,” JP Morgan said.
“From a fundamental perspective, continued growth in the global economy should underpin growth in industrial applications for silver but cheaper alternative materials and thrifting will likely temper some of this growth,” said the bank, which said that industrial application demand will grow by 2.5 per annum over the next two years………………………………………..Full Article: Source

Posted on 01 April 2015 by VRS |  Email |Print

Iron ore completed the biggest quarterly loss since at least 2009 as surging low-cost supplies from Australia and Brazil swamp the global market, spurring a glut as demand from China slows. Ore with 62 per cent content at Qingdao, China, sank 28 per cent since the start of the year, according to daily data from Metal Bulletin.
The raw material retreated to $US51.35 a dry metric ton on Tuesday. That’s the lowest since 2004-2005, based on data from Metal Bulletin and annual benchmarks compiled by Clarkson, the world’s largest shipbroker. Westpac is tipping the price will fall to $US47 a tonne. The commodity capped a fifth quarterly retreat on Tuesday after Rio Tinto Group and BHP Billiton expanded supply, betting increased volumes would offset lower prices and force higher-cost miners to close………………………………………..Full Article: Source

Posted on 01 April 2015 by VRS |  Email |Print

Russian metals producer Norilsk Nickel believes the LME nickel price is “bottoming out” and is bullish on the alloying metal as the Indonesian government has said it is committed to keeping its ore export ban in place.
Commenting on its outlook in its results statement for 2014, the company said it expects nickel supplies to move into a deficit of about 20,000 tonnes in 2015, after a surplus of 93,000 tonnes in 2014………………………………………..Full Article: Source

Posted on 01 April 2015 by VRS |  Email |Print

Should you trade exchange-traded funds (ETFs) or individual stocks? With thousands of stocks traded in the marketplace, an investor has the wherewithal to construct a portfolio perfectly tailored to his or her own unique risk tolerance and investment objectives. However, there are a handful of trading situations when ETFs may be better suited than stocks for inclusion in a portfolio.
But first, what are the similarities between ETFs and stocks? Both ETFs and stocks trade on a recognized exchange. Like blue-chip stocks, the larger ETFs (like the SPDRs or “spiders” and “Diamonds”) are very liquid and have narrow bid-ask spreads. Similar to stocks, ETFs can also be sold short………………………………………..Full Article: Source

Posted on 01 April 2015 by VRS |  Email |Print

As the U.S. dollar’s value has soared against other currencies, so has interest in currency-hedged exchange-traded funds. In just the first two months of this year, an estimated $11.6 billion has flowed into the 20 currency-hedged ETFs tracked by investment-research firm Morningstar Inc. That swelled the funds’ assets to nearly $35.6 billion, up from just $4.4 billion in 2013 and $21.3 billion last year, according to Morningstar.
The number of fund options has ballooned, too. More than half of the currency-hedged ETFs that Morningstar tracks were launched last year, including a group from WisdomTree Investments that provide exposure to some individual industry sectors in Japan such as health care………………………………………..Full Article: Source

Posted on 01 April 2015 by VRS |  Email |Print

After the recent swing in the equities market, more anxious investors may consider alternative investments and exchange traded funds to help even out an investment portfolio.
Alternative investments provide exposure to assets with little or no correlation to traditional stocks and bonds, which can help offset a portfolio’s potential losses in volatile conditions. For those with a low risk tolerance, an alternative investment strategy could help protect one’s assets……………………………………….Full Article: Source

Posted on 01 April 2015 by VRS |  Email |Print

Deutsche Börse Group intends to acquire a minority stake in a new commodities exchange in India. While the German exchange has declined comment, a spokesperson for the Bombay Stock Exchange (BSE) told ShareCast on Tuesday that Deutsche Börse’s planned stake could be in the region of 5%, as the Indian exchange moves to set-up a new commodities trading outfit at a special economic zone in India’s Gujarat state.
The move, should it materialise, would not be the first Indian foray for Deutsche Börse. In 2007, it took a 5% stake in the BSE. Both the BSE and Deutsche Börse already have a wide-ranging technological partnership. The BSE currently deploys Deutsche Börse’s N7 trading network synced to its equity and derivatives platforms………………………………………..Full Article: Source

Posted on 01 April 2015 by VRS |  Email |Print

The United States feels China’s yuan does not yet meet the standards for inclusion in the International Monetary Fund’s basket of global currencies, Treasury Secretary Jack Lew said on Tuesday. The yuan’s inclusion in the basket, which defines the value of the IMF’s reserve assets, would add to China’s global status while encouraging more central banks to hold the currency.
Currently the basket includes the dollar, the yen, the euro and the pound, and the IMF is reviewing the composition of the basket this year. Officials at the international lender look for a currency to be used heavily in international trade as well as freely convertible. Lew said that China had more work to do………………………………………..Full Article: Source

Posted on 01 April 2015 by VRS |  Email |Print

Citi’s Chief Economist Willem Buiter spent some time with FT Alphaville explaining why he believes Draghi’s concession on profit and loss sharing among ECB member national central banks turns, in all likelihood, the single monetary unit into nothing more than a glorified currency board.
Quick background: The ECB’s profit-and-loss sharing mechanism became a key negotiating point ahead of European QE. For the Bundesbank, QE was only viable if NCBs assumed most of the responsibility for losses on assets they brought into the consolidated balance sheet. In the end Draghi acquiesced by reducing risk-sharing to only 20 per cent of assets………………………………………..Full Article: Source

Posted on 01 April 2015 by VRS |  Email |Print

Germany’s carbon emissions fell last year - due largely to the milder winter. Experts say that unless action is taken to cut the use of highly polluting brown coal, the country will not reach its 2020 climate targets.
The German government released figures Tuesday (31.03.2015) indicating that carbon dioxide emissions fell in 2014 - putting the country back on track after three years of rising emissions. But politicians admitted that warmer weather was a decisive factor. “Much of the reduction was in 2014 due to the mild winter. But we owe part of the decline to real progress on climate protection,” said Environment Minister Barbara Hendricks………………………………………..Full Article: Source

Posted on 01 April 2015 by VRS |  Email |Print

The past week has been bright for the UK’s renewable energy sector. The UK Department for Energy and Climate Change released energy trends data for 2014, showing that renewables supplied a record 19.2% of all generated electricity, up from 14.9% in 2013. A Bloomberg New Energy Finance Analyst Reaction details how the outcome of the upcoming general election could influence these figures for the future.
Drax Group’s conversion of a second coal power plant to burn wood, has reduced the utility’s exposure to the price of carbon emission permits and boosted the UK’s biomass power generation. Total UK greenhouse gas emissions are estimated to have fallen 8.4% in 2014. This and a surprisingly sharp drop in the country’s electricity consumption in 2014 are examined in a separate note from Bloomberg New Energy Finance………………………………………..Full Article: Source

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