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Commodities Briefing 12.Mar 2013

Posted on 12 March 2013 by VRS |  Email |Print

Goldman Sachs turned bullish on commodities on Monday, upping its near-term return forecast from 2 percent to 6 percent, despite renewed concerns about a slowdown in China. Prices for commodities such as oil fell sharply in February, as weak data raised concerns about the economic strength of China, the world’s second-biggest oil consumer. Brent crude oil traded below $110 on Monday, down from a three-month high of $119.17 on February 8.
However, Goldman Sachs said the drop in prices was “too much, too soon”. “Although volatility rose during February, it did so from extremely low levels and in some cases from record low levels,” Goldman analysts wrote in a note………………………………………..Full Article: Source

Posted on 12 March 2013 by VRS |  Email |Print

The latest commodity advice from Goldman Sachs suggests the current sell-off may be overdone. Here are the key points from Monday’s note: Shifting to near-term overweight as commodity sell-off overdone: Commodity markets declined sharply in February along with emerging market (EM) equities due to renewed concerns over China, which we believe is overdone.
Although our price targets other than gold remain unchanged, this pull back has pushed our near-term return forecast from 2.0% to 6.0%, making commodities the asset class within the ECS coverage universe with the most robust near-term outlook. However, our 12-month neutral recommendation remains unchanged as our returns forecast is still a more subdued 3.0%, as we continue to remain structurally neutral on long-dated oil and commodity prices due to the structural supply-side response to persistently high prices………………………………………..Full Article: Source

Posted on 12 March 2013 by VRS |  Email |Print

Wall Street commodity revenues crashed last year to their lowest on record, as tighter regulation and limited price swings squeezed the once dominant traders of Goldman Sachs Group Inc, JPMorgan Chase & Co and Morgan Stanley.
All three firms reported double-digit percentage declines in revenues for oil, grains and copper trading in 2012, illustrating how the one-time ‘Wall Street Refiners’ have withered in the face of subdued markets and restrictions on proprietary trading. The decline is most stark at Goldman, where commodity revenues collapsed by more than 60 percent year-on-year in 2012 to just $575 million, according to the bank’s annual report………………………………………..Full Article: Source

Posted on 12 March 2013 by VRS |  Email |Print

Investment banks are notorious for their “boom-bust” approach to business, riding cyclical profit opportunities to the hilt until the opportunity dwindles and they are forced to retrench. If commodities markets continue to normalize and volatility remains muted, we could see another wave of savage job cuts at the investment banks.
With big finance firms still trading at deep discounts to their historic norms, investors everywhere are wondering if this is the new normal or if finance stocks are a screaming buy today………………………………………..Full Article: Source

Posted on 12 March 2013 by VRS |  Email |Print

The rally for the stock market is coming at the expense of raw materials including crude oil, wheat and gold as equities trade at the highest valuation relative to commodities in four years.
The CHART OF THE DAY shows the ratio of the Standard & Poor’s 500 Index of equities to the S&P GSCI Spot Index of 24 raw materials reached 2.4 on March 6, the highest since February 2009. The S&P 500 is less than 2 percent from a record reached in October 2007 and has rallied 8.8 percent this year. The GSCI is up 0.3 percent in 2013 and 27 percent lower than the all-time high touched in July 2008………………………………………..Full Article: Source

Posted on 12 March 2013 by VRS |  Email |Print

Understanding why oil markets are “sticky for prices” needs a look at the basics. Oil markets are among the most liquid, most traded and most sought after - not only by investors, traders and hedgers, but also by economic and monetary policy makers of the world, due to the geopolitical sentiment that runs alongside oil. This highground can, and often does shade the basic supply-demand energy role of oil to an also-ran, but this has limits.
What we know for sure is oil’s role in world energy has declined - not crashed but declined - on a constant long-run basis, almost unrelated to annual or multi-annual average prices. In 1973 oil supplied about 53% of world energy, but today it provides about 32%. By 2020, it may supply only 27%. This, for starters, should take the crisis-word out of oil analysis……………………………………….Full Article: Source

Posted on 12 March 2013 by VRS |  Email |Print

The weekly average price of the Organization of Petroleum Exporting Countries (OPEC) declined to 107.02 US dollars per barrel last week, compared with 109.28 dollars a week earlier, the Vienna-based cartel said Monday. This is the third consecutive weekly decline of the OPEC basket price, a sharp drop from 114.5 dollars in mid-February, the highest level in recent months.
The three-week long decline of the OPEC basket price is supposed to be affect by the uncertain monetary policy of the US Federal Reservethe and downgrading of Italy’s long-term foreign and local currency Issuer Default Ratings (IDR) to ‘ BBB+’ from ‘A-’ last Friday………………………………………..Full Article: Source

Posted on 12 March 2013 by VRS |  Email |Print

Investors were recently unnerved to see a particular signal at the end of last month, gold’s “death cross”, when the price’s 50-day rolling average drops below its 200-day moving average. Two out of the last three such “death crosses” were followed by marked sell-offs reports Sydney Morning Herald.
As sentiment turned more bearish, an eye-catching note from Goldman Sachs grabbed attention. The bank cut its forecast for the gold price this year to $1600 an ounce from $1810, and predicted that next year the price will be $1450. “The turn in the gold cycle has likely already started,” the bank’s analysts warned, pointing to “a quickly waning conviction in holding gold positions, especially ETFs”………………………………………..Full Article: Source

Posted on 12 March 2013 by VRS |  Email |Print

The Dow Jones Industrial Average climbed a steep wall of worry and last Tuesday returned to its all-time high from late 2007. The Dow finished at 14253.77, topping the previous record set in October 2007 and is already up 8.8% for the year.
The Fed’s expansive monetary policy to prop up the economy has kept stocks climbing higher despite a less than glowing global economy. By pumping trillions into the financial system, the Fed has convinced investors it will provide a safety net for future shocks. In addition, by keeping interest rates extremely low, the Fed is forcing investors to seek higher returns in the stock market………………………………………..Full Article: Source

Posted on 12 March 2013 by VRS |  Email |Print

Silver and silver mining stocks are front and center for investors and active traders. Because of silver’s high volatility (large price swings) it naturally attracts a lot of attention.
First, you have seasoned investors who are waiting for the right opportunity to get long or short for the next move. Then you have the active traders playing the day to day price swings. Finally, you get the gamblers who are salivating over the potential to double their accounts and are riding the commodity on pure emotions (Fear & Greed). All these things compound the volatility for the investment making it headline news and what everyone wants to be involved in………………………………………..Full Article: Source

Posted on 12 March 2013 by VRS |  Email |Print

Iron ore prices have fallen to a 2½-month low as Chinese steelmakers resist restocking amid weakening economic data. Spot prices for the benchmark 62 per cent grade of the commodity fell to $144.10 a tonne on Monday, the lowest so far this year and down 9.3 per cent since mid-February, according to The Steel Index, a price reporting agency.
The price of iron ore is critical to the global economy as it feeds through into the price of steel and everyday goods such as cars and washing machines. It is also key to the profitability of three of the world’s largest mining companies: BHP Billiton, Vale and Rio Tinto………………………………………..Full Article: Source

Posted on 12 March 2013 by VRS |  Email |Print

The ECB, BOE, BOJ, RBA, BOC all had policy meetings last week. While none of them changed interest rates or asset purchases, all indications were for accommodative policy to continue if not become more aggressive.
Meanwhile the data-flow in the US was extremely positive with a large increase in non-farm payrolls (+236k vs. +165k expected) boosting the US dollar. Gold, silver, and platinum fell in dollar terms after the announcement as investors weighed the probability of less easing from the Fed following the recent fall in unemployment to 7.7%, a four-year low……………………………………….Full Article: Source

Posted on 12 March 2013 by VRS |  Email |Print

China should accelerate opening commodities futures to overseas investors and detail regulations allowing domestic firms to trade raw materials contracts on bourses abroad, Shanghai Futures Exchange Chairman Yang Maijun said in proposals to the National People’s Congress.
Government agencies including foreign exchange regulators and the tax bureau should use preparations already under way for crude oil futures trading to prepare similar policies allowing foreign investors to trade base metals, precious metals and natural rubber futures, Yang said………………………………………..Full Article: Source

Posted on 12 March 2013 by VRS |  Email |Print

Soft commodities represent the main area of overlap between NYSE Euronext and IntercontinentalExchange (ICE). The former is best known for its stock markets and financial futures, while Atlanta-based ICE runs derivatives exchanges heavily geared towards energy products, as well as soft commodities following its acquisition of the New York Board of Trade.
In December, ICE announced that it had agreed to buy NYSE Euronext for $8.2 billion (£5.5 billion). After the completion of the prospective merger, currently undergoing European and US regulatory approvals, ICE will keep the NYSE Euroenext soft commodity derivative contracts based in London and will put a five-year ceiling on their trading fees………………………………………..Full Article: Source

Posted on 12 March 2013 by VRS |  Email |Print

After years of grabbing the spotlight in US-China economic relations, US concerns over the value of Beijing’s currency appear to be fading, giving ground to newer issues like cyber-security and trade secret theft. Some lawmakers continue to argue a weak Chinese yuan is robbing jobs from the United States. But action to force a change is unlikely and the issue will probably remain on the back burner as long as the US economy continues to improve.
An increase in the value of the yuan, a big drop in China’s global trade surplus and a rise in labor costs that has made Chinese products less competitive have conspired with a pickup in US job growth to take the wind out of Washington’s sails………………………………………..Full Article: Source

Posted on 12 March 2013 by VRS |  Email |Print

Hedge funds turned their most bearish on agricultural commodities since the depths of the global financial crisis - but appear to have been wrong-footed in lean hogs - ramping up short bets– just ahead of a rebound in prices.
Managed money, a proxy for speculators, extended a mammoth shift towards betting on falling agricultural commodities, according to data from the Commodity Futures Trading Commission, the US regulator………………………………………..Full Article: Source

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