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Commodities Briefing 05.Mar 2014

Posted on 05 March 2014 by VRS |  Email |Print

Commodities trader and producer Glencore Xstrata says global demand for its raw materials is expected to grow, but that its earnings have been hit by big one-time charges. The expenses, many associated with Glencore’s takeover of Xstrata, pushed the company to a net loss of $7.4 billion last year, compared with a profit of $1 billion the previous year. Not counting those expenses, profits rose 20 percent to $3.67 billion.
Chief Executive Ivan Glasenberg says the company sees healthy demand growth in key commodities, “underpinned by the long term trend of urbanization in emerging markets and parts of the developed world returning to trend growth.”……………………………………….Full Article: Source

Posted on 05 March 2014 by VRS |  Email |Print

Commodity bulls live and die by metrics of Chinese demand. So the analytical folks at Sanford C. Bernstein reviewed the scope of that demand through another, less-used indicator: China’s completion and announcement of infrastructure projects.
Big-ticket projects such as nuclear plants and high-speed rail that took off during Beijing’s stimulus splurge to fend off the financial crisis are winding down. The appetite to replace these with similar-sized projects is waning, Bernstein’s Michael Parker says. New ventures coming up are mostly smaller scale, such as subway tracks and electrical transmission lines………………………………………..Full Article: Source

Posted on 05 March 2014 by VRS |  Email |Print

A top Federal Reserve official said on Tuesday that while there is a potential risk to the U.S. economy from the crisis in Ukraine, it appears quite manageable so far with commodity markets stable.
“So far commodity markets seem to have absorbed the news reasonably well,” Jeffrey Lacker, president of the Richmond Fed, told reporters following a speech in New York. “That’s where I see the potential for risks but they seem quite manageable at this point.”……………………………………….Full Article: Source

Posted on 05 March 2014 by VRS |  Email |Print

The deployment of Russian military in Crimea is making global commodities markets traders jittery. As the tension between Russia and Ukraine flared up, speculative long positions were built in gold, which is generally seen as a safe haven during military hostilities.
It is still early days but if the situation gets out of hands and turns into a conflict then it will lead to rally in precious metals and create trouble for the Emerging Markets………………………………………..Full Article: Source

Posted on 05 March 2014 by VRS |  Email |Print

The crisis in Ukraine has introduced new event risk for commodity markets. Commodities play an important role for the Ukrainian economy since exports account for around 50% of Ukrainian GDP, of which commodities account for around 60% of all exports: Deutsche Bank Report.
The country’s commodity exports include agriculture, chemicals, metals and timber products. However, the country’s strategic position when it comes tonatural gas flows is, in our view, the most relevant………………………………………..Full Article: Source

Posted on 05 March 2014 by VRS |  Email |Print

Canada’s grain-supply boom is turning into a bust for farmers as record harvests and railroad logjams make sales almost impossible.
Consider Dennis Gallant, 76. He has yet to collect one cent on the wheat, canola, barley and oats harvested last year on the 1,000-acre farm in Warren, Manitoba, he has run since 1960. He has called the local grain elevator every 10 days since October. The answer since is always the same. No thanks. We’re full………………………………………..Full Article: Source

Posted on 05 March 2014 by VRS |  Email |Print

Opec’s oil output has risen further in February from December’s 2 and half year low, due to more shipments from Iraq and Angola, and further upward creep in Iranian exports.
According to the survey based on shipping data and information from sources at oil companies, Opec and consultants, output from the Organisation of the Petroleum Exporting Countries averaged 29.96 million barrel per day, up from a revised 29.79 million barrel per day in January………………………………………..Full Article: Source

Posted on 05 March 2014 by VRS |  Email |Print

The European Union should ensure that future climate and energy policies do not undermine the competitiveness of its industry, already weakened by a price gap with the U.S., the bloc’s member states said.
Energy ministers from the EU’s 28 nations had their first debate about 2030 carbon-reduction and renewable energy strategy at their quarterly meeting in Brussels. It followed yesterday’s gathering of environment ministers, where countries differed over how ambitious Europe’s emissions-cut target should be and how fast new policies should be adopted………………………………………..Full Article: Source

Posted on 05 March 2014 by VRS |  Email |Print

Gas and oil prices have risen amid fears the Ukraine crisis could have a damaging effect on one of Europe’s main energy supply routes. But analysts say high European gas stocks will limit the turbulence.
Gas futures climbed by up to 10% in early trading, while the benchmark price for oil rose by more than 2%. Traders are worried about the stability of supplies from Russia, which provides a quarter of Europe’s natural gas, half of it through Ukraine………………………………………..Full Article: Source

Posted on 05 March 2014 by VRS |  Email |Print

The price of crude oil dropped sharply Tuesday after a big jump the day before over concern that Russia’s military advance into Ukraine could result in economic sanctions against one of the world’s major energy suppliers.
By early afternoon in Europe, benchmark U.S. crude for April delivery was down $1.58 to $103.34 a barrel in electronic trading on the New York Mercantile Exchange. On Monday, the contract added $2.33 to close at $104.92………………………………………..Full Article: Source

Posted on 05 March 2014 by VRS |  Email |Print

Iranian Oil Minister Bijan Namdar Zanganeh expressed the hope that the country would not need to sell crude oil in the near future. The Iranian oil minister on Tuesday also expressed the hope that with investments in petrochemical and refinery sectors, Iran would stop selling crude oil by the next four to five years.
Iran sits on a massive natural resource, oil, and because of this, the country’s economy has become oil-based for decades………………………………………..Full Article: Source

Posted on 05 March 2014 by VRS |  Email |Print

China’s buying of gold jewelry, coins and bars is now the biggest driver of prices, not investment demand from the West, according to Global Research. “We would argue that physical demand trends in the emerging world will largely define gold’s price movements this year,” HSBC analysts James Steel and Howard Wen said in a research note.
China alone can take up the equivalent of half of the global gold mine output, while a possible recovery in Indian demand could also act as a boost for the yellow metal as long as the Indian authorities reduce import tariffs on gold………………………………………..Full Article: Source

Posted on 05 March 2014 by VRS |  Email |Print

You’re not supposed to discuss religion or politics at the dinner table, and you really shouldn’t ever bring up gold in polite company either. For many boosters, gold takes on a kind of religious political importance, as some investors feel they can turn to it for deliverance from seemingly wasteful and duplicitous governments who resort to inflation to sustain ever-growing bureaucracies.
It’s the political extremism of gold’s fervent supporters that often leads people to ignore their claims of gold market manipulation. But there has been increasing evidence that something fishy is going on in the market for gold bullion, and in so-called paper gold, or various financial derivatives backed by gold………………………………………..Full Article: Source

Posted on 05 March 2014 by VRS |  Email |Print

With mounting tensions between Russia and Ukraine, most analysts fear a rise in crude oil prices. But Mark Keenan, Head of Commodities Research - Asia, Societe Generale does not agree with the popular perception. He is not expecting an escalation in crude prices because of unrest in Ukraine.
Keenan argues the initial concerns and fears were a function of risks to crude oil moving out of the Black Sea region. But according to later research, it is in everyone’s interest - especially Russia - to ensure that crude oil continues to flow out of the region. He is infact more concerned about other commodities like natural gas where a lot of the supply out of Russia moves through Ukraine to Europe. ……………………………………….Full Article: Source

Posted on 05 March 2014 by VRS |  Email |Print

The shine is coming off of silver, at least according to a report from Citi Research published yesterday. Citi analysts David B. Wilson, Jason S. Sappor and Ivan Szkapowski say that the recent rise in silver prices is likely unsustainable given the neutral-to-bearish fundamentals of the silver market. The analysts summarize their point of view below.
“It should be emphasized that strong retail investor demand for coins and medals in 2013, with record US Silver Eagle coin sales of 47 m oz., was driven largely by falling prices and resultant bargain hunting, while conversely 2013 ETF uptake was muted because of those same price falls. ……………………………………….Full Article: Source

Posted on 05 March 2014 by VRS |  Email |Print

Taking many investors by surprise, natural resource investing has dominated the headlines this year thanks to the global growth worries following the initiation of the taper. Both gold and silver have followed this trend, and while both types of bullion have performed well, the surge was more intense in the mining ETF space, as the latter often trades as a leveraged play on the underlying metal.
Notably, between gold and silver mining ETFs, the second has seen more gains this year and its Zacks Industry Rank is also more favorable. Silver mining ETFs, which shed about 50% in 2013, gained 25% in contrast to 22.48% gain seen in gold mining ETFs………………………………………..Full Article: Source

Posted on 05 March 2014 by VRS |  Email |Print

With our market timing model remaining in “buy” mode, our current focus primarily remains on leading individual stocks. Tesla (TSLA), for example, is now showing an unrealized gain of 68% since our December 31 buy entry. SolarCity (SCTY) is similarly up 56% since our December 19 buy entry.
However, despite strength in leadership stocks, we have also been noticing a stealth sector rotation of institutional funds flowing into various commodity ETFs………………………………………..Full Article: Source

Posted on 05 March 2014 by VRS |  Email |Print

Three straight years of negative returns for broad commodity benchmark indices, such as the Dow Jones-UBS Commodity Total Return Index, have led some investment advisors (and their clients) to begin questioning the rationale for including commodity futures ETFs1 in their asset allocation models.
Relatively tame inflation expectations seem to support these doubts, as commodities are often thought of as a hedge against inflation. However, the fact that inflation expectations are so low may actually highlight one of the most important reasons for maintaining (or adding) a strategic allocation to commodity futures ETFs: in order to hedge against unexpected inflation………………………………………..Full Article: Source

Posted on 05 March 2014 by VRS |  Email |Print

International core equity funds offer good options for both passive and active fund investors: Funds focused on developed Europe offer attractive relative value with U.S.-type growth opportunities, while Asia Pacific–focused funds potentially benefit from recent volatility.
Emerging markets funds demand greater selectivity, and emerging markets debt funds are in for another volatile year. Commodity funds, meanwhile, remain lackluster despite gold achieving some price stability………………………………………..Full Article: Source

Posted on 05 March 2014 by VRS |  Email |Print

CME Group Inc., locked in a race to extend its global footprint against rival IntercontinentalExchange Inc., has found itself outflanked in Asia by ICE’s just completed takeover of the Singapore Mercantile Exchange.
The $8.0 billion transaction now intensifies pressure on Chicago-based CME Group, the world’s largest owner of commodity exchanges, to carry out its own acquisition in the high-growth Asian market. ……………………………………….Full Article: Source

Posted on 05 March 2014 by VRS |  Email |Print

After weeks of negotiations with the Swiss trading firm Mercuria Energy Trading over a potential purchase of its physical commodities unit, executives at JPMorgan Chase are close to greenlighting a deal, according to people familiar with the matter, one of whom said an announcement could come within the next week.
Mercuria, the Geneva-based trading firm that specializes in sourcing and shipping petroleum and refined products, entered into exclusive negotiations with JPMorgan in early February after the bank completed talks with dozens of other suitors………………………………………..Full Article: Source

Posted on 05 March 2014 by VRS |  Email |Print

HKEx looks to extend trading hours for the products from April to allow for hedging by investors in the wake of recent volatility in the currency. Hong Kong Exchanges and Clearing will add yuan currency futures in an after-hours evening session from April 7 in its latest effort to promote yuan products.
“The yuan has become very volatile recently while its trading pattern last week showed the currency did not always go up. This would be the right time for HKEx to extend the trading hours for yuan futures to allow investors to do some hedging,” Charles Li Xiaojia, chief executive of the bourse, said as he unveiled HKEx’s strategy at its annual media briefing……………………………………….Full Article: Source

Posted on 05 March 2014 by VRS |  Email |Print

I’ve already explained why meaningful trade and financial sanctions against Russia are a non starter – everyone would lose from such action. Europe would be pushed back into recession, Russia into financial meltdown.
This is not the sort of self harm Europe is prepared to contemplate right now. Indeed, thanks to the indiscretion of a UK official, who was snapped going into Downing Street with his briefing documents on display for all the world to see, we know this to be the case. Trade and financial sanctions have already been ruled out………………………………………..Full Article: Source

Posted on 05 March 2014 by VRS |  Email |Print

Japan is preparing to define bitcoin as a commodity and establish rules for trading and taxing the virtual currency “in the days ahead,” according to the Nikkei Asian Review . The reported move comes after the collapse of bitcoin exchange Mt. Gox, which was located in Tokyo.
Banks and securities firms won’t be allowed to handle or broker bitcoin trades, according to the report. Bitcoin trading gains and bitcoin purchases will be taxed………………………………………..Full Article: Source

Posted on 05 March 2014 by VRS |  Email |Print

The European Emission Trading System is set to change radically on March 12, after EU ministers approved last week a regulation to delay 900 million carbon permits from 2014-16 to 2019-20.
The measure known as ‘backloading’ will tighten the market balance significantly, after a period of abundant supply of emission allowances (EUAs) and dwindling carbon prices. EUAs have already gained 40 per cent to €7/t since the start of the year, in anticipation of the auction curbs. Prices are likely to rise further once backloading begins, as it will more than halve the supply of new carbon permits………………………………………..Full Article: Source

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