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Commodities Briefing 13.Jan 2016

Posted on 13 January 2016 by VRS |  Email |Print

A gauge of returns on raw materials tumbled to the lowest since at least 1991, extending the agony that producers of energy, industrial metals and agricultural commodities faced in 2015. The Bloomberg Commodity Index, a measure of returns from 22 raw materials, fell as much as 1.5 percent to 74.02 on Tuesday.
A roundup of the bearish numbers: Crude oil in New York dipped below $30 a barrel, copper fell to less than $2 a pound and natural gas as low as $2.24 per million British thermal units. The expansion of the global economy has faltered, supplies of everything from oil to copper to grains are ample and a stronger dollar has eroded the appeal of raw materials as alternative investments………………………………………..Full Article: Source

Posted on 13 January 2016 by VRS |  Email |Print

The Chinese stock market had an absolutely disastrous start to the year. On the first trading day of 2016, stocks fell by nearly 7%. The selling pressure triggered a circuit-breaker, which halted trading of Chinese shares for the day.
Not surprisingly, the artificial measure did little to contain the market slide. So, the Chinese government intervened drastically on the second trading day. In the early trading hours, they pumped stock prices nearly 5% higher. Unfortunately for them, global equities barely held up by the end of the trading session. The nightmare for regulators and punters didn’t stop there………………………………………..Full Article: Source

Posted on 13 January 2016 by VRS |  Email |Print

The mining sector has been decimated over the past few years with the Bloomberg article below putting the stock losses at $1.4 trillion since 2011. Many investors would see this as a opportunity and the article looks at potential M&A activity for a revival within the sector.
The current scenario sees two classic investment quotes go head to head. On the one hand, as Baron Rothschild was quoted in the 18th century: “Buy when there’s blood in the streets, even if the blood is your own.” And while iconic current day guru Warren Buffett agrees with the concept he doesn’t believe in the commodity space………………………………………..Full Article: Source

Posted on 13 January 2016 by VRS |  Email |Print

Research Team at ANZ, suggests that the aggressive broad-based declines since mid-2014 means commodity prices are now at levels that are loss-making, or at best only marginally profitable, for many globally traded hard and soft commodities.
“This means many producers are scratching their heads and saying surely things can’t get too much worse. However, you don’t have to look too far back in the history archives to see international prices could well move lower yet in 2016. Indeed even at the low point mid last year for our ANZ commodity price index it was still a third higher than the depths of the GFC………………………………………..Full Article: Source

Posted on 13 January 2016 by VRS |  Email |Print

Low commodities prices are hurting the very companies that you’d think would benefit from them. The rise in volatility that has accompanied lower prices of materials from oil to copper to corn is making it harder for management of companies across Standard & Poor’s 500 Index sectors to forecast future cash flows, according to Citigroup Inc.
That uncertainty can lead even companies that aren’t commodity producers to decrease investing and expansion, which subsequently crimps sales growth, Citigroup’s Financial Strategy and Solutions Group wrote in a note distributed to clients Tuesday………………………………………..Full Article: Source

Posted on 13 January 2016 by VRS |  Email |Print

Oil prices have become detached from the fundamentals of supply and demand, making a plunge to $US10 a barrel possible, according to Standard Chartered. In afternoon trade in New York on Tuesday, US oil futures plunged as much as 4.7 per cent, falling below $US30 ($42.90) a barrel for the first time since December 2003.
West Texas Intermediate for February delivery fell 97 US cents, or 3.1 per cent, to close at $US30.44 a barrel on the New York Mercantile Exchange. It was the lowest settlement since December 1, 2003. The contract touched $US29.93, the lowest intraday price since December 2, 2003. Total volume traded was 43 per cent above the 100-day average at 2.59pm………………………………………..Full Article: Source

Posted on 13 January 2016 by VRS |  Email |Print

Oil prices have fallen sharply again – and the latest range of investment bank forecasts has them dropping as low as $10 a barrel before finally bouncing back. Turmoil on the Chinese markets, a strong dollar and more evidence of global supply remaining high despite an already heavily overstocked market prompted oil to fall sharply yesterday to a 12-year low.
International benchmark Brent crude touched a low of $30.43 a barrel before steadying - and it had pared losses to a little below $30.90 this morning in London. At its nadir, overnight oil fell close to 8 per cent from where it had been in London earlier in the day………………………………………..Full Article: Source

Posted on 13 January 2016 by VRS |  Email |Print

The collapse in commodity prices pushed oil futures even lower on Monday and analysts predicted that the slide was far from over, Jad Mouawad reports in The New York Times. Oil prices were at a 12-year low on Tuesday, with West Texas Intermediate near $30 a barrel after a decline of more than 5 percent overnight.
Brent crude was just under $31 a barrel by the Asian afternoon, as The Wall Street Journal reports. The drop in commodities prices is being felt throughout the energy sector and beyond. Saudi Arabia said it was considering selling shares in its state-run oil company………………………………………..Full Article: Source

Posted on 13 January 2016 by VRS |  Email |Print

Oil’s dire performance since the start of the new year continued on Tuesday as prices of benchmark Brent crude and US marker West Texas Intermediate flirted with $30 a barrel. Concerns about China’s economy, whose growth led a surge in global oil demand over the past decade, together with still robust US production and a jump in output from Opec producers has taken prices to levels last seen more than a decade ago.
But where do prices go from here? The Bear Case — Ed Morse, global head of commodities research at Citigroup: “It would take an unusual series of supply disruptions to change this course of price behaviour. In the short-run the market outlook for oil is fairly bleak………………………………………..Full Article: Source

Posted on 13 January 2016 by VRS |  Email |Print

Some OPEC nations are pushing for an emergency meeting as the oil-producing group grapples with crude prices that are drawing closer to $30 a barrel, though it is unclear whether all 13 members will agree to a gathering.
The Organization of the Petroleum Exporting Countries “may hold an emergency meeting in the first quarter if prices remain at current levels,” Nigerian oil minister Emmanuel Ibe Kachikwu said Tuesday at an Abu Dhabi energy conference, according to a recording of his comments………………………………………..Full Article: Source

Posted on 13 January 2016 by VRS |  Email |Print

The Organization of the Petroleum Exporting Countries’ (OPEC) strategy on maintaining high oil output is working, as non-OPEC countries have lowered their production, UAE Energy Minister Suhail Mazrouei said Tuesday. Earlier in the day, Brent crude reached a 12-year low, majorly due to prolonged global oversupply and the OPEC unwillingness to cut production out of fear of losing market share.
“My assessment of that strategy is that it is working,” Mazrouei said at an energy forum in Abu Dhabi, as quoted by UAE-based newspaper The National. “We have seen a major reduction in the yearly production of non-Opec – it is a fundamental change.”……………………………………….Full Article: Source

Posted on 13 January 2016 by VRS |  Email |Print

The chaos of the first trading week of 2016 was unprecedented in modern history. There hasn’t been an opening week like that since 1928. Panic is starting to creep in as all U.S. indexes hurtle towards a “classic” 10% correction.
Millions of investors are looking for the exits and a reliable safe haven. And with Middle East tensions flaring and perpetual uncertainty over Chinese markets, millions more are sure to follow. But… all that bad news on the markets is terrific news for gold – and everyone holding it. As those reactions intensify, I think we’ll see gold hit these levels in 2016………………………………………….Full Article: Source

Posted on 13 January 2016 by VRS |  Email |Print

The premium of gold to platinum has moved to its largest level on record, at over $250/oz, as the metal fails to keep up with large gains made by gold this year. Whereas gold has added over $50/oz in 2016 to date on safe haven buying at over $1,100/oz this week, soft China data, persistent yuan depreciation and weak stock markets have all helped platinum lose around the same amount this year, to $845/oz as of 1100 GMT Tuesday.
2016 has been even worse for palladium, down around 15% year to date, trading around $450/oz Tuesday morning, its lowest level in over five years, as concerns over China continue to dominate prices for industrial and precious group metals. Palladium’s discount to gold is the largest since 2013, at $650/oz………………………………………..Full Article: Source

Posted on 13 January 2016 by VRS |  Email |Print

Gold saw some relief last week on safe-haven demand, hitting a two-month high, while the other precious metals suffered; however, Mitsubishi says the outlook doesn’t look too positive for the precious metals.
“An unusual divergence between gold and the PGMs took place last week as bullion was buoyed by risk-averse mentality as global equities, led by China, plunged lower and geopolitical concerns…came to the fore. Platinum and palladium reverted to their pro-cyclical industrial roles while gold and silver both benefitted from safe-haven buying,” said Jonathan Butler, precious-metals strategist for the company, in a research note Monday afternoon………………………………………..Full Article: Source

Posted on 13 January 2016 by VRS |  Email |Print

Palladium slumped to a five-year low as Chinese car sales increased at the slowest pace in three years, adding to concerns about weaker demand in one of the world’s biggest buyers of the metal. Gold also fell.
With a faltering economy and turmoil in the stock market hurting consumer confidence, China’s vehicle sales rose 4.7 percent last year, the smallest gain since 2012, China Association of Automobile Manufacturers data show. Palladium futures fell as much as 4.8 percent, while platinum, which is also mainly used in catalytic converters that cut harmful emissions, traded near a seven-year low………………………………………..Full Article: Source

Posted on 13 January 2016 by VRS |  Email |Print

The mining sector’s mantra has been “when in doubt, cut.” Indeed, chopping investment plans has helped bolster miners, even as commodities prices have tumbled. Some, however, are running out of road.
Look at investment plans relative to companies’ so-called sustaining capital expenditure. The latter, also called “stay-in-business” spending, is a bare-bones figure, the essential maintenance and development needed to maintain mines………………………………………..Full Article: Source

Posted on 13 January 2016 by VRS |  Email |Print

ETF industry in Europe experienced its best ever year yet in 2015, giving weight to industry predictions that foresee assets under management hitting the €1 trillion mark by 2020. The European ETF industry experienced its best ever year yet in 2015, with net inflows at a record high €70.8 billion, greatly surpassing the previous high of €51 billion recorded in 2008.
The combination of record high net inflows plus overall capital appreciation across most asset classes of €19.6 billion has pushed assets under management (AUM) in exchange traded products up by 24% year-on-year to €467.4 billion from €377 billion at the end of 2014……………………………………….Full Article: Source

Posted on 13 January 2016 by VRS |  Email |Print

Investors embarked on the biggest three-day buying spree in gold-backed exchange traded funds for a year as bullion rallied at the start of 2016 amid a stock-market slump. Holdings in ETFs climbed 19.6 metric tons in the three days through Monday to 1,477.7 tons, according to data compiled by Bloomberg, the largest increase since January 2015.
Assets rebounded from the lowest in almost seven years on Jan. 6. Investors had been selling gold on expectations that U.S. borrowing costs would rise, hurting the metal as it doesn’t pay interest………………………………………..Full Article: Source

Posted on 13 January 2016 by VRS |  Email |Print

Hedge funds in 2015 posted their lowest annual return for four years amid heightened volatility and a weak market, industry data tracker Eurekahedge said on Tuesday. The Eurekahedge Hedge Fund Index fell 0.58 percent in December while the MSCI World Index declined 2.23 percent, Eurekahedge said, giving hedge funds an average annual performance of 1.56 percent.
“Returns across hedge fund strategic mandates were disappointing during December with most finishing the month in negative territory,” Eurekahedge said. “In particular, long positions into European equities suffered losses as ECB’s early December meeting proved to be a disappointment for investors leading to a slump in European equities,” it said………………………………………..Full Article: Source

Posted on 13 January 2016 by VRS |  Email |Print

Bets against commodity-linked emerging currencies are on the rise again as crude prices fall to around $30 a barrel, but volatility remains well below the peaks of last year. Brent crude’s renewed tumble this year has put commodity exporters’ currencies on course to extend last year’s losses and some, such as the South African rand and the Mexican peso, have hit record lows.
The Russian rouble is inching lower too, 4 percent off record lows struck toward the end of 2014, and these spot market losses are filtering into options markets where investors can try to hedge against further weakness………………………………………..Full Article: Source

Posted on 13 January 2016 by VRS |  Email |Print

An unprecedented surge in the cost of borrowing in yuan in Hong Kong adds to questions about the outlook for the city’s role as the biggest offshore hub for the Chinese currency. The overnight yuan Hong Kong Interbank Offered Rate climbed 53 percentage points to 66.82 percent on Tuesday — a side-effect of a campaign by the People’s Bank of China to curb arbitrage between the offshore and onshore rates for the currency.
“A 66 percent rate is murderous for others being swept up in this who are not speculating,”said Michael Every, head of financial markets research at Rabobank Group. Central banks “usually win a round like this, but lose in the end,” he added………………………………………..Full Article: Source

Posted on 13 January 2016 by VRS |  Email |Print

Analysts have cut their forecasts for European carbon prices on expectations that cheap gas will encourage more switching from coal, a Reuters quarterly poll showed on Tuesday. Front-year EU Allowance (EUA) futures are expected to average 9.02 euros ($9.79) this year, rising to 10.55 euros in 2018, according to the mean forecast of nine analysts.
The forecasts were down 7.4 percent and 14.3 percent from forecasts of 9.74 euros and 12.31 euros respectively in the last poll published in October. The EU Emissions Trading System (ETS) regulates around half of Europe’s output of heat-trapping gases by forcing more than 11,000 power plants, factories and airlines to surrender a carbon allowance for every tonne they emit………………………………………..Full Article: Source

Posted on 13 January 2016 by VRS |  Email |Print

Emissions charges and carbon pricing should be “front and centre” in addressing climate change, the International Monetary Fund has said. In a paper titled After Paris: Fiscal, Macroeconomic and Financial Implications of Climate Change, IMF staff highlight that fiscal policies will be crucial to implementing the historic agreement between 195 world leaders signed at COP21 in Paris last December.
“Most immediate, and key, is the need to recognise and exploit the potential role of fiscal policies in implementing the mitigation pledges submitted by 186 countries in the context of the Paris agreement,” it said………………………………………..Full Article: Source

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