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Friday, 24th February 2017
Markets: TDJIA continues to rise, resource sector falls. DJIA caution emerging as the AFR reports that fund manager were cautious of US equities, investing selectively in favoured sectors while remaining aware of the high price-to-book ratios of US stocks, particularly in domestic-focussed stocks. Price-to-book ratios in the United States have grown far more quickly in the United States than in Western Europe. And on a cyclically adjusted price-earnings basis, US stocks are trading at 25 times their value when the 25-year mean is 19 times. Western European stocks are trading at a discount to long-term averages. It is viewed that "Trump has come along and given the market a boost, but the issue we have is he's given a boost to an already expensive market."
Commodities: Fell across the board apart from gold. Appears related to the threat of faster than expected rising US interest rates.
Vale – Reports Quarterly Result In Line With Expectations: The company reported an EBITDA of US$4.1bn in its iron ore business, +33% versus the previous quarter and +300% YonY, as prices increased by 22% over the previous quarter. In 4Q, both the pellet premium and the high quality premium for fines remained high, allowing Vale to a realized price 12% above the spot market. Higher quality is essentially offsetting the longer distance (freight cost), improving Vale's competitiveness. Cash cost at US$14.4/t was $1.4/t higher QoQ but with $0.9/t explained by non-recurring events (inventory adjustment, collective bargaining agreement and provisions).
Thursday, 23rd February 2017
Markets:The Dow Jones achieved its ninth successive record closing high, despite fresh fears of a sooner-than-expected rate rise from the Federal Reserve. Australian resources indices were mixed.
Commodities:The iron ore spot price jumped 2.7% overnight and is now trading at $US95.50 a tonne. This contracts with the Federal Government which had forecast iron ore prices to average $US55 a tonne in 2016-2017. Gold has been relatively steady with investors seen raising gold ETF holdings.
Wednesday, 22nd February 2017
Markets: U.S. stocks rose on Tuesday, with major indexes adding to their string of records even as concerns remained about the market’s valuation. The market has been in a pronounced uptrend since the election of Donald Trump in November. Investors are hoping that the policies he is expected to pursue, including tax cuts and deregulation, will accelerate economic expansion and lift corporate profits. Trump’s recent suggestions that policies would be unveiled soon have spurred recent buying, although few details have been forthcoming. European stocks finish at their highest in more than a year, finding support from upbeat eurozone data.
Commodities: BCommodity prices were generally lower. Gold prices on Tuesday settled near break-even levels, confounding some market players as the commodity pared an earlier loss in the session, even as U.S. equities rose and the dollar strengthened. Gold futures for April delivery ended down 20 cents, or less than 0.1%, at $1,238.90 an ounce. Some market participants attributed the stronger finish for gold, which traded as low as $1,226.80 during the session, to heighten concerns about the outcome of European elections showing the rise of anti-establishment candidates like France's far-right Marine Le Pen. Gold may have been drawing some haven bids as a result of worries about geopolitics that could prove disruptive to the eurozone and the euro. Meanwhile, the dollar, as measured by the ICE U.S. Dollar Index gained 0.5% at 101.4000. A stronger dollar ordinarily is a headwind for gold and other assets priced in the currency, which can become less attractive to buyers using other monetary units.
Tuesday, 21st February 2017
Markets: Flat market overnight ranging from the DJIA, FTSE-100 and TSX Global Mining. Australian resources indices down but reflect some softness on Friday.
Commodities: Strong rises in copper, lead and zinc. Elsewhere, the Latest CFTC data highlighted the gold speculative position decreasing by 0.6 Moz to 12.8 Moz. Macquarie notes that there is a puzzle in that it doesn’t correspond to more substantial falls in the gold price. Currently the net long position is no higher than it was at the end of 2016, while the price is $100/oz higher.
Bonds: PM Capital has predicted falls of more than 20 per cent in the face value of 10-year US government bonds on the back of many US companies are doing “a lot better than most people think”.
Its greatest concern is the way fixed income portfolios are invested now, with many being highly sensitive to increases in actual interest rates, and rates are really still not that far from their at all-time lows. It places it in context by noting that “to put it into context, if we consider that a standard US 10-year government bond has an interest rate duration of around nine years, a 1% move in market interest rates effectively creates a 9 per cent move in the capital value of that bond.
“So in a more normalised environment where rates have gone up by say 2-3 per cent, you’re talking about potentially 20-30 per cent type capital losses from an investment like that. That’s a far cry from what many investors would expect from their fixed income portfolios in terms of volatility and potential losses.”
Monday, 20th February 2017
Daily Markets: DJIA and FT-100 were flat. Australian resources were also low and are likely to continue this trend today.
Commodities: Base metals generally sold off on Friday apart from cobalt while tin and the bulks held level pricing and reflected a general increase base metal stockpiles on the Shanghai Future Exchange. For example, copper stock levels in Shanghai rose by 6.5% up 18,071t to 295,730t with a further 36,308t on warrant taking this week’s on warrant level to 135,896t.
Mining In The Philippines: The Philippine Inquirer.net reports that that 11,000 families in the towns of Paracale and Panganiban have lost their primary source of income following the closure of subsistence mining in the region. The government has issued a cease-and-desist order against mining activity in 12 towns of Camarines Norte Province. It is argued by some analysts that one solution to the problem of unregulated and uncontrolled mining may be to allow expert mining companies to take over certain mines and to put proper environmental controls in place, though we suspect the government is keen to simply close these mines altogether.