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We have summarised the daily market commentary from the Breakaway Mining Research Daily Reports from the 6th to the 10th March 2017.
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Friday, 10th March 2017
Markets: DJIA moved sideways. Better than forecast US ADP payroll numbers increase the chances for a rate hike next week leading the US$ and bond yeilds higher.
Australia resource indices lower yesterday
Commodities: Softened across the board. Gold is down for a fourth day now ahead of non-farm payrolls (NFPs) on Friday and the FOMC monetary policy announcment on Wednesday next week.
Iron ore futures hit one-month low amid declines in steel prices and a weaker demain outlook in China.
Thursday, 9th March 2017
Markets: Lacklustre overnight markets. Bloomberg has noted that market volatility is unnervingly low despite stretched valuations. It notes that even the Fed has noticed the lack of turbulence. In the minutes from the central bank’s last meeting, a few officials “expressed concern that the low level of implied volatility in equity markets appeared inconsistent with the considerable uncertainty attending the outlook” for Trump to deliver on pro-growth agenda.
Commodities: Weaker commodities, particularly nickel. Uranium and coal represented a bright spot.
The World Gold Council has published a report stating that Indian demand will recover from 2016’s lows. It instigated a barrage of policy initiatives aimed at purging India of black money and instilling greater transparency rocked India’s economy last year, including its gold market. The most dramatic was the radical decision to demonetise over 15 trillion rupees, around US$220bn
Other policies – such as the re-introduction of excise duty – affected the gold market, too. And the forthcoming Goods & Service Tax (GST) will change the shape of the industry. It believes that India’s gold market faces some short-term headwinds. However looking ahead, these policies may deliver a stronger economy and a more transparent gold industry, underpinning gold demand, which it expects to be between 650-750t in 2017.
Wednesday, 8th March 2017
Markets: The DJIA fell after US president Donald Trump’s says he will bring down drug prices and backed a bill to replace the Obamacare healthcare law. Pharmaceutical stocks came under pressure.
Commodities: LME metals fell across the board. Nickel led the way, down 4.1%, while LME copper stocks rose once more. Elsewhere, Malaysia’s environment minister has stated plans to recommend a further three-month extension to the moratorium on bauxite mining, a situation which has been in place since early-2016. The almost tripling of Chinese imports from the Atlantic Basin, mostly Guinea, has helped offset this loss of supply.
Tuesday, 7th March 2017
Markets: Markets flat. Rate hike probability implied by the market has gone up to 96% and is considered a “done deal” at the moment with the FOMC meeting scheduled for Tue-Wed next week. On Friday Janet Yellen highlighted that an increase in rates was likely to be “appropriate” at the Mar meeting should employment and inflation come in line with the Board projections
Commodities: Base metal prices sold off as China guides for a continuing slowdown in economic growth rates.
Also China is likely to cut steel capacity by 50mt and to cut coal capacity by >150mt according to its top economic planner. In a statement, China has reasserted pledges to make deep cuts in steel and coal capacity indicating a new drive by the authorities to tackle pollution and improve urban air quality. “We will make our skies blue again.”
The government has pledged to continue to weed out low-grade steel that uses recycled material, which it reckons is a major source of smog. Bad news for scrap metal dealers! The cut in coal capacity is significant as China is likely to import more, better quality, thermal and coking coal to supplement some of the cuts.
Monday, 6th March 2017
Daily Markets: US stocks were relatively flat as comments from Janet Yellen and other key Federal Reserve officials confirmed growing expectations of a March interest-rate increase.
MarketWatch reports an analyst for TopTradr, states that “U.S. equity markets have been detached from reality…the valuations on stocks are just completely out of kilter with anything we’ve seen before. Forward price-to-earnings ratio on the S&P 500 is at 17.9, the highest level since 2004.” .
Commodities: Commodities were softer on the back of a stronger US dollar. Macquarie reports that In terms of thermal coal, power demand growth to remain strong in H1 17 due to the residual effect of strong property investment last year.
Recent data points (freight rate, vessels in queue, daily coal use) also suggest strong coal demand from IPPs, while on the supply side safety inspections are ongoing. This should help support the coal price in March, usually a weak demand season.