Wednesday, June 25, 2014

LME Copper to struggle to sustain rallies much above $7,000 a ton in interim

LME Copper to struggle to sustain rallies much above $7,000 a ton in interim
In the interim, BNP Paribas believes that LME copper will struggle to sustain rallies much above $7,000 a ton and that the fundamentals are sufficiently weak to drag it back down to at least the March low and perhaps to $6,000 a ton.

BNP Paribas looks for a small copper-market surplus in 2014-2015 and doubts rallies above $7,000 per metric ton will be sustained. 

The bank says it looks for demand to grow above trend, with refined copper demand projected to increase by 5.5% to 6.0% in 2014 and by 4.0% to 4.5% in 2015. However, copper output is also rising sharply. 

BNP Paribas forecasts that world mine production will rise by about 10% over 2014-15, albeit with the growth skewed heavily towards 2015. 

The bank forecast a further modest global supply surplus of refined copper over 2014-15 of 450,000 metric tons, skewed toward 2015.

While the faltering in early June of copper’s recovery from the March low was largely due to the Qingdao scandal, BNP Paribas thinks there are structural reasons to expect it to remain more under downward than upward pressure. 

This may persist until mid-2015, when the market may start to look to the increasingly positive longer-term story.

Tuesday, June 24, 2014

Guess Who Is Propping Up The US Housing Market

A month ago we showed a chart that, in our humble opinion, summarized all that is wrong with the US housing market. The chart in question showed the April breakdown of existing home sales on a Y/Y basis by pricing bucket.
Guess Who Is Propping Up The US Housing Market

Needless to say, what the chart showed was the symptomatic, and schizophrenic, breakdown of US housing into two camps: the housing market for the 1%, those costing $750K and above, where the bulk of transactions are mostly between non-first time buyers, and typically take place as all cash transactions, and the market for "everyone else" which continues to deteriorate.
Moments ago the NAR released its May data, which on first blush was widely lauded as bullish: the topline print came at a 4.9% increase, rising from 4.65MM to 4.89MM, above the 4.74MM expected. Great news... if only on the surface. So what happens when one drills down into the detail? As usual, we focused on the last slide of the NAR breakdown, located at the very end of the supplementary pdf for good reason, because what it shows is hardly as bullish.
So how does this "housing recovery" in which the NAR has proclaimed the "sales decline is over" look on a granular basis.
The answer is below, and it is even worse than the April data. It also explains why first time buyers have dropped to even further cycle lows of just 27%, down from 29% both a month and year ago.
Guess Who Is Propping Up The US Housing Market
This is bad because while in April there was a modest increase sales in house buckets from $250 all the way up to $1MM +, in May the only bucket that had an increase in sales from a year ago was that exclusively reserve for the ultra-richest, i.e., those who benefit the most from the Fed's non-trickle downing wealth effect policies. In fact, on a price bucket basis, the May data was unformly worse than April!
The logical follow up question: what is the total percentage of sales by given price bucket? The answer, once again, below.
Guess Who Is Propping Up The US Housing Market
Housing recovery? Maybe for the richest, and even they are far less exuberant about purchasing $1MM+ mansions. For everyone else, enjoy "plunging" hedonically-adjusted LCD TV prices. Everything else is, well,noise.


Source: NAR

Copper Market in 83,000 Tonnes Deficit in Mar 2014 - ICSG

Copper Market in 83,000 Tonnes Deficit in Mar 2014 - ICSG
The global world refined copper market showed a 83,000 tonnes deficit in March, compared with a 2,000 tonnes surplus in February, the International Copper Study Group (ICSG) said in its latest monthly bulletin.
For the first 3 months of the year, the market was in a 205,000 tonnes deficit compared with a 206,000 tonnes surplus in the same period a year earlier, the ICSG said.
World refined copper output in March was 1.87 million tonnes , while consumption was 1.95 million tonnes.
Bonded stocks of copper in China showed a 27,000 tonnes deficit in March compared with a 32,000 tonnes surplus in February.

Copper price extends rally after Chinese data, deficit surprise

Copper price extends rally after Chinese data, deficit surprise
In New York trade on Monday September copper jumped to a high of $3.151 a pound after data out of China shows manufacturing activity at a seven-month high.
It's the seventh straight day of gains for the red metal after coming dangerously close to breaching the $3.00 a pound level for the second time this year.
LME copper also showed some strength climbing to $6,900 a tonne after inventories at warehouses managed by the exchange fell to a six-year low.
The latest jump came after the preliminary or "flash" Chinese manufacturing purchasing managers' index (PMI) indicated that the world's second largest economy was stabilizing.
China's HSBC/Markit manufacturing PMI for June rose to 50.8, up from 49.4 in May and much better than expected. A reading above 50 indicates expansionary conditions for industry.
The output and new orders components picked up, even though export orders weakened, suggesting strength in domestic demand.
Better than expected PMI number from the US also boosted sentiment and while the eurozone's measure of manufacturing activity fell back, at 52.8 it is still indicative of growth.
The output and new orders components picked up suggesting strength in domestic demand

The copper price is highly correlated with economic growth thanks to the widespread use of the metal in the construction, transport and power industries.
The global refined copper market swung to a surprise shortage in March and a 205,000 tonnes deficit for the first three months of the year, compared with a 206,000 tonnes surplus in the same period in 2013, preliminary data from the International Copper Study Group showed on Monday.
Defying market expectations, the copper price has dug itself out of a near four-year low struck mid-March.
The metal remains 6.5% down in 2014 as the market adjusts to slower growth in China which consumes more than 40% of the world's copper demand of some 21 million tonnes.
Chinese copper imports tumbled 16% in May compared to the previous month, but year to date China is still importing refined copper at a record setting pace – up a whopping 34% over 2013 to 2.1 million tonnes.
The better than expected import numbers out of China may be a bit misleading however, because much of Chinese copper imports are tied up in finance deals as collateral for trade credit and is not being put to industrial use.

Global primary aluminum output up 200 mt/day in May: IAI

Global primary aluminum output up 200 mt/day in May: IAI
According to figures released by the International Aluminum Institute (IAI), the global primary aluminum output was up by 200 mt per day during the month of May this year.
As per data, the average primary aluminum output excluding China was 67,500 mt per day in May ’14. This is when compared with the revised average primary aluminum output of 67,300 mt per day during April. However, the average output during May ’14 fell significantly from the levels a year ago. The global primary aluminum output had averaged at 68,100 mt per day during May 2013.
The total production during the month of May amounted to 2.093 million mt, almost 3.6% higher when compared with the previous month. The primary aluminum production had totaled 2.020 million mt during the month of April this year. Production during May this year was down when compared with the figures of 2.111 million mt recorded during May last year.
The primary aluminum output during the first five months of the year totaled 10.108 million mt. The average production during the five-month period was 66,900 mt per day. The total output during the corresponding five-month period in 2013 was 10.312 million mt at an average daily rate of 68,300 mt.

Monday, June 23, 2014

Weekly Economic Data for the week 21-Jun-14 to 27-Jun-14

Weekly Economic Data for the week 21-Jun-14 to 27-Jun-14


Avg. change of last 1 year: Average Change in Actual data calculated for last 1 year.
Expected impact on price: This indicator shows the effect of the anticipation of data on the prices of related country’s major indices. We have categorized it as below:
Very Good Good Neutral Bad Very Bad
Actual: Refers to the actual/latest figures after its release.
Data for the week 21-Jun-14 to 27-Jun-14
Date Time (IST) Country Data Exp. Prior Exp. chg today Avg. chg of last 1 year Exp. Impact on Price
23 to 27 -Jun-2014 -- United Kingdom Nationwide House PX MoM 0.5% 0.7% -0.20 Neutral
23-Jun-2014 07-15 AM China HSBC China Manufacturing PMI 49.7 49.4 0.30 0.97 Neutral
23-Jun-2014 11-30 AM Japan BOJ Governor Kuroda Speaks in Tokyo         Neutral
23-Jun-2014 02-00 PM United Kingdom Bank of England Credit Conditions Survey         Neutral
23-Jun-2014 07-30 PM United States Existing Home Sales 4.74M 4.65M 0.09M 0.16 Neutral
 
24-Jun-2014 01-30 PM Germany IFO - Business Climate 110.3 110.4 -0.10 0.00 Neutral
24-Jun-2014 7-30 PM Germany Merkel Meets Designated NATO Head Stoltenberg         Neutral
24-Jun-2014 07-30 PM United States Reuters/Michigan Consumer Sentiment Index 83.5 83 0.50 2.48 Neutral
24-Jun-2014 07-30 PM United States US-New Home Sales 0.44M 0.43M 0.01 0.01 Neutral
 
25-Jun-2014 12-30 PM Germany Merkel Gives Policy Speech to Lawmakers Before EU Summit         Neutral
25-Jun-2014 06-00 PM United States GDP Annualized QoQ -1.8% -1% -0.80% 0.45 Neutral
25-Jun-2014 06-00 PM United States US-Durable Goods Orders -0.2% 0.8% -1.00% 6.72 Neutral
25-Jun-2014 08-00 PM United States EIA Crude Oil Stocks change -- -5.75 5.79 3.45 Neutral
 
26-Jun-2014 08-00 PM United States EIA Natural Gas Storage change -- 113 -113.00 33.60 Neutral
 
27-Jun-2014 02-00 PM United Kingdom GDP QoQ 0.8% 0.8% 0.00% 0.28 Neutral
27-Jun-2014 02-30 PM European Monetary Union EC - Consumer Confidence -- -7.4 7.40 1.04 Neutral
27-Jun-2014 07-25 PM United States Reuters/Michigan Consumer Sentiment Index 82 81.2 0.80 3.26 Neutral

Economic Calendar 

BofA Blasts Sell Bonds, Sell Gold, Buy Dollars

"After several weeks, Gold is setting up for a sell, US Treasuries are set to resume their bear trend, and the USD is set to resume its bull trend. Get ready..." is the ominous warning BofAML's Macneil Curry sets forth in his technical treatise this weekend. Despite the plethora reasons for rates to go lower for longer (and treacherous market conditions expected ahead) and the various fundamental and technical drivers of recent precious metals strength, Curry says it's time.

Via BofAML's Macneil Curry,
Over the course of the past several weeks, some of our core views and themes have fallen into short term corrective mode. Specifically, we are referring to our bearish US Treasury view and our bullish US $ view (most notably against €, CHF and many EMFX, as well as gold and silver). In the week ahead, we look for these trends to re-emerge and do so in a manner that should provide some excellent low risk, high reward trade setups. Beginning with US Treasuries, we likely look to sell 10yr notes into the 2.53%/2.49% zone for the Apr-04 highs at 2.82% and beyond. In FX, we will likely look to re-initiate €/$ shorts into the 1.3676/3735 zone for a resumption of its medium, potentially long term bear trend and in $/ZAR we will likely look to re-buy near the 50d (10.5357) for a resumption of its long term bull trend and new 2014 highs (now 11.3915). Finally, gold is fast approaching the 1334/72 topping zone from which we look for significant weakness to and through 2013 lows at 1180.
Chart of the week: US 10yr Treasury yields to resume higher
BofA Blasts Sell Bonds, Sell Gold, Buy Dollars
In our view, the bear trend is about to resume. Intra-day charts say the 2wk consolidation is in its final stages. We will likely look to sell one last push lower, ideally to 2.53%/2.49%, for a resumption of the larger bull trend to 2.82% & beyond. 
Get ready to sell EURUSD...
BofA Blasts Sell Bonds, Sell Gold, Buy Dollars
The choppy range of the past several weeks has been frustrating, but now evidence says the medium, if not long term bear trend is about to resume. We will likely look to go short on one last squeeze to 1.3676/1.3735 for a resumption of the larger downtrend to 1.3104 and below. NOTE: we may also look to buy $/CHF
...and buy USDZAR
BofA Blasts Sell Bonds, Sell Gold, Buy Dollars
The impulsive advance (seen clearly on intra-day charts) following the test and hold of the 50wk avg/3yr t/line (10.3867/10.3778) says that $/ZAR has resumed its l/term uptrend. We will look to re-enter longs into the 50d (10.5337) for new 2014 highs
Setting up for a sell in gold
BofA Blasts Sell Bonds, Sell Gold, Buy Dollars
In last week’s KrystalBull we wrote that “the medium term trend has turned higher” for gold but that “gold bulls should not get too enthusiastic. AT BEST, we think it can reach the 1334/1374 area (measured move and yearlong contracting range highs) before topping and substantial weakness”. The strength of last week’s move caught us off guard and says that the 1334/1374 topping zone could be reached much more quickly than anticipated. We will look to go short into this zone. As can be seen from the chart below, gold is close to resuming its almost 3yr downtrend after a year of consolidation, with targets seen for a test and break of the 2013 lows at 1180.