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LME WEEK - Mercuria says copper shortages could push prices up to record levels
The head of metals research at Mercuria said that the trading house expects a 700,000-metric-ton copper concentrate deficit and a 300,000-metric ton deficit for refined metal this year, which could drive prices up to new records. Nicholas Snowdon, the high-profile bull of Mercuria in Geneva, expects copper prices to reach record levels sooner rather than later. Snowdon said at the LME Asia Week Conference in Hong Kong that the copper market is in a vulnerable state. It's not a matter of if but when this market will move into a scarcity state. This could happen as early as the second half this year. Snowdon cited supply disruptions and stagnant production at a period of resilient Chinese demand, even though vast volumes of copper were diverted to the United States to prepare for potential import tariffs. This week, analysts told that they expected large shipments to arrive. Copper to the U.S. The COMEX, based in the United States, is a market that makes it profitable for both traders and producers to make profits as long as tariffs are still a threat. On March 26, COMEX copper reached a new record of $11,633 per metric ton. Snowdon stated that 500,000 metric tonnes of copper will be shipped to the U.S. in the second quarter this year. UBS analyst Sharon Ding said at an event on February that she expected 450,000 to 500,000 tonnes of copper to ship to the U.S. during the period March-May, which is about 250,000 to 300,000 tons more than what would be normal. Last week, copper inventories In China, the number of withdrawals soared sharply. This ended a three-week streak of large withdrawals which had caused concerns about shortages due to the global supply being pulled towards the U.S.
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Iron ore prices rise on a weak US dollar and resilient Chinese demand
On Wednesday, iron ore futures rose on the back of a weaker dollar and a resilient demand for this steelmaking ingredient. However, weakness in China's property sector tempered the gains. As of 0248 GMT, the most traded September iron ore contract at China's Dalian Commodity Exchange was trading 0.55% higher. It was 727 yuan (US$100.86) per metric ton. The benchmark June Iron Ore at the Singapore Exchange rose 0.35% to $99.75 per ton. Hexun Futures, a broker, said that the demand for iron ore exceeded expectations. This is due to the fact that steel mills are still operating at high levels. Mysteel, a consultancy, says that the number of blast-furnace mills reporting profits is increasing, with 60% of these mills reporting profits in the last week. The U.S. Dollar, which had fallen 1.3% in two days, was also supportive of prices. The greenback price of commodities is cheaper for those who hold currencies other than the U.S. Dollar. As authorities eased monetary policy, China cut its benchmark lending rate for the first since October. Major state banks also lowered their deposit rates, which boosted sentiment and caused Chinese stocks to rise on Tuesday. Analysts at ANZ said that iron ore futures were pressured by signs of continued weakness in China's real estate sector. Market sentiment was impacted by China's slower factory output, retail sales that missed expectations and new home prices remaining stagnant. Mysteel reported that the volume of iron ore shipped from mines in Australia and Brazil increased by 11.7% on a weekly basis to 27.1 millions tons. Coking coal and coke, the other steelmaking ingredients traded in a sideways manner. The benchmarks for steel on the Shanghai Futures Exchange have gained some ground. The Shanghai Futures Exchange saw a rise in steel benchmarks. $1 = 7.2080 Chinese Yuan (Reporting and editing by Michele Pek)
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Gold reaches a new high in a week on the back of a weaker dollar and US fiscal concerns
The gold price rose to its highest level in a week on Wednesday as the dollar fell and investors sought security amid U.S. financial uncertainty. Congress was debating an sweeping tax reform. As of 0209 GMT spot gold rose 0.2% to $3,293.98 per ounce after reaching its highest level since the May 12 session earlier in that session. U.S. Gold Futures rose 0.3% to $3295.80. Gold priced in greenbacks is now cheaper for holders of foreign currencies. The general dollar index has lost over a point in the past 24 hours due to the Moody's downgrade and skepticism regarding Trump's tax bill. Trump urged his Republican colleagues in the U.S. Congress on Tuesday to unite around a sweeping bill to cut taxes, but failed to convince a few holdouts that could still block a comprehensive package that includes much of his domestic agenda. In a low rate environment, gold, which is traditionally viewed as a safe haven during times of political and economic unrest, thrives. Tim Waterer, Chief Market Analyst at KCM Trade, said that "over the medium to long-term, gold's price is likely to rise further. However, if there are any headlines about positive trade deals, this could make it difficult for gold to try to regain the $3,500 mark." St. Louis Fed president Alberto Musalem said to the Economic Club of Minnesota, that trade tensions could allow the labor markets to remain strong and inflation on track to reach the Fed's goal of 2%. The traders now bet on the Fed cutting rates again in October, and that there will be around 54 basis point cuts by 2025. Spot silver dropped 0.2% to $32.99 per ounce. Platinum was down 0.3%, at $1,050.25. Palladium rose 0.5% to reach $1,017.93 - its highest price since February 4.
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London copper prices rise on Dollar weakness and China rate cuts
The copper price in London was slightly higher on Tuesday, following some weakness in U.S. dollars and the stimulus efforts of top consumer China. However, gains were modest due to persistent uncertainty about economic growth caused by high tariffs. As of 0208 GMT, the benchmark copper price on London Metal Exchange was up 0.6% to $9,572.5 per metric tonne. The U.S. Dollar edged lower Wednesday, continuing a two-day decline against major counterparts, making commodities priced in greenbacks less expensive for buyers with other currencies. China lowered its benchmark lending rate for the first since October. Major state banks also lowered their deposit rates. Authorities are easing monetary policy in an effort to cushion the economy against the effects of the Sino-U.S. Trade War. Last week the U.S. agreed to lower tit-fortat tariffs with China and implement a 90 day pause in actions. However, there is still uncertainty about what will happen after this temporary truce. The fear that these tariffs could contribute to a possible U.S. economic recession may limit the gains in copper price at higher levels, said Sugandha Sachdeva. He is founder of SS WealthStreet a New Delhi based research company. Copper prices have found strong support in the technical sense at $9,500 a tonne. In the short term, they are expected to reach $9,950 a tonne if there are no macroeconomic shocks. Other London metals saw an increase of 0.6% in aluminium to $2486.5 per ton. Zinc rose 0.4% at $2721, while lead rose 0.4% at $1989, and nickel grew 0.08% at $15,530. Tin fell 0.04% to $30,070. The Shanghai Futures Exchange's (SHFE) most traded copper contract rose by 0.4%, to 78.160 yuan per ton ($10,837.8). SHFE aluminium rose 0.5%, to 20,165 Yuan per ton. Zinc was up by 0.5%, to 22,540 Yuan. Lead was up by 0.6%, to 16,905 Yuan. Nickel firmed up 0.08%, to 123450 Yuan. Tin was up 1.2%, to 267960 Yuan.
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Asian stocks gain as US fiscal health and trade deals are in focus
Investors remained concerned about the fiscal outlook for major developed economies, and the lack progress in new trade agreements. After a CNN report that Israel was planning a strike against Iranian nuclear facilities, the price of crude oil rose by more than $1 per barrel. This raised supply concerns outside of Middle East's key producing region. It also brought geopolitical issues back into focus. The Japanese bond market is also in the spotlight, after the yields of super-long-term bonds surged to new highs amid concerns about the demand for debt from the country following a disappointing 20-year auction. Early trading on Wednesday saw the yields on JGBs of 20 years and 30 years rise by 2 basis points while the 30-year JGB yields fell by 1.5 bps. Hong Kong's Hang Seng Index grew 0.58%, but China's blue chip index was down in the early trading. China warned that it would take legal action against anyone or any organisation who helped or implemented U.S. policies that advised companies to avoid using advanced semiconductors made in China. The MSCI index for Asia-Pacific stocks outside Japan grew by 0.5% while Japan's Nikkei fell 0.18%. Kyle Rodda is a senior financial analyst at Capital.com. He said, "The markets are looking for new catalysts that will increase risk appetite." The U.S.'s reversal on trade policy, and the damage-control that was done to fix the mess they created with the Liberation Day Tariffs, signals a commitment to getting this all done. This is what keeps equity valuations strong." Data released on Wednesday revealed that Japanese exports to the U.S. rose for the seventh consecutive month even though shipments fell. This highlights the potential impact of President Donald Trump's new tariffs on Japan's fragile economic recovery. Wall Street also felt the effects of fiscal woes. The benchmark S&P500 ended a six-day streak of gains on Tuesday. This was limited by an increase in U.S. Treasury rates, which remained steady during Asian hours on Thursday. Congress is expected to vote on a tax bill this week that could add between $3 trillion and $5 trillion to U.S. government's $36.2 trillion debt, just days after Moody's lowered the country's rating. Analysts noted that progress on new deals between the U.S. Officials from the U.S. Federal Reserve said on Tuesday that rising U.S. tariffs were causing higher prices and urged patience before making interest rate decisions. Traders are also concerned that U.S. officials may be attempting to weaken the dollar at Group of Seven Finance Minister meetings, which are currently taking place in Canada. STOXX futures in Europe were stable, while FTSE 100's futures were muted. This was due to the caution that had been set in place ahead of a consumer price inflation report from the United Kingdom, which is expected later today. The economists polled predicted that the consumer price index would rise by 3.3% from 2.2% in March to 3.3% in April. The dollar index (which measures the U.S. money against six other currencies) fell 0.03%, to 99.938, after a two-day drop of 1.3%. The Japanese yen rose to 144.27 dollars, nearing its highest level in the past two weeks. The dollar fell on Wednesday, and investors moved to safer assets. Gold spot was up 0.14% to $3,293 an ounce. This is the highest price in over a week. (Reporting and editing by Johann M Cherian in Singapore, Ankur Banerjee)
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Sources say that RPT-China’s CMOC has called on Congo to lift the cobalt export prohibition.
Three sources said that China's CMOC group, the world's largest cobalt mining firm, called on the Democratic Republic of Congo to lift a current export ban for battery metal due to expire in the next month. Congo, which is the world's largest cobalt producer, implemented the four-month-long ban in February to try to reduce surpluses after cobalt prices reached a nine-year low of around $10 per lb or $22,000 per metric ton. . Sources said that CMOC Vice President Kenny Ives, during a closed session at an industry conference in Singapore, told delegates that Congo should remove the export restrictions on metals, which are an important component in batteries for electric vehicles. Sources who heard Ives speak said that Kizito Pakabomba, the Congo Mines Minister, was present at the session. Congo kept the market guessing about its next move when the ban expires on June 22, according to sources. Sources told the media in February that the government might extend the suspension, and also consider export quotas. Sources who requested anonymity due to the sensitive nature of the issue said that Ives had said China's inventory of pipelines was running low and Congo should allow its miners to export cobalt freely. Ives said that Congo's restrictions of cobalt exports could accelerate automakers' shift to lithium iron phosphate batteries (LFP), which do not require cobalt. BYD and other Chinese electric vehicle manufacturers have already adopted LFP battery technology, which is also used in utility-scale energy storage. Two sources claim that Congolese officials who were present at the event perceived Ives' mention of LFPs as an act of threat. One source said that the remarks reinforced officials' fears that China was trying to lower cobalt prices to build strategic stockpiles. Officials from the Congo, including Pakabomba did not reply to phone calls or emails asking for comments. CMOC's spokesperson Vincent Zhou refused to comment on Ives remarks or questions about Congo's fears of stockpiling but stated that the company is in favor of a "healthy marketplace environment". According to LSEG, Chinese electric vehicle batteries maker CATL has a 30% stake at CMOC. CMOC is expecting to produce between 100,000 and 112,000 metric tons of Cobalt in 2019, which is roughly twice the amount produced in 2023. This will be due to its increased activity at its Tenke Fungurume copper and cobalt mining operations in Congo. GLENCORE BACKS EXPORT CURBS Traders from Glencore, another major cobalt miner said that the market needed a stable price to lift the export ban and producers like Congo and Indonesia had to manage the oversupply. Glencore has declined to comment. Sources said that Glencore traders in Singapore stated the company would accept an quota system if the Congo government chose to implement it. Shirley Wang, General Manager of Shanghai Metals Market said that Chinese smelters had built up stocks to last for between two weeks and 6 months. One source said that Congo is currently evaluating and considering the impact of this ban, and proposals from mining companies, and other players in the market. She added that the negative side of stopped exports would be a loss of revenue for the government. Benchmark Mineral Intelligence stated in a press release that the most likely scenario is either an extension of this ban, followed by an introduction of export quotas or a transition directly to export quotas starting late June. Both scenarios will likely support pricing. Reporting by Felix Njini from Johannesburg and Pratima Dasai from London; editing by Veronica Brown, Joe Bavier and Joe Bavier
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Oil prices rise 1% after reports that Israel is preparing a strike against Iranian nuclear facilities
The price of oil jumped by more than 1% after Israel was reported to be preparing an attack on Iranian nuclear facilities. This sparked fears that the conflict could disrupt supply in this key Middle East region. Brent futures rose 86 cents or 1.32% to $66.24 per barrel at 0003 GMT. U.S. West Texas Intermediate Crude Futures for July rose 90 cents, or 1.45%, to $62.93. CNN reported Tuesday that the United States has received new intelligence suggesting that Israel is planning to attack Iranian nuclear facilities. CNN cited multiple U.S. government officials who are familiar with the issue. CNN, citing officials, added that it was unclear whether Israeli leaders had made a decision. On the news, U.S. crude oil futures rose over $2 per barrel while Brent futures climbed more than $1. Israel's attack on Iran could disrupt oil flows. Iran is the third largest producer in the Organization of Petroleum Exporting Countries. Iran may also retaliate, blocking oil tanker traffic through the Strait of Hormuz, a chokepoint in Gulf through which Saudi Arabia Kuwait Iraq and United Arab Emirates export crude and fuel. Nevertheless, some signs of improvement in crude supply were evident. Market sources cited American Petroleum Institute data on Tuesday to report that U.S. crude stockpiles rose last week, while gasoline and distillate stocks fell. Sources, who spoke on condition of anonymity, said that crude stocks in the U.S. - the world's largest oil consumer - rose by 2.5m barrels during the week ending May 16. Investors will also be watching the Energy Information Administration's report on U.S. government oil stocks later this Wednesday. A source in the industry said that Kazakhstan's oil output has risen by 2% since May. This is a significant increase, which defies the pressure of OPEC+ to reduce Kazakhstan's production. (Reporting and editing by Christian Schmollinger in Houston, Georgina McCartney from Houston)
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South Korea pledges support to biopharmaceutical and auto sectors in the face of US tariffs
The South Korean government announced on Wednesday that it would increase support for export industries including biopharmaceutical, auto, and the biopharmaceutical sectors. These sectors are expected to suffer from U.S. President Donald Trump’s tariffs. In a press release, the government said that it would prepare new measures for its biopharmaceutical firms as soon as Trump's tariffs in this sector are known. Trump signed an Executive Order earlier this month to reduce the time required for approval of pharmaceutical plants within the United States. This move is part new regulations designed to encourage domestic production, following Trump's probes of pharmaceutical imports to put tariffs on that sector. In 2024, South Korea's pharmaceutical exports will amount to $9.59 billion. This represents just 1.4% its total exports. Yet, the United States was the largest market for the country's exports, accounting for 16%. The government also said that it would prepare additional support measures if needed to complement the earlier packages announced by last month in order to help other industries, such as automakers or chipmakers and steel producers, cope with tariffs. Seoul, after a second round at ministerial level last week, is now holding technical discussions on a working-level with Washington. It seeks to exempt all tariffs through a comprehensive trade package that will be crafted by early July. South Korea's exports surprised many last month. They were buoyed by a strong demand for semiconductors in spite of the U.S. trade tariffs. However, there are signs global trade tensions may be affecting its important auto sector. (Reporting and editing by Ed Davies.)
Hedge funds and ETFs sell over $40 billion worth of stocks in response to Trump tariff shock
Hedge funds and leveraged exchange traded funds (ETFs), which are increasingly bearish following President Trump's election, dumped over $40 billion in stocks at an accelerated pace.
Donald Trump
shock announcement of harsher-than-expected global tariffs, according to bank notes to clients on Friday.
S&P 500 companies are reporting a rise in profits since late Wednesday night, when Trump raised tariff barriers to the highest level seen in over a century.
Stock market values dropped by over $4 trillion
JPMorgan stated in a report that portfolios targeting volatility had between $25 billion to $30 billion of equities they would be selling in the next few days as they unwind their positions to reduce risks.
JPMorgan reported that Levered ETFs needed to sell an additional $23billion to rebalance their portfolios before today's close. This was mainly tech stocks.
The bank said that macro systematic strategies sold stocks on Thursday at levels higher than expected, and a resurgence of the meltdown on Friday will force them to sell even more.
The sell-off was also driven by other strategies. Goldman Sachs said in a separate note that hedge funds who are long or short equities around the world experienced the biggest selling on a global basis on Thursday. They also became the most bearish ever since 2011.
Goldman Sachs, JPMorgan and other firms that provide trading and leverage to hedge funds track industry trends by using their clients. JPMorgan said that it also uses some estimates.
Goldman has not provided the dollar amount of net sales and has not responded to an immediate request for comments.
In a note, the bank stated that portfolio managers added bets primarily against stocks and credit exchange-traded fund on Thursday. They also ditched their long positions after Trump announced new import tariffs which sparked concerns about a recession.
The U.S. led hedge fund sales with the financial shares net-sold in the fastest rate since 2016.
The bank said that the only sectors where investors purchased on a net-basis were real estate, staples, and utilities. These are the three industries which have a tendency to do well in recessionary conditions.
Long/short hedge fund portfolios with more bearish positions outperformed the benchmark S&P 500 Index, which has lost 13.7% year-to date through Friday morning.
Goldman said that leverage levels within the hedge fund sector remain near a year-high. (Reporting and editing by Megan Davies and Franklin Paul in New York. Editing by Richard Chang, Diane Craft, and Diane Craft.)
(source: Reuters)