Canada
Interest Rates: The C.D. Howe Institute has moved off its neutral stance on Canadian interest rates, issuing a call Thursday for the Bank of Canada to raise its benchmark rate by one-quarter of a percentage point when the central bank makes its next scheduled rate decision next week. The Ottawa-based think tank's Monetary Council, a body of some of the country's top academic and private-sector economists that meets prior to every Bank of Canada rate decision and issues a recommendation, cited “the continued generation of inflationary pressure in a Canadian economy operating above its productive capacity” as its main reason. “Notwithstanding signs that inflation expectations remain contained, as well as the subdued performance of some measures of wage increases, and the possibility that the recent strong appreciation of the Canadian dollar will dampen demand and price pressures, recent higher-than-expected indicators of both real activity and prices inclined most MPC members to advocate a higher policy rate immediately, and to expect continued increases in the policy rate over the next six to 12 months,” the council said in its statement. The recommended rate hike marks the first time since last July that C.D. Howe's Monetary Council has called for the Bank of Canada to raise rates. (Report on Business)
United States
Existing Home Sales: Tanked in March, dropping 11.3 percent - the largest monthly drop since January 1989. The 6.120 million unit annualized pace was the lowest sales level since June 2003. Supply rose to 7.3 months from 6.8 months in February and 6.6 months in January. On a year-on-year basis, existing home sales were down 10.7%. The median national sales price was down 0.8% year on year to $220,900 in April. Inventories of unsold homes rose 10.4% to 4.20 million, a 8.4 month supply, the highest in 15 years. (Marketwatch)
Dow Jones: After declining 84.52 points or 0.62% to 13,441 yesterday and closing lower for four straight sessions, the Dow is precariously positioned and looks to be on the verge of violating the upward trend line. The index has been finding support at its 21 and 50 days moving average ever since it broke above these levels in mid-March after a brief violation in late February. The key levels to watch for are 13,300, 13,100 and 12,700. (RTT News)
(I predict the DOW closes lower today and breaks that downtrend line)
Commodities
Nickel: China’s imports of refined nickel and alloy remained strong at 9,649t in April. Cumulative imports over the first four months of this year were 39,208t, up 22% on the year-earlier periodIt’s worth emphasising that this robust level of import has taken place at a time of rising prices. LME cash averaged $50,267 per tonne in April, up from $46,325 in March. As such the country’s net imports in Jan-Apr were 31,324t, up 22.7% on the same period of 2006. There is also little doubt that the country’s new source of nickel—nickel pig iron made from imports of ore—is also seeing continued robust production growth. Imports of ore and concentrates—the country’s customs department does not provide a breakdown—hit a fresh monthly record of 1,593,772t in April. They totalled 3.849 million tonnes in the Jan-Apr period, compared with just 337,400t in the year-earlier period. (Metals Insider)
Voisey’s Bay: Nickel-concentrate shipments from Canada's Voisey's Bay will resume on Sunday despite an ongoing labor dispute between two contractors and their employees, according to an official with Voisey's Bay Nickel Company on Thursday."Shipments will resume on May 27," said Bob Carter, manager of Public Affairs with Voisey Bay Nickel Co. (Hoovers)
Videos
Video - Hugh Cleland – Portfolio Manager with Northern Rivers Capital Management on BNN’s Market Call (May 24th, 2007). His top picks were: Systems Xcellence, Neptune Tech & BioResources, and Western Goldfields. (BNN)
Video - Peter Hodson of Sprott Asset Management commenting on the markets on May 24th, 2007. (Around 50.30 mark) (BNN)
Jobless Claims: After three weeks of steady improvement, jobless claims popped back up in the May 19 week, rising a roughly as expected 15,000 to 311,000. Despite the rise, the four-week average still showed improvement, down 3,500 to 302,750 and the lowest level in more than a year.
New Home Sales: Jumped 16 percent in April to a much higher-than-expected annual unit rate of 981,000. The year-on-year decline eased back to 10.6 percent, showing improvement from a year-and-a-half stretch of often 20 percent declines and sometimes nearly 30 percent declines. Improvement was centered in the South where sales jumped 28 percent.
In reaction to the report, Jennifer Lee, economist with BMO Capital Markets writes:
Despite being the coldest April in a decade, homebuyers trotted back out, pushing new home sales up 16.2% in the month, the largest monthly gain since 1993. The surge obliterated the last three months of declines, leaving the level of new home sales at 981,000, the highest since the end of last year.
Canada
Quarterly Financial Statistics for Enterprises: Canadian corporations posted a record $63.8 billion in operating profits in the first quarter of 2007, up 2.9% over the previous quarter. This represents the fourth consecutive quarterly increase in profits and the ninth gain in the past 10 quarters. About half of the overall profit gain can be attributed to rising commodity prices, which boosted earnings in the petroleum and coal products and primary metal manufacturing industries. Ted Carmichael, chief economist for J.P. Morgan Securities Canada, said the outlook for the current quarter is equally rosy. He noted that Canadian commodity prices have risen 4.6 per cent so far in the second-quarter, led by a 6.9 per cent jump in the price of energy. “Meanwhile, the Canadian dollar has appreciated 4.4 per cent quarter-over-quarter versus the U.S. dollar so far in the second quarter, which should dampen manufacturing profits but boost service sector profits,” he said. “This combination is likely to see profit growth move higher in the second quarter.” (Report on Business)
Commodities
Video-Peter Mcguire of Commodity Warrants predicting $70 crude by August – September (Bloomberg)
Gold Port Resources Ltd. (TSX-V:GPO) is pleased to announce that Mr. Robert McEwen, Chairman and C.E.O. of US Gold Corporation and founder of Goldcorp (AMEX,TSX:UXG) and Guyana Goldfields Inc. (TSX:GUY) have delivered subscription agreements to subscribe for units of the Company in connection with the Company's private placement of units previously announced on March 6, 2007 and April 30, 2007. Mr. McEwen is subscribing for a total of 2,500,000 units representing 10.33 % of the issued and outstanding shares of the Company at closing. Guyana Goldfields Inc. is subscribing for 2,500,000 units representing 10.33 % of the issued and outstanding shares of the Company at closing. (PR Newswire)
An overview of the GFMS World Silver Survey 2007 (Mineweb)
Nickel: Yesterday the strike at the Voisey’s Bay Nickel mine escalated into a complete walk out bringing all operations to a halt. Local media report that the wild-cat action was triggered by an incident when a replacement worker mistakenly sealed a container with five union members still inside. Although they were freed unharmed by a manager and the replacement worker has been removed from the site, union members are now refusing to return to work until all replacement workers are removed. The following comments, made by Curtis Saunders, VP of the local United Steelworkers Union, give some idea of the tensions: “Everything is completely shut down until they resolve this issue, until they can guarantee the scabs [are] removed from site." (Metals Insider)
The World Bureau of Metal Statistics (WBMS) says it calculates the global nickel remained in deficit in the first quarter of this year to the tune of 42,000t. Mine production in January to March 2007 was, at 391,900t, 16% above the year-earlier period. Refined production, however, is estimated to have risen by a slower 5.7%, largely reflecting output increases in China, South Africa and Canada. World demand was 68,000t higher year-on-year, according to the WBMS. (Metals Insider)
General Market Comment
Video - Patricia Croft (Chief Economist at Phillips, Hager & North Investment Mgmt.) on why the North American markets seem to be topping but valuations seem reasonable (15:30 minute mark) (BNN)
The global economy is doing better than for years as red-hot Chinese growth combines with comebacks by Europe and Japan to offset a U.S. slowdown, the Organization for Economic Co-operation and Development said on Thursday. “The current economic situation is in many ways better than what we have experienced in years,” chief economic Jean-Philippe Cotis said. Unemployment is falling and central banks need to remain on guard as inflation risks mount due to increases in the cost of food, commodities and shipping, the Paris-based OECD said in a twice-yearly report on international economic prospects. Inflation apart, a big danger was that governments would splurge soaring tax revenues for short-term gain rather than use the good times to cut debts and deficits, repeating what Mr. Cotis called the catastrophic errors of the late 1980s and late 90s. It dropped its 2007 growth forecast for the United States to 2.1 per cent from 2.4 per cent previously but predicted a recovery to growth of 2.5 per cent in 2008, after 3.3 per cent in 2006. It raised its Japanese growth forecast for this year to 2.4 from 2.0, followed by growth of 2.0 per cent next year, after 2.2 per cent in 2006. The OECD highlighted Europe's German-led recovery and also a surprise rebound in Italy, raising its forecasts for the 13-nation euro currency area as a whole to 2.7 per cent this year followed by a more moderate 2.3 per cent in 2008. The OECD said it expected the European Central Bank to raise its key interest rate twice more this year, to 4.25 per cent. The OECD saw those rises coming in June and late 2007 followed by a pause in 2008, Mr. Cotis said in the interview with Reuters.Britain should keep rates on hold too and if anything there was a risk it might need to raise them, an OECD official added. (Reuters)
United States
Geopolitical: A large flotilla of U.S. warships sailed through the narrowest point in the Gulf in broad daylight on Wednesday to hold drills off Iran's coast in a major show of force that unnerved oil markets. U.S. Navy officials said Iran was not notified of plans to sail nine ships, including two aircraft carriers, through the Straits of Hormuz and the maneuver raises pressure on the Islamic Republic, coinciding with the findings of the U.N. atomic watchdog that Iran had ignored Security Council demands and expanded uranium enrichment, which could lead to tougher sanctions. (Reuters)
(Now all that needs to happen are some inflammatory words from the Iranian President and this could shoot crude oil prices even higher)
Dollar: The dollar fell after minutes from a Bank of England policy meeting and strong data on euro-zone industrial orders suggested interest rates in Europe could rise more than previously thought. “A combination of more hawkish [Bank of England] minutes, stronger-than-expected euro-zone industrial orders and talk of reserve-related demand helped cap the dollar," Marc Chandler, global head of currency strategy at Brown Brothers Harriman, told clients. “The price action today may be the first preliminary indication that what we have regarded as largely a position-adjusting/technically inspired dollar bounce may be running out of steam," he said in a research note. Also making foreign-exchange waves, Thailand's central bank cut its benchmark rate for a fourth time this year. "Amid an unstable political environment, domestic demand has been sluggish," said Sherman Chan, economist at Moody's Economy.com. "The ongoing rate cuts will hopefully help stimulate consumer expenditure. Moreover, the lower interest rate will help control the appreciation of the baht so as to maintain Thailand's export competitiveness."
(As global currencies continue to move higher [as countries are enforcing tighter monetary policies] the U.S. dollar will continue to weaken. This is not a pretty scenario for the dollar.)
Here's Some Technical Data on the U.S. Dollar Courtesy Daily FX
Commodities
Uranium giant Cameco Corp. is buying a 10-per-cent stake in Western Uranium Corp. (WUC:TSXV) as part of a strategic alliance, the companies announced Wednesday. The buy-in entails a private placement of 5.4 million units at $3.80 each, with each unit containing one share and one-half of a share purchase warrant. (Report on Business)
Nickel: Voisey’s Bay: The strike at CVRD’s-Inco’s Voisey’s Bay Project (by employees of 2 contractor companies - Torngait Services & Ushitau Maintenance) continues with no signs of abating. Attempts by the United Steelworkers union to directly involve CVRD-Inco in the dispute have failed, while the regional authorities have also rejected suggestions they should become involved.
Crude Oil: BP said Tuesday it would shut down one-quarter of its Alaskan oil production, or 100,000 barrels a day, for a "few days" after discovering a water pipeline leak. Analysts said the temporary loss of output at Prudhoe Bay should not have a dramatic impact on world oil markets, but with supplies already tight, any snag in the industry tends to make energy traders jittery. BP's Alaskan oil output is cut 25% by shutdown. (International Herald Tribune)
Some Very Interesting Charts from BESPOKE INVESTMENT GROUP
Here's a very succint summary from David Pescod (Cannaccord Capital) of the report:
1. Remain substantially overweight the base metal stocks. As we have been saying for four years, these are core investments and will continue to outperform almost all other stock market sectors.
2. Retain a strong position in the Alberta oil sands producing companies. They are unique assets, now that Hugo Chavez has, in effect, taken development of the only other major oil sands properties off the table for private sector companies.
3. Remain overweight the gold mining stocks and the gold ETF. When gold breaks through $700 the next time, it will be ready to challenge its all-time high…
4. Reduce exposure to banking and financial stocks.
5. Continue to build exposure to agribusiness…
6. Reduce bond exposure all three ways... (Coxe is a believer that inflation may be about to be going the wrong way, particularly if you own bonds).
Nesbitt Burns Institutional Client Conference Call (May 11th 2007) with Don Coxe This call has mostly to with inflation in food prices.
Commodities
Royal Dutch Shell, the biggest European oil company, may shelve a joint venture plan to create the largest U.S. refinery because of President George W. Bush's efforts to reduce gasoline use, a Shell executive said Monday. "If you're an investor getting ready to put several billion dollars into expanded capacity, would you do that when the president himself says we want less gasoline?" John Hofmeister, Shell's top U.S. executive, said at a conference in Santa Clara, California. (Bloomberg)
(Does anyone but me think this is going to push crude oil prices higher? What if I say that today “The cease-fire that greatly reduced Israel-Palestinian violence in Gaza from November until last week lay shattered as violence escalated to dangerous levels when a rocket fired from Gaza killed an Israeli woman, inviting a harsh Israeli response.” [RTT News] Additionally, with the hurricane season slated to officially kick off on June 1st, my gut tells me oil prices are going higher even if it only for the summer. Earlier this month, Philip Klotzbach, a research associate at Colorado State University, and Joe Bastardi, the chief hurricane forecaster for AccuWeather Inc., said they anticipate a more active storm cycle this year. Mr. Klotzbach and his colleague at Colorado State, William Gray, predict a “very active” season this year with 17 named storms, including nine hurricanes. Mr. Bastardi predicted fewer storms but agreed 2007 would be more active than usual. He expects 13 or 14 named storms, six or seven of which will strike the U.S. coast. Mr. Bastardi said the Texas Gulf coast is twice as likely to be hit as in an average year and Florida appears four times as likely. [Report on Business])
A gallon of regular grade gasoline is being sold at an average price of $3.18, beating the inflation adjusted high of $3.15 per gallon reached in March 1981. Further upside is not ruled out, with the approach of the official commencement of the summer driving season, which coincides with the Memorial Day holiday.
LONDON, May 21 - The world's second largest uranium miner Rio Tinto will spend $40 million this year on expanding existing mines and searching for new deposits, senior executives said on Monday. "We are certainly looking at maximising the amount of output within as short a time as possible," the chief executive of Rio Tinto's energy division, Preston Chiaro, said during a presentation in London. "The uranium market is expected to be tight, at least until 2012," With output from secondary uranium -- from utility stockpiles and scrapped atomic weapons -- falling to 25 percent of total world production by 2020 from 40 percent now, the market had limited supplies, Chiaro said. He also said there was plenty of upside to uranium prices because demand was not very price sensitive, though one risk was the large amount of uranium -- 10,000 tonnes from annual production of 60-70,000 tonnes - held by hedge funds. "I don't think they will sell all that material at once...but if they do it would affect prices," Chiaro said. (Reuters)
United States
Dollar: The Central Bank of Kuwait's decision over the weekend to untie its currency from the U.S. dollar might signal a growing trend among global central banks, especially those with large foreign-exchange reserves, to more actively manage their currencies. Kuwait on Sunday, in a move to combat inflation, abandoned its dinar's peg to the U.S. dollar in favor of a basket of international currencies. The dinar had been pegged against the dollar since 2003. The central bank has not announced the composition of its currency basket. Kuwait also announced it would revalue the dinar by 0.37% against the dollar. "The significant drop in the exchange rate of the American dollar against most other major currencies had a negative impact on the Kuwaiti economy over the past two years," Sheikh Salem Abdel Aziz Al Sabah, governor of the central bank, told the official Kuwait news agency. In the big picture, Moody's Buskas said the move by Kuwait suggested that "currencies pegged to the dollar will increasingly come under pressure as the dollar continues to adjust lower." "Countries in the Middle East and throughout Asia will increasingly be forced to reconsider their pegs to the dollar," she said. "The trend to de-peg from the dollar and move to a basket will most likely affect other Asian countries, newly emboldened by China's recent decision to widen its yuan-dollar trading band to 0.5% from 0.3%." The news from Kuwait "cannot be seen as U.S.-dollar supportive," said Dennis Gartman of the Gartman Letter. "For if Kuwait, who owes the U.S. so much for having liberated it from Iraq's clutches in the war there during Bush senior's tenure in office, abandons the dollar, what then of the other currencies of the world still pegged to the dollar?" (Marketwatch)
Interest Rates: In an exclusive interview on CNBC, Richmond Federal Reserve President Jeffrey Lacker said he'd like to see the inflation rate come down a bit more. Last year, Lacker dissented four times from the majority at the Fed who wanted to keep interest rates unchanged instead of raising them. “I don’t think the moderation we’ve seen is statistically significant,” he said. “The core inflation has been fluctuating between 2% and 2.5% for two years now and before that from 1996 through 2003, core inflation was between 1% and 2%. We need to get back to containing core inflation between 1% and 2%.” (CNBC)
(So countries like Kuwait are decoupling thier currency from the dollar and a U.S. federal Reserve President is predicting rate cuts by the end of the year...hmm...anyone else want to join me in shorting the U.S. dollar??)
(Is the index breaking down?? I guess if the S&P and the Dow yield better gains everyday, the reason to invest in REIT's is nullified huh??)
Commodities
Palladium
A couple of days ago I posted a report on Palladium by Johnson Matthey on the future outlook and supply/demand situation for Platinum and today this: May 21 (Bloomberg) -- From Ford Motor Co. to Fortunoff to Schroders Plc, the demand for palladium is increasing fast enough to outstrip the supply and make it this year's best investment among precious metals. Sales will rise 6.5 percent in 2007, according to precious metals consultant CPM Group, after Ford, General Motors Corp. and other automakers used 32 percent more palladium in car- exhaust systems the past five years. Fortunoff started selling palladium wedding bands in November and says the metal already represents 10 percent of the market. Supplies of palladium are declining because Russia, the producer of about half of the global supply, will slash exports for the second straight year, according to Johnson Matthey Plc, the largest marketer of the metal. Palladium may jump 37 percent to $500 an ounce by yearend, says Gerry Schubert, a director of metals in London at Fortis, Belgium's biggest bank. “We're positive long-term on palladium,'' said Christopher Wyke, commodities product manager in London at Schroders, the money manager with $1 billion invested in commodities including palladium. Speculators have amassed a record bet in New York palladium futures, holding a net 11,873 contracts as of May 8, six times more than at the start of the year, according to the Commodity Futures Trading Commission in Washington. The total slipped to 10,665 as of May 15, the data show. Bruce Kovner's Caxton Associates LLC of New York and Kenneth Griffin's Citadel Investment Group LLC (major hedge funds) in Chicago both are investing through stakes in Stillwater Mining Co., the only U.S. producer of palladium and platinum. (Bloomberg)
Uranium
At the Hard Assets Conference in May 2007 James Dines, editor of the Dines’ Letter told listeners that most people still don’t know that a uranium bull market is going on, so there’s still upside to come. However, even the “original uranium bug” was less confident about the longevity of the “screaming uptrend.” Dines Dines again profiled three previous companies, Bayswater, Laramide Resources, Mega Uranium, but offered another new pick: Titan Uranium (TUE:TSXV). (Resource Investor)
For insights into the uranium sector and uranium stocks you might want to check out this video interview with Dennis Da Silva (Managing Director, Resource Group Middlefield Capital Corp.) on May 17th 2007 (BNN)
Canada
Retail Sales: Surged in March, resulting in a strong first quarter. March's gains were widespread with seven of eight retail sectors posting sales increases. After two months of little change in sales growth, total retail sales rose 1.9% in March to an estimated $34.0 billion. The latest monthly increase helped retail sales in the first quarter of 2007 rise by 2.0%, marking a return to strong quarterly growth after a lackluster fourth quarter of 2006. (Statscan)
The Canadian dollar touched 91.85 cents (U.S.) on Friday after a much stronger-than-expected report on retail sales. Today's 1.1-per-cent gain made it the best performing major currency in the world against the U.S. dollar. The last time the loonie was this strong was Oct. 11, 1977. “There really isn't much reason to be bearish about the Canadian dollar right now,” said David Watt, senior currency strategist at RBC Capital Markets. He sees the loonie strengthening to 92.50 cents in the third quarter of this quarter before retreating later this year. Economists at National Bank Financial, Bank of Montreal and Canadian Imperial Bank of Commerce have all mentioned the parity word in notes over the past week. Last Friday, BMO cited five factors underpinning the loonie's recent gains: a weaker U.S. dollar, rising commodity prices, capital inflows stemming from mergers and acquisitions, changing market sentiment and a shift towards tightening by the hawkish Bank of Canada. (Report on Business)
Commodities
A report by Johnson Matthey on the future outlook and supply/demand situation for Platinum – Must Read for Platinum Group Metals (PGM) investors.
(PDF File)
Stocks
May 17, 2007 Pinetree Capital purchases shares of Centram Exploration (CNA-H:TSXV) [Pinetree buying into Centram gives me an extra dose of confidence in Centram's management]
May 17, 2007 Pinetree Capital purchases shares of Erin Ventures (EV:TSXV)
May 16, 2007 May 17, 2007 Pinetree Capital purchases shares of Calypso Acquisition Corp. (CLP:TSXV)
Industrial Production: Jumped 0.7 percent during April in a report that confirms strength in ISM manufacturing data and points to renewed growth in the manufacturing sector. Capacity utilization rose 4 tenths in the month to a still moderate 81.6 percent. Manufacturing output, the most important of the report's three main industry categories, rose 0.5 percent and added to a 0.6 percent gain in the prior month. Year-on-year rates for manufacturing output have been on the decline, at only 1.9 percent in April for the lowest rate in about 3-1/2 years. The Federal Reserve's efforts to the slow economy have hit two sectors especially hard, housing and manufacturing. The outlook for housing is still uncertain, but the manufacturing sector appears to be coming back to speed. Treasuries eased in initial reaction to the report. (Nasdaq)
Stocks/Indices
The Standard & Poor's 500 Index advanced after billionaire investors Warren Buffett, Edward Lampert and Carl Icahn increased their holdings of drug companies, banks and railroads. Buffett's Berkshire Hathaway Inc. almost doubled its investment in Johnson & Johnson. Lampert's ESL Investments Inc. disclosed an $800 million stake in Citigroup Inc. and Icahn snapped up a $122 million stake in CSX Corp., the third-largest U.S. railroad. A larger-than-forecast rebound in industrial production also contributed to the stock market's gain. (Bloomberg)
China
China’s headline industrial production rose by 17.4% year-on-year in April, the country’s national statistics bureau reported today. It marked a very slight slowdown from growth of 17.6% in March and 18.5% in Jan-Feb (the two months are combined to smooth out the impact of the Lunar New Year holidays). (Interfax)
Belle International, a Chinese mainland footwear maker based in Shenzhen, received an oversubscription of more than 500 times for its retail tranche, freezing a fund of 438 billion HK dollars and breaking the IPO record of ICBC, the largest Chinese commercial bank listing in Hong Kong, according to the IPO sellers Tuesday. (P5W)
If this doesn’t signal TOP – TOP – TOP (at least short term) I do not know what will!!
Here’s some additional proof of a stock market top - The current hero of the Chinese media, the Associated Press reports, is a 60-year-old cleaning woman from the southwestern city of Chongqing. She cleaned up on the red-hot Chinese stock market, doubling her 20,000 yuan ($2,860) investment in two months. "At a time like this, who can lose money?" she told the Chongqing Morning Post.
Commodities
Rob McEwen’s (now CEO & Chairman of U.S. Gold but is also the founder of Goldcorp) outlook for price of gold. He predicts by the end of 2006 we will test $850 per ounce and by the end 2010 we will be north of $2000 per ounce. (Bloomberg)
An article on why coal is an inherently sustainable, relatively inexpensive source of primary energy. (Report on Business)
U.S. supplies of motor gasoline rose for a second week and crude inventories have been climbing for a month, the Energy Department reported Wednesday, keeping crude prices under $63 a barrel and dragging reformulated gasoline futures to their lowest level in a week. (Marketwatch)
Here are some very interesting commodity charts from the BeSpoke Investment Group.
These charts highlight the historical trading areas of commodities. The green trading area is two standard deviations above and below the commodity's 50-day moving average. When the price of the commodity moves above or below this trading area, it is considered overbought or oversold. The trading area can also be used as a measure of volatility. A narrow area means the commodity has traded in a tight channel over the past 50 days, while a widening of the area represents an increase in upward or downward price movements. Currently natural gas is near the top of its range.
Unites States
International trade balance: The U.S. trade deficit widened in March to a worse-than-expected $63.9 billion from a $57.9 billion shortfall in February. The consensus had expected a $60.1 billion gap. Imports rebounded 4.5 percent, largely reflecting an increase in the price of oil. Exports also rebounded 1.8 percent. Today's report is a clear reminder of the impact of higher oil prices. The wider gap will put downward pressure on the dollar and upward pressure on rates. Equities could go either way-the higher gap means heavier demand but also sticky inflation problems. (Nasdaq)
Jobless claims: For the week ended May 5 fell 9,000 to a much better-than-expected level of 297,000 and pushing the four-week average down sharply to 317,250 and a level consistent with steady growth in the labor market. The results, released with trade and import price data, didn't move the markets, at least immediately, but they are a weight on the side of economic strength. (Nasdaq)
U.S. stocks dropped after crude oil climbed and import prices rose the most in almost a year, reducing prospects the Federal Reserve will cut interest rates. (Bloomberg)
Commodities
Investment bank Close Brothers will be coming out with a new Close Enhanced Commodities Fund 2 as a result of ferocious commodities demand from China and India and investor interest. The fund will have a six year life.
GFMS Market Analysis – Nickel
Market Briefing - May 9, 2007
Prices received some support at the end of April from a week-long stoppage in production at the Voisey’s Bay mine. However, normal operations have now recommenced. At around $52,600/tonne, nickel price have now reached a new high (up from the previous $52,350 recorded on April 10), and continue to receive support from the low level of LME stocks (4,716 tonnes, May 4). Cancelled warrants still account for approximately 31% of LME stocks.
Physical market is quiet in Europe
High prices have led to volumes on the spot market drying up as consumers are living on a hand to mouth basis. This is now causing premiums to weaken in Europe. However tight supply is stopping premiums from falling too heavily and most remain at high levels. 4x4 cut cathode premiums are currently around $900-1,100/tonne (in-warehouse Rotterdam), after rising to $1,100-1,200/tonne in April (from a previous range of $800-1000/tonne in March and February). Uncut premiums however, have now fallen to $350-400/tonne after rising to $500-600/tonne in late March/early April. Meanwhile in the US, supply tightness is adding upward support for premiums, with melting premiums reported to be in the 80-90c/lb range ($1,765-2,000/tonne), which is nearly double the level at the beginning of the year.
Strong demand growth in early 2007
Consumption of nickel for the January-February period, as reported by the WBMS, has risen by around 20% year-on-year to 261,500 tonnes led by the continued surge in Asian demand (+29% year-on-year to 129,300 tonnes). This reflected the continued surge in stainless production within the region.
Is the stainless market moving into oversupply?
We note that stainless prices are increasing as a result of higher nickel prices, but base prices are under pressure. In addition volumes are relatively low. This is due to consumers and traders trying to destock and the ongoing substitution pressures (see below). This trend is highlighted by developments at Nippon Steel. It is raising prices but is also reducing miseuri (spot) sales fearing that inventories may build along the distribution chain. This has already happened in Europe and the US. (GFMS)
Productivity and Costs: Productivity and labor costs came in better than expected. First quarter productivity came in at an annualized 1.7 percent, down from the fourth quarter pace of 2.1 percent. Productivity came in notably above the market consensus projection for a 0.5 percent annualized increase. The slower growth in productivity reflected a deceleration in output. Today's report is very favorable to bonds and equities. Interest rates eased immediately on news of the improvement in unit labor costs and better than expected productivity. The Fed will like the numbers but will still be in a wait and see mode. Notably, initial jobless claims improved today - highlighting the fact that the labor market is still tight - a key concern for the Fed.
Institute for Supply Management's non-manufacturing index: Posted a sizable pop higher in April to 56.0, up from a multi-year low of 52.4 in March. New orders showed less strength, 55.5 vs. 53.8, while backlog orders actually showed no month-to-month change, 50.0 vs. a 52.5 reading that indicated growth in March. This index had correctly pointed to lower first quarter growth, and today's gain will steady the outlook for future growth. Treasuries slid in reaction to the report while the dollar firmed.
Dollar
After the 8:30 a.m. release of stronger-than-expected jobs data in the U.S., the greenback began to sharply move up. http://news.ino.com/headlines/?newsid=50320071145 (INO -Requires free registration)
Markets
Michael Metz (CIO of Oppenheimer and Co.) says we have a mania here to hop aboard a rising stock market all over the world because alternative investments like real estate and bonds are unattractive and that the markets may keep going up for a few more weeks but the then its over for the balance of the year. (Bloomberg)
Commodities
Gold prices advanced on Thursday morning in the U.S. June gold advanced to $677.40, up $2.20 on the session. Silver advanced to $13.38, up 4.5 cents on the session, copper was up slightly to $3.63 and platinum advanced $6.40 to $1,306. Palladium fell 45 cents to $374.50. http://news.ino.com/headlines/?newsid=50320071201 (INO)
LME stocks for Nickel fell for the 4th day in a row which indicates a continuing robust demand for the commodity.(LME)
According to the last survey of the Chinese Ni-pig iron sector by Brook Hunt (mining and metal industry consultants), they identified nine companies that between them accounted for nearly three-quarters of total Chinese nickel pig iron production during 2006. “We believe that production of nickel in pig iron will increase substantially in the near term. Baosteel’s announcement that it will be using more Ni-pig iron in 300 series stainless steel production this year indicates that other Chinese stainless steel companies may also be able to do this, implying that much more Ni-pig iron will be used in China’s stainless steel industry during 2007 than we had previously thought possible.” (Brook Hunt Website)
As long as it takes - "Contractor strike growing at Voisey’s Bay"
EIA Natural Gas Report: Natural gas in storage rose 87 billion cubic feet in the April 27 week to 1,651 bcf. (Nasdaq)
Check out this indicator that tells you fairly accurately when to buy/sell energy stocks on Yaser Anwar's website
China
Report on the ‘Era of China’ by Eric Sprott and Sasha Solunac (Sprott)
**Tommorow**
I will post some research i have done on a junior gold explorer in Peru.
United States
ISM Manufacturing Index: Rose 3.8 points to 54.7 in April for its best reading in nearly a year. The manufacturing sector has been flat over the last couple of quarters, dampening overall economic growth. But the sector, unlike housing, has not contracted and may now be poised to resume expansion. The combination of strength and higher prices is a negative for the bond market where Treasuries tumbled in initial reaction. The dollar firmed in reaction as the data pushes back chances for a Federal Reserve rate cut. The ISM's report on non-manufacturing, which has long shown more strength, will be posted on Thursday. (Nasdaq)
Pending home sales Index: Fell 4.9 percent in March to 104.3 showing a deepening year-on-year decline of 10.5 percent. (Nasdaq)
The New York market was mixed Tuesday after weak numbers from the housing sector overshadowed several positive earnings reports. After rising by as many as 45 points earlier, the Dow Jones Industrial Average pared its gains and was recently higher by a point to 13,064. The S&P 500 was down 2.5 points to 1480, and the Nasdaq Composite fell 11 points, or 0.5%, to 2514. (The Street)
Commodities
Gold fell in New York on speculation investors may sell the metal after the dollar's drop to a record against the euro failed to spur a rally in precious metals. Silver also declined.
http://www.bloomberg.com/apps/news?pid=20601012&sid=acQrghJ8u2nE&refer=commodities (Bloomberg)
Comment: I am somewhat concerned that gold is not moving higher even though the dollar is testing new lows. For now I shall wait and see what happens next.
Energy
Energy prices slipped on Tuesday in U.S. trading. Crude threatened to fall below $65 before settling a little higher. Natural gas, heating oil and gasoline also fell (INO – Need Free Registration)
