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MARKET HIGHLIGHTS COMMODITY WRAP
February 18, 2013
WTI crude lower on US IP data, Brent recovers
Gold down, eyes test of
Copper eases, looks to return of Chinese buyers
Market weighs restocking potential for iron ore, metcoal
– The G20 meeting over the weekendhad slightly stronger language towards exchange ratescompared to the G7 statement out earlier in the week. Japanwas essentially given the green light by the G20 to continuemonetary easing, as long as the objective is to defeatdeflation, not to target the yen. This saw USD/JPY moveslightly higher as the statement made markets morecomfortable about the current level of the yen. Economic dataout of the US was mixed but generally positive. Thepreliminary read for the University of Michigan consumerconfidence index improved, but remains at depressed levels.Industrial Production in the US fell by 0.1% in January,weaker than the expected gain of 0.2%. Despite the fall,there were upward revisions to recent months’ outcomes. Aregional manufacturing survey for the New York arearebounded in February by more than expected. Meanwhile,UK retail sales disappointed expectations, falling 0.6% m/m inJanuary. Equity markets in the US were mostly unchangedwhile European equities fell.
OVERNIGHT RANKED PRICE MOVES (%)
(2.0)(1.7)(1.5)(1.5)(0.8)(0.4)(0.4)(0.1)(0.1)0.00.20.60.70.71.1(2.5) (2.0) (1.5) (1.0) (0.5) 0.0 0.5 1.0 1.5SilverPlatinumGoldWTI OilZincCoal (NEWC)Copper TinS&P 500Iron oreUSD (DXY)AluminiumBaltic FreightNickelLead
Note: Coal (NEWC) refers to front month futuresSources: Bloomberg, ANZ Commodity Strategy
Oil benchmarks were lower
. Oil prices were lower after thesofter than expected US industrial production print. Marketswere also subject to the typical round of position squaringahead of the US President’s Day holiday today. In Friday’ssession, April 13 Brent saw heavy selling as it traded nearUSD117.88/bbl, Thursday’s closing price. After falling to a lowof USD116.28 in the session, prices recovered to finish nearunchanged. March 13 WTI crude futures sold off in line withBrent but couldn’t recover and closed down 1.5%.
Gold broke down last week
after support at USD1,640/ozfinally failed and prices pushed below USD1,600. Thismorning, bullion is trading at USD1,614, versus USD1,635this time Friday. The technical profile remains bearish. If prices are unable to regain USD1,640 the market would targetUSD1,525-1,550. The RSI is down at 30.1, on the threshold of oversold and its lowest in a year. The current spell of weakness adds to the risks that we may undershoot our Q1forecast of USD1,730, especially if physical buyers hold backon expectations of further falls. In PGMs, platinum hit itslowest in two weeks, falling by 2%. Palladium fared better,dipping 1.3%. Platinum bounced back to USD1,688/oz earlyMonday, and unlike gold, chart indicators are bullish, with aretest of resistance at USD1,740 possible.
Copper dipped on Friday
ahead of the return of China fromthe New Year holidays. Copper closed at USD8,207/t, downUSD25 from when China closed a week ago. China is likely tocome to the market as a buyer and we expect to see priceschallenge the recent highs around USD8,350. Zinc fell abouthalf a percent, having touched a 17-month high last week. Ameteor shower on Friday damaged buildings at theChelyabinsk zinc plant in Russia, but there are no reports of production being affected. Aluminium continued itstechnically-driven bounce, bucking the mostly weaker trend inthe LME and targeting resistance at USD2,200.
Newcastle thermal coal prices fell slightly.
The strike atColombia’s Cerrejon mine continued into its second week witha resolution between Cerrejon, the Government and minersyet to be reached. Uncertainty over the strike, impactingabout 30 million tonnes of thermal coal exports into theseaborne market, may have contributed to choppy tradingover the past week. Meanwhile, coking coal spot prices edgedhigher despite the absence of Chinese buyers due to holidays.Coking coal appears to be playing catch up to the 7% rally iniron ore prices, and tighter availabilities for delivered cargoesto India and China suggests demand should remain firm.Limited movement in the iron ore complex continued astraders held off on taking positions until the market returns tonormal after the Lunar New Year holiday break. Views remainmixed as to whether we will see any physical re-stockingactivity this week, but a lack of available spot material shouldsee prices supported in the short-term.