SP Angel . Morning View . Fed minutes smack US dollar while strengthening gold
Paul Kettle
Morning Broker Research -3 min read
12:18, 10th January 2019

SP Angel – Morning View – Thursday 10 01 19

Fed minutes smack US dollar while strengthening gold

 

MiFID II exempt information – see disclaimer below

 

Chimata Gold Corp (CAT CN) – Kamativi Tailings Company signs term sheet for US$9.5m off-take financing for phase 1 lithium concentrate

 

Dow Jones Industrials

 

+0.39%

at

  23,879

Nikkei 225

 

-1.29%

at

  20,164

HK Hang Seng

 

+0.09%

at

  26,486

Shanghai Composite

 

-0.36%

at

   2,535

FTSE 350 Mining

 

-0.83%

at

  17,499

AIM Basic Resources

 

+1.43%

at

   2,161

 

 

Economics

US – Fed minutes provided a more dovish outlook on the future of monetary policy decisions, the latest FOMC meeting minutes showed.

  • The officials agreed that “some further gradual increases” in the federal funds rate would be appropriate.
  • While minutes highlighted that future decisions will be data dependent the rhetoric seems to have softened compared to four hikes in 2019 widely expected only a few months ago.
  • The committee argued that the FOMC “could afford to be patient about further policy firming”, which comes in line with Powell comments last week.
  • “Nevertheless, this doesn’t mean the Fed is done raising interest rates… the minutes note the “contrast between the strength of the incoming data on economic activity and concerns about downside risks evident in financial markets”…we still expect the Fed to hike its policy rate up to twice more in the first half of this year,” Capital Economics commented on the news.
  • The government and Democratic Congressional leaders standoff continued as Trump is reported to have walked out of shutdown meeting.
  • President later confirmed he had cut the meeting short, declaring it “a total waste of time”.
  • US futures equities are trading weaker this morning as initial optimism over the start of US/China trade talks waned and investors were looking for tangible results from negotiations.
  • S&P 500 Index futures are down 0.6% today marking the first decline in a week.

 

China – Slowing inflation reflects a recent drop in oil prices while also offering authorities room for manoeuvre to support economic activity.

  • Core inflation that excludes food and energy held steady at 1.8%yoy.
  • CPI (%yoy): 1.9 v 2.2 in November and 2.1 forecast.
  • PPI (%yoy): 0.9 v 2.7 in November and 1.6 forecast.

 

UK – The government will have three days to come with a Brexit “Plan B” should May deal get voted down next week, Parliament rules.

  • This cuts the previous 21 days period with many MPs suggesting PM will not be able to run down the clock to 29 March to try to bounce those against a no-deal Brexit into supporting her agreement in another vote.

 

France – The second largest economy in the eurozone shows signs of weakening growth with industrial production posting a third consecutive annual decline in November.

  • Two days after Germany reported weak industrial production numbers raising concerns it may be heading towards a recession, France posts a surprise 2.1%yoy drop.
  • While declines were relatively brad based, energy sector recorded worst drops affected by protesters blocking various sites during the demonstrations.
  • The “yellow vests” protests have erupted in mid-November as a protest against a fuel tax but has developed into a broader backlash against the government.
  • Industrial Production (%mom/yoy): -1.3/-2.1 v 1.3/-0.6 in October and 0.0/-0.2 forecast.

 

Currencies

US$1.1556/eur vs 1.1465/eur yesterday  Yen 107.89/$ vs 108.84/

nbsp; SAr 13.859/$ vs 13.945/
nbsp; $1.277/gbp vs $1.275/gbp  0.718/aud vs 0.716/aud  CNY 6.781/$ vs 6.834/$

 

Commodity News

Precious metals:         

Gold US$1,297/oz vs US$1,283/oz yesterday

  • Gold rises towards $1,300/oz level following the minutes from the last Federal Reserve meeting in December, revealing policy makers took a more cautious approach to further rate increases, hurting the dollar.
  • The latest Fed minutes highlight many policy makers felt the central bank ‘could afford to be patient about further policy firming’, giving rise to speculation that US rates will be on hold through March or longer.
  • Investors are also monitoring developments after U.S.-China trade talks. The Trump administration is pushing for a way to make sure Beijing delivers on its commitments in any deal the two nations reach to defuse a trade war that has roiled financial markets and hurt the outlook for global growth.
  • Adding to political concerns, President Donald Trump stormed out of a meeting with congressional leaders Wednesday as talks to end a nearly three-week government shutdown collapsed, with the two sides far apart on finding a solution to a dispute on border wall funding.
  • Global holdings in bullion-backed ETFs are at a 7-month high after rising for the past nine sessions.

   Gold ETFs 71.8moz vs US$71.7moz yesterday

Platinum US$828/oz vs US$822/oz yesterday

Palladium US$1,320/oz vs US$1,338/oz yesterday

  • Palladium continued its charge, surging as much as +1.2% to $1,344.4/oz, as China announces measures to shore up auto demand, even as it recorded the first annual slump in sales in more than two decades.
  • China, the world’s largest vehicle market, is also on a mission to reduce smog as tougher emissions standards boost prospects for palladium consumption. Shortages of the metal sent prices to a string of records last year, and analysts said the tight market is likely to continue through at least 2019.
  • While investors typically pile into exchange-traded funds as prices rally, the ETFs backed by palladium have become the supplier of last resort. Holders have pulled the metal to offer it in the lease market. The cost to borrow the raw material for three months climbed to 21.8% on Wednesday.

Silver US$15.78/oz vs US$15.62/oz yesterday

           

Base metals:   

Copper US$ 5,967/t vs US$5,966/t yesterday

Aluminium US$ 1,855/t vs US$1,871/t yesterday

  • Aluminium continues to slip as bearish speculators kept up selling pressure, despite positive developments in US-China trade talks. The worst performing metal on the LME gathered negative momentum as concerns over excess supply were exacerbated after the US announced it would lift sanctions on Russian giant Rusal.
  • Excess supply was evident in a build-up of LME aluminium inventories, which rose again on Tuesday, daily LME data showed. The stocks have surged nearly 40% since mid-October last year.
  • “There are smelter re-starts in the U.S., a very large expansion in Bahrain, and in China you've got significantly more production than at this time a year ago”, according to commodity economist at Capital Economics. “This is all coming at a time when demand is proving to be relatively soft and slowing in a number of major markets”.
  • Aluminium has the biggest speculative net short position of the LME complex at 28% of open interest, a level not seen since November 2015, according to estimates by Marex Spectron.

Nickel US$ 11,295/t vs US$11,280/t yesterday

Zinc US$ 2,480/t vs US$2,498/t yesterday

Lead US$ 1,980/t vs US$1,980/t yesterday

Tin US$ 20,150/t vs US$20,065/t yesterday

           

Energy:           

Oil US$60.7/bbl vs US$59.2/bbl yesterday

Natural Gas US$3.012/mmbtu vs US$3.005/mmbtu yesterday

Uranium US$28.90/lb vs US$28.90/lb yesterday

           

Bulk:   

Iron ore 62% Fe spot (cfr Tianjin) US$72.7/t vs US$73.1/t

  • China’s Dalian iron ore futures dipped nearly -1% as emergency anti-pollution measures dampened demand for steelmaking raw materials. The Ministry of Ecology and Environment reported that it expects a bout of severe smog of blanket regions in northern China, including top steelmaking province Hebei and coal mining hub Shanxi from Jan. 10-14.
  • Some cities have issued smog alerts and asked heavy industry to restrict production, particularly the use of sinter plants, during the forecast pollution period. The highly pollutive sintering process melts iron ore before it is put into a blast furnace.
  • Stocks of imported iron ore at Chinese ports has risen to 140.6mt, as of Jan.7, its highest level in seven weeks, data compiled by SteelHome showed.
  • "Iron ore prices could be volatile in the near-term due to restrictions on sintering plants," analysts at Huatai Futures. "But there will still be some support for prices as steel mills are expected to replenish their stocks ahead of Chinese new year in February, while shipments from overseas miners may fall in the coming weeks."

Chinese steel rebar 25mm US$590.2/t vs US$585.9/t

Thermal coal (1st year forward cif ARA) US$80.5/t vs US$81.3/t

Coking coal futures Dalian Exchange US$214.9/t vs US$209.9/t

           

Other:  

Cobalt LME 3m US$44,000/t vs US$44,000/t

China NdPr Rare Earth Oxide US$46,528/t vs US$46,165/t

China Lithium carbonate 99% US$10,102/t vs US$10,023/t

China Ferro Vanadium 80% FOB US$70./kg vs US$70.5/kg

China Antimony Trioxide 99.5% EU US$7.1/kg vs US$7.0/kg

Tungsten APT European US$270-280/mtu

 

Battery News

LG Chem target $2bn construction of second EV battery plant in China

  • LG Chem plans to invest $2bn by 2023 to build a new electric vehicle battery plant in Nanjing, with battery production expected at the new plant in October 2019.
  • The company are focusing to gradually expand production at the new plant to 32GWh per annum by 20203, with ‘considerable’ amount of batteries to be exported to Europe.

 

Company News

Chimata Gold Corp (CAT CN) C$0.08, Mkt Cap C$2.7m – Kamativi Tailings Company signs term sheet for US$9.5m off-take financing for phase 1 lithium concentrate

  • Chimata Gold Corp signs term sheet between Transamine Trading S.A. and Kamativi Tailings Company (KTC) for a US$9.5m finance and off-take facility for concentrate produced from the Kamativi Tailings Lithium Project.
  • The tenor of the facility is in line with the construction project plan and allows sufficient time for repayment from free cash. The use of proceeds focus on the construction of the Phase 1 processing plant to be constructed for the project and working capital.
  • Transamine will have the right to 150,000t +6% Li2O spodumene concentrate, with commercial terms to be agreed in line with the international market terms.
  • Chimata’s local Zimbabwean partner holds a 60% equity stake in KTC, which is a Joint Venture with the remaining 40% of the equity being held by Kamativi Tin Mines Ltd.

 

Analysts

John Meyer – 0203 470 0490

Simon Beardsmore – 0203 470 0484

Sergey Raevskiy – 0203 470 0474

Phil Smith (Technology) – 0203 470 0475

Zac Phillips (Oil & Gas) – 0203 470 0481

 

Sales

Richard Parlons – 0203 470 0472

Jonathan Williams – 0203 470 0471

 

SP Angel                                                            

Prince Frederick House

35-39 Maddox Street London

W1S 2PP

 

*SP Angel are the No1 integrated nomad and broker by number of mining brokerage clients on AIM according to the AIM Advisers Ranking Guide (joint brokerships excluded)

+SP Angel employees may have previously held, or currently hold, shares in the companies mentioned in this note.

 

DISCLAIMER

This note has been issued by SP Angel Corporate Finance LLP (“SP Angel”) in order to promote its investment services.

This information is a marketing communication for the purpose of the European Markets in Financial Instruments Directive (MiFID) and FCA’s Rules. It has not been prepared in accordance with the legal requirements designed to promote the independence or objectivity of investment research.

This document is not based upon detailed analysis by SP Angel of any market; issuer or security named herein and does not constitute a formal research recommendation, either expressly or otherwise.

The value of investments contained herein may go up or down. Where investment is made in currencies other than the base currency of the investment, movements in exchange rates will have an effect on the value, either favourable or unfavourable. Securities issued in emerging markets are typically subject to greater volatility and risk of loss.

This note is confidential and is being supplied to you solely for your information and may not be reproduced, redistributed or passed on, directly or indirectly, to any other person or published in whole or in part, for any purpose.

Neither the information nor the opinions expressed herein constitutes, or is to be construed as, an offer or invitation or other solicitation or recommendation to buy or sell investments. This information is for the sole use of Eligible Counterparties and Professional Customers only and is not intended for Retail Clients, as defined by the rules of the Financial Conduct Authority (“FCA”) and  subject to SP Angel’s Terms of Business as published or communicated to clients from time to time.

It is not investment advice and does not take into account the investment objectives and policies, financial position or portfolio composition of any recipient. This document should not to be relied upon as authoritative or taken in substitution for the exercise of you own commercial judgment. SP Angel is not responsible for any errors, omissions or for the results obtained from the use of the information in this document.

This document has been prepared on the basis of economic data, trading patterns, actual market news and events, and is only valid on the date of publication. SP Angel does not make any guarantee, representation or warranty, (either expressly or implied), as to the factual accuracy, completeness, or sufficiency of information contained herein. This document has been prepared by the author based upon information sources believed to be reliable and prepared in good faith.

SP Angel, its partners, officers and or employees may own or have positions in any investment(s) mentioned herein or related thereto and may, from time to time add to, or dispose of, any such investment(s).

SP Angel Corporate Finance LLP is a company registered in England and Wales with company number OC317049 and whose registered office address is Prince Frederick House, 35-39 Maddox Street, London W1S 2PP.  SP Angel Corporate Finance LLP  is authorised and regulated by the Financial Conduct Authority whose address is 25, The North Colonnade, Canary Wharf, London E14 5HS and is a Member of the London Stock Exchange plc. 

Advertisement
Comments
info
Login or register to post comments

Recent Articles