Copper flashing red signals on China

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Copper prices are signalling that demand may be weakening in China, the world’s largest consumer, as stocks of the metal flow out of the country to warehouses elsewhere in Asia.

The red metal, which is often seen as a gauge of global economic activity due to its ubiquitous use in wiring, has relinquished its gains for the year, falling 2 per cent. That is in contrast to other metals also heavily tied to Chinese demand such as zinc, tin and nickel, which have all staged rallies.


High quality global journalism requires investment. Please share this article with others using the link below, do not cut & paste the article. See our Ts&Cs and Copyright Policy for more detail. Email ftsales.support@ft.com to buy additional rights. The drop in price to a 10-week low on Tuesday comes after imports of the metal into China fell in July, and stocks have built up on London Metal Exchange warehouses in South Korea and Singapore.

Global stocks of copper are now at their highest levels since October 2015, according to data from broken Marex Spectron.

That is raising fears that demand in China could be weakening after a government stimulus in the first half of the year saw prices rise to a peak of $5,131 a tonne in March, giving hopes to some of the world’s largest miners. Copper traded at $4,607 a tonne Tuesday.

Most analysts do not expect the copper market to recover until 2018, when supply starts to tighten due to lack of investment in new mines. Credit ratings company S&P Global Ratings said it forecasts a price of $4,600 a tonne for this year as the market remains oversupplied, rising to $4,850 a tonne in 2017.

In the meantime, the copper market could be due for a “sharp slowdown” in the second half of the year, which could send prices even lower, according to Barclays.

The premium, or the price a trader could get for selling physical copper into the market, has been unusually weak since April, according to Dane Davis, a Barclays analyst in New York. That is providing an incentive for traders and smelters to send metal outside the country where they can earn more leaving it in a warehouse.

“Momentum is starting to stall in China and people are starting to off load the metal in other markets,” he said. “There’s strong availability of supply and demand has been tepid and started to cool off in May and June.”

There has also been a build-up of excess metal in China after it imported a record amount in the second half of 2015, according to analysts. Domestic refined production has also increased 7 per cent this year, according to Bank of America Merrill Lynch.

Investors are also betting that copper prices will fall further. Traders on the Shanghai Futures Exchange are holding a net short position of 16,684 contracts, according to exchange data, while on the Comex exchange in New York, speculators swung to a net short position in the week ended Aug. 23.

Speculators in Comex copper futures had previously built a net short position in early June, before a bounce in copper prices led to an unwinding.

“Weakening fundamentals triggered the return of a copper net-short position,” Ole Hansen, head of commodity strategy at Saxo Bank, said. “With funds having only just turned net-short again, there will be plenty of room to increase short positions
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European stocks book a loss as rate-hike signals intensify

European stocks on Monday finished in negative territory, kicking off the week lower as rising expectations the U.S. Federal Reserve will lift interest rates later this year poked the air out of a recent rally.

The Stoxx Europe 600 index SXXP, -0.15%  lost 0.2% to close at 343.20, pulling back after a 1.1% climb last week.

The pan-European benchmark settled 0.5% higher on Friday, after Fed Chairwoman Janet Yellen, at a closely watched speech at Jackson Hole, Wyo., said the U.S. economy is improving, seen as a sign of confidence in economic growth world-wide. However, the central-bank boss also hinted a rate increase is on the cards in coming months, which weighed on U.S. markets on Friday and dragged stocks in most of Asia and Europe lower on Monday.

Read: Here’s what the Fed’s rate should be, using rule footnoted in Yellen speech

“The Fed is about to tighten the screw again on cheap money and one step closer to bringing the monetary policy to its normal path. This is not the kind of news that the equity traders are going to cheer and hence we are seeing this kind of reaction in the market,” said Naeem Aslam, chief market analyst at ThinkMarkets, in a note.

“The most important data which is standing between the Fed and another rate hike is the upcoming U.S. [nonfarm payrolls] number due this week on Friday,” he added.

The nonfarm-payrolls data is one of the most highly anticipated monthly economic reports, as it reveals the health of the U.S. labor market and helps the Fed set its path for monetary policy.

The dollar strengthened against most major currencies after the Yellen’s speech and continued its march higher on Monday. The euro EURUSD, -0.1698%  slipped to $1.1175, down from $1.1197 late Friday in New York.

Movers: Shares of Alstom SA ALO, +2.86%  gained 2.9% after the French infrastructure company late Friday said it signed a €1.8 billion deal to design and build 28 new high-speed trains for U.S. rail operator Amtrak.

Roche Holding AG ROG, +0.46%  rose 0.5% after the Swiss drugmaker said it had received an “emergency use authorization” from the U.S. Food and Drug Administration for its Zika test.

Oil companies were heading lower, tracking a sharp decline in oil prices. Crude oil CLV6, +0.38%  slid 1.7% to $46.85 a barrel as doubts grew that the Organization of the Petroleum Exporting Countries will reach a deal to freeze production next month. Shares of Eni SpA ENI, -1.03%  dropped 1%, Total SA FP, -0.93% TOT, -0.39%  lost 0.9% and Repsol REP, -1.32%  gave up 1.3%.

Other Indexes: Germany’s DAX 30 index DAX, -0.41%  slid 0.4% to 10,544.44, while France’s CAC 40 index PX1, -0.40%  gave up 0.4% to finish at 4,424.25.

Meanwhile, U.K. markets were closed for a local bank holiday.
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QUAL: A Solid Pick For This Uncertain Market Backdrop

Summary

On paper, the US stock markets are doing just fine.
But most investors are nervous, and for good reason.
Consider iShares Edge MSCI USA Quality Factor ETF (QUAL) which gives investors exposure to a number of high-quality stocks.

On paper, the US stock markets are doing just fine. Just a few days ago, the three major US indices, Dow Jones (NYSEARCA:DIA), S&P-500 (NYSEARCA:SPY) and Nasdaq (NASDAQ:QQQ) all closed at their record high on the same day. On a year-to-date basis, the Dow Jones and S&P-500 have gained by roughly 6% each while Nasdaq-100 is up 4.2%. In an environment of low bond yields, the stocks could continue moving higher. Yet most investors I've met are nervous, and for good reason.

The second quarter earnings season has almost come to an end, and most of the major companies have beaten Mr. Market's earnings estimates. In fact, as per FactSet, 95% of the S&P-500 companies have reported results so far and more than 70% of those have ended up beating analysts' mean earnings estimates. But that's because estimates were already down. What's particularly upsetting is that earnings have been declining for the last five consecutive quarters. That's something which hasn't happened since the global financial crisis.

In Q2-2016, actual and estimate results translate into 3.2% decline in earnings for the S&P-500. The poor performance has been driven in large part by the persistent weakness in commodity prices which has hurt companies operating in the energy and materials sectors.

Moreover, it appears that profits will likely continue to head lower. For Q3-2016, 102 companies have released earnings guidance, 70% of which have been negative. Analysts foresee a 2% earnings drop in the third quarter and a 0.4% decline for the full year for the S&P-500. This compares against an earnings decline of 0.8% seen last year. But analysts have been reducing earnings estimates. On December 31, the consensus estimate for the S&P-500 called for an earnings growth of 5.9%, which was considerably better than what we are hearing now. The actual results, therefore, could turn out to be far worse.
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Market edges lower in early trade

 Key benchmark indices edged lower in early trade tracking lackluster trading in Asian stocks. At 9:16 IST, the barometer index, the S&P BSE Sensex was down 35.24 points or 0.13% at 27,950.30. The Nifty 50 index was currently down 9.95 points or 0.12% at 8,619.20.

In overseas stock markets, most Asian stocks edged lower tracking lackluster trading in US overnight. Markets were playing wait-and-see ahead of a key speech from US Federal Reserve chair later this week. In Japan, the Nikkei 225 Average was currently off 0.22%. The Nikkei flash Japan manufacturing purchasing managers' index (PMI) rose to 49.6 in August from July's reading of 49.3. A reading above 50 signals an improvement, while one below 50 points to a contraction in activity. August's flash PMI shows a contraction for the sixth month in a row. In mainland China, the Shanghai Composite was currently up 0.33%. In Hong Kong, the Hang Seng was currently off 0.36%. Chinese business confidence weakened in August after showing signs of stability in recent months, clouding investors' outlook on the world's second largest economy. The MNI Deutsche Borse Group business sentiment indicator declined to 54.3 in August from July's reading of 55.5.

US stocks closed mostly lower yesterday, 22 August 2016, dragged down by energy shares on lower crude oil prices. Federal Reserve chair Janet Yellen's speech at the Kansas City Fed's annual Monetary Policy Symposium in Jackson Hole, Wyoming is scheduled on Friday, 26 August 2016. Minutes from the Federal Open Market Committee's (FOMC) July meeting showed officials were split on whether an increase in interest rate was needed soon.

Closer home, the market breadth indicating the overall health of the market was positive. On BSE, 540 shares rose and 454 shares declined. A total of 47 shares were unchanged. The BSE Mid-Cap index was currently down 0.08%. The decline in this index was lower than Sensex's decline in percentage terms. The BSE Small-Cap index was currently up 0.01%, outperforming the Sensex.

Cement stocks declined. UltraTech Cement (down 0.93%), Ambuja Cements (down 0.67%), and ACC (down 0.55%) edged lower.

Grasim Industries was down 0.33%. Grasim has exposure to cement sector through its holding in UltraTech Cement.

GAIL (India) was up 0.71% at Rs 366.65 after the company and Silicon Valley-based Bloom Energy announced signing a memorandum of understanding (MoU) to deploy revolutionary natural gas-based fuel cell technology to generate electricity. The announcement was made after market hours yesterday, 22 August 2016.

The solid oxide fuel cell (SOFC) technology of Bloom Energy Servers convert fuel into electricity using natural gas as the base fuel to generate reliable and resilient electricity in a highly efficient non-combustible process that reduces emissions of greenhouse gas and harmful air pollutants, with minimal use of water vis-vis the conventional power producing technologies. The Bloom Energy Servers could be installed onsite at any operating premises or building and can be plugged into natural gas pipeline to generate uninterrupted, efficient, noise-less base load power round-the-clock.

GAIL's subsidiary at Bengaluru is already supplying natural gas for energizing a multi-MW Bloom Energy project for a large global technology company at the Technology Park in Bangalore.

The unique tie-up seeks to leverage the strengths of both the organizations. Whilst GAIL brings a portfolio of natural gas to ensure reliable and competitively available natural gas for Bloom Energy projects along its integrated gas supply networks, Bloom Energy's power systems run on advanced solid oxide fuel cell technology that are not just acknowledged as the most efficient producers of electricity based on natural gas but also combines the advantage of requiring a tenth of the space required for generating equivalent power through other modes. The MoU provides an alignment of a shared vision between GAIL and Bloom Energy and opens up an opportunity for Indian consumers to experience bundled and reliable service by the two leading brands for expanding the distributed power generation systems in India.

HPCL lost 1.86% at Rs 1,191.95 after net profit rose 30% to Rs 2098.38 crore on 5.67% decline in total income to Rs 51936.30 crore in Q1 June 2016 over Q1 June 2015. The result was announced after market hours yesterday, 22 August 2016.

Average gross refining margin in Q1 June 2016 was $6.83 per billion barrel (BBL) as against $8.56 per BBL in Q1 June 2015.

Based on the approval received from Government of India, HPCL accounted for budgetary support amounting to Rs 328.41 crore in Q1 June 2016 towards under recovery on sale of PDS kerosene (SKO), compared with Rs 450.61 crore in Q1 June 2015. State-run oil marketing companies bear under-recoveries on domestic sale of LPG and kerosene at controlled prices. The government has already freed pricing of petrol and diesel.

In Q1 June 2016, discount from upstream oil company viz., ONGC amounted to Nil in respect of crude oil purchased from ONGC, compared with Rs 218.25 crore accounted in Q1 June 2015.
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ForexPeople introduces ClickFX, South Africa’s first online solution to personal Forex trading

One of South Africa’s largest Forex intermediaries Forex People, has introduced ClickFX to offer South Africans a simple and cost effective way to transfer Forex online. 

Over the last decade the personal foreign exchange allowance has increased from a once-off R350 000 to an annual amount of R10 million. As a result, more and more people are looking at how they can transfer funds offshore to mitigate the continued fluctuation of the Rand. Currently, South Africans generally still deal with banks when it comes to Forex transfers. However, internationally it has become the norm to trade Forex using a specialist online broker.

The Forex market and the local regulatory environment can be quite daunting for an individual. Click FX offers a friendly, intuitive and reliable way to get a great rate when buying or selling Forex. As part of the Forex People family, Click FX benefits from the huge volumes traded every day, ensuring sharp exchange rates, low fixed bank fees, smooth processes and professional, friendly support staff; all via a secure online platform.

“What’s great about ClickFX is that it brings the bargaining-power of several hundred regularly-trading importers and exporters to the man on the street, via a secure online service,” says CEO, Richard Beddow. “Whether someone wants to send a large lump sum, or small regular amounts, the cost effectiveness and simplicity of ClickFX means anyone can send funds offshore as and when they want.”

Established in 2003, ForexPeople is a Johannesburg-based, privately-owned and managed, independent Foreign Exchange intermediary. It is regulated by the South African Reserve Bank, the Financial Services Board and the Financial Intelligence Centre. Recently clients have become more comfortable with technology and are now booking Forex trades using email, SMS, WhatsApp and Skype. ForexPeople identified an inherent need for a quick fix to Forex trading and this is where the idea for ClickFX originated.

ClickFX services individuals sending their allowances out of the country as well as expatriates bringing offshore earnings back in. “ClickFX is a fully-compliant Forex transfer service,” adds Richard Beddow. “It is not a speculative trading platform where people buy and sell Forex for personal gain.”

Using ClickFX is hassle free. Once registered, the system checks your FICA compliancy within 24 hours. You simply transfer the funds to your own Forex account, accept a rate, and trade. Within two days your Forex arrives in your offshore account, which ClickFX can open for you – if you don’t already have one.

You no longer need to be a wealthy individual in order to have an offshore portfolio. ClickFX proves that buying or selling Forex doesn’t have to be complicated or expensive but can be as easy as the click of a button.
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