Commodities & Currencies. Weekly Tracker. 21 November 2016

Transcription

1 Commodities & Currencies Weekly Tracker 21 November 2016

2 Global Equities Performance (%) Currencies Weekly Performance (%) (0.1) (0.3) (0.5) (2.5) (2.7) 0.0 (1.0) (2.0) (3.0) (1.1) (1.5) (2.1) (2.5) Source: Reuters Source: Reuters

3 7.0 Agri-Commodities Weekly Performance (%) Non-Agri Commodities Weekly Performance (%) (1.0) (3.0) (5.0) (1.4) (2.1) (2.5) (3.1) (4.2) (1.0) (0.2) Source: Reuters Source: Reuters

4 Global update President of the Federal Reserve Bank of Richmond, Jeffrey M. Lacker said that he hopes that the Trump government doesn t change independence of Fed policy. He also mentioned about taking the new trade policy into account prior to Dec 16 policy statement. Upcoming Italy Referendum on 4th Dec 2016 has infused jitters in the European markets. The Prime Minister of Italy is in support of Leave vote and has decided to give up his seat if the Remain party wins. ECB s vice-president has warned that Donald Trump s US election victory could expose the Euro area to rising protectionism and political risk, suggesting the bank is ready to agree to a fresh round of controversial bond purchases to bolster economic recovery. Britain s PM Theresa May took the unusual step of commenting on central bank policy that nearzero rates and the BoE's bond-buying programme had hurt savers thereby raising question on Bank of England s independence on policy decision. Bank of Japan surprisingly announced its first special bond-buying operation to curb growth in bond yields. The governor mentioned about not standing idly by as Japanese government bond yields jump in line.

5 Gold Last week, spot gold prices declined by 1.4 percent to close at $ per ounce as prices fell to a 5-1/2-month low on Thursday, giving up earlier gains as the dollar index tapped a 13-1/2-year high on strong U.S. economic data and comments by U.S. Federal Reserve Chair Janet Yellen that bolstered the case for hiking interest rates next month. On the MCX, gold prices declined by 1.6 percent to close at Rs per 10 gms. The election of Republican Donald Trump as U.S. president has done nothing to change the Fed's plans for a rate increase "relatively soon," Yellen said in Congressional testimony that included a pledge to serve out her term. The CFTC positions in gold indicate a buildup contracts for the week ending 15 th November. Hedge funds have been adding longs for three consecutive weeks in gold. SPDR gold trust has seen outflows of around 20 tonnes last week and current holdings in trust as on 18 th Nov stands at tonnes From a week perspective, we expect gold prices to trade lower towards $1180 mark while MCX gold prices will trade lower towards Rs.28,000 mark.

6 Crude Oil WTI oil prices rose by 5.3 percent last week to close at $45.7 per barrel s a stronger dollar outweighed expectations of an OPEC deal to limit production. On the MCX, oil prices declined by 1 percent to close at Rs.3079 per barrel. There is optimism that the Organization of the Petroleum Exporting Countries (OPEC) would reach an agreement to cap production at its meeting in Vienna on Nov. 30. Saudi Energy Minister Khalid al-falih said he was optimistic about OPEC's deal to limit oil output, while Venezuelan President Nicolas Maduro said OPEC members are ready to reach a "forceful" agreement, following a meeting with OPEC Secretary-General. The prospects of OPEC nations cutting the oil output looks uncertain as Venezuela president has commented that they might reach to a forceful agreement on this issue. On the other hand, continuous increase of inventories in the US is also exerting downside pressure on oil. From a weekly perspective, we expect oil prices to trade lower towards $42 while MCX crude oil prices can inch lower towards Rs.2900 mark.

7 Copper LME Copper prices traded lower by 3.2 percent last week at $5423/tonne, declining from 17-month highs, as the dollar rallied to 14-year highs after Fed Chair Janet Yellen affirmed in her testimony that Trump s victory in the Presidential elections will not change anything. She will stay in office until her term expires in January 2018 and reiterated that the Federal Reserve remains on course of raising interest rates next month. Along with this, Retail sales, CPI and housing starts in the US turned out robust in October. MCX copper prices traded lower by 0.9 percent to close at Rs per kg last week. Also, CEO of Freeport, the world s largest publicly traded copper miner on Wednesday said that the rally in Copper would need more than infrastructure spending and mentioned US trade protectionism would be matter of concern. However, China s annual fixed-asset investment, a proxy for long-term spending, increased 8.3% in the January-October period although industrial production and retail sales grew less than expected in October. Besides, inventories are down by 19 percent this month and rose yesterday for the first time since 18 th October 16. From a weekly perspective, we expect LME Copper prices to trade higher towards $5700/t while MCX Copper prices may surge towards Rs.380/kg mark.

8 Rupee The Indian Rupee depreciated by 1 percent in the last week owing to strong DX in the overseas market. The newly elected US President Donald Trump has promised to increase government spending, cut taxes and ease financial regulations so as to boost the US economy. Moreover, Modi s government s decision to withdraw Rs 1,000 and Rs 500 notes has led to further weakening of the INR. Rupee demonetization was done mainly to cut spending and tame inflation which could boost the chances of rate cut. However, the INR demonetization has kept the market in jitters leading to huge outflows of FII s from India which hampered the Indian Rupee. All the above factors dented the demand for the Indian Rupee which made a weekly low of and closed at levels on Friday. From a weekly perspective, the Indian Rupee is expected to depreciate and linger at around levels as hawkish comment from the US Fed Chairwoman with respect to America getting a rate hike pretty soon will boost the demand for the dollar in turn keeping the rupee weak. Moreover, the recent attempt of demonetizing rupee by the Modi government to tame inflation and corruption will keep the Indian Rupee a bit weaker.

9 Euro Euro traded lower by more than 2 percent in the last week as the upcoming Italy Referendum (4th Dec 2016) has infused jitters in the European markets. The Prime Minister of Italy wants Italy to leave the EU and has decided to give up his seat if the Remain party wins. Euro-zone is in a state of despair as it cannot afford another Brexit like situation. Rising apprehension from the 'Brexit' negotiations and continued structural weaknesses plus upcoming elections in many Euro-zone countries has affected the demand for the shared currency. Moreover, the ECB s vice-president has warned that Donald Trump s US election victory could expose the Euro area to rising protectionism and political risk. He said that to counter this uncertainty the ECB is ready to release a fresh round of controversial bond purchases to bolster economic recovery. From a weekly perspective, the Euro currency is expected to trade lower and head towards mark as rising apprehension from the 'Brexit' negotiations and continued structural weaknesses plus upcoming elections in many Euro-zone countries will affect the demand for the shared currency. Moreover, the recent Trump victory has kept the ECB thinking about US-Europe s trade relations which could hamper Euro area s already stilled economic growth. The ECB President has signalled at continuation of monetary support amid a fragile Euro-zone recovery and weak inflationary pressure.

10 Soybean Soybean futures closed higher last week as market participants have bought soybean at lower levels. The most-active Dec 16 delivery contract closed 1.55% higher last week to settle at Rs. 3,078 per quintal. There is lower supplies in the physical market as there is cash crunch in all the APMC mandi. The soybean harvesting is complete and the farmers are quite reluctant to sell lower than MSP. Soymeal exports enquiries have slightly improved primarily from South-East Asian countries at the current level and the exports tariff on soy oil to increase by the government is supporting the soybean prices in the domestic market. U.S. soybean futures closed CBOT soybean closed higher last week due to good export demand from China, strong US crush figures and technical buying from the lower levels.

11 Soybean The USDA data shows that more than 1 million tonnes of soybean exports from US last week as brisk Chinese demand continuing. Moreover, NOPA showing that its members crushed million bushels of soybeans in October, the third-heaviest total on record. Export demand has also been supportive, with the U.S. Department of Agriculture confirming sales of more than 1 million tonnes of U.S. soybeans last week. Soy oil stocks as of Oct. 31 stood at billion pounds, the lowest since February The U.S. CFTC's weekly commitments report showed the drop in net long position by managed money participants in CBOT soybeans for the first time in six weeks by nearly 26,087 contracts in the week ending Nov 15, to 98,177 contracts. We expect Soybean prices for December delivery to trade higher towards 3180 / 3200 (CMP: 3,100) due to expectation of lower level buying by the market participants. Moreover, prices may trade in a range on expectation of higher domestic soybean crop this season and weak soy meal exports.

12 Cotton Cotton complex prices closed higher last week due to expectation of shortfall in cotton supply in Gujarat and Maharashtra due to liquidity crunch due to demonetisation. Moreover, improved demand from mills and ginners for new season crop too supports prices. NCDEX Kapas for Apr 17 closed 0.64% higher to close at Rs per 20 kg while MCX Nov 16 cotton closed 2.00% higher to close at Rs. 19,400 per bale. The arrivals of new season cotton in the physical market is down. As per the Commerzbank, instead of the 150, ,000 bales per day (usual for this time of year), only 30,000-40,000 bales of cotton per day are currently reaching the market in India. The demonetization has resulted in payment problems, delivery delays and an increase in domestic cotton prices. But this will be normalised before the end of the month. According to trade sources, in the new marketing season that began Oct 1, Indian traders entered into contracts to export around 600,000 bales (1 bale = 170 kg) which is down 60% on year, of the new cotton crop for delivery during Dec-Jan.

13 Cotton ICE Cotton futures traded higher last week due to short-covering ahead of the first notice day of the December contract next week and encouraging export data. U.S. Government data showed net upland sales totaled 214,400 running bales of cotton for the week ended Nov. 10, up 27 percent from the previous week. Moreover, concerns about US harvesting delays and reports of crop damage in China to support the prices International Cotton Advisory Committee (ICAC) has forecasted lower Chinese ending stock which may increase world cotton prices in coming season.however, as per CFTC data, speculators cut net long position by 55 contracts compared to more than 5700 contract previous week to 61,839 in the week to Nov 15. We expect cotton prices to trade higher towards Rs / (CMP: 19,380 / bale) due to improved demand for new season crop from textile mills and ginners coupled with anticipation of lower supplies from the farmers. Moreover, firm international market will also support domestic cotton prices.

14 Thank You! Angel Commodities Broking Pvt. Ltd. Registered Office: G-1, Ackruti Trade Centre, Rd. No. 7, MIDC, Andheri (E), Mumbai Tel: (022) Corporate Office: 6th Floor, Ackruti Star, Central Road, MIDC, Andheri (E), Mumbai Tel: (022) MCX Member ID: / FMC Regn No: MCX / TCM / CORP / 0037 NCDEX : Member ID / FMC Regn No: NCDEX / TCM / CORP / 0302 Disclaimer: The information and opinions contained in the document have been compiled from sources believed to be reliable. The company does not warrant its accuracy, completeness and correctness. The document is not, and should not be construed as an offer to sell or solicitation to buy any commodities. This document may not be reproduced, distributed or published, in whole or in part, by any recipient hereof for any purpose without prior permission from Angel Commodities Broking (P) Ltd. Your feedback is appreciated on commodities@angelbroking.com