China s manufacturing contracts in August raises hopes of stimulus

Transcription

1 nh COMMODITY 03 September 2012 Bernanke s speech raises expectations of QE China s manufacturing contracts in August raises hopes of stimulus Kishore Narne kishorenarne@rathi.com India s gross domestic product in the April-June quarter grew 5.5%, compared with 5.3% in the previous quarter. The manufacturing sector grew an annual 0.2% during the quarter, while farm output rose 2.9%, the data showed. Bernanke did not rule out the possibility of a third round of quantitative easing, stating that the Fed would take further action if warranted. He also added that lack of progress in the labour market is a grave concern, raising hopes that the Fed could be close towards easing. Expectations that China could ease its policy have intensified further after a report from the nation showed manufacturing contracted for the first time in nine months. It came in at 49.2, compared with a reading of 50.1 in July. Retail sales in Australia unexpectedly fell 0.8% in July, following an upwardly revised reading of 1.2% in June. Commodity Chana Zinc Soybean Silver Soy Oil Commodity Cardamom Castor Seed Kapas V97 Turmeric Wheat Top Gainers Price % Change Top Losers Price % Change Key Economic Releases of India & US for 3/9/2012 Country Indicator Time (IST) Previous Survey Actual Please refer to the disclaimer at the end of this report 03/09/ Commodity 1

2 Precious Metals On Bernanke s comments, gold surges to five-month high China manufacturing contracts for the first time in nine months Abhishek Chinchalkar abhishekchinchalkari@rathi.com Projected Gold Spot Spot Bullish Moderate Gold Comex Sep Strong Moderate Gold MCX Oct Bullish Moderate 31,444 31,303 GoldM MCX Oct Bullish Moderate 31,466 31,299 Silver Spot Spot Bullish Moderate Silver Comex Sep Bullish Moderate Silver MCX Sep Bullish Moderate 59,765 58,505 Gold rallied to a five-month high of $1, an ounce while silver advanced to a four-and-ahalf-month high of $ an ounce on Friday in reaction to Fed chairman Bernanke s comments at the Jackson Hole symposium. In his speech, Bernanke did not rule out the possibility of a third round of quantitative easing, stating that the Fed would take further action, if warranted. Markets were initially disappointed by his comments and pushed gold to as low as $1, immediately following his speech. However, with Bernanke adding that lack of progress in the labour market is a grave concern, hopes that the Fed could provide a stimulus in case the labour sector deteriorates further led to a broad-based rally in both gold and silver. Ahead, the outcome of this Friday s crucial labour report is likely to provide further hints regarding the timing of QE as such movements in bullion would be closely impacted by the outcome of this huge event. Meanwhile, today gold has held on to most of its prior-session gains amid renewed expectations that China could soon ease monetary policy. Such expectations were in reaction to a report from China over the weekend which showed the manufacturing sector in the world s second largest economy contracted for the first time in nine months. It came in at 49.2, compared to a reading of 50.1 in July. Ahead, the U.S. will be closed today on account of the Labour Day holiday. On the data front, the focus will be on the release of Spanish and Italian manufacturing PMI as well as U.K. manufacturing PMI. Meanwhile, ECB president Draghi is scheduled to speak later tonight and could drop some hints concerning what action the ECB would be taking later this week during the bank s policy meeting. His comments could trigger some volatility in bullion. Technically, support for gold lies at 1678 while resistance is at For silver, support lies at and resistance at Instrument Gold Prices Price % Change GOLDS Comdty GOLD SPOT $/OZ $ 1, GOLDAU Comdty GOLD SPOT AUD/OZ AUD 1, GOLDLNAM Comdty London Fixing $ 1, IADMGOLD Index Inflation Adjusted ($) $ GDLSLVR Index Gold / Silver Ratio INGLD Index Gold Import Parity Rs. 31, Please refer to the disclaimer at the end of this report 03/09/ Commodity 2

3 Base Metals Bernanke says Fed ready to act Money managers the most bullish on copper since May Pinky Shah Projected ALUMINIUM Sep Bearish Moderate COPPER Nov Bearish Moderate LEAD Sep Bearish Moderate NICKEL Sep Bearish Moderate ZINC Sep Bearish Moderate Copper rose, snapping the longest slump in 12 weeks, after Federal Reserve chairman Ben Bernanke said that the central bank may need to provide more stimulus to revive sluggish U.S. job growth and as China's official purchasing managers' index for the services sector strengthened in August China's official PMI for the services sector rose to 56.3 in August (from 55.6 in July). Meanwhile, China's manufacturing unexpectedly shrank as new orders contracted and output rose at a slower pace, signalling the slowdown in the world s second-largest economy is deepening. The PMI fell to 49.2 in August (from 50.1 in July), the National Bureau of Statistics and China Federation of Logistics and Purchasing said. It was the first time since November 2011 that the figure had fallen below 50, which separates expansion from contraction. Federal Reserve chairman Ben Bernanke on Friday left the door open to a further easing of monetary policy, but stopped short of a clear signal concerning imminent action. The chairman in his speech titled "Monetary Policy since the Onset of the Crisis" defended the effectiveness of non-traditional policy approaches, noting that the impact of QE is "economically meaningful" and that it "provided significant help for the economy". Bernanke indicated a number of headwinds, including the low levels of housing activity, fiscal policy uncertainty and financial market stresses as a result of the EU crisis. The most noteworthy comment was that Bernanke said that stagnation of the labour market in particular is a grave concern, the strongest word Bernanke has ever used regarding the dire situation in employment. Separately, hedge funds and money managers boosted their copper futures positions to their most bullish since May. Managed money increased their net longs in copper by 6,484 lots in the week up to Aug. 28, switching the market to a net long of 3,260 lots. For the day, market movement could be subdued as the US markets are closed in observance of Labour Day. The focus would be on manufacturing PMI data from the euro zone. 31/08/2012 Metal Change Close Cash - 3 M Inventory Change Aluminum Copper Lead Nickel Tin Zinc Instrument Shanghai Prices (in CNY) Price % Change AA1 Comdty Aluminum CU1 Comdty Copper ZNA1 Comdty Zinc RBT1 Comdty Steel Rebar WRT1 Comdty Wire Steel Instrument Aluminum Copper Lead Nickel Zinc Zinc Lead Premium LME Badla Spread Comment 1.40 Raising 4.55 Falling 0.40 Constant 9.40 Falling 1.00 Constant 6.75 Raising Please refer to the disclaimer at the end of this report 03/09/ Commodity 3

4 Energy Oil gains as Fed says monetary easing is evident Factory orders posted the biggest rise in 12 months Prathamesh Mallya Projected NYMEX Crude Oct Bullish High Brent Crude Oct Bullish Moderate MCX Crude Sep Bullish Moderate 5,397 5,369 MCX Crude Oct Bullish Moderate 5,427 5,402 Natural Gas NY Oct Flat Moderate MCX Nat Gas Sep Flat Moderate In volatile trading on Friday, oil rose above $114 a barrel, taking gains in August above 9%, after U.S. Federal Reserve chairman Ben Bernanke stopped short of signalling extra monetary easing was imminent but kept the door open for action. Crude initially pulled back after Bernanke's address at a central bankers' symposium in Jackson Hole, Wyoming. As traders parsed details, prices were quick to move higher, supported by stronger-than-expected U.S. economic data. Figures released on Friday showed U.S. factory orders in July posted the biggest rise in 12 months, jumping 2.8%, while the Thomson Reuters/University of Michigan survey of consumer sentiment showed the index rising to 74.3 in August from 73.6 in a preliminary August report. Quantitative easing is viewed by many investors as likely to boost the price of commodities and other hard assets as it tends to depress the value of the dollar. On Friday the euro rose against the dollar, boosted by signs of progress toward a deal to tackle the euro-zone debt crisis. U.S. markets will be closed today for the U.S. Labor Day holiday. Crude was further supported by reports that Germany and Italy are opposed to the release of emergency consumer oil stocks. This created further uncertainty about the timing of any possible release as sanctions on Iranian exports have tightened the market and boosted prices. Meanwhile, the Department of Energy loaned to Marathon Petroleum Corp. one million barrels of light sweet crude oil from the U.S. Strategic Petroleum Reserve (SPR) due to short-term supply problems created by Hurricane Isaac. The DoE added it continues to "keep all options on the table to address additional or sustained oil supply issues." Overall however, the Gulf of Mexico oil and gas industry has so far reported little major stormrelated damage to infrastructure although one Louisiana refinery had flooding. Energy production is expected to start ramping up again over the weekend. Traders said oilfield maintenance in the North Sea was also boosting prices, with a potential strike by Norwegian oil workers looming just weeks after a walkout lasted 16 days and stopped 13% of Norway's oil production. Norwegian oil drilling workers may strike on Sunday at installations operated by KCA Deutag in two North Sea fields, but production will not be affected, a union leader said on Friday. Fighting in Syria and tension over Iran's nuclear programme also lent support. Spreads Instrument Spread Comment WTI Brent $ Raising NYMEX Calendar $ 0.29 Contango GOLDS Comdty Brent Calendar $ 0.57 Backwardation GOLDAU Comdty MCX Calendar Rs Contango GOLDLNAM Comdty IADMGOLD Index NYMEX Crude Option Distribution.GDLSLVR Index.INGLD Index Thousands Puts Calls Please refer to the disclaimer at the end of this report 03/09/ Commodity 4

5 Spices Pepper drops on fresh selling Jeera futures fall on drop in spot prices Tanmay Kothari Projected Jeera Sep Bearish Moderate 14,696 14,394 Pepper Sep Bearish Moderate 41,670 41,195 Chilli Sep Bearish Moderate 5,036 4,888 MCX Cardmom Sep Bearish Moderate Turmeric Sep Bearish Moderate 6,103 5,929 Pepper Pepper futures dropped on fresh selling, driven by more rainfall in Karnataka and Kerala in the last few days and almost negligible overseas sales because of higher prices, but thin supplies and lower stocks restricted the downside. In Kerala, the leading pepper producer, rains were GOLDS Comdty GOLDAU Comdty GOLDLNAM Comdty IADMGOLD Index.GDLSLVR Index.INGLD Index 56% above average in the week to Aug.29. The most-active September contract ended 0.53% lower at Rs.41,315 per 100 kg. In Kochi, spot pepper rose by Rs.200, to Rs.41,000 per 100 kg, on thin supplies. Jeera Jeera futures fell more than 3% as traders cashed in gains, while a drop in spot prices also weighed futures down. The September jeera contract ended down 3.37% to Rs.14,485 per 100 kg. At Unjha, jeera rose by Rs.19 to Rs.15,606.3 per 100 kg. Turmeric Turmeric futures fell as higher prices dented demand from overseas and local buyers, but lower area under cultivation limited the losses. The September turmeric contract fell 1.04% to end at Rs.6,080 per 100 kg. At Nizamabad, spot turmeric ended Rs lower, at Rs.5,574 per 100 kg. Please refer to the disclaimer at the end of this report 03/09/ Commodity 5

6 Oil Seeds & Edible Oil Domestic oilseeds drop on weak export demand CBOT oilseed drop as traders book profit ahead of Labour Day Prathamesh Mallya Projected RM Seed Sep Bearish Moderate 4,443 4,386 Soy Bean Oct Bearish Moderate 4,049 3,964 Soy Oil NCDX Sep Bullish High CPO MCX Sep Bearish Moderate NCDEX Castor Sep Bearish Moderate 3,904 3,730 Soybean Oilseeds and soyoil futures dropped on Friday on weak export demand for soymeal, a drop in overseas markets and as key oilseed-growing areas got good rainfall last week. On Friday U.S. soybean gave back all gains from the previous session when it had touched a contract high as traders took GOLDS Comdty GOLDAU Comdty GOLDLNAM Comdty IADMGOLD Index.GDLSLVR Index.INGLD Index profits, with markets looking to a gathering of central bankers later in the day for clues concerning a possible imminent monetary stimulus. The October soybean contract fell 1.9% to end at Rs.3, per 100 kg, while rapeseed dropped 1.59% to end at Rs.4,452 per 100 kg. Soyoil for October delivery ended at Rs , down 1.23%. At the Indore spot market in Madhya Pradesh, soyoil nudged down by Rs.0.7 to Rs per 10 kg, while soybean eased by Rs.3 to Rs.4,536 per 100 kg. At Sri Ganganagar in Rajasthan, rapeseed rose by Rs.25 to Rs.4,355 per 100 kg. India has set a new base price for RBD palmolein imports at $1,014 per ton, lower than the previous price. Malaysian crude palm oil futures inched up on Thursday, recovering from a near two-week low hit the previous day The benchmark November soybean futures on the Chicago Board of Trade fell 0.4% on Friday, halting a three-day rise, due to profit-taking ahead of a U.S. holiday weekend and softening cash markets. November soybean ended the week up 1.4% and finished the month up 7%, the contract's third straight monthly rise. Cash soybean basis bids continued to weaken in the U.S. Midwest on expectations of increased supplies from the harvest that is about to start. Rain and wind from the remnants of Hurricane Isaac were expected to move into the central U.S. Midwest this weekend, stalling crop harvests and causing some localized damage. Palm Malaysian crude palm oil futures inched up on Thursday, recovering from a near two-week low hit the previous day although traders were cautious ahead of a speech by U.S. Federal Reserve chairman Ben Bernanke on Friday. The edible oil has posted two straight weeks of gains as the worst drought in over half a century damaged soybean crops in the U.S. Midwest, hurting soybean oil supply and shifting more vegetable oil demand to the cheaper palm oil. At closing, the benchmark November 2012 contract on the BMD Exchange gained 0.7% to 3,019 ringgit ($967) ton. Please refer to the disclaimer at the end of this report 03/09/ Commodity 6

7 Other Commodities Sugar gains on improved spot demand Chana declines on more rainfall Tanmay Kothari Projected MENTHAOIL Sep Bullish High 1,377 1,353 CHANA Sep Flat Moderate 4,802 4,694 COCUDAKL Sep Bearish Moderate 1,538 1,518 POTATO NCDX Sep Flat Moderate 1, , WHEAT Sep Bearish High 1,572 1,562 BARLEY Sep Bearish Moderate 1,263 1,244 SUGAR Sep Bearish Moderate 3,517 3,480 Kapas V797 Apr Bearish Moderate 1, , Sugar futures extended gains on Friday to hit the highest level in nearly four weeks as demand in the spot market improved on an estimated drop in output in a key producing state. The key October contract ended 0.69% higher at Rs.3,633 per 100 kg. Sugar in the Kolhapur spot market rose 36.9% to Rs.3, per 100 kg. Chana fell more than 1% on Friday on improved rainfall, which would help sowing, and on poor demand in spot markets. The most-active chana contract for September delivery ended down 1.52% to Rs.4,650 per 100 kg. In the Delhi spot market, chana fell by Rs to Rs.4, per 100 kg. Monsoon rains were 6% above average in the past week, the weather office said on Thursday, the first time they have been heavier than normal in the current season that began in June, in what is turning out to be a drought year according to the IMD. GOLDS Comdty GOLDAU Comdty GOLDLNAM Comdty IADMGOLD Index.GDLSLVR Index.INGLD Index p f, 1 Chana fell more than 1% on Friday on improved rainfall, which would help sowing, and on poor demand in spot markets Please refer to the disclaimer at the end of this report 03/09/ Commodity 7

8 - Level Playing Sheet Prices as of Close on 01/09/2012 Projected Gold Spot Spot Bullish Moderate Gold Comex Sep Strong Moderate Gold MCX Oct Bullish Moderate 31,444 31,303 GoldM MCX Oct Bullish Moderate 31,466 31,299 Silver Spot Spot Bullish Moderate Silver Comex Sep Bullish Moderate Silver MCX Sep Bullish Moderate 59,765 58,505 ALUMINIUM Sep Bearish Moderate COPPER Nov Bearish Moderate LEAD Sep Bearish Moderate NICKEL Sep Bearish Moderate ZINC Sep Bearish Moderate NYMEX Crude Oct Bullish High Brent Crude Oct Bullish Moderate MCX Crude Sep Bullish Moderate 5,397 5,369 MCX Crude Oct Bullish Moderate 5,427 5,402 Natural Gas NY Oct Flat Moderate MCX Nat Gas Sep Flat Moderate Jeera Sep Bearish Moderate 14,696 14,394 Pepper Sep Bearish Moderate 41,670 41,195 Chilli Sep Bearish Moderate 5,036 4,888 MCX Cardmom Sep Bearish Moderate Turmeric Sep Bearish Moderate 6,103 5,929 RM Seed Sep Bearish Moderate 4,443 4,386 Soy Bean Oct Bearish Moderate 4,049 3,964 Soy Oil NCDX Sep Bullish High Soy Oil MCX Mar Bearish Moderate 1, , CPO MCX Sep Bearish Moderate NCDEX Castor Sep Bearish Moderate 3,904 3,730 MENTHAOIL Sep Bullish High 1,377 1,353 SUGAR Sep Bearish Moderate 3,517 3,480 CHANA Sep Flat Moderate 4,802 4,694 COCUDAKL Sep Bearish Moderate 1,538 1,518 Kapas V797 Apr Bearish Moderate 1, , POTATO NCDX Sep Flat Moderate 1, , WHEAT Sep Bearish High 1,572 1,562 BARLEY Sep Bearish Moderate 1,263 1,244 Guidelines to Use: * 5DMA = 5 Day Moving Average; 20 DMA = 20 Day Moving Average; * S1; S2; S3 are 1st, 2nd and 3rd Supports respectively R1; R2; R3 are 1st, 2nd and 3rd Resistances respectively + Trend: This is a broad based technical Trend of the commodity prevalent, may not be necessarily for the day # Projected high and low are indicative range for the day, if the price moves out of the range the trend in that side may accelerate and turn highly bullish or bearish Please refer to the disclaimer at the end of this report 03/09/ Commodity 8

9 Intraday call tracker for Date Commodity Call Entry Target Stop loss Exit / Close Result Profit / Loss Analyst 30 Aug 12 SUGARS150 Buy At / Profit 2900 Siva 30 Aug 12 CRUDEOIL Sell Below Loss 3500 Sagar 30 Aug 12 SILVER Sell Below Profit 4620 Sagar 31 Aug 12 SYOREFIDR Sell At / Profit 2900 Siva 31 Aug 12 COPPER Sell At / Profit 3750 Siva 31 Aug 12 SUGARS150 Buy Above NA NI Siva 31 Aug 12 GOLD Sell Below / Profit 7900 Sagar 31 Aug 12 SILVER Sell Below / NA NI Pragnesh 31 Aug 12 GOLD Sell At / Loss 6500 Pragnesh 31 Aug 12 SILVERM Sell At / Loss 3250 Pragnesh Total 63% 8820 NI = Not Initiated Disclaimers: This report has been issued by AnandRathi Commodities Limited (ARCL), which is regulated by FMC. The information herein was obtained from various sources; we do not guarantee its accuracy or completeness. Neither the information nor any opinion expressed constitutes an offer, or an invitation to make an offer, to buy or sell any commodities or any options, futures or other derivatives related to such commodities ("related investments"). ARCL and its affiliates may trade for their own accounts as market maker / jobber and/or arbitrageur in any commodities of this issuer(s) or in related investments, and may be on the opposite side of public orders. ARCL, its affiliates, directors, officers, and employees may have a long or short position in any commodities of this issuer(s) or in related investments. This research report is prepared for private circulation. It does not have regard to the specific investment objectives, financial situation and the particular needs of any specific person who may receive this report. Investors should seek financial advice regarding the appropriateness of investing in any commodities or investment strategies discussed or recommended in this report and should understand that statements regarding future prospects may not be realized. Investors should note that income from such trades, if any, may fluctuate and that each commodity's price or value may rise or fall. Past performance is not necessarily a guide to future performance. Foreign currency rates of exchange may adversely affect the value, price or income of any commodity or related investment mentioned in this report. The views expressed in this research report accurately reflect the personal views of the analyst(s) about the commodities or issuers and no part of the compensation of the research analyst(s) was, is, or will be directly or indirectly related to the specific recommendations or views expressed by the research analyst(s) in this report 2010 AnandRathi Commodities Limited. All rights reserved. This report or any portion hereof may not be reprinted, sold or redistributed without the written consent of AnandRathi Commodities Limited. Additional information on recommended commodities is available on request. Please refer to the disclaimer at the end of this report 03/09/ Commodity 9