Good afternoon
the US$ is weak today against Euro - perhaps in expectation of Yellens comments later today - perhaps because Draghi commented, that loose policy will be continued in Europe despite a relatively broad improvement of our economy here. The IMF cut it´s growth forecast for Trump-country from 2.3 to 2.1% this year. Consumer Confidence is pretty strong in the US - but the phenomenon of a strong vote for present condition, and a weak vote for future conditions remains.
M&A for coal is continuing...Apollo is bidding for Wesfarmers, while the bidding war for RIO´s Hunter Valley assets continus. Coal is dead? Not sure about that....It might be desirable, but probably not possible for the next 15-20 years at least.
Metals are having a strong day again, while gold recovers from the Fat Finerg (?) story yesterday. Early this morning, 800.000 oz have been traded within 5 minutes...
I really do not understand the cautious mood for the metal stocks...these things have moved quite nicely recently:
Beginning of the year low this year ( usually in early June ) today
Zinc 2576 US$/t 2447 2736
Nickel 10.000 8.800 9.100
Copper 5.535 5.480 5.826
Lead 2.016 2.055 2.271
Cobalt 32.750 58.750
Gold 1.138 US$/oz 1.250
So all of these metals have recovered nicely from the lows - usually reached a few weeks ago for base metals - but the mood continues to be pretty bad. This might have to do with iron ore, which has been suffering, and which in $-terms is all-important. But without any doubt, this is not a question of demand weakness, rather one of strongly rising supply. The price for steel rebar seems to support this argument, as steel is trading at a reasonably positive price today and is up by nearly 10% from year end 2016.
I guess tax-loss selling may be playing a part here. As you know, the Australian tax year is finishing on the 30th of June, and realised profits can be offset by realised losses. As the market is trading close to a high, the main losses are coming from smalelr resources stocks, which have been under constant pressure since about February anyway.
Usually, stocks being hit by tax-loss selling do outperform following the 1st of July - this is supported by very reasonable metal prices, and we might see some nicer moves, once the Quarterlies come out progressively over the course of July.
Independence Gold - had to cut it´s forecast production from their new, very important nickel mine Nova once again. A very funny one...there actually is some downgrading - but tehy also had to acknowledge, that tehy kind of mixed up teh amount of nickel in ore being fed into the plant, and the amount of nickel coming out of it at the eback end. As the recovery is disappointing so far at 79%, this effect has been exaggerated. But still - I hope tehy do their other business more diligent than tehy do theior production forecasts...this casts a very negatively light on management, in my opinion!!!
Have a nice evening
WS