TEETERS AS METALS, ORE AND OIL PLUMMET

COMMODITY TIPS | TEETERS AS METALS, ORE AND OIL PLUMMET:-

Overnight and early trading
Weakness in commodity prices based on the current Opec imbroglio and the big fall in iron ore overnight has dragged on mining and energy stocks, offsetting gains in the banks.

BHP had dropped 2%, Rio was down 1.5%, while South32 lost 1.8% and Fortescue 4%.

Overnight, crude oil dropped below $46/barrel on concern an Opec deal to stabilise prices is in jeopardy as major producers disagree on curbing output. The USD retreated, while US equities ended higher after paring gains.

     

US oil fell to a two-week low after 10 hours of technical talks failed to resolve differences between crude-producing nations, with Iran objecting to proposed production cuts.

The S&P 500 Index rose after Monday’s retreat, with gains in healthcare and bank stocks offsetting losses among energy shares.

A rally in metals fizzled on signs China is taking steps to cool a trading frenzy in commodities. The dollar reversed early gains, while Treasuries edged higher as optimism over better-than-expected data on US economic growth faded.

     

With the market giving just 30% odds to an agreement to end the oil supply glut, according to Goldman Sachs Group, pessimism around the make-or-break Opec talks is helping quell a commodity rally sparked by Donald Trump’s surprise US presidential victory.

Investors are retreating from some of November’s standout trades as the month comes to a close, with the dollar pulling back from decade high reached as Trump’s election fueled bets on interest rate hikes.

The highly anticipated monthly US payrolls report is due Friday, after data Tuesday showed growth last quarter beat forecasts.

West Texas Intermediate crude futures slipped 3.9% to $45.23/b, after rising 2.2% on Monday. Saudi Arabia has said it is ready to reject an agreement unless all Opec members, excluding Libya and Nigeria, take part, it was reported.

Copper fell from its highest level in more than a year as the main industrial metals tumbled in London.

The Shanghai Futures Exchange and Dalian Commodity Exchange have raised margins and fees to ease a trading frenzy that’s fueled aggressive price gains this month, and further measures are expected.

South Africa’s rand sank 1%, the worst selloff among major currencies on Tuesday, after President Jacob Zuma staved off a bid by officials in the ruling party to oust him.

The JPY weakened 0.4% to 112.39 per dollar, snapping a two-day rebound to be headed for its biggest monthly drop since 2009.

Speculation that President-elect Donald Trump will pursue inflationary spending and tax policies has weighed on Japan’s currency and those of emerging market nations, with odds of a Federal Reserve rate hike hitting 100% in the futures market.

The S&P 500 rose 0.1% to 2,204.66 as all but two main industry groups climbed. The Dow Jones Industrial Average added 0.1% as well, while the Nasdaq Composite Index climbed 0.2%.

Tiffany & Co climbed 3.2% on improving sales in China and Japan and as the jewellery company signaled that the worst of the downturn period may be over.

The VIX inched lower 1.9% to 12.90. The Stoxx Europe 600 Index gained 0.3%, after dropping 0.8% Monday.

Actelion rallied 10% after Johnson & Johnson was said to have raised its takeover offer for Europe’s largest biotech firm.

Asian index futures were split, with contracts on stock gauges in Japan, Australia and South Korea rising, while those on Chinese benchmarks declined.

Yields on 10-year Treasury notes slipped one basis point, or 0.01%, to 2.30%, falling for a second day after spiking up by four basis points earlier in the session.

Italian bonds advanced, pushing 10-year yields down 11 basis points to 1.96% as demand increased at auctions of 10 and five-year securities.

Prime Minister Matteo Renzi’s office denied news reports that he is considering stepping down even if he wins the December 4 referendum on constitutional reform.

Local markets and commodities

•  The S&P/ASX 200 Index futures +0.2%; futures relative to estimated fair value suggest an early gain of 0.2%.

• Bank of New York Australia ADR Index -0.8%, BHP Billiton ADR -2.3% to A$25.04 equivalent, 1.6% discount to last Sydney close, Rio Tinto ADR -2.6% to A$51.33 equivalent, 15% discount to last Sydney close.
• Gold futures for February delivery fell 0.3% to $1,190.80/oz on Comex. The metal climbed Monday by the most since November 2. Prices fell below $1,200/oz last week for the first time since February. Investors have sold 100.6 tonnes of gold through ETFs so far this month as the outlook for higher US rates curbed the appeal of owning assets that don’t provide a yield. Holdings fell 6.3 tonnes to 1,887 tonnes as of Monday, data compiled by Bloomberg show. Gold miners fell 0.2% overnight. Gold stocks: GOR, NCM, NST, AQG, EVN, KCN, RMS, RRL, SAR, SLR.
• Oil fell to a two-week low as an Opec deal to curb output appeared in jeopardy after Iran and Saudi Arabia failed to bridge differences. West Texas Intermediate for January delivery dropped $1.85 to $45.23/b on the New York Mercantile Exchange which was it’s the lowest settlement since November 14 after Iranian Oil Minister Bijan Namdar Zanganeh told reporters in Vienna his nation won’t reduce production. Total volume traded was about 17% above the 100-day average.  
• Iron ore was smashed, down 4.4% to $77.30/t as prices dropped from the highest in more than two years as steel prices in China fell on perceptions that ore supplies are still ample. Iron is still on trach to head clocking its first annual increase in four years. Iron ore stocks: FMG, BHP, GBG, GRR, MGX, RIO, BCI, SDL.
• Industrial metals slumped, paring the biggest monthly rally in four years, on signs that China is taking steps to cool a trading frenzy in commodities. Copper fell from the highest in more than a year as all the main industrial metals on the London Metal Exchange tumbled. Copper for delivery in three months slid 3% to settle at $5,705 a metric ton in London, the first drop in seven days. Lead plunged 6.7% and zinc dropped 6.6%. Copper stocks: PNA, OZL, SFR; Nickel stocks: IGO, WSA; Aluminium stock: AWC

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