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10 October 2018 08:44 AM
Overseas Market ReportCurrent
Level
PreviousChangeDaily %
Change
Monthly %
Change
Dow Jones Industrial Average26,43126,487-56.00-0.212.22
S&P 5002,8802,884-4.00-0.140.11
NASDAQ7,7387,7362.000.03-2.35
FTSE 100 Index7,2387,2334.000.06-0.57
DAX 3011,97711,94730.000.25-0.08
CAC 40 Index5,3195,30018.000.350.93
Nikkei 225 (Japan)23,52723,46957.000.245.16
HKSE26,17326,203-30.00-0.11-1.66
SSE Composite Index2,7212,7175.000.171.93
S&P/TSX Composite Index15,85415,946-92.00-0.58-1.26
NZ 509,0379,070-33.00-0.36-0.13
US Volatility (Vix)16
Overseas Market Report

US sharemarkets were flat on Tuesday. Investor sentiment was dented by a downgrade in global growth forecasts in response to the Sino-US trade war. The energy sector rose in response to a higher oil price but the materials sector was lower. The Dow Jones finished down by 56 points or 0.2% after trading in a 216-point range. The S&P500 index was down by just 0.1% but the Nasdaq index rose by2 points or less than 0.1%.

Global oil prices rebounded on Tuesday. There was a partial production shutdown in the Gulf of Mexico ahead of Hurricane Michael. And data showed that production from OPEC's third largest oil producer, Iran, was just 1.1 million barrels per day in the first week of October. Production was 1.6mbpd in September and was 2.5mbpd earlier in the year in April. Brent crude rose by US$1.09 or1.3% to US$85.00 a barrel and the US Nymex price rose by US67cents or 0.9% to US$74.96 a barrel.

Base metal prices mostly rose on the London Metals Exchange on Tuesday. Nickel rose most, up 3.5%, but tin rose by just 0.6%. In contrast lead fell by 2% and aluminium lost 0.7%.

The gold futures price rose by US$2.90 an ounce or 0.2% to $1,191.50 an ounce. The spot gold price was trading near US$1,188 an ounce in late US trade. Iron ore rose by US$1.15 or 1.7% to US$70.55 a tonne.

CommoditiesCurrent
Level
PreviousChangeDaily %
Change
Monthly %
Change
Oil Brent84.9485.00-0.06-0.079.78
Oil - West Texas crude74.7674.96-0.20-0.2710.69
Gold Spot $/OZ1,190.001,190.000.400.04-0.47
Silver Spot $/OZ14.4014.400.000.171.64
Iron Ore65.3065.000.300.385.32
Thermal Coal Newcastle111.00112.80-1.80-1.60-3.14
Coking Coal FOB ECP AUS0.000.000.000.000.00
Aluminium ($US/t)2,0492,063-14.00-0.680.89
Copper Mar-18 ($US/lb)2.822.821.000.367.89
Lead ($US/t)1,9091,948-39.00-1.98-7.21
Nickel ($US/t)12,93312,496438.003.505.39
Zinc ($US/t)2,7202,65565.002.4312.24
Tin ($US/t)18,98218,876106.000.56-0.46
Uranium ($US/lb)28.0028.000.000.182.42
Australian Market ReportCurrent
Level
PreviousChangeDaily %
Change
Monthly %
Change
ASX All Ords6,1556,155-1.00-0.01-1.52
S&P/ASX 2006,0406,041-1.00-0.02-1.66
ASX 24 Futures6,012
Australian Market Report

Tuesday 09 October - close. Australian stocks have put in another weak performance as healthcare and other global sectors caused the ASX to lag, hovering just above 6000 percentage points at the close for the second day. The benchmark S&P/ASX200 index was down 59.2 points, or 0.97 per cent, at 6041.1 at 1630 AEDT on Tuesday, after hitting a low of 6033.6 just before 1500 AEDT, while the broader All Ordinaries was down 63.1 points, or 1.01 per cent, at 6115.5 

Ashanti Headlines

LME week bullish on outlook for copper

 

  • LME copper rises as much as +0.9%, leading a broad rise in base metals with investors favouring the red metal’s outlook in remarks at LME week in London. Metals are shrugging off IMF’s warnings on the global economy, after the lender cut its growth forecast for the first time in more than two years, finding cause in the escalating trade tensions and stresses in emerging markets.
  • Freeport-McMoRan exec Javier Targhetta sees a “very powerful copper market,” citing falling inventories, long-term demand from electric vehicles, moves to cleaner energy, urbanization and constrained supply. CRU Group’s Vanessa Davidson also likes copper on expectations of solid demand, as long as China avoids a “dramatic slowdown.”
  • The metal could also surge above $7,000/t as demand is set to outstrip supply, according to head of commodities and Asia-Pacific foreign exchange at UBS Group AG, Dominic Schnider. “Its really demand concern. If China stimulates enough, US does quite well in activity and Europe holds up, we’re good to go for another deficit.”
  • While the metal trades at a -14% discount to the beginning of 2018, targets on $7,000-$8,000/t are needed to attract essential mine investment.
  • Concerns over a global trade war’s effect on economic growth helped drive copper into a bear market in August and price recovery since then has been tepid. However, physical spot sales of copper to China are booming and exchange inventories have fallen sharply. That disconnect has metals specialists gathering in London for LME Week -- from producers to commodity-focused hedge funds -- turning increasingly bullish on copper.
  • Efforts to sell up to 60,000tpa copper from Codelco to China Minmetals between 2019-2021 is marking a change in sales strategy for a longer-term agreement from typically annual deals. The aim was to agree ‘evergreen’ three-year deals in which the Chinese company would commit to buy 50-60ktpa during the period, with the three-year pact rolling over annually – so from 2020 the deal would be extended to run for three years until the end of 2022 and so on.
  • Typically supply contracts are agreed annually for the next year during what is known as "mating season" in October and November when producers and customers agree quantities. Premiums are set above the London Metal Exchange benchmark price. According to one source “Codelco is looking to establish a base of bigger and long-term strategic customers worldwide and Asia is not an exception”.
  • Codelco, the world's largest copper miner, accounted for 1.734mt of global supplies last year, about 7% of the total estimated at about 23mt. It has historically been used as a benchmark for copper premiums.
  • Many companies are keen to lock in long-term supplies due to expectations of shortages over coming years, created by a dearth of new projects, deteriorating ore grade and healthy demand. However, a 25% duty on Chinese imports of U.S. copper scrap imposed since from Aug. 23 has fueled uncertainty about supplies in China, the world's largest consumer of the metal used widely in power and construction. These duties could create disruptions to Chinese consumers, and the move to secure long-term supply reflects growing supply concerns.
  • MOD Resources is our preferred exposure to ASX listed copper explorer / developers. In our view, the current T3 Resource more than underpins MOD's current valuation (MCAP A$86.8M, EV of A$69M) and with 10 drill rigs active across the companies expansive landholding, we are expecting plenty of positive news-flow. We are particularly looking forward to the drilling of the T20 dome due to commence this month. 
  • Please contact the desk on +61 6169 2668 if you'd like to discuss further. 


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