Good morning. Global markets rallied last night as the USD continues to get “crunched” on the back of stronger corporate earnings and better-than-expected Chinese data. To add “fuel to the fire”, analysts are pushing back their interest rate revisions and we don’t see interest rates rising in the US or the rest of the world for the next six months…. Big call? Sure…….
This is what we like waking up to….
Dow Jones + 49 points
European Indices up 0.8%+
Crude oil + 2.3%
SPI Futures + 27
We should have a good day…. Crude oil climbed 2.3 percent to $43.90 a barrel in London, as a labour strike that started Sunday in Kuwait, OPEC’s fourth-biggest member, reduced the nation’s output by 60 percent to 1.1 million barrels a day. West Texas Intermediate rose 3.1 percent to $41.01 a barrel in New York.
Silver futures entered a bull market after prices jumped to a 10-month high and as investors pile into precious metals, with top forecasters’ staying positive on gold. Silver soared 4.4 percent to settle at $16.972 per ounce, the highest since June 2. The metal has gained 21 percent this year, the best performing asset in the Bloomberg Commodity Index.
Gold futures jumped 1.5 percent to $1,253.70 an ounce in New York. Iron ore extended its rally above $60 a metric ton as steel prices in China surged.
“The recession talk from February is off the table and we’re also seeing stability in China which is helping global commodities in general,” Mark Kepner, an equity trader at Themis Trading LLC in Chatham, New Jersey, said in a phone interview.
“Bank earnings show they’re having a rough time with investment banking but that’s not the main street economy. People are looking at consumer loans going up and now thinking the glass is half full.”
So here’s the question….
Are we in a commodities bull market right now?
In Oz, yesterday, equities rallied (XJO + 50 points), as Rio Tinto stated that it is cutting its iron ore production guidance for next year by as much as 20 million tonnes, but remains on track to meet output guidance for 2016.
On Tuesday Rio said Pilbara production was expected to be between 330 million and 340 million tonnes in 2017, compared to previous guidance of 350 million tonnes, "subject to final productivity and capital expenditure plans".
UBS analyst Glyn Lawcock said the guidance change "could positively impact market sentiment for iron ore supply/demand, especially if we see BHP reduce its guidance also, as we expect".
Today, all focus will be on BHP’s production report, which is also likely to cut production…
The SPI is up 27 points this morning.
Niv Dagan is an Executive Director of Melbourne based boutique funds management and corporate advisory firm, Peak Asset Management (www.peakassetmanagement.com.au). He is also a regular financial commentator on Sky Business.