The September unemployment rate in the Euro-area came out worse than expected at 11.6%. Spain is still holding out on requesting a bailout and Greece, which is supposed to receive a 31bn Euro package in November, is far behind in the implementation of the necessary structural reforms. The strong US data, weak European data and continued European sovereign concerns have kept the US dollar strong, keeping downward pressure on dollar-sensitive commodities. It will be interesting to see if concerns about a potential US sovereign downgrade if the “fiscal cliff” issue is not solved (or postponed) by the end of year, reverses current US dollar bullishness. During last summer’s budget ceiling standoff and US downgrade gold rallied 30%.
WTI crude ETCs receive strong inflows, totalling US$28.4m, in the aftermath of Hurricane Sandy. Oil demand is expected to rise in the short term, as refineries in the US East coast resume operations after the transit of the superstorm. This, coupled with positive Chinese manufacturing data, improved the outlook for oil and prompted inflows into WTI crude ETCs.
Long copper ETCs see over US$15m of inflows bolstered by positive Chinese PMI numbers. October Chinese PMI climbed to 50.2 surpassing the 50 level for the first time in 3 months, indicating that concerns about Chinese economic weakness might have been overstated. Sentiment for industrial metals was boosted by the positive economic indicators last week, with both copper and nickel ETCs receiving inflows. Following the recent slump in prices, nickel ETCs saw inflows of over US$3m last week, on expectations that nickel demand may soon recover.
Long silver ETCs see US$11m of inflows on expectations of stronger demand from China. According to the Chinese research institute Antaike, demand for silver from China, the 2nd biggest consumer, may jump as much as 10% in 2013 on higher investment demand. Jewellery demand, which represents around a third of total silver consumption in China, was up 19.3% in the first eight months of 2012 compared to a year earlier. At the same time, government plans to expand its solar capacity is also likely to further boost demand. Platinum ETCs also received strong inflows last week of US$10.5m, on the back of sit-in protests in South African mines. Last week, operations at AngloGold’ mine Tau Tona were suspended due to a worker sit-in protest over bonus payments. At the same time, Anglo Platinum reported to have lost over 140,000oz in production because of the on-going strikes. The situation in South Africa may keep prices supported for some time.
Key events to watch this week: US Presidential elections, BOE and ECB interest rate decisions and the start of the 18th Chinese Communist Party Congress. The election of the 45th President of the
US will be closely monitored by investors as the new leader may have an impact on how smoothly fiscal-cliff discussions will progress. Although little is known about the Chinese Party Congress, the event will be closely watched for signs of policy change. UK, Europe and China’s industrial production numbers will also be watched closely to assess the relative strength of those economies.
Source: ETFWorld.co.uk
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