Market Update & Important Indicators
U.S. stocks drifted between gains and losses Wednesday as investors continued to focus on the path of U.S. monetary policy. Many investors say that uncertainty about the Fed's monetary policy could exaggerate stock-market swings. Still, the Fed is likely to take a slow approach to raising rates, which means returns on stocks will remain more attractive than on other assets. The S&P and Dow both fell 0.2% to 2,040 and 17,635 respectively.
Stocks across Europe rallied Wednesday, with further declines in the euro pushing the pan-European market's benchmark to a fresh multiyear high and the German market to a fresh record. The Stoxx Europe 600 leapt 1.5% to 395.5, following two consecutive declines that had knocked the index back about 1.1%.
Stocks in Hong Kong had the added pressure from weak China data, including on industrial output, which rose 6.8% in the January to February period from a year ago, down from a 7.9% increase in December and below a 7.6% growth forecast from a Wall Street Journal survey. The Hang Seng Index was down for the seventh straight day, to a two-month low. Australian shares fell Wednesday amid global jitters about a possible midyear interest-rate increase in the U.S.
Metals ion the LME were down for the second day in a row. Copper fell 0.6% to US$2.61/lb and nickel lost 2.0% to US$6.22/lb. Gold was down 0.7% to US$1154/oz while Brent rose 2.7% to US$57.90/bbl.
Thought for the day – Iron ore leverage point
Relentless growth
In the wake of the Global Iron Ore & Steel Forecast Conference we are seeing reaffirmation that Australia’s majors plan to continue their relentless push for increased production. Head of both BHP’s and RIO’s iron ore businesses (Jimmy Wilson and Andrew Harding) defended their growth strategies. And why not? With breakeven prices of in the mid to low US$30s/dmt (CFR fines equivalent), both Company’s maintain strong margins to today’s price of US$58/dmt.
The casualties of declining prices are likely to be the junior field with FMG pushed to the wire.
Atlas Iron, BC Iron Mount Gibson Iron and Fortescue Metals are all dancing on the edge of leverage with current prices hovering around their respective breakeven price. This means we could see significant share value accretion if there is a price recovery. Unfortunately, despite continued growth in iron ore demand (~driven by 4-5% CAGR global steel production), 5-6% growth in seaborne supply in 2015 is likely to maintain downward pressure on prices.
Recent Contacts & Presentations
Fertoz (FTZ), Atrum (ATU), Doray (DRM), Perseus (PRU), Avanco Resources (AVB), RTG Mining (RTG), Helix Resources (HLX), Rift Valley Resources (RVY), Saracen (SAR), Anova Metals (AWV), West African Resources (WAF), Commodities Group (COZ), Pioneer Credit (PNC), Matrix (MCE), Austal (ASB), Ausdrill (ASL), TFS Corporation (TFC), Gage Roads (GRB), Austin Engineering (ANG), Buru Energy (BRU)
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