Overview: After a weak start to the week, equities re-gathered momentum as global growth data bounced back at the end of the week. Gold miners rallied nearly 6% as the gold price rose and sentiment towards miners continues to improve….
ETF Securities Research
Industrial metal prices also rallied strongly as Indonesia’s ban of mineral ore exports came into effect. Today’s better-than-expected Chinese Q4 GDP release reinforces that trend. Improved European car sales helped lift the price platinum group metals last week as the market braced itself for yet another miner strike in South Africa. In currencies, cyclically linked currencies like the Swedish Krona and the New Zealand Dollar posted the strongest performance, mainly against the British Pound. AUD is likely to join the trend this week with continued strength of the Chinese economy likely to be supportive.
Commodities: Industrial metal prices rose across the board last week as Indonesia’s ban of mineral ore exports came into effect, which could see the supply of several metals tighten this year. Stronger-than-expected economic activity also lifted investor sentiment toward cyclical assets. Although the mineral ore export ban has been watered down from its original proposal, exports of ores for use in nickel pig iron are affected. Nickel prices rose 8.4%. Precious metals also rose across the board despite the stronger US dollar. Improved European car sales, after an extended period in the doldrums, helped lift the price platinum group metals last week as the market braced itself for yet another miner strike in South Africa. Natural gas prices rose 8.6% as EIA data confirmed that that natural gas storage withdrawals had beat the prior record set in December as result of the extreme cold weather.
Equities: Global equities back on the uptrend as positive growth indicators revived market’s appetite for cyclical assets. US equities started last week on a negative note following the previous Friday’s weak US non-farm payroll. However, better-than-expected industrial production data in Europe and the US combined with UK retail sales strong 2.8% growth against the expected 0.3%, managed to put global equities back on the upward trend. European leveraged equity indices jumped 4.6% on average over the past week to Thursday while the DAXglobal® Gold Miners Index surged 5.7% on the back of investors’ continued appetite for cyclical assets and gold price 1.3% increase over the same period. We expect current momentum to remain for the coming weeks.
Currencies: AUD forming base as cyclical bulls push SEK and NZD to top performance. With the exception of the Australian dollar (AUD), cyclically linked currencies like the Swedish Krona and the New Zealand Dollar posted the strongest performance, mainly against the British Pound. AUD is likely to join the trend this week with continued strength of the Chinese economy likely to be supportive, despite the softer fundamental backdrop in Australia. The AUD could show surprising strength against the Euro in the week ahead, especially if the Eurozone manufacturing numbers fail to show that the region remains on a recovery path. While we expect a cyclical recovery to continue, we feel that this will benefit the US Dollar given the potential development of liquidity reduction. In this light we would suggest long cyclical currencies against the Euro given the ECB remains in ‘whatever it takes’ mode.