need2know: Commodities shining

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This was published 8 years ago

need2know: Commodities shining

By Timothy Moore
Updated

Local shares are poised to rise at the open. Iron ore jumps 18.5%. Rio, BHP advance in London. Oil higher. $A extends rally. Locally, RBA deputy governor Philip Lowe is poised to speak at a conference in Adelaide this morning.

What you need2know

RBA deputy governor Philip Lowe speaks at a conference in Adelaide this morning.

RBA deputy governor Philip Lowe speaks at a conference in Adelaide this morning.Credit: Dominic Lorrimer

SPI futures up 24pts or 0.5% to 5155 at 7am Sydney time

AUD fetching 74.66 US cents, 84.62 Japanese yen, 67.83 Euro cents and 52.36 British pence

On Wall St, in afternoon trade, Dow flat, S&P 500 -0.1%, Nasdaq -0.9%

In Europe, Stoxx 50 -0.5%, FTSE -0.3%, CAC -0.3%, DAX -0.5%

In London, BHP +3.5%, Rio +5%

Spot gold +0.3% to $US1263.02 at 12.41 New York time

Brent crude +4.4% to $US40.43 at 12.17pm New York time

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Iron ore surged $US9.99 or 18.5% to $US63.74 a tonne

What's on today

RBA deputy governor Philip Lowe speaks at a conference in Adelaide.

Local data: NAB Feb business survey, NZ manufacturing activity

Overseas data: China trade surplus, imports, exports (Feb.), Japan final GDP (fourth quarter), NFIB US small-business optimism index (Feb.), euro area GDP (fourth quarter),

Overseas earnings: RWE, Merck, Volkswagen

Bank of England governor Mark Carney and deputy governor for financial stability Jon Cunliffe testify to UK lawmakers on Britain's referendum on EU membership; EU finance ministers meet to discuss taxation, fiscal sustainability, banking union, the recent G-20 meeting and the coordination of budget policy; Italian Prime Minister Matteo Renzi and French President Francois Hollande hold a summit meeting.

Hawaii, Idaho, Michigan and Mississippi hold primaries or caucuses in the US presidential elections. Other states/territories holding elections this week are Washington, DC; Idaho; Kansas; Kentucky; Louisiana; Maine; Nebraska; and Puerto Rico.

Currencies

The euro fell for the first time in four days as investors braced for the ECB's policy decision. Nearly three-quarters of the economists in a Bloomberg survey predict the central bank will expand monthly quantitative easing, and all but one see the deposit rate being cut further below zero. The shared currency weakened 0.1 per cent to 125.05 yen, while falling to $US1.10.

A gauge of twenty emerging currencies advanced a sixth day. Colombia's peso and Russia's rouble led gains in currencies, climbing at least 1 per cent versus the US dollar.

Brazil's real fell as economists said this year's recession will be deeper than previously expected, throwing cold water on a four-day rally that sent the currency to a three-month high last week. The real declined 0.5 per cent to 3.7776 per US dollar.

Commodities

Iron ore's benchmark price rose $US9.99 or 18.5 per cent to $US63.74 a tonne on Monday, according to Metal Bulletin, the largest gain since daily pricing began in mid-2008. From its record low of $US38.30 on December 11 last year, the benchmark price has now risen 66 per cent.

Brent crude rose as producers sought a new anchor price for oil after a selloff that has lasted nearly two years, although some analysts warned the global glut is still big. Brent, the global crude benchmark, hit a 2016 high of $US40.11. It has rebounded from a 12-year low of $US27.10 on January 20.

Morgan Stanley said "a large portion" of the oil rally was due to US dollar depreciation. "Thus, prices can continue to rally on headlines and a dollar pullback, but the upside should be limited by bloated global inventories and producer hedging," it said in a note.

United States

Stocks on Wall Street fell from a two-month high in afternoon trade as Netflix led technology shares lower. Netflix slipped on a report that its subscriber growth slowed. Energy producers gained as oil rallied on speculation production may be frozen.

Wall Street's average bonus fell 9 per cent to $US146,200 in 2015, the biggest drop since 2011, according to estimates by New York State Comptroller Thomas DiNapoli.

Federal Reserve governor Lael Brainard said the US economy isn't immune to global risks and called for careful adjustments to the policy rate to preserve the expansion. The speech, to the Institute of International Bankers annual conference in Washington, was one of the most detailed arguments to date by a Fed official on downside risks to the outlook.

Europe

Traders questioning the longest run of weekly rallies since October sent European stocks lower, while a rise in oil prices helped equities pare losses in the final hour of trading. The Stoxx Europe 600 Index slid 0.3 per cent, trimming a decline of as much as 1 per cent after China outlined an economic expansion of 6.5 per cent to 7 per cent for this year, which would be less than last year's 6.9 per cent rate, already the slowest growth in a quarter century.

"People are now taking profits after a decent run in the last weeks," said Konstantin Giantiroglou, head of investment advisory and research at Neue Aargauer Bank in Brugg, Switzerland. "Economic data will become the dominant factor as everything looks so fragile, especially now ahead of ECB. The market expects the ECB to do something."

Italian lenders were once again leading declines, with Banca Monte dei Paschi di Siena SpA and Banco Popolare SC falling more than 4 per cent. Concern over their bad loans sent them to their lowest prices since at least 2012 last month. The nation's FTSE MIB Index dropped 1.2 per cent for the biggest drop among western-European markets.

JPMorgan and Goldman Sachs are leading the sale of 700 million shares in Italian oil contractor Saipem, two traders said on Monday. One of the traders said the shares were being sold at a discount at 0.3875 euros each. Saipem shares closed up 7.2 per cent on Monday at 0.4258 euros.

What happened yesterday

The Australian sharemarket soared for a sixth day, hitting a two-month high as iron ore's rally led to a huge 24 per cent rally in Fortescue Metals Group and a jump in BHP Billiton. The S&P/ASX 200 index raced above 5100 points at the open, remaining steady for the session before pushing higher in late trade.

The benchmark index finished 1 per cent, or 52.8 points higher, to 5142.8, while the broader All Ordinaries ended 1 per cent or 53.6 points higher to 5204.7.

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