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Global Commodities Roundup: Market Talk

5 Mar 2017 11:39 pm

2339 GMT - Although commodity currencies can suffer during Fed rate hiking cycles, there are mitigating factors, says Govinda Finn, a senior strategist at Standard Life Investments. "What's happening in China is important to the commodity price cycle and hence how these currencies trade; currently we expect global activity to strengthen rather than weaken," he says. "Many commodity exporters have already gone through painful adjustments following the earlier collapse in commodity prices, reducing their vulnerability to renewed Fed tightening," he adds. Commodity currencies might fare better than those of emerging market manufacturing exporters if U.S. President Donald Trump takes a more combative approach on trade. This doesn't mean commodity currencies haven't found a local peak after recent appreciation, but it does "caution against assuming that shorting them is a one-way bet." (rachel.pannett@wsj.com; @rachelpannett)

2306 GMT [Dow Jones] A wetter wet season in Australia's iron-ore-rich west together with positive sentiment among China's steel producers may help explain why prices of iron ore have pushed well above market expectations, Macquarie suggests. The bank's weekly shipping data on all key ports in Western Australia shows iron-ore shipments, which were running at about 850M tons a year in the final quarter, declined to 801mtpa in January and 794mptpa in February. That's a modest decline but suggests that after benign wet seasons the past two years that the upper end of shipping guidance from Rio Tinto (RIO.AU) and BHP Billiton (BHP.AU) may not adequately account for a normal or above-average wet season, Macquarie says. (robb.stewart@wsj.com; Twitter: @RobbMStewart)

2304 GMT [Dow Jones] For most of this year, investors piled into currencies of commodities exporters like Australia or Brazil, as prices rose for everything from copper to wheat. Now, many of those rallies are slowing or reversing on renewed signs of U.S. dollar strength. Many currency investors are shifting to more creative trades. A current favorite: AUD/NZD. Because global growth is likely to be driven by investments in infrastructure, such as those promised by U.S. President Donald Trump, Australia "will be a stronger beneficiary...compared to New Zealand," says Nader Naeimi, a Sydney-based portfolio manager at AMP Capital, which manages more than 165 billion Australian dollars (US$124.95 billion). AUD/USD was last 1.0793. (rachel.pannett@wsj.com; @rachelpannett)

2213 GMT [Dow Jones] Shares of New Zealand-based Synlait Milk (SML.NZ), a supplier for infant-formula maker a2 Milk (ATM.NZ), should benefit after a2 purchased a roughly 8% stake in Synlait. The new position "may provide a floor in the share price near term," analysts at Macquarie say, adding the stock is "looking more attractive on balance of risks and rewards." Macquarie says Chinese infant-formula regulations could move toward requiring a "higher level of ownership over supply chain," which could prompt a2 to increase its Synlait position in the future. Synlait shares jumped 4.5% on Friday to NZ$3.24 after the deal was announced. (mike.cherney@wsj.com; @Mike_Cherney)

2207 GMT [Dow Jones] NZD will be undermined by a 6-8% decrease in dairy prices and a firmer USD this week, says CBA. Dairy prices have peaked because good growing conditions in the key dairying regions has prompted a recovery in production. CBA expects NZD to keep trending lower this week and AUD/NZD to continue to increase. NZD now trades at US$0.7021.(james.glynn@wsj.com; Twitter @JamesGlynnWSJ)

(END) Dow Jones Newswires

March 05, 2017 18:39 ET (23:39 GMT)

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