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Global Commodities Roundup: Market Talk

20 Mar 2017 2:32 am

0232 GMT [Dow Jones] London spot gold prices rose in Asia trade on Monday, extending a rally since last week as concerns ease that the US Federal Reserve will accelerate its pace of monetary tightening. Gold is now hovering near a two-week high. Dollar weakness also continues to support gold. Gold was trading $4.61 higher at $1,233.21/ounce. (biman.mukherji@wsj.com)

0021 GMT - Oil prices start the week in Asian trading to the downside, and there's few positive cues on the horizon. Investors are taking on more short positions as the US onshore oil-rig count continued to rise last week. "Speculators have now decreased their bullish net positions for 3-straight weeks as the market becomes concerned with the overall global effect of" rising US output "versus the cuts made by the OPEC and company," says Stuart Ive, a client manager at OM Financial. April Nymex futures are down 18 cents at $48.60/barrel, which would be the lowest level since Tuesday, while May Brent is 11 cents lower at $51.65. (jenny.hsu@wsj.com; @jen1113)

2310 GMT [Dow Jones] There are plenty of bearish drivers for iron-ore and steel prices, including high stockpiles in both markets. But macro news is outweighing fundamental drivers in setting price direction for now, says Citi. "Spot iron-ore trading volumes have been weak recently, but traders continue to show" a strong desire to support "prices thanks to robust macroeconomic sentiment and expectations on sequential increase of steel output," it says. Spot iron ore last traded at US$92.30/ton, near a two-and-a-half-year high. (rhiannon.hoyle@wsj.com; Twitter: @RhiannonHoyle)

2245 GMT [Dow Jones] Dairy bulls are braced for disappointment at this week's Global Dairy Trade auction, but they shouldn't fret about the outlook. Futures trading points to a further fall in whole milk powder prices this week after a sharp 12% drop at the auction two weeks ago. Westpac, however, thinks global dairy prices will improve during 2017. Supply is the big drag on dairy prices right now. New Zealand production is surprisingly strong while milk collections in Europe are also improving. Still, prices are around 35% higher than in mid-2016, Westpac says. "And while prices might track a bit lower in the near term, fundamentals in dairy markets are better than they were a year ago with global supply still well shy of last year's peak," Westpac says. (david.winning@wsj.com; @dwinningWSJ)

2239 GMT [Dow Jones] Morgan Stanley has a question for Evolution Mining (EVN.AU): How will it add value to its Ernest Henry investment? "At the time of the acquisition we said buying the gold stream from a copper-gold mine was a novel way to add gold production without paying a control premium," it says. "However we also noted that unlike the prior acquisitions, of Mungari and Cowal, Evolution doesn't operate this one; in our view this limits its ability to add value through asset optimization." With Evolution now holding a site tour for analysts, Morgan Stanley says it will be looking for further details on how the miner may increase production or mine life, and how any projects will be funded. (rhiannon.hoyle@wsj.com; Twitter: @RhiannonHoyle)

2234 GMT [Dow Jones] Alumina (AWC.AU) is certainly headed for a much stronger year in 2017, says Morningstar, following an average alumina price of nearly US$350 a ton in the first two months. "Our forecast for adjusted earnings to nearly triple in 2017 to A$0.11 per share assumes an average alumina price of US$300 per ton," it says. Still, the research firm worries the market is a little too bullish on the company, despite Alumina's shares stabilizing around A$1.85. It hangs a sell rating on the stock, saying recent strength in alumina prices is encouraging more supplies from China, which could weigh on the market and Alumina. (rhiannon.hoyle@wsj.com; Twitter: @RhiannonHoyle)

2226 GMT [Dow Jones] With strike action hitting Freeport McMoRan's (FCX) Cerro Verde mine in Peru, the world's top three copper mines are now experiencing production disruptions. Macquarie thinks it is a little too early, though, to upgrade copper's outlook. "We are allowing for just under 1 million tons of disruption at present, and we have filled 256,000 tons or just over a quarter of it," it says. Macquarie also thinks the Cerro Verde disruption is less serious than issues at Escondida and Grasberg, and that "this mine goes back to work in the near term." (rhiannon.hoyle@wsj.com; Twitter: @RhiannonHoyle)

2124 GMT [Dow Jones] One of UBS's surprise takeaways from Australia's economic recovery in 4Q: farming is now adding more to growth than housing. Well, on the surface at least. The farm sector added 0.5 percentage points on-year to GDP in 4Q, which was the most since 2008. In contrast, the contribution of housing investment moderated to 0.3 percentage points in 4Q, halving from its 2Q peak. "However, the 'indirect' impact of housing is still far more material (than farm) for the overall economy," UBS says. That includes spending on household items like sofas. Also, UBS says surging house prices have led to a sharp drop in the household savings rate, which has seen real consumption growth continue despite record low wages. Farming's boost will likely be felt more locally in areas dependent on agricultural output. (david.winning@wsj.com; @dwinningWSJ)

1939 GMT [Dow Jones] The G20 communiqué over the weekend left no doubt that trade policy is shifting, says Australia and New Zealand Banking Group. The communiqué included a commitment to work toward strengthening the contribution of trade to economies, while prior language to avoid all forms of protectionism was omitted. "You can debate what the former means (though it has been labelled a 'fudge'), with free trade replaced by the U.S.'s pursuit of fair and balanced trade," ANZ says. "But deleting the latter is blunt and obvious; anything is now possible as the rule-book gets re-written." This should serve as a wake-up call to investors, ANZ says. A streamlined global supply chain and the lowering of barriers has been a key driver of productivity growth and earnings. "You can't have the antithesis and expect the productivity and earnings story not to be dented," ANZ says. (david.winning@wsj.com; @dwinningWSJ)

(END) Dow Jones Newswires

March 19, 2017 22:32 ET (02:32 GMT)

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