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Global Commodities Roundup: Market Talk

27 Jun 2017 10:17 am

1017 GMT - SocGen downgrades Nestle to hold from buy, saying the stock is "becoming too frothy" following the news that activist investor Third Point has bought a 1.25% stake in the packaged foods giant and is pushing for changes. Although Third Point's views aren't new and were likely already being considered inside Nestle, says SocGen, "with elevated expectations and Nestle trading at a premium vs a discount previously, it increases the chance of disappointment" at the upcoming investor day in September. "CEO Mark Schneider will drive change but it will take time to turn this supertanker around." SocGen keeps its target price at CHF93. Nestle shares trade down 0.9% at CHF84.90. (Saabira.Chaudhuri@wsj.com , @SaabiraC)

1005 GMT - Money managers lifted their net-long position on robusta coffee in the week ending June 19, according to market data released by ICE. The latest data show a 10.7% net-long position reduction to 21,059 lots. On the futures market robusta prices rose 4.3% in the period, with prices rallying on increasingly widespread rumours of supply shortages out of Vietnam and continued problems with the Brazilian crop. On the New York-traded arabica coffee market, however, the net-long position continued to fall, dropping 16.4%, in the same period as supply continued to mount. London traded robusta was last down 0.53% at $2,065.00 a ton. New York arabica was up 0.40% at $1.25 a pound.(david.hodari@wsj.com; @davidhodari)

0944 GMT - Managed money slightly became slightly less bearish on London cocoa prices, according to market data released Monday by ICE. In the week to June 19, the net-short position decreased by 6.2%. This represents a small reversal after funds reduced their net-long positioning by 84.5% the previous week. Both London and New York cocoa prices have seen volatility, with weather-watching and low volumes producing some big moves. Funds are bracing for very large crops in the Ivory Coast and Ghana, their question now is how big they will be. London cocoa futures fell 4.4% in the week to June 19. In New York, the net-short position on New York traded cocoa rose by 2.7% in that same week. London traded cocoa was last up 0.87% at $1,503 a ton and the New York price was up 0.81% at $1,861.(david.hodari@wsj.com; @davidhodari)

0934 GMT - London's top-flight equity index falls in early deals, with retailers lower after a survey showed a sharp drop in consumer confidence following this month's U.K. general election, while gains in the pound against the dollar also weigh on U.K. stocks. The FTSE 100 Index drops 0.1%, or 6.4 points, to 7441.42. GKN is the biggest faller, down 2.5%, in reaction to a profit warning, late Monday, by fellow automotive parts supplier Schaeffler. Retail stocks decline after a YouGov poll showed confidence in June falling back to just above levels last seen just after last year's vote to leave the EU, hit by the U.K. election resulting in a hung parliament and a weaker housing market. Shares in Marks & Spencer Group PLC fall 1.7% and shares in Primark owner Associated British Foods PLC drop 1%. Miners top the risers as the gold price rises, with Anglo American the biggest gainer, up 3%.(philip.waller@wsj.com)

0904 GMT - Schaeffler shares trade down 10% at EUR12.90 in mid-morning trade as the market digests its profit warning from late Monday and fears a spillover into other automotive supplier shares. Shares of Continental AG, which confirmed its full-year guidance, fall 3.2%. Analysts from Evercore ISI think announcements like this will increase near-term skepticism in the supplier group while simultaneously highlighting "the growing abyss" between typical legacy suppliers such as Schaeffler and growth suppliers such as Delphi and Valeo, which have boosted R&D investment and technology focus for several years now. Valeo shares trade down 1.77% in Paris.(ulrike.dauer@wsj.com)

0843 GMT - The euro and German bund yields jump as European Central Bank President Mario Draghi expresses confidence eurozone inflation will eventually pick-up, increasing the prospect of the ECB soon outlining plans to reduce monetary stimulus. The euro rises to $1.1249, its highest in nearly two weeks, up from from $1.1191 beforehand and an increase of 0.5% on the day. Bund yields jump 3 basis points to 0.27%, from 0.24%. Draghi says eurozone growth is above trend and well distributed, while ECB policy is causing reflationary pressures. "We can be confident that our policy is working and its full effects on inflation will gradually materialise," he says. Factors such as low oil prices weighing inflation are temporary, allowing the central bank to look through them, he says, although he reiterates policy needs to remain very accommodative for now. (jessica.fleetham@wsj.com , tasos.vossos@wsj.com)

0835 GMT [Dow Jones] Gold accelerated on the upside and broke above the upper boundary of Bollinger Bands, which confirmed the continuation of bullish trend, on the 30-minute chart. A new challenge to its next resistance at $1,255 seems more likely to occur. The 20-period moving average is turning up and is about to cross above the 50-period one. The MACD is above its signal line and the 0-level. The RSI is heading upward. As long as $1,242 holds on the downside, look for a further advance to $1,255 and even to $1,259 in extension. Only a break below $1,242 would turn the outlook to negative with down targets at $1,238 and $1,235.8, the June 26 low. Gold is trading at $1,253 an ounce. (analysts-europe@tradingcentral.com)

0817 GMT Tanzania won't allow export of unprocessed grains as the East African nation seeks to lower its food import bill, amid steep local prices and inflationary pressure, says Prime Minister Kassim Majaliw. The move aims at encouraging construction of food-processing facilities in the country, which saw its food import bill rise 5% to $461 million in 2016-17 fiscal year. The ban potentially disrupts supplies of corn, beans and rice out of Tanzania in a region battling spiraling prices after an El Nino-fueled drought. Tanzania, usually a surplus food producer has seen its stocks dwindle amid surging regional demand. Africa Development Bank expects the continent's food import bill to triple in 10 years as the population increases and amid sluggish agricultural growth. Nicholas.Bariyo@wsj.com;@Nicholasbariyo)

0809 GMT - Congo, Africa's top copper producer could see it's economy rebound from last year's slump aided by recovering global metal prices, but lingering political tensions pose renewed risks, says Moody's Investors Service.Moody's expects real GDP growth to reach 3.5% in 2017, followed by 5% in 2018 as mine output recovers, a bright spot for Congo, which saw its GDP growth slow to 2.4% last year from 6.9% in 2015 amid low copper prices. Moody's notes that Congo, which suffered a 5% slump in copper output in 2016 is now stabilizing aided by rebounding prices. But commodity price volatility and political instability stemming from President Joseph Kabila's refusal to step down after the expiry of his mandate last year pose economic headwinds. (Nicholas.Bariyo@wsj.com;@Nicholasbariyo)

0750 GMT - EUR/USD trades at $1.1187, up slightly on the day but hovering just below the $1.12 level, having risen above that level Monday after weak U.S. durable goods data. The euro has struggled to make a firm break above $1.12 in recent days and Danske Bank expects it to drop below $1.10 over the summer. Eurozone data has "started to show some weakness recently", but euro/dollar has been held up by "the continued stream of disappointments" from U.S. data releases. But Danske expects the balance to tip in favor of the dollar over the summer. Danske adds, however, that positioning may be helping to support euro/dollar, with positioning data showing speculators have already reduced long euro positions in favor of the dollar. (jessica.fleetham@wsj.com)

0738 GMT - London spot-gold prices rose steadily in Asian trading before a late-session bounce as European activity came online, helped by a pullback in the dollar. Gold hit 6-week lows Monday after upbeat economic data from Germany. Nearly back to pre-release levels, Commerzbank's Daniel Briesemann sees prices going sideways--though that's arguably been the case for several years now. Spot gold is up 0.5% at $1,250.13/troy ounce. (biman.mukherji@wsj.com)

(END) Dow Jones Newswires

June 27, 2017 06:17 ET (10:17 GMT)

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