Bloomberg reported that Mr Stephen Leeb president of Leeb Capital Management and author of Red Alert How China's Growing Prosperity Threatens the American Way of Life talks about the outlook for commodity markets and China's commodity demand.
Copper traders are bullish for the first time in six weeks on signs that demand is still expanding as global inventories decline to an 11 month low and central banks cut funding costs to shore up growth.
Data compiled by Bloomberg showed that Twelve of 24 surveyed by Bloomberg expect the metal to advance next week and two were neutral. The last time they were bullish overall in the week ended October 21st 2011 prices surged more than 14% in the following five days. Global stockpiles monitored by exchanges in London, New York and Shanghai fell 23% since March.
Copper rallied the most in a month on November 30th 2011 as China, the biggest consumer of the metal cut the reserve requirement ratio for banks for the first time since 2008. More than USD 1.2 trillion was added to value of global equities that day as the central banks of the US, the euro region, Canada, the UK, Japan and Switzerland agreed to cut the cost of providing dollar funding, to ease strains from Europe’s debt crisis.
Mr Angus Staines an analyst at UBS AG in London said that “Consumption growth will be positive. Credit in China will become easier to acquire and that will allow businesses to build their inventories. It will tighten the global traded copper market significantly, and that should support the price.”
A Bank of America Corp. index showed that copper dropped 18% to USD 7,831.50 per tonne on the London Metal Exchange this year heading for the first annual decline since 2008. The Standard & Poor’s GSCI Index of 24 commodities advanced 4% as the MSCI All Country World Index of equities retreated 8.8%. Treasuries returned 8.8%.
The traders surveyed by Bloomberg anticipate gains next week in gold, sugar corn and soybeans. It’s the first time respondents were positive on all the commodities since October 14th 2011.
According to Barclays Capital, Asian buying is driving the decline in copper stockpiles. Inventories in Asian warehouses monitored by the LME plunged 68% since June. Metal tracked by the Shanghai Futures Exchange is now at the lowest level since August 2009. China accounts for 38% of global consumption.
The bank is forecasting 5% gain in the nation’s demand next year, more than compensating for an anticipated 1.6% contraction in Europe. Global consumption growing at 2.5% will mean a 234,000 tonne shortage next year, Barclays predicts. That’s equal to about 44% of all the metal held in bourse monitored stockpiles.
According to the Commodity Futures Trading Commission, while traders are turning bullish, hedge funds and other money managers remain bearish. They are a holding a net short position or bets on lower prices of 7,731 US futures and options. Speculators have held a net-short position since mid-September, the longest stretch since July 2009, month after the last US recession ended.
(Sourced from bloomberg.net)
