Market Musings 160324: Watching Dr Copper
Key Points:
- Copper moves higher, breaking out from a long-term downtrend and highlighting a stronger global economy
- Copper producers are moving higher in response to these higher prices
- Brent crude oil price also moves higher on IEA forecasts of stronger global demand + OPEC+ production cuts
- Oil & Gas stocks also move higher on higher oil price, robust oil refining margins
- Eurozone Banks remain a source of strength, outperforming UK Banks
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Watch Dr Copper's sharp move higher
In the last week one of the most notable movements in the commodities market has been the sharp rise in the copper price to nearly $9,000 a ton or about $4.10 per pound. This is important because copper is usually a good leading indicator for the health of the global economy
Source: tradingview.com
This suggests that copper is pointing to better times ahead for the global economy and in particular global manufacturing. Looking at the S&P/JP Morgan Global Purchasing Manager's Index (PMI), we see evidence of a pick-up in output that should translate into stronger global economic growth in the forthcoming months.
S&P Global's PMI surveys indicated that the global economy gained further growth momentum in February. At an eight-month high of 52.1, against 51.8 in January, the headline PMI covering manufacturing and services over 40 economies has now risen for four consecutive months. The gathering upturn points to an encouraging start to the year, albeit with the PMI remaining below the survey's long-run average of 53.2.
Recent results from copper-producing companies has been quite disapointing. Note that the supply of copper has been somewhat constrained
lately because of the under-production of key copper companies across
the world, e.g. from key producing countries such as Chile.
There,
the country's chief copper producer Codelco has been reporting
disappointing levels of production, which has supported the copper price.
If you look at the pure copper-producing companies that are listed in the UK and in the US such as ANTO Antofagasta, FCX Freeport Mcmoran and SCCO Southern Copper - these of all seen very buoyant share prices of late following the copper price higher.
