SP Angel . Morning View . Tuesday 29 10 19US closes in on partial Trade dealMiFID II exempt information – see disclaimer below LME Week this week – Investors and traders complain that automated trading systems are exacerbating momentum driven volatility making markets harder and more risky to tradeMany thanks to Mitsui and Triland (Mitsubishi) for their LME Week events last nightConversa

3M - Today's Market View - US closes in on partial Trade deal

SP Angel . Morning View . Tuesday 29 10 19

US closes in on partial Trade deal

MiFID II exempt information – see disclaimer below 
 

LME Week this week – Investors and traders complain that automated trading systems are exacerbating momentum driven volatility making markets harder and more risky to trade

  • Many thanks to Mitsui and Triland (Mitsubishi) for their LME Week events last night
  • Conversations with a number of trader, commodity-trading hedge funds and principal investors echo the same sentiments in that Automated trading is amplifying commodity price movements in short term trading strategies often led by charts and price driven trading.
  • Increasing momentum is raising risk for more traditional, fundamental-driven traders and driving principal investors away from the market
  • Our team are at the Roskill seminar, presentations this morning so please forgive us for slightly less news than usual today –

Electric Vehicle Systems develops new breakthrough technology for electric drive systems for light and heavy mobile mining equipment

  • The company is using a ultra-low voltage electric drive system
  • Environmentalists should take note that mining companies have been using electric vehicles in mines for many years and are driving technology improvement in the sector

Lithium producers scaling back expansion plans due to near-term oversupply concerns (Reuters)

  • Falling lithium prices are causing the world’s largest producers to delay expansion of their operations.
  • Expectation of further rapid growth in the EV sector has seen lithium production increase, however slowing EV growth and increased supply saw prices for the metal fall.
  • The rapid increase in the supply of lithium is primarily due to the number of hard rock operations in Australia commencing production (S&P).
  • Albemarle is delaying construction plans for 125,000t of additional processing capacity and SQM is delaying an expansion in Chile’s Atacama salt flat until 2021.
  • Lithium carbonate prices in China are down 65% to $8,500 per tonne since the start of 2018, according to Benchmark Minerals Intelligence.

Dow Jones Industrials +0.49% at 27,091

Nikkei 225 +0.47% at 22,974

HK Hang Seng -0.37% at 26,793

Shanghai Composite -0.87% at 2,954

FTSE 350 Mining +1.17% at18,124

AIM Basic Resources -0.28% at 2,172

Economics

US – S&P hits record high on Monday

  • The S&P index hit a record high on Monday, surpassing levels reached in the summer.
  • The benchmark S&P 500 closed 0.6% higher at 3,039.4, taking it past its previous peak of 3,025.9 in July.
  • Progress regarding US-China trade talks and interest rate cuts returned investor confidence in the US.

Hong Kong – Politicians urge government to implement stronger relief measures to rescue city’s economy

  • Lawmakers made the appeal last week at an economic development panel meeting, where the government announced relief measures worth HK$100 million (US$12 million) for the city’s travel industry.
  • This is additional to the initiatives announced last week worth HK$2 billion last week to help the logistics sector, including fuel subsidies.
  • Other stimulus packages were rolled out last month and in August, and were expected to boost the economy by 2%.
  • Civic unrest has seen tourism numbers fall- the first 15 days of October saw arrivals fall 50% year on year.

Sweden – regulators threatens sanctions over Swedbank, Sweden’s oldest bank in $100bn money laundering probe

  • Swedbank’s Baltic operations are implicated in the laundering of funds from the former Soviet Union

China – Great Wall Motors posts 507% rise in Q3 profit

  • The improvement is said to be due to squeezing suppliers to raise margins. Shows there is much fat in the system.

Currencies

US$1.1092/eur vs 1.1095/eur yesterday.  Yen 108.94/$ vs 108.71/$.  SAr 14.552/$ vs 14.576/$.  $1.286/gbp vs $1.285/gbp.  0.686/aud vs 0.683/aud.  CNY 7.055/$ vs 7.066/$.

Commodity News

Gold US$1,492/oz vs US$1,505/oz yesterday

 Gold ETFs 82.1moz vs US$82.1moz yesterday

Platinum US$914/oz vs US$929/oz yesterday

Palladium US$1,801/oz vs US$1,781/oz yesterday – Palladium reaches $1,800 for first time (Bloomberg)

  • The precious metal climbed 2.1% to US$1,802/oz in New York yesterday.
  • Spot palladium traded at $1,802/oz in London on Tuesday morning, after peaking at $1,810/oz on Monday.
  • Tighter emissions legislation has seen demand for the metal used in catalytic converters increase.
  • Supply from the two biggest nations, South Africa and Russia, has stalled in recent times also contributing to higher prices.

Silver US$17.77/oz vs US$18.04/oz yesterday

Base metals:   

Copper US$ 5,895/t vs US$5,899/t yesterday

Aluminium US$ 1,737/t vs US$1,733/t yesterday

Nickel US$ 16,625/t vs US$16,745/t yesterday – Indonesian nickel exports halted with immediate effect (Bloomberg)

  • Exports due to be shipped from Indonesia will instead be bought by local smelters at an international price level.
  • On the 30th of August, the Indonesian government announced that a ban on nickel exports would be brought forward to January 2020, however this has now been revised.
  • Expectations of the Indonesian nickel ban have seen prices increase nearly 40% since the ban was announced.
  • According to the country’s investment agency chief, the decision to stop exports is a joint agreement between nickel miners and the government, and not a ban imposed by the government.
  • The nickel export ban has been implemented to develop the ore processing industry so that exports have additional values, whilst creating jobs (Reuters).  
  • The price of nickel rose 1.2% to $16,980 when the news was announced.

Zinc US$ 2,540/t vs US$2,532/t yesterday

Lead US$ 2,235/t vs US$2,215/t yesterday

Tin US$ 16,680/t vs US$16,715/t yesterday

Energy:           

Oil US$61.3/bbl vs US$61.8/bbl yesterday

Natural Gas US$2.518/mmbtu vs US$2.368/mmbtu yesterday

Uranium US$24.05/lb vs US$24.10/lb yesterday

Bulk:   

Iron ore 62% Fe spot (cfr Tianjin) US$84.4/t vs US$85.8/t

Chinese steel rebar 25mm US$558.2/t vs US$556.9/t – Chinese Hot Rolled Coil prices continue to fall towards $400/t cfr (FastmarketsMB)

  • Weak demand and oversupply are blamed for the fall
  • Bidders are seen offering under $400/t

Thermal coal (1st year forward cif ARA) US$64.4/t vs US$64.8/t

Coking coal futures Dalian Exchange US$183.7/t vs US$183.4/t

Other:  

Cobalt LME 3m US$36,000/t vs US$36,000/t

NdPr Rare Earth Oxide (China) US$41,175/t vs US$41,111/t

Lithium carbonate 99% (China) US$6,874/t vs US$6,934/t

Ferro Vanadium 80% FOB (China) US$34.5/kg vs US$35.5/kg

Antimony Trioxide 99.5% EU (China) US$5.4/kg vs US$5.4/kg

Tungsten APT European US$225-245/mtu vs US$205-215/mtu

Battery News

Tesla in ‘final stages’ of selecting site for European Gigafactory (electrek)

  • An announcement is expected by the end of the year providing details of the location of Tesla’s European Gigafactory.
  • Several countries have expressed an interest, including Portugal and the Netherlands.
  • Last year, Musk said that Germany is the leading choice for a factory, and even specified the German-French border.

Company News

Aura Energy Limited* (LON:AURA) 0.35p, Mkt Cap £4.5m – Withdrawal of requisition notice for general meeting

  • Aura Energy reports today on the withdrawal of a Section 249D notice by Pre-Emptive Trading which requested a general meeting to consider a number of resolutions including the appointment of a non-executive director.
  • Pre-Emptive Trading owns/ed 5.89% of the company.
  • The company says that it “is seeking legal advice in relation to the Requisition Notice and will update the market in due course.”

*SP Angel act as Broker to Aura Energy
 

Analysts

John Meyer – 0203 470 0490

Simon Beardsmore – 0203 470 0484

Sergey Raevskiy – 0203 470 0474

Sales

Richard Parlons – 0203 470 0472

Abigail Wayne – 0203 470 0534

Rob Rees – 0203 470 0535

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*SP Angel are the No1 integrated nomad and broker by number of mining brokerage clients on AIM according to the AIM Advisers Ranking Guide (joint brokerships excluded)

+SP Angel employees may have previously held, or currently hold, shares in the companies mentioned in this note.

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