ACY Securities doubles number of instruments and drastically reduces spreads and commissions in Australia.

20th September 2021

Sydney, Australia

The Sydney based multi-regulated broker released a statement this morning saying that all 3 developments were part of its overall mission to empower clients through low costs of trading and increased product choice.

Justin Pooni, Head of Branding & Communications at ACY said the company is always working hard to secure competitive costs of trading for clients at all levels and provide as much choice as possible when it comes to the number of instruments available for clients to trade.

Mr Pooni made three separate statements today in relation to each of the major announcements.

Reduction of spreads for Australian clients

Mr Pooni stated that although substantial reductions in spreads were automatically applied to Australian clients some time ago, he wanted to bring increased awareness to what he described was a significant development for the benefit of traders.

“When it comes to cost of trading, we are always working hard to achieve the most competitive spreads for our clients. We’re delighted to have already implemented big reductions in spreads to clients under our Australian entity across all major FX pairs including AUDUSD, EURUSD, GBPUSD, USDCAD, USDCHF and USDJPY, as well as on Gold and (WTI) Oil” said Mr Pooni in an interview today.

Reduction of commission for Australian clients

“On top of that, we have reduced commissions on the ProZero account for our Australian clients from A$8.50 round-turn to just A$3 round turn. That’s just $1.50 per lot per side and represents one of the lowest commissions in Australia when looking at raw commission-only accounts. But it doesn’t stop there. If you apply our Levelling discounts that could drop even further to a ridiculously low A$2.5 round-turn, truly representing one of the most competitive commission cost structures available anywhere in Australia” Mr Pooni continued on to explain.

Doubled the number of instruments to over 1600.

The other big news ACY shared through a written statement today was of course the doubling of instruments.

Mr Pooni complimented the statement by stating:

“The other significant development we would like to formally acknowledge is that we have more than doubled our offering across our share CFDs on the ASX, NYSE, Nasdaq and NYSE Arca Equities from 800 to over 1600.

What that means is that you can now trade CFDs on over 1600 shares and ETFs including Apple, Facebook, Tesla, Amazon, SPDR S&P500 ETF Trust, VanEck Vectors Gold Miners, and the Proshares UltraPro Dow 30 to name a few”.

Mr Pooni went on to say:

“For the commodities traders amongst us, in addition to the massive increase in exchange-related products, we have also added a fresh lineup of new hard commodities to include Copper, Lead, Zinc, Nickel, Gas and Aluminium. These are all in addition to our already extensive commodities offering”.

New Commercial (Hard) Commodities of offer:

Instrument Trading Hours (Mon – Fri) Measure Max Leverage* Contract Size Min Lot Size

Max Lot

Size

INCR
Copper 03:05 – 20:55 Tonnes 10:1 100 0.01 100 0.01
Lead 03:05 – 20:55 Tonnes 10:1 100 0.01 100 0.01
Zinc 03:05 – 20:55 Tonnes 10:1 100 0.01 100 0.01
Nickel 03:05 – 20:55 Tonnes 10:1 100 0.01 100 0.01
Gas 01:05 – 23:55 MMBtu 10:1 10000 0.01 100 0.01
Aluminium 03:05 – 20:55 Tonnes 10:1 100 0.01 100 0.01

The company put together a humorous video showcasing their low spreads and commissions, which can be seen here

Earlier this year ACY Securities announced the appointment of Clifford Bennett as their new Chief Economist, and a multi-million-dollar multi-year partnership extension with Socceroos legend and former Everton star Tim Cahill.

See highlights of the partnership announcement in 2019.

See the 2020 TVC – over 500,000 views.

See the 2021 TVC – almost 1 million views.

For more information contact Justin Pooni

Phone +61 2 8350 7894

Email justin.pooni@acy.com

ACY Securities Pty Ltd is regulated by the Australian Securities and Investments Commission (ASIC AFSL:403863). Registered address: ACY Tower, Level 18, 799 Pacific Hwy, Chatswood NSW 2067. AFSL is authorised us to provide our services to Australian Residents or Businesses. Only Australian residents and businesses can be onboarded with ACY.

© 2018 – 2021 ACY Securities is a brand name of ACY AU and ACY LTD, ACY Securities Pty Ltd. All right Reserved.

Terms of use ACY Securities Website

Commodity Supercycle Sets New Record Highs – Where Next For Prices?

Commodities are currently on an unstoppable run with everything from the metals, energies to agriculture markets setting new record highs as the supercycle firmly gathers pace.

Last week, a wide number of commodities blasted through all-time highs.

Aluminium prices soared to 13-year highs. Nickel prices hit 7-year highs and Uranium prices surged to 9-year highs – surpassing a record 6-year high, set only a week ago.

The bullish momentum also split over into other commodities with Natural Gas rallying to a 7-year high. Sugar prices hitting 4-year highs and Lithium prices climbing to an all-time record high.

In total 27 Commodities ranging from the metals, energies to soft commodities have tallied up double to triple digit gains within the in the past year.

Uranium, Natural Gas and Lithium prices are up 219%, 240% and 215%, respectively.

But the best performing commodity, so far this year, is Crude Oil.

Crude Oil prices have quadrupled this year and are setting new record highs almost every month. Crude Oil prices are currently up over 287% from their 2020 lows.

There are plenty of reasons why commodities are on the move, but the key driver is rapidly surging global inflation, tightening supply, logistical bottlenecks and booming demand across many highly essential commodities as a result of the COVID-19 pandemic.

Where are prices heading next? Watch The Commodity Report now, for my latest price forecasts and predictions:

For a look at all of today’s economic events, check out our economic calendar.

Copper’s Long-Term Bullish Potential Remains

Industrial metals continue to experience mixed fortunes with a noticeably gab emerging in the performance between copper and aluminum, the two bell weather metals in this sector. While copper remains stuck in a range, aluminum has continued to surge higher with the latest move higher being driven by the risk of supply disruptions of Bauxite, a key component in the production of aluminum.

Aluminum, one of the metals with the most bullish fundamentals, trades up 40% year-to-date and at $2790/tons on the London Metal Exchange, it has reached the highest price in 13 years. Already benefiting from a robust long-term outlook due to its role in the clean-energy transition, and China’s crackdown on emissions in its energy-intensive industries such as aluminum, nickel and steel, the latest jump has been driven by political unrest in Guinea, a key source of supply of bauxite, a feedstock used to make alumina, which is further processed into aluminum.

Guinea, sometimes called the Saudi Arabia of bauxite holds the world’s largest reserve with China, the biggest producer of aluminum sourcing more than half of its bauxite from Guinea. The latest supply worry adding upside pressure to a metal already driven by the prospects for strong demand increasing the visible deficit in China and the West.

Having tracked each other closely during the early parts of 2020, the noticeable slowdown in China during the past few months arrested the rally in copper while aluminum continued higher on the mentioned tight supply concerns.

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Dr. Copper, used in everything from wiring and electronics to electrical vehicles, and as such a good indicator of global growth and activity remains the go to industrial metals from investors and speculators seeking exposure to the sector. In addition, the ease of access to trading copper around the world, together with its relative deep pool of liquidity at the three main exchanges in New York, London and Shanghai, often sees the price of copper, not only react to copper fundamentals but also global economic developments.

Expected to be the future king of the so-called “green” transformation metals together with the fear of inflation, especially during the first few months of 2020, helped attract investment interest from speculators and investors. The buying culminated in May when the price surged to a record $10750/t on LME and $4.89/lb in New York, just before China announced measures to curb commodity prices in order to address surging factory gate costs.

On top of these measures to curb prices and speculative interest, copper also felt the impact of growth starting to cool into the third quarter as stimulus spending and the re-opening-fueled burst of activity slowed in both the US and China. Third quarter growth in the US has been revised sharply lower with one US bank calling for zero growth while another has halved its forecast from 6.5% to 2.9%. According the Citigroup economic surprise index, recent data from around the world has in general been trailing expectations, thereby supporting the view, that growth may be slowing while inflation still looks anything but transitory.

Again, with copper being the go-to metal for many so-called “paper” investors, it has suffered accordingly with speculators in HG copper having cut their net-long position by 65% since the February peak. However, having rallied by 148% from the 2020 pandemic low to the May 2021 high, the relatively small 18% correction seen since then highlights a market which in our opinion looks relatively cheap relative to the outlook for future demand growth.

China went through a destocking cycle during the first half and as they start to rebuild the call on LME monitored stocks may rise, thereby creating a more visible deficit. This at a time where demand in China remains relatively robust, and the rest of the world continues to move the agenda towards environmental friendly policies. Elevated demand expectations, especially from the push to electrify the transportation sector together with an absence of new mine investment is likely over the coming years to push the market into a deep and price supportive deficit.

The helicopter perspective shows a copper contract still lingering in a downtrend but which at the same time has managed to put in a double bottom around $3.95/lb. While we wait for a higher high, the risk of a deeper correction cannot be ruled out. Focus being the mentioned low and ultimately the 38.2% retracement of the 2020 to 2021 rally at $3.77/lb ($8300/t on LME). Timing is as usual crucial, but in our opinion copper remains a buy on fresh strength and on any potential additional weakness.

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Ole Hansen, Head of Commodity Strategy at Saxo Bank.

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This article is provided by Saxo Capital Markets (Australia) Pty. Ltd, part of Saxo Bank Group through RSS feeds on FX Empire

London Aluminium Hits 10-Year High on Supply Concerns

Aluminium prices have been supported by production curbs in Chinese smelting regions often aimed at easing the strain on the power grid.

The government in southern China’s Guangxi region, an aluminium and alumina production hub, called on Monday for tougher controls on energy consumption, according to a statement issued after a teleconference it gave, sparking fears of more output cuts.

Three-month aluminium on the London Metal Exchange advanced as much as 2.9% to $2,726.50 a tonne, its highest since May 2011, before easing to $2,693 a tonne, still up 1.6% at 07:53 GMT.

The most-traded October aluminium contract on the Shanghai Futures Exchange closed up 1.2% at 21,390 yuan ($3,311.09) a tonne, hovering near its highest since August 2008 of 21,550 yuan a tonne hit in the previous session.

“The impact of power and production restrictions in Yunnan is still expanding,” Huatai Futures said in a report, adding the addition of other production areas to the list was not ruled out.

Yunnan is an aluminium hub and has seen some smelters forced to cut production due to power curbs this year.

The China Nonferrous Metals Industry Association held a meeting of top aluminium smelters on Monday to address what it described as an “irrational surge” in aluminium prices.

FUNDAMENTALS

* The LME cash aluminium contract was trading at a premium of $25.75 a tonne to the three-month contract, its biggest since July 2018, indicating tightening nearby supplies.

* One party controls 50%-80% of available aluminium stocks and short-term futures on the LME, exchange data showed.

* Average alumina prices in China provided by SMM rose to 2,802 yuan a tonne on Monday, the highest since June 2019. Guangxi is China’s third-biggest alumina-producing region with output of 925,500 tonnes in July, according to the National Bureau of Statistics.

* ShFE nickel hit a record 149,870 yuan a tonne and LME nickel advanced 3.4% to $19,650 a tonne on low inventories. LME copper increased 1.1% to $9,515 a tonne and ShFE copper was up 0.6% at 70,100 yuan a tonne.

(Reporting by Mai Nguyen in Hanoi and Tom Daly; Editing by Shounak Dasgupta, Subhranshu Sahu and John Stonestreet)

Gold Bought, Oil and Copper Sold on Virus Concerns

As a result the dollar strengthened, yields dropped while commodities traded lower, led by losses in energy and industrial metals while gold and most agriculture commodities saw net buying.

Saxo Bank publishes weekly Commitment of Traders reports (COT) covering leveraged fund positions in commodities, bonds and stock index futures. For IMM currency futures and the VIX, we use the broader measure called non-commercial.

The summary below highlights futures positions and changes made by hedge funds across commodities, forex and financials up until last Tuesday, August 17. A week where continued focus on the risk of an earlier than expected unwinding of the Fed’s massive stimulus program, helped support a renewed growth to value rotations in stocks, a stronger dollar and somewhat surprising, lower bond yields.

The latter potentially driven by emerging risk adversity caused by the continued spreading of the delta coronavirus variant as well as weaker input cost through lower commodity prices.

A relative small decline in the Bloomberg Commodity index driven by another decline in both energy and industrial was partly offset by continued buying of grains and softs, as well as renewed demand for gold.

Commodities

The Bloomberg Spot index traded lower in the week to August 17, albeit only by 0.4% with losses in energy and industrial metals being partly off-set by strength across the agriculture sector and renewed buying of gold. The rotation resulted in the combined long across 24 major commodity futures holding unchanged at 2.2 million lots with the biggest reductions hitting Brent crude oil, natural gas and copper while strong demand was seen in gold, corn and cocoa.

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Energy

In response to continued Covid-19 demand worries, speculators cut their combined crude oil long in WTI and Brent by a total of 31.2k to 534k, a nine-month low. All energy contracts including natural gas saw net-selling.

Monday morning comment

Crude oil (OILUSOCT21 & OILUKOCT21)as well as most other commodities has started the week with gains in response to improved risk appetite, not least supported by a softer dollar. Last week’s slump, the worst in three years for oil, was driven by the delta variant, Chinese growth worries, and the prospect of reduced Federal Reserve stimulus.

While the virus remains a threat to the short-term demand outlook, despite signs of an improving situation in China, this week’s Jackson Hole summit may give the market some ideas about the timing of tapering (see below). Double bottoms have emerged in Brent at $64.50 and WTI at $62 while speculators cut bullish oil bets to a 9-month low in week to August 17.

Metals

The strong recovery that followed the August 9 flash crash helped drive a 52% increase in the speculative gold long to 77.6k lots while silver, troubled by its link to falling industrial metals, saw its net length slump to a 26-month low at just 9.7k lots. Copper’s worst slump in two months helped drive a second week of selling which saw the net long down 38% on the week to 20k lots. Platinum which recently had seen its discount to gold hit $800 from less than $500 last month saw a small amount of buying after speculators recently build the biggest net short in two years.

Monday morning comment

Gold has started the week relatively good shape after managing to shrug off last weeks dollar strength and renewed pick up in real yields. It however remains below the psychological important $1800 level, as the market adopts a wait-and-see approach as investors await Jackson Hole later this week for more insight into the Federal Reserve’s policy outlook. Silver (XAGUSD) has clawed back some of last weeks losses with the XAUXAG trading at 76.80 after hitting 77.75 a couple of trading sessions ago.

HG Copper (COPPERDEC21) continues to recover following last week’s slump on supportive signs from China where stock levels have fallen and local premiums above LME spot has risen in response to the government’s efforts to combat the recent virus outbreak. Also, the risk of strike related disruptions in Chile remains with a slew of mines undergoing contract renewal talks, with unions at two mines currently out on strike.

The sharp recovery from below $4/lb, now a double bottom,together with the long-term supportive outlook for copper has helped attract fresh buying and short covering. First level of resistance at $4.215 followed by $4.295.

Agriculture

Across-the-board buying of key crops helped lift the grains sector long by 45k lots to a ten-week high at 544k lots. The biggest exposure remains by far in corn followed by soybeans and increasingly now also wheat, with both Kansas and Chicago traded wheat seeing raised demand during the past few weeks. In softs, all contracts saw net buying led by sugar with the net long reaching a five-year high, and cotton which reached a three-year high at 82k lots. Cocoa flipped back to net long while coffee was bought despite trading lower on the week.

Forex

Speculators almost cut their recently established dollar in half during the week to August 17. The selling, however, was concentrated against the euro where an initial rejection at €1.17 and subsequent bounce to €1.18 helped drive a 70% increase ($3.5 billion equivalent) in the EUR net long to a five-week high at 57.6k lots. Longs that immediately got challenged by the renewed euro weakness towards the end of last week when general risk adversity helped strengthen the dollar back below €1.17.

With most of the other major currencies led by CHF, JPY and CAD seeing continued selling, the overall reduction in the net dollar long against ten IMM currency futures and the Dollar index was cut by $2.3 billion to $2.6 billion.

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What is the Commitments of Traders report?

The COT reports are issued by the U.S. Commodity Futures Trading Commission (CFTC) and the ICE Exchange Europe for Brent crude oil and gas oil. They are released every Friday after the U.S. close with data from the week ending the previous Tuesday. They break down the open interest in futures markets into different groups of users depending on the asset class.

  • Commodities: Producer/Merchant/Processor/User, Swap dealers, Managed Money and other
  • Financials: Dealer/Intermediary; Asset Manager/Institutional; Leveraged Funds and other
  • Forex: A broad breakdown between commercial and non-commercial (speculators)

The reasons why we focus primarily on the behavior of the highlighted groups are:

  • They are likely to have tight stops and no underlying exposure that is being hedged
  • This makes them most reactive to changes in fundamental or technical price developments
  • It provides views about major trends but also helps to decipher when a reversal is looming

Ole Hansen, Head of Commodity Strategy at Saxo Bank.

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This article is provided by Saxo Capital Markets (Australia) Pty. Ltd, part of Saxo Bank Group through RSS feeds on FX Empire

Marketmind: Gathering Clouds?

European stocks posted their biggest weekly drop last week since February. A large part of the reason behind the sharp drop is growing concerns over a slowing global economy, as well as increasing fears over rising infection rates and vaccine durability. Investors hoping for a bounce this week from a clutch of “flash” European manufacturing surveys for August out on Monday may be disappointed going by the recent softening trend in U.S. and Chinese PMIs.

The broad message from the European PMI camp is likely that the strong recovery in growth seen over Q2 is now in danger of fading as a combination of rising prices, ongoing supply chain issues (see Toyota news last week) and labour shortages take their toll on business activity.

Indeed, investors in an August global fund manager survey by investment bank BoFA Securities cut their expectations for global growth to their lowest since April 2020. Notwithstanding a wave of short covering lifting Asian markets in early Monday, signs of growing caution are rife in asset markets.

Base metals, bulk resources and oil are struggling after global growth jitters took a heavy toll on commodities last week. The dollar index consolidated gains below a November 2020 high while the yield curve held near a one-year low.

The focus will shift to the Fed later in the week when Fed Chair Jerome Powell takes the stage at the Jackson Hole symposium. Markets will be keenly watching the tapering plan and potential next steps from officials.

While much of the tapering news value is already baked into markets, it remains to be seen whether the global rise of the Delta variant prompts the Fed to soften its rhetoric.

Elsewhere, in coronavirus news, Prime Minister Jacinda Ardern on Monday extended New Zealand’s strict nationwide COVID-19 lockdown.

Key developments that should provide more direction to markets on Monday:

Germany, France, UK, Euro PMIs

U.S. home sales

Private equity companies are circling British supermarket group Sainsbury’s SBRY.L with a view to possibly launching bids of more than 7 billion pounds ($9.53 billion), the Sunday Times reported.

For a look at all of today’s economic events, check out our economic calendar.

(Reporting by Saikat Chatterjee)

 

SP500 Traders Should Get Ready For Bumpy Trading In Coming Weeks

The fundamentals driving market sentiment continue to revolve around the pandemic, inflation, consumer spending/confidence, and the Federal Reserve.

If you boil it down a little further, coronavirus is largely still directing the whole show as the continued fallout is believed to be driving inflation which in turn has broad implications for the Fed’s policy direction.

An increasing number of insiders believe that the resurgence in coronavirus outbreaks is holding back the global economic recovery to some degree. However, bulls view this as a short-term threat. Meaning that some of the anticipated post-pandemic demand may be delayed temporarily but isn’t seen having a significant impact on the longer-term growth outlook.

Warning signals

There is evidence that institutional investors may be taking a more “risk off” stance with money shifting into traditionally defensive plays like Gold. At the same time, money has retreated from things like oil and copper.

In particular, the recent weakness in copper prices is viewed by some as an early warning sign of slowing economic growth and overall weakness in commodities. There has been a definite slowdown in China’s industrial production which has helped fuel the pullback in copper prices. However, global growth is being led by U.S. consumers so bulls aren’t fully convinced by this traditional “warning signal” that the global recovery is at risk.

It’s worth keeping in mind that markets are also battling seasonal trends that generally see trading volume plummet in the latter half of August heading into the Labor Day weekend holiday. Lower trading volume typically translates to higher volatility which has made a definite comeback this week.

Federal Reserve

There is also some consolidation happening ahead of key data and events that many investors consider critical to determining market direction in the months ahead.

One of the most highly anticipated is the Federal Reserve’s annual Jackson Hole Economic Policy Symposium next week on August 26-28 (Thur, Fri, Sat), where Jerome Powell is widely expected to announce plans to start reducing the central bank’s monthly asset purchases.

The following week on September 3 brings the August Employment Report, which Wall Street insiders widely expect will show another month of +800,000 or more jobs added, a level that would put even more pressure on the Fed to further rein in its supports.

The Fed’s next policy meeting is September 21-22.

In conclusion

Bottom line, it could be a bumpy few weeks as the central bank’s next policy moves continue to be heavily debated.

Earnings next week slow considerably with the bulk of companies having already reported. Key results will include Best Buy Intuit, Medtronic, Nordstrom, Toll Brothers, and Urban Outfitters on Tuesday; Salesforce and Snowflake on Wednesday; and Dell, Dollar General, Dollar Tree, The Gap, HP, and Peloton on Thursday. Economic data next week includes Existing Home Sales on Monday; New Home Sales on Tuesday; Durable Goods Orders on Wednesday; the second estimate of second-quarter GDP on Thursday; and the PCE Price Index and Consumer Sentiment on Friday. The PCE Index is one the Fed’s favorite inflation gauges so that one could have a particularly big impact on markets.

Investors Stick to Stocks, But Gear up for Bumpier Ride

Signs of caution abound, even as U.S. stocks hover near record highs. Goldman Sachs economists recently lowered their tracking estimate of U.S. economic growth in the third quarter to 5.5% from 9% due to the impact of the Delta variant, while fund managers surveyed by BofA Global Research said they boosted cash overweights to the highest level since October 2020 while adding to positions in defensive sectors such as healthcare and utilities.

Worries over slowing growth in China and other major economies have hit prices for oil, copper and other raw materials while the U.S. dollar, a key destination for nervous investors, stands at its highest level in nearly nine months against a basket of currencies.

Even retail investors, a group that has supported rallies in everything from tech stocks to crypto over the past year, appear to be cooling their heels. Online brokerage Robinhood, the gateway for many retail investors into so-called meme stocks, said Wednesday its clients are likely to slow their trading in coming months.

Past warnings of a coming pullback have so far failed to play out this year, and cutting exposure to stocks has been a losing strategy during the market’s run from its 2020 lows, reinforcing the idea that there are few assets where investors have been able to notch the type of returns seen in equities. Still, the looming risks have bolstered the view that markets may be more turbulent in the months ahead.

“We have gotten past that euphoria-type of rally where everything, all asset classes and all stocks, continued to rally,” said Megan Horneman, director of portfolio strategy at Verdence Capital Advisors, which oversees about $3 billion in assets. Now “you have to be a bit more selective.”

Among investors’ key worries is the risk that the Fed, faced with stronger-than-expected inflation, begins pulling back on its support for the economy just as growth starts ebbing and the coronavirus’ Delta variant threatens to rollback reopenings across the country.

“We got such tremendous Federal Reserve monetary support for the economy for some time, so the market has trepidation about Fed taper and what that is going to do for growth,” said Rob Haworth, senior investment strategy director at U.S. Bank Wealth Management.

Investors will be watching next week’s central bank symposium in Jackson Hole, Wyoming for clues on when the Fed will begin slowing its $120 billion purchases of U.S. government bonds.

BofA Global Research analysts earlier this week moved up their timeline for the start of the Fed’s taper to November, from a previous forecast of January, believing that minutes from the central bank’s most recent policy meeting, released Wednesday, signaled a greater likelihood of an unwind beginning this year.

Rich valuations are also giving investors pause. The S&P 500′s P/E ratio on a forward 12-month basis stands at 21.1, a more than 34% premium to its 20-year average, according to Refinitiv Datastream.

Despite all these worries, many investors are employing strategies that will allow them to stick with stocks, which have benefited from ultra-low Treasury yields and standout growth in the U.S.

Horneman, of Verdence Capital Advisors, has added alternative investments such as some liquid long-short hedge fund strategies that aim to be less correlated with the prices of stocks and bonds.

Greg Bassuk, chief executive at AXS Investments, said interest has recently grown in liquid alternatives such as private equity and venture capital and strategies like managed futures, which aim to hedge risk while still maintaining exposure to stocks. In the U.S., inflows into such investments stand at their highest levels since 2013, Morningstar said in July.

Mark Haefele, chief investment officer at UBS Global Wealth Management, said in a Friday note that investors should prepare for volatility by diversifying across regions and asset classes, including hedge funds. Haefele said the S&P will finish next year at 5,000, from 4,437.18 today, though he expects a bumpy ride to those levels.

Among the biggest arguments for owning stocks has been the market’s resilience over the past decade, where investors have largely been rewarded for jumping in when equities weaken. For Horneman, that strategy remains in effect.

“We are still on the buy on dip mentality, not sell on strength,” she said.

For a look at all of today’s economic events, check out our economic calendar.

(Reporting by Saqib Iqbal Ahmed; Editing by Ira Iosebashvili and Aurora Ellis)

US Stock Index Futures Struggling in Pre-Market Trade Amid Delta Variant Concerns, Fed Taper Discussions

The major U.S. stock index futures are trading lower early Friday shortly before the cash market opening as investors brace for another day of volatility following yesterday’s small gain. On Thursday, the benchmark S&P 500 Index snapped a two-day losing streak while the blue chip Dow Jones Industrial Average finished lower for a third-straight session. The tech heavy NASDAQ Composite closed slightly higher.

The divergence between the U.S. stock indexes suggests investor indecision and impending volatility, which may be the reason why all three majors are on track to close lower for the week. The S&P 500 and the Dow are both on track to post their worst weekly performances since June, while the NASDAQ is set to see its worst week since May.

At 08:24, September E-mini S&P 500 Index futures are trading 4374.50, down 27.00 or -0.61%. September E-mini Dow Jones Industrial Average futures are at 34610, down 208 or -0.60% and September E-mini NASDAQ-100 Index futures are trading 14866.25, down 61.75 or -0.41%.

Thursday’s Recap

Wall Street indexes were supported by gains in defensive and heavyweight technology stocks on Thursday, as investors fretted over when the Federal Reserve could begin tapering its massive stimulus program, according to Reuters.

Meanwhile, the Dow Jones Industrial Average retreated on losses in growth-sensitive sectors, while gains in major technology stocks kept the NASDAQ in positive territory.

Sector Performances Mixed

Defensive sectors such as utilities and consumer staples were the best performers, while technology rose 1.1%. The real estate sector also outperformed.

Financials and industrials were among the sectors in the red, falling about 0.8%.

The S&P energy sector was the worst performer among its peers with a 2.8% tumble, as oil prices hit a three-month low, while the materials sector dropped 0.7% after copper prices tumbled, Reuters reported.

Stock-Related News

U.S. department store chains Macy’s Inc and Kohl’s Corp are leaning on a strong back-to-school season to sustain a sales recovery fueled by shoppers splurging on perfumes, shoes and dresses.

In company news, shares of Macy’s and Kohl’s rose 19.6% and 7.3%, respectively, following increased annual sales forecasts.

Shares of Nvidia Corp rose 4%. The chip company forecast third-quarter revenue above Wall Street expectations late on Wednesday as it benefits from a boom in demand.

The Internals

Declining issues outnumbered advancing ones on the NYSE by a 2.59-to-1 ratio; on NASDAQ, a 2.43-to-1 ratio favored decliners.

The S&P 500 posted 28 new 52-week highs and 3 new lows; the NASDAQ Composite recorded 35 new highs and 274 new lows.

About 10.3 billion shares changed hands in U.S. exchanges, above the 9.3 billion daily average over the last 20 sessions, Reuters reported.

For a look at all of today’s economic events, check out our economic calendar.

Gold and Silver Length Cut in Half; Agriculture Bought on Weather Woes

Saxo Bank publishes weekly Commitment of Traders reports (COT) covering leveraged fund positions in commodities, bonds and stock index futures. For IMM currency futures and the VIX, we use the broader measure called non-commercial.

The summary below highlights futures positions and changes made by hedge funds across commodities, forex and financials up until last Tuesday, August 10. A week where hawkish comments from Clarida, the Fed vice-chair and strong jobs report saw markets starting to price in an earlier than expected unwinding of the Fed’s massive stimulus program.

These developments helped trigger a one percent increase in the Bloomberg Dollar index while ten-year inflation protected yields jumped 16 basis points just after hitting a record low. Stocks saw another growth to value rotation while commodities traded mixed with heavy selling in precious metals being partly offset by continued buying across the agriculture sector. Energy and industrial metals also suffering setbacks on demand concerns in response the continued spreading of the delta coronavirus variant.

Commodities

The Bloomberg Spot index lost 1% during the reporting week to August 10, as the continued spreading of the delta coronavirus variant in Asia and parts of the US raised concerns about demand for key commodities such as crude oil and copper. Investment metals slumped on rising yields and dollar while the agriculture sector remained to the go to sector with adverse weather across the world providing a boost to both grains and softs.

Overall, the total net long across 24 major commodity futures was cut by 4% to 2.2 million lots with selling of crude oil, gas oil, gold, silver, and copper being only partly offset by demand for sugar, soybeans, corn, and wheat

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Energy

Continued crude oil weakness saw speculators cut their net length in WTI and Brent for a second week to an eight-month low. This in response to demand worries caused by the rapid spreading of the delta coronavirus variant, not least in China were a relatively small number of cases has led to renewed shutdowns and restrictions on movements.

The combined long was cut by 48k lots to 566k, but just like the previous week reduction, the change was solely driven by long liquidation with no signs of appetite for naked short selling. Probably due to the belief the disruption will be transitory and that OPEC and friends, if necessary, will adjust production to support the price.

Monday morning comment: Crude oil trade lower for a third day with Brent back below $70after key oil consumer China released weaker than expected retail sales and industrial production data and following Friday’s very weak sentiment reading. These developments support IEA’s latest downgrade to demand for the months ahead as a resurgent delta coronavirus variant is impactingdemand across the world. Also, in the US there are signs shale producers are ramping up activities with the number after the number of rigs last week rose by 10 to 397, marking the biggest jump since April.

Metals

Speculators more than halved their gold and silver longs during a very troubling week for precious metals. The week covered a renewed rise in bond yields following Fed vice-chair Clarida’s hawkish comments and the strong jobs report culminating in last Monday’s flash crash. In response to these for metals adverse developments, the gold net length was cut by 52% to 51k lots while the silver length collapsed by 54% to just 12k lots, a fifteen months low.

Platinum, which during the week saw its discount to gold rise to $800 from an April low at $500 saw continued selling with the recently established net short more than doubling to a 13-month high at 9k. Rangebound copper was sold for a second week with the net long dropping 19% to 32k lots, thereby reversing half the buying seen since the June low at 19k lots.

Monday morning comment:

Gold finished last week on a firmer footing after a much weaker than expected University of Michigan sentiment (see below) helped deflate some of the buildup taper angst with Treasury yields and the dollar traded lower ahead of the weekend. Both paused their retreat overnight with gold and silver drifting lower as a result. A major band of resistance has emerged between $1790 and $1815 while support needs to hold around the $1750 area.

Following last Monday’s flash crash, speculators slashed their gold and silver net longs by more than 50% leaving the market exposed to fresh buying on a break higher. This week the market will be watching a speech by Fed chair Powell, as well as minutes of the Fed’s last meeting.

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Agriculture

Continued price gains across the agriculture sector helped drive another week of speculative buying in both grains and softs. Adding to the support was the grain market gearing up for an expected price supportive monthly supply and demand report from the US Department of Agriculture last Thursday. A report that turned out to justify the recent buying, not least in wheat which surged higher on weather related production reductions in the US, Canada and Russia.

The world is potentially facing a supply issue with high protein milling wheat used for human consumption in bread, and that explains why Paris Milling wheat and Kansas HRW wheat both trade higher by more than 10% this month. Overall, the net length in Chicago and Kansas wheat was increased by 10k lots to 64k, still substantially below the interest seen in corn (254k) an soybeans complex (180k)

Sugar is another highflyer due to lower supplies from frost and drought hit regions in Brazil, and news India, the world’s second largest shipper is considering diverting canes towards the production of biofuel to curb imports of increasingly expensive crude oil. The net length in raw sugar futures rose 7% to a five-year high at 265k lots. The cotton long reached a three-year high at 73k lots while the coffee long suffered a setback after the price retraced from a multi-year high above $2/lb.

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Forex

Speculators increased bullish dollar bets in response to the early August strong jobs report and hawkish Clarida comments. The reporting week ended last Tuesday when several currencies was under pressure from a strong greenback, not least the euro which was challenging key support at €1.17. In response to these developments, the net dollar long against ten IMM currency futures and the Dollar index jumped one-third to a fresh 17-month peak at $4.8 billion.

Selling was broad but mostly concentrated in euros, Japanese yen and Aussie dollar while short covering helped flip the Sterling position back to a net long.

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What is the Commitments of Traders report?

The COT reports are issued by the U.S. Commodity Futures Trading Commission (CFTC) and the ICE Exchange Europe for Brent crude oil and gas oil. They are released every Friday after the U.S. close with data from the week ending the previous Tuesday. They break down the open interest in futures markets into different groups of users depending on the asset class.

  • Commodities: Producer/Merchant/Processor/User, Swap dealers, Managed Money and other
  • Financials: Dealer/Intermediary; Asset Manager/Institutional; Leveraged Funds and other
  • Forex: A broad breakdown between commercial and non-commercial (speculators)

The reasons why we focus primarily on the behavior of the highlighted groups are:

  • They are likely to have tight stops and no underlying exposure that is being hedged
  • This makes them most reactive to changes in fundamental or technical price developments
  • It provides views about major trends but also helps to decipher when a reversal is looming

Ole Hansen, Head of Commodity Strategy at Saxo Bank.

Start trading now

This article is provided by Saxo Capital Markets (Australia) Pty. Ltd, part of Saxo Bank Group through RSS feeds on FX Empire

Monday Blues: Delta, Kabul, Disappointing Chinese Data

Note that South Korea’s markets were closed, and the Kospi will have a seven-day losing streak in tow when it reopens tomorrow. Taiwan’s Taiex fell for the eighth consecutive session today. Europe’s Dow Jones Stoxx 600 is snapping a 10-day advance, while US futures indices are sporting small losses. US bonds rallied after the shockingly poor consumer confidence reported before the weekend, and this helped ease Asia Pacific yields.

European yields have firmed after a soft start, while the US 10-year yield that peaked near 1.38% last week is nearly flat, around 1.27% today near midday in Europe. The dollar is the fulcrum today, with the growth/risk-sensitive dollar bloc currencies and Scandis trading heavily and the funding/safe-haven currencies (Swiss franc and Japanese yen) firmer. Emerging market currencies are mixed, leaving the JP Morgan Emerging Market Currency Index slightly higher before Latam opens. Gold edged a little higher initially to almost $1783.

Although it has not sustained its early momentum, it looks like it has not given up on a retest of the $1800 area. Oil has slipped lower, but September WTI bounced off the $66.80 in Europe to test $68. Key support is at $65. Copper gained 1% last week but has given it all back plus more today with a 1.6% loss through the European morning.

Asia Pacific

An unexpected pick-up in consumption helped lift the Japanese economy by 0.3% in Q2. Consumption was expected to have been flat but instead rose by 0.8%. As a result, the Q1 decline was revised to -1.0% from -1.5%. Strength, as expected, came from business spending. It rose by 1.7% on the quarter, better than expected, though the Q1 contraction was widened to -1.3% from -1.2%. Inventory liquidation shaved 0.2% off Q2 GDP, a bit more than expected after it contributed 0.4 % to Q1 GDP. Although exports rose, imports rose faster, and the net export function shaved 0.3% off GDP, more than the 0.2% compression in Q1.

Separately, revision to June industrial output figures (6.5%, month-over-month rather than 6.2% initially reported) suggests some momentum as the quarter ended. Lastly, we note that the GDP deflator was -0.7% after -0.2% in Q1. It is the largest drop since Q1 13.

With the Olympics over, Japan’s Prime Minister Suga’s attention turns to politics as if it ever left. His term as the head of the LDP ends next month. For all practical purposes, Japan remains a one-party state, with the LDP dominating. There are other parties, but rarely have they acquired power. Suga is not very popular. A poll by Asashi last week showed his support may have fallen below 30%, the perceived threshold of winning the next election. Yet, the LDP rules favor the status quo and require any challenger to Suga to get the backing of 20 other members.

The LDP leadership is trying to discourage other potential candidates. Yesterday, Suga avoided the controversial Yasukuni Shrine (but did send a religious offering) and marked the end of WWII with a somber address. He followed the new precedent of his predecessor Abe in not apologizing for its aggression. Japanese prime ministers issued apologies for a couple of decades, but still not to the satisfaction of South Korea and China.

We have noted that Japan has recently seemingly elevated its commitment to defend Taiwan should it be attacked by China. Besides providing the latest excuse for the aerial harassment of Taiwan, given Beijing’s modus operandi, some “punishment” of Japan seems likely.

China’s July data disappointed, and the resurging virus warns of further weakness this month, which has seen a large port shut and regulatory pressures weighing on steel output. Retail sales, industrial production, investment in both fixed assets and property slowed.

The “surveyed jobless rate” unexpectedly rose to 5.1% from 5.0%. Speculation of additional easing by the PBOC was already running high last week, and today’s data will encourage it more. Meanwhile, there is much interest in China’s National People’s Congress session. It is expected to force the anti-sanctions law on Hong Kong. The enforcement could further the angst of foreign companies, especially banks, operating in HK.

The dollar has been sold to nine-day lows near JPY109.30. The greenback has been streaky lately. Today is the fourth consecutive loss, which ended a five-day advance. Initial support is in the JPY109.00-JPY109.20 area, but the month’s low was set near JPY108.70. The Australian dollar is weaker but within the $0.7300-$0.7400 range that, with few exceptions, has dominated for the past month.

There is an option for A$970 mln that expires tomorrow at $0.7330. The Chinese yuan strengthened slightly but remained in a narrow range. Within this narrow range, the dollar has not strengthened in a week. The dollar has traded mostly between CNY6.45 and CNY6.50 since mid-June. For the sixth session, it was confined to a tighter CNY6.4735-CNY6.4890 range. The PBOC set the dollar’s reference rate at CNY6.4717, a bit stronger than recently seen relative to expectations (CNY6.4695).

Europe

The weekly Insapol out over the weekend shows the German Social Democrats are finding some traction ahead of the late-September election. For the first time in a year, support has edged above the Greens. Support rose for the SPD by a couple of percentage points to 20, while the Greens were unchanged at 18%. On the other hand, the CDU/CSU slipped one percentage point to 25%, its lowest in three months. These poll results, as fluid as weekly polls may be, and the fact that the SPD’s Scholz is more popular than the CDU’s Laschet, suggest the possibility just emerging on the event horizon of a SPD-Green-FDP coalition.

Swiss overnight deposits rose by more than one billion francs for the second consecutive week. This suggests that the Swiss National Bank’s hand may have been behind the trough carved out by the euro near CHF1.0720. It recovered to CHF1.0840 ahead of the weekend before reversing lower and posting an outside down day. Follow-through selling today brought the cross briefly back below CHF1.0760 before stabilizing.

With deeply negative yields, there is not much for the SNB to do but intervene to block currency appreciation that is not based on Swiss fundamentals. Moreover, there are insufficient domestic bonds to buy (QE), leading it to buy foreign assets, especially US shares.

The euro recovered smartly ahead of the weekend. On the back of the drop in US consumer confidence, the euro, which had found support earlier in the week just above $1.17, rallied to $1.1805 and settled just below. Today, it found sellers in the $1.1800 area and has been sold to $1.1780.

There is an option for almost 500 mln euros at $1.1750 that expires today. A break of $1.1740 would re-target the $1.1700-key support area. Sterling recovered from a two-week low before the weekend but stalled near $1.3880. That area continues to block the upside. Immediate support is seen near $1.3835, and of its signals, a return to the 200-day moving average near $1.3780.

America

The US Treasury sold $126 bln of coupons last week. The supply was easily absorbed. In fact, on some metrics, like the low amount left in the hands of primary dealers, set records. A big concession may have helped. The yield had backed up nearly 25 bp in the five sessions before the auction. There may have been some immediate buyers remorse as yields headed higher the following day.

The market took its breath near 1.38%, and the dreadful consumer University of Michigan’s consumer confidence survey (lowest in a decade) helped make the action participants happy as the 10-year yield plunged over eight basis points (to almost 1.27%), the most in three weeks. Investors will be watching the bill auctions for signs of disturbances spurred by the debt ceiling considerations. The 20-year bond auction ($27 bln) has been more challenging this year, and it may be struggling to find/create a natural constituency. The premium is not as plump, and market conditions may be thinner.

In a well-tipped and anticipated move, Canada’s Prime Minister Trudeau called for a snap federal election, two years ahead of schedule, on September 20. In the 2019 election, he lost his parliamentary majority garnered in 2015. Trudeau hopes to re-gain his majority on the coattails of a successful inoculation campaign, strong fiscal and monetary from both the US and Canada-led recovery, and an opposition that is struggling Nor is Trudeau giving the opposition much time.

The 36-day campaign is the shortest permitted by law. To secure the majority, Trudeau’s Liberals need to pick up a net of 13 seats. The polls suggest it is close. Recall that in 2019, the Liberals lost every contest in Alberta and Saskatchewan in protest of Trudeau’s climate policies.

The US reports the August NY Fed manufacturing survey. It popped up from 17.4 in June to 43.0 in July, a record high. It is not expected to have sustained that momentum, and a pullback toward 28.5 is expected. Although it is typically not a market-mover, traders may be more sensitive after the University of Michigan consumer confidence report. The Treasury International Capital (TIC) report is due after the market’s close. Given the low level of intervention and the dated nature of the report (two-month lag), it tends to be discussed by analysts but rarely market moving.

The week’s highlights include July retail sales tomorrow and industrial production figures Wednesday. Fed Chair Powell hosts a town hall discussion with teachers tomorrow and the FOMC minutes for last month’s meeting are due on Wednesday. While the focus in Canada is on the election, it reports exiting homes sales today, July CPI on Wednesday, and retail sales Friday.

The US dollar is trading at four-day highs against the v near CAD1.2550. The 200-day moving average is just shy of CAD1.2565. It closed above the 200-day moving average a couple times last month, and although it has been frayed on an intraday basis this month, it has not closed above it. Above it, resistance is seen in the CAD1.2600-CAD1.2615 band. Recall that last week, the Mexican peso had been bought before Banxico hiked rates and sold off on the fact.

Follow-through selling ahead of the weekend stalled with the poor US confidence report and sent the peso to new highs for the week. The greenback is consolidating today within the pre-weekend range. In the European morning, the dollar found support near MXN19.88. Initial resistance is seen in the MXN19.92-MXN19.94 area. Meanwhile, the risk-off sentiment and domestic political issues may weigh on the Brazilian real, which has depreciated for the past four weeks and six of the past seven weeks. The dollar faces resistance in the BRL5.30 area and then the 200-day moving average around BRL5.3380.

This article was written by Marc Chandler, MarctoMarket.

Commodity Weekly: Weather Woes Keep Agriculture Commodities on Top

The commodity sector, with the exception of some key food items, remains on the defensive as the current surge in virus cases in major economies clouds the short-term outlook for growth and demand. In addition, the prospect for an earlier-than-expected return to a tightening regime by the US Federal Reserve has helped put upward pressure on bond yields and the dollar, thereby reducing the appeal for investment metals, such as gold and silver.

The macro-economic outlook remains clouded by the current third Covid-19 wave which continues to spread across Asia and parts of the US, thereby creating a great deal of uncertainty with regard to the short-term demand for key growth and demand-dependent commodities from crude oil and gasoline to copper and iron ore. With this in mind, the increased possibility of the US tapering its massive asset purchase program is unlikely to be followed by others, potentially leading to rising US Treasury yields and a stronger dollar.

As in the previous week, pockets of strength remained with several key agriculture commodities continuing to find support following what up until now has been a very volatile weather season across some of the key growing regions of the world. Cold weather in parts of Brazil has hit the sugar cane crop while also causing extensive damage to the region’s coffee as well. Elsewhere, extreme heat leading to dryness have sliced the expectations for this year’s grains crop, especially corn and wheat.

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In its latest World Supply and Demand Outlook (WASDE) the US Department of Agriculture forecast the lowest US wheat harvest in 19 years with global supplies suffering a further downgrade in response to large reductions to estimates from drought-hit fields in Canada and Russia. The prospect for lower shipments from Russia, the world’s biggest exporter, saw the high protein milling wheat future traded in Paris jump to a three-month high above 255 per tons, some 35% above the five-year average.

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Gas prices in Europe rose to another record before retreating with supply concerns being somewhat offset by weaker sentiment in the broader energy market given the latest wave of Covid-19. In the US, gas prices headed for their biggest weekly loss following a bigger-than-expected weekly rise in stocks, but forecast for another incoming heatwave will likely limit the correction with tight winter supplies, just as in Europe, a risk that may continue to support prices ahead of winter.

In Europe, an unexplained reduction in flows from Russia combined with rising competition from Asia for LNG shipments has made it harder to refill already-depleted storage sites ahead of the coming winter. These developments have led to rising demand for coal, thereby forcing industrial users and utilities to buy more pollution permits, the price of which are already trading at record prices. All in all, these developments have led to surging electricity prices which eventually will be forced upon consumers, thereby adding to the already rising cost of everything.

Gold spent most of the week trying to recover from the price collapse that followed the stronger-than-expected US jobs report on August 6. The sell-off culminated during the early hours of the Asian session last Monday when the yellow metal, within a short period, tanked more than 70 dollars. Coming into August, sentiment was already hurt by gold’s inability to rally in response to the July slump in Treasury yields. A drop in yields that concluded just days before the slump when US 10-year inflation-adjusted yields hit a record low at -1.22%.

Having struggled to rally amid favorable yields, gold immediately turned lower at the first sign of higher yields and once key technical levels in the $1750 to $1765 area were taken out, the flood of sell stops during a very illiquid time of day took it briefly down to the March double bottom below $1680, where fresh bids from physical gold buyers in Asia emerged once again.

The short-term outlook remains challenged by the risk of yields and the dollar both moving higher ahead of the late August meeting of central bankers at Jackson Hole. The annual symposium which in the past has been used to send signals of changing policies or priorities to the market.

A weekly close above $1765 in gold would create a bullish candle on the chart and it may help send a supportive signal to a market still dizzy following the latest rollercoaster ride. However, in order to look for a recovery, silver needs to join in as well and, so far, it is struggling with the XAUXAG ratio trading above 75 ounces of gold to one ounce of silver, its highest level and silver’s weakest against gold since December.

Copper’s recent and price-supportive focus on potential supply disruptions in Chile eased as BHP workers at the Escondida mine, representing 5% of global output, voted to accept a final wage proposal. In recent weeks, the threat of supply disruptions have offset surging Covid-19 cases and worries about a Chinese slowdown hitting demand. With the risk of disruptions fading the market could, just like oil, see a period of sideways trading while the current virus outbreak is being brought under control.

While resistance has been established above $4.4/lb, support has been equally strong below $4.20/lb. Overall, however, we still see further upside with the price of High-Grade copper eventually reaching $5/lb, but perhaps not until 2022 when continued demand for copper towards the green transformation and infrastructure projects increasingly could leave the market undersupplied.

Crude oil remains one of the biggest losers so far this month, only surpassed by iron ore and silver. Following several months where the main focus was on OPEC+ and its ability to support prices by keeping the market relatively tight, the focus has once again reverted to an uncertain demand outlook caused by the rapid spreading of the Delta coronavirus variant, particularly in key importer China. A development that has led to growth downgrades and raise questions about the short-term demand outlook for oil and fuel products from the world’s biggest buyer.

While some of the major bulls on Wall Street see the disruption from the Delta variant being transitory and only negatively impacting demand for a couple of months, both the IEA and OPEC in their latest monthly oil market reports cut their demand outlook for the remainder of the year. The latest wave is leading to a renewed reduction in mobility around the world with the biggest concern being the flare-up in China, where a still-low number of infected has been met by an aggressive approach to contain the outbreak.

However, the flexibility exhibited by the OPEC+ group during the past year will likely prevent a deeper correction should demand growth suffer a bigger-than-expected headwind from the current outbreak. With this in mind and considering the lack of response from US producers despite high prices, we maintain a constructive view on the direction of prices into yearend.

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Ole Hansen, Head of Commodity Strategy at Saxo Bank.

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This article is provided by Saxo Capital Markets (Australia) Pty. Ltd, part of Saxo Bank Group through RSS feeds on FX Empire

Delta Drives Cut in Oil and Copper Longs; Gold Steady Before The Storm

Saxo Bank publishes weekly Commitment of Traders reports (COT) covering leveraged fund positions in commodities, bonds and stock index futures. For IMM currency futures and the VIX, we use the broader measure called non-commercial.

 

The below summary highlights futures positions and changes made by hedge funds across commodities, forex and financials up until last Tuesday, August 3. A relative calm week that saw stocks reach new highs with many companies beating earnings expectations, the yield on 10-year Treasuries reaching a new cycle low while the dollar softened.

All developments that occurred before explosive end of week developments, starting with Wednesday’s hawkish comments from Clarida, the Fed vice-chair, and topped up with Friday’s strong US jobs report. Commodities traded lower led by crude oil and copper in response to the rapid spreading of the delta coronavirus variant and its potential negative growth and demand impact, especially in Asia.

Commodities

The Bloomberg Spot index lost 0.5% during the reporting week to August 3, as the rapid spreading of the delta coronavirus variant in Asia and parts of the US raised concerns about demand for key commodities such as crude oil and copper. These developments were somewhat offset by gains in precious metals as both the dollar and yields softened before the sharp reversal on Friday. The grains market saw a strong adverse weather-related jump in wheat prices.

Overall, these developments resulted in no major change in the overall commodity exposure held by funds with selling of crude oil, soybeans, natural gas and copper being offset by buying in wheat, corn, sugar and silver.

Energy

Crude oil’s late July rally ran out steam after the market attention increasingly turned from OPEC+ to Asia, and especially China, where the delta coronavirus variant continued to spread thereby putting a cloud over the short-term demand outlook. As a result, the net long in WTI and Brent was cut by a combined 18.4k lots to 614k lots, thereby reversing one-third of what was added in the previous week. The bulk of the change led by long liquidation with no signs of increased short-selling activity.

The natural gas long in four Henry Hub deliverable swap and futures contracts was, despite surging prices, cut by 4% to 312k lots. This the fourth consecutive week of net selling has occurred while the price has continued to rally, and it closed the week at $4.14, the highest since December 2018 in response to hot weather and robust export of LNG raising concerns about insufficient stockpiles for the coming winter.

Following the worst week for crude oil in ten months, the market will be watching closely the monthly oil market reports from EIA on Tuesday followed by the IEA and OPEC on Thursday for any signs of changes in the demand outlook. The rapid spreading of the delta coronavirus variant in Asia and parts of the US has seen the market focus switch back to demand worries from OPEC’s ability to keep prices supported by keeping supplies sufficiently tight.

Metals

The gold long, just like the price, held steady with a small net addition of just 851 lots disguising a pickup in short selling interest with traders increasingly seeing the risk of a downside move in response to gold’s week-long failure to respond to a sharp fall in US Treasury yields. A worry that was confirmed on Friday, when the a very strong US jobs report helped push an already weakened price over the edge to record its biggest fall in seven weeks.

Silver meanwhile saw the net long receiving a 22% boost but with the sole driver being short covering. Copper was net sold with virus worries off-setting the risk of a strike related supply disruption in Chile, the world’s number one producer.

With the market focus on jobs over for now, the short-term direction of precious metals could be dictated by U.S. inflation – the other part of the Fed’s mandate – with July CPI due on Wednesday.

Today’s flash crash

Gold (XAUUSD) and silver (XAGUSD) already under pressure following Friday’s stronger than expected US jobs report, suffered a flash crash during the early parts of the Asian session. Following the weak close on Friday both metals had been left vulnerable into the opening, and with both Singapore and Japan on holiday the Asian opening offered even less liquidity than normal. Within minutes gold dropped more than 4% while silver slumped 7%, before pairing losses ahead of the European opening.

Traders have been rattled by golds strange behavior in recent weeks when falling yields failed to boost the price, while last week’s small turnaround in yields triggered an immediate and strong negative response. This sort of capitulation can often coincide with a significant low in the market but for that to happen economic data is required to turn more gold friendly.

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Agriculture

Selling of soybeans were more than offset by strong buying of corn and both wheat contracts on KCB and CBOT. CBOT wheat futures traded close to the May high with adverse weather developments increasingly pointing to tighter global supplies due to expectations of lower output from top exporters Russia and the US. Rains have hurt grain quality in parts of Europe and China, while heat and drought have slashed the production outlook in Russia and North America. Apart from ongoing weather developments the market will also be watching a monthly supply and demand report from the US Department of Agriculture on Thursday.

Forex

A mild bout of dollar weakness in the week to last Tuesday, saw speculators reduce bullish dollar bets from a 17-month high by 18% to $3.6 billion. This before Clarida the Fed vice-chair’s hawkish comment on Wednesday and Friday’s across the board strong jobs report saw the 10-year Treasury yield climb to 1.3% and the dollar strengthen against it major peers, not least the Euro which ended the week at a four-month low.

The mentioned change was primarily driven by GBP and JPY buying. The sterling position returned to neutral while the yen short was reduced to a six-week low. Overall, and just like the previous week, the overriding theme was the reduction in positions, both long and short, as the peak summer holiday period continues to reduce risk appetite.

What is the Commitments of Traders report?

The COT reports are issued by the U.S. Commodity Futures Trading Commission (CFTC) and the ICE Exchange Europe for Brent crude oil and gas oil. They are released every Friday after the U.S. close with data from the week ending the previous Tuesday. They break down the open interest in futures markets into different groups of users depending on the asset class.

Commodities: Producer/Merchant/Processor/User, Swap dealers, Managed Money and other
Financials: Dealer/Intermediary; Asset Manager/Institutional; Leveraged Funds and other
Forex: A broad breakdown between commercial and non-commercial (speculators)

The reasons why we focus primarily on the behavior of the highlighted groups are:

  • They are likely to have tight stops and no underlying exposure that is being hedged
  • This makes them most reactive to changes in fundamental or technical price developments
  • It provides views about major trends but also helps to decipher when a reversal is looming

Ole Hansen, Head of Commodity Strategy at Saxo Bank.

Start trading now

This article is provided by Saxo Capital Markets (Australia) Pty. Ltd, part of Saxo Bank Group through RSS feeds on FX Empire

Barrick Gold Sees Little Hit From Inflation, Reaffirms 2021 Targets

Chief Executive Officer Mark Bristow said the miner had accounted for costs at current levels, but if costs climbed further, Barrick could see a 1% hit.

He also said the company did not expect to exceed costs on new projects even though there was some impact, particularly from rising steel prices.

Last month, rival Newmont warned of rising costs for materials, energy and labor in second half of the year and in 2022, adding aggregate costs were seen rising about 5% when steel, fuel and oils were factored in.

Barrick reiterated its plans to spend between $1.8 billion and $2.1 billion, and all-in-sustaining costs of $970 per ounce to $1,020 per ounce of gold and $2-$2.20 per pound of copper in 2021.

It maintained its production estimate of 4.4 million ounces to 4.7 million ounces of gold attributable to the company, and 410 million pounds to 460 million pounds of copper.

Production fell 9.4% to 1.04 million ounces in the second quarter, while realized gold prices rose 5.5% to $1,820 per ounce as a weaker dollar and safe-haven buying due to pandemic-related uncertainties boosted demand.

Barrick’s all-in-sustaining costs, a metric that reflects total costs associated with production, rose 5.4% to $1,087 per ounce of gold.

U.S.-listed shares of the company, which have fallen 8% this year, were down 1.4% in premarket trading, tracking a dip in gold prices.

Shares of global miners have fallen this year after surging on record high gold prices last year.

Barrick’s second-quarter adjusted earnings per share of 29 cents beat estimates of 26 cents, according to Refinitiv IBES. Revenue of $2.89 billion, however, missed estimates of $2.92 billion.

For a look at all of today’s economic events, check out our economic calendar.

(Reporting by Arathy S Nair in Bengaluru; Editing by Shinjini Ganguli)

Virus and Yield Rise Clouding Short-Term Commodity Outlook

The commodity sector began August on the defensive on a combination of weakness in Chinese economic data and the rapid spreading delta coronavirus variant causing renewed worries about the short-term demand outlook. Growth-dependent commodities such as crude oil and industrial metals traded lower while precious metals, having struggled to rally in response to the July slump in US Treasury yields, traded lower as yields and the dollar rose following hawkish Fed comments and a very strong US job report.

Pockets of strength remained with agriculture commodities such as sugar and wheat receiving a boost from what so far has been a very volatile weather season across some of the key growing regions of the world. Gas prices trading at a 2 ½-year high in the US and at record levels in Europe was another area that continued to exhibit strength amid tight supply at a time of strong demand, both raising concerns that stockpiles may not build sufficiently ahead of the peak winter demand period.

Despite another Covid-19 related cloud, the macro-economic outlook remains supportive with strong growth in Europe and the US somewhat off-setting concerns in Asia where the virus has penetrated fortress China resulting in renewed lockdowns and down revisions to growth.

The copper market, while rangebound, has during the past couple of months gone from being very bullish to more cautious. A whole host of opposing forces have in recent weeks been pulling the price in opposite directions, thereby causing some uncertainty as to the short-term direction. Overall, however, we still see further upside with the price of High-Grade copper eventually reaching $5/lb, but perhaps not until 2022 when continued demand for copper towards green transformation and infrastructure projects increasingly could leave the market undersupplied. Despite the risk of a slowdown in China, demand growth elsewhere will highlight the risk of rising demand not being met – at least in the medium term – by rising supply which tends to be quite inelastic.

Currently, supporting the price of copper is the risk of simultaneous strike disruptions at three major mines in Chile, including Escondida, the biggest mine. However, against that we see uncertainty related to signs of a slowdown in China and the general growth impact of the current spreading of the Delta coronavirus variant. Demand for refined copper has also received a small setback after Chinese policymakers reversed a planned ban to scrap metal imports, and finally Fed vice-chair Clarida’s hawkish comments earlier this week about normalization could further dampen investor appetite for metals as a diversifier and inflation hedge.

CBOT wheat futures traded close to the May high before suffering a small bout of profit taking. Adverse weather developments increasingly point to tighter global supplies due to expectations of lower output from top exporters Russia and the US. Rains have hurt grain quality in parts of Europe and China, while heat and drought have slashed the production outlook in Russia and North America. According to the latest COT report, speculators have only just flipped their position in wheat back to a net long, and further positive price momentum, supported by bullish fundamentals, may force them to chase the market higher.

However, in the short term, mounting cases of the Delta coronavirus variant may raise doubts over the level of demand while some major consuming nations such as Egypt, Pakistan and Turkey have backed off from purchases in recent weeks. Under pressure from rising prices, the Egyptian President is even considering raising the price of the country’s subsidized bread. Something that was last attempted in 1977 when then President Anwar Sadat reversed a price rise in the face of riots.

Natural gas prices across the world remain bid on a combination of hot weather driving increased demand for cooling and rising demand from industry as the global economy bounces back from the pandemic. In the US, the price of Henry Hub is trading above $4/MMBtu, the highest price for this time of year in at least ten years on a combination of rising domestic demand and rising LNG exports. This comes at a time when production has struggled to pick up, especially due to the slow recovery in shale oil production, from which gas is a byproduct.

Much worse is the situation Europe where prices have reached record levels. An unexplained reduction in flows from Russia, combined with rising competition from Asia for LNG shipments, has made it harder to refill already-depleted storage sites ahead of the coming winter. These developments have led to rising demand for coal, thereby forcing industrial users and utilities to buy more pollution permits, the price of which are already trading at record prices.

All in all, these developments have led to surging electricity prices which eventually will be forced upon consumers across the continent, thereby causing a major headache for governments and potentially challenging the political will to decarbonize the economy at the agreed rapid pace.

Crude oil traded lower and following several months where the main focus was on OPEC+ and its ability to support prices by keeping the market relatively tight, the focus once again reverted to an uncertain demand outlook caused by the rapid spreading of the Delta coronavirus variant, particularly in key importer China. A development that has led to growth downgrades and raise questions about the short-term demand outlook for oil and fuel products from the world’s biggest buyer.

The latest developments justify the continued cautious approach by OPEC+ towards raising production too fast, too soon. It also highlights why Saudi Arabia and other leading members of the group has been keen on prolonging the current quota system beyond next April.

The flexibility exhibited by the OPEC+ group during the past year will likely prevent a deeper correction should demand growth suffer a bigger-than-expected headwind from the current outbreak. With this in mind and considering the lack of response from US producers despite high prices, we maintain constructive view on the direction of prices.

Precious metals

Having just returned from my holiday, the first question I had to ask was why gold was not trading quite a bit higher? During the past month, US Treasury yields have seen steep declines and with inflation expectations not changing much, the inflation-adjusted rate, or real yield, slumped to a record low at -1.22%. Given the historical strong inverse correlation between real yields and gold, the failure this past month to rally has caused a great deal of head scratching among participants, potentially resulting in some long liquidation for fear that a recovery in yields may not be met by the same level of inaction.

A worry that was confirmed on Wednesday when the first signs of recovering yields emerged in response to hawkish comments from Fed vice-chair Clarida discussing the interest tightening path. The comments which helped send the dollar and yields higher was given additional credibility following a very strong US job report for July.

Silver meanwhile has witnessed an even greater exodus with its relative value against gold falling to a six-month low after the gold-silver ratio traded back above 72 ounces of silver to one ounce of gold. Responding to this disappointing performance, hedge funds recently cut their net long to just 21k lots, a 14-month low. Silver will need to see the ratio break back below 70 in order to return to the driving seat, but for that to happen gold would first need to weather the potential short-term challenge triggered by recovering yields.

With gold and silver drifting lower, the hardest hit of the semi-industrial metals is platinum which has seen its discount to gold widen to 800 dollars from an April low at 300. Reasons being the current chip shortage which has curbed auto production, rising sales of EV’s and the current spreading of the delta variant.

Ole Hansen, Head of Commodity Strategy at Saxo Bank.

This article is provided by Saxo Capital Markets (Australia) Pty. Ltd, part of Saxo Bank Group through RSS feeds on FX Empire

What Does Biden’s $1 Trillion Dollar Infrastructure Plan Mean For Silver Prices?

The executive order is part of Biden’s broader $1 trillion Green Energy and Infrastructure spending plan, to transform the economy and firmly position the United States an industry leader the Electric Vehicle market.

Electric Vehicles currently represent 2% of total global vehicle sales and are forecast to exceed 25% of total sales by 2030 – that’s a whopping 1150% increase in growth by the end decade.

Biden’s Electric Vehicle revolution, ultimately means that the U.S is going to need more commodities.

Specifically industrial metals including: Copper, Palladium, Platinum, Lithium, Nickel and rare earth metals for batteries and renewable energy technology. Above all, it needs Silver – and lots of it.

Silver is a key component in President Biden’s ambitious $1 trillion dollar plan – as it will go into the Electric Vehicles, as well as the batteries, fuel cells and plug-in charging stations to power them – as well as the cables connecting new wind turbines and solar farms to the electric powered grid.

Currently, Silver prices are trading near $25 an ounce, which presents an incredible opportunity for traders to gain exposure in the metal before it really takes off.

Goldman Sachs see silver prices rising to $33 an ounce in H2 2021, boosted both investment and industrial demand for the precious metal – and our research suggests similar.

In my opinion, Silver is still definitely the best trade right now and any substantial pullbacks should be viewed as buying opportunities.

Where are prices heading next? Watch The Commodity Report now, for my latest price forecasts and predictions:

For a look at all of today’s economic events, check out our economic calendar.

Bonds Take a Breather, Tencent Tumbles Again

By Marc Jones

Rising bank shares helped Europe’s main bourses and Wall Street futures shuffle higher [.EU] but the real action was elsewhere.

A Chinese state media outlet branding online games “spiritual opium” was enough to send Tencent’s shares tumbling as much as 10% in Asia, wiping $60 billion off its value hot on the heels of its worst month in nearly a decade.

The firm scrambled to say it would curb children’s access to its flagship Honor of Kings game but the panic engulfed gaming rivals NetEase, XD and GMGE which all plunged between 8% and 15%.

There was other spill over too. Shares in Amsterdam-listed tech investment firm Prosus, which holds a 29% stake in Tencent, fell more than 5%. European gaming firms Ubisoft and Evolution fell 2.6% and 5% and the U.S. listed shares of Netease dropped 9% before the bell

“China is exerting control over its tech sector and this has already driven a very sharp de-rating,” Hasnain Malik, head of equity research at Tellimer said.

He said that there would be no reversal in Beijing’s direction although the more than 40% slump in many of the biggest Chinese tech firms since February meant they may now be worth a “revisit”.

Big FX movers were the Australian dollar, which jumped half a percent after its central bank stuck with plans to taper its bond buying programme from next month despite ongoing coronavirus lockdowns.

New Zealand’s dollar also rose after its central bank said it would look at ways to control an inflated house prices while the Swiss franc hit its highest since November versus the euro. [/FRX]

The U.S. dollar meanwhile lurked near one-month lows after disappointing economic data on Monday. That had also pushed the benchmark 10-year Treasury yield down as far as as 1.151%, its lowest since July 20, though Tuesday’s moves nudged it back up to 1.19% [US/]

“There is some definite downside bias in the dollar now,” said Vasileios Gkionakis, Global Head of FX Strategy at fund manager Lombard Odier in Switzerland. “You are starting to a see a rotation of growth away from the U.S.”

NEGATIVITY

In Europe’s bond markets, Germany’s 10-year yield was up less than a basis point at -0.475% having fallen to its lowest since early February on Monday when the whole German yield curve went back into negative territory.

Falling yields globally over the last two months mean there is now more than $16 trillion worth of negative yielding debt again. It had peaked at just above $18 trillion in December.

“If you go back a couple of months the concern about inflation was present everywhere but even in the United States now you don’t see the same sort of concerns,” said Morgan Stanley’s chief economic adviser Reza Moghadam. “The issue now is growth”.

In commodity markets, oil steadied having slumped 3% on Monday on a combination of the U.S. and Chinese economic worries amid the sharp rise in COVID-19 Delta variant cases around the world.

Wuhan in China, where the virus first emerged in late 2019, said overnight it would test all 12 million of its residents after confirming its first Delta variant cases.

Brent crude was up 33 cents in London at $73.28 per barrel. U.S. crude inched up to $71.56 a barrel while gold and industrial metal copper were both slightly lower at $1,810.45 per ounce and 9,594.50 a tonne respectively. [MET/L][GOL/][O/R]

(Additional reporting by Tom Arnold and Sujata Rao in London; Editing by Emelia Sithole-Matarise and Alison Williams)

Bonds Take a Breather, Tencent Tumbles Again

By Marc Jones

Rising bank shares helped Europe’s main bourses and Wall Street futures shuffle higher [.EU] but the real action was elsewhere.

A Chinese state media outlet branding online games “spiritual opium” was enough to send Tencent’s shares tumbling as much as 10% in Asia, wiping $60 billion off its value hot on the heels of its worst month in nearly a decade.

The firm scrambled to say it would curb children’s access to its flagship Honor of Kings game but the panic engulfed gaming rivals NetEase, XD and GMGE which all plunged between 8% and 15%.

There was other spill over too. Shares in Amsterdam-listed tech investment firm Prosus, which holds a 29% stake in Tencent, fell more than 5%. European gaming firms Ubisoft and Evolution fell 2.6% and 5% and the U.S. listed shares of Netease dropped 9% before the bell

“China is exerting control over its tech sector and this has already driven a very sharp de-rating,” Hasnain Malik, head of equity research at Tellimer said.

He said that there would be no reversal in Beijing’s direction although the more than 40% slump in many of the biggest Chinese tech firms since February meant they may now be worth a “revisit”.

 

Graphic: BATtered, https://fingfx.thomsonreuters.com/gfx/mkt/zdvxoyjbgpx/Pasted%20image%201627980391416.png

 

Big FX movers were the Australian dollar, which jumped half a percent after its central bank stuck with plans to taper its bond buying programme from next month despite ongoing coronavirus lockdowns.

New Zealand’s dollar also rose after its central bank said it would look at ways to control an inflated house prices while the Swiss franc hit its highest since November versus the euro. [/FRX]

The U.S. dollar meanwhile lurked near one-month lows after disappointing economic data on Monday. That had also pushed the benchmark 10-year Treasury yield down as far as as 1.151%, its lowest since July 20, though Tuesday’s moves nudged it back up to 1.19% [US/]

“There is some definite downside bias in the dollar now,” said Vasileios Gkionakis, Global Head of FX Strategy at fund manager Lombard Odier in Switzerland. “You are starting to a see a rotation of growth away from the U.S.”

 

Graphic: “Spiritual opium” video game shares tumble, https://graphics.reuters.com/GLOBAL-MARKETS/SHARES/lbvgnryrkpq/chart.png

 

NEGATIVITY

In Europe’s bond markets, Germany’s 10-year yield was up less than a basis point at -0.475% having fallen to its lowest since early February on Monday when the whole German yield curve went back into negative territory.

Falling yields globally over the last two months mean there is now more than $16 trillion worth of negative yielding debt again. It had peaked at just above $18 trillion in December.

“If you go back a couple of months the concern about inflation was present everywhere but even in the United States now you don’t see the same sort of concerns,” said Morgan Stanley’s chief economic adviser Reza Moghadam. “The issue now is growth”.

In commodity markets, oil steadied having slumped 3% on Monday on a combination of the U.S. and Chinese economic worries amid the sharp rise in COVID-19 Delta variant cases around the world.

Wuhan in China, where the virus first emerged in late 2019, said overnight it would test all 12 million of its residents after confirming its first Delta variant cases.

Brent crude was up 33 cents in London at $73.28 per barrel. U.S. crude inched up to $71.56 a barrel while gold and industrial metal copper were both slightly lower at $1,810.45 per ounce and 9,594.50 a tonne respectively.

(Additional reporting by Tom Arnold and Sujata Rao in London; Editing by Emelia Sithole-Matarise and Alison Williams)

Will Silver Outperform Gold In Q3 2021?

Sentiment towards the precious metals complex turned bullish after Fed Chair Jerome Powell stated that the rising cases of the Delta variant may weigh on a recovery in the labour market and that the central bank was still “along away” from considering raising interest rates.

The main takeaway from the Federal Reserve’s July policy meeting was that the central bank remains firmly committed to their massive quantitative easing program, while allowing inflation to run hotter than usual, for some time yet.

Currently, Silver prices are trading near $25 an ounce, which presents an incredible opportunity for traders to gain exposure in the metal before it really takes off.

Silver is not only an excellent inflation hedge, but it’s also a key component in everything from electric vehicles, renewable energy to 5G technology. Based on our proprietary research, photovoltaic demand for silver could exceed 3000 tonnes in 2021, while the 5G rollout – which is only just beginning – will be a major driver of demand for years to come.

Goldman Sachs see silver prices rising to $33 an ounce in H2 2021, boosted both investment and industrial demand for the precious metal – and our research suggests similar.

In my opinion, Silver is still definitely the best trade right now and any substantial pullbacks should be viewed as buying opportunities heading into August.

Where are prices heading next? Watch The Commodity Report now, for my latest price forecasts and predictions:

For a look at all of today’s economic events, check out our economic calendar.

Anglo American Pays Out Record $4.1 Billion to Shareholders for First Half

By Clara Denina and Zandi Shabalala

London-listed shares in Anglo, which have surged almost 80% over the last year, were up 5.2% at 1225 GMT, close to 13-year highs hit in May.

Soaring prices for most of Anglo’s products, including copper, iron ore and platinum group metals, helped to boost profits at the miner, which was hardest hit among its peers by COVID-19 lockdowns.

“I still don’t think it’s our finest hour, that is yet to come … From our point of view it’s a good milestone,” Chief Executive Mark Cutifani told reporters.

Surging commodity prices have boosted miners’ earnings and emboldened them to dish out higher shareholder payouts, with Rio Tinto on Wednesday being the first of the global miners to announce record dividends.

“The underlying investment case at Anglo American remains strong, with differentiated high quality growth, better diversification vs. peers and increasing shareholder returns adds to this compelling mix,” RBC Capital analysts said.

Cost increases, which knocked $200 million off underlying earnings before interest, tax, depreciation and amortisation (EBITDA), were likely to weigh on Anglo, but the miner’s shares remained inexpensive, the analysts said.

Underlying EBITDA rose to $12.1 billion for the six months to June 30, up from $3.4 billion in the same period last year, beating the average forecast of $10.9 billion from 12 analysts compiled by Vuma.

Anglo declared an interim dividend of 1.71 cents per share, up from 0.28 cents last year, totalling $2.1 billion, and a special dividend of 0.8 cents per share, or $1 billion. It also announced a $1 billion share buyback programme.

Net debt fell by 74% to $2 billion in the first half from a year earlier, while unit costs climbed 15%. Costs were still the lowest among its peers, Cutifani said.

“The de-levering process for Anglo is clearly complete, in our view, and sizable capital returns have commenced,” said Jefferies analyst Chris LaFemina, adding Anglo’s shares were poised to outperform between now and the end of the year.

Anglo in June spun off its South African thermal coal business into a new company, Thungela Resources, and agreed to sell its stake in Colombia’s Cerrejon, completing its move away from the most polluting fossil fuel.

Cutifani said discussions over potential increases in taxes and royalties in Peru and Chile, where Anglo has many of its copper operations, were more “sensible” than initial proposals.

The miner is expecting its Peruvian copper project Quellaveco to come on stream in 2022. The project is one of the few sizable ones in the pipeline in an industry hunting for more of the metal as the world moves to a lower carbon economy.

Anglo would focus on investing in its own mines and projects over mergers and acquisitions, Cutifani told a results call.

(Reporting by Clara Denina and Zandi Shabalala Editing by Sonali Paul, Bernadette Baum and Mark Potter)