Miracle Panic-Buyer Lifts Stocks Green From 50DMA

Do you believe in miracles? With death-crosses crossing, Hindenburgs Omening, bonds and credit diverging, breadth deteriorating, stocks on the verge of the worst run of thge year, and the S&P 500 testing the crucial 50-day moving average... it should be no surprise that a combination of VIX-slamming, USDJPY-ramping, PBOC-firing, Fed-speaking sent stocks to their biggest gains in 7-weeks after the worst selling in 5 weeks (and people think the BoJ is the only one buying stocks). Treasury yields rose but nothing like the exuberance in stocks. HY credit markets deteriorated notably (bounced with stocks but notably less so). The USD surged (apparently on PBOC rumors) early (+0.3% on the week). Gold & Silver dropped, copper rose modestly but WTI oil prices exploded higher with stocks' exuberance (and Benghazi headlines). VIX was banged from over 15 to under 13.5. S&P 500 2,000 (1,999.79 achieved) and getting back to green post-FOMC was all that mattered today - and Mission Accomplished... before a slightly weak close.

Dead cat bounce? Perfect 50% retrace of the drop...

and The S&P 500 desparately wanted 2,000 (but failed 1999.79 highs)

WTI outperformed Brent - spread back to almost $4

India’s top court cancels over 200 coal licences

India's Supreme Court has cancelled 214 of the 218 government permits for coal mines allocated since 1993 after the licensing process was deemed illegal, in a move that adds uncertainty beyond the struggling sector to the heart of Asia's third-largest economy.

"The court has cancelled all the allocations except four," Attorney General Mukul Rohtagi told reporters on Wednesday outside the court, Business Standard reports.

Last month the same court ruledthe country's decades-old method of granting coal mining concessions was illegal and arbitrary

Last month the same court ruled the country's decades-old method of granting coal mining concessions was illegal and arbitrary, putting investments worth billions of dollars at risk.

The court decision took effect immediately for the 172 mines that weren't in production. It also ignored requests from the federal government to exempt about 40 coal blocks that had either started production or were near it.

The ruling sent shares of Jindal Steel and Power Limited, Hindalco Industries Limited and Tata Power Co Limited sharply lower.

The firms have already spent heavily on steel and power plants based around the coal blocks.

As companies have waited to learn the fate of the coal-mining rights, India has faced an acute shortage of coal, which fuels about three-fifths of its power needs.

The country is the world's third-largest producer of coal, behind China and the U.S. Yet it relies heavily on imports because of mismanagement and an onerous bureaucracy in coal exploration, production and power generation. As a result, nearly a quarter of India's 1.2 billion people have no electricity, according to the World Bank.

Mine closures – a boon for zinc

Zinc prices seen rising as some of the mines run dry amidst spurt in demand

Zinc is used principally for galvanising iron and more than 50 per cent of metallic zinc goes into galvanising steel.

Zinc is the primary metal used in making American pennies and rising prices of this bluish-white metal this year have forced the US Mint to reduce manufacturing costs to offset higher prices.

Zinc prices have soared to three-year highs in 2014 on intensifying deficit in the global market as one of the biggest mines, Century open pit in Australia, is due for closure next year and the delayed start of its Dugald River project. MMG’s Century mine is expected to run dry in 2015, removing about 5 per cent of global supply.

Several large, aging mines are also scheduled to close next year as miners need higher prices to justify the cost of finding and developing new sources of metal. Miners may not produce enough zinc to meet the needs of steel companies and coin-makers until 2018. Owing to this, zinc production is expected to fall short of demand this year for the first time since 2007.

According to the Lisbon-based International Lead and Zinc Study Group, zinc demand is up 7.7 per cent globally in the first six months of this year to 6.8 million tonnes. As a result, users are drawing on stockpiles of the metal to make up for production shortfalls.

Supplies of the metal in LME-licensed warehouses fell to a three-and-a half- year-low in July, and are down 15 per cent this year. The warehouses contain enough zinc to meet 19 days of demand, down from 24 days at the start of the year.

Chinese factor

Moreover, China’s MMG Ltd, owner of the world’s third-biggest zinc mine, said the global deficit in the metal had increased faster than expected, spurred partly by demand growth in China to rust-proof steel for cars. Chinese demand had picked up as companies sought galvanising technology, following a push by the International Zinc Association to tout the benefits of coating steel with zinc to prevent rust.

As a result of this, Chinese imports of refined zinc have jumped by 39.3 per cent through July, given the solid underlying demand growth, up about 7 per cent in 2014, boosted by strong auto production (+9.4 per cent year to date), rising content of galvanised steel in cars to prevent rust.

After a surplus of six years, supplies of the metal would be in deficit this year, coinciding with world major economies struggling for a breakout from recession, propelled by forecasts of annual demand growth of five-six per cent.

The Zinc study group has estimated that demand for zinc exceeded output by 248,000 tonnes in 2014 through July’14, compared with a 15,000-tonne production surplus in the same period a year earlier.

Prices to rise

Strong demand growth at a time when a number of big mines are approaching the end of their lives will lead to increase in physical deficit and a rundown in stocks at registered LME and Shanghai warehouses, thereby boosting prices further.

For the coming months, prices will continue to surge as some of the world’s largest zinc mines run dry just amidst spurt in demand.

In addition, MMG Ltd, which owns Century, had planned to open a new mine in Australia next year, but it’s being delayed back to late 2016 due to technical issues. This will fuel supply concerns.

However, higher shipments from China, the world's top consumer and producer of refined zinc, in the fourth quarter as tight credit crimps domestic demand at a time of increased imports to LME warehouses in Asia could cap LME zinc prices, which gained around eight per cent this year.

LME Zinc (CMP: $2,222) prices can head higher towards $2,500/tonne, while zinc on the MCX (₹135.5) can head higher towards ₹152/kg.

Automotive Demand Prompting Aluminum Deficit Predictions

Aluminum looks set to continue its comeback this year as automotive companies increasingly turn to the metal over traditional steel.

 

Ford, Jaguar and Toyota have all made high-profile switches to using the metal in vehicle production, while marine companies are forecasting greater demand for aluminum -built liquefied natural gas (LNG) carriers.

Time for a turnaround

 

Aluminum prices have dropped over the past few years because of an excess of global production,according to Bloomberg, but a projected deficit is helping the price gather pace. Indeed, in a recent Reuters poll, seven out of 14 analysts predicted an aluminum market deficit for 2015 — encouraging news given the fact that the global aluminum market has been in a surplus for nine years.

 

Prompting the reversal is the fact that some companies, like Rusal and Alcoa, have cut aluminum production in an effort to correct what has been a market saturated with product. As a result, the metal has been on a steady increase this year, and is currently hovering at $0.88 a pound. It’s up about 10 percent for the year and in August reached an 18-month high on the back of speculation of rising demand and US economy growth.

 

What’s driving the increase?

 

As mentioned, it’s the fact that the metal has been tapped for use in new car models — as well as in the production of ships that carry LNG — that is helping boost its price.

 

Ford announced in August that its F-150 model will be produced with more aluminum, a move that will shave roughly 700 pounds from the F-150 and boost its fuel economy by an average of 7 miles per gallon. The metal already makes up about 75 percent of the Jaguar XE sedan’s components.

 

The latest in the line of automotive companies to make the switch is Toyota, which is going to be using aluminum in the production of hoods for its Camry. Speaking to AutoNews, spokeswoman Jana Hartline said: “Toyota has plans to use aluminum on future vehicles for hood, closures and parts for lightweighting.”

 

The reason behind the switch is a desire to better meet corporate average fuel economy regulations. A lighter car theoretically would have better fuel efficiency and therefore meet stricter fuel emissions laws. In all, aluminum demand is expected to double in the auto industry by 2025.

 

Not only car companies are looking to use the lightweight metal for production. Aluminum is also widely used in the marine industry due to its resistance to corrosion and fuel efficiency, and companies are boosting aluminum output accordingly.

 

For instance, UACJ, the world’s third-largest producer of rolled aluminum products, is expanding its capacity for sheets to be used in LNG carriers by 50 percent to meet rising tanker demand.

 

In an interview with Bloomberg, Hiroshi Hashimoto, a senior analyst at the Institute of Energy Economics, called the demand “unprecedented” and said the Asian country will need more than 20 new LNG carriers.

 

The time is right

Reuters has warned investors that the aluminum deficit may be short lived due to potential Chinese stockpiles, which, if released, will likely bring the metal’s price down. However, given that the size of any potential stockpile in China is unknown, the potential for higher aluminum prices remains.

Similarly, FastMarkets recently cautioned investors to move quickly to take advantage of favorable prices. That said, it estimates that the price of aluminum will hit an average of $1,900 by the end of 2014, up from roughly $1,800 at the end of 2013.

US & Arab Partner Nations Begin Airstrikes In Syria

As the broad coalition crumbled, it appears Washington decided there was no time to waste:

• *U.S., PARTNER NATIONS STRIKING ISIS IN SYRIA: PENTAGON
• *U.S. USING FIGHTERS, BOMBERS, TOMAHAWKS TO ATTACK ISIS

NBC News reports the attack includes drones and is expecting to hit up to 20 targets. FOX is reportingQatar is among the arab nation coalition (along with UAE, Saudi Arabia, Jordan and Bahrain), according to Lt. Col. Oliver North, which is rather surprising given their rather well-known support for Al-Nusra.

Newmont gets permit to restart Indonesia copper exports this week

Newmont's Batu Hijau copper and gold mine. 

Newmont Mining (NYSE:NEM) said Monday it has received a permit from the Indonesian government to restart ore shipments, with copper concentrate exports likely to resume this week.

The US copper and gold miner agreed earlier this month to pay an increased export tax. The other points agreed in the renegotiations include royalties, size of mining and exploration area, domestic processing and divestment obligations and possible mining contract extension.

The company also said it will provide a $25 million assurance bond to demonstrate its support for smelter development in Indonesia, which is pushing companies to refine mineral products domestically, part of a drive to build up the country's value-added economy.

The announcement marks the end of a long-dragged dispute between the Colorado-based miner and Indonesia over an export tax imposed in January

The announcement marks the end of a long-dragged dispute between the Colorado-based miner and Indonesia over an export tax imposed in January that the firm said conflicted with its mining contract. The company declared force majeure at its Batu Hijau copper and gold mine in June and filed for international arbitration in July, withdrawing a month later.

“For the more than 8,000 employees and contractors at Batu Hijau and their families, the resumption of operations marks an important milestone in restoring their livelihoods, as well as supporting the economy of the Sumbawa Barat region,” Martiono Hadianto the president director for Newmont's subsidiary in the Southeast Asian nation, said in a statement.

The Batu Hijau mine, on the island of Sumbawa Barat, began its operations in 2000. The company had forecasted copper concentrate output for 2014 at 110,000-125,000 tonnes before the new export rules.

150 Years Of Global Monetary Policy

While everyone debates if the Fed will, once again, be wrong in its forecasts about a rate hike cycle starting some time in mid-2015 (spoiler alert: it will be), we decided to take a look in the other direction.

The chart below shows the key global events that have influenced monetary policy for the 4 major legacy central banks: the US, UK, Germany and Japan since the mid-19th century. Because if there is one thing to "learn" from the history of monetary policy it is that there is nothing to learn from the history of monetary policy: after all, "this time is always different" when the voodoo priests in charge of it all try to make a bubble-blowing, kneejerk-response "science" out of something that only a mother could call art.

Source: Goldman