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Commodity price plunge melts the miners
00:00, 15 April 2013
Europe Anyone hoping for a quiet start to the week in the lead up to this week's G20 and IMF meetings got a rude awakening as European markets dropped sharply on the open in the wake of disappointing Chinese economic data which showed that economic growth for Q1 only came in at 7.7%, well below expectations of a rise to 8%. Mining stocks and commodity prices have got absolutely battered with gold prices falling though a key technical support level and silver prices also doing the same thing. Copper prices have also dropped sharply hitting their lowest levels since the end of 2011 making the mining sector the biggest faller on the day. The biggest fallers have been Fresnillo, Polymetal and Randgold Resources all lower with Fresnillo in particular being battered on the back of a "sell" downgrade from Citigroup. Plunging oil prices have also hit oil services stocks with Petrofac and John Wood Group also lower. Investors have sought sanctuary today in the defensive sector of utilities with Severn Trent and United Utilities in the blue, while airlines are also higher on the back of the sharp drop in oil prices with Easyjet and International Consolidated Airlines near the top of the UK benchmark. US US markets took their cues from the falls in the European session this morning though it wasn't helped by a disappointing read from the latest Empire Manufacturing survey for April which came in well below expectations at 3.05, well below the March number of 9.24. In earnings the news was more positive as Citigroup reported quarterly earnings above analysts' estimates on both EPS and revenues. Q1 earnings came in at $1.29c a share on revenues of $20.81bn. FX The Japanese yen has been the best performer today after the US treasury fired a warning shot across Japan's bows over the weekend with respect to the recent weakness in the yen. With the IMF and G20 due to meet later this week traders have decided to book some profits from the recent yen weakness after the failure to push through the 100 level earlier this month. The US dollar has also pushed higher across the board with the commodity currencies taking the biggest hits with the New Zealand dollar, Australian dollar and Canadian dollar all sliding sharply on the plunge in gold, oil and copper prices. The pound has remained a relative haven in all of this activity in what is likely to be a busy week with inflation, unemployment and Bank of England minutes due later this week. Commodities It's the commodity space that has driven price action today as gold, copper and oil prices have plunged across the board. The gold price in particular has plunged sharply after breaking through a key technical support level at $1,525 on Friday amid reports that a large 400 ton forced sale on COMEX on Friday tipped the yellow metal over the precipice, triggering a barrel load of stops just below the $1,520 area. The estimated sum was the equivalent of 15% of annual gold mining production, while reports of possible margin hikes on the Shanghai exchange also gave prices an added impetus lower. The yellow metal could well fall as far as the $1,310 level on this technical break which we last saw in 201, and was the low that year. Silver prices have also been hit hard on the back of weaker demand concerns with respect to its place as an industrial metal, as well as being caught in the back draft of the gold sell-off after it also fell through key technical support at $26. Brent crude prices have also dropped sharply approaching the $100 a barrel mark for the first time since July last year on the disappointing Chinese growth numbers while US prices have also hit their lowest levels this year after US economic data continued to disappoint today after Empire Manufacturing missed to the downside for the second month in a row. Copper prices also declined sharply hitting fifteen month lows against the US dollar on concerns that the perceived likely future demand from China may not be as great as investors had originally been pricing in. CMC Markets is an execution only service provider. The material (whether or not it states any opinions) is for general information purposes only, and does not take into account your personal circumstances or objectives. Nothing in this material is (or should be considered to be) financial, investment or other advice on which reliance should be placed. No opinion given in the material constitutes a recommendation by CMC Markets or the author that any particular investment, security, transaction or investment strategy is suitable for any specific person