Sector movers: Miners surge, steel demand strong survey says

Shares in miners surged again as sentiment towards the sector continued to thaw on Tuesday, amid more bullish views from some strategists in the previous session and a soft US dollar.

That sent a pan-European gauge of stocks in the sector, the DJ Stoxx 600’s Basic Resource sub-index, bounding higher by 4.55% to 304.22.

Anglo American paced gains on London’s top -flight index, rising by 8.49% to 752.5p, alongside an advance of 7.55% in the likes of Antofagasta and another 7.50% to 169.9p for shares in commodities-trader Glencore.

BHP Billiton was up by a ‘tamer’ 5.25% to 964.5p.

Three-month copper futures were up 2.0% to $4,917.50 per metric tonne in LME trading as of 16:35BST, in tandem with gains of 0.8% to $1,582 per metric tonne for primary aluminium and larger gains of 1.4% and 1.2% for nickel and zinc futures.

Some order indices for steel at record levels, Macquarie says

The results of Macquarie’s steel survey for April, published on Tuesday, revealed a continued strengthening in demand from infrastructure and construction, with order indices for both of them reaching the highest level in the history of our survey.

Sentiment among steel mills was at its strongest since the start of 2013, the Australian broker’s analysts said.

However, sentiment among iron ore traders “dipped”, “perhaps reflecting the pressure from rapid supply increases from both domestic and overseas mines,” the broker added.

Macquarie also called attention to the $61.60/tonne price (Macquarie: $58/tonne) settled between Glencore and Tohoku for the Japanese Fiscal Year (JFY) thermal coal contract, which marked the largest premium to spot in at least 15 years.

Citi sees commodities markets stumbling back towards normalcy

On 19 April, Citi’s global commodities research team argued that the world’s commodity markets were stumbling back towards normalcy.

“Energy is uniquely critical to a commodities rebound, given the energy intensity across commodities, Oil markets now look likely to enter a period of sustained inventory draws, ushering in higher prices, propelled by demand growth and declining non-OPEC production,” the team from Citi led by Ed Morse said in a research note sent to clients.

Kuwait oil strike in focus

Another Stoxx 600 sub-index for Oil&Gas shares rose 1.90% to 274.70, as investors kept track of Kuwait’s efforts to restore oil production after last Sunday’s walk-out by public sector workers saw output drop from about 2.8m barrels a day to approximately 1.1m barrels.

Production had so far recovered to roughly 1.5m barrels day, Bloomberg reported, with analysts at Energy Aspects telling the newswire the strike might last between 10 to 15 days.

Silver futures move back into ‘bull’ market

Stock in Fresnillo was also near the top of the leader board on the Footsie, taking its cue from silver futures, as the COMEX-traded May 2016 contract saw the biggest advance in the industrial metals’ space, rising 4.66% to $17.01 per ounce.

“Despite all the apparent risk on sentiment, silver prices are surging with gold prices also taking upside cues. The price ratio is now at a 2016 low. Silver’s greater industrial use means it is more sensitive to the industrial cycle and potentially less of a haven than gold.

“Over the long term (100 years) the ratio has gone below 20 three times and neared 100 twice, so silver does look cheap relative to gold in some respects,” London Capital Group’s chief market analyst Brenda Kelly said.

According to data from Bloomberg, Tuesday’s rally in silver meant futures might have entered a ‘bull’ market again, after having risen by over 20% from their most recent lows, with gold just shy of crossing that same threshold.

In terms of the ‘big picture’, the US dollar spot index was retreating 0.47% to 94.04 on Tuesday, while the Bloomberg commodity index was up by 2.14% to 166.20.