Thursday, 31 July 2014

China July factory activity strongest in 18 months, adds to recovery signs

China's factories posted their strongest growth in at least 1-1/2 years in July as new orders surged to multi-month highs, two surveys showed on Friday, cementing bets that the economy is re-gaining momentum after a spate of stimulus measures.

The official Purchasing Managers' Index (PMI) issued by the government climbed to a 27-month high of 51.7 in July, beating forecasts for 51.4.

A separate PMI published by HSBC/Markit also rose to 51.7, its best performance in 18 months.

A reading above 50 indicates an expansion in activity on a monthly basis, and below that a contraction.

Analysts welcomed the data as a sign that the world's second-biggest economy is enjoying a revival after a rocky spell prompted authorities to launch a volley of support measures, including increasing bank lending to spur growth.

Now that looser monetary policy is having its intended effect, some analysts questioned the need for more economic stimulus in China, at least in the near term.

"There is no reason in China to be concerned about growth right now," said Julian Evans-Pritchard, an economist at Capital Economics. "It's a good time for policymakers to step back from stimulus and concentrate on reforms."

Both surveys showed that the rebound in manufacturing was led by firmer domestic demand as new orders -- a proxy for domestic and overseas demand -- rose more sharply than new export orders.

The official PMI showed new orders jumped to 53.6 from June's 52.8, the best reading since May 2012. The HSBC/Markit PMI also showed the new orders sub-index jumping nearly two points to 53.3, a level last seen in March 2013.

Worried by a slowdown in the economy in the first quarter, China began easing policy in April by cutting taxes, hastening investment, and lowering the reserve requirement for some banks.

Bank lending, which is controlled by the government, is expected this year to hit levels unseen since the 2008/09 global financial crisis.

All of this should help China sustain its economic recovery, said Qu Hongbin, an analyst at HSBC.

"We expect the cumulative impact of these measures to filter through in the next few months and help consolidate the recovery,” he said.


"LIKELY TO MEET GROWTH TARGET"

China's economy has had a rocky spell this year.

Growth cooled to an 18-month low of 7.4 percent in the first quarter, and it was only after the flurry of policy support that activity edged back up to 7.5 percent between April and June, in line with the government's 2014 GDP expansion target.

And what started as a slowdown largely driven by unsteady foreign and domestic demand and investment has broadened to include a housing downturn, which in recent months has become the biggest threat to the economy.

Average home prices fell in May for the first time in two years, while growth in land prices also slowed for the first time in two years in the second quarter.

Although a retreat in the once-heated housing market is a welcome for Chinese since home prices are still near record highs, the cooldown is painful for policymakers since the sector accounts for roughly 15 percent of China's economic growth.

Some economists say the economic recovery still hinges on the magnitude of China's pro-growth steps, and whether the government can successfully curb the risks stemming from a cooling property sector.

Indeed, in a sign that the recovery may still be patchy, a sub-index for employment in the HSBC/Markit PMI showed employment contracted for the ninth consecutive month in July as some companies laid off workers.

Premier Li Keqiang also said on Thursday that China has to work harder on reforming its economy in the northeastern region, where growth has lagged after regional governments cut state investment to re-orient the Chinese growth engine. 
Following three decades of double-digit economic growth, China wants to re-make its maturing economy so that it relies not on investment and exports, but on domestic consumption for sustainable growth.

"Future policy depends on whether the cost of funding in China would continue to fall," said Zhou Hao, an economist at ANZ Bank in Shanghai.

"But it's clear that China's economic growth momentum has increased and it's very likely that this year's 7.5 percent growth target will be met."
Source: Reuters

U.S. OIL WTI dives below $100 on Kansas refinery outage, equity drop

 U.S. crude oil tumbled more than $2 on Thursday, going below $98 a barrel, hitting the lowest level since March on news of a potentially lengthy shutdown at a Kansas oil refinery, while Brent also slipped amid signs of robust OPEC oil production.

CVR Refining said its 115,000-barrel-per-day refinery in Coffeyville, Kansas might be shut for as long as four weeks after a fire in a gasoline-related unit on Tuesday. The refinery is a major consumer of benchmark West Texas Intermediate (WTI) crude.

U.S. equity markets slid alongside crude, with the Dow and the S&P 500 posting their first monthly decline since January, while the Nasdaq fell for a third month in the last five.

The S&P 500 posted its worst daily decline since April and first monthly drop since January on Thursday as economic data sparked concern that the Federal Reserve could raise interest rates sooner than some have expected. [.N]

Earlier, prices fell after a Reuters survey showed OPEC pumped more oil in July, further tempering concerns that unrest in North Africa and the Middle East could hurt global oil supplies.

Brent crude for September delivery settled down 49 cents at $106.02 a barrel. Brent has fallen more than 6 percent in July, on track for its biggest monthly decline since April 2013.

U.S. crude futures for September delivery dropped $2.10 to settle at $98.17 a barrel. The contract hit an intraday low of $97.95, its lowest since mid-March. U.S. crude is on course for a monthly drop of nearly 7 percent, its biggest since May 2012.

A lengthy shutdown of the Coffeyville refinery could temper demand for WTI crude. Traders say this should help rebuild inventories in the Cushing, Oklahoma, delivery hub that have fallen this summer to six-year lows.

"If refinery runs pull back, we will see rebounds in crude stocks," said Phil Flynn, analyst at the Price Futures Group in Chicago.

Jack Lipinski, CVR's chief executive officer, said Thursday on a conference call that damage to the unit was "very limited" but they had been forced to shut the entire plant due to damage to the distributed control and data systems.

Also around midday, WTI fell below a technical marker of $99. Traders said this could trigger further technical selling.

"We broke a key technical level of last week's $99 low, that may have triggered some momentum selling," said Gene McGillian, analyst at Tradition Energy in Stamford, Connecticut.

"It seems all fears of supply disruption from geopolitical risk have evaporated in a little less than two weeks."

Rising gasoline stockpiles in the United States, even during the peak summer driving season, have raised concerns about the demand outlook in the world's largest oil consumer.


GEOPOLITICS

Oil prices have steadily eased after hitting multi-month highs in June on world political tensions.

In Libya, rival militia brigades resumed their battle for control of Tripoli’s main airport. Crude oil output has remained around 500,000 bpd.

Iranian oil exports increased after the country met the terms of a six-month agreement on its nuclear program in mid-July, softening Western sanctions.
In Europe, traders are watching how sanctions will affect oil exports from Russia.

The head of Russia's second-largest oil producer Lukoil said Western sanctions would force the company to reduce its investment program.


Source: Reuters

Zinc, nickel fall as stockpiles rise, copper flat

 Zinc lost ground on Thursday after inventories rose, highlighting an overhang of supplies that analysts say needs to be eroded before expected shortages kick in.

Nickel prices also slipped after inventories touched another record high.

Benchmark zinc on the London Metal Exchange (LME) slipped 0.4 percent to $2,369.50 a tonne in official open outcry trading after hitting $2,416 on Monday and again on Tuesday, the strongest since August 2011.

Zinc prices have climbed 15 percent this year as funds have scrambled to buy on forecasts of future shortages after the closure of major mines, but many analysts say prices are overheated since tight markets have not yet formed.

"It does seem to indicate that people are asking questions about whether zinc has any further upside. We have been saying that the price has escaped the fundamentals. It's overextended and it's got a correction due," analyst Vivienne Lloyd at Macquarie in London said.

"With stocks going in to New Orleans today, that's going to diminish appetite for the upside as well."

LME zinc stocks rose 7,375 tonnes on Thursday to 655,750 tonnes after dropping by 30 percent so far this year. It was unclear yet whether this was a one-off increase or marked a halt of the declining stocks trend, Lloyd added.


NICKEL

Nickel is another metal that has seen strong gains this year on forecasts of expected shortages, but which still has healthy inventories.

The price of the metal mainly used in stainless steel slipped after LME nickel stocks rose 1,398 tonnes to a fresh record of 315,798 tonnes. Benchmark nickel failed to trade in official rings and was last bid down 1.0 percent at $18,775 a tonne.

Other LME metals were either little changed or in the red, weighed down by a slightly stronger dollar and concerns about the Chinese economy.

The International Monetary Fund said that China should lower its growth targets for next year as part of a push towards safer and more sustainable growth. It also flagged the country's property market slowdown as a cause for concern.

The world's second-largest economy accounts for around 40 percent of world refined copper demand, and China's construction sector for a large portion of its copper consumption.

"The (positive) Chinese economy story might carry into the next quarter. But the game is structural deceleration, so bad news is waiting to come around again," analyst Dominic Schnider of UBS Wealth Management in Singapore said.

The dollar hovered near a 10-month high against a basket of currencies after the U.S. Federal Reserve said on Wednesday it was in no rush to raise interest rates and data showed on Thursday that euro zone inflation fell to its lowest since the height of the financial crisis five years ago.

A stronger dollar makes dollar-priced commodities more expensive to buyers outside the United States.

LME copper dipped 0.1 percent to $7,120 a tonne in official trading after gaining around 0.5 percent in the previous session. Prices are within reach of $7,212, the July 8 peak which was in turn the highest since February.

LME aluminium failed to trade in official rings and was last bid down 0.1 percent at $2,020 a tonne after gaining 2 percent on Wednesday.

The London Metal Exchange's attempts to cut backlogs at warehouses with new rules are likely to be delayed again for several months after judges declined to make an immediate ruling on a case holding up the reforms.

The news helped propel cash aluminium prices to the highest against benchmark prices since December 2012. 

Lead shed 0.6 percent to $2,246 a tonne in official trading while tin added 0.3 percent to $22,950.

Source: Reuters

Portugal's Banco Espirito Santo edges closer to state aid as investors baulk at losses

 Banco Espirito Santo's hopes of raising capital without taking state aid suffered a major blow on Thursday as investors took fright at massive losses and revelations of potential illegal activity at Portugal's largest listed bank.

Its shares, which were suspended from trading on Wednesday evening, plummeted to an all-time low within five minutes of trade resuming in Lisbon at 0914 GMT on Thursday. They later pared losses, but were still down 28 percent by mid-morning.

The shares had been suspended to give investors time to digest details of a 3.6 billion euro half-year loss that will force the bank to raise capital and the suspension of top officials over suspected "harmful management".

"The results and the recapitalisation need are close to the worst scenario envisaged by the market, the capital ratio has fallen way below what is requested," said Joao Lampreia, an analyst Banco Big in Lisbon, who expects the bank will need to raise around 3 billion euros.

BES, founded by Portugal's only banking dynasty over 100 years ago, was the only Portuguese bank to avoid taking a bailout during the financial crisis. Its new management, who were appointed on July 14 after the Espirito Santo family lost control, want to retain that status.

That goal will likely be harder to achieve following Wednesday's announcement.

"Bank of Portugal and BES’ new CEO have commented that private investors are willing to step in. But would the state and/or junior bondholders have to get involved?" Citi analyst Stefan Nedialkov wrote in a note to clients.

Portugal's central bank said on Wednesday night that private capital was its preferred solution for BES, which had a common equity tier one ratio of just 5 percent at the end of June, below the regulatory minimum 7 percent.

It said public funds are available should the bank need them. Portugal, which emerged from its sovereign bailout in May and has been eyeing economic recovery, has 6.4 billion euros of funds for any bank recapitalisation.

BES said late on Wednesday it would raise enough money to give it a cushion above what it was legally required to hold, but did not immediately say how much cash it would seek. It said it would call a shareholders' meeting to approve the recapitalisation plans "within a reasonable time frame".

In a note to clients, Nomura analysts said the bank would need at least 1 billion euros of new equity to meet minimum requirements and as much as 3 billion euros to restore its previous cushion.

BES last raised capital on June 11, selling 1 billion euros of discounted shares to existing investors. Even before Thursday's share price falls, those investors had suffered losses of about 50 percent.

Last week more than 20 investors held talks with the Bank of Portugal about a possible investment, people familiar with the discussions told Reuters. U.S. hedge fund DE Shaw and clients of Goldman Sachs have already taken a combined stake of 5 percent.


The sources, speaking on the condition of anonymity as discussions are private, also stressed that Bank of Portugal had repeatedly made it clear that state aid was an absolute last resort.

One hedge fund manager who is considering an investment said a bailout was not inevitable. “If there really was no prospect of getting any cash, the stock should probably be at zero,” he said.

He said there was precedent for a bank raising far more capital than it has, pointing to Italy’s Monte dei Paschi raising 5 billion euros despite its market value being just over 2.5 billion euros when it approached investors.
Source: Reuters

WSJ: Oil Prices Slide as Dollar Strengthens

       The WSJ reports,"oil prices fell to the lowest point in more than two weeks Thursday, as the strength of the U.S. dollar weighed on prices and global supplies remained ample.
Light, sweet crude for September delivery recently traded down 81 cents, or 0.8%, to $99.46 a barrel on the New York Mercantile Exchange, up from a two-week intraday low of $99.09 a barrel. Brent crude on ICE Futures Europe fell 23 cents, or 0.2%, to $106.28 a barrel.
The dollar has strengthened among a basket of other currencies due to unexpectedly strong U.S. economic indicators, including a better-than-expected reading of gross domestic product for the second quarter. A strong dollar weakens buying appetite because crude is priced in dollars and becomes more expensive to the rest of the world when the U.S. currency strengthens".
"The dollar continues to push higher. I think that that brings more liquidation selling in crude," said Gene McGillian, broker and analyst at Tradition Energy in Stamford, Conn.
Even with ongoing violence in various regions, including Ukraine, Iraq and Libya, oil production has yet to be disrupted and global supplies remain high.
"Despite all of the evolving geopolitical issues, the market is still viewing the overall global supply and demand balances as amply supplied, with no shortages of oil anyplace in the world," said Dominick Chirichella, analyst at the Energy Management Institute, in a note.
Speculative traders, including hedge funds, pension funds and managed-money funds, took on record-high bets on rising U.S. and global oil prices last month after an insurgency broke out in Iraq, prompting fears of a large supply disruption. Now those traders may be closing out their bets, pushing prices lower, Mr. McGillian said.
"In our rush to nine-month highs [in June], the market brought on a record amount of speculative length, and I think that's where the selling pressure is coming from," he said.

Disappointing earnings, weak inflation hit European stocks

A raft of disappointing earnings reports from European heavyweights pushed the region’s stock markets to sharp losses on Thursday, while another soft inflation reading for the euro zone offered little consolation.
Meanwhile, a “selective default” by Argentina kept investors in a downbeat mood.
 Inflation in the euro zone dropped to 0.4% in July from 0.5% in June, marking the lowest level since October 2009. The weakness is a setback to the European Central Bank, which in June launched a package of liquidity measures aimed at boosting growth and bringing inflation more in line with the bank’s goal of just below 2%.
In a bit better piece of news, unemployment in the currency union fell to 11.5% in June, from 11.6% in May, reaching its lowest level since September 2012.
The number of Germans without a job fell more than expected in July, while the unemployment rate was unchanged at 6.7%.
In the U.K., a survey from British lender Nationwide showed house prices in the country in July rose at the slowest pace since April last year.
All major European markets were mired in the red. The Stoxx Europe 600 index  lost 0.8% to 337.54, setting it on track for a 1.3% monthly drop. Such a decline would mark the biggest monthly slide since January.
Germany’s DAX 30 index   fell 0.9% to 9,503.40, poised for a 3.3% decline for July. France’s CAC 40 index   gave up 0.8%, set for a 3.2% loss for the month.
The U.K.’s FTSE 100 index   slipped 0.2% to 6,761.85. For the month, the U.K. benchmark looked set to outperform the other country-specific indexes with a 0.3% advance.
The euro EURUSD -0.14%  slipped to $1.3385, from $1.3397 late Wednesday.
Source:  Marketwatch

Wednesday, 30 July 2014

Cia de Minas Buenaventura* S.A.A announced today Q2 2014 results *Peru's largest publicly-traded precious metals mining company

Compañia de Minas Buenaventura S.A.A. (“Buenaventura” or “the Company”) (NYSE:BVN; Lima Stock Exchange: BUE.LM), Peru’s largest publicly-traded precious metals mining company, announced today results for the second quarter (2Q14) and 6-month (6M14) periods ended June 30, 2014. All figures have been prepared in accordance with IFRS (International Financial Reporting Standards) on a non GAAP basis and stated in U.S. dollars (US$).
Second Quarter 2014 Highlights:
  • EBITDA from direct operations increased 89% compared to 2Q13 and 41% compared to 1Q14.
  • Net Income increased 22% compared to 2Q13 and improved significantly compared to the US$16.1 loss in the previous quarter.
  • Stronger results were driven by higher silver and copper volume sold, from Uchucchacua and El Brocal’s production, respectively.
  • Yanacocha’s contribution to results was a loss of US$12.9 million, mainly due to a US$21.3 million leachpad write-down. Gold production is expected to ramp up in 2H14 to reach guidance of 895k - 985k ounces.
  • Equity gold production from direct operations to recover in 2H14 to achieve annual guidance (420k – 430k ounces). Accessing new areas closer to surface in Orcopampa will allow a 2014 production of 200k ounces. La Zanja and Tantahuatay are expected to produce 140k ounces each in 2014. Breapampa will produce 80k ounces of gold in 2014.
  • Uchucchacua is expected to increase ore treated volume in 3Q14 due to new permittings. Ore extraction will be focused in the Socorro mine with high silver-manganese content.
  • The Public Audience at Tambomayo project was successfully held on July 24-25. The Environmental Impact Assessment (EIA) has been filed and approval is expected by the end of 2014.
  • Huanza Hydro plant commenced full commercial operations And should generate an excess of 95 MW to supply energy to all direct operations at competitive costs.
  • El Brocal plant expansion to 18K tons per day was completed and full operations should start in September. The plant will operate in August at 14k tons per day capacity.
       
Compañía de Minas Buenaventura S.A.A. and Subsidiaries
Consolidated Income Statement
For the six-month periods ended June 30, 2014 and 2013
For the three-month period
ended June 30,
For the six-month period
ended June 30,
2,0142,0132,0142,013
US$(000)US$(000)US$(000)US$(000)
Operating income
Net sales297,710273,099571,678613,972
Royalty income7,399 12,693 15,424 26,495 
Total operating income305,109285,792587,102640,467
 
Operating costs
Cost of sales, without considering depreciation and amortization(149,634)(172,869)(292,593)(331,004)
Exploration in operating units(21,907)(49,681)(53,635)(96,050)
Depreciation and amortization(49,771)(46,494)(95,909)(85,670)
Royalties(7,102)(6,929)(14,480)(16,595)
Total operating costs(228,414)(275,973)(456,617)(529,319)
    
Gross profit76,695 9,819 130,485 111,148 
 
Operating expenses
Administrative expenses(23,061)(22,262)(51,817)(37,168)
Exploration in non-operating areas(14,821)4,085(25,195)(17,675)
Stoppage of mining units(15,941)-(15,941)-
Selling expenses(4,614)(3,970)(8,784)(8,480)
Contingencies(2,002)(1,340)(9,643)(2,393)
Impairment of long-term lived assets--(794)-
Other, net8,268 9,320 9,724 9,631 
Total operating expenses(52,171)(14,167)(102,450)(56,085)
 
Operating profit (loss)24,524 (4,348)28,035 55,063 
 
Other income, net
Share in the results of associates under equity method20,16948,80615,689132,974
Financial income1,8422,2283,6483,184
Financial expenses(3,199)(8,678)(6,590)(9,881)
Net loss from currency exchange difference(268)(6,715)(764)(6,603)
Total other income, net18,54435,64111,983119,674
 
Profit before income taxes and non-controlling interest43,06831,29340,018174,737
 
Income taxes(10,494)(10,434)(17,816)(42,945)
    
Net profit32,574 20,859 22,202 131,792 
 
Attributable to:
Owners of the parent23,08818,9536,976121,630
Non-controlling interest9,486 1,906 15,226 10,162 
32,574 20,859 22,202 131,792 
 
Basic and diluted earnings per share attributable
to owners of the parent, stated in U.S. dollars0.09 0.07 0.03 0.48 
 
Weighted average number of shares outstanding
(common and investment), in units254,186,867 254,186,867 254,186,867 254,186,867

Copper underpinned as Fed relaxes on rate rise timing

London copper was underpinned on Thursday by indications that the U.S. Federal Reserve is not hurrying to raise interest rates, even as the world's top economy logged robust second quarter growth that brightened the outlook for demand.

The U.S. economy rebounded sharply in the second quarter as consumers stepped up spending and businesses restocked, putting it on course to close out the year on a solid footing. 

But the Federal Reserve on Wednesday reaffirmed it was in no rush to raise interest rates, even as it upgraded its assessment of the U.S. economy and expressed some comfort that inflation was moving up toward its target.[ID:nW1N0Q4007]

This has all helped to burnish the outlook for metals - at least for the near term.

"It's really the metals where people have a little higher confidence, and we share that," said analyst Dominic Schnider of UBS Wealth Management in Singapore.

"Maybe we already have 75 percent behind us and we're looking at the last 25 percent. The (positive) Chinese economy story might carry into the next quarter. But the game is structural deceleration, so bad news is waiting to come around again," he added.

Three-month copper on the London Metal Exchange edged down by 0.2 percent to $7,128.75 a tonne by 0053 GMT after gaining around half a percent in the previous session. Prices are creeping back up towards $7,212, the peak from July 8 that was the loftiest since February

The most-traded October copper contract on the Shanghai Futures Exchange rose 0.6 percent in overnight trade.

Activity in China's vast factory sector likely expanded at the fastest pace in eight months in July, a Reuters poll showed on Wednesday, adding to evidence that the economy is regaining momentum after a burst of government stimulus measures.
However the International Monetary Fund said that China should lower its growth targets for next year, as part of a push towards safer and more sustainable growth. It also flagged the country's property slowdown as a cause for concern. [ID:nB9N0OL01V]

China's construction sector consumes a large portion of China's copper needs. China accounts for around 40 percent of refined copper demand.

In other upbeat news for the global economy, Euro zone economic sentiment unexpectedly improved in July despite the deepening crisis between the West and Russia over Ukraine, data showed on Wednesday. 



LME aluminium slipped by 0.2 percent after gaining 2 percent on Wednesday, while LME zinc and lead were mixed after profit-taking on a rally the session before.

Aluminium's gains came as exchange stocks looked to be locked up for a while.

The London Metal Exchange's attempts to cut backlogs at warehouses with new rules are likely to be delayed again for several months after judges declined to make an immediate ruling on a case holding up the reforms.

The news also helped propel cash prices to the highest against benchmark prices since Dec. 2012. 

Newmont Mining Corp will stick to a "parallel path" of arbitration and negotiation with the government of Indonesia in an attempt to resolve an impasse over copper concentrate exports, the company's chief executive said on Wednesday. 

Source: Reuters

Crude Oil falls under $100, set for deepest monthly fall since Oct

U.S. crude oil futures fell under $100 in early Thursday trade, putting the contract on course for its steepest monthly slide in nine months, as concerns over weak demand rose while fears over supply shortages in the Middle East and North Africa waned.
FUNDAMENTALS
* U.S. crude futures for September delivery <CLc1> fell 80 cents to $99.47 a barrel by 0007 GMT, putting the contract on course for a 5.6 percent fall for the month - its deepest since October.
* The contract finished 70 cents lower on Wednesday. 
* U.S. crude stockpiles fell more than forecast last week, while gasoline and distillate inventories rose less than expected, the Energy Information Administration reported on Wednesday. [EIA/S]
* OPEC's oil production rose in July from June, a Reuters survey found on Wednesday, as a fragile recovery in Libyan supply outweighed fighting in Iraq and reduced output from Angola.
* The Federal Reserve on Wednesday reaffirmed it was in no rush to raise interest rates, even as it upgraded its assessment of the U.S. economy and expressed some comfort that inflation was moving up toward its target. 
* U.S. crude oil exports reached 288,000 barrels per day in May, the highest levels since April 1999, data from the U.S. Energy Information Administration showed on Wednesday. 
* Iraqi Kurdistan's attempts to export oil independently of Baghdad hit another obstacle on Wednesday, as a Turkish energy official and industry sources said the autonomous region's pipeline to the Mediterranean has been shut for the past week. 
MARKETS NEWS
* The U.S. dollar held below a 10-month peak against a basket of major currencies early on Thursday, having soared at first on upbeat growth data only to have a dovish Federal Reserve take some steam out of the rally. 
* The S&P 500 and Nasdaq ended higher on Wednesday after the Federal Reserve gave a rosier assessment of the U.S. economy while reaffirming that it is in no hurry to raise interest rates. 

Source: Reuters

Popular Posts