Commodities, Dollar, our september 2014 forecasts
Here follow some excerpts of our september 2014 base metals, commodities, Oil, Dollar forecasts as a sample of our services to foreign companies (among which there are some multinational entities).
SCENARIO (september 2014)
“- The American economy is, at present, the only source of support in the international economic scenario. The economy is growing, the economic and financial system has been able (unique in the World) to regain stability after the 2008 crisis The paradox is that just from the USA started the crisis that even today, in various ways and with different mode, continues to plague all the other countries. Today there is a clear divergence at various levels (economics, finance, policy, monetary policy) between what happens in the United States and in other countries around the world but, in our opinion, even the American situation hides a great fragility, both from a financial and economic point of view. The sustained recovery in progress in the United States is, in our opinion, the result of the return of the international investments to that country, due to the critical situation in the BRICS and the political and financial crisis still ongoing in Europe, more than an autonomous trend, naturally and authentically solid.
– China may soon begin a new cycle of cuts in official interest rates, for the serious signs of deterioration in the economic environment, particularly in real estate-construction sector, which is excessively increasing the risks of stability for the financial system.
– The ECB monetary policy will continue for a long time to be pointing in an ultra expansive direction, thereby supporting the financial component of the economy (even if the policy of banks towards businesses and households is not likely to produce any improvement).
Dollar
– The strengthening of the dollar and, in particular, the exchange rate of the euro-dollar may help revitalize the European economy and in particular the Italian one that, among the various economies in the euro zone, is among the most sensitive to this Exchange rate.
Oil
– According to our analysis, the price of oil could drop significantly in the coming months and this would bring a great benefit to the consumer, especially in the West, pulling down at the same time, the cost of production of some metals. The possibility that the oil prices (WTI) will reach the area of 75.00 – $ 65.00 has to be considered, in the light of the results of our most recent analysis.
– Cuts in production and restrictions intended at removing part of the offer from the market could still occur and contribute to the rise in metal prices. Protectionist trends seeking to maintain the internal situation of some Countries stable, are likely to condition the situation in this sense. In addition, the growing nationalistic tendencies (particularly in Africa), limiting the operations of foreign compagnie, may restrict the offer. In some South American Countries, however, the export quota policy and the taxation of foreign companies operating in the mining sector could worsen, with a consequent contraction of activities.
– The possibility of a definitive reversal of the trend in American rates could weigh, in the future, on all the markets, from equities to commodities and precious metals, with a further appreciation of the dollar against the other currencies.
– The weak performance of the economies of the so-called BRICS (Brazil, Russia, India, China, South Africa), the inability of these countries to continue to pursue the growth model adopted in the last decade, could test the social situation of those countries, with the consequence of an increase of the internal politics tension such as to endanger the stability.
Dollar
– In light of our most recent calculations and estimates, the possibility / probability of a further weakening of the EUR / USD should be taken into consideration, with a potential target of 1.2250, any violation of which could result in a decline of the exchange rate to the 1.1500-1.1000 area.
– The serious difficulties of the Chinese real estate market is a major obstacle to a recovery in the international economy. The most recent data show a significant deterioration in real estate-construction and a further slowdown in the manufacturing sector, both signs that would suggest that the greatest potential for recovery has been achieved.
– A renewed weakness in the German economy in the Euro Zone are a heavy factor in the future, mitigated only by the changing perspectives of the monetary policy of the ECB, in the sense of further expansion.
– According to our analysis, the geopolitical situation is not likely to improve, especially in regard to relations between the United States, European Union and Russia, with serious risks on the horizon, both in the European scenario and in the Middle East. However, we are currently inclined to think that this will not take a bullish effect on the oil prices.
– The transition from the stage of mining investments (in recent years) to that of the continuous production is ongoing and this should ensure an optimum level of supply in the future. A large part of the investments of the past were based on overly optimistic projections of the future growth of the world economy (especially on the Chinese economy).
– Investigations at the Chinese port of Qingdao on possible abuses in the practice of import and purchase of metals have not yet had a negative impact on the market prices trend. There remains, however, a certain tension among the traders, coupled with concerns arising from this latest scandal concerning certain primary importance raw materials.
– China and , more generally, the BRICS countries are in a delicate phase of transition to new economic models less linked to production – export. Moreover, these countries will have to face the inevitable political changes resulting from changes in their societies, especially in the last decade. In this situation, in our opinion, the rates of double-digit growth recorded in the past will remain a memory and the economy in the emerging areas will not be of great help to the prices of commodities. We therefore believe that, in the absence of decisive support of the BRICS, the markets of the commodities most closely linked to the cycles of the economy, in 2014, should be less nervous and volatile and could go back to move accordingly to key fundamentals in the short term, rather than the expectations of the international economy future development. This applies if the economic situation in Asia remains at least stable. However, if the emerging economies processes of transformation will evolve less orderly and peaceful than expected resulting, for example, in facts that are disruptive to the economy and markets (worth mentioning at the first place the possibility of a financial and banking crisis in China), there will be extremely heavy consequences, especially for the raw materials prices.
– We recall again that the priority objectives of the 12th Five-Year Plan of China (2011-2015) are sustainable growth, improvement in industrial activity, promotion of domestic consumption. In the past and with great anticipation we have repeatedly pointed out how these factors would have been negative for commodity prices (…)”.
