Monday, 21 January 2019

Crude oil prices are expected to trade higher today


Weak trade data from China had pressurized crude prices. However, Prices were supported by China’s plans to boost their economy which has stalled in the past couple of months.

US crude output surged to about 12 million barrels per day (bpd) amid weaker demand which restricted the gains. US Crude Inventories declined marginally whereas a large build up was seen in the gasoline inventories which pointed towards weak demand for oil from the US.

Supply cuts by OPEC and other major producers reduced concerns about excess output. OPEC had decided to reduce output from January 2019 as per its statement in late 2018.

Outlook

Markets expect FED to pause its rate hike cycle which might support Gold prices. On the MCX, gold prices are expected to trade higher today, international markets are trading flat at $1281.15 per ounce.

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Source: Moneycontrol

Copper futures slide 0.13% on low demand


Copper prices fell 0.13 per cent to Rs 428.80 per kg in futures trade Monday as speculators reduced their exposure amid easing demand in the spot market. However, a firm trend in the base metals pack led by copper, restricted the losses.

At the Multi Commodity Exchange, copper for delivery in February declined by 55 paise, or 0.13 per cent, to Rs 428.80 per kg in business turnover of 2,973 lots.

Analysts said participants trimmed their positions owing to slackened demand from consuming industries in the physical markets.

At the London Metal Exchange, three-month copper gained 1.0 per cent to $6,052 per tonne after touching $6,071, its highest since December 28 on easing US-China trade tensions.

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Lead futures rise 0.63% as demand picks up


Lead prices traded higher by 0.63 per cent at Rs 142.75 per kg in futures trading Monday as speculators built up fresh positions due to upsurge in demand in the spot market amid firm global cues. Moreover, a firm trend in the base metals pack at the London Metal Exchange (LME) and signs of easing trade tensions between the US and top metals consumer China, influenced sentiments.

At the Multi Commodity Exchange, lead for delivery in January month edged up by 90 paise, or 0.63 per cent, to Rs 142.75 per kg in business turnover of 603 lots.

Market analysts said fresh positions created by traders after uptick in demand by battery-makers in the physical markets mainly helped lead prices to trade higher at futures trade.

Globally, at the LME, lead climbed 1.8 per cent to $1,998 per tonne.

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China December aluminium production surges to record monthly high


China's primary aluminium output defied low prices to rise for a second straight month to a record high in December as falling alumina costs boosted margins, while 2018 annual output was also a record, official data showed on Monday.

The world's top producer churned out more than 3 million tonnes in a month for the first time, undeterred by aluminium prices at two-year lows, the impact of the US-China trade war and Beijing's environmental crackdown.

Production was likely spurred by new smelter openings late last year and higher utilisation rates following a plunge in the cost of raw material alumina, said Helen Lau, an analyst at Argonaut Securities.

On a daily basis, China produced almost 98,400 tonnes of aluminium last month, up from 94,000 tonnes in November and also a record high, according to Reuters calculations. December had one more day than November.

Full-year output came in at 35.8 million tonnes in 2018, up 7.4 percent from the previous annual record in 2017.

China added 3.8 million tonnes of aluminium smelting capacity in 2018, according to consultancy AZ China, while about 2.8 million tonnes was shut due to a slump in aluminium prices.

Winter restrictions on output to curb pollution were also less severe than expected.

Shanghai aluminium prices slumped a hefty 14 percent over 2018 to below 14,000 yuan ($2,063) a tonne amid plentiful supply and worries over the impact of the Sino-US trade war on demand.

"Even though at the current (aluminium) price you may say smelters are not making money, as long as they break even they will continue to produce," said Lau, who expects another 5 percent increase in China's output in 2019.

"Those newly commissioned smelters have to start operating to pay back their loans. They have to generate enough cash flow to do that."

Alumina prices, which soared from March last year on an outage at Norsk Hydro's Alunorte plant, fell almost 30 percent in the fourth quarter, easing the pressure on smelters.

Meanwhile, output of 10 nonferrous metals - including copper, aluminium, lead, zinc and nickel - came in at a record 5.08 million tonnes in December, up 7.8 percent from November and up 10 percent year-on-year.

Full-year output was up 6 percent at 56.88 million tonnes, also a record high. The other metals in the group are tin, antimony, mercury, magnesium and titanium.
Output hit 3.05 million tonnes in December, National Bureau of Statistics data showed, up 8.2 percent from November and up 11.3 percent from December 2017.

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Source: Moneycontrol

Gold firm as rising risk appetite offsets Fed pause views


Gold prices held steady on Monday as expectations that the US Federal Reserve will pause its multi-year interest rate hike cycle, were offset by a recovery in investor appetite for risk.

Spot gold was trading up 0.1 percent at $1,282.31 per ounce by 0306 GMT, while US gold futures were steady at $1,282 per ounce.

"Dovish signals (from the Fed) have kept dollar strength in check, helping gold. But on the other hand, we have seen them easing bearish sentiments in equity markets," said Benjamin Lu, analyst at Phillip Futures, Singapore.

Less than two weeks ahead of the US central bank's first policy meeting of the new year, Federal Reserve officials have left little doubt that they want to stop raising interest rates - at least for a while.

Slower global growth, a stock meltdown last quarter, and a partial US government shutdown that threatens consumer confidence and spending have many in the Fed worried.

"We have seen very positive conditions in US equities and the dollar has also seen a series of positive trades. All these competing influences have capped the safe-haven appeal," Lu said, adding that gold was facing strong technical resistance at $1,300 levels.

Gold has risen more than 10 percent since touching 1-1/2-year lows in mid August, mainly due to tumultuous equity markets and a softer dollar.

Asian markets were steady on Monday, after Wall Street posted a fourth straight week of gains last week.

"On the longer run, we are still very positive on gold on a synchronised slowdown in global economic conditions and geopolitical uncertainties," Lu said.

Data on Monday showed the Chinese economy slowed at the end of last year, underlining the urgent need for more stimulus as Beijing wrestles with the United States over trade.

Investors are also waiting to hear British Prime Minister Theresa May's 'Plan B' for Brexit, which is due to be presented to parliament later on Monday, after her deal was rejected by lawmakers last week.

Reflecting investor appetite for gold, holdings of SPDR Gold, the largest gold based exchange traded fund, rose 1.5 percent on Friday to 809.76 tonnes.

Meanwhile, spot palladium, which hit a record high of $1,434.50 last week, was up 0.4 percent at $1,382 on Monday.

"Palladium has eased lower as investors took profits after the recent strong run," ANZ analysts said in a note.

Palladium has risen 9.5 percent so far this month on supply concerns in South Africa and Russia, which are keeping the market tight amid strong demand, the note said.

Spot silver was steady at $15.33, while spot platinum fell 2.3 percent to $796.

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Source: Moneycontrol

China's coal output hits highest in over three years as mines start up


China's December coal output climbed 2.1 percent from the year before, government data showed, hitting the highest level in over three years as major miners ramped up production amid robust winter demand and after the country started up new mines.

Miners produced 320.38 million tonnes of coal in December, according to data released on Monday by the National Bureau of Statistics. That is the largest volume since June, 2015.

China approved more than 45 billion yuan's ($6.64 billion)worth of new coal mining projects last year, much more than 2017, official documents show.

That came after the country closed old and more-polluting coal mines as part of its battle to clean up the environment.

"Coal mining capacity coming online will lead to another increase in output this year after boosting December output to a more than three-year high," said a Beijing-based coal analyst with a major broker. He declined to be named due to local stock exchange rules.

The new projects stoked overall coal output last year, with annual production rising 5.2 percent to the highest since 2015 at 3.55 billion tonnes.

However, some miners and traders expect supplies to fall sharply in January following a crackdown on coal mines after a major accident on January 13 in the northwestern province of Shaanxi, potentially dragging on output through the year.

"It is now possible that Shaanxi will implement the strictest-ever regulations on illegal production, which would significantly reduce output in the province for the year," Zhai Yu, senior consultant at analysts Wood Mackenzie said in a note published last week.

"If stricter checks are extended to other provinces, domestic supply could tighten from its currently relaxed situation, helping coal imports as a result," Zhai wrote.

Shaanxi accounts for about 20 percent of China's annual coal production.

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Source: Moneycontrol

Oil dips as China's economy slows but OPEC-led cuts support


Oil prices dipped on Monday as China reported its weakest annual economic growth in 28 years, although oil prices remain relatively well supported by supply cuts led by the Organization of the Petroleum Exporting Countries (OPEC).

International Brent crude oil futures were at $62.57 per barrel at 0215 GMT, down 13 cents, or 0.2 percent, from their last close.

US West Texas Intermediate (WTI) crude futures were down 11 cents, or 0.2 percent, at $53.69 a barrel.

China's economy grew by 6.6 percent in 2018, its slowest expansion in 28 years and cooling from a revised 6.8 percent in 2017, official data showed on Monday. China's September-December 2018 growth was at 6.4 percent, down from 6.5 percent in the previous quarter.

The slowing growth in China, which has generated nearly a third of global growth in the past decade, is stoking worries about risks to the world economy and are weighing on profits for firms ranging from Apple to big carmakers.

"The global outlook remains murky, despite emerging positives from a dovish Fed (now boosting US mortgage applications), faster China easing (China credit growth stabilizing) and a more durable US-China truce," US bank J.P. Morgan said in a note.

Despite this, analysts said supply cuts led by OPEC would likely support crude oil prices.

"Brent can remain above $60 per barrel on OPEC+ compliance, expiry of Iran waivers and slower US output growth," J.P. Morgan said.

It recommended investors should "stay long" crude oil.

Researchers at Bernstein Energy said the supply cuts led by OPEC "will move the market back into supply deficit" for most of 2019 and that "this should allow oil prices to rise to US $70 per barrel before year-end from current levels of US$60 per barrel."

In the United States, energy firms cut 21 oil rigs in the week to Jan. 18, taking the total count down to 852, the lowest since May 2018, energy services firm Baker Hughes said in a weekly report on Friday.

It was biggest decline since February 2016, as drillers reacted to the 40 percent plunge in US crude prices late last year.

However, US crude oil production still rose by more than 2 million barrels per day (bpd) in 2018, to a record 11.9 million bpd.

With the rig count stalling, last year's growth rate is unlikely to be repeated in 2019, although most analysts expect annual production to average well over 12 million bpd, making the United States the world's biggest oil producer ahead of Russia and Saudi Arabia.

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Source: Moneycontrol

South Indian Bank falls 8% as Q3 profit falls 27%; asset quality deteriorates


South Indian Bank’s shares plunged over 8 percent as investors reacted to the December quarter results.

The bank posted 27 percent decline in net profit at Rs 83.85 crore for the third quarter ended December 31, 2018.

The bank had recorded a net profit of Rs 115 crore in the corresponding period of the previous financial year.

Total income of the lender, however, improved to Rs 1,921.93 crore during the quarter under review, as against Rs 1,735.77 crore in the year-ago period, South Indian Bank said in a regulatory filing.

Gross non-performing assets (NPAs) rose to 4.88 per cent of the total advances, compared to 3.40 per cent at the end of the third quarter of 2017-18.

Net NPAs also increased to 3.54 per cent in October-December 2018 from 2.35 percent a year ago.

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Source: Moneycontrol

L&T falls 3% as SEBI rejects Rs 9,000-crore buyback issue


Shares of Larsen & Toubro declined by over 3 percent in morning trade as investors reacted to Sebi denying permission for its buyback issue.

The engineering major on January 19 said market regulator Sebi denied permission for its Rs 9,000 crore share buyback offer.

In a regulatory filing to stock exchanges, L&T said the Securities and Exchange Board of India (Sebi) has asked it not to proceed with the buyback.

"Since the ratio of the aggregate of secured and unsecured debts owed by the company after buy-back (assuming full acceptance) would be more than twice the paid-up capital and free reserves of the company based on consolidated financial statements", the buyback offer is not in compliance with the Companies Act and Sebi norms, the regulator said in a letter to the company.

L&T had proposed to buy back up to 6.1 crore shares from shareholders at a price of Rs 1,475 per equity share, aggregating to Rs 9,000 crore. The offer was open to those holding equity shares as on October 15.

A buyback reduces the number of shares available in the open market.

According to company sources, while turning down the proposal, Sebi has applied the financial ratio based on the consolidated financial statement of the company.

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Source: Moneycontrol

IT stocks surge as rupee extends fall to near 71.50/$


Shares of information technology (IT) companies rose in trade as the rupee saw some depreciation.

A weaker rupee is seen as a positive cue for IT companies as it means better revenue.



After falling to 71.34 per US dollar against its previous close of 71.18 per US dollar, the rupee has further extended its fall to nearly 71.50 per US dollar.

Rupee fell in the latter half of the session on Friday primarily as global crude oil prices continued to rally after supply cuts led by OPEC supported prices. OPEC issued a list of oil production cuts by its members and other major producers for six months starting on January 1 to boost confidence in its oil supply reduction pact.

Last week, OPEC’s monthly report showed it had made a strong start in December before the pact went into effect, implementing the biggest month-on-month production drop in almost two years. Today, USD-INR pair is expected to quote in the range of 70.70 and 71.50, said Motilal Oswal.

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Source: Moneycontrol