a Junkers’ moment.

In 2007 as the GFC began to crash around Europe the recently elected President of The European Union Jean-Claude Junkers, then PM of Luxemburg, was quoted saying “”We all know what to do, but we don’t know how to get re-elected once we have done it.” That is the dilemma facing the EU again as foreign ministers meet to agree action against Russia for its part in the downing of the Malaysian Airways civil flight and the broader Ukrainian issue. Every country in the Union has something to lose from tougher action, presently demanded by the electorate but will the electorate accept the economic cost? The Indonesian presidential election was won by the Jakarta mayor Joko Widado, but not decisively, 53.1% to challenger Prabouro Subianto’s 46.9%. This could see an ongoing dispute that would not be good for the country.

The metals posted good gains yesterday with al and zn hitting levels not seen in the past couple of years. The story line is getting firmly entrenched that zn and al will be in short supply as the recovery takes hold. Three things would make us cautious going forward; both have significant LME and private stocks enmeshed in financing deals; these stocks are tied into big strong trading houses and both metals are dominated by China. Of the two, zn at the mine end has the better fundamentals with years of low prices stifling exploration and development. Bauxite is in abundant and cheap supply. However, rather like ni, when the bulls get the story line there is little reason to stand in front of the train. Wait for it to runs its course. With al up 15% since May AZ China a Beijing consultancy firm points out that at present, on a theoretical basis, 80% of Chinese al smelters are losing money, about 20 million tonnes of production per year. Most survive by favourable power and finance deals from provincial and city. As the prices edges close to the perceived US$ 2,00 per tonnes breakeven line so more output will flow. authorities. What has been of note is the falling al stock level, off 10% from the start of the year, that has seen the cash to three month contango shrink to US$ 17 / tonnes against US$ 40 – 50 per tonne. We believe all this is part of the metals finding a new normal, as the recent changes to the market structure with the, exiting of the banks from trading and warehousing; the rise of the super commodity houses owning supply, warehouses and trading; then the bottom of the interest rate cycle and signs of economic growth change the landscape. This will changes all the metals. The Indonesian election result as it stands might help Newmont in its cu dispute with the country.

The data load remains light, May Japanese all industry activity index rose 0.6% (Apr -4.62%) on the waning tax rise effect. Is it a rogue number or a warning the Jul UK business group CBI reported business optimism slipped to 19 (Jne 33). Jne US CPI  rose 0.3% (May 0.4%) yoy steady at 2.1% and ex food and energy inched 0.1% (0.3%) 1.9% (2.0%). The Jne existing home sales up 2.6% to 5.04 million units (4.9% at 4.89 million units) and the Jul Richmond Fed manufacturing index rose to 7 (Jne 3).

Sorry no updated stocks number today.