Monthly Archives: April 2012
McDonald’s, $MCD, Reports In Line Profits; Global Comps Up Nicely
Sean Egan Defends Himself Rigorously Against the SEC Harassment
Survey: Manufacturers More Likely to Hire in U.S. vs China
Emerging Economies Hint at More Financial Help for Europe
NOMURA Says China Demand for Metals Can Not Last
“Various group of people have been saying a lot about the end of the commodity/ steel/ metal and other super-cycles which were led primarily by China’s increasing demand. Credit Suisse had absolutely no idea what is going to happen as different teams disagreed with each other, and Citi thinks that it’s over. Now it is Nomura’s take.
Similar to Citi’s argument, Nomura thinks that while commodity consumption per capita-type of analysis shows that China’s metal consumption does not look very stretched, this type of analysis is likely understating the true usage. Citi argues that the value in use (i.e. taking the prices of those metal into account) analysis shows that China has overtaken most of the developed world in terms of metal consumption, while Nomura points out that the amounts of various metal used per USD1 million of GDP for China are basically outliers and outrageously high.
Why we are different is more important than the fact we are different: Our analysis is focussed on metal intensity of China’s GDP, not per capita metal consumption
The point we wish to emphasize to readers is not so much that our forecasts are different, but why they are different.
We have performed a detailed analysis of metal intensity of GDP for steel, copper and aluminium in the following pages, which we believe clearly outlines our view that China’s economy is not large enough (in GDP terms) to support a continuation of the rapid growth in metal consumption seen in 2000-11.
Our conclusions are based on an analysis of China’s metal intensity of GDP rather than metal consumption per capita, and reflect a simple premise that while a country’s population size may be an important indicator of a country’s potential demand for industrial metals (per capita), the ability to meet potential demand is determined by the quantity of metal consumed in relation to the size of economic output (ie, GDP, not GDP per capita). Hence, in our view, metal intensity of GDP is a more important variable to monitor than per capita metal consumption.
The three charts below show the per capita consumption. As you can see, China is not really using ridiculous amount of various metals on a per capita basis.
Source: Nomura
On a consumption per GDP basis, however, China is outrageously high. In other words, to produce the same amount of GDP being generated, China is already using much more Steel, Copper and Aluminium than most other countries, as shown in the following three charts:
Source: Nomura”
Comments »Kimberly-Clark, $KMB, Profit Tops Estimates on Higher Pricing
Honeywell, $HON, Beats Expectations and Raises Guidance
$GE Beats by a Penny
Richard Parsons: Repeal of Glass Steagal Partly Responsible for Financial Crisis
G-20 Statements Stokes Yields to Go Higher in Spain and Italy
“Italian and Spanish bonds fell as the Group of 20 nations said Europe’s debt crisis still poses a threat to global growth.
The declines pushed the yield on the Spanish 10-year bond above 6 percent for first time in four days. The G-20, whose finance chiefs are meeting in Washington, cited “the situation in Europe” first among drags on the world economy, according to a draft statement obtained by Bloomberg News. French 10-year bond yields reached the highest in almost three months before the first round of presidential elections on April 22.
“Underlying sentiment is still pretty nervous and people are still pretty worried about the fiscal prospects in Spain,” said Nick Stamenkovic, a strategist in Edinburgh at RIA Capital Markets Ltd., a broker for banks. “With French elections starting, investors remain on the defensive toward risk markets. That will continue near term.”
The yield on Spain’s 10-year bond increased five basis points, or 0.05 percentage point, to 5.98 percent at 9:42 a.m. London time, after being as high as 6.04 percent. The 5.85 percent bond maturing in March 2022 fell 0.365, or 3.65 euros per 1,000-euro ($1,316) face amount, to 99.06. Italy’s 10-year yields climbed six basis points to 5.67 percent.
French 10-year yields were little changed at 3.10 percent, after reaching 3.17 percent, the most since Jan. 25. The extra yield that investors get for holding the securities instead of German bunds widened to as much as 149 basis points, the most since January. French securities slipped this week as Citigroup Inc. said it expects the nation’s credit rating to be cut over the next two to three years….”
Comments »Oil Trades Higher After 3 Days of Downside Action
Clinton Sees NATO Role in Pressuring Syria’s Assad Regime
“U.S. Secretary of State Hillary Clinton said Turkey may seek NATO’s support in dealing withSyria as the UN Security Council made clear the Assad regime’s truce violations won’t prevent the deployment of as many as 300 cease-fire observers.
Turkey may invoke the North Atlantic Treaty Organization’s charter provision triggering consultations if a member’s security is threatened, Clinton said yesterday in Paris following a meeting of the alliance in Brussels. While there is little sentiment for military intervention to oust Syria’s President Bashar al-Assad, involving NATO would add a new lever of pressure on the Damascus government.
“We have to keep Assad off-balance by leaving options on the table,” Clinton said at the “Friends of Syria” meeting in Paris. Turkey has already discussed with NATO “the burden of Syrian refugees on Turkey, the outrageous shelling across the border from Syria into Turkey a week ago, and that Turkey is considering formally invoking Article 4” of the NATO charter…..”
Comments »Copper Begins to Turn Around After 6 Weeks of Downside
“Copper traders are bullish for the first time in six weeks on mounting confidence that demand will accelerate in line with economies at a time when mining companies are already failing to keep up with consumption.
Eleven of 29 analysts surveyed by Bloomberg expect the metal to climb next week and 10 were neutral. Rio Tinto Group (RIO), based in London, said April 17 that its first-quarter copper output slid 18 percent because the ore mined contained less metal. Codelco, the largest copper producer, said the following day that it sees no weakening in Chinese buying. Barclays Capital is predicting a third consecutive year of shortages…”
Comments »The Euro Strengthens As German Business Confidence Improves
Morgan Stanley Reduces Exposure to European Countries by Roughly 15%
“Morgan Stanley (MS), owner of the world’s largest brokerage, said its net exposure to five ofEurope’s most-indebted nations was $2.41 billion, down from $3.06 billion in January.
Morgan Stanley’s net exposure to the five countries — Greece, Ireland, Italy, Portugal and Spain — was $4.01 billion before hedges, according to figures posted yesterday on the New York-based bank’s website. Net exposure to France rose to $4.14 billion from $1.71 billion as of Dec. 31.
Concern that Europe’s debt crisis would spark bank losses contributed to a 41 percent tumble for Morgan Stanley’s shares in the third quarter of last year. The firm said in October that its net exposure to the five was $3 billion, helping halt the decline of the shares….”
Comments »Asia Trades Flat to Mixed, Europe Slightly Higher, and U.S. Futures Reach For Higher Ground
Japan says IMF to meet $400 billion target to boost firepower
Comments »WASHINGTON (Reuters) – The International Monetary Fund is likely to achieve the touted $400 billion boost to its financial firepower as more countries signaled readiness to contribute funds, Japan’s finance minister said, in a sign the G20 has made progress in building up a global firewall to contain the euro zone debt crisis.
The IMF may even manage to collect more than the $400 billion target when including countries that cannot make a firm commitment now but are willing to contribute later, Jun Azumi told reporters after attending the Group of Seven and Group of 20 gatherings in Washington on Thursday.
