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Iron Ore surges

Published June 12, 2019

Author: Nicholas Cork

Post long weekend trading was subdued yesterday as the AUD languished within a 20 point range between 0.6950/0.6970, unable to reclaim Monday mornings 70 cent level as the NAB business survey rocked the local markets with its weak headline conditions reading, and led to immediate market calls for further local rate cuts. NAB noted that from a longer-term perspective business conditions are about 20 points below their early-2018 peak, and the retail sector has continued to deteriorate and is “clearly in recession”.

The effect on the AUD was subdued as AUD demand actually appeared from expectations that our big miners will be unable to expand production to meet higher demand from the Vale disruptions, as data also confirmed that China’s iron ore imports rebounded in May from an 18-month low in April, but were still well down on the same month last year. Iron ore gained around 4% in local trading, and is up around 7% for the month.

In trade talk, Trump threatened China with 300 bio worth of tariffs if Xi won’t meet with him at the upcoming G7,  but Chinese markets actually performed the best in the region as Beijing said it will allow local governments to use proceeds from special bonds to fund major investment projects in a bid to provide a boost the slowing economy. Reports that Mexico has secured Chinese meetings on the sidelines of the summit will no doubt annoy Trump further.

In other local news, the Australian Bureau of Agriculture has just cut its wheat production forecast for the 2019/20 harvest by more than 11% as an unrelenting drought across the country’s east coast threatens crops for a third year in a row.

Chart below is of the NAB business survey : conditions (yellow) vs confidence (red)

Chinese CPI and PPI is due today … good luck