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- The U.S. economy posted a 4.1% annualized growth rate in Q2. This is the fasted the U.S. economy has grown in 4 years, since it hit a 5.1% growth rate in 2014. Earlier this year the Trump administration pushed through $1.5trn in tax cuts and has declared the growth rate as being ‘sustainable’, though economist have declared it ‘unsustainable’. George Bush also pushed through tax cuts during his tenure. Business investment is driving a large part of the growth spurt with a 7.3% Q-o-Q growth rate. Q1 annualized growth was 2.2%.
- Canada has yet to release its Q2 GDP growth rate figures but Q1 annualized growth was 2.3%. Assuming the recent trade war between to the U.S. and Canada hasn’t severely impacted on the intimate link between the U.S. and Canadian economies it’s likely we’ll see a sharp uptick in Canadian GDP growth when Q2 figures are released. Earlier this month the Bank of Canada said that the Canadian economy was operating at capacity and inflation was higher and in-line with expectations, and it was likely to hike the base rate to 1.5%.
- The French economy isn’t doing as well with annualized GDP growth coming in at 1.7% for Q2 vs 2.2% in Q1 and 2.8% in Q4 17. Strikes hit GDP growth as workers and unions hit back at Emmanuel Macron’s economic reform plans. Meanwhile, French consumer spending increased by a mere 0.1% vs a 0.6% forecast over the quarter.
Singapore and the South American custom’s union Mercosur have started free trade negotiations. Mercosur consists of Uruguay, Paraguay, Brazil and Argentina. Singapore trade with these countries amounts to £2.22bn in goods and £1.07bn in services. It’s likely the trade talks will focus on Singapore investment into Mercosur economies and Singapore acting as a base for Mercosur companies to enter the Asian markets.
Thailand’s military junta is apparently looking towards China as a source of FDI. Foreign investment in Thailand’s economy has declined since the junta took power in 2014. The country is looking to attract Chinese funds by integrating itself with the Chinese one-belt one-road policy. Thailand has been lagging between its South-East Asian neighbours in GDP growth rates and investment as a proportion of GDP has fallen since 2013 by circa 5% per year.
The Kenyan economy is improving again after several quarters of (relatively) weak growth. Annualized growth in Q2 came in at 5.7% vs 5.3% in Q1 and sub-5% for much of 2017. Prior to the 2017 slowdown Kenyan economic growth was steady around 5.5% to 6% per year. Much of the growth improvement can be put down to improved business and consumer confidence after the conclusion of general elections in 2017. Those elections were troubled by violence and allegations of vote rigging.
- Strategie Grains has cut its European harvest forecasts again for rapeseed but increased its sunflower seed and soybean harvest estimates. The agricultural research house said in a note that dryness and heat in northern Europe has meant a drop in estimated production tonnage for this harvest from 21.11m to 19.95m for rapeseed, which means the stockpiles built up from last year’s harvest will be consumed this year. Forecasts for sunflower seeds and soybeans were increased from 8.76m to 8.91m and 2.69m to 2.71m. European sunflower seed harvests will be lower than last year, according to Strategie Grains, whilst soybeans will be higher.
- The rally in global wheat prices has paused for the time being with European and American futures holding steady this week. UK Feed Wheat has found some stability around the £185/tonne level after failing to break through £190/tonne. Paris milling wheat found stability just above €200/tonne after failing to push through €205/tonne. Whilst Chicago wheat found a ceiling at $5.50/bushel. It looks as if the markets have priced in all the forecasts of a poor European harvest this year and are awaiting actual production figures. European farmers are currently harvesting.
- A court in Ivory Coast has ordered the liquidation of SAF-Cocoa, the largest exported of Ivorian cocoa over debts owed to the Coffee and Cocoa Council. The company exports circa 175,000 tonnes of cocoa annually. London and New York cocoa futures sat in a bear market for much of 2017, recovered somewhat in early 2018 only spend much of this summer falling. New York Cocoa is trading at $2,237/tonne and London Cocoa is trading at £1,646/tonne.
OPEC’s oil output in July is highest this year as all the organization's members combined pumped some 32.64m barrels per day. This is a 70,000 barrel per day increase from June. OPEC produces roughly 40% of the world’s oil. Donald Trump urged oil producers to increase production to replace lost Iranian oil due to renewed sanctions. Iranian, Libyan and Venezuelan output was lower M-o-M though.
The Republic of Congo joined OPEC in June. The country has participated in OPEC oil production cuts in the past and is looking to boost its oil production 350,00 barrels per which would make it the third largest producer in sub-Saharan African after Nigeria and Angola.
European carbon market forecasts have bumped up their longer-term price forecasts. A new Reuters poll including analysts from Bloomberg, Reuters, Commerzbank and Berenberg are forecast on average carbon credit prices of €16.01/tonne in 2018, €18.59/tonne in 2019 and €20.76/tonne. On average this is a 30% forecast price hike from the previous poll due to expected market reforms will reduce credit supply. Dec-18 carbon is trading at €17/tonne.
- Copper prices fell on Monday before a set of Chinese economic data comes out this week. LME Copper closed at $6,250/tonne while Shanghai copper closed at ¥49,660/tonne. Forecasters are expecting lower Chinese factory activity growth for the second month running. A strike by copper mine workers in Chile has had no impact on the market, yet.
- Worries that Chinese pollution curbs will lead a tighter domestic steel market is pushing Chinese steel futures higher. Shanghai rebar steel prices reached a 5 year higher this week according to Reuters to trade around the $600/tonne level. China’s second largest steel making province, Jiangsu, is planning to cut pollution at heavy industry sites by 50%. Meanwhile, Chinese stockpiles of iron ore are falling and Dalian iron ore futures trading above ¥480/tonne.
- New York platinum futures dropped lower this week to levels not seen since Q1 2016. Front month platinum futures are trading around $830/troy ounce. The market has been down at this level thrice since 2004 – now, once in 2016 and once at the depth of the 2009 commodity market rout. A weak automotive sector in China and strong production in South Africa is weighing down on the market.