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General news

  • It has been announced that Sainsbury's has agreed to buy Asda for £7.3bn.
    • If the deal goes ahead it would result in the group taking Tesco's title of the UK's biggest supermarket group by market share.
    • Following the announcement Sainsbury's shares gained 21%, whilst those in competitors Morrisons and Tesco fell.
    • Many anticipate the merger process could take up to a year and that it will be subject to a full CMA referral.

Agriculture

  • Sugar prices have fallen to their lowest level since September 2015. The continued price decline has come as a result of concerns over a global supply glut and the weakening of the Brazilian currency, the real. Brazil is the largest sugar producer and the drop in its currency is leading to increased returns for Brazilian exporters due to the fact that sugar is traded is USD. Sugar is now trading at around 10.69USc/pound.

Metals

  • Supply problems following the US sanctions imposed on Russian producer Rusal are triggering exports of alumina, a raw material used in aluminium smelting, from China. The surge in Chinese exports is very unusual as China's aluminium industry normally absorbs almost all of its alumina.
  • Copper prices are edging upwards on the back of anticipated increased demand from China following signs that the Chinese economy remains resilient despite a modest decline in manufacturing activity over the past month. The benchmark contract for 3-month delivery is currently trading at $6,829 a tonne, up from the two-week low touched last week.

Energy - UK 

  • Prompt UK wholesale gas prices have risen following colder weather lifting demand, at a time when Norwegian imports fell due to gas being re-routed to the continent.
  • According to the BEIS Public Attitude Tracker (PAT), Brits are becoming increasingly concerned about the UK's energy security. The latest survey indicates that concerns are predominantly over:
    • The UK becoming too dependent on foreign supply.
    • Energy prices rising steeply in the future.
    • Investment in alternative sources of energy being too slow.

Energy - International

Oil

  • For the first time in over 4 years, the price of Brent has risen above $75.
    • The main driving factor behind the latest gains is the tightening of the market over the past 18 months thanks to the growing global economy and the success of the OPEC-led supply cuts.
    • This has been compounded by the currently heightened geopolitical risk in the form of
      • Trump's decision to withdraw from the Iran nuclear deal and reimpose sanctions on its oil exports.
      • Declining output from Venezuela due to the ongoing economic and political crisis.
      • Conflict between Saudi Arabia and Yemen rebels.
      • Ongoing instability in Libya.
    • Infrastructure constraints in the Permian shale basin are also helping support prices by restricting the flow of US barrels from West Texas to refineries, storage tanks and the coast for export.
  • For the first time, US shale companies have started earning enough to cover the cost of new wells themselves. Until now shale companies have relied on steady inflows of capital but the sustained gains in oil price now means that the sector's companies are becoming self-sustainable.

Other

  • US natural gas futures have fallen following the forecast for mild weather over the next two weeks weighed on the expected demand for heating. This is despite the fact that inventory levels are very low as traders anticipate an aggressive building of stockpiles over the coming weeks as production nears record highs.
  • Thermal coal prices continue to be supported by Asian demand, defying the seasonal slowdown which is typical of this time of year. Benchmark Australian thermal coal prices are now nearing $100 a tonne.