Asa Bridle Comments: Anglo Leads Rally in Best Week for Mining Stocks in Four Months

 February 05, 2016, Bloomberg News – Online

Stonger job market raises specter of U.S. rate inreases 

Miners defy drop for metals; Freeport adds to weekly rally 

Copper declined and industrial metals had the biggest loss in more than three weeks as the dollar climbed amid signs of a strengthening U.S. labor market. 

The dollar rebounded from a two-month low against a 10-currency basket after a U.S. employment report showed wage growth exceeded estimates, strengthening the case for the Federal Reserve to continue raising interest rates this year. A stronger dollar cuts the appeal of commodities, including copper, as alternative investments. At the same time, higher rates make raw materials less attractive as stores of value, since they only offer returns through price gains. 

Copper slumped 24 percent last year, the biggest annual loss since 2008, amid mounting demand concerns as the economy weakened in China, the world’s largest metals consumer. Goldman Sachs Group Inc. predicts the commodity will remain in surplus through 2020. Investor appetite for raw materials was also curbed in 2015 as the Fed raised rates in December for the first time in almost a decade. 

“The stronger dollar is certainly a factor,” Bill O’Neill, a partner at Logic Advisors in Upper Saddle River, New Jersey, said in a telephone interview. Better jobs data “leads to the potential that perhaps the Federal Reserve might be more inclined to tighten. We’re still in an oversupply market,” he said. 

Copper futures for March delivery slipped 1.3 percent to settle at $2.103 a pound at 1:20 p.m. on the Comex in New York. The Bloomberg Industrial Metals Sub-index declined 2.2 percent, the biggest loss since Jan. 11, as aluminum, zinc, nickel and lead also fell. Tin rose on the London Metal Exchange. 

Miners defied the slump in metal prices. A gauge of 18 large global base metal wwwucers has risen 15 percent since the close on Tuesday, set for the biggest three-day gain since 2009. Teck Resources Ltd. headed for the steepest three-day climb since October. Producers have rallied amid expectations that output cuts taken over the past year will finally start to erode the gluts across metals.