In today’s briefing:
- The Art of the Trade War: US/CHINA Opening Moves
- No Change: Still a Sell Signal Set-Up
- China’s Housing Market: Nascent Signs of Stabilisation Emerge
- Copper Tracker 10th Feb 2025: Comex Spreads Bullish, Commentary on China Improving
- Bessent’s Challenges in 2025 and Beyond
- Reserve Bank of India’s Balancing Act Begins
- Iron Ore Tracker (10-Feb-2025): Rangebound / Pounding the Table On Fenix Resources (FEX AU)
The Art of the Trade War: US/CHINA Opening Moves
- Trump imposed smaller than anticipated tariffs on China and Xi reacted with a smaller than anticipated retaliation. China is in a better negotiating position than Canada and Mexico.
- DeepSeek’s announcement of its powerful and less expensive A.I. model which performed at a similar level to ChatGPT changes the dynamic of US tech domination in the A.I. field.
- Xi has taken aim at the Magnificent 7 companies as a strategy to weaken Trump’s hand in negotiations and pressuring the US stock market.
No Change: Still a Sell Signal Set-Up
- Plenty of warnings of a long-term market top are appearing, but the warnings belong to the category of condition indicators and not actionable trading signals.
- Current conditions amount to just a sell signal set-up, and a review of the short-term technical picture shows a resilient market structure.
- Long-Term investment-oriented accounts should de-risk to more neutral positions. Traders can wait for more definitive signs of downside breaks before turning defensive.
China’s Housing Market: Nascent Signs of Stabilisation Emerge
- Vibrant secondary home sales have emerged, particularly since supportive measures were announced by the government last September. Falling prices have enhanced affordability and triggered the return of buyers.
- Premium primary sales have been boosted by relaxed restrictions and “trading up” by existing homeowners, helping private developers. Their hare of primary home sales will, however, still be squeezed.
- China’s consumers remain downbeat due to numerous factors, but a weak labour market for younger people has raised the urgency of the government to provide more affordable housing stock.
Copper Tracker 10th Feb 2025: Comex Spreads Bullish, Commentary on China Improving
- Copper prices closed above $9,000 per ton once more and are poised for short-term gains as the outlook on China’s economic recovery becomes more favorable.
- The COMEX spread has hit a 12-week high, nearly reaching $1,000 per ton, as traders expressed concerns about copper potentially being included in the Trump administration’s blanket levies.
- We favor Southern Copper (SCCO US) and Antofagasta PLC (ANTO LN) due to their greater copper exposure, higher ROCEs, and robust long-term expansion strategies.
Bessent’s Challenges in 2025 and Beyond
- Treasury Secretary Scott Bessent declared in an interview that he is mainly focused on lowering the 10-year Treasury yield and Trump is not calling the Fed to lower short-term rates.
- The market is co-operating and giving Bessent the benefit of the doubt. The bulls can rightly argue that inflation expectations have declined since the inauguration, which pushed down the 10-year.
- In the end, much depends on the trajectory of the term premium. Any spike in the term premium would pose a serious threat to the success of Trump’s economic agenda.
Reserve Bank of India’s Balancing Act Begins
- The RBI has cut the repo rate by 25 basis points to 6.25%, marking its first reduction in five years.
- While aimed at supporting growth, the central bank maintains a neutral stance, signaling caution amid global uncertainties.
- Inflation is projected to ease, but risks from trade disruptions and financial volatility remain key concerns.
Iron Ore Tracker (10-Feb-2025): Rangebound / Pounding the Table On Fenix Resources (FEX AU)
- Goldman Sachs has upgraded its iron ore price forecast, highlighting rising near-term demand from China’s steel sector during the spring construction season and weather-related disruptions at Australian ports.
- However, Goldman is bearish on iron ore for the second half (a consensus view), predicting a decline in China’s steel demand and the emergence of lower-cost supply.
- We continue to pound the table on Fenix Resources (FEX AU). Read “Fenix Resources (FEX AU) Q2 FY25 Update: Close to Tripling Production.
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