Chinese exports surged 25% year-over-year in January, providing further evidence that the global recovery is on track. Notwithstanding the potential distortions to the data due to the timing of the Chinese New Year, the strength in the numbers has further boosted cyclical assets.
The Reserve Bank of Australia, while holding rates unchanged last week, signaled that there is scope to ease policy further this year.
The ECB hinted that the high euro exchange rate may force its hand to cut rates, in a move many see as a verbal intervention and the ECB’s contribution to the “currency war.”
With further possible debasement of the world’s major currencies to come, the attraction of hard assets such as gold and other commodities is likely to remain strong.
ETFS Palladium Trust (PALL) sees US$15m of inflows as Chinese and US auto sales boost demand for the precious metal. Chinese auto sales jumped 46.4% year on year in January while US sales climbed 14% over the same period. Palladium which is used in the manufacture of the petrol engine auto-catalysts that dominate the US and Chinese markets rose 2.6% on the back of demand strength.
Platinum, which is used in the manufacture of the diesel auto-catalysts that dominate the European markets rose 2.9%. Even though US-listed ETFS Platinum Trust (PPLT) saw US$17m of inflows, there were US$21m of outflows from London-listed ETFS Physical Platinum (PHPT), resulting in a net outflow from platinum ETPs. Investors appear to be favoring palladium in light of the relative strength of the auto markets in the US and China, as well as tighter supply conditions for this metal. [Platinum, Palladium ETFs Hit 17-Month Highs]
ETFS Industrial Metals (AIGI) receives US$13m of inflows as investors continue to increase exposure to cyclical assets. A steady flow of positive economic data from the US and China and a continued commitment by major central banks to keep monetary conditions accommodative has favored cyclical assets such as industrial metals. However, there were US$22m of outflows from ETFS Copper (COPA) as investors took profits on earlier price rises. Copper prices fell 1.1% in the week to Thursday, before rising again on the back of strong Chinese export data for January released on Friday.
Brent-WTI spread widening drives flows into ETFS Brent (OILB) and out of ETFS WTI Crude Oil (CRUD). Although prices of both Brent and WTI crude oil rose last week, Brent rose much faster as investors were encouraged by the strong economic data from China. In the US, the Seaway pipeline is still not working at full capacity and therefore is unable to remove the glut of oil at Cushings fast enough, thus weighing negatively on the WTI benchmark.