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Strategies & Market Trends : Bonds, Currencies, Commodities and Index Futures -- Ignore unavailable to you. Want to Upgrade?

To: Chip McVickar who wrote (331)	11/29/2000 1:22:34 PM
From: Chip McVickar	Respond to of 12410

Commodites afr.com.au C O M M O D I T I E S ------------------------------------------------------------ $US fall a mixed signal for commodities Nov 29 Robert Guy Analysts remain cautious on whether yesterday's dip in the US dollar will lead to renewed interest in commodity markets, saying any correction in the all-powerful greenback would hold mixed messages. While the CRB Index, a broad-based measure of commodity prices, has jumped 5.2 per cent this month, market pundits said weakness in recent months was attributable to the rampaging US currency, which rose to its highest level in more than 14 years last week. Mr Glyn Lawcock, a resources analyst with UBS Warburg, said while the outcome of the US election remained unresolved, there would probably continue to be gyrations in the $US, which in turn would be reflected in commodity markets. Although UBS Warburg was not anticipating any weakness in the $US over the next three months, Mr Lawcock noted that any softness would send a mixed signal to the commodity markets. On the one hand, a lower greenback would make $US-denominated commodities more attractive in pricing. But alternatively, it could be reflecting market concerns about slowing US economic growth, which would clearly be a negative for commodities. The US is a major consumer of base metals such as copper and aluminium. The rebound in the CRB this month has some analysts questioning the extent of any slowdown in economic growth, with better than expected growth likely to boost demand for commodities, and potentially the Australian dollar. "It was US dollar strength that was one reason for commodity weakness in the second-half of October and the fact that commodity prices are currently defying the US dollar is worth noting," said a Macquarie Bank research note. "Perhaps the stabilisation of the euro is more important for commodity prices than the level of the US dollar Trade Weighted Index, although this is no more than speculation. "Whatever the reason for the recovery in the CRB, this is one indicator that says that the global downturn is not turning into something really nasty. Rather, a short, sharp dip in activity has developed and although growth on average will be slower, perhaps the result will be closer to 1995 than 1998." Should growth surprise to the upside, Australian resource companies would benefit from better than expected commodity prices. Dr Ric Simes, the chief economist at NM Rothschild & Sons, said the house was anticipating a 5 per cent correction in the $US over the coming year as the greenback was seen as too expensive. He said econometric research had indicated that a 10 per cent fall in the $US had tended to result in a rise of 7 per cent to 9 per cent across a basket of commodities. "Prices on average should be increasing at a moderate pace over the next year due to the US dollar, as well as conditions in the individual commodity markets," Dr Simes said.

To: Chip McVickar who wrote (331)	11/29/2000 6:36:36 PM
From: Raymond Duray	Read Replies (1) \| Respond to of 12410

Hi Chip, Thanks for the interesting couple of articles on Asia/Japan. Very informative. I found today's Caroline Baum column to be worth reading: quote.bloomberg.com <snip> Tech Stocks Sinking, Tech Investment Shrinking..... <body> .....Outcomes Worsening ``The first scenario is that this is all about a valuation adjustment, and that once it's done, the tech wonderment continues,'' Barbera says. ``The decline in tech stocks says nothing about the underlying dynamic of the tech sector.'' That's the good news. The second and third scenarios differ only in the way they play themselves out. ``The second scenario is the tech wreck presages a wreck for tech activity,'' Barbera says. ``It leads to a sharp slowing in economy activity.'' Scenario three starts with a tech wreck and ends with a Fed rescue. The rescue is justified on the economic grounds, not as a life preserver for stock investors. There is nothing about recession in the Fed's mandate. <continues> YMMV, Ray :)