Etikett: coffee

Risk aversion sees oil and gold prices diverge

ETF Securities Risk aversion sees oil and gold prices divergeRisk aversion sees oil and gold prices diverge

Commodity ETP Weekly – Risk aversion sees oil and gold prices diverge

Brent trades at its biggest discount to WTI.
Gold safe haven status reignited.
Coffee ETPs receive their highest inflows since July 2015.

  • Bargain hunters continue to drive flows into energy ETPs, extending last year’s trend for a second week in 2016 despite the oil price slide.
  • Gold ETPs flows hit 9-week high at the start of 2016 as uncertainty over global markets looms.
  • Coffee ETPs flows garner momentum after International Coffee Organisation raised estimates for global production shortfall.

Download the complete report (.pdf)

Brent trades at its biggest discount to WTI. WTI and Brent crude oil prices have fallen to fresh 12-year lows below US$29/bbl this week. Brent, the North Sea crude used as an international benchmark, has fallen faster than WTI and is trading at its biggest discount to the US benchmark since 2010. The lifting of oil sanctions against Iran this weekend mounted pressure on Brent prices as investors contemplated the effects of rising Iranian exports in an already over supplied oil market. Despite the precipitous oil slide, bargain hunters remained undeterred, driving inflows of US $26.9mn into long Brent ETPs – the highest level since February last year and inflows US $45.6mn in long WTI crude ETPs are at the highest level in 8 weeks.

Gold safe haven status reignited. Gold ETPs recorded their highest inflows in 9 weeks , amounting to US $17.6mn. We believe the simplest explanation for this has been the global stock market rout, exacerbated by Friday’s oil price declines, which renewed gold’s appeal as a safe haven asset. Another key point to highlight is the ripple effect that a lower sticky inflation outlook could have on the Fed’s ability to raise rates in the US this year. Persistently low oil prices could lower the future rate profile compared to the current FOMC dot plot, encouraging a weaker dollar and thereby making gold priced in dollars cheaper to buy. By virtue of oil being a vital part of inflation forces, and given the recent oil price slide subsequent lower inflation would also reduce the need for gold as a hedge against inflation. However, in the current environment, gold’s defensive properties are driving price performance. Gold has posted gains of 1.43% last week highlighting gold’s resilience at a time when market uncertainty is at the highest levels since the global equity correction in September 2015.

Coffee ETPs receive their highest inflows since July 2015. ETFS Coffee (COFF) recorded flows of US$3.5mn after the International Coffee Organisation (ICO) hiked estimates for the global production shortfall this season held back by a weaker harvest in Brazil. In its forecast for the output for 2015-16, the ICO expects the first growth in production in three years. Nonetheless, the ICO forecast a deficit for a third successive season.

Key events to watch this week. After a torrid week in financial markets all eyes will be glued on China’s GDP report due to be released on Tuesday for any signs of respite from the ongoing sell off. Friday sees the release of the US inflation data, a key ingredient to the FOMC’s rate policy formulation and the USD, a key driver of commodity prices. The European Central Bank meets on Thursday and consensus remains for rates to be left unchanged. The Canadian Dollar’s decline to a 12-year low coupled with sliding oil prices may force the Bank of Canada to take further action when they meet on Wednesday.

For more information contact

ETF Securities Research team
ETF Securities (UK) Limited
T +44 (0) 207 448 4336
E info@etfsecurities.com

Important Information

General

This communication has been provided by ETF Securities (UK) Limited (”ETFS UK”) which is authorised and regulated by the United Kingdom Financial Conduct Authority.

This is a strictly privileged and confidential communication between ETFS UK and its selected client. This communication contains information addressed only to a specific individual and is not intended for distribution to, or use by, any person other than the named addressee. This communication (i) is provided for informational purposes only, (ii) should not be construed in any manner as any solicitation or offer to buy or sell any securities or any related financial instruments, and (iii) should not be construed in any manner as a public offer of any securities or any related financial instruments. If you are not the named addressee, you should not disseminate, distribute or copy this communication. Please notify the sender immediately if you have mistakenly received this communication. When being made within Italy, this communication is for the exclusive use of the ”qualified investors” and its circulation among the public is prohibited.

This document is not, and under no circumstances is to be construed as, an advertisement or any other step in furtherance of a public offering of shares in the United States or any province or territory thereof. Neither this document nor any copy hereof should be taken, transmitted or distributed (directly or indirectly) into the United States.

This document may contain independent market commentary prepared by ETFS UK based on publicly available information. ETFS UK does not warrant or guarantee the accuracy or correctness of any information contained herein and any opinions related to product or market activity may change. Any third party data providers used to source the information in this communication make no warranties or representation of any kind relating to such data.

Any historical performance included in this document may be based on back testing. Back tested performance is purely hypothetical and is provided in this document solely for informational purposes. Back tested data does not represent actual performance and should not be interpreted as an indication of actual or future performance.

Historical performance is not an indication of or a guide to future performance.

The information contained in this communication is neither an offer for sale nor a solicitation of an offer to buy securities. This communication should not be used as the basis for any investment decision.

ETFS UK is required by the United Kingdom Financial Conduct Authority (”FCA”) to clarify that it is not acting for you in any way in relation to the investment or investment activity to which this communication relates. In particular, ETFS UK will not provide any investment services to you and or advise you on the merits of, or make any recommendation to you in relation to, the terms of any transaction. No representative of ETFS UK is authorised to behave in any way which would lead you to believe otherwise. ETFS UK is not, therefore, responsible for providing you with the protections afforded to its clients and you should seek your own independent legal, investment and tax or other advice as you see fit.

Risk Warnings

Any products referenced in this document are generally aimed at sophisticated, professional and institutional investors. Any decision to invest should be based on the information contained in the prospectus (and any supplements thereto) of the relevant product issue. The price of any securities may go up or down and an investor may not get back the amount invested. Securities may valued in currencies other than those in which there are priced and will be affected by exchange rate movements. Investments in the securities which provide a short and/or leveraged exposure are only suitable for sophisticated, professional and institutional investors who understand leveraged and compounded daily returns and are willing to magnify potential losses by comparison to investments which do not incorporate these strategies. Over periods of greater than one day, investments with a short and/or leveraged exposure do not necessarily provide investors with a return equivalent to a return from the unleveraged long or unleveraged short investments multiplied by the relevant leverage factor. Investors should refer to the section entitled ”Risk Factors” in the relevant prospectus for further details of these and other risks associated with an investment in any securities referenced in this communication.

If you have any questions please contact ETFS UK at +44 20 7448 4330 or info@etfsecurities.com for more information.

Bearish bets on coffee hit record high

Bearish bets on coffee hit record high

Trade Idea – Commodities – Bearish bets on coffee hit record high
26th November 2015

Coffee prices to remain depressed

•         Last week the BRL staged a 3% rally as the incumbent Brazilian President, Dilma Rousseff, won a political victory aimed at narrowing the country’s growing budget deficit. The strengthening of the BRL sent the price of Arabica coffee soaring 8% from 23 month lows (see Figure 1, Source: Bloomberg) and partially reversed a downward trend that has plagued the soft commodity since the end of last year. Brazil is the largest global exporter of Arabica coffee and the recent weakening of its currency has, until September, significantly weighed on the coffee price[1]. In coming months, we expect support from favourable currency movements to fade and a strong coffee supply outlook for 2016/17 crop year to weigh on price, benefiting those investors with tactical short exposure to coffee.

Speculative coffee positioning reaches record low

•         According to the Commodity Futures Trading Commission (CFTC), short bets on coffee swelled to the highest level on record in the week to Nov 17 (see figure 2), reflecting the bearish sentiment that has dominated coffee trading until last week’s recovery. We believe that bearish sentiment will reassert and help to push coffee prices lower as soon as BRL strength abates. The Brazilian economy is currently under considerable duress as stagflation and political turmoil weigh on the nation’s prospects. Therefore, we believe that the optimism that has fuelled the recent BRL appreciation is fragile and will likely fade as the economy slips further into recession and political uncertainty persists.

Favourable supply outlook

•         The Brazilian harvest for 2015/16 is almost complete and despite the 2014 drought prompting forecasts of a large fall in production, output has only fallen 3% YoY (Source: United States Department of Agriculture). Looking ahead to next year, good rain in key producing regions is helping the flowering process of Brazilian coffee trees which should aid coffee cherry development and in turn increase the likelihood of a strong yield from the 2016/17 harvest.

•         Elsewhere, Columbia and Honduras have seen production grow 40% and 46% respectively over the past five years as tree renovation programmes, aimed at combatting coffee rust (disease that affects coffee plantations), pay considerable dividends (see Figure 3). Given that both are top five global exporters of coffee (third and fifth respectively) this trend will likely be another source of pressure on coffee prices in the near future.

Investors wishing to express the investment views outlined above may consider using the following ETF Securities ETPs:

Coffee
•         ETFS Coffee (COFF)
•         ETFS 2x Daily Long Coffee (LCFE)
•         ETFS 1x Daily Short Coffee (SCFE)
•         ETFS 3x Daily Long Coffee (3CFL)
•         ETFS 3x Daily Short Coffee (3CFS)
•         ETFS EUR Daily Hedged Coffee (ECOF)
•         Swiss Franc Daily Hedged Coffee (CCOF)

The complete ETF Securities product list can be found here.
[1] Brazilian coffee suppliers increase output as a weaker BRL means that their produce become cheaper on international US Dollar denominated markets.

 

Disclaimer Title Important Information

Disclaimer Text This communication has been issued and approved for the purpose of section 21 of the Financial Services and Markets Act 2000 by ETF Securities (UK) Limited (“ETFS UK”) which is authorised and regulated by the United Kingdom Financial Conduct Authority (the “FCA”). The information contained in this communication is for your general information only and is neither an offer for sale nor a solicitation of an offer to buy securities. This communication should not be used as the basis for any investment decision. Historical performance is not an indication of future performance and any investments may go down in value. This document is not, and under no circumstances is to be construed as, an advertisement or any other step in furtherance of a public offering of shares or securities in the United States or any province or territory thereof. Neither this document nor any copy hereof should be taken, transmitted or distributed (directly or indirectly) into the United States. This communication may contain independent market commentary prepared by ETFS UK based on publicly available information. Although ETFS UK endeavours to ensure the accuracy of the content in this communication, ETFS UK does not warrant or guarantee its accuracy or correctness. Any third party data providers used to source the information in this communication make no warranties or representation of any kind relating to such data. Where ETFS UK has expressed its own opinions related to product or market activity, these views may change. Neither ETFS UK, nor any affiliate, nor any of their respective, officers, directors, partners, or employees accepts any liability whatsoever for any direct or consequential loss arising from any use of this publication or its contents. ETFS UK is required by the FCA to clarify that it is not acting for you in any way in relation to the investment or investment activity to which this communication relates. In particular, ETFS UK will not provide any investment services to you and or advise you on the merits of, or make any recommendation to you in relation to, the terms of any transaction. No representative of ETFS UK is authorised to behave in any way which would lead you to believe otherwise. ETFS UK is not, therefore, responsible for providing you with the protections afforded to its clients and you should seek your own independent legal, investment and tax or other advice as you see fit. While this communication is made by ETFS UK, certain content has been produced and provided for ETFS UK by Roubini Global Economics, LLC (“RGE”). RGE is an independent, unaffiliated third party to ETFS UK. No forwarding, reprinting, republication or any other redistribution of this content is permissible without the express consent of RGE and ETFS UK. RGE and ETFS UK reserve the right to enforce their respective copyrights and pursue any such other action as they deem appropriate in respect of any such unauthorised use, republication or redistribution of this communication.

Stimulus helps global economic outlook

Stimulus helps global economic outlook

Commodity ETP Weekly – Stimulus helps global economic outlook

•  Diversified commodity exposures see month long inflows.
•  Agricultural ETP inflows reach 7-week high.
•  Seventh consecutive weekly inflow into energy ETPs, led by crude.
•  Gold inflows top sector as central banks remain in stimulus mode.
•  Upcoming webinar: Commodities – Is the Outlook Changing? Register here to attend

Download the complete report (.pdf)

Central banks from Europe to China are keeping the stimulus taps flowing alongside modest but encouraging signs of global recovery. While Chinese growth dipped under 7% for the first time since 2009, Chinese authorities remain ready to provide support and have the balance sheet to match. Alongside indications of resilient global activity commodity demand is likely to be supported as we head into year-end. In turn, sentiment towards commodities appears to be turning with investors increasing exposure to long diversified commodity ETPs. While the stronger US Dollar is likely to cap commodity gains in the near-term, particularly for precious metals, foreign investors are benefiting from weaker local currencies.

Diversified commodity exposures see month long inflows. ETPs with a diversified exposure to the commodities market as a whole have experienced a month-long run of inflows, totalling US$52mn over the period. The trend signifies that investor sentiment appears to be turning for commodities, the worst performing sector over the past four years. Investors are also increasing exposure to basket ETPs in each sector, with ETFS Agriculture (AIGA), ETFS Industrial metals (AIGI) and ETFS Energy (AIGE) all receiving inflows last week.

Agricultural ETP inflows reach 7-week high. ETFS Agriculture (AIGA) received the highest inflows in 10 weeks. AGRI inflows totalling US$5.7mn topped the agricultural sector, closely followed by the US$5.1mn inflows into coffee ETPs. Coffee inflows reached a 16-week high, as a plunge in coffee prices has attracted bargainhunters to the commodity. Overdue rainfall in Brazil sent prices over 10% lower last week, as expectations for a better crop rose.

Seventh consecutive weekly inflow into energy ETPs, led by crude. The energy sector has experienced one week of outflows over the past four months, with inflows totalling over US$550mn since late July. Oil prices declined last week, after the Energy Information Administration reported a large jump in inventory levels, more than double market expectations. Both WTI and Brent crude have dropped by over 10% since the recent early October peak. While this was the fourth consecutive weekly stock build, rig counts have been falling for the past eight weeks, giving investors’ confidence that the oil price is forming a bottom. Moreover, demand, particularly from China is seemingly robust, offsetting some concern of a sharp slowdown in the world’s second largest economy.

Gold inflows top sector as central banks remain in stimulus mode. The gold price has remained relatively resilient last week, retaining its gains over the past month as lingering concern stemming from recently softer global economic data is coupled with an increasing desire by central banks to be proactive in terms of monetary support. The European central bank appears keen to do more to offset what it sees as ‘downside risks’ to the economy, and additional stimulus raises the potential for further currency debasement, a supportive influence for monetary metals, particularly gold.

Key events to watch this week. After China and the ECB set the stage for greater central bank accommodation, such trends are likely to be positive for metals demand, particularly precious metals. Nevertheless, precious metals gains are likely to be capped, with the US Dollar strengthening after the ECB meeting last week. This week’s FOMC meeting will give clarity on future policy direction, and while we expect the FOMC to hike rates this year, it is unlikely to be this week.

For more information contact

ETF Securities Research team
ETF Securities (UK) Limited
T +44 (0) 207 448 4336
E info@etfsecurities.com

Important Information

General

This communication has been provided by ETF Securities (UK) Limited (”ETFS UK”) which is authorised and regulated by the United Kingdom Financial Conduct Authority.

This is a strictly privileged and confidential communication between ETFS UK and its selected client. This communication contains information addressed only to a specific individual and is not intended for distribution to, or use by, any person other than the named addressee. This communication (i) is provided for informational purposes only, (ii) should not be construed in any manner as any solicitation or offer to buy or sell any securities or any related financial instruments, and (iii) should not be construed in any manner as a public offer of any securities or any related financial instruments. If you are not the named addressee, you should not disseminate, distribute or copy this communication. Please notify the sender immediately if you have mistakenly received this communication. When being made within Italy, this communication is for the exclusive use of the ”qualified investors” and its circulation among the public is prohibited.

This document is not, and under no circumstances is to be construed as, an advertisement or any other step in furtherance of a public offering of shares in the United States or any province or territory thereof. Neither this document nor any copy hereof should be taken, transmitted or distributed (directly or indirectly) into the United States.

This document may contain independent market commentary prepared by ETFS UK based on publicly available information. ETFS UK does not warrant or guarantee the accuracy or correctness of any information contained herein and any opinions related to product or market activity may change. Any third party data providers used to source the information in this communication make no warranties or representation of any kind relating to such data.

Any historical performance included in this document may be based on back testing. Back tested performance is purely hypothetical and is provided in this document solely for informational purposes. Back tested data does not represent actual performance and should not be interpreted as an indication of actual or future performance.

Historical performance is not an indication of or a guide to future performance.

The information contained in this communication is neither an offer for sale nor a solicitation of an offer to buy securities. This communication should not be used as the basis for any investment decision.

ETFS UK is required by the United Kingdom Financial Conduct Authority (”FCA”) to clarify that it is not acting for you in any way in relation to the investment or investment activity to which this communication relates. In particular, ETFS UK will not provide any investment services to you and or advise you on the merits of, or make any recommendation to you in relation to, the terms of any transaction. No representative of ETFS UK is authorised to behave in any way which would lead you to believe otherwise. ETFS UK is not, therefore, responsible for providing you with the protections afforded to its clients and you should seek your own independent legal, investment and tax or other advice as you see fit.

Risk Warnings

Any products referenced in this document are generally aimed at sophisticated, professional and institutional investors. Any decision to invest should be based on the information contained in the prospectus (and any supplements thereto) of the relevant product issue. The price of any securities may go up or down and an investor may not get back the amount invested. Securities may valued in currencies other than those in which there are priced and will be affected by exchange rate movements. Investments in the securities which provide a short and/or leveraged exposure are only suitable for sophisticated, professional and institutional investors who understand leveraged and compounded daily returns and are willing to magnify potential losses by comparison to investments which do not incorporate these strategies. Over periods of greater than one day, investments with a short and/or leveraged exposure do not necessarily provide investors with a return equivalent to a return from the unleveraged long or unleveraged short investments multiplied by the relevant leverage factor. Investors should refer to the section entitled ”Risk Factors” in the relevant prospectus for further details of these and other risks associated with an investment in any securities referenced in this communication.

If you have any questions please contact ETFS UK at +44 20 7448 4330 or info@etfsecurities.com for more information.

Mixed feelings on China rate cut

Mixed feelings on China rate cut

ETFS Multi-Asset Weekly – Mixed feelings on China rate cut

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Highlights

•  Commodities: Softer Chinese economy weighs on commodities.
•  Equities: Already buoyant stocks to increase risk appetite.
•  Currencies: The PBOC cut rates while ECB kept rates unchanged.
•  Upcoming webinar: Commodities – Is the Outlook Changing? Register here to attend

Chinese GDP fell below the 7% target for the first time since Q2 2009 and whilst higher than expected, declining sentiment put downward pressure on most asset classes last week. Combined with weaker Chinese industrial production and a stronger USD, commodities have given back most of their recent gains. Stocks fell early last week before rebounding on the expectation of further stimulus from the European Central Bank by the end of 2015 and on the People’s Bank of China (PBOC) rate and reserve requirement ratio cut last Friday. Although the PBOC decision took the market by surprise, and initially buoyed sentiment, uncertainty surrounding the outlook for growth could weigh on sentiment for the coming week.

Commodities

Softer Chinese economy weighs on commodities. Although above market expectations, China GDP for Q3 fell below the Chinese government 7% target for 2015. Combined with lower-than-expected industrial production and a stronger USD, commodities fell by 1.8% last week, giving back most of their previous weeks’ gains. Gold slipped 1.5%, closing at US$1,167/oz. on Thursday, 0.7% below its 200-day moving average while large increase in US inventories weighed on the price of WTI, down 2.2%. Coffee plunged 10% over the past week on lower beans quality in Columbia and rain in Brazil while sugar rose 3% on strong China imports in September. Although the past three weeks saw what looked like a bear rally, commodities came under pressure again last week. We expect that continued global demand combined with further production cuts will eventually ease pressure on many commodities.

Equities

Already buoyant stocks to increase risk appetite. Global stocks started last week negatively as Chinese economic growth slowed for the third consecutive quarter in Q3. While major equity indices rebounded on Thursday following the ECB meeting, China’s central bank unexpectedly cut its lending rates to 4.35% last Friday. This is the 6th time China’s central bank has cut rates since November 2014 with investors split on whether this is a good or bad sign. MSCI China A Index closed last Friday trading day up 1.5% while the EuroStoxx 50 rallied 2.5% on Thursday as ECB president Draghi indicated that they will be ready to act if China slowdown becomes a threat to the ECB efforts in supporting the Eurozone recovery. Stocks in the US also performed strongly last week on overall better-than-expected Q3 earnings among the 172 companies (35%) that have reported earnings so far.

Currencies

The PBOC cut rates while ECB kept rates unchanged. The European Central Bank’s (ECB) appears ready to provide more stimulus, putting downward pressure on the Euro. We expect further weakness, particularly against the USD. Meanwhile, the PBOC cut its one-year lending rate by 25bps and the Reserve Requirement Ratio (RRR) by 50bps in response to falling domestic growth, dropping below the 7% target for 2015. The PBOC has however more room to support the Chinese economy and further declines in the CNY can’t be ruled out if it implements more aggressive monetary policy. While the PBOC cut its rate, a rate rise is still on the cards for the FED this year. Strong home sales and job data in the US lent support to the USD, up 2.1%, and this week’s FOMC meeting will be closely watched for clues as to the trigger for a rate hike.

For more information contact:

ETF Securities Research team
ETF Securities (UK) Limited
T +44 (0) 207 448 4336
E  info@etfsecurities.com

Important Information

General

This communication has been issued and approved for the purpose of section 21 of the Financial Services and Markets Act 2000 by ETF Securities (UK) Limited (”ETFS UK”) which is authorised and regulated by the United Kingdom Financial Conduct Authority (”FCA”).

Investments may go up or down in value and you may lose some or all of the amount invested.  Past performance is not necessarily a guide to future performance. You should consult an independent investment adviser prior to making any investment in order to determine its suitability to your circumstances.

The information contained in this communication is for your general information only and is neither an offer for sale nor a solicitation of an offer to buy securities. This communication should not be used as the basis for any investment decision. Historical performance is not an indication of future performance and any investments may go down in value.

This communication may contain independent market commentary prepared by ETFS UK based on publicly available information. Although ETFS UK endeavours to ensure the accuracy of the content in this communication, ETFS UK does not warrant or guarantee its accuracy or correctness. Any third party data providers used to source the information in this communication make no warranties or representation of any kind relating to such data. Where ETFS UK has expressed its own opinions related to product or market activity, these views may change. Neither ETFS UK, nor any affiliate, nor any of their respective, officers, directors, partners, or employees accepts any liability whatsoever for any direct or consequential loss arising from any use of this publication or its contents.

ETFS UK is required by the FSA to clarify that it is not acting for you in any way in relation to the investment or investment activity to which this communication relates. In particular, ETFS UK will not provide any investment services to you and or advise you on the merits of, or make any recommendation to you in relation to, the terms of any transaction.  No representative of ETFS UK is authorised to behave in any way which would lead you to believe otherwise. ETFS UK is not, therefore, responsible for providing you with the protections afforded to its clients and you should seek your own independent legal, investment and tax or other advice as you see fit.

This document is not, and under no circumstances is to be construed as, an advertisement or any other step in furtherance of a public offering of shares or securities in the United States or any province or territory thereof. Neither this document nor any copy hereof should be taken, transmitted or distributed (directly or indirectly) into the United States.

Other than as set out above, investors may contact ETFS UK at +44 (0)20 7448 4330 or at retail@etfsecurities.com to obtain copies of prospectuses and related regulatory documentation, including annual reports. Other than as separately indicated, this communication is being made on a ”private placement” basis and is intended solely for the professional / institutional recipient to which it is delivered.

Third Parties

Securities issued by each of the Issuers are direct, limited recourse obligations of the relevant Issuer alone and are not obligations of or guaranteed by any of UBS AG, Merrill Lynch Commodities Inc. (”MLCI”), Bank of America Corporation (”BAC) or any of their affiliates. UBS AG, MLCI and BAC, Shell Trading Switzerland, Shell Treasury, HSBC Bank USA N.A., JP Morgan Chase Bank, N.A., Deutsche Bank AG any of their affiliates or anyone else or any of their affiliates. Each of UBS AG, Merrill Lynch Commodities Inc. (”MLCI”), Bank of America Corporation (”BAC) or any of their affiliates. UBS AG, MLCI and BAC, Shell Trading Switzerland, Shell Treasury, HSBC Bank USA N.A., JP Morgan Chase Bank, N.A. and Deutsche Bank AG disclaims all and any liability whether arising in tort, contract or otherwise (save as referred to above) which it might have in respect of this document or its contents otherwise arising in connection herewith.

”Dow Jones,” ”UBS”, DJ-UBS CISM,”, ”DJ-UBS CI-F3SM,” and any related indices or sub-indices are service marks of Dow Jones Trademark Holdings LLC (”Dow Jones”), CME Group Index Services LLC (”CME Indexes”), UBS AG (”UBS”) or UBS Securities LLC (”UBS Securities”), as the case may be, and have been licensed for use by the Issuer. The securities issued by CSL although based on components of the Dow Jones UBS Commodity Index 3 month ForwardSM are not sponsored, endorsed, sold or promoted by Dow Jones, CME Indexes, UBS, UBS Securities or any of their respective subsidiaries or affiliates, and none of Dow Jones, CME Indexes, UBS, UBS Securities, or any of their respective subsidiaries or affiliates, makes any representation regarding the advisability of investing in such product.

Markets Calm before Fed Decision

Markets Calm before Fed Decision

ETFS Multi-Asset Weekly – Markets Calm before Fed Decision

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Highlights

•    Commodities: Persistent surplus weighs on oil prices.
•    Equities: Global equity market sell off continues amid weaker PMI and US payrolls data.
•    Currencies: Dollar stages a comeback after August jobs report

The US Federal Open Market Committee will convene this week to discuss raising interest rates. We don’t believe they will pull the trigger on this occasion, given the uncertainty surrounding the deceleration of China and Europe and elevated financial market volatility. The last time the central bank increased rates was in 2006 and will not take this decision lightly. A policy reversal will be costly for the Fed’s reputation and we think the central bank will err on the side of caution while it assess whether these risks are likely to drive price expectations lower or hurt labour market prospects. A surprise rate rise could be gold price negative.

Commodities

Intensifying El Niño conditions drive agriculture prices higher. Cocoa rose 5.4% as El Niño drives dryness into West Africa where the majority of the world’s cocoa is grown. Wheat and corn prices rose ahead of the WASDE report by 2.5% and 3.5% respectively. El Niño could reverse some of the strong rains seen in Australia so far this season, hurting the wheat crop currently growing. US corn is currently vulnerable to weather changes. On the 15th September CONAB will release its Brazilian coffee harvest estimate. This report will end months of speculation about the size of the crop. There has been heightened uncertainty because of the highly volatile weather Brazil has experienced this season. Oil gave back part of the prior week’s gains. A surprisingly high inventory build led to a decline in of Brent 3.5% and fall in WTI of 1.8%.

Equities

Equity markets stabilise in a shortened week. The VIX (options implied volatility of the S&P 500) stabilised albeit above its long term historical trend with the S&P 500 and Russell 2000 indices in the US finishing the week marginally higher. The MSCI China A-Share has given back of all of last week’s gains today after the release of weaker than expected industrial production. Labor Day and Victory Day respectively shorted the US and Chinese trading weeks. European bourses trended lower despite an upward GDP growth revision indicating that economic conditions are somewhat better than previously assumed. However, the looming threat of US rate rises and global financial market conditions tightening gave European markets little cause for cheer.

Currencies

Central banks continue to drive FX markets. The Kiwi depreciated last week as the Reserve Bank of New Zealand cuts rates. This week, the FX market’s focus will be on the Fed’s rate decision. Consensus is still looking for a rate rise this week, but the futures market indicates that a rate rise is more likely in December. There is also scepticism about December, given that financial market liquidity is usually low in that month. While domestic conditions in the US may be looking healthy, the threat of global conditions unravelling the momentum remains at large. The Swiss National Bank and Bank of Japan, two other policy makers of haven currency countries will host their respective monetary policy meetings, revealing their interpretation of recent financial market turmoil. We expect dovish rhetoric to depreciate the JPY and CHF.

For more information contact:

ETF Securities Research team
ETF Securities (UK) Limited
T +44 (0) 207 448 4336
E  info@etfsecurities.com

Important Information

General

This communication has been issued and approved for the purpose of section 21 of the Financial Services and Markets Act 2000 by ETF Securities (UK) Limited (”ETFS UK”) which is authorised and regulated by the United Kingdom Financial Conduct Authority (”FCA”).

Investments may go up or down in value and you may lose some or all of the amount invested.  Past performance is not necessarily a guide to future performance. You should consult an independent investment adviser prior to making any investment in order to determine its suitability to your circumstances.

The information contained in this communication is for your general information only and is neither an offer for sale nor a solicitation of an offer to buy securities. This communication should not be used as the basis for any investment decision. Historical performance is not an indication of future performance and any investments may go down in value.

This communication may contain independent market commentary prepared by ETFS UK based on publicly available information. Although ETFS UK endeavours to ensure the accuracy of the content in this communication, ETFS UK does not warrant or guarantee its accuracy or correctness. Any third party data providers used to source the information in this communication make no warranties or representation of any kind relating to such data. Where ETFS UK has expressed its own opinions related to product or market activity, these views may change. Neither ETFS UK, nor any affiliate, nor any of their respective, officers, directors, partners, or employees accepts any liability whatsoever for any direct or consequential loss arising from any use of this publication or its contents.

ETFS UK is required by the FSA to clarify that it is not acting for you in any way in relation to the investment or investment activity to which this communication relates. In particular, ETFS UK will not provide any investment services to you and or advise you on the merits of, or make any recommendation to you in relation to, the terms of any transaction.  No representative of ETFS UK is authorised to behave in any way which would lead you to believe otherwise. ETFS UK is not, therefore, responsible for providing you with the protections afforded to its clients and you should seek your own independent legal, investment and tax or other advice as you see fit.

This document is not, and under no circumstances is to be construed as, an advertisement or any other step in furtherance of a public offering of shares or securities in the United States or any province or territory thereof. Neither this document nor any copy hereof should be taken, transmitted or distributed (directly or indirectly) into the United States.

Other than as set out above, investors may contact ETFS UK at +44 (0)20 7448 4330 or at retail@etfsecurities.com to obtain copies of prospectuses and related regulatory documentation, including annual reports. Other than as separately indicated, this communication is being made on a ”private placement” basis and is intended solely for the professional / institutional recipient to which it is delivered.

Third Parties

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