Etikett: Yen

Largest inflows into commodity ETP baskets since May 2016

Largest inflows into commodity ETP baskets since May 2016 ETF SecuritiesLargest inflows into commodity ETP baskets since May 2016

ETF Securities Weekly Flows Analysis – Largest inflows into commodity ETP baskets since May 2016

  • Inflows of US$58.5mn into broad commodity ETPs, marks the highest in eight months.
  • Equities have had a strong week with inflows of US$39m. Thematic styles such as Robotics, US small caps and cyber security all saw inflows.
  • Crude oil ETPs see largest outflows in six weeks as investors take profit

Signalling the broad-based interest in commodities, commodity basket ETPs see their highest inflows since May 2016. Following five years of underperformance, commodities made a come-back in 2016. We continue to see interest in diversified commodity baskets as more investors rotate toward the asset class.

Equities have had a strong week with inflows of US$39m. Thematic styles such as Robotics, US small caps and cyber security all saw inflows whilst Australian equities saw US$12.6m inflows. That came despite world equities seeing a decline in performance over the week, suggesting investors are searching for alternative investment styles as valuations rise. Investors are getting noticeably more bearish on broad equities. For example we saw US$16m inflows into short European Stoxx 50 equities and US$15m of outflows in long positions. In terms of thematics, Robotics particularly remain in favour with year-to-date inflows totalling US$50m.

The rout in precious metal that begun after the US presidential election now looks to be over, with inflows into gold of US$59.6m over the last week and US$96.6 since the beginning of the year. Recent payroll figures suggest a mixed employment picture. The FOMC implied that a March rate hike, whilst being data dependent, was unlikely, with a persistence of negative real interest rates most likely in our view.

Crude oil ETPs see largest outflows in six weeks. Outflows from long crude oil ETPs of US$42.1mn followed a 7% rally in oil prices last week as investors took profit. While OPEC is one month into its 6-month production cut, the US continues to increase production. US inventory is rising as more oil rigs come into operation every week in the in the US.

Industrial metals basket ETPs see seven consecutive weeks of inflows. Inflows into industrial metal baskets totalled US$12.9mn. Against the odds, most industrial metals continue to rise. Last week’s surprise announcement from the Philippines that it will close 23 nickel mines sent the price of the metal soaring by 8%.

Largest outflow from long Yen ETPs since September 2015. Investors appear concerned that Yen weakness is here to stay, after divesting funds in ETPs tracking long EUR/JPY positions at the fastest rate since inception(2012), totalling US$4.8mn last week. With inflation expectations rising in Europe, and as the ECB is nearing the limit of its QE activities as it is expected to taper its asset purchase programme toward year-end, the Euro should benefit.

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 (the ”FCA”).

This communication is only targeted at qualified or professional investors.

The products discussed in this communication are issued by ETFS Commodity Securities Limited (”CSL”), ETFS Hedged Commodity Securities Limited (”HCSL”), ETFS Hedged Metal Securities Limited (”HMSL”), Swiss Commodity Securities Limited (”SCSL”), ETFS Foreign Exchange Limited (”FXL”), ETFS Metal Securities Limited (”MSL”), ETFS Oil Securities Limited (”OSL”), ETFS Equity Securities Limited (”ESL”), Gold Bullion Securities Limited (”GBS” and, together with CSL, HCSL, HMSL, SCSL, FXL, MSL, OSL and ESL, the ”Issuers”) and GO UCITS ETF Solutions Plc (the ”Company ”). Each Issuer (apart from SCSL) is regulated by the Jersey Financial Services Commission. The Company is an open-ended investment company with variable capital having segregated liability between its sub-funds (each a ”Fund”) and is organised under the laws of Ireland. The Company is regulated, and has been authorised as a UCITS by the Central Bank of Ireland (the ”Financial Regulator”) pursuant to the European Communities (Undertaking for Collective Investment in Transferable Securities) Regulations, 2003 (as amended). Italy: When being made within Italy, this communication is for the exclusive use of the ”qualified investors” and its circulation among the public is prohibited. Switzerland: In Switzerland, this communication is only intended for Regulated Qualified Investors. US: This communication 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, where none of the Issuers, the Company or any securities issued by them are authorised or registered for distribution and where no prospectus for any of the Issuers or the Company has been filed with any securities commission or regulatory authority. Neither this communication nor any copy hereof should be taken, transmitted or distributed (directly or indirectly) into the United States. Neither the Issuers, the Company nor any securities issued by them have been or will be registered under the United States Securities Act of 1933 or the Investment Company Act of 1940 or qualified under any applicable state securities statutes. This communication 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 communication may be based on back testing. Back tested performance is purely hypothetical and is provided in this communication 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 nor shall any securities be offered or sold to any person in any jurisdiction in which an offer, solicitation, purchaser or sale would be unlawful under the securities law of such jurisdiction. This communication should not be used as the basis for any investment decision. 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.

Risk Warnings

Securities issued by the Issuers and the Company may be structured products involving a significant degree of risk and may not be suitable for all types of investor. This communication is 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 Issuer or the Company which includes, inter alia, information on certain risks associated with an investment. The price of any securities may go up or down and an investor may not get back the amount invested. Securities may be priced in US Dollars, Euros, or Sterling, and the value of the investment in other currencies will be affected by exchange rate movements. Investments in the securities of the Issuers or the shares of the Company 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 the securities offered by the Issuers and the Company. The relevant prospectus for each Issuer and the Company may be obtained from www.etfsecurities.com. Please contact ETFS UK at +44 20 7448 4330 or info@etfsecurities.com for more information.

Issuers

General: The FCA has delivered to the regulators listed below certificates of approval attesting that the prospectuses of the Issuers indicated have been drawn up in accordance with Directive 2003/71/EC. For Dutch, French, German and Italian Investors: The prospectuses (and any supplements thereto) for each of the Issuers (apart from SCSL) have been passported from the United Kingdom into France, Germany, Italy and the Netherlands and have been filed with the l’Autorité des Marchés Financiers (AMF) in France, Bundesanstalt für Finanzdienstleistungsaufsicht (BaFin) in Germany, CONSOB and the Bank of Italy in Italy and the Authority Financial Markets (Autoriteit Financiële Markten) in the Netherlands. Copies of prospectuses (and any supplements thereto) and related regulatory documentation, including annual reports, can be obtained in France from HSBC France, 103, Avenue des Champs Elysées, 75008 Paris, in Germany from HSBC Trinkhaus & Burkhardt, AG, Konsortialgeschäft, Königsalle 21/23, 40212 Dusseldorf and in the Netherlands from Fortis Bank (Nederland) N.V., Rokin 55, 1012 KK Amsterdam. The prospectuses (and any supplements thereto) for each of the Issuers (apart from SCSL) may be distributed to investors in France, Germany, Italy and the Netherlands. This communication is not a financial analysis pursuant to Section 34b of the German Securities Trading Act (Wertpapierhandelsgesetz – WpHG) and consequently does not meet all legal requirements to warrant the objectivity of a financial analysis and is also not subject to the ban on trading prior to the publication of a financial analysis. This communication is not addressed to or intended directly or indirectly, to (a) any persons who do not qualify as qualified investors (gekwalificeerde beleggers) within the meaning of section 1:1 of the Dutch Financial Supervision Act as amended from time to time; and/or (b) in circumstances where other exemptions or dispensations from the prohibition the Dutch Financial Supervision Act or the Exemption Regulation of the Act on Financial Supervision apply. None of the Issuers is required to have a license pursuant to the Dutch Financial Supervision Act as it is exempt from any licensing requirements and is not regulated by the Netherlands Authority for the Financial Markets and consequently no prudential and conduct of business supervision will be exercised. For Austrian, Danish, Finnish, Portuguese, Spanish and Swedish Investors: The prospectuses (and any supplements thereto) for each of CSL, HCSL, HMSL, MSL, ESL and FXL have been passported from the United Kingdom into Austria, Denmark, Finland, Portugal, Spain, Sweden and have been filed with Österreichische Finanzmarktaufsicht (Austrian Financial Market Authority) in Austria, Finanstilsynet (Financial Supervisory Authority) in Denmark, Finanssivalvonta (Finnish Financial Supervisory Authority) in Finland, Comissão do Mercado de Valores Mobiliários (Portuguese Securities Market Commission) in Portugal, Comisión Nacional del Mercado de Valores (Securities Market Commission) in Spain and the Finansinspektionen (Financial Supervisory Authority) in Sweden. The prospectuses (and any supplements thereto) for these entities may be distributed to investors in Austria, Finland, Portugal, Spain, Denmark and Sweden. For Belgian Investors: The prospectuses (and any supplements thereto) for GBS, CSL, MSL and FXL have been passported from the United Kingdom into Belgium and has been filed with the Commission Bancair, Financiére et des Assurances in Belgium. The prospectuses (and any supplements thereto) for GBS, CSL, MSL and FXL may be distributed to investors in Belgium. For Swiss investors: The prospectus (and any supplements thereto) for SCSL may be distributed to investors in Switzerland. Securities in SCSL are not shares or units in collective investment schemes within the meaning of CISA. They have not been approved by the Swiss Financial Market Supervisory Authority (FINMA) and are not subject to its supervision. The Swiss Franc Currency-Hedged Commodity Securities are not issued or guaranteed by a supervised financial intermediary within the meaning of CISA. This document does not constitute a prospectus under the Companies (Jersey) Law 1991 and is not an offer or an invitation to acquire securities in SCSL. This document does not constitute a Swiss listing prospectus under the SIX Listing Rules and the SIX Additional Rules for the listing of Exchange Traded Products. This document must be read in conjunction with the Swiss Listing Prospectus. If there is any inconsistency between this document and the Swiss Listing Prospectus, the Swiss Listing Prospectus shall prevail. Detailed information on the terms and conditions of the Swiss Franc Currency-Hedged Commodity Securities can be found in the Swiss Listing Prospectus under Part 6 – Trust Instrument and Swiss Franc Currency-Hedged Commodity Securities. Other than as set out above investors may contact ETFS UK at +44 (0)20 7448 4330 or at info@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. Securities issued by the Issuers are direct, limited recourse obligations of the relevant Issuer alone and are not obligations of or guaranteed by any of UBS AG (”UBS”), Merrill Lynch Commodities Inc. (”MLCI”), Merrill Lynch International (”MLI”), Bank of America Corporation (”BAC”), Bloomberg Finance LP (”Bloomberg”), Société Générale (”SG ”), Shell Trading Switzerland, Shell Treasury, HSBC Bank plc, JP Morgan Chase Bank, N.A., Morgan Stanley & Co International plc, Morgan Stanley & Co. Incorporated or any of their affiliates or anyone else or any of their affiliates. Each of UBS, MLCI, MLI, BAC, Bloomberg, SG, Shell Trading Switzerland, Shell Treasury, HSBC Bank plc, JP Morgan Chase Bank, N.A., Morgan Stanley & Co International plc and Morgan Stanley & Co. 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Funds

Austria: Investors should base their investment decision only on the relevant prospectus of the Company, the Key Investor Information Document, any supplements or addenda thereto, the latest annual reports and semi-annual reports and the memorandum of incorporation and the articles of association, which can be obtained free of charge upon request at the Paying and Information Agent in Austria, Erste Bank der oesterreichischen Sparkassen AG, Graben 21, A1010 Wien, Österreich and on www.etfsecurities.com. France: Any subscription for shares of the Funds will be made on the basis of the terms of the prospectus, the simplified prospectus and any supplements or addenda thereto. The Company is a UCITS governed by Irish legislation and approved by the Financial Regulator as UCITS compliant with European regulations although may not have to comply with the same rules as those applicable to a similar product approved in France. Certain of the Funds have been registered for marketing in France by the Authority Financial Markets (Autorité des Marchés Financiers) and may be distributed to investors in France. Copies of all documents (i.e. the prospectus (including any supplements or addenda thereto, the Key Investor Information Document, the latest annual reports and the memorandum of incorporation and articles of association) are available in France, free of charge, at the French Centralizing Agent, Société Générale, Securities Services, at 1-5 rue du Débarcadère, 92700 Colombes – France. Germany: The offering of the Shares of the Fund has been notified to the German Financial Services Supervisory Authority (BaFin) in accordance with section 310 of the German Investment Code (KAGB). Copies of all documents (i.e. the Key Investor Information Document (in the German language), the prospectus, any supplements or addenda thereto, the latest annual reports and semi-annual reports and the memorandum of incorporation and the articles of association) can be obtained free of charge upon request at the Paying and Information Agent in Germany, HSBC Trinkaus & Burkhardt AG, Königsallee 21-23, 40212 Düsseldorf and on www.etfsecurities.com. The current offering and redemption prices as well as the net asset value and possible notifications of the investors can also be requested free of charge at the same address. In Germany the Shares will be settled as co-owner shares in a Global Bearer certificate issued by Clearstream Banking AG. This type of settlement only occurs in Germany because there is no direct link between the English and German clearing and settlement systems CREST and Clearstream. For this reason the ISIN used for trading of the Shares in Germany differs from the ISIN used in other countries. Netherlands: Each Fund has been registered with the Netherlands Authority for the Financial Markets following the UCITS passport-procedure pursuant to section 2:72 of the Dutch Financial Supervision Act. United Kingdom: Each Fund is a recognised scheme under section 264 of the Financial Services and Markets Act 2000 and so the prospectus may be distributed to investors in the United Kingdom. Copies of all documents (i.e. the Key Investor Information Document, the prospectus, any supplements or addenda thereto, the latest annual reports and semi-annual reports and the memorandum of incorporation and the articles of association) are available in the United Kingdom from www.etfsecurities.com. None of the index providers of the Funds referred to herein nor their licensors make any warranty or representation whatsoever either as to the results obtained from use of the relevant indices and/or the figures at which such indices stand at any particular day or otherwise. None of the index providers shall be liable to any person for any errors or significant delays in the relevant indices nor shall be under any obligation to advise any person of any error or significant delay therein.

Yen poised for move lower

Trade Idea – Foreign Exchange – Yen poised for move lower

Highlights

  • Hawkish US Fed official, Jeffrey Lacker, has sent US rate expectations higher and the USD/JPY up through recent downward trend lines.
  • The real yield differential between the US and Japan has started to trough and normalise supporting US Dollar strength.
  • USD/JPY is poised for further upside if current resistance levels are broken.

USD/JPY forms a base

Sentiment towards the US Dollar has turned a corner in the past ten days, after a hawkish speech from Richmond Federal Reserve (Fed) President, Jeffrey Lacker, prompted a fresh spike in rate-hike expectations. In his speech, the Fed official explained that the US policy rate should already be at 1.5% and that monetary authorities should be taking greater pre-emptive action to offset building domestic inflationary pressure. While Lacker himself is not a voting member of the Federal Open Market Committee (FOMC), his words echoed the sentiment of three members on the committee that broke ranks and voted to raise rates earlier at the September meeting. The speech combined with a strong US service sector report the following day to boost investor expectations of a December rate rise to 68% (from around 60%) and push the trade weighted dollar index up 2% to the highest level in approximately six months. The positive USD momentum has helped the USD/JPY currency pair break through its medium term downward trend line and test key resistance levels established earlier in the year. Signs of diminishing slack in the US economy and dovish Japanese monetary policy should help to boost the US-Japan real rate differential in months to come, lending strength to the USD/JPY currency pair.

(Click to enlarge)

Real yield compression to reverse

The USD/JPY has been subject to a large 14% drop this year as the difference between US and Japanese real yields (inflation adjusted) has plunged to multi-year lows. The move comes despite the Bank of Japan (BoJ) unleashing negative rates and unprecedented levels of monetary easing. The driver of yield compression has been the sharp drop in US nominal yields as pricing of interest rate normalisation has turned dramatically more dovish over the course of the year, while Japanese inflation expectations have grinded higher. More recently, rising US nominal yields has caused this difference to trough and even start to climb (see Figure 1). As year-end draws nearer, we expect this trend to continue as healthy US inflation and labour market data (September US inflation data due on 18th October and next payroll release on November 4th) support rate hike expectations and in turn the USD/JPY.

Watch for the break

In recent months, the USD/JPY currency pair has managed to form a base at the psychologically important 100 level after sustaining the large fall earlier in the year. The Lacker speech (4th October) helped to reverse the pair’s fortunes, sending it up through its 50-day moving average (DMA) (which has been acting as a medium term downward trend line) to test resistance at 104.2. Should the pair manage to break this level then we could see it move to its high from July of 107.48. Alternatively, if the pair sunk towards the 100 level it should be viewed as an attractive buying opportunity.

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

Currency ETPs

EUR Base

ETFS Long JPY Short EUR (SJPS) ETFS Short JPY Long EUR (SJPL)

GBP Base

ETFS Long JPY Short GBP (GBJP) ETFS Short JPY Long GBP (JPGB)

USD Base

ETFS Long JPY Short USD (LJPY) ETFS Short JPY Long USD (SJPY)

3x

ETFS 3x Long JPY Short EUR (EJP3) ETFS 3x Short JPY Long EUR (JPE3) ETFS 3x Long JPY Short GBP (JPP3) ETFS 3x Short JPY Long GBP (SYP3) ETFS 3x Long JPY Short USD (LJP3) ETFS 3x Short JPY Long USD (SJP3)

5x

ETFS 5x Long JPY Short EUR (EJP5) ETFS 5x Short JPY Long EUR (JPE5)

For more information contact:

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

Important Information

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

This communication is only targeted at qualified or professional investors.

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

EU Referendum: investors vs gamblers

EU Referendum: investors vs gamblers

EU Referendum: investors vs gamblers. Brexit. According to some recent polling evidence, the British public has now turned toward voting to leave the European Union. We look at what investors vs gamblers are really thinking…we follow the money.

Following the real money seems like a better predictor of the referendum result than extrapolating surveys when the ‘don’t know’ voters (of which there is around 10% of polling surveys) have such a significant impact on the final outcome. Although the FT reports that the ‘Leave’ camp has the upper hand over the ‘Remain’ camp (by 3 percentage points on average), the ‘don’t knows’ are critical to the result and evidence suggests they tend toward the status quo.

Investors vs Gamblers

Gambling flows on betting website Betfair indicates that the vast majority (around 80% of gambling funds) are betting on Britain remaining inside the EU. Somewhat counter-intuitively, this is in contrast to investor flows into ETPs, which shows that 85% of total British Pound ETP funds are being deposited into products tracking short GBP positions. Although not strictly comparable, investment flows are showing a distinctly counter trend from gambling. We feel that the difference represents investors hedging potential losses in other asset classes that could be sustained if the referendum were to go the way of the ‘leave’ camp. Investment hedging is pragmatic and does not represent a underlying view that that Britain will leave the EU, in our opinion.

That being said, our base case remains that Britain will vote to remain inside the EU and that such a result is a positive one for the UK economy and the British Pound in the long run. Nonetheless, volatility has reached new extremes for GBP currency crosses. Elevated volatility levels of GBP opens up buying opportunities in the medium term as uncertainty fades.

Historically, steep falls in the Pound have presaged strong rebounds. The subsidence of volatility following the financial crisis and the Scottish referendum, led to strong gains for GBP against the Euro and JPY. With GBP being battered by the uncertainty surrounding the ebb and flow of sentiment following polling survey results, we see attractive value in the Pound, especially against the Euro and Yen, in the final lead-up to the June 23rd vote.

Martin Arnold, Global FX & Commodity Strategist at ETF Securities

Martin Arnold joined ETF Securities as a research analyst in 2009 and was promoted to Global FX & Commodity Strategist in 2014. Martin has a wealth of experience in strategy and economics with his most recent role formulating an FX strategy at an independent research consultancy. Martin has a strong background in macroeconomics and financial analysis – gained both at the Reserve Bank of Australia and in the private commercial banking sector – and experience covering a range of asset classes including equities and bonds. Martin holds a Bachelor of Economics from the University of New South Wales (Australia), a Master of Commerce from the University of Wollongong (Australia) and attained a Graduate Diploma of Applied Finance and Investment from the Securities Institute of Australia.

Yen slide to continue

Market Insight – Foreign Exchange Yen slide to continue

Yen slide to continue

Abe urges coordinated response to slow growth

At last week’s G7 summit, Japanese prime minister, Shinzo Abe, urged world leaders to take part in a coordinated fiscal response to lacklustre global growth, comparing current economic conditions to those during the 2008 financial crisis. While the speech failed to garner much support, it did highlight the willingness of Japanese authorities to do more in order to ensure growth and acted as a precursor to Abe’s decision on Wednesday to delay the proposed 2% sales tax hike by two and a half years to October 2019, a move which sent the USD/JPY falling over 1%. While we expect fiscal stimulus to continue to be an important part of achieving the nation’s economic goals, with core inflation so far from its target (2.3% below), it is highly likely that the Bank of Japan (BoJ) will implement further monetary stimulus in coming months. Further loosening should put pressure on the JPY against the US Dollar, as diverging policy paths come increasingly to the fore.

BoJ unlikely to disappoint for much longer

After the sharp JPY rally that followed the disappointment of the BoJ’s last monetary policy meeting, it is understandable that investors may be cautious about the central bank’s intentions. However, the surprising decision to maintain the status quo masked the grim economic picture that was delivered in the BoJ’s quarterly outlook report that was released simultaneously. The report revealed a deep cut to the 2016 inflation forecast and raised concerns over the impact of slowing emerging market demand on Japanese exports. Recent inflation and manufacturing data has likely added to these concerns, showing the second month of declining core consumer prices and the fastest contraction in manufacturing activity in three years (see Figure 1). Given this backdrop, we see the BoJ as more likely to ease than not at its upcoming meeting on June 15th.

Figure 1: Economy remains weak

Positioning shifts

Despite widening nominal yield differentials between Japan and the US, speculative positioning has remained stubbornly JPY bullish, until now. Last week, speculative long JPY positions experienced the largest fall since November 2011, and shorts showed early signs of bottoming. A catalyst in the form of further monetary easing by the BoJ or hawkish comments during Janet Yellen’s World Affairs Council (WAC) speech (6th June) could spur an increasing shift to bearish positioning.

Important Information

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.

Gold Shines as China’s Economy Fuels Growth Concerns

Gold Shines as China’s Economy Fuels Growth Concerns

ETFS Multi-Asset Weekly – Gold Shines as China’s Economy Fuels Growth Concerns

Download the complete report (.pdf)

Highlights


•    Precious metals extend rally while energy continues to slide.
•    Equity market volatility spikes as more than 5 trillion is wiped out from global equity markets since China devalued its Yuan.
•    Euro, Yen and Swiss Franc remain strongest amidst risk averse backdrop.

Asian markets have opened the week sharply lower, exacerbating the global selloff in the aftermath of China’s currency reform. Despite attempts made by the Chinese government from lowering interest rates to the reserve requirement, suspending stock trading and finally devaluing its currency, sentiment is decisively negative. Equity market volatility along with Fed dovish Federal Reserve minutes has helped gold prices rally and any dovishness from this week’s meeting of central bankers at Jackson Hole could add to that momentum.

Commodities

Precious metals extend rally while energy continues to slide. Gold at US$ 1154/oz has staged a comeback attaining its highest level in 5 weeks. Concerns over China’s growth path and slightly more dovish set of Federal Reserve Policy minutes drove gold higher in US dollar terms. The 38% y-o-y increase in platinum imports by China in July has helped support this week’s advance of 5.4%. WTI and Brent crude oil fell to US$39 and US$45 per barrel respectively continuing their 8th week of declines, the longest losing streak since 1986. The lowest reading in 9 years 47.1 in Caixin’s China purchasing manager’s index (PMI) for August coupled with the surprise increase of 2.5mn barrels in crude oil stocks by the US Department of Energy raised fears of waning demand in an oversupplied market.

Equities

Equity market volatility spikes as more than 5 trillion is wiped out from global equity markets since China devalued its Yuan. Weaker Chinese PMI data outweighed the strengthening European PMI data, accelerating a selloff in global equity markets. France’s economy stagnated in the second quarter and despite factory data in Germany rising to a 4-year high, the DAX fell 7.8%. Commodity stocks that make up about fifth of the FTSE 100 Index weighting caused the Index’s biggest weekly decline since December. In particular, mining giant Glencore PLC was the latest to fall prey to the commodity rout as profits declined 56% in H1. Its plans to close Eland platinum mine in South Africa and divest its 23.9% holding in Lonmin Plc (the world’s third largest platinum producer) extended further pressure on platinum supply.

Currencies

Euro, Yen and Swiss Franc remain strongest amidst risk averse backdrop. With risk off the table, the unwinding of carry trades lent support to low yielding currencies namely Euro and Yen. Although the impending Greek elections following Syriza party’s split could pose a risk to the Euro. The lack of a clear signal from the Fed minutes and miss on the manufacturing PMI pushed the probability of a Fed rate hike in September from 50 to 28 percent, reversing the strengthening dollar. The continued weakness in oil prices weighed heavily on the Canadian currency. The positive CPI print early in the week lent support to Sterling as investors see encouraging signs of the UK moving nearer to a rate increase.

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.

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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.