Open: London Session | Forex, Metals, Oil, Agriculture November 24, 2020

Currencies

Copper prices impact the performance of Chilean stocks in U.S. dollar terms largely through their impact on the currency. The dollar touched the lowest since 2018 on Monday before gaining ground and gold is at a four-month low amid the risk-on mood. Unsurprisingly, the Fed and the ECB will remove the most securities each month, in US dollar terms (see Exhibit 8). BL Research BureauThe rupee (INR) ended marginally higher at 74.09 against the dollar (USD) on Monday.

Metals

However, the close historical correlation between ECH and copper prices highlights the extent to which the metal impacts the index through the broader economy and currency. Despite a two-thirds rally in the price of copper from the March low, the peso has barely advanced and its real effective exchange rate remains deeply undervalued. ECH Vs. Copper: Divergence Suggests ECH Upside Source: Bloomberg ECH has historically moved very closely in line with the price of copper, the country’s largest export by far.
As copper prices declined, the country’s terms of trade deteriorated and with it, reducing the fair value of the peso. The ongoing rally in copper is a strong leading indicator of an economic recovery. The iShares MSCI Chile Capped ETF (ECH) does not have direct exposure to copper prices as state-owned Codelco dominates output. The rally in copper should provide additional impetus. These two acts served the goal of completely separating the government’s money from gold and giving it the ability to create new money by fiat.
Furthermore, the underperformance of the mining complex in recent years means SGDM should outperform gold bullion for the duration of this bull market. Gold topped out at well over $1900 an ounce in September 2011 and just recently surpassed this number this year.

Oil

One of Williams Companies’ largest source of strengths is its natural gas focus, where natural gas demand has stayed very resilient. However, longer term, despite natural gas’ benefits over other forms of power like coal, it faces a long-term steady shift to other forms of power, like renewables. (Natural Gas Demand – Investor Presentation) Across the board, power generation demand has gone up, along with LNG & Mexican exports. On an adjusted basis, demand actually went up More so, Williams Companies has outpaced the market rate, with its natural gas gathering volumes increasing by 3.1% YoY.
That’s on top of U.S.-wide natural gas production declines, highlighting the strength of the company’s business and the importance of its assets. With nearly 70% of demand for its natural gas coming from utility and power companies, Williams Companies has a reliable customer base that consistently helps it. As a result of these benefits, despite long-term risks of a slow movement away from natural gas, we recommend investing in the company.
The company has virtually minimal competition across its impressive natural gas transmission network, along with its expertise. The company’s net debt has dropped from a peak of $180 billion to $149 billion and its debt towers have improved significantly with bottom of the barrel interest rates. These projects serve core long-term markets with significant natural gas and electricity.

United States

Specifically, the company’s HBO Max has announced a new streaming deal with Amazon (NASDAQ: AMZN), with increased potential for a new deal with Roku (NASDAQ: ROKU). The Fed was put in charge of keeping stock prices from falling precipitously under the guise of claiming that any bear market would automatically lead to rising unemployment. The combination of the election and Pfizer’s vaccine news resulted in the fed funds curve jumping higher (cyan and red lines).
The surge in risk assets suggests the market is expecting booming real growth to be the catalyst for the shift toward a more hawkish Fed. In late July (brown line) the market was flirting with the idea of negative rates, as shown by the fed funds futures curve. If a bank found itself in trouble, it could approach the discount window and exchange 100% guaranteed government debt for Fed credit at a deep discount. In fact, what we believe is the largest source of risk is T-Mobile (NASDAQ:TMUS) or potential new competitors in the cellular businesses.
(Source: Nasdaq) Given the strong bounceback in equities led by consumer and technology stocks, the scope of more upside in the medium term remains limited.
Given the Fed’s preference for jobs over inflation, this means there should be no talk of the Fed hiking rates. The market is starting to see a Fed hike on the distant horizon.

China

We start with history, because Kissinger was once an accomplished historian and He makes the case that Americans cannot understand Beijing’s insecurity. Xi Jinping, the one man in China’s system, is now propagating the audacious concept of tianxia, that “all under heaven” owe allegiance to Beijing. Kissinger, by urging conciliation when Beijing has made clear it cannot be appeased, has helped produced today’s grave situation. Beijing-based China Online was founded to develop online course curricula to teach the English language to Chinese and Philippine students.
Since then, Beijing has added new claims — to the South China Sea — and has laid the groundwork for additional ones, especially over Japan’s Ryukyu chain. In Kissinger-speak, that is a “no” to international cooperation against Beijing.

Europe

Irresponsible Standoff | ECB policy maker Olli Rehn called the political standoff over the EU s pandemic recovery plans irresponsible. Meanwhile, the EU s Irini naval mission has further strained relations with Turkey.

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