Insightful analysis and commentary for the US and global equity investor
Contributors: Douglas McIntyre Jon C. Ogg

Previous Posts

Monday, September 11, 2006

Opportunities & Threats Faced By The Markets

By Yaser Anwar, CSC of Equity Investment Ideas


Inflation is a lagging indicator and with growth slowing, and worldwide central-bank tightening to keep it under control, it should stabilize soon.

Investor concerns about prospects for a slowing economy may present an opportunity for investment in selected less economically sensitive sectors such as healthcare, staples and utilities.

M&A activity presents opportunity for gains in the equity markets.

Profitability for South African gold producers could improve in the third quarter as the rand has declined by 8.5% over the past month.

Interest in gold continues to gain strength in China, according to the latest report from the China Gold Association. The Shanghai Gold Exchange saw a total traded volume of 687.30 metric tons for its various precious metals contracts for January-July 2006, up 44.29 percent from the same period in 2005.

Late last week, the strike at Escondida, the world's largest copper mine, was settled. Escondida is now on track to be at full production this week. Workers ended the 25 day strike after approving a new contract with mine managers.

The Chinese yuan could appreciate as Premier Wen Jiabao said the currency could become more flexible and reforms will allow the market to set its value.

Positive outlook for Gold & US Trade Deficit


The fear of rising inflation could spur the Fed to continue raising rates, which at this point would surprise the market and likely pressure bond prices.

Falling housing prices may crimp consumer demand.

The threat of a slowing rate of increase in corporate profits in 2006 may present a headwind for stocks.

The US dollar may remain relatively stable over the near term while the market waits to see if the Fed will resume raising interest rates.

The rate of gold being accumulated in the various exchange-traded trusts has slowed.

Housing data continues to come in weaker and energy prices are falling, perhaps cooling off fears that inflation will accelerate.

China is producing at least 60% more raw alumina this year, with officials estimating that at least 5 million tons of capacity would come on stream in the coming six months. A smelter official predicts that prices would likely fall below $200 in coming months. Overseas suppliers are now offering spot alumina at about $320 a ton to Chinese ports, down from $500 in early July.

China stated that it would not support sanctions against Iran on the uranium enrichment issue. This could be another source of conflict between the US and China, as well as bodes negative for further oil downfal.
Negative outlook for Corporate Profits, US & China relations and Consumer Spending

UPDATE 1255 AM: Expect Oil to be weak today as Iran & EU talks have made progress. Look to go short OIH for a 1-2%

Powered by Blogger