Articles in Category: Macroeconomics

This morning in metals news: aluminum roller and recycler Novelis announced its quarterly financial results; meanwhile, the United States International Trade Commission voted Tuesday on anti-dumping duties for prestressed concrete steel wire strand; and, lastly, the Consumer Price Index rose by 0.8% in April.

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Novelis reports ‘outstanding’ quarter

earnings sign

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Aluminum roller and recycler Novelis reported net income of $180 million during the quarter ending March 31, 2020 (Q4 of fiscal year 2021).

The performance marked a jump from $63 million in Q4 of fiscal year 2020.

“Guided by our purpose and driven by the resilience of our people and the strength of our partnerships, we safely navigated this extraordinary year to achieve outstanding results,” President and CEO Steve Fisher said. “With the ongoing successful integration of Aleris, a diverse and innovative product portfolio, and unmatched geographic footprint, we have proven our ability to deliver sustainable aluminum solutions to customers in a way that resulted in record financial performance.”

Furthermore, among other factors, higher average aluminum prices helped drive a 33% year-over-year rise in sales to $3.6 billion.

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productivity word cloud

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This morning in metals news: nonfarm business sector labor productivity jumped by 5.4% in the first quarter; the CME Group said it will permanently close the trading pits it shut down last March; and US energy production dipped last year.

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US nonfarm labor productivity shoots up in Q1 2021

US nonfarm labor productivity rose by 5.4% in the first quarter, the Bureau of Labor Statistics reported.

Furthermore, output increased by 8.4% and hours worked increased by 2.9%.

Meanwhile, manufacturing labor productivity rose by 0.1% in Q1 2021. Manufacturing output rose by 2.4% and hours worked by 2.3%.

Durable goods manufacturing productivity rose by 0.7% in the first quarter. Meanwhile, nondurable goods manufacturing productivity increased by 0.3%.

CME closes trading pits permanently

After closing its open outcry trading pits last March, the CME Group said the closure is now permanent.

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This morning in metals news: US real GDP grew at an annual rate of 6.4% in Q1 2021; meanwhile, U.S. Steel reported its Q1 financial results; and, lastly, Intel cited the “explosive growth” in semiconductors in its Q1 2021 financial report.

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US GDP grows 6.4% in Q1

US GDP

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US GDP grew at an annual rate of 6.4% in Q1 2021, the Bureau of Economic Analysis (BEA) reported this week.

Real GDP had increased by 4.3% in Q4 2020. After GDP plunged a record 33% in Q2 2020, GDP has increased each of the past three quarters.

“The increase in first quarter GDP reflected the continued economic recovery, reopening of establishments, and continued government response related to the COVID-19 pandemic,” the BEA said in its report. “In the first quarter, government assistance payments, such as direct economic impact payments, expanded unemployment benefits, and Paycheck Protection Program loans, were distributed to households and businesses through the Coronavirus Response and Relief Supplemental Appropriations Act and the American Rescue Plan Act.”

Personal consumption expenditures (PCE), nonresidential fixed investment, federal government spending, residential fixed investment, and state and local government spending paced the Q1 rise, the BEA added.

In addition, increases in durable goods (led by motor vehicles and parts), nondurable goods, and services paced the rise in PCE.

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electric vehicle charging

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Most carmakers had a pretty torrid first half of 2020, with factories disrupted, show rooms closed and consumers bunkered down in their homes. Sales plummeted across Europe and North America.

However, the second half of last year and, particularly, the first quarter of this year have seen carmakers’ prospects come roaring back.

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The move to electric vehicles

Yet, the turmoil being experienced by the industry is much more about the stop-go of last year.

Rather than cause a retrenchment, the pandemic has helped accelerate the move to electrification.

The greatest spur, however, has undoubtedly been government legislation.

EU penalties on carmakers that fail to meet emission reduction targets are driving a mass migration from internal combustion engines (ICE) to hybrids and fully electric vehicles. After a slow start, European carmakers are adopting aggressive transition plans.

Volkswagen goes all in on electric vehicles

Just this past week, Volkswagen announced — to the joy of its shareholders, who piled in to push shares up 20% — that the German automaker aims to become the global leader in electric cars by 2025. The automaker is placing heavy bets on next-generation lithium-ion batteries, the Financial Times reported.

Volkswagen says it will sell 1 million electric or hybrid cars this year, a tenfold increase from 2019, with half being fully electric vehicles and the rest plug-in hybrids.

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housing starts

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After what was a frigid month across the country, February housing starts declined in the US. February saw a historic chill in Texas and elsewhere in the region — in addition to inclement weather in other, traditionally colder parts of the country — that led to many losing power and a decline in natural gas production, among other impacts.

The MetalMiner Best Practice Library offers a wealth of knowledge and tips to help buyers stay on top of metals markets and buying strategies.

US housing starts fall 10.3% in February

With residential and commercial customers losing power across most of Texas last month, it’s not surprising that construction activity slowed.

According to the US Census Bureau’s latest report today, US housing starts reached a seasonally adjusted annual rate of 1.42 million. The February rate marked a 10.3% decline from the previous month.

Furthermore, the rate declined by 9.3% from February 2020.

Furthermore, single-family housing starts in February reached a rate of 1.04 million, or down 8.5% from January. In addition, the February rate for units in buildings with five units or more reached 372,000, the Census Bureau reported.

Building permits also decline

In addition, building permit authorizations declined in February by 10.8%, down to a rate of 1.69 million.

Meanwhile, single-family authorizations fell 10.0% to a rate of 1.14 million. Authorizations of units in buildings with five units or more reached a rate of 495,000.

Materials prices rise

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Department of Commerce building

The U.S. Department of Commerce. qingwa/Adobe Stock

This morning in metals news: the Department of Commerce said imports of common alloy aluminum sheet from 18 countries are being dumped and benefiting from subsidies; Federal Reserve Governor Lael Brainard this week commented on the US’s economic outlook; and the copper price has retraced somewhat over the last week.

DOC makes common alloy aluminum sheet ruling

The Department of Commerce ruled that common alloy aluminum sheet imports from 18 countries benefited from either dumping or countervailable subsidization.

The affirmative final dumping determination related to imports from: Bahrain, Brazil, Croatia, Egypt, Germany, India, Indonesia, Italy, Oman, Romania, Serbia, Slovenia, South Africa, Spain, Taiwan, and Turkey.

Meanwhile, the countervailing subsidy investigation referred to common alloy aluminum sheet imports from Bahrain, India and Turkey.

In 2019, Germany sent the most common alloy aluminum sheet, by value, to the US, at $286.6 million.

Don’t miss the MetalMiner analyst team on March 24 at 10:00 a.m. CDT for a 30-minute metals market forecast and strategies to deploy in falling markets:

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gold price

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This morning in metals news: the gold price continues to slide; the Federal Reserve released its latest Monetary Policy Report; and the record freeze in Texas is disrupting natural gas production.

Gold price weakens

After surging to around $2,035 per ounce in August, the gold price for the most part trended in a band between $1,850-$1,950 through the balance of 2020.

Of late, however, the gold price has retraced, even falling below the $1,800 threshold.

Gold closed Thursday at $1,775 per ounce.

The gold price has fallen, even as the US dollar has also continued to lag. The US dollar index reached 90.23 today, compared with just over 99 a year ago.

One thing worth monitoring is growing interest in cryptocurrencies, particularly Bitcoin. The cryptocurrency has surged above the $53,000 mark and jumped by approximately 80% this year.

Amid a run of loose monetary policy from central banks around the world, some investors will look to other assets. That could mean they’ll even look to assets other than time-tested safe havens, like gold.

It’s unlikely that the US dollar will lose its status as the global reserve currency anytime soon. However, cryptocurrencies like Bitcoin could potentially weigh on gold, leading some investors to rethink traditional safe-haven asset strategy.

A lot can change in a year. In February 2020, Bitcoin hovered around just under $10,000.

The MetalMiner Best Practice Library offers a wealth of knowledge and tips to help buyers stay on top of metals markets and buying strategies.

Fed releases Monetary Policy Report

Speaking of currency, the gold price and monetary policy, the Federal Reserve today released its latest Monetary Policy Report.

The report notes the labor market recovered as the year progressed. However, the pace of the recovery slowed down significantly late in 2020.

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US GDP

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US GDP finished 2020 on a positive note, rising by 4.0% in the fourth quarter, the Bureau of Economic Analysis reported today.

US GDP gains — but falls short of expectations

With that said, US GDP gains in Q4 fell short of expectations. The country continued to deal with the impact of the coronavirus pandemic and intermittent restrictions related to the crisis.

The increase slowed considerably from the previous quarter, when it gained by 33.4%.

“The increase in fourth quarter GDP reflected both the continued economic recovery from the sharp declines earlier in the year and the ongoing impact of the COVID-19 pandemic, including new restrictions and closures that took effect in some areas of the United States,” the Bureau of Economic Analysis said.

Meanwhile, US GDP for 2020 as a whole retraced by 3.5%, the largest decline since 1946.

Personal income declines

While US GDP increased in Q4 2020, personal income declined, the BEA reported.

Current-dollar personal income fell by $339.7 billion in Q4 2020, compared with a drop of $541.5 billion in Q3 2020.

Furthermore, disposable income decreased $372.5 billion in Q4 2020, or by 8.1%. In Q3 2020, disposable income fell by 13.2%, or by $638.9 billion.

Disposable income is one important indicator of economic health or distress — in short, do people have money to spend? Some sectors did some recovery as 2020 progressed, like automotive, which bounced back after idling production for two months from March-May.

However, the scale of job losses remains significant.

Nonfarm payroll employment fell by 140,000 in December, the Bureau of Labor Statistics (BLS) reported earlier this month. Manufacturing employment rose by 38,000, with a rise of 7,000 for motor vehicles and parts.

The US unemployment rate remained at 6.7%.

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India came in for considerable criticism over its reaction to the spread of the coronavirus pandemic in the first wave.

Locking down the economy almost overnight and trapping millions of migrant workers from returning home, only to then release them a week or two later to flood out into rural areas and spread the virus, was roundly condemned (both inside the country and out).

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Coronavirus pandemic in India

Since then, infections have been on a relentless rise. Infections reached a peak in mid-September of some 93,000 per day. That brought the total to some 9 million cases and deaths to nearly 130,000 (one of the highest totals in the world).

Rolling local containments and much more effective work at the city and community levels have gradually reduced infections. Infections are about half of what they were in late September, as this graph illustrates:

chart of coronavirus cases in India

Lacking the financial firepower of mature economies, the government has been unable to support the economy in the way many Western governments have done.

As a result, India’s GDP contraction has been brutal.

According to the Financial Times, gross domestic product contracted almost 24% year over year in the second quarter of 2020. In the third quarter, GDP fell by an additional 9%.

The decline puts the country into a technical recession for the first time in its history.

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E.U. and U.S. flags

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As poll workers continue to count the final votes in the U.S. presidential election, it looks like we have a Biden victory — not by the landslide he and many of his supporters had hoped for, but a victory nevertheless.

There will be ongoing legal arguments, demands for recounts, and claims of fraud. However, the U.S. voting system is one of the most robust in the world: fraud is, in reality, not an issue.

Furthermore, the legal challenges are not intended to change the outcome. They are more about setting the scene for the post-Trump landscape, for what the then-ex-president does next. Even a Trump-stuffed Supreme Court knows it answers to the constitution first and the president second.

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Market implications of the presidential election

So, now we have a better idea of the political outcome, does that change our election day review of the implications for markets?

Yes and no.

Most of us in business would take comfort from the fact a more constrained government is one that is less able to do anything radical. Markets generally don’t like radical, at least from politicians.

The prospect of a Democrat presidency and a Republican-controlled senate could be a positive for equities. Such an arrangement reduces the possibility that regulation and corporation tax can be increased.

Market sentiment turned a little cautious overnight. For example, new environmental laws are likely to be more limited, helping those sectors that had been sold down in the run-up to the election.

But others have declined that might have benefited from the proposed stimulus program. A split executive and house likely reduces the size and scope of any future fiscal stimulus package in the U.S.

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