By Dave Brown – Exclusive to Resource Investing News Wall Street will begin trading week within the context of a carefully orchestrated and coordinated plan aimed at stabilizing U.S. equity and debt markets while minimizing the liability for taxpayers. The U.S. Treasury Department has engineered a conservatorship, to control the assets of Fannie Mae and … Continued
By Dave Brown – Exclusive to Resource Investing News
Wall Street will begin trading week within the context of a carefully orchestrated and coordinated plan aimed at stabilizing U.S. equity and debt markets while minimizing the liability for taxpayers.
The U.S. Treasury Department has engineered a conservatorship, to control the assets of Fannie Mae and Freddie Mac after the biggest increase in default loans in at least three decades threatened to collapse the companies making up almost half the U.S. home mortgage market. On Sunday, Treasury Secretary Henry Paulson said, “Our economy and our markets will not recover until the bulk of this housing correction is behind us. Fannie Mae and Freddie Mac are critical to turning the corner.”
Historically, September has often produced volatile periods, and resource investors will be wary of how the markets react to this news and what impacts it will have upon construction projects and overall confidence measures.
The category 3 Hurricane Ike is certain to be of interest for resource investors, as just last week the Gulf of Mexico oil refining and natural-gas production region dodged a bullet with the threat of Gustav impacting on the energy industry. Ike is forecast to enter the Gulf of Mexico region midweek, reaching the center by the end of the week before heading south of Louisiana possibly towards Texas. According to a press release on Sunday from the Minerals Management Service, personnel from 10 oil rigs have been evacuated; this is equivalent to 8.3 per cent of the total currently operating in the area. The Gulf of Mexico has about 717 manned production platforms in operation, and is home to more than a quarter of US oil production.
The week ahead
News flow and stories worth watching this week for resources investors include Monday‘s data release of consumer installment credit outstanding, Tuesday‘s pending home sales index, Thursday‘s international trade balance, treasury budget and jobless claims, and Friday‘s producer price index, retail sales numbers, and consumer sentiment index.
Molybdenum: The future unfolds
On Thursday, the London Metal Exchange board voted in favour of adding molybdenum to its cache of metals that are traded on the futures market, scheduled to occur in the second half of 2009. Some producers and suppliers say the introduction of the futures contracts will increase price volatility and that trading moly serves no purpose other than to attract investors who should not be diving into the minor metals markets. These speculative types of investors are likely to manipulate prices and flee from the markets contributing to volatility in moly’s prices.
Copper: Cooperation is critical
On Tuesday, Rio Tinto Ltd (LSE: RIO, ASX: RIO) announced the signing of exploration agreements with Chile’s Codelco, the world’s largest copper producer. The agreements strengthen and build upon an existing relationship between the two copper giants which are under pressure to elevate production as ore grades decline at their largest mines, within a region that provides about a third of the world’s copper output.
Nickel: Patience rewarded with inflationary offer
Victory Nickel Inc. (TSX:NI) has increased the value of its offer for Independent Nickel Corp. (TSX:INI). Richard Murphy, President and CEO of Independent Nickel Corp. supports the takeover, “after careful consideration of all aspects of the increased offer, our Board of Directors has concluded that accepting the Victory Nickel offer, presents shareholders with the best opportunity available to maximize value.” This recommendation was based on the results of a Special Committee of the Board of Directors reporting on Victory’s offer to Independent Nickel. The new bid offers 1.1 share of Victory Nickel for each share of Independent Nickel, up from one share.