Weekly Round-Up: US Strength Offsets China, Europe Worries

The Eurozone is back in recession, according to Markit Economics, which reported this week that its Eurozone PMI Composite Output Index fell to a three-month low of 48.7 in March, down from 49.3 the previous month.

The HSBC Flash Purchasing Managers’ Index for China reached 48.1 in March compared to 49.6 the previous month, the investment bank reported. A reading below 50 indicates a contraction; the decrease was largely a result of a slowdown in exports coupled with weaker domestic demand, analysts said.

Nevertheless, investors have been able to shake off many of their fears about China and Europe in light of yet more signs of US economic strength. On Thursday, the US Department of Labor reported that weekly jobless claims fell to a four-year low of 348,000, while on Friday the Commerce Department reported that new single-family home sale prices rose to their highest level in eight months, up 8.3 percent to $233,700. Actual home sales, however, fell 1.6 percent to an annual rate of 313,000 units.

In morning trade Friday, Brent crude is 1.7 percent higher at $125.20 a barrel, while copper is up 0.6 percent at $3.78 a pound, and gold is up 1.1 percent at $1,660.40 an ounce.

“Base commodities are lower as the impact from China’s slowdown will impact them the most, as the largest consumer of raw materials may be in for a tougher landing than originally planned,” said Janet Mirasola, managing director of R.J. O’Brien & Associates. She added that oil and copper have been facing downward pressure from “potential reduction in demand from China.”

Oil

Expectations of stronger energy demand in the US and continued unease about tensions with Iran are keeping crude prices high. Still, Maria van der Hoeven, Executive Director of the Paris-based International Energy Agency, said at an energy conference in New Delhi on Friday that Saudi Arabia will be able to provide enough crude to offset any disruption in supply from Iran.

Canadian Prime Minister Stephen Harper said that the government is looking to implement regulatory reforms that would allow more sales of Canadian oil and gas to Asia.

“It’s essential that we be able sell our energy products outside of North America to partners, countries other than the United States,” Harper said at a Bangkok press conference with Thai Prime Minister Yingluck Shinawatra. “That will require some significant infrastructure projects to go forward, and we’re obviously, as we’ve indicated, looking at taking steps necessary to ensure we can get timely regulatory decisions.”

BP (LSE:BP) is looking to increase output at its Kirkuk oil field, according to Bloomberg. The deputy director general of Iraq’s North Oil, Hussain Gholam, said that BP is the “most competent” of the companies bidding to raise output by 300,000 barrels a day, which is more than double the field’s current output.

In Brazil, criminal charges have been filed against 17 oil executives involved in the massive oil leak in the Atlantic last November, when over 110,000 gallons of oil leaked from a Chevron well. The 17 named include heads of the Brazilian subsidiaries of both Chevron (NYSE:CVX) and Transocean (NYSE:RIG), and are citizens of the US, France, Australia, Britain, Canada, and Brazil.

Petro Viking Energy (TSXV:VIK) will acquire Grisham Assets, which has an 80 percent interest in blocks 1810, 1710, and 2913B offshore the coast of Namibia. The Ministry of Mines and Energy of the Republic of Namibia has issued a Petroleum Exploration License on block 1710. Licenses are pending on blocks 1810 and 2913B and are expected to be granted prior to closing. The remaining 20 percent is a carried interest held by NAMCOR (Namibian Government) and the Namibian Black Economic Empowerment group.

Copper

Earlier this week,  BHP Billiton (ASX:BHP) iron ore division president Ian Ashby,expressed his concerns about the Chinese market, telling  reporters in Perth that demand for copper would fall “to single digits, if it is not already there.”

Ivanhoe Mines (NYSE:IVN) announced this week that its Oyu Tolgoi copper and gold project is on track to begin initial production later this year. However, concerns remain that the deadline may not be met. Australia’s Brisbane Times, has reported difficulties in delivering the necessary power to the location, as a deal to import power from China has still not been reached. The plan is to connect the site to a power grid on the Chinese side of the border, but officials from China and Mongolia have not yet agreed to the specific terms.

Excelsior Mining (TSXV:MIN) is employing environmental consulting group Haley & Aldrich to develop a comprehensive permitting plan for the North Star deposit at its Gunnison Copper Project in Southeast Arizona. Haley & Aldrich will help design a hydrological program that will lead to a more complete understanding of North Star’s hydrogeological conditions, and provide environmental, engineering, and strategic services related to hydrologic studies that will further the successful permitting of the project.

Gold

Investors’ appetite for gold has been on the wane, and “without more Fed steps to stimulate growth, and with more positive US economic data, investors expect the dollar to strengthen which puts downward pressure on gold and other commodities,” said Arnie Waters of Waters Capital.

Shares in Toronto-based Avion Gold (TSX:AVR) have tumbled following a military coup in Mali, where the company operates. CEO John Begeman stated, however, that its Tabakoto and Kofi sites are “are running normally and for the most part [are] unaffected.”

Baja Mining (OTCQX:BAJFF) reported that independent proxy advisory group Glass, Lewis & Co. has recommended that Baja shareholders vote the GOLD proxy in support of Baja’s board.

Glass Lewis recommended that shareholders not elect to the board two dissident nominees put forward by Mount Kellett Master Fund II A LP. The vote is scheduled to take place at a special meeting of shareholders on April 3, 2012.

Securities Disclosure: I, Shihoko Goto, hold no direct investment interest in any company mentioned in this article.