Weekly Round-Up: US Jobs Disappoint, European Elections May Rattle Commodities

Energy prices are ending the week lower on mixed signals about the US labor market’s strength, while worries about Europe’s economic outlook persist. Base metals are range-bound amid worries about global economic risks, but gold has picked up slightly amid rekindled investor interest in shoring up safe haven assets.

The US unemployment rate fell to 8.1 percent, and only 115,000 new jobs were added in April, which was less than what analysts had expected. This mixed data suggests that the jobs market in the US still remains weak.

Weakness in Europe’s manufacturing sector is bogging down investors’ appetite for industrial metals and energy. The Purchasing Managers’ Index for manufacturing and services in the Eurozone fell to 46.7 in April from 49.1 the previous month. In addition, European Central Bank President Mario Draghi said that Europe’s economic outlook is now “more uncertain,” raising speculation that the ECB may step in with further stimulus as governments continue to implement fiscal reform.

Investors will also be closely following the French elections over the weekend as they may propel Socialist Francois Hollande to power. Greece’s parliamentary elections, also being held this weekend, will effectively be a referendum about the austerity measures that have been put into place to avoid a national default.

Australia is also bearish about its outlook, as the Reserve Bank of Australia cut its economic growth projection to 3.0 percent from 3.5 percent for 2012 due to concerns about the employment situation as well as the housing market. The Australian central bank did, however, highlight the mining sector as one of the few bright spots.

“Labor market conditions have continued to be on the soft side to date, with large increases in employment in mining and some service industries roughly offset by declines in the manufacturing, hospitality and retail sectors,” the central bank stated in its latest quarterly monetary statement. Yet worries about the country’s growth prospects have led to a sharp sell-off in bourses across Asia, which in turn could further hamper global demand.

In midday trading, Brent crude is 2.83 percent lower at $112.74 a barrel, while copper is down 0.23 percent at $3.74 a pound, and gold is up 0.62 percent at $1,644.90 an ounce.

Oil

BP (LSE:BP) secured preliminary approval of its proposed settlement over the Gulf of Mexico oil spill by agreeing to pay $7.8 billion. This amount will pay for most individual claims for damages and losses resulting from the 2010 disaster.

Exxon Mobil (NYSE:XOM) said a pipeline shutdown at its Baton Rouge refinery in Louisiana will not affect operations. Oil from the North Line pipeline is processed at the site, but it was shut down last week due to a leak near Torbert, Louisiana.

Canadian Natural Resources (NYSE:CNQ,TSX:CNQ) reported first quarter profits surging to CAD $427 million from CAD $46 million as both output and oil prices increased.

Romania’s new government has pledged a moratorium on shale gas exploration, even though the previous government awarded Chevron (NYSE:CVX) exploration rights to shale gas for areas near the Black Sea despite environmental concerns.

San Antonio, Texas-based Cross Border Resources (OTCQX:XBOR) reported average daily production reaching about 750 barrels of oil equivalent per day in March, of which 82 percent was oil. The company also reported that three of its seven new wells are now in production, while four are waiting completion.

Copper

There is growing speculation that China will be exporting copper cathodes to London Metal Exchange warehouses led by Jiangxi Copper (HKEX:0358), which would push down prices in coming months.

Also on the supply side, worries about labor unrest at the world’s biggest copper mine appear to have abated, at least for now, as workers ended a blockade at the Escondida mine in Chile. While contract workers had blocked roads in protest over pay, unionized miners have continued to work, and mine operations have been unaffected. Escondida is majority owned by BHP Billiton (ASX:BHP).

As for Rio Tinto (LSE:RIO), CEO Tom Albanese said that copper demand will remain strong and that the company’s “strategy is consistent and unchanged,” with over $33 billion in major expansion projects underway.

Vancouver-based MAX Resource (TSXV:MXR) resumed core drilling at its Majuba Hill project in Nevada. The Phase III drill program is permitted for up to 30 holes that will test the southeast extension of near-surface, high-grade supergene oxide mineralization, and will initiate delineation drilling at the DeSoto discovery zone 1.4 km to the northwest. An initial NI 43-101 compliant resource estimate is expected by the end of the year.

Gold

Eldorado Gold (NYSE:EGO) posted a first quarter profit of $67.9 million, up 29 percent from a year ago, with gold production reaching 155,535 ounces, or five percent more than the same period a year ago, at an average cash cost of $452 per ounce.

Brigus Gold (AMEX:BRD,TSX:BRD) reported that second quarter gold production is on target as it produced 7,088 ounces of gold in April. For the full quarter, it sees output reaching between 18,000 and 21,000 ounces. For the full year, Brigus projects output to reach between 77,000 and 85,000 ounces.

The newly-elected Romanian government is reviewing Rosia Montana Gold’s plan to build Europe’s largest open-cast gold mine in Transylvania. Gabriel Resources (TSX:GBU) is the majority shareholder in Rosia Montana, and the company estimates that the site has about 300 tons of gold as well as 1,600 tons of silver.

Toronto-based Xmet (TSXV:XME,OTCQX:XMTTF) identified gold targets on its wholly-owned Grasset property in Quebec.

“The early winter breakup cut short our planned survey on our Grasset Property but our initial results are quite encouraging with the anomalies located directly along the fault trend,” said Xmet President Charles Beaudry. “Our main focus remains the Duquesne-Ottoman Project but a decision to drill ourselves or farm-out a participation to a third party will be made based on the complete survey results.”

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