Here are the iron ore charts for March 25, 2014:
Stimulus party! From Reuters:
A contraction in China’s manufacturing activity for a third straight month in March spurred hopes that the government will implement stimulus measures, although some analysts warn that those pricing in any aggressive move may only end up disappointed.
“There is a lot of risk pricing in a big stimulus plan by China because I don’t see the economy has slowed down to a point that it needs to be rescued,” said Helen Lau, senior mining analyst at UOB-Kay Hian Securities in Hong Kong.
“Whenever there’s weak data, the market expects the government to do something and now investors are making the same speculation.”
…China has been trying to stimulate the economy with recent efforts including engineering a depreciation of the yuan to boost exports, said Lau.
What Beijing can do further at this point is to fast track approvals of investment projects and address tight liquidity conditions, she said.
And so, paper markets melted-up in a short squeeze. Rebar future were especially impressive, limit up 4%. Of course, fundamental demand still sucks with physical rebar and a stalled Baltic Dry measure, but hey, they’re gonna spend and spend big!
To repeat, I expect modest stimulus and this little bounce may run a little. But the base case is unchanged and I expect this move to be disappointed in due course. If Chinese authorities are good to their word, there’ll be no monetary loosening – neither generally nor prudentially – but some accelerated infrastructure spending, and pressure on ponzi steel mills will run unabated.
