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“Everybody likes a kidder, but nobody lends him money.”

                                                                               Arthur Miller

February 3, 2012

Global Markets

US stocks are still having a difficult time finding momentum. The clouds of the European debt crisis still hang over the marketplace; largely offsetting optimism over a steady stream of improving global economic data. The NASDAQ and S&P managed to finish in the green yesterday, but the Dow fell 11 points to the downside.

Stocks stayed in a tight trading range, even after initial jobless claims fell to 375,750, the lowest since June 2008. So far this week, data has showed that the private sector added 170,000 jobs, and correction spending was higher than expected, and manufacturing was in line with expectations. None of it, however, has been enough to offset uncertainty in the long term economic view.

Once again, US stock futures point to another flat opening this morning, ahead of US payrolls data.

In a side note, the so-called Baltic Dry Index, which essentially measures economic activity by means of the shipping industry, has now fallen to record lows. The global economy basically boils down to moving goods from one point to another and, as such, this may not be a good sign for the long-term.

Asian stocks finished somewhat mixed overnight. The Nikkei finished lower for a second session, with a loss of about 0.51%. Earnings reports within Japan’s technology sector have been particularly dismal and this is been a considerable drag on sentiment. Elsewhere, the Hang Seng recovered late to finish a few points higher, while the Shanghai Composite pulled off a respectable gain of about 0.77%.

The European markets are modestly higher this morning, as investors await the release of economic data here in the US. The upside ranges from 0.2% in Germany, to about 0.4% in London and Paris.

Updated Euro-zone PMI data confirmed initial reports of modest growth in the private sector. The gauge climbed to 50.4 from 48.3 the prior month. A number above 50 indicates expansion.

Meanwhile, negotiators are hoping to wrap up a deal between Greece and its creditors, which apparently will include a loss of about 70% for private bondholders.

Gold & Precious Metals

Gold quietly moved about $15 higher yesterday to close at $1758. This morning, as traders keep an eye on fluctuating currencies, and flat stock futures, gold has stayed in a tight range; giving up a Dollar at $1757.

Gold is likely to wrap up its fifth consecutive week of gains today, with prices about 12% higher than the start of the year. Most traders expressed confidence in the long-term trend for gold, although there is clearly some rest for a few bumps along the way.

Federal Reserve Chairman Ben Bernanke spoke to lawmakers yesterday, defending the Fed’s position to hold rates low for an extended period. Long-term easy money policy will, therefore, continue to be supportive of gold prices in the foreseeable future. Right now, with currencies and the equity markets influx, we may not see much movement today.

Gold’s safe haven status has changed a bit from what it once was, and prices have been more sensitive to economic stability. As such, recent global economic data has been relatively positive and this will be key for gold in the coming months. Global manufacturing data this week was better than expected. The latest data in the UK and Germany, as well as the wider Euro-zone has shown improvement. The numbers in China were also better than expected , which was good for economic sentiment but lowered expectations for monetary easing in China.

A possible downside risk for gold is any changes for the worst in Europe. Progress has been slow in terms of Greek debt and plans for Euro-wide fiscal coordination. Lying beneath the occasional moments of optimism is the realization that the problems run deep. Greece will face many challenges beyond any short term arrangements to avoid default. Several other EU member states also could face similar crisis in the coming months as well.

Energy and Commodities

Commodities are mostly higher this morning, but don’t have a whole lot of traction heading into the trading day on Wall Street.

Crude oil is drifting along, with a modest gain of 0.16% this morning up to $96.52. While traders had been keeping an eye on supply-side issues related to unrest in the Middle East and Iran particularly, attention has largely shifted to the demand side this week.

Disappointing inventories data took away all momentum from the energy markets. The Energy Department’s report on Wednesday confirmed a big jump in inventories. Crude stockpiles had risen by 4.2 million barrels last week, while gasoline inventories also climbed 3.0 2 million barrels. Other data showed gasoline demand fell to its lowest level in more than 10 years.

Adding some support has been the steady flow of positive economic data. In the US, the private sector added 170,000 jobs, construction spending was higher than expected, and manufacturing was in line with expectations. US jobless claims also fell. Global manufacturing data was better than expected this week.

Uranium Investing

At least one industry expert, Thomas Drolet, President of Drolet & Associates Energy Services, says he sees a supply crisis in the uranium industry by about 2016. He points out that long-standing supply is already dwindling and will be a growing issue in the next year or so. In 2010, 118 million pounds of uranium was mined, while global consumption was about 190 million pounds.

Uranium spot prices remain generally unchanged at around $52, but there continues to be a lot of deal activity within the industry.

China Guandong Nuclear Power Corporation has upped its stake in Kalahari Minerals to nearly 30% as it slowly moves toward a complete takeover

Elsewhere, Gold One International has finally completed its $250 million acquisition of Rand Uranium in a deal that was first announced back in May 2011. Gold One received approval from South Africa’s Department of Mineral Resources in late December 2011.

Elsewhere, Rio Tinto is wrapping up its Hathor Exploration acquisition, by buying up the small percentage of shares it did not already own. Rio said it will then de-list Hathor from the Toronto Stock Exchange.

Shares in Russian-owned miner Uranium One are on the rise after the company announced it had produced a record 10.7-million pounds of the nuclear fuel in 2011, which is a 45% increase from the prior year.

China’s Ministry of Environmental Protection has put together a draft of new safety rules for its nuclear industry. Once approved by the government, China may be ready to move ahead with new nuclear projects. No details of the draft have been released, but the ministry says that the new safety rules are “tougher” than earlier regulations.

Rare Earth Investing

The World Trade Organization basically gave China a symbolic slap on the wrist, by saying that China’s rare earth export restrictions were a violation of global trading rules. China quickly rejected the ruling and it is unlikely that any changes in policy would come as a result of it.

Recently, China’s Commerce Ministry announced a 27% reduction in exports for the first half of 2012. It should be noted, however, that China actually fell short of its quota last year, as weakening global economic conditions also reduced demand.

An Energy Department report suggested that several critical rare earth elements would remain in short supply in till at least 2015. The report highlighted dysprosium, terbium, europium, neodymium and yttrium as the key elements to watch.

The future of rare earth profits will lie largely in the heavy rare earths. This does pose a problem for some would-be manufacturers, as the refining process is complex and expensive and, as such, prohibitive to many junior miners.

Public Finance and Fixed Income

US Treasuries are heading for their second consecutive weekly gain ahead of today’s payrolls data. Recent economic data has been relatively positive, the traders think it has not been enough and that the Fed may find it necessary to intervene in support of growth.

Slowly improving sentiment toward Europe has helped boost French bonds in the marketplace, which have moved higher in seven of the last eight sessions. Investors have been a little more willing to move away from safer assets, such as German bunds, and toward higher-yielding investments.

Updated Euro-zone PMI data confirmed initial reports of modest growth in the private sector. The gauge climbed to 50.4 from 48.3 the prior month. A number above 50 indicates expansion.

Meanwhile, negotiators are hoping to wrap up a deal between Greece and its creditors, which apparently will include a loss of about 70% for private bondholders.

At a summit in Brussels on Monday, European leaders signed an agreement which moves them closer to fiscal coordination, which is seen by most as critical to the survival of the Euro. 25/27 EU member states signed off on the agreement.

International Currencies

The Dollar is a bit mixed this morning; gaining ground against most of its peers, but still about 0.15% lower on the Euro and the British Pound. Traders are waiting for the latest US payrolls data this morning and equity futures have been running flat as well.

So far this week, data has showed that the private sector added 170,000 jobs, and correction spending was higher than expected, and manufacturing was in line with expectations. None of it, however, has been enough to offset uncertainty in the long term economic view.

At a summit in Brussels on Monday, European leaders signed an agreement which moves them closer to fiscal coordination, which is seen by most as critical to the survival of the Euro. 25/27 EU member states signed off on the agreement.

Other details of the agreement include the establishment of a permanent €500 billion rescue fund and specific deficit control measures promoted by Germany.

Economic News & Corporate Earnings

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“Difficulties mastered are opportunities won.”

                                                                Winston Churchill

February 1, 2012

Global Markets

In a similar pattern that we saw on Monday, stocks dipped at the open yesterday and recovered slightly as the day went on. This time, the Dow finished 20 points to the downside, while the NASDAQ was the only US index to finish in positive territory, with a gain of just 0.07%.

Better economic data in Europe, and optimism for today’s US data, has set a positive tone in the marketplace this morning. Futures indicate as much as a 100 point jump this morning on the Dow. Analysts expect to see improvement in the ADP Employment numbers and in US manufacturing in today’s reports.

New data in Europe showed that manufacturing in the euro-zone did contract but was better than expected.  Manufacturing data in the UK also beat expectations; rising to an eight month high. German PMI also came in a little better than expected.

Asia’s stock markets turned in a mixed performance overnight. The Nikkei managed to stay positive, but with a gain of only 0.08%. Meanwhile, the Hang Seng drifted 0.28% lower and the Shanghai Composite declined more than 1%.

Interestingly enough, it was positive manufacturing data in China that led stocks lower in Shanghai. China’s PMI climbed to 50.5 in January; a slight improvement from last month at 50.3. Analysts had expected a mild contraction and the better-than-expected numbers lowered expectations for further easing from China’s policymakers.

The European markets have responded strongly to better-than-expected manufacturing data across the region. Clearly many traders have been hungry for something positive as they wait out negotiations on Greek debt. At mid-day, the FTSE is up by about 1.3%, while stocks in Paris and Stuttgart have gained an average of about 1.6% so far.

Gold & Precious Metals

After another choppy trading session yesterday, Gold did manage to finish about six dollars higher at $1736. Gold has built more notable momentum this morning, after several positive economic reports out of Europe. Prices quickly jumped about $12, with gold now trading at $1748.

New data in Europe showed that manufacturing in the euro-zone did contract but was better than expected.  Manufacturing data in the UK also beat expectations; rising to an eight month high. German PMI also came in a little better than expected. Coincidentally, China’s PMI also climbed to 50.5 in January; a slight improvement from last month at 50.3. Analysts had expected a mild contraction and the better-than-expected numbers lowered expectations for further easing from China’s policymakers. If, in fact, the numbers showed a contraction, we probably would’ve seen a much bigger rally in gold prices this morning.

The next factor to consider is the talks between Greece and its creditors, which may conclude as early as today. Private bondholders have reportedly budged on their demands and may take what amounts to a 70% haircut on their existing holdings. Expectations surrounding these talks, however, may be a bit overblown. It would seem all too likely that, at the conclusion, many traders and analysts will turn their attention to Greece’s long-term prospects and to other EU members such as Portugal.

Energy and Commodities

Commodities have started gaining momentum this morning, as the equity markets looked ready to surge, and the Dollar begins to decline.

Crude oil failed to maintain its momentum yesterday, after a brief climb above the $100 mark. The latest API inventory data showed another jump in crude stockpiles, which took away the momentum. Crude oil inventories rose by 2.1 million barrels.

Oil has, however, started to gain some momentum this morning, with an upside of 0.65% back up to $99.12. Traders will anxiously await the EIA Petroleum Status Report, but those numbers may also show a sharp rise in stockpiles of crude.

It’s all about manufacturing this morning, as several data points showed improvement globally. Manufacturing across the euro-zone did contract but was better than expected.  Manufacturing data in the UK also beat expectations; rising to an eight month high. German PMI also came in a little better than expected. Lastly, China’s PMI also climbed to 50.5 in January; a slight improvement from last month at 50.3. Analysts had expected a mild contraction.

Also impacting the energy markets will be rumors that India and China may be considering ways of getting around the EU embargo of Iranian oil, set to begin July 1. More than anything, this would certainly change the overall impact of the embargo on Iran and in the energy markets.

Uranium Investing

At least one industry expert, Thomas Drolet, President of Drolet & Associates Energy Services, says he sees a supply crisis in the uranium industry by about 2016. He points out that long-standing supply is already dwindling and will be a growing issue in the next year or so. In 2010, 118 million pounds of uranium was mined, while global consumption was about 190 million pounds.

Uranium spot prices remain generally unchanged at around $52, but there continues to be a lot of deal activity within the industry.

China Guandong Nuclear Power Corporation has upped its stake in Kalahari Minerals to nearly 30% as it slowly moves toward a complete takeover

Elsewhere, Gold One International has finally completed its $250 million acquisition of Rand Uranium in a deal that was first announced back in May 2011. Gold One received approval from South Africa’s Department of Mineral Resources in late December 2011.

Elsewhere, Rio Tinto is wrapping up its Hathor Exploration acquisition, by buying up the small percentage of shares it did not already own. Rio said it will then de-list Hathor from the Toronto Stock Exchange.

Shares in Russian-owned miner Uranium One are on the rise after the company announced it had produced a record 10.7-million pounds of the nuclear fuel in 2011, which is a 45% increase from the prior year.

China’s Ministry of Environmental Protection has put together a draft of new safety rules for its nuclear industry. Once approved by the government, China may be ready to move ahead with new nuclear projects. No details of the draft have been released, but the ministry says that the new safety rules are “tougher” than earlier regulations.

Rare Earth Investing

In an effort to support softening rare earth prices in the marketplace, China has announced another cut in its rare earth export quotas. The Commerce Ministry announced a 27% reduction in exports for the first half of 2012. It should be noted, however, that China actually fell short of its quota last year, as weakening global economic conditions also reduced demand.

A new Energy Department report, however, suggested that several critical rare earth elements would remain in short supply in till at least 2015. The report highlighted dysprosium, terbium, europium, neodymium and yttrium as the key elements to watch.

China’s Ganzhou Qiandong Rare Earth Group has signed a joint venture agreement with Great Western Minerals Group to develop a rare earth separation plant in South Africa.

Germany is also getting into the game. German miner Deutsche Rohstoff has said it will develop an estimated deposit of 38,000 tons in eastern Germany. The subsidiary set up for the rare Earth project received €2.2 million from German investors and plans a public offering later this year. Exploratory drilling is planned in the Spring. This

Molycorp recently announced that about 78% of its Phase 1 rare-earth production at its Mountain Pass, California manufacturing facility has been committed. Having a product sold before it’s reduced is certainly a positive development for any company. One thing that remains in question for Molycorp is whether they will be able to process the critical heavy rare earths that are likely to be in the greatest demand.

The future of rare earth profits will lie largely in the heavy rare earths. This does pose a problem for some would-be manufacturers, as the refining process is complex and expensive and, as such, prohibitive to many junior miners. Molycorp, for one, has solid potential in this arena but does not, as yet, possess the capability to process the “heavies.” It could pose a $500-$600 Million problem that has not been discussed openly.

Public Finance and Fixed Income

US Treasuries have moved lower again this morning, as risk tolerance rises considerably in the marketplace, after several positive manufacturing reports around the globe.

Manufacturing across the euro-zone did contract but was better than expected.  Manufacturing data in the UK also beat expectations; rising to an eight month high. German PMI also came in a little better than expected. Lastly, China’s PMI also climbed to 50.5 in January; a slight improvement from last month at 50.3. Analysts had expected a mild contraction.

At a summit in Brussels on Monday, European leaders signed an agreement which moves them closer to fiscal coordination, which is seen by most as critical to the survival of the Euro. 25/27 EU member states signed off on the agreement.

Other details of the agreement include the establishment of a permanent €500 billion rescue fund and specific deficit control measures promoted by Germany.

German Finance Minister Wolfgang Schaeuble warned that Greece has some work to do before assuring it will receive another round of aid from the European community. Word out of Europe is that negotiators are getting closer to a deal between Greece and its private creditors and that we may see an agreement by the end of the week.

International Currencies

The Dollar is lower again this morning, after several new reports showed improved manufacturing activity in Europe and China. Economists expect to see similar positive momentum in US manufacturing data due out this morning.

Manufacturing across the euro-zone contracted slightly but was better than expected.  Manufacturing data in the UK also beat expectations; rising to an eight month high. German PMI also came in a little better than expected. Lastly, China’s PMI also climbed to 50.5 in January; a slight improvement from last month at 50.3. Analysts had expected a mild contraction.

Positive sentiment in Europe has pushed the Euro about 0.88% higher on the Dollar so far this morning. The British Pound has also moved about 0.5% higher.

At a summit in Brussels on Monday, European leaders signed an agreement which moves them closer to fiscal coordination, which is seen by most as critical to the survival of the Euro. 25/27 EU member states signed off on the agreement.

Other details of the agreement include the establishment of a permanent €500 billion rescue fund and specific deficit control measures promoted by Germany.

Economic News & Corporate Earnings