- Vedanta’s attempt to halt the split of Konkola Copper Mines was stopped yesterday as a Zambian court dismissed the motion. The judge cited procedural reasons in dismissing the order, which is a blow to the company which had said it would contest any attempt by Zambia to sell KCM to third parties. In response to the decision, Vedanta expressed its disappointment and noted that it will “act within its rights in both Zambia and internationally to ensure that its interests in KCM are fully protected”. Vedanta added that it believes that “the provisional liquidator is cur-rently contravening the limitations of its office” and that it would seek legal counsel to determine the next steps.
- 3m LME copper is bid in Asia with the market responding to concerns for concentrate supplies from Peru and Chile as well as hopes that the $1.9trn US stimulus plan will be passed in spite of fears of a Republican backlash against it.
- On the supply side, Codelco has enacted its “wet weather” contingency plan and made minor changes to operations which are not expected to have a major impact just yet. It may however lead to some supply issues should the weather persist. Added to this, we have Peru entering a 15-day lockdown for some regions which does pose a threat to mining activities.
- Stateside, US factory activity cooled slightly in the ISM data released yesterday, although the data was still deep in expansion territory to con-firm that the recovery remains intact, despite the Covid-related disruptions. The employment sub-component has continued to expand, even as new orders suffered a slip. Any slip is likely to prove temporary as investors focus on the global economy expanding and opening up as more and more people get vaccinated.
- From a fiscal point of view, it appears as though the Biden administration is set to use its majority in the House and Senate very soon to pass his bumper $1.9trln fiscal stimulus package. Despite meeting with Senate Republicans who urged Biden to scale back the size of the fiscal stim-ulus package out of concern for the future consequences it might hold, Biden will be taking counsel from Treasury Secretary Yellen who is known for her commitment to full employment and the use of policy to achieve that. Within the next week or two, it is likely that the Senate will be asked to vote on the package.
- Interestingly, the Senate might be divided on the size of the fiscal stimulus package, but so too are Fed policymakers. While some like Dallas Fed President Kaplan believe that the US remains “in the teeth of this pandemic,” but will still grow at 5% and drop unemployment to 4.5%, others such as Minneapolis Fed President Kashkari believe that “wartime spending” was justified and that the authorities had scope to tap into such resources to deploy them.
- A EUR sell-off has sparked a strong rally in the USD, following some particularly weak German retail sales data, and a study from the ECB that suggests that inflation in the EZ might be softer than the headline numbers suggest. It points to an ECB that will likely persist with ultra-accommodative monetary policy for longer, which would naturally count against the performance of the single currency. Whether the move in the USD will be sustained given the backdrop of huge deficits even before another $1.9trln stimulus package has been announced and imple-mented is debatable. For now, it appears as though speculators remain comfortable persisting with their large net short, speculative positions on the USD.
- The Kwacha kicked off the first trading session of the month on the back foot extending its journey north of the 21.00 mark. Note in January, the Kwacha recorded a monthly loss against the USD as Zambia’s deeply negative real rates and poor fiscal dynamics continued to weigh on the currency. For context, Zambia’s real interest rate now sits at -13.5%, making it the lowest real rate in African countries tracked by ETM.
Please click here to access the full Market Watch