Morning Mumble: Chinese PMI Services & Manufacturing Data (deflation), the western capital ducks fly home.

Good Morning, Oops, Good Afternoon after typing up and forgetting to publish. 

With such a glut of PMI data, the inbox was rammed with everything from the positives of the Czech data to the woes of China and Nikkei India Manufacturing PMI™. 

The Chinese Caixin General Services PMI™ & General Manufacturing PMI™ data pre-empted the sell-off in Rio Tinto (RIO), BLT (BHP Billiton) and Fortescue Metals Group (FMG) in Australia. This was whilst the profit taking on oil occurred (the money for old rope trade of August). Why papers are suggesting traders got torched, when in all probability, the shorts caused the spike en mass closing.

Chinese/Indian PMI data has not supported the Iron Ore (FE62) price, in fact adding greater discounts to inferior products (discount for lower quality iron ore) - watch out Atlas Iron at 3 Aussie cents a share, the graph won’t look too bad! The FE62 price has had some support, thanks in part to a redirection of supplies because of Chinese WW2 celebrations and the Athletic events in Beijing. 

The events impacted/distorted orders provided some market support thanks to the air pollution orders covering August 20- 3rd September? There was also immediate premium applied to the majority of commodities handled at Tianjin after the explosion. Tianjin’s major imports after cars/autos are light trucking and containers, are Ethylene (15% of national supply), 15% of Wheat imports and 30% of the domestic steel exports. Not a minor port, but capacity easily filled elsewhere. 

There appears to be a conflict in the Chinese leadership, one perhaps that could end with a few changes. As one new source of information put it, the Chinese are now witch hunting people even for saying "sell" on Chinese Bulletin Boards. 

We had known for a while about the issues in the Chinese stock market. Likewise, Li's trading accounts being suspended and his two or was it three interviews with "regulatory forces". Now Li now has no working trading account. On the plus side, Li's one of the lucky ones being "permitted/allowed" to withdraw all his monies. 

The actions of the Chinese Government is now one of fear, with arrests across all areas of the stock market. The charges are listed as, i) manipulation ii) profiting from the Chinese Government intervention iii) assisting others to profit iv) spreading rumour (whether false or accurate) v) accepting bribes to provide information of Government intervention. 

We'll just rephrase the i-v, i) Chinese Government purchases, ii) alleged Chinese senior government selling stock amazingly just as the "Government Team" is buying, iii) brokers and "team Government" assisting all iv) Chinese news channels encouraging buying and open threats to those considering selling anything v) as item ii, where "the senior hierarchy" have been almost immune to the stock market movements. 

Risk off today? Why not, we love a market that's incapable of assessing fundamentals and is merely crowd driven. Although the disappointment is coming to those with South Africa exposure. Not only have wage and energy costs not helped matters, but more so the political outlook and 'uncertainty' may impact on operations as redundancies become more significant. 

Anglo American's woes have been made worse thanks to Alrosa. Anyone want to buy a 'once upon a star decent entity known as De Beers?' It would appear not...not only the price reduction, but Alrosa it appears have realised 'forcing ones contractually obliged long-term sight-holders to purchase might be a bad idea!' 

Atb Fraser 

Morning Mumble: Chinese Property Bonds &....wonder will never cease, oil revisions downwards.

China's overseas property investment to reach $20 bln in 2015-study As Kaisa defaults, Goldman sees value in the property builders. The property slowdown is forcing the insurers and larger Chinese developers to diversify their holdings to an international hedge. Its wise to consider this the top of the property cycle as the leverage is unlikely to be paid with internal growth faltering.

Li put it simply , "there's just so much on the market a buyer is being deterred from the off ings". Li I am sure meant offerings but you get the idea. Li's been tracking the property market since the clamp down on corruption in China and the charts are staggering, dropping almost identically from 18 March 2013 to today. Surely the Chinese housing situation isn't directly linked to corruption that the dropped started 4 days after Xi Jinping became president?!

Today, Royal Dutch Shell (RDSA) announced there 4th Quarter and Full Year 2014 Unaudited Results and with it a very logical  update balancing growth and returns to address the sector issues they are experiencing was the license to print money for those short on the news. RDSA's prudence in their sales was more fortune than well-timed divestments. 

RDSA buybacks are scrapped (wisely) the investors (long only) are now the ones to take the pain, with earnings significantly under pressure and limited further divestments, I have to wonder if RDSA will be on the acquisition trail very soon, there is some very well-placed gossip of a very large acquisition. Over to UBS to get the ball rolling. Over to the Industrial Engineering components to react appropriately. 

Glencore (GLEN) appear to not know what to do with their coal operations. Glencore considers cuts at South Africa coal unit Optimum, having tried closing its Australian operations for 3 weeks, why did they bother opening it again? Now they're considering South Africa (RSA). 

GLENs asset classes should be considered tier 2. Over to GLEN to meander through with an inconsistent strategy. Had GLEN had the understanding of the market like they should do, the only benefit was to the short-term price where as soon as the news of the restart came the price gave up any support. We'll blame China for the thermal coal prices, rather than the entire change in global demand. The one saviour may be that RSA could be compelled to buy / take these struggling assets off miners hands to shore up the ailing economy, with the Rand like to depreciate further there's going to be a few bargains*.

For those whom dislike the shorters, they'd be wise to check the prices of PDL (Petra Diamonds) and Gem Diamonds (GEMD), the market has awoken to the fact the sale of Antwerp Diamond Bank to a Real Estate company (Yinren Group) didn't go as planned (a year ago). 

Of great significance, Shanghai, Hong Kong shares fall as China launches new probe into margin trading China Securities Regulatory Commission (CSRC) perhaps have found something in the alleged routine checks. 

Kaz Minerals Q4 production report from Roger Bade gets the chocolate teapot award. For myself, you'd be rude if you didn't agree there is no guidance on currency or costs. The market has to look over its shoulder at the all in net cash costs of $2.04/lb (not all in costs circa $2.75/lb EMC estimate) of the interims last August. With prices stabilising and likely to appreciate over the next 12 months, save for more economic woes and the Greek issues, plus Bozshakol Copper Project and Aktogay Copper Mine coming on stream there should be an element of knife catching now. 

Kaz's debts should not be ignored with the Chinese Development Bank (CDB) funding there's room for discussions. Kaz location to China is obviously strategic for both parties, time to start considering the positives.

Atb Fraser

Morning Mumble: Contrarian Gold & CU were told...+ Ahhh'fren + AO. World + SHFT

Good Morning, a fab weekend thank you!

Delays because of an earlier than planned phone conference as people appear to not know the UK is in a different time zone than Switzerland. You are forgiven, this once!

Copper hit a past low, pending one whom you listen to this is a 4 1/2 to 5 1/2 years. All "blamed" on the lack of Chinese Stimulus and Strong U$D. Read in conjunction with EMC Friday is here...Oil will be grateful & Copper lowering demand higher levels of "fire sale" inventory and China’s factory-gate prices tanked. The leverage or lack of, save for the provision by what the Chinese (Government) banks wish to provide now, is impacting on the copper market. 

The issues aside of this, as reported by most being that the German industrial production fell unexpectedly. If it was an unforeseen event, then the consensus should have read the August figures for Germany Industrial Production (GRIPIMOM) in August weren't these an indicator of a cycle? Blomberg ran: German Industrial Output Drops Most Since 2009. 

With futures dropping to $2.755/lb and the absence of positive speculation the trend is set. Historically if oil is setting news lows and tests historic support levels then perhaps copper's chances of Circa $2.5/lb are becoming a real risk. 

The oil cycle, inconsistent data from America in terms of wage growth (or lack of) and lack of new stimulus from China is creating inconsistent moves in Gold. Gold ran up to $1230/oz. slipping a tad to circa $1224/oz. In the absence of any change in the news global there is no reason for Gold to be trending so high. All deflationary indicators are kicking in (the above) with oil being the start of the cycle of lower costs (exc. for OPEC intervention).

Afren (AFR) today came back with a kicking for shareholders with the update on Barda Rash, Kurdistan region of Iraq far from the news the market was expecting. It doesn't bode well for any negotiations for the business as there was a belief of significant upside in Barda Rash. Will this impact on the offer? Hmmm...In fact save for a significantly discounted offer, will there be one! At the current SP its hard to find little value above the current price for equity holders and if oil deteriorates further, there's a potential default (nil value for shareholders). 

AO World (AO.) third quarter trading statement pleased the market today...one shall bide my time there for the next run! At a silly level of future earnings (even today) there's little room for mistakes from AO. 

The leaky ship award goes to Quindell (QPP) and the its only a moment of time award goes to shaft sinkers (SHFT). There's some rumours out of South Africa that certain mining companies are going to provide finance. Over to Impala, ENRC (Via KazChrome) and a few others to decide on the fate...shareholders shouldn't expect too much. From 2012 the writing on the wall has not been good for Shaft Sinkers, a casualty where the equitable risks to projects should have been considered in greater depth (I know bad pun). One will expect a nice apology from a certain group regarding the outcome for Shaft Sinkers. For a quote from a "professional"...your view of shft is misguided if it ever hits 5 pence there will be something very wrong. I wonder what said person thinks to tuppence give or take a few?

With Brent at $48.84/bbl...expect some carnage in the sector. With a timely reminder that Iron Ore dropping subs $70/t, there were no surprises to the casualties. On the Atlas Iron (ASX:AGO) front they were being punished as a result. One hopes they banked significant profits...

Atb Fraser

(Edited/Proof-read as I had a little more time to correct basic errors this mornings was in a significant rush apologies.) Original here: Unedited