Get Ready for the Copper Surge: Predicted 75% Soar to Record Highs by 2025 as Deficits Loom!

Commodity

Energy

Summary:

Anticipate a surge in copper prices over the next two years, fueled by disruptions in mining supply and heightened demand for the metal. The green energy transition and a weakening U.S. dollar, expected in the latter half of 2024, will further bolster the rise in demand. Notably, copper prices reached an all-time high of $10,730 per ton on the London Metal Exchange in March of the preceding year.

Copper prices are set to skyrocket by over 75% in the next two years, driven by disruptions in mining supply and a surge in demand, particularly propelled by the global shift towards renewable energy. The green energy transition, coupled with an anticipated decline in the U.S. dollar in the latter half of 2024, is expected to further fuel the rise in copper prices, according to a report by BMI, a Fitch Solutions research unit.

BMI's report highlights the potential impact of the green energy revolution, with more than 60 countries pledging to triple global renewable energy capacity by 2030 at the recent COP28 climate change conference. Citibank forecasts that these ambitious renewable energy targets could increase copper demand by an additional 4.2 million tons by 2030, potentially pushing copper prices to a staggering $15,000 per ton in 2025.

Bank of America Securities' Matty Zhao emphasizes the macro factors supporting the positive outlook for copper, citing potential Federal Reserve rate cuts and a weakening U.S. dollar. The market is banking on the U.S. Federal Reserve to cut rates, weakening the dollar and making copper more attractive to foreign buyers.

A key player in the energy transition ecosystem, copper is crucial for manufacturing electric vehicles, power grids, and wind turbines. Its demand is considered a proxy for economic health, and a growing global economy tends to boost copper demand.

However, the surge in copper prices is not solely driven by increased demand. Mining disruptions, such as the halting of production at the Cobre Panamá, one of the world's largest copper mines, and the decision by Anglo American to cut copper output in 2024 and 2025, are contributing to a potential deficit. Goldman Sachs anticipates a deficit of over half a million tons in 2024, further tightening the copper market.

Chile and Peru are poised to be the primary beneficiaries of the impending copper rush, according to BMI estimates. These countries, rich in green transition minerals like lithium and copper, are expected to experience increased investment and higher export demand. Chile, in particular, holds around 21% of global copper reserves.

As supply decreases, new copper smelters coming online may face shortages of concentrates to work with, as highlighted by S&P Global's Senior Copper Analyst Wang Ruilin. Copper ores, extracted from the earth, are converted into copper concentrates and sent to smelters to be purified into refined copper, setting the benchmark LME price.

The tightening copper market, driven by supply disruptions and heightened demand, raises questions about the potential impact on global industries dependent on this essential metal. As copper prices continue to surge, how will nations and industries adapt to secure a stable supply of this indispensable resource?

Source: CNBC

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Damon

Central Bank

This time last year, most economists expected that the Federal Reserve would be busy dealing with a "recession" throughout 2023 while fighting against the worst inflation for a generation. Instead, the United States achieved the strongest growth of any large economy in 2023. Its unemployment is near record lows, and inflation is also falling back towards the Fed's 2% target.

With numerous better-than-expected economic data, the Fed predicted at its 2023 year-end policy meeting that the U.S. economy in 2024 would be nearly as good as that in 2023. The Fed is expected to cut the benchmark federal funds rate by 75 basis points over the next 12 months.

The forecasts from the Federal Open Market Committee (FOMC) hint that the U.S. economy is heading for a soft landing, inflation will return to the Fed's target level, economic growth will only see a moderate slowdown, and the unemployment rate will remain at a reasonably low level. These economic forecasts from FOMC members are a rosy picture of the U.S. economy, but will these come true?

Inflation exceeds market expectations

On the inflation front, the latest Personal Consumption Expenditures (PCE) price index, the Fed's preferred measure of price pressures, was up 2.6% from a year ago; the core PCE rose 3.2% year-on-year, the smallest rise since April 2021. The stable downside forecast in inflation, coupled with hints of three rate cuts in 2024, would suggest that this wave of inflation is primarily driven by the supply side, i.e., caused by labor and commodity shortages during the pandemic, rather than the result of excessive federal spending and accommodative monetary policy.

The lower-than-expected PCE data paves the way for a Fed rate cut in 2024, with futures markets now pricing in rate cuts of more than 1.5% in 2024. The focus now turns to the timing and magnitude of the cut.

Despite the sharp cooling of inflation in recent months, the core services sector, which includes health care, education, and hospitality, grew at a 5.2% annualized rate during the three-month period, and another measure of rental inflation hovered around 5.7%, both showing a slight uptick.

The labor market continues to ease inflation

The labor market will keep cooling. U.S. employers expect to hire less in 2024, according to several regional Federal Reserve bank surveys, a trend that will limit wage gains and ease inflation pressures. The U.S. will release its non-farm payrolls report this week, and the market expects non-farm payrolls to increase by 170,000 in December. It is also forecast to add an average of 80,000 new jobs per month in the first quarter of this year, half of the increase in the fourth quarter of 2023. The data suggests that the Fed's efforts to slow growth and curb inflation are being transmitted to the economy. While this signals a slowdown, it doesn't mean a complete contraction in employment.

In addition to non-farm payrolls, the most important data is wages. According to Dow Jones, average hourly earnings rose 0.3% from a month earlier and 4% from a year ago. While the year-on-year growth rate is still higher than the Fed's 2% inflation target, it is below the peak of 5.9% seen in March 2022. Bringing wage growth down to a sustainable level is critical to reducing inflation. A sharply higher-than-expected wage increase would surely cause a violent reaction in the market.

The unemployment rate edged up year-over-year, but it has already increased by 0.5% from the low of 3.4% in April 2023. According to Sahm Rule, when the three-month average of the unemployment rate rises 0.5% or more relative to the lows of the past 12 months, it signals that the economy is entering the early stages of a recession.

Consumer spending drives the economy

As consumer spending accounts for two-thirds of the GDP, consumption plays a crucial role in driving the economy out of recession. In recent months, consumers have been spending more on spending, driving the economic growth at a rapid pace. This runs counter to previous surveys that "a sharp rise in the cost of living and higher interest rates on consumer loans weigh on budgets". The economy has been underpinned by recent good consumer data, but the growth in consumer spending in recent months has been driven by a depletion of savings. This driving momentum may dissipate over the winter months. Nonetheless, continued consumer spending supports the view that the U.S. economy will avoid a recession.

Although a slowdown cannot be avoided based on data in hand so far, a positive development can be expected in 2024 as a higher interest rate environment will help restore lending stability.

Timing of Fed rate cuts

The last Fed policy meeting in December significantly boosted expectations of a rate cut, with the market betting that the Fed will start cutting rates as early as March this year. But for now, it's maybe too early to see a cut in March because the U.S. economy is thriving. The increase in consumer spending will unbalance supply and demand for goods and services, which will prompt the supply side to raise prices and in turn drive inflation higher. In this scenario, if the economy does not slow down enough, the economy will push the Fed to raise interest rates as a way to fight against inflation.

In addition, the current growing debt burden will also cause consumers to deplete their savings over time, which in turn will reduce the support of consumer spending for economic growth. Downside risks to the economic outlook will increase and the economy may weaken in the first quarter of this year. Then in May, the Fed may cut interest rates to respond to the weakness, and the magnitude is expected to be greater than the Fed predicted.

Market expectations also confirmed this speculation. As shown in the chart below, the probability of a rate cut in May has reached 98.2%, of which 26.9% expect a 25 base point rate cut, 63.9% expect 50 bps, and 7.4% expect 75 bps.

U.S. Economy Is Heading for a "Soft Landing"_1

Summary

While many economists do not believe that a "soft landing" is possible, the U.S. economy may have been heading for a "soft landing". The reason is that the economy in the post-pandemic era has exhibited several impossible aspects: a set of circumstances drove inflation, and measures made by policymakers increased household savings and allowed households with sufficient savings to continue to consume. The result of all these is that the U.S. economy has remained resilient even as interest rates have risen, leaving room for a soft landing.

Going forward, it remains important to focus on whether inflation retreats further, whether employment and wage growth increase, and whether consumer spending is resilient enough to support GDP growth. Nonetheless, there is no denying that the vision of a soft landing for the economy is before us.

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Chandan Gupta

Traders' Opinions

Stocks

Fundamental Analysis

Alright, imagine the NASDAQ 100 as this fiery roller coaster ride in the stock market. If you’re someone who loves a thrill, this could be your kind of deal.

Now, hold on a sec. I'm not here to shout that the market’s about to go kaboom and crash right this moment. Nope, it’s more like we’ve gone a tad overboard, just like when you eat too many cookies in one sitting.

Picture this, The market’s been all jazzed up thanks to the tech giants and their artificial intelligence magic. But! There's a catch. Sometimes, markets get a little grumpy and throw a fit. We might be in for a grumpy phase sometime soon.

Why, you ask? Well, Wall Street is partying over the idea of lower interest rates this year. But, and here’s the sneaky part, sometimes when rates drop, it's not because everything’s hunky-dory. The Federal Reserve might just be trying to fix something that’s not working too great in the economy. Tricky, right?

So, here’s the deal: The NASDAQ 100 is like the VIP club for money managers. They all wanna hang out with those famous 7 stocks. But guess what? Some traders might start selling off their shares to make some cash. Money managers will be like, "What’s going on, folks?"

Here’s where it gets fun. Lower interest rates might mean more money flowing into technology. But the big question is why the Fed’s hitting the brakes. Is it to tame inflation (that’s prices going up crazily) or because the economy's feeling a bit under the weather?

Okay, look at this chart. It's all green and positive. But! I wouldn’t bet against this market. Nope, no way. However, I wouldn’t go chasing after it either. It’s been running like a sprinter on Red Bull, up about 20% since late October. That’s not normal.

But here’s the thing: this market’s like a puppet show, controlled by a handful of stocks. Selling it? Nah, too risky. What we’re hoping for is a good ol’ market slap, like a 10% drop. Sounds weird, right? But that’s when we’ll want to start buying again.

I’ve got my eye on this magical number, 15,780. If the market takes a tumble and lands there, it’s party time! Sadly, I’m not too hopeful. This roller coaster might not slow down that much.

Bottom line? Don’t rush in. Sooner or later, markets go for a walk back to reality. And that’s when you want your ticket to the party.

Technical Analysis

The Nasdaq 100 took a bit of a dive on Tuesday. It was like that moment when you're riding a bike and you hit a bump, but phew, it didn’t crash into this important support zone around 16,700. That’s like the superhero landing to save the day for the stock market's hopes of hitting a new record high.

Here's the drama: If this magical support area around 16,700 gets broken, oh boy, we might see the market taking a deeper plunge. The next stop for the market’s attention would be around 16,150. Not a place the market wants to visit willingly.

But hey, let’s look at the bright side. If everyone in the market suddenly starts feeling optimistic again and things start looking up, there’s this thing called "overhead resistance" at 17,165. It’s like a ceiling that the market might try to break through.

But here’s the thing about history: Sometimes, it loves to repeat itself. So, the Nasdaq 100 might give that 17,165 ceiling a little nudge and then back off again. Like trying to open a door with a "push" sign when you're supposed to "pull."

But! If by some magic trick, the market manages to break through that ceiling at 17,165, buckle up! We might be in for a wild ride to 17,500. That’s like setting a new high score in a video game for the tech stocks. Nasdaq 100: January 2024 Outlook_1

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Zi Cheng

Cryptocurrency

Bitcoin has been a hot topic towards the end of the year 2023 and remains hot in the new year of 2024. Just stepping into 2024, and on the 3rd day, it has already gained a total of 9.41% which is very impressive and caught lots of investors attention trying to jump on this rocket.

However, despite such strong bullish momentum, it failed to close above the $46,000 psychological level. It was just short less than a hundred dollars before approaching the $46,000 mark. According to Binance, it reached a peak of $45,942 before sellers stepped in and tossed Bitcoin back down below $45,000 during the close of New York session. Bitcoin is back above $45,000 during the Asian session again and it is highly anticipated if it will surge past $46,000 today.

$46,000 will not be a easy level to break as seen with evidence from the Binance order book, there were lots of sell limit orders placed at the key psychological level. If Bitcoin wants to surpass it easily, some sort of catalyst, like news event, will be the key factor to drive it past $46,000 mark.

One of the key factors could be happening today though, there will be a Fed meeting happening approximately in the New York afternoon. If the Fed provides some dovish insights, it is highly likely that Bitcoin will break through the $46,000 mark. Don't forget that Bitcoin crosses with the Dollar, if the Dollar weakens, Bitcoin will strengthen.

Besides that, there is another key event that will drive the price of Bitcoin crazy, either huge decline or huge increase. The deadline is closing in for the US Securities and Exchange Commission (SEC) to either approve or deny the raft of spot-bitcoin exchange-trade funds (ETFs) on the regulator’s table.

Bitcoin Struggles to Break Past $46,000_1

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Kevin Du

Cryptocurrency

Bitcoin has sprinted to a more than 6% gain over the first three days of January, bucking a dour start to the year in global markets.

The largest digital asset traded above US$45,300 (RM209,943) as of 6.50am on Wednesday in London, buoyed by expectations that the US will soon allow the country's first spot bitcoin exchange-traded funds (ETFs). General crypto optimism also encouraged advances in smaller coins such as Solana and Avalanche.

In contrast, US equity futures struggled for traction after a drop in American stocks on Tuesday, the first trading day of 2024 in traditional markets. A dollar index held an advance in a further sign of investor caution.

Bloomberg Intelligence analyst James Seyffart is among those expecting the Securities and Exchange Commission (SEC) to approve a batch of spot bitcoin ETF applications by a Jan 10 deadline. The token is up 172% in the past 12 months on bets that the products will help bolster bitcoin demand.

The question now is whether the actual green light will become a reason for speculators to bank some profits, given that it remains uncertain whether the ETFs will succeed in making bitcoin more of a mainstream asset. Bitcoin's New Year Jump Weathers Sombre Start in Global Markets_1

Bitcoin's New Year Jump Weathers Sombre Start in Global Markets_1

"We don't expect mega immediate inflows to the ETFs. Hence, it might become categorised as a 'sell-the-news' event," K33 Research analysts Anders Helseth and Vetle Lunde wrote in a note. But they added that the products herald a longer-term structural shift in buyer interest.

K33 estimated there's still a 5% chance that the SEC "pulls a shocker", and rejects the efforts to launch ETFs that invest directly in bitcoin. It assigned 75% odds to approval being a "sell-the-news" event, and 20% odds to a further increase in bitcoin prices due to ETF inflows.

Digital assets have also benefited from wagers that the US Federal Reserve will cut interest rates in 2024. The New Year weakness in stocks is partly a reflection of a reassessment of those projections. Crypto prices could wobble if investors continue to pare back expectations of looser monetary policy.

The escalating cost of bets on rising bitcoin prices in the futures market is an indication of "speculative excess" emerging in the token's bull run, Sean Farrell, the head of digital-asset strategy at Fundstrat Global Advisors LLC, wrote in a note.

"Funding costs at these levels normally precede volatility, and the direction of that volatility will depend on near-term flows," he said.

Source: Bloomberg

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Warren Takunda

Central Bank

Economic

As 2024 unfolds, the financial arena appears to be entering a 'Year for Non-Consensus,' marked by a notable behavioral shift prompted by the long-awaited dovish pivot of the Federal Reserve. This report delves into the intricacies of the market, providing insights into the dynamics of bond resilience, potential stock fragility, and the soaring ascent of gold amid unprecedented economic events.

Bond Market: Structural Trends and Behavioral Inflection Points (Data as of October 2023):

The benchmark 10-year U.S. Treasury note achieved a significant milestone in October 2023, surpassing the 5% yield mark for the first time since 2007. This event, contrary to market expectations, was driven by central banks signaling a commitment to higher interest rates for an extended period. However, the dovish Fed pivot and heightened speculation on the magnitude of rate cuts in 2024 led to the yield retracting to just over 3.9% by Tuesday morning.

Contrary to prevailing market sentiment, a resilient bond market poised for a rebound. Despite expectations of as many as six rate cuts from the Fed in 2024, the forecast suggests a return to and potential surpassing of the 5% handle over the long term. This projection aligns with a structural higher-for-longer trend characterized by rolling waves of volatility.

Equity Markets: S&P 500's Exceptional Rally (Data as of December 31, 2023):

The S&P 500 concluded 2023 with an extraordinary rally, notching up a remarkable 24.23% gain. This surge was amplified by the Federal Reserve's indication of at least three potential interest rate cuts in the coming year, a conservative estimate that the market currently prices in as many as six.

However, caution looms over the market's triple whammy of momentum, sentiment, and sector rotation fragility. Information technology stocks led the charge with a staggering 56.4% gain, followed by communication services at 54.4% and consumer discretionary at 41%.

The extraordinary surge suggests a prevailing tendency towards risk aversion in U.S. equities, propelled by highly overbought conditions and a trend of investing in smaller-cap, lower-quality stocks, commonly referred to as a 'dash for trash.' This phenomenon attracted speculative investments as the year drew to a close.

Economic-sensitive stocks face added pressure in this late-cycle stage, where growth expectations may disappoint to the downside, contributing to market fragility.

Geopolitical Landscape and Safe-Haven Assets (Data as of December 31, 2023):

Amidst an increasingly fraught geopolitical backdrop, gold emerged as a safe-haven asset, enjoying its strongest year since 2020. The spot price comfortably closed 2023 above the $2,000 per ounce mark. As geopolitical tensions deepen in 2024, the forecast anticipates continued safe-haven flows into gold, propelling the precious metal to break out above the $2,900 mark by the year's end.

To stay updated on all economic events of today, please check out our Economic calendar

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Thomas

Palestinian-Israeli conflict

Latest news on the Israeli-Palestinian conflict

0:37

Breaking Event | Saleh al-Arouri, deputy chairman of the Hamas politburo and founder of the army, was assassinated by an Israeli drone in Beirut, Lebanon.

▶ Saleh Al-Arouri is the deputy to Hamas Politburo leader Ismail Haniyeh and one of the founders of the organization’s military wing.

▶Saleh Aluri was assassinated by an Israeli drone attack in his office in the southern suburbs of Beirut, Lebanon.

▶Hezbollah Secretary Nasrallah canceled a speech scheduled to be delivered tomorrow because Aluri was assassinated by Israel.

▶ Saleh Aluri is currently the operational commander coordinating Hamas with Iran and Hezbollah.

▶The Iranian news agency Mehr reported that Saleh Aluri and two assistants were killed in the Beirut attack.

▶Iran’s Mehr News Agency mourns Hamas Vice Chairman Saleh Aluri.

▶A senior Hamas official denied on the Lebanese LBCI channel that Osama Hamdan was injured in the explosion.

▶According to the information obtained, two explosions occurred, one in the apartment and the other in the car.

▶Hamas leader Izat Rishq: The assassination proves that the enemy has failed to achieve its goals in Gaza.

Latest News on the Israeli-Palestinian Conflict (January 3)_1

0:58

The Hamas Politburo issued an emergency statement:

"The cowardly assassinations of leaders and symbols of the Palestinian people inside and outside Palestine by the Zionist occupiers will not succeed in destroying the will and steadfastness of our people or the continuation of their heroic resistance. This once again proves that this enemy A disastrous failure to achieve any aggressive goals in the Gaza Strip."

1:07

Hamas confirms: Saleh al-Arouri and two Hamas Qassam commanders were killed in an Israeli attack on his office in the southern suburbs.

Al-Mayadeen reporters confirmed in the southern suburbs of Beirut that a building was hit by three missiles fired by Zionist drones, killing six people.

1:10

Serious escalation: Tensions between Lebanon and Israel are currently at their highest level!

• Al Jazeera reporter: “The situation in Lebanon will seriously escalate.”

• Israeli media: “Hezbollah notifies international agencies of response to assassination of leader Saleh Aluri”

• Israel Channel 12: “The ball is now in Nasrallah’s court: either an all-out war with Israel or containment of assassinations.”

• Prime Minister Netanyahu's Office: Asking ministers to refrain from commenting on Saleh Aluri's assassination.

Event analysis:

• Hezbollah's response was expected, with a high alert status along the northern border among the ranks of the Zionist entity.

• It is now clear why Israeli troops began withdrawing from Gaza.

• They were heading to the border with Lebanon.

• The second phase I announced—an all-out war with Hezbollah—is very close to happening.

• While I think it's early days, Israel will want to take a gamble.

1:44

BREAKING: West Bank announces full mobilization and attack on Israel.

• Fatah's military wing in the West Bank, the Al-Aqsa Martyrs Brigades, announced full mobilization in response to Israeli assassinations of Hamas leaders and officials in Beirut.

• Palestinian national and Islamic groups have called for mass strikes in West Bank cities in solidarity with Hamas and Gaza.

• This unprecedented unified response involves Palestinian factions.