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19 April 2017 by lberuti

Over the last few weeks, macro concerns have grabbed most of investors’ attention. Most notably, the uncertainty surrounding the outcome of the French presidential election and the distinct possibility of a second round opposing the far right candidate to the far left candidate has led to extreme caution, which translated into minimal variations as investors are reluctant to position themselves one way or the other. Idiosyncratic moves have been few and far between, so the recent weakness in the basic material sector is worth highlighting. These credits are the worst performers since the beginning of the week. Iron Ore is trading at a five-month low and has lost 25% since mid-March. It dropped almost 4% yesterday alone, and miners and steel producers saw their risk premia jump. Compared with last Friday, the 5-year CDS of MTNA ( ArcelorMittal SA ), AALLN (Anglo American Plc) and TKAGR ( ThyssenKrupp AG ) were trading 17bps, 8bps and 8bps wider at 266bps, 210bps and 159bps respectively today at the close. Investors are bracing themselves for more volatility in the sector, as some iron ore producers are ramping up output which will not help reduce the glut which last year already stood at 70 million tonnes.