Housekeeping: Good Morning.
“The Gold reset is a process, not an event”
Today:
Discussion: Taiwan Straits
Analysis: BOA on Miners, Fishhook
Discussion: Taiwan Straits
Joint Sword 2024B. China’s 3rd practice blockade of Taiwan since 2022 reportedly began 5am Beijing time. For westerners it might be hard to understand thestress it causes. Fortunately we have a contact on the island itself who gae us some color.
From a contact on the island:
“For perspective, the food self-sufficiency rate in Taiwan is 32%, 10 days, entire island goes on power rationing, so if it lasts for two weeks, island has no power and there will be not enough food and riots could ensue”
How long this lasts is part of the game the mainland is playing i nresponse to continued harsh criticicisms and tough talk coming out of Taipei.
This “practice event” effectively stops incoming cargoes while in place. The contact also noted about the TSWE markets : ‘magically the dip was bought and stocks are back to unchanged!’
BOA Covers Miners at Bottom…
News/Analysis:
Equity Recap:
The S&P 500 and Dow Jones Industrial Average closed at new highs on Friday after better than expected bank earnings. Large caps lagged small caps: S&P 500 (+0.61%) vs. Russell 2000 (+2.10%). MSCI Emerging Markets (EEM) and MSCI EAFE (EFA) gained 0.72% and 0.51% respectively.
Market News:
"US bank stocks hit their highest level since before the collapse of Silicon Valley Bank on Friday FT
"How many hundreds of billions of dollars will Beijing plow into pumping up China’s wobbling economy?... How much of that will go to consumers? : WSJ
"Elon Musk unveiled Tesla’s highly anticipated self-driving taxi at a flashy event that was light on specifics Bloomberg
"A measure of wholesale prices showed no change in September, pointing to a continued easing in inflationCNBC
"Retailers, restaurants and other companies spent years lifting prices. Now that consumers are closing their pocketbooks, some companies are turning to discounts to win back business.: WSJ
Politics/Geopolitics:
US President Biden said he is sending THAAD missile defence to defend Israel, according to WSJ.
Israel’s military ordered the residents of 22 villages in southern Lebanon to evacuate north of the Awali River
Lebanon’s Hezbollah said it attacked a Golani Brigade camp in northern Israel with a swarm of drones which was reported to have injured more than 60 people
Turkish President Erdogan said Israel is a concrete threat to regional and global peace
US President Biden's administration official said they are monitoring the PLA exercise and urge the PRC to avoid any further actions that may jeopardize peace and stability across the Taiwan Strait
Data on Deck:
MONDAY, OCT. 14 Columbus Day holiday. Bond market closed.3:00 pm
TUESDAY, OCT. 15 Empire State manufacturing survey
WEDNESDAY, OCT. 16 Import price index
THURSDAY, OCT. 17 U.S. retail sales
FRIDAY, OCT. 18 Housing starts
FINAL MARKET CHECK
Premium:
FCX top copper picks, CCJ in uranium; CMC in steel
The BofA Commodities team sees copper rising to $12,000/t or $5.44/lb in 2026E, +20% higher than spot. Buy rated Freeport-McMoRan (FCX) is our top pick.
In uranium, Cameco (CCJ) remains our top idea. Despite our near-term constructive view on HRC pricing, Commercial Metals (CMC) remains our top pick in steel given our medium-term preference for long steel production.
In precious metals, we continue to favor Agnico Eagle (AEM) and Pan American Silver (PAAS). See Exhibit 4 for complete rating and PO changes. Exhibit 1 summarizes our PO changes.
