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ALCOA AND ALUMINUM MARKET REPORT

EXECUTIVE SUMMARY: Alcoa is CONTRARIAN BUY at $15-16

Trade war is officially over as US and China signed the Phase.1 deal in the middle of January. Overall risk conditions switched to the high Greed mode not seen since the late 2017 with commodities have been finally playing catch up – only Nat Gas, Aluminum and Corn are in Fear mode.

Macroeconomic drivers turn to neutral as the hopes for Trade Deal and monetary stimulus improved business confidence. On the other hand reduced risks make global CBs less so dovish with the Fed is starting to think how to exit its REPO stimulus gambit and the ECB is not going to cut rates anymore. Chinese and EM economies stabilized with downside risk.  

Investors’ interest in commodities was really high over the last months. But it was concentrated in retail investors’ money flow as trading activity in commodity futures declined and net positioning improved moderately with Precious metals and Gasoline are the most overbought and Aluminum, Zinc and Nat. Gas are the most oversold

Aluminum industry finished the year in relatively depressed mood as the most hated metal in the LME with rising inventories and switching to surplus market as additional capacity to come on line over the next couple of years without corresponding demand growth. However we see a real chance for positive surprise both in demand (“green push”) and supply (cut back) 

Alcoa was the main headliner of that industry challenges as it was the first to report full year results and predict another surplus year not only for aluminum industry but for alumina and bauxite as well. As a result valuation discount to its AWAC based valuation reached extreme levels paving the way for value accretive actions from the company via sale/spin-offs 

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commodity;

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Oil Market Report - March 2020

Crude oil prices ended February 2020 sharply lower with both ICE Brent and NYMEXWTI showing monthly declines of more than 12% to reach their lowest monthlyvalues in almost 2.5 years as the rapid spread of Covid-19 in China and several othercountries raised investors’ concerns about the impacts on the global economy and oildemand, and triggered a sharp sell-off in markets amid uncertainties on the extent ofdemand destruction and worries that this health crisis might evolve into a pandemic.

oil, investment, equity

Arbat Capital: Banking Sector Report - February 2020

US banks tumbled again in February after very weak performance in January amid spreading COVID-19 around the world. The broad market was underperformed substantially for the second consecutive month after 4 months in a row of leading dynamics. Thus, BKX index decreased by 12.5% MoM in February vs -8.4% MoM of SPX index. Absolute performance on MoM basis was -2 std from the mean and it is in the bottom 4% of absolute MoM performance of BKX index.

investment, banks;

Commodity market Report - February 2020

Trade war is officially over but Chinese risks resurfaced from the other side - extreme quarantine measures after coronavirus outbreak in Jan-Feb resulted in significant breakdown in the industrial production chains and construction activity. However monetary and fiscal stimuli quickly reversed negative sentiment and overall risk conditions returned to the high Greed mode with only commodities market kept in risk-off mode. Energy complex was very volatile as its initial sharp drop was lately compensated by OPEC verbal interventions and renewed risk in Libya and Venezuela. Industrial metals fell sharply, but Precious shined brightly with unbelievable bubble in Palladium. Agri commodities were mostly range bound with Cocoa being top performer

Macroeconomic drivers turn to negative as positive developments after the Trade Deal signature and record financial markets levels gave the way to fears of world economic slowdown after the virus outbreak. On the other hand there were not many voices for recession as stimulative monetary policy should provide the cushion. However we think that markets overstated willingness of the Fed to keep on printing and the main risk once again turned to the hawkish surprise when it exits REPO stimulus gambit and the ECB to end QE. 

commodity;