Disruptive Discoveries Journal

PMI

Q1 2014 Economic and Energy Metals Review

Chris Berry

In accordance with the roll out of our new journal offering next week, and our goal of increasing your “value added,” we will begin publishing a quarterly review of the Discovery space.  Specifically, today we will analyze the overall macroeconomic picture and how it has affected select Energy Metals.  We'll highlight the key themes which have driven many of the companies involved in exploration, development, and production to double digit returns YTD.

 

As the West Sputters Along…..

In mid 2013, it appeared as if the US and Euro Zone economies were picking up steam based on accelerating PMI readings and falling unemployment.

Did the ISM Manufacturing Data Just Kick Start a Collapse?

Shelley Chen

The Institute of Supply Management released its January 2014 survey yesterday. 

  • While the survey still indicated growth in the US Manufacturing sector (at a reading of 51.3), the consensus estimate called for a reading of 56. 
  • This was a substantial “miss” and equity markets collapsed with the Dow falling 326 points, or over 2%. 
  • The ISM reading, coupled with increased volatility in emerging markets such as Argentina and Turkey, have many thinking that the long awaited correction and rebalancing of growth in financial markets is upon us. 
  • Two questions remain – First, have the Emerging Markets entered a crisis phase or is slowing growth in the developed world a bigger issue? Second, Can the Fed continue to taper asset purchases in the wake of this volatility and possible economic weakness in the US? 

Significance of the ISM 

Regular readers of Morning Notes will know of my preference for ISM and PMI data as a gauge of industrial demand. If industrial demand is increasing and economic expansion is occurring, this is ultimately bullish for the base and energy metals complexes. 

Since last summer, the ISM numbers in the developed world (the US and Europe) have ticked up and lent credence to the idea of a slow, possibly sustainable, economic recovery.