By Alexander Bueso
Date: Monday 20 Mar 2017
(ShareCast News) - Cyclicals were on the front-foot on Tuesday with shares in steel-maker Evraz pacing gains following an upgrade out of analysts at Citi.
The analysts pointed to a jump in long steel prices in China as the catalyst for the move amid induction furnace closures and stronger than expected construction demand.
Evraz was one of thew few Russian steelmakers poised for significantly higher volumes in 2017 as global long product markets tightened in reaction to developments in China's markets. It was also operating well below full capacity on the long side, the analysts said.
At $1.45bn the company´s EBITDA would again surprise analysts with its second half 2016 figures, Citi said.
Acting as a backdrop, over the weekend China's National Bureau of Statistics reported that house prices increases accelerated and broadened last month, leading to tighter requirements from Beijing on down-payments.
Citi upgraded Evraz from Neutral/High Risk to Buy/High Risk.
Construction stocks were also wanted, with Balfour Beatty rising on follow-through buying after the infrastructure group's latest set of full-year numbers last Thursdsay, alongside gains for US-exposed CRH.
Also moving higher were oilfield service stocks on news that the US oil rig count increased for a ninth week running, by fourteen to 631.
That same bit of news on the other hand was one factor in Monday's decline for Big Oil stocks, which were tracking the ensuing 1.2% drop for West Texas Intermediate crude oil futures to $48.21 a barrel on NYMEX.
The other factor dragging oil futures lower was the latest US CFTC data, which revealed that large speculators cut their bets on a rise in the oil price by the most since 2006.
Over the week ending on 14 March hedge funds slashed their net long position 23% to 288,774 lots.
Furthermore, on 17 March Russian energy minister Alexander Novak reportedly said it was too soon to discuss extending production cuts by several of the world's largest producers past June.
There was also some market chatter to be heard that JP Morgan had cut its 2017 Brent oil price forecasts to $55.75 a barrel.
Nostrum Oil was the biggest percentage mover in the space after a London High Court injunction has blocked Nostrum Oil & Gas executive chairman Frank Monstrey from dealing with his shares in the company, including voting and other rights.
Banks were also taking it on the chin as benchmark Gilt yields slipped ahead of a raft of Fedspeakers scheduled for over the rest of the week.
Top performing sectors so far today
Industrial Metals & Mining 2,479.98 +4.44%
Food Producers & Processors 8,103.27 +1.27%
Construction & Materials 6,974.46 +1.12%
Oil Equipment, Services & Distribution 15,486.73 +1.11%
Electronic & Electrical Equipment 5,501.36 +0.97%
Bottom performing sectors so far today
Oil & Gas Producers 7,872.60 -0.48%
Banks 4,276.10 -0.25%
Mobile Telecommunications 4,771.53 -0.21%
Tobacco 58,896.51 -0.21%
Pharmaceuticals & Biotechnology 14,467.19 -0.17%
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