Copper is supposedly a harbinger of economic health, rising in advance of economic growth and falling in advance of recessions. Some of this simplistic forecasting is overdone, because the price of copper reacts to short-term factors which have nothing to do with economic health and to trading strategies like short selling.

So copper is due for a recovery starting as soon as next month according to the London Metal Exchange. The recent sag in prices is likely to reverse over fear of a strike at the Escondida mine in Chile. If this occurs, the surplus copper and short selling will reverse. But even without a strike the LME says mine supply is expected to deteriorate from last year in H2. In the current quarter, LME cash copper was priced at $6834 per metric tonne, down from $7000 on April 1. However, CU closed at $6714/tonne on June 30, and on July 19 fell to $5988 per tonne, well below the $6200/tonne cost of producing the red metal, before recovering a bit to $6006 at the close.

The reason for the drop is short-selling because of the US and China's trade war. Each country is hitting goods imported from the other with $35 billion of tariffs. These import taxes hit raw material inputs (like copper) more than others.

Citigroup analysts wrote July 19: “The recent s​ell-off is providing a long-term buying opportunity,“ adding that a full scale trade war would push prices of raw materials lower still. However it concluded: “Our base case is that we do not expect a sustained downward spiral in global growth as a result to the trade war.”

In fact US copper scrap markets are already inching upwards because of shortages. Now consensus forecasts for the shortfall of copper supplies for the full year have more than doubled to 129,000 metric tonnes. Unlike general forecasting using copper as simple crystal ball, the LME operates to balance supply and demand for metals every working day.

While the parameters for trading precious metals are broader, because gold has a role outside the production of things, there is some overlap with copper as well. Gold hit a 12-mo low on July 19 at $1214.45 before recovering, the same pattern as was shown by other precious metals.

As for the inverted yield curve as a predictor, that one is even more misleading although the 2 yr to 10 yr US T-bill spread is very flat and may be inverting soon.

Comcast, a stock I own, opted to let Walt Disney win the titans' battle for 21^st Century Fox and will instead use its money to bid for Fox's 39%-owned Sky plc in Britain. Both Rupert Murdoch's Fox and CMCSA have bids in for the rest of Sky. I think all parties will find this makes sense, the best outcome for my shares and The Mouse which both rose July 19 while FOXA fell. Sterling, the currency in which Sky is priced, fell below $1.30 for the first time in 10 months.

President Trump appears to be close to doing a NAFTA deal with Mexico alone before the new Administration takes office, while leaving Canada for later. The peso is up some more but most currencies are down versus the greenback.

Drug Majors

I failed to realize that the conference call remarks by CEO Vas Narasinhan of Novartis yesterday about keeping drug prices from rising were made in direct response to the Pfizer's 10% price increases getting slapped down by President Trump and being reversed. I was covering the results, not the politics.

Later July 18 FDA head Scott Gottlieb, indicated that overpriced biosimilars would face pressure from imports his agency will allow even if the match isn't perfect. While 11 biosimilars have been approved so far by the FDA, only 3 of them are on the US market because of tactics used to stymie competition by the majors. The new Biosimilars Action Plan will allow data-sharing with non-US regulators by a new Office of Therapeutic Biologics and Biosimilars.

In addition, the Dept of Health & Human Services sent the White House a proposal to curb rebates offered by drug makers, which mainly go to insurance companies and pharmacy benefits, and support high prices which hit drug buyers.

So drug major stocks are down, with Teva off 2.3%; Roche off 1.25%; GSK off 1.1%.

Novartis is paying  95 million euros upfront and milestones of up to 850 million for all rights to a dermatitis antibody drug under development by Galapagos (GLPGY, sold) and MorphoSys of Germany still in phase II trials NVS shares have held up today. The deal depends on clearance by the German and EU competition authorities.

Roche again clarified its IMPower phase III trial resutls for Tecentriq combined with chemotherapy in first-line treatment of advanced non-squamous non-small cell lung cancer. The interim analysis did not show statistically significant overall survival but did show some clinical benefit, the disease not worsening, vs chemo alone. But for overall survival, the data were not yet statistically significant so research is continuing. Tecentriq which binds to the PD-1 on tumor cells, works against some bladder or urinary tract carcinomas, as a secondary treatment for non-small cell lung cancer which has spread despite chemotherapy.

Glaxo Smith Kline's partner for Quell, an over-the-counter neurostimulation device to deal with chronic pain, NeuroMetric of Waltham MA, has booked $8.8 million in GSK milestones this year.

Amazon is said to be buying Indian pharma sales chain MedPlus. More on Amazon below

Energy

Energias Market Research says the global nuclear power market will see a compound annual growth rate of 8.9% and hit $205.2 billion by 2024 because it is the most advanced low-carbon alternative to fossil fuels. While the US is the world's leading producer of nuclear power now, it currently will only be bringing on 4 more plants in this period. The big market for nuclear reactors now is outside the USA. In the next decade the US will be overtaken by Russian, South Korea, and China.

Because its uranium comes from Kazakhstan plus Canada, with which the US is holding a trade war, Cameco lost the rise its share saw in the Tuesday aftermarket. The Section 232 investigation by the US Dept of Commerce will have no impact on existing contracts or US deliveries, CCJ said in a clarification note. The US DoC investigation will have to be completed in 270 days, and it will provide inputs and responses as it proceeds. It also pointed out that CCJ produces more uranium than any other company not only in Canada but also in the USA. I bought more Cameco at $10.78 today.

Barclays cut its target price for Schlumberger Ltd to $67 from $70. SLB of the Dutch Antilles remains a hold.

BP plc was upgraded to outperform with a target price of £6.4 ($48/ADR) by Crédit Suisse analysts. Argus also upgraded BP. Raymond James prefers Royal Dutch Shell now an outperform.

Materials

UK Investors Intelligence chartists tipped Johnson Matthey as a bull today with a high trend score of 84 after it found price support at £35-36. We bought it because we think its precious metals refining business will resume growth. Its stock is a quick exit from faltering sterling as well. My writeup was used as a "Top Pros' Top Picks of the Week" by The Money Show Digest this week. 

Sociedade Quimica y Minera de Chile, SQM, is seeking govt approval for a $450 million expansion of its Salar del Carmen lithium carbonate plant, according to Reuters.

Irish CRH plc's euros 510 million divestiture to a US REIT of its DIY yesterday chain was for entire Benelux, not just for The Netherlands. Its 7/19 press release was incorrect.

My purchase of De La Rue was real but misreported by my broker, Charles Schwab. I paid $21.17 per pink sheet share of DLUEY (DLAR in London). Unfortunately, the Schwab statement said I had bought De Louisiana Rue and this appeared in my daily tracking program. Charles Schwab is a known dyslexic but he doesn't input the share names from the ticker symbols. It is done by underpaid people in India who don't have the time or information to do this correctly. They regularly write about Sanofi using the Banco Santander ticker symbol, SAN. On the other hand they give you free trades for 2 years and Credit Suisse research.

Technology

Vodafone will work with IBM's iX to launch its digital transformation in New Zealand.

Nokia will report on its Q2 and H1 on July 26 at 8 am Finnish well before the NYSE open. It posted a $175,000 challenge to startups to bring their innovative ideas to market with help from NOK and its Bell Labs sub.

Eduardo Garcia writes from Mexico City that the number of Amazon Prime purchasers in Mexico rose 250% year over year—but the amount they spent was not released. This may not be as bad as it sounds for Argentina's Mercado Libre, MELI.

Funds

Teva is the largest holding of Polaris Global Value Fund, at 2.09%. It is a no-load open end fund.

British Empire Trust, a value investment firm, is raising £100-200 million with an IPO for investing in Japanese equities. Its lead manager Joe Bauernfreud thinks Japan is home of the best value equities.

Eaton Vance Tax-Managed Global Diversified Equity Income Fund (EXG, sold) in June distributed 12% in investment income and the rest of its 7.l6 cent, 88%,was return of capital. This situation I think will not survive the new tax rules being worked on by the IRS, why we sold. This is a structure created to payback shareholders tax free and can only be confirmed at the end of the year when a full report is issued.