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The Global Resources Fund gained 2.17 percent in October as commodities and commodity-related stocks rebounded from volatility in September. The fund’s performance trailed that of its benchmark, the Morgan Stanley Commodity Related Index, by nearly 4 percentage points. See complete fund performance here.
- Metals and mining stocks across the board led the way with the S&P Metals and Mining Select Industry Index up 7.25 percent.
- Energy-related stocks performed well despite a 5.81 percent decline in crude oil. The S&P Supercomposite Oil & Gas Equipment & Services Sub Industry gained 5.82 percent and the Bloomberg North American Crude Oil Production Index gained 5.26 percent. Also, the S&P Supercomposite Oil & Gas Refining & Marketing Sub Industry Index gained 12.80 percent.
- Steel stocks staged a big move in October with the S&P Supercomposite Steel Sub Industry Index up 8.59 percent.
- WTI crude oil fell 5.81 percent during the month while Brent was flattish, up 0.43 percent.
- Metals including gold and copper were weak with gold falling 0.44 percent and copper falling 0.73 percent.
- After a strong rally in September, the Baltic Dry Freight Index fell almost 25 percent in October.
- Mergers and acquisitions (M&A) activity is increasingly trending toward exploration and production assets and new discoveries while corporate deals are on the decline. About 45 percent of all M&A transactions so far this year were for producing assets, while 24 percent were for development projects, and 10 percent were for interests in new discoveries, according to a study by London and Bangalore’s Derrick Petroleum Services and Houston’s PLS Inc. Over the same period, corporate deals are trending downward to the lowest level on record at 21 percent, compared to a five-year average of 55 percent, says the research and advisory firms. The analysts said a record $135 billion worth of assets were currently in play for M&A.
- China's consumption of refined copper is expected to grow faster in 2014. However, the consumption is not fast enough to boost imports significantly as production increases quickly, according to state-backed research firm Antaike. China is the world's top producer and consumer of the metal and imports have been dropping in line with weaker economic activity, dragging international prices down nearly 10 percent so far this year. Nevertheless, the market has been looking for a rebound next year as the economy stabilizes and infrastructure spending increases. China's consumption of refined copper is forecast to grow 6.5 percent to 8.7 million tonnes in 2014, as Beijing continues to invest heavily in the power sector, according to Antaike's chief copper analyst Yang Changhua.
- Saudi Arabia, the world’s largest crude exporter, is making “massive investments” as it seeks a production buffer to guard against swings in global oil prices, while addressing a decline in output from its older fields. Saudi Arabian Oil Co., the state-owned producer known as Saudi Aramco, plans to maintain spare output capacity of more than 2 million barrels a day, according to Chief Executive Officer Khalid Al-Falih. The Dhahran-based company raised its annual capital budget tenfold to $40 billion over the last decade, and in the past two years has adjusted its daily production by more than 1.5 million barrels. “We are on track to increase the average of our conventional oil recoveries to 70 percent, which is more than double the current world average,” Al-Falih said at the World Energy Congress in Daegu, South Korea. “Resources are in fact, abundant.”
- OGX Petróleo e Gas Participações S.A., the Brazilian oil company controlled by former billionaire Eike Batista, sought court protection from creditors this week in Latin America's largest-ever corporate bankruptcy filing. The bankruptcy protection request, filed in a Rio de Janeiro court, came after OGX failed to reach an agreement with creditors to renegotiate part of its $5.1 billion debt load. The request marks another chapter in the unraveling of Batista's once high-flying industrial empire, which he has been dismantling in recent months after disappointing output from offshore OGX wells set off a crisis of investor confidence.
- The global glut of nickel will extend into a fourth year in 2014 as new technology lowers costs for Chinese furnaces producing record amounts of a lower-grade substitute that helped drive prices into a bear market. Chinese producers will supply 456,000 metric tons of nickel pig iron (NPI) in 2014, or 49 percent more than last year. Costs at their rotary kiln electric furnaces more than halved to $11,000 a ton in five years, according to Beijing Antaike Information Development Co. That implies they’re still profitable even after prices slumped 17 percent since the start of 2013, reaching a four-year low of $13,205 in July. China expanded NPI output from 3,000 tons in 2005 to make the stainless steel needed for its construction boom after costs for pure nickel reached a record $51,800 in 2007. While slumping prices previously shut furnaces in China and curbed excess supply, the new technology means they can now compete with traditional refineries. The cumulative surplus since 2007 will have reached about 589,000 tons by the end of 2014, or almost four years of U.S. demand.
Past performance does not guarantee future results.
The Morgan Stanley Commodity Related Index (CRX) is an equal-dollar weighted index of 20 stocks involved in commodity related industries such as energy, non-ferrous metals, agriculture, and forest products. The index was developed with a base value of 200 as of March 15, 1996. The S&P 500 Metals & Mining Index is a capitalization-weighted index that tracks the companies in the metals and mining sector as a subset of the S&P 500. The S&P Oil & Gas Equipment & Services Sub Insdustry Index tracks the market performance of companies involved in oil and gas equipment and services. Bloomberg North American Crude Oil Production Index is an equal-weighted index. S&P Oil & Gas Refining and Marketing Index tracks the market performance of downstream oil and gas companies. The Baltic Dry Freight Index is an economic indicator that portrays an assessed price of moving major raw materials by sea as compiled by the London-based Baltic Exchange.
Holdings in the Global Resources Fund as a percentage of net assets as of 9/30/2013: OGX Petróleo e Gas Participações S.A. 0.00%