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Weekly Mining Market Summary

Globalequities closed last week at an eight-month high after the European CentralBank left monetary policy unchanged at its July 21 meeting. The euro wasweaker, however, and the yields on benchmark government bonds moved even lower.

The ECBpresident, Mario Draghi, reiterated that he remained ready to use all thestimulus tools at his disposal but confirmed that the bank had not discussedexpanding its asset-buying program. Analysts expect the ECB's peers in the U.K.and Japan to loosen their financial policy over the next month.

Incontrast, the Federal Reserve's Open Market Committee is meeting this week onJuly 26-27, and expectations are rising for at least one increase in U.S.interest rates this year — there are further FOMC meetings in September,November and December. Futures markets are pricing in the probability of aDecember rate rise at 43%, compared with only 8% at the beginning of July. Thissentiment helped the dollar reach a four-month high against a basket of currencieson July 20. The dollar also benefited from strong data for housing starts.

TheInternational Monetary Fund last week slashed its 2017 forecast for the U.K. economy, sayingthat the decision to exit the European Union was a "spanner in theworks" for global growth. Even if the U.K. reaches a quick deal withoutnew trade barriers with the remaining 27 EU countries, the IMF expects the grow only 1.3%, instead of 2.2%, in 2017. This is its biggest downgrade of anyadvanced economy.

Asurvey of U.K. purchasing managers provides the most significant evidence yetof the damage caused by the Brexit decision a month ago. An early snapshot of July'sPMI figures, published by Markit/CIPS last week, is at a level associated withrecession. The reading of 47.7, compared with 52.4 in June, is the lowest formore than seven years. The decline was most evident in the services sector. Asa result, the Bank of England is expected to move U.K. interest rates lower inthe near future.

Meanwhile,the move away from actively managed investment funds is gathering pace. InJune, according to Morningstar, these funds in the U.S. saw an outflow ofUS$21.7 billion, which is the worst monthly figure since October 2008. Passivefunds in the U.S., including exchange-traded funds, took in US$8.7 billion.

Therehas been an important takeover in the mining and construction equipmentsector, with Japan's KomatsuLtd. to buy U.S.-based Joy Global Inc. The strong yen has encouraged Komatsu tooffer a 20% premium on Joy's market price, valuing the deal at US$3.7 billion,including debt. Komatsu's equipment is mainly for surface mines, whereas Joyproduces equipment for both surface and underground operations.

Joyhas suffered indirectly from the low commodity prices that have affected itscustomers, and reported a net loss of US$1.2 billion in the year to end-October2015. Sales were only US$3.2 billion, which was one-third lower than two yearspreviously. The company's CEO Ted Doheny described the offer as"compelling." He warned that the mining industry continues to face"cyclical headwinds," and blamed the oversupply of commodities,reduced consumption and structural changes in the coal industry.