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ETF Strategy: 20% coffee shift stings short sellers

China set to double natural gas consumption

ETFS NAT.GAS ETFS NATURAL GAS 

Natural gas has been the perennial bridesmaid of the energy sector in the past year, trailing behind oil on the way up in 2009 and falling back to 12-month lows in 2010.

Prices spiked 12% in June on weather reports before falling back a little. News that China is intending to double its reliance on gas power could provide a floor, however.

The country is already forecast to run a 10 billion cubic metre gas shortfall this year as it encourages heavy industry to shift away from its reliance on polluting coal.

In the US, the upcoming American Power Act will also offer new tax incentives for a wider range of gas usage, such as vehicle conversion.

Coffee hits a two-year high as supply levels fall

ETFS LEV COFFE ETFS LEVERAGED COFFEE

Short coffee has been a consensus trade in the past year, one that backfired massively for some when what appeared to be short covering caused a 20% price rise last week.

Touching a two-year high, the rally appeared to have been sparked by estimates from the International Coffee Organisation that supply fell 8% over the six months to May. Vietnam, which exports 50% of the robusta beans used in instant coffee, has reported a 20% lower harvest this year, while the South American yield has also been poor.

Asian inventories have been severely depleted and the shortfall is expected to peak in September between the two annual harvests, before rising again into 2011. 

European real estate market still to deleverage

ISHARES PLC ISHARES FTSE/EPRA European Prop Idx Fds

The best prognosis on the state of the European property market was probably illustrated by a recent anecdote in Property Week.

Speaking at a recent conference, Savill’s head of valuation William Newsom revealed he had been forced to change the name of his presentation from Back to Normality? to Plotting a Course Through Volatility.

Unlike the UK, the Continental real estate sector is still only taking its first steps toward deleveraging while sentiment has decisively turned against debt in any form.

Tentative activity has continued in the prime sector, however, as activity and output normalise. The gulf between it and secondary sites is likely to continue to widen.

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