Commoditized Wisdom: Report (Week Ending April 19, 2024)
Posted:
Key point
Energy prices were all lower. Crude oil and gasoline prices fell 3%, heating oil prices lost 5% and gasoil prices dropped 6%. Natural gas prices decreased 2%.- Grain prices were all lower as well. Wheat and corn prices decreased 1% and soybean prices fell 2%.
- Spot gold and silver prices increased 2% and 3% respectively. Spot platinum prices fell 4%.
- Base metal prices were all higher. Nickel and aluminum prices gained 9% and 7%, respectively. Copper prices rose 5% and lead prices increased 2%. Zinc prices rose 1%.
- The Bloomberg Commodity Index increased 0.2, again with base and precious metals gains offset by energy and agricultural sector losses.
- Decent inflows dominated by gold and crude oil ETPs. Silver ETPs offset a portion of the inflows, experience noticeable outflows.
Commentary
A markedly lower week for stock markets with the Nasdaq Composite Index faring the worst, followed by the S&P 500 Index and with both of those indexes sharply underperforming the Dow Jones Industrial average. Strong economic data (including much better-than-expected retail sales, sharply higher Philly Fed Mfg Index and continued low level of initial jobless claims) along with hawkish comments from Fed Chair Powell (basically promoting higher-rates-for-longer-than-expected) drove U.S. Treasury rates to 5-month highs and tech stocks, in particular, significantly lower. Iran-Israel tensions somewhat added to risk-off sentiment with markets reacting negatively on Friday to Israel’s overnight attack on Iran. For the week, the S&P 500 Index fell 3.1% to 4,967.23, the Nasdaq Composite Index dropped 5.5% to 15,282.01, the Dow Jones Industrial Average was practically unchanged at 37,986.40, the 10-year U.S. Treasury rate rose 10bps to 4.62% and the U.S. dollar (as measured by the ICE U.S. Dollar index – DXY) strengthened 0.1%.
Increased expectations of higher-rates-for-longer, lessened Mideast-blowup concerns and growing U.S. oil inventories acted to push crude oil prices about 3% lower on the week. Israel’s overnight attack on Iran initially pushed oil prices sharply higher Friday, but those gains were all but removed after the extent of the attack and Iran’s response became known. Plans regarding U.S. oil sanctions on Iran also lent some support to prices.
Spot gold prices continued their move higher bolstered by Mideast-tension haven buying and despite diminished rate cut expectations. Prices did retreat Wednesday in the aftermath of strong retail sales data and hawkish Fed Chair Powell comments but moved higher the remainder of the week as Mideast concerns flared.
Copper and other base metal prices moved sharply higher last week, buoyed by U.S. and UK sanctions on Russian metals (the sanctions prevent delivery of Russian metal to the LME), increased expectations of a copper deficit and signs of China economic growth. Aluminum and nickel prices, directly affected by the U.S. and UK sanctions, increased the most, followed by copper prices.
Grain prices moved lower last week mainly on favorable weather forecasts and weakish export inspections. Prices did move noticeably off Thursday’s lows, prompted primarily by short covering perhaps due to flaring Mideast tensions before the weekend.
Coming Up This Week
PMIs, Durable Goods, GDP and, most importantly, the PCE Price Index Friday.
Who is Jeff Klearman in our research team? Jeff has over 20 years experience working as a trader, structurer, marketer and researcher. Most recently, Jeff was the Chief Investment Officer for Rich Investment Services, a company which created, listed and managed ETFs. Prior to Rich Investment Services, Jeff headed the New York Commodities Structuring desk at Deutsche Bank AG. From 2004 to 2007, he headed the marketing and structuring effort for rates based structured products at BNP Paribas in New York. He worked at AIG Financial Products from 1994 to 2004 trading rates-based volatility products as well as marketing and structuring. Jeff received his MBA in Finance from NYU Stern School of Business and his Bachelors of Science in Chemical Engineering from Purdue University.
