Commoditized Wisdom: Report (Week Ending March 15, 2024)
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Key points
Crude and heating oil prices rose 4% and gasoline prices gained 7%. Natural gas prices fell 7%.- Wheat prices were 2% to 4% lower and corn prices were 1% lower. Soybean prices increased 1% while soybean oil prices rose 7%.
- Spot gold prices fell 1%. Spot silver and platinum prices rose 3% and 2%, respectively.
- Copper prices gained 6%. Aluminum, zinc and lead prices rose 1%. Nickel prices moved slightly higher.
- The Bloomberg Commodity Index increased 1.3%, mainly due to gains in the energy and base metals sectors.
- Decent ETP inflows this week almost entirely into Gold ETPs
Commentary
Major stock market indexes finished lower again last week. The Nasdaq Composite Index performed the worst falling just under 1% while the Dow Jones Industrial Average finished only slightly lower. An as-expected headline CPI release Tuesday (along with a slightly higher-than-expected core CPI release) initially propelled stock prices higher with expectations of a June rate cut remaining mostly intact. That sentiment weakened Wednesday amidst growing uncertainty of the timing and extent of Fed rate cuts. Thursday’s higher-than-expected PPI release accentuated that uncertainty driving all 3 major stock indexes lower Thursday and Friday. 10-year Treasury rates, reflecting increased higher-rates-for-longer expectations, rose over 20bps with almost the entire increase coming from rising 10-year real rates. For the week, the S&P 500 Index decreased 0.1% to 5,117.09, the Nasdaq Composite Index fell 0.7% to 15,973.17, the Dow Jones Industrial Average was practically unchanged at 38,714.77, the 10-year U.S. Treasury rate rose 23bp to 4.31% and the U.S. dollar (as measured by the ICE U.S. Dollar index – DXY) appreciated 0.7%.
Buoyed by increased IEA demand forecasts and Ukraine drone attacks on Russian refineries, crude oil prices moved 4% higher last week. Increased U.S refinery utilization rates and a surprise fall in U.S. oil inventories also contributed to the gain. Last week’s gain comes despite a noticeably stronger U.S. dollar.
Spot gold prices fell 1% last week, primarily affected by a slightly higher-than-expected core CPI release and a higher-than-expected PPI report. June fed rate-cut expectations fell (from around 70% to 60%), 10-year Treasury rates jumped 23bps higher and the U.S. dollar noticeably appreciated, all contributing to a decline in gold prices. Spot silver and platinum prices, in contrast, rose over 2%, increasing more in line with base metal prices.
Base metal prices were all higher last week with copper prices significantly outperforming. Copper prices gained on news of China voluntarily cutting smelter activity while aluminum prices benefited from strong demand. Copper prices also were bolstered by better-than-expected Chinese new loan data and hedge fund buying.
Wheat prices moved lower, suffering from reports of continued China order cancelations and despite 7-year India stockpile lows. Corn prices also moved lower. Corn prices moved lower following improved weather conditions forecasts and despite lowered Brazil production estimates. Soybean prices moved about 1% higher, supported primarily by sharply higher soybean oil prices.
Coming Up This Week
FOMC Announcement Wednesday is the heavy this week. PMI indexes and housing data also of import.
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.
