Commoditized Wisdom: Report (Week Ending May 3, 2024)
Posted:
Key point
Energy prices, except for natural gas prices, moved lower. Crude oil and gasoline prices lost between 6% and 7% and heating oil and gas oil prices fell 5%. Natural gas prices rose 6%.- Grain prices were mainly higher. Corn and soybean prices rose 2% to 3% and wheat prices were unchanged. Soybean meal prices gained 5% while soybean oil prices lost 8%.
- Spot gold and silver prices fell 2%. Spot platinum prices rose 4%.
- Base metal prices were mixed. Copper and aluminum prices decreased 1%, lead prices were unchanged and nickel and zinc prices rose between 1% and 2%.
- The Bloomberg Commodity Index decreased 1.4%. losses in the energy, precious metals and softs sectors were only partially offset by gains in the grains sector.
- Small net outflows from commodity ETPs with gold and silver ETP outflows offset by broad commodity and energy ETP inflows.
Commentary
A volatile week for stock markets with major market indexes jostled by quickly changing rate-cut expectations and better-than-expected corporate earnings. Through Wednesday, all 3 major indexes fell 1% or more pressured by growing “higher-rates-for-longer" concerns. Tuesday’s higher-than-expected Employment Cost Index release combined with the FOMC’s as-expected rate decision and slightly hawkish Fed Chair Powell comments Wednesday (and despite weaker-than-expected manufacturing activity), added to rate-cut uncertainty, reducing risk-on sentiment, driving index levels lower. A much better-than-expected Amazon earnings report combined with Apple’s announcement of a large stock buyback plan (and a better-than-expected earnings report), drove stock markets noticeably higher Thursday. Friday’s weaker-than-expected Payroll Report added to Thursday’s risk-on sentiment, pushing all 3 major indexes over 1% higher and into the green for the week. For the week, the S&P 500 Index rose 0.6% to 5,127.79, the Nasdaq Composite Index gained 1.4% to 16,156.33, the Dow Jones Industrial Average rose 1.1% to 38,675.68, the 10-year U.S. Treasury rate fell 15bps to 4.51% and the U.S. dollar (as measured by the ICE U.S. Dollar index – DXY) weakened 0.9%.
Oil prices moved markedly lower suffering from a much larger-than-expected build in U.S. inventories, larger-than-expected increase in gasoline inventories, declining heating oil demand and growing U.S. production. Diminished Mideast tensions also contributed to lower prices while Friday’s weaker-than-expected payroll report seemed to have little effect on prices.
Spot gold prices fell again last week, pressured by continued higher-rates-for-longer concerns (precipitated by Tuesday’s higher-than-expected Employment Cost Index release) and despite Friday’s weaker-than-expected payroll report. Spot prices did rally Wednesday following an as-expected FOMC rate decision and Fed Chair Powell comments saying it was more likely rates would fall than increase.
Copper prices ended the week slightly lower. Prices moved lower through Thursday pressured by higher-rates-for-longer concerns and uncertainty regarding China economic growth. Friday’s weaker-than-expected payroll report increased September rate-cut expectations, weakening the U.S. dollar and pushing copper prices higher and off their intraweek lows.
Wheat prices moved lower through Wednesday on favorable U.S. and Russia weather forecasts and lower Russia/Ukraine prices vis-à-vis U.S. prices. Prices then moved higher the remainder of the week following less-favorable weather forecasts and a weaker U.S. dollar. Corn and soybean prices ended the week higher benefiting from adverse U.S. and South America weather forecasts as well as lowered Argentina production estimates.
Coming Up This Week
Very, very light data-week: Jobless Claims and Consumer Sentiment
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.
