Key points
A bit of a mixed week for energy prices with natural gas and gasoline prices moving higher and all other prices moving lower. WTI and Brent crude oil prices fell 8.7% and 7.6% , respectively and gasoil and heating oil prices decreased 7.3% and 3.4%, respectively. Natural gas prices rose 0.7% and gasoline prices increased 2.5%.
Grain prices gave up some of their recent gains. Chicago and Kansas wheat prices fell 4.3% and 2.8%, respectively. Corn and soybean prices decreased 2.2% and 3.3%, respectively.
Base metal prices were all higher last week. Aluminum prices rose 1.7%, copper prices 3.7%, zinc prices 3.1% and nickel price increased 3.2%.
Precious metal prices also gave up some of their recent gains. Gold futures prices fell 3.1% and silver futures prices lost 4.9%. Platinum futures prices increased 3.4%.
The Bloomberg Commodity Index decreased 2.17% last week. The energy, precious metals and grains sectors were predominately responsible for the decline. The base metals sector was the only sector with positive performance last week.
Total assets in commodity ETPs rose significantly again last week, increasing $4,642.6. Almost all the increase came from gold ($2,315.1m) and crude oil ($1,984.2) ETP inflows with smaller inflows into silver ($184.8m) and broad commodity ($182.8m) ETPs. There were no ETP outflows.
Commentary
A see-saw week for U.S stock markets, pushed and pulled by competing pressures of extremely weak economic data and poor earnings reports on the one hand and growing optimism surrounding re-opening the economy and substantive progress in the development of COVID-19 treatments on the other. A much weaker-than-expected retail sales report on Wednesday and another large jobless claims number along with a large decline in new homes sales and in the Philadelphia Fed manufacturing index on Thursday worked to offset reduced coronavirus fears leaving U.S. stock markets almost unchanged through Thursday. President Trump’s announcement of plans to re-open the economy Thursday night followed by news of promising results for a COVID-19 treatment pushed U.S. stock markets up 2% -3% on Friday. At week’s end the S&P 500 Index increased 3.0% to close at 2,874.56, the 10-year U.S. Treasury rate fell 9bps to 0.64% and the U.S. dollar (as measured by the DXY Index) strengthened 0.3%.
Increasing 3% on Monday following news of an OPEC+ agreement to reduce production by close to 10 million barrels/day, WTI crude oil prices decreased the rest of the week, falling sharply on Tuesday and Wednesday, with increasing skepticism the cutbacks would seriously offset coronavirus demand destruction. Spot WTI oil prices settled close to $18/barrel, the lowest price in 18 years.
Base metal prices moved higher, despite a stronger U.S. dollar, following reports on Tuesday that China’s copper imports increased 13% YoY, indicating strong Chinese demand. A larger-than-expected drop in China’s Q2 GDP (released on Friday) appeared to have little effect on base metal prices.
Higher through Tuesday, gold prices fell the remainder of the week as a result of a stronger U.S. dollar and good news regarding Gilead’s COVID-19 treatment. Weaker-than-expected U.S. economic reports on Thursday drove the U.S. dollar by almost 0.9%, pressuring gold prices lower. Friday’s news reporting the success of Gilead’s COVID-19 treatment helped reduce coronavirus demand-destruction concerns, pushing gold prices lower.
Grain prices fell for various reasons last week. Record low oil prices reflecting coronavirus demand destruction continued to pressure corn prices lower. Better-than-expected weather in Russia increased wheat supply forecasts, pushing wheat prices lower while reduced demand for bio-fuels like soybean oil combined with food processor shutdowns weakened soybean demand.
Coming up this week
- Yet another light data week highlighted by home sales data and the PMI Composite Flash Index.
- Existing home sales on Tuesday.
- Jobless claims, PMI composite flash and new home sales on Thursday.
- Durable goods orders and consumer sentiment on Friday.
- EIA petroleum report on Wednesday and Baker-Hughes rig count on Friday.