Key points
Energy prices were mixed last week with Brent crude and heating oil prices rising and all other prices falling. Brent crude oil prices rose 0.9% and heating prices rose 5.4%. WTI crude oil prices fell 5.0%, gasoil prices decreased 0.7%, gasoline prices declined 2.3% and natural gas priced edged lower, falling 0.2% .
Grain prices all moved higher last week. Chicago and Kansas wheat prices moved higher again, increasing 5.9% and 3.8%, respectively, and soybean prices increased 2.2%. Corn prices rose 0.7%.
Base metal prices were mixed last week as well. Aluminum prices fell 2.6% and copper prices were unchanged. Zinc and nickel prices increased 1.5% and 1.2%, respectively.
Precious metal prices soared last week with platinum prices increasing the most. Gold prices increased 8.2%, silver prices rose 17.4% and platinum prices jumped 20.9%.
The Bloomberg Commodity Index increased 2.65% last week. The precious metals sector was predominately responsible for the index’s increase though the grains sector also contributed. All other sectors detracted from the index’s performance.
Total assets in commodity ETPs surged $3,957.7m last week, mainly driven by gold ETP inflows but with good sized inflows into broad commodity, silver and crude oil ETPs as well. There were no significant ETP outlflows. Inflows: Gold – $2,886.8m, Broad Commodity – $371.2m, Silver – $260.6m and Crude Oil – $423.0m.
Commentary
Yet another volatile week for bond and stock markets, though this time U.S. stock markets ended the week higher. Monday’s FOMC announcement of unlimited Treasury and mortgage backed securities buybacks along with three new lending programs to support consumer and corporate credit did little to buoy U.S. equity markets with the U.S. Senate’s inability to pass a $2 trillion coronavirus stimulus package Sunday and again on Monday weighing heavily on market sentiment. Reports on Tuesday that the Senate was close to approving the stimulus package reversed market sentiment pushing U.S. stock markets significantly higher despite sharply lower Europe and US PMI composite flash indexes. (The Dow Jones Industrial Average increased over 11%, its largest one-day gain since 1933, and the S&P 500 Index increased over 9%.) U.S stock markets moved sharply higher again on Thursday, despite record high jobless claims, after the Senate finally approved the stimulus package and as a result of the ECB restarting its debt buyback programs. Emerging concerns that central bank action and government stimulus packages may not be sufficient to forestall a recession helped move the S&P 500 Index over 3% lower and the 10-year U.S. Treasury rate down by 17bps to 0.68% on Friday. At week’s end the S&P 500 Index increased 10.3% to 2,541.47, the 10-year U.S. Treasury rate fell 16bps to 0.68% and the U.S. dollar (as measured by the DXY index) weakened by 4.3%.
WTI crude oil prices increased over 8% through Wednesday supported by optimism the U.S. Senate would soon approve a $2 trillion economic stimulus package. Emerging concerns the stimulus package may not be sufficient to fend off a recession combined with the continued Saudi-Russia price war and the announcement the U.S. Department of Energy would not purchase 30 million barrels for the Strategic Petroleum reserve due to lack of congressional funding pushed WTI oil prices down over 12% from Wednesday’s highs.
Down over 3% on Monday over coronavirus demand destruction concerns, copper prices finished the week unchanged benefiting from optimism generated by the $2 trillion stimulus package, a weaker U.S. dollar and, to some extent, supply concerns as a result of potential mine shutdowns.
Accommodative measures implemented by the both the U.S. Federal Reserve Bank and the ECB, negative short-term Treasury bill rates and negative real interest rates along with a much weaker U.S. dollar helped move gold and other precious metals significantly higher last week.
Continued strong demand for wheat-based products, stronger exports to China and Russia’s announcement it would limit wheat exports due to concerns of shortages in Russia, helped move wheat prices higher again last week. Corn prices, though slightly higher on the week, continued to suffer from steeply lower oil and gasoline prices, greatly reducing demand for corn-based ethanol.
Coming up this week
- Full data week replete with manufacturing and services index releases and capped off with the employment situation report on Friday.
- Pending home sales on Monday.
- Chicago PMI and consumer confidence on Tuesday.
- PMI and ISM manufacturing indexes on Wednesday.
- Jobless claims, international trade and factory orders on Thursday.
- Employment report and PMI and ISM services indexes on Friday.
- EIA petroleum report on Wednesday and Baker-Hughes rig count on Friday.