Uncertainty in commodities market replaced by selling pressure

ISTANBUL

The weeks-long search for direction and uncertainty in the commodities market last week gave way to selling pressure.

Uncertainties over the monetary policy of the US Fed and concerns over recession weighed large on commodities markets last week.

In the US, non-agricultural employment rose by 199,000 people, beating expectations.

Although the expectations that the Fed’s hawkish monetary policy had come to an end were strong last week, after non-farm payrolls data was announced, the probability that the bank would start cutting policy rates in March fell below 50%.

Macroeconomic data also showed concerns that economies may be in recession, triggering concerns over demand.

Factory orders in the US fell 3.6% in October, above market expectations. The fall shows that the industrial sector is being hit by high interest rates, analysts said.

The eurozone economy contracted 0.1% in the third quarter of 2023, as expected. Due to the decline in mechanical engineering production, industrial production in Germany fell below forecasts by 0.4% in October, extending its decline for a fifth straight month.

In China, imports fell 0.6% in November.

The Japanese economy contracted beyond expectations in the third quarter, which raised concerns that the economic activity in the country is more fragile than previously believed.

In the third quarter, Japan’s GDP fell below expectations, down 0.7% compared to the previous quarter, and 2.9% on an annual basis.

 

– Fed interest rate decision due

This week the Fed’s decision on interest rates will focus on stock markets, and the decision made will be progressive and decisive in terms of the commodity market, analysts said.

The US Dollar Index, which tested a three-week high of 104.263, also rose 0.8% last week to 104.

The ounce price of gold, which saw a historical peak at $2,145.12 last week, switched to a negative trend and completed the week down 2.2%.

Silver fell 9.7%, platinum 1.5% and palladium 5.3% in value.

After the US published its Employment Situation report for November, which dampened expectations, the Fed is expected to begin loosening its monetary policy, with the rise in bond yields and the US Dollar Index testing a three-week high putting pressure on precious metals.

Brent crude oil ended the week with a loss of 4%, and natural gas traded on the New York Mercantile Exchange ended down 8.3%.

Concerns over the Chinese economy and strong oil production levels in the US also continue to put downward pressure on prices.

Data on weakening demand from the world’s largest oil consumer, the US, also had an impact on prices.

US crude oil inventories rose by 594,000 barrels, the American Petroleum Institute announced. The market expectation forecast was that the inventories would decrease by 2.3 million barrels.

Copper went down 2%, lead 4.6%, aluminum 1.8%, nickel 0.6%, and zinc 1% last week.

Rising demand for the US dollar, diminishing expectations that the Fed would reduce interest rates, and unrelenting uncertainties about the Chinese economy weighed on copper prices.

Expectations of a surplus continue affecting nickel prices.

Russian mining company Norilsk Nickel estimated the global nickel supply surplus to be over 250,000 tons in 2023. Its previous estimation was around 200,000 tons.

Last week, there was a mixed trend in agricultural commodities. While wheat rose 4.9% and corn 0.4%, while soybeans fell 1.4% and rice 0.8%.

Cotton traded on the US-based Intercontinental Exchange went up 2.6%, and cocoa 2.1%, while coffee went down by 3.5% and sugar 6.7%.

Chinese demand for wheat helped push up its value. China ordered 440,000 tons of wheat to the US for the 2023-2024 season, according to a US Department of Agriculture report. It was the largest amount of orders placed in the country since 2020.

Cheap supply from Brazil especially had a downward impact on soybean prices.

Coffee prices remained under pressure last week as supply concerns eased.

The International Coffee Organization predicted that global coffee production will climb 5.8% annually to 178,000 bags in 2023/24.

Sugar prices went down due to forecasts that there may be a global surplus.

Cocoa prices rose due to a decision by the Ivory Coast Council of Coffee-Cocoa to stop future sales starting next April.

The decision exacerbated uncertainty in the cocoa supply in the region.

• commodities market