Commodities

Sterling outperforms as Truss government forms

The USD remains in the ascendency amidst rising Fed rate expectations; DXY hits fresh 20-year high. GBP outperforms and UK curve sees huge steepening move on reports of Truss plan to cap household energy prices, says BNZ Markets this morning. “There has been another big sell off in global bonds overnight with market reacting to a stronger-than-expected US ISM Services index and reports that new UK PM Liz Truss will unveil a massive fiscal stimulus later this week to protect households from...

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Commodities Update

  5.9.22 * Global oil prices rose by around 0.5% on Friday. The OPEC+ production group is expected to keep oil output quotas unchanged for October at today's meeting. US jobs data supported oil prices. The Brent crude oil price rose by US66 cents or 0.7% to US$93.02 a barrel. And the US Nymex crude oil price rose by US26 cents or 0.3% to US$86.87 a barrel. Over the week Brent crude fell US$7.97 or 7.9% and Nymex crude fell US$6.19 or 6.7%. * Base metals were mixed on Friday. Zinc fell...

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Global oil prices up

9.8.22 Global oil prices rose around 2% on Monday, reported CommSec, traders citing firm economic data driving prices, notably stronger export growth in China and Friday's strong US jobs report. “Despite recession fears, the data suggested that demand for oil may not ease as much as expected. “Reuters cited a research report from Goldman Sachs with the broker saying the case for higher oil prices remains strong, with the market in a larger deficit than they expected in recent months.” The...

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Dairy price weakness likely

1.8.22   Westpac expect whole milk powder prices (WMP) to drop by around 2% at the upcoming auction this week. “This follows a 5.1% price slide at the previous auction. Commodity prices have corrected lower on growing concerns about the downside risks for global economic activity, and dairy prices have been no exception. “In addition, Fonterra lifted WMP auction volumes for August and September. This move may have increased the downward pressure on prices at least temporarily. “However,...

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Base metals higher

25.7.22 Base metal prices were higher on Friday except lead which was flat. Over the week metals rose 0.7-14.2% with nickel up the most and tin up the least, reports CommSec The gold futures rose by US$14.00 an ounce or 0.8% to US$1,727.40 an ounce. Spot gold was trading near US$1,726 an ounce at the US close. Over the week gold rose by US$23.80 or 1.4%. The iron ore futures price rose by US$1.10 or 1.1% to US$104.46 a tonne. Over the week iron ore rose by US$1.39 or 1.3%

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Weakening in global dairy demand

20.7.22 Dairy auction prices posted a chunky fall this week, comments Nathan Penny, agri-economist for Westpac. Overall prices slid 5.1%, while key whole milk powder (WMP) prices were down 5.0%. “Prices have effectively been on the wane since March,” says Mr Penny. “In fact, WMP prices have plunged 25% over that period, while overall prices are down 23%. “The price weakness was also broad-based. All five products on offer fell, with skim milk powder prices posting the largest fall (down...

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Commodity currencies and UK pound out-perform

8.7.22 Having been gripped by recession fears over recent weeks, markets are trading with a more upbeat tone overnight, notes BNZ Markets. “US equities and commodity prices are higher, the US 10-year rate is back to 3%, while global growth-sensitive currencies, including the NZD, are stronger,” says Nick Smyth. “The EUR remains under pressure though, falling to 1.0150 and bringing parity into closer view.  The nonfarm payrolls release is the key market focus in the session ahead. Market...

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Kiwi flat on quiet markets

5.7.22. With US markets closed for the Independence Day holiday, trading conditions have been quiet. Commodity currencies have found some favour, although going against the grain the NZD has been relatively flat, says Jason Wong at BNZ Markets. “The yen has underperformed against a backdrop of much higher European bond yields. “With the US on holiday, there has been little news and market movements have been modest apart from a notable lift in European bond yields.  This reverses some of last...

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Kiwi dollar dips below key support

Recession concerns continue to dominate markets at present and the NZ dollar has briefly broken key support on the downside. There were big falls in global rates again (US 10-year -13bps) in thin conditions, says Nick Smyth at BNZ Markets.   • Industrial commodities fall further on demand fears - copper now 25% off its highs   • NZD and AUD make two-year lows amidst stronger USD and global growth concerns   A soft ISM manufacturing survey on Friday night added to investors’...

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Neat deal but lacking meat on its bones

  New Zealand’s newest free trade agreement, with the 27-state European Union, is being hailed as a big success by PM Jacinda Ardern, who shook on the deal with EU President Ursula von der Leyden in Brussels overnight. “Export revenue to the EU will grow by up to $1.8 billion annually on full implementation,” said Ardern. There will be duty-free access on 97% of New Zealand’s current exports to the EU; with over 91% being removed the day the FTA comes into force. “NZ exporters set to save...

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Kiwifruit harvest 2022 in the bin

The 2022 harvest of New Zealand’s largest horticultural produce, kiwifruit, is now largely complete with almost all 2,800 growers’ orchards from Kerikeri in the north to Motueka in the south picked for consumers. The 2022 season was expected to have a record-breaking crop of at least 190 million trays of kiwifruit, overtaking last year’s record of over 177 million trays, according to NZ Kiwifruit Growers Inc. On average, each tray has around 30 pieces of kiwifruit. However, revisions in the...

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Tight supply underpins oil price

Global oil prices rose by as much as 1% on Tuesday. Traders attribute the gains to continued tight global supplies and increased summer fuel demand in the US and Europe, notes CommSec. “Supporting prices were predictions from Exxon Mobil Corp Chief Executive Darren Woods that fairly tight oil markets would extend for 3-5 years.” US President Biden has asked the chief executives of six oil companies to a meeting on Thursday to discuss ways to reduce high energy prices. The Brent crude price...

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Oil prices swing higher

Global oil prices swung higher in volatile trading on Monday, as traders focused on tight crude supplies over slowing global economic growth. The Brent crude price rose by US$1.01 or 0.9% to US$114.13 a barrel. And the US Nymex crude price gained US71 cents or 0.6% to US$110.27 a barrel. * Base metal prices were mostly higher on Monday. Aluminium rose by 1.3%. And copper lifted by 0.3% after hitting 9-month lows on worries about a potential global recession. Tin fell by 1.3%. * The gold...

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US investors fear rate hikes

14.6.22 US sharemarkets slumped again on Monday with investors fearing that aggressive inflation-fighting rate hikes could tip the economy into recession, notes CommSec. Reuters reported "Cryptocurrency- and blockchain-related stocks, including Riot Blockchain, Marathon Digital Holdings and Coinbase Global, all plunged as bitcoin slumped more than 10% after major US cryptocurrency lending company Celsius Network froze withdrawals and transfers citing "extreme" conditions." The Dow Jones index...

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US market had one direction to go

14.6.22 \\ US stocks only had one way to go after inflation fears intensified and raised the risk of stronger tightening by the Fed and a much sooner recession, says Edward Moya, senior market analyst, The Americas, for OANDA this morning. “Wall Street is facing a plethora of negative headlines, but the problem is that until we see a deterioration with credit conditions and market functioning, the Fed has the greenlight to tighten as much as possible to get inflation under control “An ugly...

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Global food crisis looms

Global food prices continue to strengthen as shortages loom for basic foods such as grains, says the ANZ bank in its latest Agri Focus report. This means there will also be a shortage of carbohydrates to feed livestock, says ANZ agri economist Susan Kilsby. “This won’t directly impact New Zealand food production systems, but it will impact our competitors who rely on grain to produce beef and milk. At the same time, the price of growing pasture has also gone up, as global fertiliser costs have...

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Commodity prices higher

, Commodities were generally higher last week, Brent crude oil gaining 6% and hitting a 2-month high, just below $120 per barrel, ahead of the start of the US summer driving season. BNZ Markets notes that EU leaders are meeting over the next two days, hoping to convince Hungary to sign up to a plan to phase out Russian oil exports. Meanwhile, copper, often seen as a barometer of the global economy, was up a more modest 0.5% on the week, but is still almost 6% off its recent lows.  At face...

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Receding recession fears lift US market

30.5.22 Risk assets ended last week on the strong note (S&P500 +2.5%) as global recession concerns appeared to diminish, notes BNZ Markets this morning. This helped drive a strong rally in the NZD and other commodity currencies, the NZD closing above 0.65 for the first time since early May, says Nick Smyth. Global rates were flat-to-lower on Friday while NZ short-term rates pushed higher again, with the market continuing to digest the RBNZ’s hawkish messaging from last week’s MPS. Last...

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Oil prices move higher

Oil prices were higher on Friday, gaining around 1.5%, with the market concerned about tight supply and the EU’s proposed ban on Russian oil imports, according to BNZ   Markets “However, Bloomberg reported over the weekend that Hungary continues to block the EU’s proposed Russian oil ban, even though it would be afforded a longer transition. “In contrast, industrial metals prices were all weaker, suggesting investors see the demand outlook softening.  Copper was 0.8% lower on Friday and 3.6%...

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Low yields for grain mean high prices

7.5.22 The additional demand from China for imported food, combined with tight global supplies of nearly all types of protein, has pushed the price of many commodities to record levels. This is certainly benefitting New Zealand farmers right now, with very strong prices on offer for dairy, beef and lamb, comments Susan KIlsby, senior agri-economist at ANZ in New Zealand. High grain costs are making importing this product very expensive for poorer countries, which may therefore result in grain...

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Dairy auction prices plunge

4.5.22 The GDT dairy auction price index plunged 8.5% at the overnight auction, more than the 2-3% expected, driven by falls across all product groups. Skim and Whole milk power prices fell 6.5%, while butter was the biggest mover, down 12.5%. The price index has now fallen for four consecutive auctions, taking the cumulative price decline to 13.4% since 1 March, notes Jason Wong at BNZ Markets. “Since that time, the NZD has fallen about 5%, cushioning the blow for prices in NZD terms, and the...

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Fresh low for Kiwi Dollar

3.5.22 By recent standards it has been a quiet trading session with little news, with the UK and some key Asian markets on holiday, says BNZ Markets. “But the new month has begun with the same trends as we saw through April – weaker equities, higher rates and a stronger USD,” says Jason Wong, senior markets strategist. “The NZD has traded at a fresh near 2-year low. The US 10-year Treasury rate cracked the 3% mark for the first time this cycle. “After a horrible April for bonds, equities and...

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Commodity prices set to stay

1.5.22 The war in Ukraine has dealt a major shock to commodity markets, altering global patterns of trade, production, and consumption in ways that will keep prices at historically high levels through the end of 2024, according to the World Bank’s latest Commodity Markets Outlook report. The increase in energy prices over the past two years has been the largest since the 1973 oil crisis. Price increases for food commodities—of which Russia and Ukraine are large producers—and fertilisers, which...

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Commodites help lift ASX

13.4.22 Buyers helped the ASX 200 deliver its second gain of the week on Wednesday, after finishing up 0.3% or 25 pts, at 7479. This comes after the Materials sector climbed 0.6% on the back of a movements in the commodity space which saw the gold price rally for the fourth straight day, and the iron ore snap a five-day losing streak, notes CommSec. Oil prices also surged by around 6% overnight, boosting the local Energy sector by 1%. Gains were also seen in other parts of the market today,...

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Commodity currencies struggle

Risk appetite is weaker as investors focus on increasing lockdowns in China and the relentless rise in longer term bond rates, BNZ Markets noted this morning. Global equities are weaker and global 10-year rates have risen to fresh multi-year highs, says Jason Wong, senior markets strategist. “Oil prices have fallen back below US$100 on weaker demand fears from China lockdowns, amid ongoing supply from Russia. Against that backdrop, commodity currencies and JPY have underperformed. The new week...

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Oil prices easing back

30.3.22 Global oil prices fell by around 2% on Tuesday. Hopes for progress in Ukraine-Russia peace talks drove oil prices lower, reported CommSec. “Also lockdowns in Shanghai to curb the spread of Covid-19 prompted concerns of lower Chinese oil demand. Investors look ahead to the meeting of OPEC+ oil producers on Thursday.” The Brent crude price fell by US$2.25 a barrel or 2.0% to US$110.23 a barrel. US Nymex crude fell by US$1.72 or 1.6% to US$104.24 a barrel. “Base metal prices fell by as...

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Oil prices retreat on ceasefire hopes

29..3.22 Global oil prices fell by near 7% on Monday on fears of lower Chinese demand. Shanghai launched a two-stage lockdown to contain a surge in Covid-19 infections, said CommSec. Reuters also noted "Hopes for progress in peace negotiations between Russia and Ukraine, which could start in Turkey on Tuesday, also weighed on prices." Investors look ahead to a meeting of OPEC+ nations on Thursday. The Brent crude price fell by US$8.17 a barrel or 6.8% to US$112.48 a barrel. The US Nymex crude...

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NZ dollar up as commodities rise

24.3.22 Global equity markets have pulled back overnight and global bond rates are also lower after their recent surge higher, notes BNZ Markets.  Commodities prices are stronger, and this has supported the AUD, more so than the NZD. GBP weakened despite another strong inflation report, while EUR was also on the soft side, says Jason Wong, senior markets strategist. “This week it feels that the bond market has captured the market’s attention, given the surge in yields that has prevailed, but...

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Dairy auction rally hits a roadblock

16.3.22 Dairy auction prices dipped in the latest DairyTrade auction. Overall prices fell 0.9%, while key whole milk powder (WMP) prices slid by 2.1%. The price fall was the first this year, and thus snapped a run of five consecutive price rises, observed Nathan Penny, senior agri-economist at Westpac.  WMP and butter posted the largest price falls. “Despite the fall, overall and WMP prices still sit 18% and 20% higher, respectively, than as at the end of 2021. Prices were mixed by product;...

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Oil price plunge – currencies steady

16.3.22 A further plunge in oil prices has helped support a recovery in US equities. “Anxiety in the bond market has settled for a day, with small changes in US Treasuries and European rates pushing lower,” adds Jason Wong, senior markets strategist at BNZ Markets this morning. “Currency movements have been modest, with the NZD showing a small gain overnight to 0.6760, recovering the small loss seen during local trading hours.” “The key market movement overnight has been another plunge in oil...

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