Commodity prices flat on holiday week

January 01, 2015 - Weekly Pricing Pulse

The IHS Markit Materials Price Index (MPI) was flat last week, interrupting a seven-week slide during which the index shed 21%.

In a thin week for trading, most underlying components went sideways, with a subtle rise in chemical prices offsetting further softness in nonferrous metals. With one week remaining in 2014, all MPI components are down year over year, led by freight rates (down 51%), oil (down 47%), rubber (down 36%), chemicals (down 34%), and steel prices (down 19%).

In a prelude to what will be one of the defining features of next year, a strong US data release—in this case, a revision—pushed the dollar to fresh five-year highs, and supported the policy-sensitive two-year Treasury yields to three-year highs. The underlying factors supporting the bearish fourth quarter for commodities have not diminished. The question for 2015 is how much of this narrative has already been bought, and how much will still be sold.

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