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Commodity prices, as measured by our Materials Price index
(MPI), rose 1.4% last week, their first increase since
mid-September. Sentiment in commodity markets does seem to be
shifting ever so slightly, though the caution is that a one week
move hardly constitutes a rally.
Energy prices led the MPI higher, rising 3.1% on strong showings
from natural gas, up 5.2%, and coal, up 5.8%. The oil market, in
contrast, remained calmed ahead of the upcoming OPEC meeting. The
ferrous sub-index increased 1.8% amidst strengthening steel prices
and the cut in a key interest rate in China. Lumber prices jumped
9.0% last week on strong US housing market data - lower mortgage
rates lifted housing starts 3.8% in October and building permits
hit a 12-year high. Non-ferrous prices fell 2.0% last week with all
prices bar copper falling. Nickel prices again fell sharply and
have now dropped more than 20% since early September as supply
concerns around Indonesia's export ban ease.
We have been touting the upside potential in commodity prices
for several weeks given the improvement in equity and bond markets
and hints that manufacturing activity may be stabilizing. Still,
commodity markets will require solid evidence that conditions in
manufacturing are in fact improving and that tangible progress is
being made in the US-China trade war before any rally in prices can
be sustained.
Posted 27 November 2019 by William May, Senior Economist Pricing and Purchasing IHS Markit
