Commodity prices are on the defensive to start the trading week as global slowdown fears creep back into focus across financial markets. Sentiment-sensitive crude oil and copper prices are following Asian and European shares lower.
A correction now appears underway, with most benchmark commodity prices following a cautious recovery in European stock exchanges higher. S&P 500 stock index futures are pointing upward as well, hinting more of the same is likely as Wall Street comes online.
Commodity prices are under pressure as fears of a global economic slowdown return to the spotlight. With the threat of a market-wide credit crisis emanating from the Eurozone neutralized for now, investors re-evaluate the macro-economic environment.
Metals are on the upswing in European trade amid a recovery in risk appetite. Optimism appears driven by hopeful expectation ahead of the outcome of the second three-year ECB long-term refinancing operation (LTRO).
The fundamental landscape remains broadly supportive for commodity prices into the end of the trading week. Signs of firming recovery in the world’s largest economy are directly beneficial for cycle-sensitive copper prices.
Copper shot higher yesterday after a deal on the second Greek bailout removed the uncertainty that prevented prices from fully capitalizing on a Chinese interest rate cut announced in the previous day.
Gold continues to track investors’ 2-3 year inflation expectations (tracked by “breakeven rates"). Prices put in their strongest performance in six sessions yesterday after minutes from January’s FOMC meeting showed some policymakers expected to introduce additional stimulus.