- “Phase One” trade deal is bullish for commodities
- The dollar index moves lower on the back of the UK election
- Most commodities rally over the past week
- Natural gas is an exception as the price falls
- Coffee puts in a bearish reversal after reaching $1.40 per pound on Friday
The story of this week:
The UK Election a Trade Deal Make For A Bullish Week In Markets
Friday was a hectic day in the news cycle, and markets reacted. The UK election is now in the books, and Prime Minister Boris Johnson emerged a huge winner. The Tory Party won an overall majority in the Parliament, with 365 out of 650 seats paving the way for Brexit. The election served as a second referendum for then divorce from the European Union, and Brexit passed the test. The pound rallied against both the US dollar and the euro currency.
The daily chart of the pound-dollar currency pair shows that it moved to a high at $1.3510, the highest level since May 2018. The pound was trading at over the $1.3330 level late Friday.
The pound-euro currency pair moved to the 1.20 level, the highest since June 2016, the time of the initial referendum.
The US and China agreed on terms for a “phase one” trade agreement. The deal avoided the December 15 deadline for tariffs on another $150 billion in Chinese exports to the US. The deal lifted the US stock market.
As the monthly chart shows, the E-Mini S&P 500 futures contract rose to a new all-time high on Friday at 3185.
All of the good news provided calm to markets and reduced fear and uncertainty. At the same time, the events overshadowed the vote in the House Judiciary Committee to send two articles of impeachment to the floor of the House next week.
When it comes to commodities, crude oil rallied to the $60 per barrel level on the nearby January future contract. Copper made a new high at over $2.83 per pound on the COMEX March futures contract before pulling back to under $2.79. Precious metals posted gains on the week. And, agricultural commodities moved higher on the prospects of Chinese buying from the US over the coming weeks and months. The Santa Claus rally in markets started on Friday, December 13, and time will tell if it continues throughout the rest of 2019 and into the new decade.
Highlights in commodities:
- February gold rises 1.10% and settled at $1481.20 per ounce
- March silver rises 2.51% on the week as the volatile precious metal settled at $17.012 per ounce
- Platinum posts a 3.34% gain on the week. January platinum was at a $552.40 per ounce discount to February gold futures, which narrowed since last week
- March palladium moved 2.46% higher for the week as it settled at over $1890 per ounce after reaching a new record high at $1958.50 on Friday
- March copper recovered 2.06% as the red metal sits at the $2.7810 level after probing above $2.80 per pound
- December iron ore futures moved 4.19% higher on the week
- The BDI fell 11.87% since December 6 to the 1388 level
- January Rotterdam coal fell 1.61% since last week
- January lumber moved 0.37% lower since December 6 as the price continued to hover around the $400 per 1,000 board feet level
- January NYMEX crude oil moved 1.47% higher since December 6 on the back of the trade deal
- February Brent crude oil moved 1.20% higher since the previous report as Brent underperformed NYMEX crude oil
- The premium for Brent over WTI in February closes Friday at the $5.20 level down 11 cents since last week
- January gasoline moved 0.96% higher while January heating oil futures rose 1.76% over the past week
- The gasoline crack spread in January was 1.01% lower while the January heating oil crack moved 2.10% higher since December 6 as products reflected seasonal factors
- Natural gas fell 1.63% on January futures closing the week at $2.296 per MMBtu after trading to a new low at $2.158 on December 9. The EIA reported a withdrawal of 73 bcf from storage on Wednesday for the week ending on December 6
- January ethanol moves 0.36% lower on the week
- January soybeans rose 2.02% since last week on the back of the trade deal
- March corn rose 1.13% on the week as the corn followed the beans
- CBOT March wheat rose 1.53% since last week. March KCBT wheat trading at an 89.75 cents discount under March CBOT wheat down 3.75 cents since December 6. The discount moved marginally towards the historical norm since last week
- March sugar rose 2.43% since December 6
- March coffee posted a 4.89% gain and rose to the $1.40 level before putting in a bearish reversal on Friday
- March cocoa fell 1.34% since December 6
- March cotton moved 1.21% higher since last week on the back of the trade deal between the US and China
- January FCOJ futures rose 2.31% since the previous report
- February live cattle rose 2.06% since last week
- January feeder cattle were 2.91% higher since December 6
- February lean hog futures rallied 2.89% over the past week on rising hopes for US exports to pork-starved China
- The December dollar index futures contract fell 0.50% on the week
- March Long-Bond futures trading at 158-04 up 0-16 for the week
- The Dow Jones Industrial Average closes at 28,135 on Friday, December 13, up 120 points from December 6. The S&P 500 rose by 0.73% since last week. The VIX was trading at around 12.63 on Friday down 1.03 on the week as the stock market rose to record highs
- Bitcoin was trading at $7,264.98 on Friday down $222.26 or 2.97% since December 6
- Ethereum was trading at $144.56 on Friday, down 3.23% since the last report
Price Changes for the week:
DBC closes at $15.87 per share, up 20 cents since December 6
DBC is the Invesco DB Commodity Tracking product which represents a diversified basket of commodities futures contracts, has net assets of $1.34 billion and trades an average daily volume of 1,027,533 shares. The fund summary for DBC states that it holds a diversified group of commodities futures but is weighted towards energy. The average volume fell slightly over the past week while the net assets remained steady, and the price of the ETF was posted a gain.
Any investment involves substantial risks, including, but not limited to, pricing volatility, inadequate liquidity, and the potential complete loss of principal. This document does not in any way constitute an offer or solicitation of an offer to buy or sell any investment, security, or commodity discussed herein, or any security in any jurisdiction in which such an offer would be unlawful under the securities laws of such jurisdiction.