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  • Stocks power higher to new highs
  • Copper and crude oil continue to recover
  • Gold, silver, and palladium move higher, platinum close to unchanged
  • Cryptocurrencies firm as Bitcoin is over the $10,000 level
  • Coffee explodes higher as soft commodity futures are rolling from March to May

The story of this week:

 

Rebounds In Copper And Crude Oil

 

While the number of fatalities and cases of Coronavirus in China continued to rise over the week, markets chose to ignore the growing health concerns in Asia and the rest of the world. The CDC in the US warns that we could be in for a prolonged period of cases over the coming weeks and months. Meanwhile, stocks stabilized and moved to new highs. Two of the commodities markets that had been falling during the recent risk-off period made comebacks over the past week.

Source: CQG

The daily chart of nearby NYMEX crude oil futures highlights the rise from a low of $49.31 on February 4 to a high of $52.34 last week before settling at $52.05 per barrel. Both the API and EIA reported significant increases in crude oil inventories in the US last week. At the same time, daily output, according to the EIA, rose to the record 13 million barrel per day level. However, the potential for further production cuts from OPEC when they meet to assess the impact of the late 2019 reduction provided support for the energy commodity.

The other market that had declined dramatically over fears about the Chinese and global economies was copper.

Source: CQG

The chart of nearby March COMEX copper futures shows the rise from $2.4875 on February 3 to a high of $2.6275 on February 13. The March futures settled at $2.5995 on February 14, just below the recent high.

Coronavirus remains one of the most significant issues facing markets, but over the past week, markets stabilized. Meanwhile, markets continue to be concerned that the Chinese government is behind the curve in fighting the virus and that the data is far below the actual number of fatalities and cases.

In the US, Senator Bernie Sanders won the New Hampshire primary last week, but markets did not reflect the rising chances that a Democratic Socialist could win the November 2020 election. It appears that the decline in support for former Vice President Joe Biden has increased the odds of former NYC Mayor Michael Bloomberg’s rise to challenge the progressive wing of the opposition party. If Bernie Sanders continues to post victories and retains a lead in delegates after Super Tuesday in early March, we could see markets begin to react. Markets reflect the economic and political landscape. The US is the world’s wealthiest nation. A significant shift in the political direction of the country could cause substantial turbulence in markets across all asset classes over the coming weeks and months. Last week, markets ignored both Coronavirus and US politics.

Highlights in commodities:

 

  • April gold rises 0.83% and settled at $1586.40 per ounce
  • March silver gains 0.24% as the precious metal settled at $17.734 per ounce on February 14
  • Platinum posts a 0.04% loss on the week. April platinum was at a $617.60 per ounce discount to April gold futures, which widened since last week
  • March palladium rose 4.82% for the week and settled at $2316.70 per ounce
  • March copper rallied 1.82% to just under the $2.60 level
  • April iron ore futures moved 6.27% higher on supply concerns in Brazil
  • The BDI fell another 2.32% since February 7 to the 421 level as the Chinese economy faces the Coronavirus
  • April Rotterdam coal rose 6.40% since last week on the back of gains in crude oil
  • March lumber moved 2.07% higher since February 7 as the price was at the $449.30 per 1,000 board feet level
  • March NYMEX crude oil recovered 3.44% since February 7 and closed the week just over the $52 per barrel level
  • April Brent crude oil rose 5.10% since the previous report as Brent outperformed NYMEX crude oil
  • The premium for Brent over WTI in April closed Friday at the $4.92 level as the spread moved $1.01 higher since last week
  • March gasoline rose 3.90% while March heating oil futures posted a 3.34% gain over the past week
  • The gasoline crack spread in March was 6.45% higher while the March heating oil crack moved 3.71% higher since February 7 as products continued to outperform crude oil
  • Natural gas fell 1.13% on March futures closing the week at $1.837 per MMBtu after trading to a new low of $1.753. The EIA reported a withdrawal of 115 bcf from storage on Thursday for the week ending on February 7
  • March ethanol rose 2.48% on the week on strength in gasoline
  • March soybeans rose 1.33% since last week in post WASDE trading
  • March corn moved 1.50% lower on the week
  • CBOT March wheat was 2.86% lower since last week. March KCBT wheat trading at a 77.25 cents discount under March CBOT wheat down 9.00 cents since February 7. The discount moved towards the historical norm since last week
  • March sugar rose 0.94% since February 7 and put in a new high at 15.90 cents
  • March coffee exploded 10.93% higher since last week
  • March cocoa rose 0.14% since February 7 and rose to a new high of $2998 per ton on the March contract, the highest price since August 2016
  • March cotton fell 0.50% since last week as the fiber futures were at the 67.41 cents per pound level
  • March FCOJ futures rose 4.53% since the previous report to just under $1.00 per pound level
  • April live cattle rose 0.44% since last week
  • March feeder cattle were 2.46% higher since January 31
  • April lean hog futures fell 2.94% over the past week
  • The March dollar index futures contract rose 0.44% on the week to just over the 99 level
  • March Long-Bond futures trading at 162-15 down 0-01 for the week
  • The Dow Jones Industrial Average closes at 29,398 on Friday, February 14, up 295 points from February 7. The S&P 500 rose 1.58% since last week. The VIX was trading at around 13.68 on Friday down 1.79 on the week on the back of higher stock prices
  • Bitcoin was trading at $10,312.20 on Friday up $578.58 or 5.94% since February 7
  • Ethereum was trading at $282.42 on Friday, up 29% since the last report

 

Price Changes for the week:

DBC closes at $14.65 per share, up 12 cents since February 7

 Source: Barchart

 

DBC is the Invesco DB Commodity Tracking product which represents a diversified basket of commodities futures contracts, has net assets of $1.27 billion and trades an average daily volume of 1,613,216 shares. The fund summary for DBC states that it holds a diversified group of commodities futures but is weighted towards energy. The average volume rose again over the past week and net assets remained the same as the price of the ETF was posted a gain. The rise in volume over recent weeks could be a bullish sign for the commodities asset class.

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.   

                                                         

 

 

 

 

 

 

 

 

 

Andy Hecht

Author

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